REV Group, Inc. (REVG) Q1 2023 Earnings Call Transcript

REV Group, Inc. (NYSE:REVG) Q1 2023 Earnings Conference Call March 8, 2023 10:00 AM ET

Company Participants

Drew Konop - Vice President of Investor Relations

Mark Skonieczny - Chief Financial Officer, President & Chief Executive Officer

Conference Call Participants

Jamie Cook - Credit Suisse

Jerry Revich - Goldman Sachs

John Joyner - BMO Capital Markets

David Johnson - D.A. Davidson

Operator

Greetings and invited to nan REV Group, Inc. First Quarter 2023 Earnings Conference Call. At this time, each participants are successful listen-only mode. A little question-and-answer convention will travel nan general presentation. [Operator Instructions] As a reminder, this convention is being recorded.

It is now my pleasance to present your host, Drew Konop, VP, Investor Relations. Thank you. You whitethorn begin.

Drew Konop

Good morning, and acknowledgment for joining us. Earlier today, we issued our first 4th fiscal 2023 results. A transcript of nan merchandise is disposable connected our website astatine investors.revgroup.com. Today's telephone is being webcast and nan descent presentation, which includes a reconciliation of non-GAAP to GAAP financial measures is disposable connected our website.

Please mention now to Slide 2 of that presentation. Our remarks and answers will see forward-looking statements, which are taxable to risks that could origin existent results to disagree from those expressed aliases implied by specified forward-looking statements. These risks include, among others, matters that we've described successful our Form 8-K revenge pinch nan SEC earlier coming and different filings we make pinch nan SEC. We disclaim immoderate responsibility to update these forward-looking statements, which whitethorn not beryllium updated until our adjacent quarterly net convention call, if astatine all. All references connected this telephone to a 4th aliases twelvemonth aliases our fiscal 4th aliases fiscal year, unless different noted.

Joining maine connected nan telephone coming is our CFO and Interim President and CEO, Mark Skonieczny. Please move now to Slide 3, and I'll move nan telephone complete to Mark.

Mark Skonieczny

Thank you, Drew, and bully greeting to everyone joining america connected today's call. This morning, I will supply an overview of our consolidated first 4th capacity arsenic good arsenic elaborate conception financials. Before I remark connected the quarterly results, I'd for illustration to convey nan Board for nan opportunity to service successful nan domiciled of Interim President and CEO. Over nan past respective weeks, I visited galore of our locations pinch important clip dedicated to businesses wrong nan Fire & Emergency segment. While I've done this complete nan past years successful my domiciled arsenic CFO, nan latest visits successful my caller role, supply further penetration and knowing of our existent accumulation capabilities, business strengths and nan resources needed successful individual operations.

As we person noted successful nan past, our operational capabilities alteration crossed our scenery of businesses. During my visit, I was encouraged by nan section teams objection of thin devices and disciplines sloppy of wherever they are successful nan maturity curve and nan wide committedness to a civilization of lean. I person besides spent clip pinch my unit coordinating and communicating our way forward. I'd for illustration to reiterate externally what I've told my squad internally. The strategical schedule group distant astatine our 2021 Investor Day remains intact. We are committed to putting successful spot nan systems and processes we consciousness will streamline operations, trim costs and amended efficiency, resulting successful accrued portion throughput crossed nan enterprise. There has been a awesome woody of advancement complete nan past respective years, some astatine nan section and individual business portion level.

I will stock a fewer examples and results of these efforts wrong nan quarter. During our Investor Day, we gave examples of really merchandise platforming to trim quoting and manufacturing complexity and amended efficiencies by converging nan creation of definite products crossed various brands wrong nan Fire Group. The Fire Group has remained committed to its platforming schedule pinch continued attraction connected communal designs contempt nan move proviso concatenation situation we person been operating in. While we person not had clip to afloat converge designs and leverage our scale, nan teams person worked done multi-sourcing and engineering process strategies to create solutions for recovery. Within nan quarter, it made advances connected compartment and assemblage fabrication that are expected to trim bottlenecks and assembly constraints. It besides expects pump module manufacturing and creation changes to supply accrued efficiencies arsenic we exit nan fiscal year.

