Rev Group Inc . (NYSE:REVG) released its Q3 Fiscal 2024 earnings, reporting an earnings per share (EPS) of $0.51, in line with analyst expectations. However, revenue fell short at $597.9 million against a forecast of $630.99 million. Despite this revenue miss, the company's stock saw an 8.11% rise in premarket trading, reaching $32, as investors reacted to strong operational performance and strategic updates.
Key Takeaways
- Rev Group's EPS met expectations, but revenue missed forecasts.
- The stock rose 8.11% in premarket trading, indicating positive investor sentiment.
- Adjusted EBITDA saw a significant increase of 49.7%.
- The company updated its fiscal 2024 guidance, maintaining strong expectations.
- Challenges in the RV market persist with declining sales and dealer inventories.
Company Performance
Rev Group reported a decrease in consolidated net sales, down 8.6% year-over-year to $579 million. Despite this decline, the company achieved a 49.7% increase in consolidated adjusted EBITDA when accounting for divestitures. The company's net debt stands at $165 million with a favorable net debt to trailing 12-month adjusted EBITDA ratio just below 1x. These results reflect ongoing efforts to streamline operations and improve efficiency.
Financial Highlights
- Revenue: $597.9 million, down 8.6% year-over-year.
- Earnings per share: $0.51, matching forecasts.
- Adjusted EBITDA: $45.2 million, up 49.7% when adjusted for divestiture.
Earnings vs. Forecast
Rev Group's EPS of $0.51 met the forecast, showing stability in earnings performance. However, the revenue of $597.9 million missed the forecast of $630.99 million, highlighting challenges in achieving expected sales targets. The revenue miss may raise concerns about the company's ability to meet future forecasts if trends continue.
Market Reaction
Despite the revenue shortfall, Rev Group's stock experienced an 8.11% increase in premarket trading, reaching $32. This rise suggests that investors are focusing on the company's operational improvements and strategic initiatives. The stock's movement contrasts with the previous day's close of $29.6, reflecting renewed investor confidence.
Company Outlook
Rev Group has updated its fiscal 2024 guidance, projecting revenue between $2.350 billion and $2.450 billion, and adjusted EBITDA between $155 million and $165 million. The company anticipates continued momentum in its Fire and Emergency businesses and plans to provide intermediate financial targets in the next earnings call. Price increases of 6-7% in these segments are expected for 2025.
Executive Commentary
CEO Mark Skaneschny emphasized the company's focus on efficiency and value, stating, "Each unit we ship today is worth more than the unit shipped yesterday." He also highlighted improvements in custom unit production, saying, "We are getting more efficient on some more custom units as they're coming through."
Q&A
During the earnings call, analysts inquired about margin improvements in the Fire and Emergency segment and strategies for managing discounts in the RV segment. The company confirmed the successful wind-down of the E&C business and discussed efforts to enhance production efficiency across vehicle segments.
Risks and Challenges
- The RV market faces a 15-20% decline in retail sales, impacting revenue potential.
- Dealer inventories have decreased by 20% since the start of the year, indicating potential supply chain or demand issues.
- The company must navigate macroeconomic pressures that could affect future sales and profitability.
Rev Group's strategic focus on operational efficiency and market positioning appears to resonate positively with investors, despite challenges in meeting revenue expectations.
Full transcript - Rev Group Inc (REVG) Q3 2024:
Conference Operator: and welcome to REV Group's Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Drew Conant.
Thank you. You may begin.
Mark Skaneschny, President and CEO, REV Group: Good morning and thanks for joining us. Earlier today, we issued our Q3 fiscal 2020 24 results. A copy of the release is available on our website at investors. Revgroup.com. Today's call is being webcast and a slide presentation, which includes a reconciliation of non GAAP to GAAP financial measures, is available on our website.
