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8-K - 8-K - REV Group, Inc.d325844d8k.htm

Exhibit 99.1

 

LOGO

March 7, 2017

NEWS RELEASE

FOR IMMEDIATE RELEASE

REV Group. Inc. Reports Fiscal First Quarter 20171 Results and Provides Full-Year Guidance

 

    Net sales of $443 million in the first quarter 2017 grew 19% over the prior year first quarter

 

    Net loss of $13.3 million in the first quarter 2017, primarily due to one-time stock compensation expense as a result of our IPO

 

    Adjusted EBITDA2 in the first quarter 2017 was $21.1 million, which was 40% higher than first quarter 2016

 

    First quarter 2017 Adjusted net income2 was $5.7 million, or $0.11 per diluted share, up from $0.07 per diluted share for the first quarter 2016

 

    The Company expects full-year fiscal 2017 consolidated net sales in the range of $2.225 to $2.325 billion, net income in the range of $40 to $43 million and Adjusted EBITDA2 in the range of $150 to $155 million

Milwaukee, Wis.—(BUSINESS WIRE)—

REV Group, Inc. (NYSE: REVG) today reported results for the three months ended January 28, 2017 (“first quarter 2017”). Consolidated net sales in the first quarter of 2017 were $442.9 million, growing 18.8% over the three months ended January 30, 2016 (“first quarter 2016”). The increase was driven predominately by strong growth in the Fire & Emergency and Recreation segments. REV Group also had strong growth in first quarter 2017 in aftermarket parts sales, which grew 10.4% over first quarter 2016 as the Company continues to execute on its growth strategies.

The Company’s first quarter 2017 net loss was $13.3 million, or ($0.26) per diluted share. The first quarter 2017 net loss was negatively impacted by a number of one-time items which included a $25.5 million before-tax stock compensation charge, due to our initial public offering (“IPO”), for stock options awarded prior to the IPO. REV Group’s IPO took place on January 27, 2017 and closed on February 1, 2017. Adjusted Net Income for the first quarter 2017 was $5.7 million, or $0.11 per diluted share, compared to $3.9 million, or $0.07 per diluted share, in the first quarter fiscal 2016.

Adjusted EBITDA in the first quarter 2017 was $21.1 million, representing growth of 40.4% over Adjusted EBITDA of $15.0 million in the first quarter 2016. The increase in Adjusted EBITDA was driven by a number of factors including higher vehicle sales, strong aftermarket parts sales, lower discounts for certain vehicle categories, and ongoing procurement and production cost optimization efforts.

REV Group, Inc. President and CEO, Tim Sullivan said “We are pleased to report strong results for our initial quarter as a public company. Our first quarter 2017 results demonstrate solid execution of the ongoing plan to scale our 27 market-leading specialty vehicle brands and meet our long-term target of generating company-wide Adjusted EBITDA margins of 10%. Our strategic efforts to increase profitability were evident in our results. Sales growth was driven by strong end-market demand, gains in market share and our new product initiatives. Our strong results serve as a testament to the hard work of our employees who are executing our strategies on a daily basis.”

 

1  The Company’s fiscal year ends on the last Saturday in October each year. The last day of fiscal 2016 was October 29, 2016. The last day of fiscal 2017 will be October 28, 2017.
2  REV Group, Inc. Adjusted Net income and Adjusted EBITDA are non-GAAP measures that are reconciled to their nearest GAAP measure later in this release.

 

1


REV Group Segment Highlights

Fire & Emergency – Fire & Emergency (“F&E”) net sales for the first quarter 2017 were $185.4 million representing growth of 44.4% over the prior year period. Sales growth was driven, in part, by the acquisition of Kovatch Mobile Equipment (“KME”) in April of 2016. Excluding the results of KME, F&E segment revenues grew 16.5% over the prior year period primarily resulting from strong growth in ambulance vehicle sales and higher sales generated at our F&E Regional Technical Centers (“RTC”). F&E backlog at the end of the first quarter 2017 was up 4.8% to $577.1 million compared to $550.8 million at the end of fiscal year 2016.

F&E segment adjusted EBITDA3 was $16.7 million in the first quarter 2017 which was a growth of 9.0% compared to $15.3 million in the first quarter 2016. F&E Adjusted EBITDA was driven during the first quarter 2017 by higher vehicle sales, and growth in RTC and aftermarket parts revenues. First quarter F&E Adjusted EBITDA margin was 9.0% of net sales compared to 11.9% in the first quarter 2016. The decline in margin percentage is attributable to the impact of the KME acquisition. We are pleased to report that we are on schedule with the KME integration and plan to increase KME profitability as the year progresses and in line with our E-ONE brand over time.

