REVG - NYSE

Greetings, and welcome to REV Group, Inc.'s Second Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session 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, Mr. Drew Konop, Vice President, Investor Relations. Thank you. You may begin.

Good morning and thanks for joining us. Earlier today, we issued our second quarter fiscal 2025 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 as well as reconciliations from non-GAAP to GAAP financial measures is available on the Investors section of 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 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 this call to a quarter or year are our fiscal quarter or fiscal year unless otherwise stated. Joining me on the call today is our President and CEO, Mark Skonieczny, as well as our CFO, Amy Campbell. Please turn to Slide three and I will 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 that we achieved within the quarter, then move to the quarter's consolidated financial performance. We are pleased to report strong second quarter performance that reflects the strength and resilience of our operations. The standout this quarter was the sustained year-over-year increase in manufacturing throughput at the majority of our fire plants, which played a pivotal role in driving our top-line growth. As many of you know, the fire business has been a central focus of our operational transformation efforts over the past several years. Throughout fiscal 2023 and 2024, we increased fire and emergency vehicle production by nearly 30% from their respective 2022 run rates. The specialty vehicle segment outlook provided in December for low single-digit volume growth reflects a more normalized production ramp environment as well as a heavier mix of more complex ambulance units that require more hours to complete. However, thanks to continued momentum in our manufacturing programs, ranging from equipment upgrades and process optimization to workforce training and lean initiatives, the fire group's second quarter shipments continued to accelerate. Over the past year, I commented that the fire group had been catching up to the ambulance group in terms of productivity gains and plant efficiency, and I am proud to report they achieved this alignment during the second quarter. The businesses have made great progress in that time and delivered impressive year-over-year performance. Within the ambulance group, the mix shift from vans to higher content modular units also progressed more rapidly than anticipated. Utilization of lean principles for the daily management of operations drove higher efficiency and reduced production cycle times, ultimately enabling us to deliver more quickly. The improved throughput translated directly into higher volumes, which in turn contributed to meaningful earnings growth. Looking ahead, we believe the structural improvements we are making, not just in terms of output, but also in quality and cost discipline. The trajectory we have established has provided us with a solid foundation for sustainable growth, and we remain confident in our ability to continue to scale efficiently and leverage centers of excellence across our diverse footprint as demand continues to evolve. We will continue to focus on investing in people and equipment, operational excellence programs, and product innovation across all our businesses to further the company's success. Now I would like to provide a further update on tariffs, which were initially announced just prior to our first quarter earnings call. In general, and as has been widely reported by other industrial companies, the supply chain environment remains dynamic as companies deal with the uncertainty regarding the amount and duration of tariffs. Specific to REV Group, as we noted in our last earnings call, we had approximately 120 days of inventory on hand entering our second quarter, and as a result, experienced minimal impacts related to tariff increases within the quarter. A reminder, all of our manufacturing facilities are located in the United States, most of our sales are in the U.S., and our raw materials and other inputs are in large part sourced in the U.S. We therefore have limited direct import exposure. Throughout the quarter, the supply chain team worked diligently with our suppliers to gain a greater understanding of the indirect exposure to tariffs and the potential financial impact. We expect a $5 million impact within the recreational segment related to Class B luxury van chassis that are imported from Europe. 