Please refer now to Slide 2 of that presentation. Our remarks and answers will include forward looking statements, which are subject to risks that could cause the actual results to differ from those expressed or implied by such forward looking statements. These risks include, among others, matters that we have described in our Form 8 ks filed with the SEC earlier today and other filings we make with the SEC. We disclaim any obligation to update these forward looking statements, which may not be updated until our next quarterly earnings conference call, if at all. All references on the call today to a quarter or a year are our fiscal quarter or fiscal year, unless otherwise stated.
Joining me on the call today is our President and CEO, Mark Skaneschny as well as our CFO, Amy Campbell. Please turn to Slide 3 and I'll turn the call over to Mark. Thank you, Drew, and good morning to everyone joining us on today's call. Today, I will provide an overview of the operating, commercial and financial highlights achieved within the quarter, then move to the quarter's consolidated financial performance. We are pleased to have delivered another strong quarter of operating results that reflect continued success and execution of our strategies to improve the performance of our municipal backlog businesses while managing the impact of a challenging environment in our cyclical businesses.
Double digit margin performance has been the target for each of our businesses since I arrived in 2020, and I applaud the various teams that contributed to the Specialty Vehicles segment achieving an adjusted EBITDA margin of 10.3% in the 3rd quarter. Within the quarter, our ambulance business continued to benefit from momentum it has built over the past several quarters with programs designed to increase line rates and improve efficiencies. The fire group is on a similar journey
Drew Conant, Presenter/Moderator, REV Group: to drive operational improvements and
Mark Skaneschny, President and CEO, REV Group: their efforts led to the improvements and their efforts led to the specialty vehicle sequential adjusted EBITDA increase for the quarter. Fire continues to pursue a strategy of simplification along with the development of manufacturing centers of excellence designed to eliminate waste, increase throughput and generate operating efficiencies. As we discussed last quarter, we have leveraged Spartan chassis production from our center of excellence in Michigan across our network of fire plants and brands to drive efficiency and cost effectiveness. In addition, we have dedicated line at our Spartan Emergency Response Facility in South Dakota to produce our S-one hundred and eighty fire apparatus, which has enabled our brands to deliver semi custom fire apparatus at accelerated lead times. Furthermore, the integration of sales, inventory and operations planning or SIOP across the group has resulted in a dual benefit contributing to improved throughput as well as a year over year reduction of Fire Division's inventory balances.
Ongoing efforts to create greater alignment between the Fire Group's resources and manufacturing footprint in addition to these improvements to our upfront processes have resulted in improved completions of trucks. As I've stated in the past, each unit we ship today is worth more than the unit shipped yesterday. Increased line rates have contributed to greater profitability throughout the year as we gain efficiencies and reduce the number of aged units from backlog. We exited the quarter with a robust $4,400,000,000 consolidated backlog led by the strength of inbound orders for fire and emergency vehicles. Specialty Vehicles segment backlog of $4,100,000,000 increased $386,000,000 or 10% as compared to last year.
The prior year's backlog of $3,700,000,000 included $421,000,000 of backlog attributed to the bus businesses. Adjusting for the divestiture of Collins and wind down of E and C, which had largely exhausted its backlog exiting the 3rd quarter, segment backlog increased $807,000,000 or 27% versus the prior year quarter. Year to date, the combined book to bill of the F and E businesses was one times on a unit basis driven by both increased shipments and a normalization of demand. This is in line with the guidance we provided in December for fiscal 2024. The benefits of our pricing strategy delivered a book to bill ratio of 1.3 times on a revenue basis in the legacy Fire and Emergency businesses during the same period.
The duration of backlog varies by business and the specific unit type, but generally remains in the range of 2 to 3 years. The backlog is elevated versus historical norms, but is in line with our industry peers given the current demand environment. Prior to 2020, the typical delivery time for a pumper unit was approximately 9 to 12 months, while an aerial ladder truck would be approximately 12 to 15 months. The ambulance group had historically operated with less visibility and backlog of 3 to 6 months. It remains our expectation that industry demand will continue to normalize, which combined with our successful increase in line rates is expected to deliver a more balanced supply and demand dynamic as we focus to achieve best in class delivery times.