Commercial – Commercial segment net sales for the first quarter 2017 were $130.2 million, which were down 7.3% compared to the prior year period. This decrease was in line with our expectations driven by lower sales in certain product categories as we are focusing on sales mix and are being more selective about which sales opportunities we pursue. End markets in all our Commercial product categories remain strong and growing versus the prior year. Commercial segment backlog grew slightly to $227.5 million from $226.1 million at the end of fiscal year 2016.

Commercial segment Adjusted EBITDA was $8.2 million in the first quarter 2017 compared to $5.2 million in the first quarter 2016, which is growth of 57.9% year-over-year. Adjusted EBITDA margin was 6.3% of net sales in the first quarter 2017 compared to 3.7% in the first quarter 2016. Adjusted EBITDA growth in the first quarter 2017 was strong for all Commercial product categories, with segment profitability improvement during the quarter driven by less discounting, lower fixed costs, procurement and product initiatives, and growing aftermarket parts revenues.

Recreation – The Recreation segment grew first quarter 2017 net sales to $128.9 million, representing growth of 21.0% over the prior year period. Segment growth was partially driven by the acquisition of Renegade RV (“Renegade”) which was completed on December 30, 2016. Revenue growth excluding Renegade was also strong at 16.1% as the RV end markets continue to grow and the segment benefited from the growth of its Class C line of products which were reintroduced in the middle of 2016. Recreation segment backlog at the end of the first quarter 2017 was $107.7 million, which was up 33.9% from $80.4 million at the end of fiscal year 2016. Excluding the backlog from the newly acquired Renegade, Recreation backlog at the end of the first quarter was down 9.0% versus the prior fiscal year-end.

Recreation segment Adjusted EBITDA grew in the first quarter 2017 to $2.8 million compared to a loss of $1.8 million in the first quarter 2016. Adjusted EBITDA margin in the first quarter was 2.2% of net sales compared to negative 1.7% in the first quarter 2016. The strong 390 basis point expansion in profitability is attributable to lower discounting, a higher mix of Class A diesel units and benefits from our ongoing procurement and operating initiatives.

Working capital, liquidity and capital allocation – Net working capital4 for the Company at January 28, 2017 was $251.6 million compared to $187.3 million at the end of fiscal 2016. This represents a normal seasonal increase in net working capital consistent with prior years. Cash and equivalents totaled $15.1 million at the end of the first quarter 2017. Total debt at the end of the first quarter 2017 was $336.0 million and the Company had $134.2 million available under its existing credit facility as of January 28, 2017.

Subsequent to the end of the first quarter, the Company completed its initial public offering and used the net proceeds of $254.4 million to pay off the remaining outstanding balance of its Senior Notes, including accrued interest and call premium, and a portion of the then outstanding borrowings on its revolving credit facility. Net debt outstanding on the Company’s revolving credit facility at the end of the first quarter 2017, assuming the use of IPO proceeds to pay-down debt, was approximately $83.0 million. First quarter capital expenditures of $18.6 million were greater than the expected quarterly run rate for the rest of the year as spending was front-end loaded for the current year. The Company expects full fiscal year 2017 capital expenditures to approximate $40 to $45 million.

 

3  Segment Adjusted EBITDA is a non-GAAP measure that is explained and reconciled to its nearest GAAP metric later in this release.
4  Net working capital is defined as current assets (excluding cash) less current liabilities.

 

2


Quarterly Dividend – Our board of directors declared a quarterly dividend for our second quarter of fiscal 2017, payable on May 31, 2017, to holders of record on April 30, 2017, in the amount of $0.05 per share of common stock, which represents $0.20 per share of common stock on an annualized basis.

Fiscal 2017 Full Year Guidance – “Today we introduce our REV Group full-year fiscal 2017 outlook for net sales and Adjusted EBITDA. We expect full-year fiscal 2017 revenues of $2.225 to $2.325 billion, net income of $40 to $43 million and Adjusted EBITDA of $150 to $155 million,” said Sullivan. “This outlook does not include any impact from potential future acquisitions.”

The Company’s policy will be to update or affirm its full year financial guidance on a quarterly basis going forward.