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. We cannot predict what the tariff landscape will look like in the future, but close collaboration with vendors, continued operational discipline, and strategic sourcing position us well to navigate future uncertainty and deliver sustainable value to our shareholders. Thanks to the combined efforts of these actions, we remain confident in our ability to contain the impacts from the tariffs that are currently in place and meet our updated full-year financial guidance that Amy will be covering shortly. Moving on, this year marked a significant milestone for the Ambulance Group as we celebrate 50 years of delivering industry-leading ambulances to first responders from our Orlando facility. Since being formed in downtown Orlando in 1975, Wheel Coach has remained committed to innovation, quality, and performance—values that have defined the vehicles they bring to the market. Over the past five decades, Wheel Coach has grown from a team of five employees manufacturing mobility vans and type two ambulances into a nationally recognized leader known for setting new standards in safety, durability, and design. Today, the company employs over 700 employees, has built and delivered over 50,000 ambulances to large and small municipalities and commercial fleets across the globe, in addition to being an approved ambulance supplier for the U.S. General Services Administration or GSA. As an advocate of passenger and patient safety, Wheel Coach was the first in the emergency vehicle industry to conduct IIHS side impact crash and rollover testing, the first to engineer internal emergency door releases, and the first to receive the ISO certified ambulance manufacturer accreditation. It also has a long history of production innovation, pioneering CNC machine-cut doors for repeatable accuracy, as well as introducing the patented Cool Bio for improved airflow, greater accessibility to the compressor, and enhanced exterior lighting. This anniversary is not just a celebration of their history, but a testament to the trust that customers, dealers, and employees have placed in them and a moment to look forward to an even more dynamic future. As a leading fire apparatus manufacturer, we are proud to sponsor and exhibit at FDIC International, the premier event for fire and rescue professionals annually in Indianapolis. Known for delivering world-class training, education, and innovation, FDIC is more than just a trade show; it's a cornerstone of firefighter and EMT preparedness and safety. Our presence at the conference underscores our longstanding commitment to supporting the men and women who work valiantly to serve and protect our communities every day. By showcasing several of our latest fire trucks, we aim to highlight cutting-edge advancements in safety, performance, and quality that continue to set our apparatus apart in the industry. From our high-performance pumpers and aerials to specialized rescue vehicles, our display emphasized reliability, ergonomic function, and innovations that align directly with the real-world demands that our first responders contend with in the field. Participating in FDIC International is not only an opportunity to demonstrate leadership in our apparatus design but also a chance to support the continued growth and safety of fire services overall. We remain committed to listening, learning, and evolving alongside the brave professionals we serve. By collaborating with the fire community at FDIC, we gain invaluable insights that inform our future innovations and strengthen our role as a trusted partner in fire and rescue. As part of our ongoing strategy, we have made the strategic decision to exit the non-motorized travel trailer and truck camper product categories through a sale of the Lance Camper business. 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. There is a significant geographic distance between this operation located in Southern California and our core RV business units in Indiana, presenting logistical and operational challenges that impact our ability to effectively optimize and manage it within our overall RV portfolio. As our only non-motorized business, over time it has become a less significant part of our overall strategic focus, with scale that no longer aligns with the broader direction of our portfolio. We felt that maintaining a presence in these product categories in its manufacturing location would divert resources from higher-performing assets and growth opportunities. In addition to recreation portfolio optimization, I am pleased to announce that Gary Gunther has been named President of the Vehicle segment. Gary has been a member of the REV Group team since 2011 when he joined as division controller and most recently served as the vice president general manager of the REV Recreation Group business, encompassing Fleetwood RV, Ally Rambler, American Coach, and Gold Shield fiberglass manufacturing facilities. Gary will work closely with Mike Lancieri, who has announced his planned retirement later this year. Mike began his tenure with REV Group in 2008 when he joined Renegade RV. Over thirteen years with the company, he played a pivotal role in transforming Renegade into one of REV Group's top-performing recreational vehicle brands, establishing its reputation as a best-in-class Super C manufacturer and a premier producer across the broader Class C category. In recognition of his leadership, he was promoted to President of the RV segment in 2021. Mike will serve as executive adviser of