The recreational vehicle end market remains challenged as discretionary purchases for such items as RVs have been delayed by consumers. According to SSI data, industry wide retail sales of Class A, Class B and Class C units declined 15%, 20% and 4% respectively over the trailing 12 months ended in June versus the prior year period. Despite these challenges, the data shows that retail sales of our motorized brands have outpaced the industry across these categories over the same period. We are looking forward to showcasing the quality and innovation of our model year 2025 units
Drew Conant, Presenter/Moderator, REV Group: at the
Mark Skaneschny, President and CEO, REV Group: Hershey RV Show and Elkhart Open House in September. The fall shows provide insights into customer and dealer sentiment and the interactions and feedback are expected to provide an early read on calendar year 2025 demand. After September, the next big indication of activity will be in January at Tampa RV Show, which historically sets the pace for the year's retail demand. Until we gain greater clarity on end market demand, we will continue to work closely with our dealers to focus on production of units that align with consumer preferences, while we aggressively address our cost structure. I would like to acknowledge the hard work by the RV segment team, which has continued to work tirelessly to navigate the market challenges and manage costs resulting in decremental margins of 14% year over year.
The wind down of production at our E and C municipal transit bus business in Riverside, California is progressing ahead of schedule with the last units expected to be completed within the Q4. I would like to thank all our dedicated employees as well as our suppliers and channel partners that have made the difficult process an operational success by delivering quality buses to our customers while exceeding the expected timeline. With the completion of the final units, we expect to realize the remaining net working capital benefit within the Q4 and we will proceed with the sale of E and C or assets when the wind down is complete. Our balance sheet and financial position continued to strengthen during the quarter. Actually in the Q3, net debt was $165,000,000 and our net debt to trailing 12 month adjusted EBITDA ratio was just below 1 times leverage.
Actually in the year, we expect to maintain leverage less than 1 times. Over the years, we have been disciplined and nimble in our capital allocation philosophy using our available capital to invest back in the business, pay down debt, buy back shares and pay both regular and special dividends. We have regular and ongoing discussions regarding our go forward capital allocation priorities and we'll communicate an updated capital allocation strategy when we share our intermediate financial targets later this year. Turning to Slide 4, consolidated net sales of $579,000,000 decreased $101,000,000 compared to the Q3 of last year. In the prior year, reported sales included $46,000,000 attributable to Collins Bus, which was divested in the Q1 of this year.
Adjusting for the sales impact of Collins, net sales decreased $55,000,000 or 8.6 percent due to lower sales in the Recreational Vehicle segment and fewer sales of terminal trucks, partially offset by increased sales in the fire, emergency and municipal transit bus businesses. Consolidated adjusted EBITDA of $45,200,000 increased $5,800,000 compared to the Q3 of last year. Included in the prior year reported adjusted EBITDA was $9,200,000 attributable to Collins Bus, resulting in an increase of $15,000,000 or 49.7 percent when adjusting for the divestiture. The increase was driven by the fire, emergency and municipal transit bus businesses, partially offset by lower earnings in the Terminal Trucks Business and Recreational Vehicle segment. Fire and Emergency results benefit from higher volumes, the operational improvements mentioned earlier and price realization.
The fire and emergency results demonstrate the team's success in offsetting the increased cost of doing business through operational improvements allowing the businesses to maximize the pricing opportunity within backlog. Please turn to slide 5 and I'll turn the call over to Amy for detailed segment financials.
Amy Campbell, CFO, REV Group: Thank you, Mark. Specialty Vehicles 3rd quarter segment sales were $432,000,000 a decrease of $34,000,000 compared to the prior year. As Mark mentioned, the prior year quarter included $46,000,000 of net sales attributed to Collins Plus. Excluding the impact of the Collins divestiture, net sales increased $12,000,000 or 2.8% compared to the prior year quarter. The increase in net sales was primarily due to price realization and increased shipments of fire apparatus, ambulance units and municipal transit buses, partially offset by lower shipments of terminal trucks.
