REV Group (REVG 16.67%) reported its fiscal 2025 second-quarter earnings on June 4, 2025, highlighting an 8% increase in consolidated mid-point revenue guidance and a 45% year-over-year hike in adjusted EBITDA guidance for fiscal 2025 driven by strong specialty vehicle operational gains. Management announced a $20 million plant expansion, a strategic portfolio exit, and raised capital expenditure plans, while also addressing approximately $15 million in tariff headwinds expected in the second half of the fiscal year and confirming a significant share repurchase program.
Specialty Vehicle Segment Outpaces with Efficiency Gains and Backlog Growth
The specialty vehicle segment, excluding the divested bus operations, delivered a 12.2% revenue increase and a 74.3% surge in adjusted EBITDA versus the prior year quarter, with the Spartan Emergency Response business segment achieving record shipment levels. Segment backlog reached $4.3 billion at quarter-end, driven by a book-to-bill ratio of 1.1, robust demand for fire apparatus, and productivity-focused capital investments, now including a $20 million expansion at the Brandon, South Dakota, plant.
“Specialty Vehicles segment backlog exiting the quarter was $4.3 billion. The increase versus last year was related to the continued strong demand for fire apparatus as well as pricing actions with a book-to-bill ratio of 1.1 in the second quarter.”
— Amy Campbell, CFO
This persistent backlog and accelerating throughput support durable revenue visibility and margin expansion, positioning the business as a structural beneficiary of public safety capital spending and production optimization initiatives.
Portfolio Optimization: Exit of Lance Camper Sharpens Strategic Focus
Management is divesting the non-motorized Lance Camper operation, a move prompted by subscale economics, geographic dislocation from RV centers, and negligible impact to core earnings, resulting in a one-time $30 million non-cash loss, partially offset by a $16.6 million tax benefit. The motorized RV division drives nearly all EBITDA for the recreation segment, which preserved a 6.2% adjusted EBITDA margin despite declining industry demand and REV brand retail sales declined 10% year over year, compared to the industry’s 13% decline over the trailing 12-month period ended March 31.
“Exiting Lance Camper aligns with our broader objective of concentrating on scalable operations with stronger competitive positioning and margin potential, and we have begun active discussions with prospective buyers of the business. Despite efforts to improve operational efficiency, this business has underperformed our targets due to scale and various other factors.”
— Mark Skonieczny, President and CEO
The rationalization frees management to accelerate investments in higher-return, scalable assets and focuses capital allocation on proven margin contributors, bolstering the long-term growth trajectory and return profile.
Tariff Exposure Contained, Investment Commitment Raises FCF Deployment
While new tariffs will drive a $10 million adjusted EBITDA impact in specialty vehicles in the second half and a $5 million adjusted EBITDA hit in recreation for the second half, management has proactively shifted chassis sourcing to U.S. suppliers and increased full-year capital expenditure guidance to $45 million–$50 million, with $20 million allocated to S-180 and custom apparatus expansion. 2.9 million shares were repurchased for $88 million at an average price of $30.70, reflecting opportunistic capital returns enabled by $117 million in cash from operations.
“We expect a $5 million impact within the recreational segment related to Class B luxury van chassis imported from Europe in the second half. The tariff impact is related to purchases and commitments already in place and is limited to a select number of units. We have transitioned our future purchases of these chassis, once all imported units have been consumed, to U.S. domestic plants to mitigate exposure. In addition to this item, we have estimated embedded within today’s updated guidance an approximate $10 million second-half impact of tariffs on our material spend, largely within the specialty vehicle segment.”
— Amy Campbell, CFO
Tariff risk remains transitory given supply chain adjustments, while intensified organic capital deployment and share buybacks indicate both confidence in cash generative capacity and a disciplined approach to long-term shareholder value creation.
Looking Ahead
Management raised consolidated FY2025 revenue guidance to $2.35 billion–$2.45 billion and adjusted EBITDA guidance to $200 million–$220 million, reflecting specialty vehicle outperformance expected to offset $10 million in second-half tariff pressure. Net income guidance, incorporating the Lance Camper divestiture loss, is now $88 million–$107 million, with adjusted net income at $100 million–$130 million. Full-year capital expenditure guidance increased to $45 million–$50 million to support capacity expansion and process efficiency initiatives; Free cash flow guidance stands at $100 million–$120 million, constrained in the second half by higher CapEx and working capital normalization.
This article was created using Large Language Models (LLMs) based on The Motley Fool’s insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.