the recreational vehicle segment while he transitions his roles and responsibilities to Gary over the coming months. I would like to extend our sincere thanks to Mike for his years of dedicated service to Renegade RV and to all the brands within our recreational vehicle segment. Next, our cash flow profile has historically been impacted by several seasonal factors, often resulting in the first half of our fiscal year. However, in the second quarter, we generated strong cash flow driven by our solid earnings performance, disciplined trade working capital management, and customer advances tied to a higher-than-expected level of orders in the specialty vehicle segment. Significant year-to-date cash generation reflects consistent financial discipline across the enterprise. Given the level of performance, we made the decision to repurchase approximately 2.9 million shares of our common stock for $88 million within the quarter under our $250 million share repurchase authorization. We hold a balanced and long-term view toward capital allocation and view this as a compelling opportunity to return value to our shareholders while continuing to invest in our businesses and maintain a strong balance sheet. We believe this was a sound use of capital in line with our strategy to create sustained shareholder value through thoughtful and opportunistic actions. Finally, today we are updating our fiscal 2025 guidance to reflect the strong year-to-date performance as well as our expectation that we have continued to manage the impact of tariffs throughout the remainder of the year. Amy will provide details shortly. We are also increasing our capital expenditure plan to reflect additional investments in our businesses. Over the past several years, we have invested in our businesses beyond our maintenance CapEx requirements to achieve improved throughput, efficiency, quality, and safety. Today's top and bottom-line results reflect the successful deployment of those investments by businesses. Having demonstrated sustained production capability, we are confident that further investment will continue to drive increased production levels and product development. A prime example of organic investment bringing market-driven solutions to life is the development and expansion of the S-180 program, a modular pre-engineered fire apparatus that provides the feel and functionality of a custom truck with a delivery time of under one year, significantly lower than that of fully customized vehicles. The recent extension of this program from its original Spartan brand to other fire brands represents not only a major step forward in our product strategy but also is a testament to the collaboration and execution of our teams across engineering, operations, marketing, and sales. What began with early adopters within the Spartan dealer network has now expanded into a broader set of geographies and brands. Positive customer feedback on units and service and the strong quoting activity underscores the product's growing popularity and the value it delivers across diverse customer needs. Today's increase in our capital expenditure guidance will in part be directed toward a $20 million investment in our Brandon, South Dakota facility to expand production of both the S-180 and fully custom Spartan apparatus as well as the advancement of painting and fabrication processes across the campus. Organic investment remains our top capital allocation priority, and all businesses are investing in people, process, and equipment to drive growth, improve quality, and deliver innovation. Turning to Slide four, I will provide our consolidated second quarter financial results. Consolidated net sales in the second quarter of 2025 were $629.1 million compared to $616.9 million in the second quarter of 2024. Net sales for the second quarter of 2024 included $32.9 million attributable to the E and C transit bus business that was exited within fiscal 2024. Excluding this impact, net sales increased $45.1 million or 7.7% compared to the prior year quarter. The increase, excluding the impact of the bus business, was primarily due to higher net sales in the specialty vehicle segment, partially offset by lower net sales in the Recreational Vehicle segment. We are pleased that the second quarter's performance continued to build upon our recent achievements. As I noted earlier, the standout this quarter was a sustained year-over-year increase in manufacturing throughput within the fire group, which played a pivotal role in driving our top and bottom-line growth. Consolidated adjusted EBITDA was $50 million compared to $37.5 million in the second quarter of 2024. Excluding the $1.5 million impact of the E and C, adjusted EBITDA increased $22.9 million or 63.6% year-over-year. I am also pleased that the recreational vehicle segment continued to navigate and execute well within a backdrop of soft industry demand and maintain a 6.2% segment adjusted EBITDA margin. Please turn to slide five, I will now turn it over to Amy for the detailed segment financials.