Engineering teams crossed nan endeavor proceed to supplement their ratio projects pinch outer resources. These engagements person allowed respective businesses to beforehand their drafting ensign capabilities arsenic good arsenic assistance pinch nan completion of measure of worldly documentation, some captious steps for accrued throughput. Proper drawings and associated bills and worldly not only provides nan instauration for elaborate activity instructions, they let much businesslike usage of inventory and will assistance done nett moving superior simplification efforts. Repeating this process crossed crushed will supply each of our businesses an opportunity for accrued statement rates, worldly savings, labour ratio gains and improved profitability.

As I mentioned earlier, I consciousness a existent consciousness of committedness to operational excellence and nan thin culture, which we outlined astatine our Investor Day 2 years ago. At nan time, we had conscionable started nan first waves of bronze, greenish and achromatic loop training for Lean Six Sigma. We had trained 500 of our 7,000 labor and developed a pipeline of 385 projects. Today, we expect to complete nan fiscal twelvemonth pinch complete half of our labor Lean-certified and person grown a number of projects to complete 1,500. While nan projects correspond various degrees of costs savings, each are typical of nan bottoms-up efforts of our labor to amended regular performance. I'm proud of each nan efforts and nan momentum this programme has demonstrated.

As we move done nan first quarter, began to acquisition an improved operating situation that benefited from a loosening proviso chain, improved OEM chassis measure rates and nan actions of our sourcing team. I would qualify nan wide constituent proviso is improving pinch shortages being much infrequent than nan wide quality we knowledgeable complete nan erstwhile 18 months. In respect to chassis, during nan quarter, we knowledgeable accrued receipts, which enabled respective businesses wrong nan F&E and Commercial segments to planned accumulation into nan 3rd quarter, immoderate pinch accrued statement complaint assumptions.

At 4th end, we maintained a chassis equilibrium of $103 million, a $40 cardinal summation from nan aforesaid clip successful nan anterior year. The existent chassis equilibrium is much successful statement pinch precoded levels. In regards to multi-sourcing, to date, we person completed complete 25% of our first targeted projects, which includes galore of nan cardinal components that constricted throughput complete nan past 18 months. However, wearing harnesses continued to situation our transit autobus business wrong nan 4th owed to a assortment of analyzable harnesses utilized successful its manufacturing process. Our sourcing squad continues its efforts to multisource harness proviso and will prosecute qualification and onboarding of caller suppliers for each targeted components passim nan remainder of nan year.

Within nan first quarter, we announced a return of nan long-time Ambulance manufacturing squad of Mark Van Arnhem and Randy Hansen. Mark will service arsenic President of Rev Amlin Group and Randy will move arsenic Chief Operating Officer of nan group; and Vice President and General Manager of our AAV brand. Mark has a agelong and successful executive history of nan REV Group and wrong nan expert community. Over nan past 35 years, he has served arsenic President and CEO of nan EV and Vice President, Sales and Marketing of Wheel Coach. Randy returned to AV, wherever he served for 30 years arsenic nan General Manager and nan marque became nan number 1 expert marque successful nan U.S.

I'm very pleased that Mark and Randy person rejoined nan squad and look guardant to nan effect that they will person arsenic we statesman to return accumulation to much historical levels. And finally, we proceed to build our portfolio of zero-emission vehicles pinch nan motorboat of a caller capacity marque hydrogen substance compartment terminal motortruck -- this motortruck is expected to run for astatine slightest 1 afloat displacement earlier refueling, which tin beryllium done successful arsenic small arsenic 15 minutes. At nan aforesaid time, it takes a accepted diesel truck. It received accolades that nan Technology and Maintenance Council Annual Meeting past week, and we expect important liking arsenic ports, intermodal customers, distributors and retailers activity to trim their c footprint.

We are enjoying a robust bidding situation successful different EV merchandise lines, including tight based schoolhouse buses, municipal transit buses and afloat electrical occurrence trucks. Within nan quarter, our next-generation artillery electrical and substance compartment transit autobus EVO was added to a superior authorities contracts, which will let our E&C business to waste straight to different transit agencies nationwide without nan request for a bidding process. And arsenic you tin spot connected nan slide, we are proud that nan all-electric vector was selected arsenic 1 of nan 4 refire pumpers that will beryllium portion of nan firefighting fleet utilized astatine nan ton International Speedway successful 2023.

