REV Group, Inc.

Greetings. Welcome to REV Group Incorporated Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Drew Knapp, Vice President of Investor Relations and Corporate Development. Thank you. You may begin.

All right. Thank you, Sherry. Good morning, and thanks for joining us. Earlier today, we issued our second quarter fiscal 2022 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 two of that presentation. Our remarks and answers will include forward-looking statements, which are subject to risks that could cause actual results to differ from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we've described in our Form 8K filed with the SEC earlier today and other filings that 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 this call to a quarter or a year are our fiscal quarter or fiscal year unless otherwise stated. Joining me today on the call are our president and CEO, Rod Rushing, as well as our CFO, Mark Skanechny. Please turn now to slide three and I'll turn the call over to Rod.

Thank you, Drew, and good morning to everyone joining us on today's call. Today I will provide an overview of the quarter's consolidated performance and then move to commercial, operating, and financial highlights achieved within the quarter. before turning it over to Mark for a detailed segment of financials. Second quarter results reflect continued strong order demand and execution in a challenging supply chain environment that has impacted industrials for the past three quarters. Strong demand for components and materials, combined with lingering labor challenges within our supply base, have restricted the availability of key components such as wiring harnesses, radiators, axles, and others. As a result, our businesses that manufacture purpose-built chassis such as fire apparatus, and municipal transit buses continue to experience throughput challenges and labor inefficiencies related to rework as these components are received. Our upfitting businesses have also experienced inefficiencies as OEM provided chassis receipts declined throughout the quarter. While we experienced improved sequential chassis pool allocations in the first quarter, several OEMs scheduled shutdowns or limited production at their facilities within the second quarter which adversely impacted the fill rate against these allocations. The receipts of chassis are much lower than expected, and what is delivered is almost always of a different mix to what our production schedule required. This impacts our ambulance, school bus, and certain recreation businesses' throughput and efficiencies. Second quarter consolidated net sales of $576 million decreased 11 percent versus $644 million in the second quarter of last year. The decrease was driven by lower sales within the fire and emergency and commercial segments, which is partially offset by increased sales within the recreation segment and price realizations from the actions that we have taken over the past year. Completions in the fire and emergency segment were challenged by shortages of chassis and key components mentioned earlier. The recreation supply chain has remained resilient and the segment continued to deliver strong results and execution with record sales against their record backlog. Consolidated EBITDA of $23.8 million was down $21.7 million versus the $45.5 million of the prior year. Current year results were driven by the recreation segment, which posted a record $28.7 million adjusted EBITDA and a record 11.9% margin performance. This was largely offset by lower sales, labor inefficiencies, and inflationary pressure within fire and emergency and commercial segments. Inefficiencies in the quarter were due to lower unit sales and our decision to maintain the direct labor staffing levels required to complete rework and deliver these essential need vehicles to our customers. Please turn to slide four for highlights of the second quarter. The backlog of each of our segments is at a record level. We continue to experience strong in-market demand for our vehicles. This combined with lower production driven by previously mentioned component and chassis shortages. have resulted in record consolidated backlog of $3.6 billion, an increase of 55% versus the prior year. At our current line rates, backlogs extend into fiscal year 2024 for several of our businesses. In April, we were pleased to debut the first North American-style fully electric fire truck at the Fire Department Instructors Conference. This new electric fire truck allows departments to drive and pump on electric only and delivers the longest electric-only pumping duration in the industry. The show generated new interest from dealers and customers of our E1, Ferrara, KME, and Spartan brands. Attendees were among the first to see and learn about Vector, which is now available in each of these brands. We continue to return cash to our shareholders in the form of dividends and share repurchases. Within the quarter, we deployed $21.5 million towards the repurchase of common shares consistent with our balance use of capital. Exiting the second quarter, our leverage ratio was 2.1 times net debt to trailing 12-month EBITDA, which is near a low end of our target range. Our updated free cash flow guidance of $64 million at the midpoint provides ample opportunity for additional share repurchases, token acquisitions, or debt reduction after accounting for potential dividend payouts in the second half. Please turn to slide five. As you know, the supply chain challenges we referenced in today's earning release and on this call have now existed for several quarters. Entering the second quarter, we believed that our supply chain would improve in the second half of this fiscal year. Within the quarter, we did not experience improved supply chain, and in certain cases, the situation has worsened. We have updated our expectations with the current view that a supply chain recovery has likely been pushed into calendar year 2023. Our supply chain team is in constant contact with our key suppliers, including having our people onsite at suppliers' facilities. I am personally communicating with executive management at our OEM partners regarding the allocation and fulfillment of chassis to meet our production plans. The availability of semiconductors and electronic components have resulted in the OEMs temporary closing a portion of their factories or reducing shifts over the past several months, as they have reported. This has resulted in lower than expected chance of receipts in the second half and planned lower line rates within our ambulance business. These actions will be aligned with appropriate flexing of costs to match reduced production rates. We continue to work to find creative solutions to navigate a shortage of critical parts. We have placed labor into our supply base where necessary. Efforts are ongoing to improve our multisourcing engineering solutions to address sole source components. Within the second quarter, we put boots on the ground and have created a physical presence that keeps suppliers to drive operational intensity needed to fulfill our demand. Last quarter, we discussed pricing strategies that included both forward pricing and repricing a portion of our backlog. We continue both efforts with actions that are designed to align the backlog and new sales with our current and future build costs. Our pricing process includes Continuous review of anticipated foreign inflation aligned with our current production lead times by business and by product type, and we will continue to move to price accordingly to preserve price costs. Finally, the RevDrive business system continues to be deployed across the enterprise. We would have undoubtedly been farther along in this process if the working environment were more stable, more predictable, and consistent with the pre-COVID conditions. Over the past several quarters, we have placed overweighted focus and efforts on tactical actions in managing materials to achieve throughput and sourcing to mitigate input pricing. Despite the near-term disruptions, we remain committed that the strategies of our rail drive business system are correct and will provide long-term value creation that we defined in our Investor Day presentation. I will now turn it over to Mark for details on the second quarter financial performance. Mark?