Thank you, Mark. Second quarter specialty vehicles segment sales were $453.9 million, an increase of $16.5 million compared to the prior year. The prior year's quarter included $32.9 million of net sales attributable to the municipal transit bus business that was divested within fiscal 2024. Excluding the impact of the divested business, segment net sales increased $49.4 million or 12.2% when compared to last year. The increase in revenue was primarily due to the higher unit production of fire apparatus units, a favorable mix of higher content ambulance units, and price realization. Partially offset by an unfavorable mix of fire apparatus in certain businesses. The Spartan emergency response business continued to drive mean setting new highs as you're both in unit shipments and net sales since its acquisition in 2020. Specialty Vehicles' adjusted EBITDA of $56.3 million increased by $22.5 million. The prior year's quarter included $1.5 million of adjusted EBITDA attributable to the divested transit bus business. Excluding the prior year contribution from the bus, specialty vehicles adjusted EBITDA increased $24 million or 74.3% versus the prior year. The increase was primarily the result of increased sales, driven by initiatives to increase manufacturing efficiencies, by investments to upgrade equipment and reduce downtime, and investments in technical training for our team. Fees in combination with favorable price realization drove higher sales and adjusted EBITDA in the quarter. The increase in total unit shipped across the fire business and improved efficiencies in the ambulance business, which allowed us to complete a more complex mix of modular units, is a direct reflection of the operational success we are achieving by focusing on lean principles and driving efficiencies across the businesses. 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. We continue to make steady progress on increasing production against the segment's backlog with the goal of reducing the backlog's duration and shortening delivery times. Measured on a unit basis, we have been successful in drawing down our fire and emergency backlog year-to-date versus fiscal 2024 year-end. Additional acceleration of shipments remains a primary focus for the teams, as we continue to strive to reduce delivery times. And the acceleration of shipments is the primary driver of the incremental CapEx spending, including the investment in our Brandon, South Dakota plant that we announced today. The top-line outlook for the specialty vehicle segment is for continued growth with sequential low single-digit revenue increases in the third and fourth quarters. Year over year, this is expected to result in mid-teens revenue growth for the second half versus last year's pro forma base. As a reminder and for modeling purposes, the divested transit bus business contributed $54 million of revenue and $6.3 million of adjusted EBITDA to the segment in the second half of fiscal 2024, with approximately 80% of those net sales and substantially all the earnings occurring within the third quarter. As Mark mentioned, we now expect approximately $10 million of adjusted EBITDA impact primarily in specialty vehicles, from non-chassis related tariffs that have been enacted resulting in the second half year-over-year revenue gains converting at a 20% to 25% incremental margin. This is lower than the previous range of 30% to 40% and reflects the headwinds to margins from tariffs that are currently in place but does not contemplate any additional changes to tariffs from those in effect as of today. Turning to slide six, recreational vehicle segment sales were $175.3 million, a decrease of $4.4 million or 2.4% versus last year's second quarter. Lower sales were primarily the result of fewer unit shipments related to continued soft end market demand. Decreased shipments in the Class A, Class B, and Class C categories were partially offset by an improved mix within the Class A and Class C categories, including more diesel and higher content units. While the end market remains challenged, our products continue to be well received and we are pleased that our brands have once again outperformed the broader industry with REV brand retail sales down 10% year over year versus the industry's 13% decline over the trailing twelve-month period ended March 31st. This is according to data from the stat survey. Recreation segment adjusted EBITDA of $10.9 million versus the prior year decreased $1.2 million or 9.9%. The decrease was primarily the result of lower unit volume, increased dealer assistance on certain models, and inflationary pressures partially offset by actions taken to better align fixed and variable costs with end market demand. Under a challenging end market backdrop, the segment continues to execute well and maintained a 6.2% adjusted EBITDA margin for the quarter. As Mark noted, we made the strategic decision to exit our non-motorized travel trailer and truck camper manufacturing business, which encompasses Lance Camper. We determined as of April 30th, 2025, that the assets and liabilities of Lance Camper met the criteria to be classified as held for sale. We also determined that the carrying value of the net assets held for sale was greater than their fair value, less expected cost to sell, resulting in a noncash loss of $30 million, which is partially offset by a $16.6 million income tax benefit. The impact of this loss and resulting income tax benefit are included in our financial statements for the three and six months ended April 30, 2025, as well as our updated guidance. Note Lance's results were included as a part of the recreational vehicle segment operating results in the fiscal second quarter. Segment backlog of $268 million declined 2% versus the prior year. The decrease is primarily related to soft end market and dealer caution to replace retail sales with new orders. While the industry destocking has created a headwind to new orders, we believe the overall dealer inventory profile is much healthier than it had been. Specific to REV brands, as of March 31st, the number of units on dealers' lots decreased 13% versus the prior year. We