REV Group Inc. reported net sales in the second quarter, ended April 30, were $615 million, an increase of 1% compared to $608.9 million in the year-ago period. The increase in consolidated net sales was driven by continued sales growth in both the commercial and recreation segments, partially offset by lower net sales in the fire and emergency (F&E) segment.

The company’s second quarter net income totaled $5.6 million, or 9 cents per diluted share, compared to net income of $7.4 million, or 11 cents per diluted share in last year’s second quarter. The decline in net income was primarily due to higher interest expense.

Adjusted net income for the second quarter 2019 was $15.2 million, or 24 cents per diluted share, compared to adjusted net income of $15.5 million, or 24 cents per diluted share, in the second quarter of 2018. Adjusted EBITDA in the second quarter 2019 was $36.1 million, compared to $34 million in the year-ago period.

“Our results through the first half of fiscal 2019 were generally in-line with our expectations. The actions we took over the last several quarters to improve our focus on organic growth and profitability are contributing to better results in most of our businesses,” said REV CEO Tim Sullivan. “We continued to experience order growth across most of our product categories, which resulted in continued strong backlog levels in both our F&E and commercial segments and positions us well for the remainder of the year.

“We believe the material and chassis supply disruptions experienced in fiscal year 2018 and through the beginning of the most recent quarter are now behind us,” he continued. “Lead times have improved, with some returning to historical levels, which has allowed our supply chain to stabilize. In addition, our continued focus on improving working capital efficiency and debt reduction resulted in improved, year-to-date cash used in operating activities and free cash flow was significantly better than the prior year. We remain on track to meet our full fiscal year 2019 objectives.”

Recreation segment net sales were $199.7 million for the second quarter 2019, an increase of $0.9 million, or 0.5% compared to $198.8 million a year ago. The increase in net sales was primarily due to increases in sales across the majority of the company’s RV brand lineup, partially offset by a decrease in sales of Class A motorhomes.

Recreation segment backlog at the end of the second quarter 2019 was $169.0 million, down 41.9% from $290.7 million at the end of fiscal year 2018 and was down 25% percent sequentially compared to the first quarter of 2019. The decrease in recreation backlog was primarily reflective of the softer Class A RV market.

Second-quarter 2019 recreation segment adjusted EBITDA increased 36.2% to $17.3 million, compared to $12.7 million in last year’s secodn quarter. Second-quarter recreation segment adjusted EBITDA margin grew 230 basis points to 8.7% of net sales compared to 6.4% in the second quarter 2018. The expansion in profitability was attributable to higher volumes and improved profitability in the Class B and Super C product categories as well as improved profitability in the Company’s towables product line.

Sullivan commented, “While the broader RV market continues to show softening, particularly at the wholesale level, demand for our Class B, Super C, and towable brands remains in-line with the outlook we provided earlier in the year. We continue to adapt to the changes in this market and shifting our mix has helped to drive significant year-over-year adjusted EBITDA improvement in the segment this quarter. We believe we are well positioned in the market as the industry continues to adjust to current demand levels and that our first-class brands and ongoing performance improvements in this segment will support continued growth in profitability.”

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