Now, turning to our first 4th results connected Slide 4. Consolidated nett income of $584 cardinal accrued $47 cardinal versus nan first 4th of past year. The summation was driven by higher income wrong nan Commercial and Recreation segments, partially offset by a alteration successful income successful Fire & Emergency segment. Commercial conception income benefited from an improved proviso chain, which enabled last completion of units antecedently trapped successful with. As a result, portion completions, shipments and conception gross reached nan highest level since nan 2nd 4th of fiscal 2020. Recreation conception income were besides higher than expected arsenic we received an OEM fixed for a antecedently announced luxury van recall. Receiving nan package update 2 months up of expectations let greater-than-anticipated shipments of Class B and Class C units wrong nan quarter.

Partially offsetting nan summation successful Commercial and Recreation conception income was a diminution successful F&E conception sales, less shipments of occurrence isolated were partially offset by accrued shipments of higher contented ambulance units. Consolidated adjusted EBITDA of $21.3 cardinal accrued $3 cardinal versus nan anterior year. Increased publication from nan Recreation conception was partially offset by little contributions from nan F&E and Commercial segments. Higher Recreation conception EBITDA was chiefly a consequence of favorable class mix, efficiencies successful definite businesses and pricing actions.

Lower publication from nan F&E conception was chiefly a consequence of underperformance of our Fire Group, specifically our holding facility, partially offset by improved profitability successful nan Anlene Group. Decreased EBITDA wrong nan Commercial conception was related to a reduced operation of municipal transit buses arsenic we vessel little value units compared to nan completion of multiyear contracts for higher contented buses successful nan anterior twelvemonth quarter. Please move to Page 5 of nan descent platform arsenic I move to a reappraisal of our first 4th conception results. For an emergency first 4th conception income were $229 million, a alteration of 3% compared to nan anterior year. The alteration successful nett income was chiefly owed to less shipments of occurrence servants of nan state and ambulance units, partially offset by value realization and improved operation of higher contented annuals.

Within Fire Group, completions of shipments proceed to beryllium impacted by lower-than-expected statement rates astatine our Holden installation arsenic we proceed nan integration of KME and for our branded production. Partially offsetting little shipments from this installation was an summation of shipments from our 2 largest plants. Sequential improvements and completion rates passim nan 4th resulted successful Fire Group shipments reaching a 15-month precocious successful nan period of January. -- wrong nan expert group, accrued capable rates and received immoderate OEM chassis complete nan past 2 quarters, improved visibility and accumulation readying greater readiness of heavy-duty chassis provided an opportunity to nutrient higher contented units, which transportation a higher trading value and margin.

F&E conception adjusted EBITDA was a nonaccomplishment of $2 cardinal successful nan first 4th of 2023 compared to adjusted EBITDA of $1.8 cardinal successful nan first 4th of 2022. The alteration was chiefly a consequence of little volume, labour inefficiencies and accrued inflationary pressure, partially offset by value realization. As I mentioned, accumulation astatine nan holding installation has not supported nan shipment of units astatine nan complaint we anticipated. -- accrued labour hours per completion and less units produced crossed nan fixed costs guidelines person weighed connected group profitability. We made structural and process changes astatine Holden arsenic we exit Q1 and expect these changes to supply sequential separator betterment arsenic we advancement done nan 2nd quarter.

In addition, arsenic multi-sourcing efforts proceed to return hold, we besides expect portion income and productivity to amended astatine our different occurrence plants wrong nan 2nd quarter. Amylin group profitability improved 160 ground points sequentially and 100 ground points versus nan anterior year. This was chiefly a consequence of improved labour utilization related to an improved proviso chain, value realization and a greater operation of higher contented units. With nan existent stabilization of chassis allocation and capable rates, definite expert businesses person started to bring connected further labour and are readying to summation accumulation rates. Our expertise to execute aliases transcend these rates to trust connected effective training and retention of caller hires, which we person been addressing pinch localized programs. The level of chassis inventory wrong nan AMLs group exiting nan 4th supports these accumulation plans successful nan fiscal 3rd quarter.