The legacy fire and emergency businesses delivered year over year increases in unit shipments and revenue from both the fire and ambulance groups. Unit starts, completions and shipments remain at or near historic highs, which has reduced the number of aged units and improved the overall mix of the backlog. Terminal truck sales were lower than the previous year, which was consistent with the expectation provided in our update to full year guidance shared during the Q2 call. The Q4 is expected to be the last quarter of difficult year over year comparisons for the terminal truck business. And accordingly, we don't anticipate singling out its performance after we exit this fiscal year.
Specialty Vehicles segment adjusted EBITDA was $44,300,000 in the Q3 of 2024, an increase of $14,600,000 compared to $29,700,000 in the Q3 of 2023. Adjusting for $9,200,000 of adjusted EBITDA attributed to Collins Bus in the prior year, 3rd quarter earnings increased $23,800,000 year over year or 116 percent. The increase in adjusted EBITDA was primarily due to increased performance in the fire, ambulance and municipal transit bus businesses partially offset by lower adjusted EBITDA from the terminal trucks business. Higher fire and emergency contribution was driven by increased unit shipments versus the prior year and greater price realization. Improved municipal transit bus contribution versus the prior year was primarily related to favorable mix, price realization and lower labor and operating expenses as the wind down progressed ahead of schedule.
Lower terminal truck contribution was related to soft industry demand. Today's update to the consolidated outlook anticipates continued fire and emergency sales and earnings momentum, partially offset by continued end market softness in the terminal trucks business. And as mentioned earlier, the shipment of the final E and C buses within the 4th quarter. We expect the momentum in F and E to result in modest sequential revenue growth and a slightly higher specialty vehicles margin as we exit the year. On slide 6, Recreational Vehicle segment net sales of $147,400,000 decreased $67,100,000 or 31% year over year.
The sales decline is primarily the result of lower unit shipments in all categories versus the prior year as well as increased discounting and an unfavorable mix of lower priced units within certain businesses. Sales within the quarter were lower than our expectations as dealers remain hesitant to replenish inventory and have deferred the delivery of model year 2025 orders in certain categories. Recreation segment adjusted EBITDA was $9,400,000 decreased $9,000,000 or 49% versus the prior year. The decrease in adjusted EBITDA was primarily the result of lower unit volume, inflationary pressures and increased discounting, partially offset by cost reductions that were executed to align fixed and variable costs with the current level of demand. The decremental margin on lot sales of 14% year over year and 9% sequentially demonstrates the RV team's efforts to aggressively contain costs and manage through this difficult period of customer demand.
Recreation segment backlog of $240,000,000 at quarterend decreased $168,000,000 or 41% versus the prior year. The decrease is primarily due to production against backlog, lower order intake and order cancellations over the trailing 12 months. Some dealers, as I mentioned earlier, opted to defer delivery of orders within the backlog. However, we are encouraged by the improved health of our dealer inventory, which has declined 20% since the beginning of the calendar year as retail sales outpaced our wholesale shipments. Given the current level of retail demand, dealer reluctance to restock channel inventory and uncertainty surrounding interest rates, we expect 4th quarter sales, earnings and margin to be sequentially about flat.
Now turning to slide 7, trade working capital on July 31 was $323,000,000 an increase of $4,000,000 compared to $319,000,000 at the end of fiscal 2023. The increase was primarily a result of lower customer advances and lower accounts payable, partially offset by a decrease in accounts receivable and inventory. As anticipated, customer advances have declined year to date as units are shipped from the backlog and consuming deposits previously received, while incoming deposits have slowed in today's higher interest rate environment. However, for the full year, we expect inventory reductions to offset customer deposit reduction, largely driven by shipments from finished goods in the Q4. Year to date cash used by operating activities was $15,200,000 Adjusted free cash flow within the quarter was $29,500,000 including $5,900,000 spent on capital expenditures.