are pleased that 77% of the units remaining are for model years 2025 and 2026. The second quarter's book-to-bill of one times was also encouraging and supportive of our updated second-half revenue guidance to be approximately flat year over year. This is slightly lower than previous expectations for the segment and reflects potential consumer uncertainty that could weigh on demand. In addition, the second half adjusted EBITDA and margin for the recreational vehicle segment is expected to be negatively impacted by an estimated $5 million tariff impact related to the import of luxury Class B vans, which as Mark noted is limited in duration and will end once all import vans on order have been consumed with future purchases transitioning to US domestic plants. The combined result is an outlook for the full-year recreational vehicles revenue to be in the range of $625 to $650 million and adjusted EBITDA in the range of $30 million to $35 million. That said, we will continue to focus on the things that we can control: award-winning product offerings, cost management, and dealer relationships. Turning to slide seven, trade working capital on April 30th, 2025, was $207.3 million, a decrease of $40.9 million compared to the $248.2 million at the end of fiscal 2024. The decrease was primarily related to lower inventory balances, increased customer advances, and the timing of accounts payable, partially offset by the timing of accounts receivable. The reduction in inventory was a result of focused efforts to reduce the days on hand balances of chassis and raw materials across both segments, along with the reduction of finished goods in the recreation segment. While we are actively reviewing cost-saving opportunities for selective pre-buys in this dynamic environment, we remain confident that over the intermediate term, inventory reduction opportunities remain on the balance sheet. Cash from operating activities within the quarter was $117 million. We spent $11.4 million on capital expenditures within the second quarter, including investments in machinery to improve efficiency and product quality. Net debt as of April 30th was $101.2 million, including $28.8 million of cash on hand. This includes $88.4 million used within the second quarter to repurchase 2.9 million common shares at an average price of $30.70. In the quarter, we also paid cash dividends totaling $3.1 million, bringing the total of cash returned to shareholders in the first quarter to $91.5 million. In addition, we declared a quarterly cash dividend of $0.06 per common share payable on July 11th to shareholders of record on June 27th. At quarter's end, the company maintained ample liquidity for our strategic initiatives, with approximately $263.2 million available under our ABL revolving credit facility. Turning to slide eight, as previously mentioned, today, we are updating our full-year guidance. Given the increase in throughput and net sales realized by the specialty vehicles segment through the first half, we now expect full-year revenue growth in the specialty vehicles segment to be in the low double digits versus a 2024 pro forma revenue base of $1.56 billion, which excludes sales from the divested bus businesses. Adding the updated $625 to $650 million revenue expectation for the recreational vehicle segment results in consolidated top-line guidance being raised $50 million from the prior outlook to a range of $2.35 billion to $2.45 billion. The updated consolidated midpoint of $2.4 billion is an 8% increase versus fiscal 2024's $2.2 billion of pro forma net sales. Full-year adjusted EBITDA guidance is also updated to a range of $200 million to $220 million from its previous range of $190 million to $220 million to reflect the solid performance delivered through the first half of the year and higher throughput in the specialty vehicles segment that is expected to largely offset tariff impacts in the second half. At the raised midpoint of $210 million, adjusted EBITDA is expected to increase 45% versus fiscal 2024's pro forma of $145.2 million. Net income guidance has been updated to also include higher expense and the $30 million non-cash loss on the Lance Camper assets held for sale, net of a $16.6 million related income tax benefit, resulting in a range of $88 million to $107 million versus the previous range of $98 to $125 million. Adjusted net income is updated to be in the range of $100 million to $130 million from the previous range of $116 to $140 million. Full-year capital expenditure guidance has been raised to $45 million to $50 million from the previous range of $30 million to $35 million to reflect the incremental investments aimed at increasing throughput that we discussed earlier. Interest expense has been raised to a range of $24 million to reflect year-to-date share repurchase activity as well as a greater than expected customer advance balance. With full-year free cash flow in the range of $100 million to $120 million. Lower than normal free cash conversion in the second half reflects our plan for higher CapEx spending as well as an expected headwind from the timing of accounts receivable and accounts payable activity that was a net benefit in the second quarter and is expected to largely reverse within the third quarter of the fiscal year. We are pleased with the performance demonstrated by the specialty vehicle segment and continued cost containment within the recreational vehicle segment. In the first half, we capitalized on strong consolidated free cash flow by returning cash to shareholders and updating our capital plans with greater investments in our business. We look forward to continuing to pursue our strategic agenda from a position of strength. With 0.5 times net debt to trailing twelve-month adjusted EBITDA leverage, and over $260 million available on our ABL credit facility. Strong execution in the first half of the fiscal year has provided a solid foundation for continued momentum and opportunity to materially offset the impacts of tariffs which were not anticipated when we provided our initial 2025 guidance. I would now like to turn it back to the operator and open up for questions.