Conference Call

REV Group, Inc. will host a conference call to discuss first quarter 2017 results and full-year fiscal 2017 outlook on March 8th at 11:00 a.m. EST. A supplemental earnings slide deck will be available tomorrow morning on the REV Group, Inc. website prior to the call. The call will be webcast simultaneously over the Internet. To access the webcast, listeners can go to http://investors.revgroup.com/investor-events-and-presentations/events at least 15 minutes prior to the event and follow instructions for listening to the webcast. An audio replay of the call and related question and answer session will be available for 12 months at this website.

Note Regarding Non-GAAP Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, management believes that the evaluation of our ongoing operating results may be enhanced by a presentation of Adjusted EBITDA and Adjusted Net Income, which are non-GAAP financial measures. Adjusted EBITDA represents net income before interest expense, income taxes, depreciation and amortization as adjusted for certain non-recurring, one-time and other adjustments which we believe are not indicative of our underlying operating performance and Adjusted Net Income represents net income as adjusted for certain after-tax, non-recurring, one-time and other adjustments which the Company believes are not indicative of its underlying operating performance as well as for the add-back of certain non-cash intangible amortization and stock-based compensation.

The Company believes that the use of Adjusted EBITDA and Adjusted Net Income provide additional meaningful methods of evaluating certain aspects of its operating performance from period to period on a basis that may not be otherwise apparent under GAAP when used in addition to, and not in lieu of, GAAP measures. A reconciliation of Adjusted EBITDA and Adjusted Net Income to the most closely comparable financial measures calculated in accordance with GAAP is included in the financial appendix of this news release.

Forward Looking Statements

This news release contains statements that the Company believes to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. This news release includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “strives,” “goal,” “seeks,” “projects,” “intends,” “forecasts,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. They appear in a number of places throughout this news release and include statements regarding our intentions, beliefs, goals or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industries in which we operate.

Our forward-looking statements are subject to risks and uncertainties, including those highlighted under “Risk Factors” and “Cautionary Statement on Forward-Looking Statements” in the Company’s most recent prospectus dated January 30, 2017 and other risk factors described from time to time in subsequent quarterly or annual reports on Forms 10-Q or 10-K, which may cause actual results to differ materially from those projected or implied by the forward-looking statement. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or

 

3


performance. You should not place undue reliance on forward-looking statements, which only speak as of the date hereof. The Company does not undertake to update or revise any forward-looking statements after they are made, whether as a result of new information, future events, or otherwise, expect as required by applicable law.

About REV Group

REV Group, Inc. (NYSE: REVG) is a leading designer, manufacturer and distributor of specialty vehicles and related aftermarket parts and services. We serve a diversified customer base primarily in the United States through three segments: Fire & Emergency, Commercial and Recreation. We provide customized vehicle solutions for applications including: essential needs (ambulances, fire apparatus, school buses, mobility vans and municipal transit buses), industrial and commercial (terminal trucks, cut-away buses and street sweepers) and consumer leisure (recreational vehicles (“RVs”) and luxury buses). Our brand portfolio consists of 27 well-established principal vehicle brands including many of the most recognizable names within our served markets. Several of our brands pioneered their specialty vehicle product categories and date back more than 50 years.

Investors-REVG

Contact

Sandy Bugbee

VP, Treasurer and Investor Relations

Email: investors@revgroup.com

Phone: 1-888-738-4037 (1-888-REVG-037)

 

4


REV GROUP, INC.

CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

     January 28,
2017
     October 29,
2016
 

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 15,137      $ 10,821  

Accounts receivable, net

     187,954        181,239  

Inventories, net

     341,495        325,633  

Other current assets

     16,395        12,037  
  

 

 

    

 

 

 

Total current assets

     560,981        529,730  

Property, plant and equipment, net

     161,854        146,422  

Goodwill

     87,639        84,507  

Intangibles assets, net

     127,826        124,040  

Other long-term assets

     3,897        4,320  
  

 

 

    

 

 

 

Total assets

   $ 942,197      $ 889,019  
  

 

 

    

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

   $ 111,449      $ 129,481  

Customer advances

     107,038        87,627  

Accrued warranty

     21,154        22,693  

Other current liabilities

     54,583        91,803  
  

 

 

    

 

 

 

Total current liabilities

     294,224        331,604  

Notes payable and bank debt

     336,008        256,040  

Deferred income taxes

     9,366        17,449  

Other long-term liabilities

     24,830        23,710  
  

 

 

    

 

 

 

Total liabilities

     664,428        628,803  

Contingently redeemable common stock

     —          22,293  

Commitments and contingencies

     

Shareholders’ equity

     277,769        237,923  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 942,197      $ 889,019  
  

 

 

    

 

 

 

 

5


REV GROUP, INC.