Year to date adjusted free cash flow was $16,500,000 which excludes approximately $54,000,000 of tax and transaction costs related to divestiture activities that are presented within cash from operations, but offset by gross cash proceeds included in the investing section of the statement of cash flows. Net debt as of July 31 was $164,500,000 including $50,500,000 of cash on hand compared to net debt of $128,700,000 as of October 31, 2023. We declared a regular quarterly cash dividend of $0.05 per share payable on October 11 to shareholders of record on September 27. At quarter's end, the company maintained ample liquidity for strategic initiatives with approximately $262,000,000 available under our ABL Rivoli credit facility. Turning to Slide 8, we provide our updated 2024 fiscal full year outlook, which builds upon the momentum within the Specialty Vehicles segment, partially offset by continued end market weakness in the Recreational Vehicles segment.
Today's update for top line guidance is a range of $2,350,000,000 to $2,450,000,000 Adjusted EBITDA guidance is $155,000,000 to $165,000,000 or $160,000,000 at the midpoint, which reflects an improvement of $4,000,000 at the low end of the range to account for the 3rd quarter performance. The update to guidance today includes an approximate $50,000,000 total revenue reduction related to softer than expected RV demand and its resulting earnings impact as we continue to manage to a 15% decremental margin with aggressive cost actions. However, we expect that the lower RV performance will be more than offset by improvements in the fire and emergency businesses. Adjusted net income is expected to be in the range of $76,000,000 to $89,000,000 and net income in the range of $226,000,000 to 240,000,000 Expectations for adjusted free cash flow, full year capital expenditures and interest expense remain the same with adjusted free cash flow in the range of $61,000,000 to 72,000,000 dollars full year capital expenditures in the range of $30,000,000 to $35,000,000 and interest expense expected to be $26,000,000 to $28,000,000 Finally, as you may recall, we provided intermediate financial targets at our Investor Day in April of 2021. We will be providing updated intermediate financial targets and a refreshed capital allocation philosophy along with our fiscal 2025 outlook during our regular fiscal Q4 earnings call in December.
We plan to extend the length of that call while opening the line to analysts and investors. Consistent with our normal outreach, we will also be available for follow-up calls to address additional questions or clarifications. Thank you again for joining us on today's call. Operator, we would now like to open the call up for questions.
Conference Operator: Thank you. Our first question comes from Jerry Revich with Goldman Sachs (NYSE:GS). Please proceed with your question.
Drew Conant, Presenter/Moderator, REV Group: Yes. Hi. Good morning, everyone. Nice performance in specialty vehicles. Amy, I'm wondering if we could just unpack the fire and emergency portion of the performance.
What was the bridge for the year over year margin improvement that you saw? How much was pricing? What did you see from inflation and productivity? Can you just unpack the margin bridge for F and E specifically, please?
Amy Campbell, CFO, REV Group: Yes. Thanks, Jerry. Thanks for the nice comments. So if you look at legacy F and E specifically, we saw revenue grow kind of mid teens, low to mid teens and about 60% of that revenue growth was price mix, about 40% of it was driven by volumes. In the quarter, I would say that we largely offset inflationary costs and saw we didn't specifically give EBITDA margins in the quarter, but saw pretty significant year over year EBITDA margin growth in the legacy F and E business and also saw a little over 100 basis points in EBITDA margin growth from the second to the third quarter.
Drew Conant, Presenter/Moderator, REV Group: Thank you. And in terms of the comments that you folks provided on book to bill on units versus revenue, the 30% difference, can we feel back how much of that 30% difference is content versus just pure price? In other words, what should we be thinking about as the potential higher cost of that content that you folks are seeing? Because I think there are 2 levers, right? 1 is absolute price.
And 2, I think you folks are driving a shift towards more custom of high end of the range. But please correct me if I'm wrong on that.