At this time, we will be conducting a question and answer session. Our first question comes from Mike Shlisky with D.A. Davidson. Please proceed with your question.

Hi, good morning. Thanks for taking my questions here. I wanted to touch first on the headwinds you had mentioned from tariffs. I think it's just $5 million in the recreational and some cost impacts in specialty vehicles. Can you comment on the time frame as to when some of these issues might kind of wash through the backlog and the output? Is this a fiscal 2025-only issue, or could we possibly see some impacts in 2026 as well?

Yeah. So I think the way to think about that, Mike, is to break them out and think about them separately. So for the RV tariff impact, we largely expect to pass through any cost increases with the exception of the $5 million of tariffs expected on the Class B luxury vans that are imported from Europe. We do not believe we can pass through those tariffs. And so those are limited in nature and primarily will impact the back half of 2025. There could be, you know, just based on consumption of those units that are on orders, some of that could move into the early part of 2026. But that is contained and would not be ongoing. And then when you look at the specialty vehicles tariffs you know, we referenced what we expect to be approximately a $10 million tariff impact in the back half of the year, you know, that we will largely offset with increased throughput. But I think the way to think about those tariffs is that is about a half a year. And so when you look into 2026, you know, that's a 2% to 2.5% increase in non-chassis material costs from tariffs. And so we would have a headwind of about that amount in the first half of the year, and then that would roll off and there would not be a headwind in comps in the second half of the year.

Got it and then, you know, just kind of curious, the investments in the facility in Brandon, it's just an interesting way to increase probably the hotter or more important product categories in fire just to get more throughput on the S-180. Do you have any kind of sense if you invest $20 million, what the approximate return might be, how much more EBITDA can you pump out of that business thanks to that investment? I mean, it's a tough question, but any kind of bracket you could keep us around the return on that would be appreciated.

Certainly, we have done those analyses and it is good. The way to think about, you know, the investments not only in our Brandon, South Dakota, facility, but we are also making investments in fabrication and paint and assembly across most of our fire and ambulance plants that are included in that CapEx raise that we announced today for the second half of the year. The primary driver of those CapEx investments is to reduce lead times, to keep the S-180 lead time, you know, under a year, which is what we have talked about, but also to reduce lead times across, you know, all of our fire and ambulance plants. And with that, you know, it would drive incremental throughput, production, and shipments that would allow us to offset any headwinds, you know, beyond what we provided in our intermediate target that we see coming.

Got it. Maybe one last one for me. As you look at those pre-published 2027 EBITDA goals, does Lance have any major impact if different when you sell it on that $310 million long-term goal? Can you also comment more broadly just up to this now, do you still feel confident that you are going to get there by 2027, particularly if there's any kind of normalization in recreational between now and then?

So in answer to your first question, I think we have been clear that Lance is less than 10% of the total sales for recreation and the motorized units provide almost all of the EBITDA. So there is no material impact from the sale of Lance on our 2027 intermediate target. You know, I'm not we're not going to write updates today, but the investments and CapEx, the ability to reduce lead times and increase production, then give us confidence that we can offset whatever headwinds we have over the next couple of years.

Awesome. Thanks for the color.

Our next question comes from Mig Dobre with Baird. Please proceed with your question.

Hey, good morning guys. This is Pete on for Mig this morning. Thank you for taking my questions. My first question is on recreation. You mentioned higher dealer assistance this quarter. Will those dealer incentives continue to move higher on a year-over-year basis in the second half? Or is that something we can maybe see stabilize or be pulled back at some point as inventories improve? Then along these lines, is there any update you can provide on dealer inventories and where those might stand by category?

So in terms of dealer assistance moving into the second half, you know, we did pull down our second half guide for recreation primarily driven by two factors. One being the $5 million of Class B luxury van tariffs that we talked about, and the other being, you know, an expectation that as we pass, I think there's some consumer confidence risk in the back half of the year. Where will interest rates be? And then as we pass through price increases from tariffs, what does that also do to consumer demand? And so I think without speaking specifically to dealer discounting and how that is year over year, we do expect a softer second half than we previously had expected, and now expect that to be about flat versus last year in terms of sales. Great. And then your second question was on dealer inventory?

Correct. Just dealer inventories if there's any color, you know, by category.

Yeah. I think it's a pretty much. But what I would say is I think dealer inventory is fairly healthy in Class A and Class C categories. Class B is the area where we have seen some incremental dealer assistance and would expect that to continue into the second half of the year given where dealer inventory levels are in that class of RVs.