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands except shares and per share amounts)

 

     Three Months Ended  
     January 28,
2017
    January 30,
2016
 

Net sales

   $ 442,937     $ 372,780  

Cost of sales

     395,417       337,841  
  

 

 

   

 

 

 

Gross profit

     47,520       34,939  

Operating expenses:

    

Selling, general and administrative

     56,498       27,106  

Research and development costs

     1,198       1,139  

Restructuring

     864       2,965  

Amortization of intangibles

     2,614       2,243  
  

 

 

   

 

 

 

Total operating expenses

     61,174       33,453  
  

 

 

   

 

 

 

Operating (loss) income

     (13,654     1,486  

Interest expense

     7,478       6,687  
  

 

 

   

 

 

 

Loss before benefit for income taxes

     (21,132     (5,201

Benefit for income taxes

     (7,829     (2,191
  

 

 

   

 

 

 

Net loss

   $ (13,303   $ (3,010
  

 

 

   

 

 

 

Loss per common share:

    

Basic

   $ (0.26   $ (0.06

Diluted

   $ (0.26   $ (0.06

Adjusted earnings per common share:

    

Basic

   $ 0.11     $ 0.07  

Diluted

   $ 0.11     $ 0.07  

Weighted Average Shares Outstanding

    

Basic

     51,360,163       52,506,201  

Diluted

     51,360,163       52,506,201  

 

6


REV GROUP, INC.

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

 

     Three Months Ended  
     January 28,
2017
    January 30,
2016
 

Cash flows from operating activities:

    

Net loss

   $ (13,303   $ (3,010

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation and amortization

     7,421       4,872  

Amortization of debt issuance costs

     585       550  

Amortization of senior note discount

     42       51  

Stock-based compensation expense

     25,506       5,683  

Deferred income taxes

     (8,563     (3,870

(Gain) Loss on disposal of property, plant and equipment

     (205     46  

Changes in operating assets and liabilities:

     (45,230     (2,347
  

 

 

   

 

 

 

Net cash (used in) provided by operating activities

     (33,747     1,975  

Cash flows from investing activities:

    

Purchase of property, plant and equipment

     (18,624     (5,734

Proceeds from sale of property, plant and equipment

     919       —    

Acquisition of businesses, net of cash acquired

     (20,581     (1,615

Acquisition of Ancira assets

     —         (6,435
  

 

 

   

 

 

 

Net cash used in investing activities

     (38,286     (13,784

Cash flows from financing activities:

    

Net proceeds from borrowings under revolving credit facility

     79,600       13,296  

Repayment of debt assumed from acquisition

     —         (3,698

Repayment of long-term debt and capital leases

     —         (269

Redemption of common stock and stock options

     (3,251     (1,401
  

 

 

   

 

 

 

Net cash provided by financing activities

     76,349       7,928  
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     4,316       (3,881

Cash and cash equivalents, beginning of period

     10,821       4,968  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 15,137     $ 1,087  
  

 

 

   

 

 

 

 

7


Non-GAAP Financial Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, management believes that the evaluation of our ongoing operating results may be enhanced by a presentation of Adjusted EBITDA and Adjusted Net Income, which are non-GAAP financial measures. Adjusted EBITDA represents net income before interest expense, income taxes, depreciation and amortization as adjusted for certain non-recurring, one-time and other adjustments which we believe are not indicative of our underlying operating performance and Adjusted Net Income represents net income as adjusted for certain after-tax, non-recurring, one-time and other adjustments which the Company believes are not indicative of its underlying operating performance as well as for the add-back of certain non-cash intangible amortization and stock-based compensation.

The Company believes that the use of Adjusted EBITDA and Adjusted Net Income provide additional meaningful methods of evaluating certain aspects of its operating performance from period to period on a basis that may not be otherwise apparent under GAAP when used in addition to, and not in lieu of, GAAP measures. The tables below present reconciliations of the Company’s presented non-GAAP Adjusted EBITDA and Adjusted Net Income measures and forecasted Adjusted EBITDA to the most directly comparable GAAP measure of Net Income (in thousands, except per share amounts):

REV GROUP, INC.