Amy Campbell, CFO, REV Group: Yes. Jerry, I don't know that I have the breakout. So we talk about units for legacy F and E, the unit book to bill at about one time and the dollar book to bill at 1.3 times with fire a little ahead and ambulance kind of going through more of a normalization period. Breaking out that 1.3 times in S and E between what's price and what's content, I'd say while we certainly do have a lot of custom units, we're also introducing we talked quite a bit about Mark did again this morning the S180, which is more of a semi custom unit. And so I mean, I guess what I would say is I don't have that 1.3 times book to bill in terms of revenue broken out between content and price.
Drew Conant, Presenter/Moderator, REV Group: And can I sneak in one last one on RV? Can you just give us an update in terms of absolute units of inventory versus prior peak and versus prior trough with the revenue reduction here? I guess what's our level of confidence that we've captured the move in inventories that we typically see?
Amy Campbell, CFO, REV Group: Are you speaking specifically to dealer inventories, Jared?
Drew Conant, Presenter/Moderator, REV Group: Yes. Thank you, Amy. RV dealer inventories.
Mark Skaneschny, President and CEO, REV Group: Yes. As we said, the dealer inventory is down 20% from the calendar year. I think we're getting more closer to pre COVID type of levels that our inventory levels are feeling good about the health of that inventory, Jerry. It's just they've been reluctant to replace orders. So we're seeing a nice like we talked about retail outpacing wholesales in the current market.
And so it's a matter of just that's why we highlighted a couple of shows. We're anxious to see what the consumer appetite is and then coming out of those what the dealer placements would be in the last couple of months dealers have been waiting. So the retailers are showing nicely, but the wholesales have been down and we've been doing shutdowns that we talked about in prepared calls to manage our costs there. So it's really a wait and see in September once we show.
Drew Conant, Presenter/Moderator, REV Group: Appreciate it, Mark. Thank you. Thank you both.
Mark Skaneschny, President and CEO, REV Group: Thanks, Jerry.
Conference Operator: Our next question comes from Angel Castillo with Morgan Stanley (NYSE:MS). Please proceed with your question.
Angel Castillo, Analyst, Morgan Stanley: Hi, good morning and thanks for taking my question. I was hoping we could expand a little bit more on the margin conversation, particularly as we look forward. I think you noted, particularly within Specialty Vehicles, you expect slightly higher margins. Can you just put a finer point on kind of the cadence and maybe quantify how much of margin expansion you anticipate here in the next quarter? And as we think about maybe the early days of fiscal year 'twenty five, I understand you're not going to give an outlook at this point, but just any kind of sense based on what you have in your backlog, what is kind of implied in terms of margin expansion for the next few quarters?
Amy Campbell, CFO, REV Group: Yes. Thanks, Angel. So I think if you look at the 3rd to 4th quarter sequentially, and I referenced we expect to see moderate revenue and EBITDA growth in terms of EBITDA dollars. I think think of that in terms of kind of low single digit type of growth and with EBITDA margin percent up just slightly. And where we would expect so that puts us at double digit margins for specialty vehicles exiting 2024, our expectation is that we would continue that trend as we move into and hold those double digit margins in
Angel Castillo, Analyst, Morgan Stanley: 2025. Got it. That's helpful. Thank you.
Amy Campbell, CFO, REV Group: And then maybe go ahead.
Angel Castillo, Analyst, Morgan Stanley: No, no, no. Sorry, you go ahead.
Amy Campbell, CFO, REV Group: Yes. And I guess maybe I would add, as we look into 2025, what we've talked about in terms of pricing and we talked about the 9 innings of the game, we're in kind of Tier 4 or 5 for fire and Tier 5 or 6 for ambulance. And those are kind of mid single digit types of pricing increases as we move from tier to tier. And so that kind of 6% to 7% price increase on our value added content next year is what we would be thinking about. And we so we're not giving 2025 guidance at this time, but certainly be looking to offset some of our inflationary headwinds as we move into 2025.