I think overall, if you look at the overall dealer inventory across all categories, like Amy said in prepared remarks, we feel very good in the positioning as we enter the 2026 model year and the age of the units that we referenced being 13% down overall is really the fact that the older units have been discounted and are leaving our dealer lots. So we feel really across the industry that the dealer inventories have improved from a health perspective and aging perspective.

Awesome. Thanks for that guys. My second question now moving to specialty. You know, specifically, I want to focus on the S-180. Two-part question. One, is there any color you could provide on what you are seeing with orders for that S-180 program? And then two, is there any color on the margin impact, you know, tailwind from a heavier mix of standardized units? I guess another way of asking the second part of that question is what the margin profile might be on an S-180 as compared to your average custom apparatus.

Yeah. So on orders, I mean, we continue to see, you know, demand for those S-180s. And as we mentioned in the script, it's not just for the Spartan. We've also expanded that S-180 program to include our Ferrara and KME brands as well. So and those products are built in that Brandon, South Dakota plant. So we continue to see demand increases there. Without giving specifics on margins, I would just say that those margins are comparative with other custom trucks.

Got it. Thanks, Amy. I guess sticking with specialty, last question here. Is there any color you can provide on the fire and ambulance, you know, respective demand cycles in terms of where we're at as an industry? And then REV specifically, anything you could share on what the expectations might be for orders in the back half?

Yeah. So when you look at where we've seen demand, I would say it's transpiring as we had expected. It is probably still slightly above those long-term trend levels, but it has come off its peaks. You know, and we expect, you know, I think orders to transition in the back half of the year at more normalized demand levels that reflect, let's say, a ten-year trend level.

Awesome. Thank you, guys.

Our next question comes from Angel Castillo with Morgan Stanley. Please proceed with your question.

Hi, thank you. This is Brendan on for Angel. I was just curious, particularly within specialty, if you could talk to what kind of pricing you've been getting on incremental orders there? And then just how we should be thinking about kind of some kind of built-in inflation buffer for those new orders? Thank you.

Yeah. I think what I would say when it comes to pricing, Brendan, is that, one, I want to clarify that we do not reprice any trucks that are in the backlog, that any pricing actions that we would take would be prospective on future orders. And so far this year, we have not taken a general price increase on either fire trucks or ambulances.

Okay. Thank you. And then what's the latest on the US Senate and then do you foresee that, you know, really impacting your ability to raise pricing going forward in your opinion?

Yeah. I would say at this point, I have nothing to add to that question, Brendan.

Okay. And then just last one for me. Within recreational vehicles, just any update on what you're seeing in terms of wholesale versus retail demand? I mean, obviously, you made the inventory commentary earlier, but just curious more specifically wholesale versus retail. Thank you.

Yeah. I mean, I think we talked about some positive news in the retail environment for recreation. April was the first month in 28 months that saw a sequential increase in retail shipments versus March. So it was the first time in 28 months we saw a month-over-month increase in shipments. So retail has seen some early signs. Now I think, you know, there's certainly a concern in the back of the year as we've discussed. And wholesale shipments, we do believe dealers have you know, really are right now at a much healthier situation in terms of dealer inventory. The dealer inventory that is on dealer hands is more is newer model years than what they had previously said. So the overall dealer inventory which should drive better wholesale orders, I think also looks positive.

Great. Thank you.

Our next question comes from Jerry Revich with Goldman Sachs. Please proceed with your question.

Hi, good morning everyone. This is Jatin Khanna on behalf of Jerry. How would you characterize the M&A pipeline today? And what's your level of optimism on opportunities to make a needle-moving acquisition over the next twelve to eighteen months?

Opportunities like we said, you know, we will be opportunistic if the right opportunity comes up. You know, as I said in my prepared remarks, we thought, you know, buying back shares was a great return to shareholders from a value perspective. So we felt good there. But, you know, that's always something that we look at. From our existing portfolio, and, you know, we look inwards and outwards. So if there are opportunities, we're definitely looking at those. But again, our forefront opportunity, like I said in my prepared remarks, is to continue to invest organically, buy back shares, and look at opportunistic M&A as it comes up.

Got it. Thank you so much.