ADJUSTED EBITDA BY SEGMENT

(Unaudited; in thousands)

THREE MONTHS ENDED JANUARY 28, 2017

 

     Fire &
Emergency
     Commercial      Recreation     Corporate &
Other
    Total  

Net Income (loss)

   $ 12,698      $ 4,563      $ 139     $ (30,703   $ (13,303

Depreciation & Amortization

     2,809        1,930        2,157       525       7,421  

Interest Expense

     1,172        817        42       5,447       7,478  

Provision (benefit) for income taxes

     4        —          —         (7,833     (7,829
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

EBITDA

     16,683        7,310        2,338       (32,564     (6,233

Transaction expenses

     —          —          —         378       378  

Sponsor expenses

     —          —          —         131       131  

Restructuring costs

     —          864        —         —         864  

Stock-based compensation expense

     —          —          —         25,506       25,506  

Non-cash purchase accounting

     30        —          435       —         465  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 16,713      $ 8,174      $ 2,773     $ (6,549   $ 21,111  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

THREE MONTHS ENDED JANUARY 30, 2016

 

     Fire &
Emergency
     Commercial      Recreation     Corporate &
Other
    Total  

Net Income (loss)

   $ 12,108      $ 2,589      $ (2,651   $ (15,056   $ (3,010

Depreciation & Amortization

     1,899        2,125        748       100       4,872  

Interest Expense

     1,018        464        10       5,195       6,687  

Benefit for income taxes

     —          —          —         (2,191     (2,191
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

EBITDA

     15,025        5,178        (1,893     (11,952     6,358  

Transaction expenses

     —          —          —         —         —    

Sponsor expenses

     —          —          —         25       25  

Restructuring costs

     307        —          95       2,563       2,965  

Stock-based compensation expense

     —          —          —         5,683       5,683  

Non-cash purchase accounting

     —          —          —         —         —    
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 15,332      $ 5,178      $ (1,798   $ (3,681   $ 15,031  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

8


REV GROUP, INC.

ADJUSTED NET INCOME

(Unaudited; in thousands)

 

     Three Months Ended  
     January 28,
2017
    January 30,
2016
 

Net loss

   $ (13,303   $ (3,010

Adjustments:

    

Amortization of intangibles

     2,614       2,243  

Transaction expenses

     378       —    

Sponsor expenses

     131       25  

Restructuring costs

     864       2,965  

Stock-based compensation expense

     25,506       5,683  

Non-cash purchase accounting expense

     465       —    

Income tax effect of adjustments

     (10,987     (3,984
  

 

 

   

 

 

 

Adjusted Net income

   $ 5,668     $ 3,922  
  

 

 

   

 

 

 

REV GROUP, INC.

FORECASTED ADJUSTED EBITDA RECONCILIATION

(In thousands)

 

     Fiscal Year 2017  
     Low      High  

Net income

   $ 40,000      $ 43,000  

Depreciation and Amortization

     32,000        32,000  

Interest Expense

     15,000        15,000  

Income Tax Expense

     23,000        25,000  
  

 

 

    

 

 

 

EBITDA

     110,000        115,000  

Transaction Expenses

     500        500  

Sponsor Expenses

     300        300  

Restructuring Costs

     1,100        1,100  

Stock-based Compensation Expense

     26,500        26,500  

Loss on Debt Extinguishment

     11,000        11,000  

Non-cash purchase Accounting Expense

     600        600  
  

 

 

    

 

 

 

Adjusted EBITDA

   $ 150,000      $ 155,000  
  

 

 

    

 

 

 

 

9


REV GROUP, INC.

SEGMENT INFORMATION

(Unaudited; in thousands)

 

     Three Months Ended  
     January 28,
2017
    January 30,
2016
 

Net Sales:

    

Fire & Emergency

   $ 185,371     $ 128,356  

Commercial

     130,221       140,450  

Recreation

     128,870       106,535  

Corporate & Other

     (1,525     (2,561
  

 

 

   

 

 

 

Total Company Net Sales

   $ 442,937     $ 372,780  
  

 

 

   

 

 

 

Adjusted EBITDA:

    

Fire & Emergency

   $ 16,713     $ 15,332  

Commercial

     8,174       5,178  

Recreation

     2,773       (1,798

Corporate & Other

     (6,549     (3,681
  

 

 

   

 

 

 

Total Company Adjusted EBITDA

   $ 21,111     $ 15,031  
  

 

 

   

 

 

 
Period-End Backlog:    January 29,
2017
    October 29,
2016
 

Fire & Emergency

   $ 577,074     $ 550,769  

Commercial

     227,512       226,067  

Recreation

     107,653       80,420  
  

 

 

   

 

 

 

Total Company Backlog

   $ 912,239     $ 857,256  
  

 

 

   

 

 

 

 

10