Angel Castillo, Analyst, Morgan Stanley: Got it. That's very helpful. And then maybe just to expand on the RV side. Can you talk about maybe the discounting? It sounds like the dealer inventories maybe are getting to a little bit of a better place and we'll get more clarity as we go into the some of the shows.
But as you think about the step change from maybe 2Q to 3Q and the level of confidence that we will that won't continue, can you talk about maybe some of the discounting or competitive dynamics in the industry and your ability to kind of outperform that?
Mark Skaneschny, President and CEO, REV Group: Yes, I think that's some of the things with the revenue drop. We are participating in the discounting as others have and that was a driver when you look at our Q3 results. So, I think we'll continue to see that in providing discounts as we move forward. But as the inventory gets healthier, those have definitely dropped sequentially when you talk about industry wide. So, where they started in Q1, Q2, they've come down in Q3 and as the inventory has become less aged sitting on the dealer lots and the introduction of 25, model year 25 units, the discounting has been reduced on the new units.
It's more the retail assistance that's provided on aged units within the inventory. But with the retails we're seeing, the dealer inventory health is definitely from an industry perspective improving.
Angel Castillo, Analyst, Morgan Stanley: Very helpful. Thank you.
Conference Operator: Our next question is from Mig Dobre with Baird. Please proceed with your question.
Mig Dobre, Analyst, Baird: Good morning. Thanks for taking the questions. So maybe going back to Specialty Vehicles, just for my own clarification, I guess. Can you remind us, E&C, where we are in the process of winding down that business? Maybe how much revenue you recognize in the quarter from E and C?
And my recollection is that there's an EBITDA drag that's associated with E and C as well that at least in theory should be going away in fiscal 2025?
Mark Skaneschny, President and CEO, REV Group: That's right. That's right, Mig. So it was around $40,000,000 in the quarter. So as we talked about it, we accelerated some of the shipments from Q4 that we expected, the great work that the team did. We were able to produce essentially 5 months' worth of production in 3 month period.
So I'm very proud of the team. Even though we've announced shutdown that we've had a very engaged workforce and suppliers and customers there. So we are ahead of schedule from that perspective and expect to have a complete wind down here within early parts of the Q4.
Amy Campbell, CFO, REV Group: I'll just add to what Mark said. I think when you look at EBITDA margins with that pull ahead of 5 month sales and some cost actions that we've been able to take in the quarter as we wind that business down. It's not only had a schedule, but it was accretive to the overall EBITDA margins in the quarter.
Mig Dobre, Analyst, Baird: Okay. So E and C was actually profitable?
Drew Conant, Presenter/Moderator, REV Group: Yes. Yes.
Mig Dobre, Analyst, Baird: Okay. And in the terminal trucks, I do know that that's been a drag and you highlighted that for several quarters. I'm trying to understand the magnitude of this drag in terms of what's been what's embedded in your full year guidance for fiscal 2024? And what's the right way to think about this business beyond 2024? Are we likely to see another step down in production next year?
Are we at a trough? And what's going on margin wise at current production levels?
Mark Skaneschny, President and CEO, REV Group: Yes, we're definitely at a trough and that's normal in our cycle as we talked about previously. Mig coming into an election year, that's a normal trough in this business. So we said that's a mid single digit margin business. Obviously, COVID it was double digit, but it's a mid single digit business going forward, EBITDA margin business.
Mig Dobre, Analyst, Baird: Okay. And we saw that there were some restructuring charges that impacted specialty vehicles. Can you talk at all about what some of the actions were that you took and any savings that would come into fiscal 2025?
Mark Skaneschny, President and CEO, REV Group: That was a continuation of the E and C closure, right? So as we're booking restructuring as people exit the business.
Mig Dobre, Analyst, Baird: Okay. Okay. So it's all E and C driven. And then lastly for me, in Recreation, I guess, one of the things that we talked about in the past was this whole concept of backlog erosion and how eventually that's going to be reflected in production. Your backlog continued to step down sequentially.
So I'm sort of curious, do you think that $100,000,000 call it $50,000,000 roughly of revenue can be sustained going forward? Or is it fair for us to expect yet another round of production cuts come the first half of fiscal twenty twenty five if demand simply stays where it currently is end user demand or sell through if you would? Thank you.
Mark Skaneschny, President and CEO, REV Group: Yes. I would say, Mig, like I responded to Jerry, it's a wait and see here. But definitely, we are flexing as much cost to enable us to hold that 6% margin that we delivered. So we are within the month as we get orders or don't get orders, we do flex our workforce. So I do like I said in my prepared remarks, I'm very appreciative of the people that we don't have a fixed schedule, right?
So people are on a very variable schedule within the business, don't have any backlog as far as what our work schedules and times that we're taking out. So we will flex those, but again to say is it 150 or whatever, it's still too hard to call here, but I can assure you we are flexing the cost and our production schedule to align with our demand.
Mig Dobre, Analyst, Baird: Understood. Thank you.
Conference Operator: Our next question comes from Mike Schlotzsky with D. A. Davidson. Please proceed with your question.
Mike Schlotzsky, Analyst, D.A. Davidson: Yes. Hi, good morning. Thanks for taking my questions.
Drew Conant, Presenter/Moderator, REV Group: Good morning, Mike.
Mike Schlotzsky, Analyst, D.A. Davidson: I want to follow-up with you on the some of your F and E comments. Great to see that you've got really the whole margins at least into next year of some of this business. And I'm glad to see you also were able to improve the units coming out this past quarter and for much of the year. I'm curious if you could just give us an update as to what inning you think you're in as far as production rates and how much you would be able to improve the speed of production at this point versus where you would hope it would be in the over the long term?
Mark Skaneschny, President and CEO, REV Group: Yes, I think our goal here, I think from an ambulance perspective as we've talked about before, they're pretty much at pre COVID rates and a little bit higher. So we feel good about where we're at from a production perspective in ambulance. We are looking at incremental capacity where we can by adding lines and whatnot or partial second shifts. But in fire, I would say we're getting that more stabilized. We still have opportunity more from an efficiency perspective, Mike, than it is incremental efficiency perspective, Mike, than it is incremental throughput.
So, it's just getting more efficient on some more custom units as they're coming through. So, I would say it's less a capacity discussion than it is in a production discussion just becoming more efficient as we move more complex units through the plant. I feel very good that I demonstrated in our Q3 where we are at. I think ambulance like I said in my prepared remarks continue their momentum that we've seen. And then fire is catching up to ambulance from a throughput as we've expected.
So they are on track with what we expected. As Amy just said, we will exit we obviously exited Q3 at double digit margins and we will exit Q4 at double digit margins in Specialty Vehicle segment.
Mike Schlotzsky, Analyst, D.A. Davidson: Okay, got it. And then Amy, I
Amy Campbell, CFO, REV Group: think you mentioned in one
Mike Schlotzsky, Analyst, D.A. Davidson: of the earlier questions in the earlier answers to one of the questions about fewer a little bit fewer custom type trucks and more standardized versions of trucks coming off the line. Could you remind us whether there's a significant margin change or a difference if the mix were to go a lot more towards standardized product, Whether you think you could make it up on the volume side if there was a large change going over time as folks want to get their trucks faster or in a more efficient manner?
Amy Campbell, CFO, REV Group: Yes. No, there's not a significant margin difference between the trucks, Mike, and that answer was more as Jerry's point, as Jerry's question was that we're doing more and more custom trucks and I just wanted to clarify that we're also we've built and designed and having good customer acceptance with this S-one hundred and eighty, which is a bit more of a semi custom truck. But as far as margins go, I think specifically to your question, there's not really a material difference between the trucks.
Mike Schlotzsky, Analyst, D.A. Davidson: Okay. Thank you so much. I'll leave it there.
Mark Skaneschny, President and CEO, REV Group: Okay. Thanks, Mike.
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