Total F&E backlog was $2.7 billion, an summation of 62% year-over-year. The summation successful backlog is simply a consequence of beardown portion orders and pricing actions complete nan past 12 months arsenic good arsenic lower-than-expected accumulation related to proviso concatenation constraints and labour dinefficiencies knowledgeable complete nan past year. We expect nan F&E conception to return to affirmative EBITDA successful nan 2nd 4th arsenic proviso concatenation pressures easiness pinch sequential separator betterment passim nan fiscal twelvemonth arsenic we recognize manufacturing efficiencies and much favorable pricing.

Turning to Slide 6. Commercial conception income of $129 cardinal was an summation of 32% compared to nan anterior year. The summation was chiefly related to higher income successful schoolhouse buses, terminal trucks and thoroughfare sweepers and value realization, partially offset by less shipments successful municipal transit buses. -- dual sourcing and improved worldly readiness aided nan completion of schoolhouse buses and terminal trucks that person been trapped successful inventory. Within nan municipal transit business, we proceed to acquisition shortages of wiring harnesses pinch constricted portion shipments. Exiting nan quarter, nan transit business was waiting to person complete 2,300 past 2 harnesses needed cleat units. This was an betterment from complete 3,100 past owed arsenic we exited December and nan consequence of our Sorciteam's efforts to trim azygous and sole-source exposures crossed nan enterprise.

Commercial conception adjusted EBITDA of $7.3 cardinal decreased 6% versus nan anterior year. The alteration successful EBITDA was chiefly a consequence of little shipments and an unfavorable operation of municipal transit buses partially offset by higher shipments and improved profitability wrong schoolhouse autobus and terminal motortruck businesses. An unfavorable operation of municipal transit buses proceed to beryllium nan consequence of low-margin units sold during nan highly competitory bidding rhythm during Cobin. We proceed to judge that improved receipt of cardinal components will let greater shipments of these bequest value units and that we will statesman to recognize much favorable pricing wrong nan 2nd half.

Improved profitability for schoolhouse buses and terminal trucks arsenic a consequence of higher shipments and efficiencies gained from greater worldly readiness and value realization, partially offset by inflationary pressures. Chassis allocation and capable complaint for schoolhouse buses has improved accumulation planning, cure chassis proviso secured works accumulation done nan 3rd quarter. Commercial conception backlog was $498 cardinal astatine nan extremity of nan first quarter, an summation of 8% versus nan anterior year. Increased backlog is chiefly a consequence of pricing actions and accrued orders for first transit buses, partially offset by accrued throughput successful nan first 4th and a normalization successful orders for terminal trucks.

For nan remainder of nan year, we expect commercialized conception gross to return to a tally complaint akin to nan 2nd half of fiscal 2022 arsenic we complete lower-priced municipal transit buses and statesman shipping higher contented units, including artillery electrical and hydrogen and substance compartment buses, we expect conception margins to retrieve from nan existent mid-single-digit scope to precocious azygous digits exiting nan year. Turning to Slide 7. Recreation conception income of $226 cardinal were up 12% versus past year's quarter. Increased income versus nan anterior twelvemonth were chiefly a consequence of accrued shipments of Class A and Class C units and pricing actions. Partially offsetting nan summation was little income of Class B units related to nan Van chassis callback noted earlier and less towable units related to proviso concatenation constraints.

Approximately $40 cardinal of gross related to nan callback hole was realized successful nan first 4th versus our anticipation that it will beryllium delayed until nan 2nd quarter. As a result, we expect 2nd 4th revenues to beryllium astir successful statement pinch nan first 4th arsenic we complete nan shipment of callback units and continued normal accumulation activities crossed nan businesses. Recreation conception adjusted EBITDA of $24.3 cardinal was an summation of 42% versus nan anterior year. The summation successful EBITDA was chiefly a consequence of value realization, measurement leverage and favorable class mix, partially offset by worldly ostentation and labour inefficiencies related to rework of units successful nan towable business. Segment backlog of $988 cardinal decreased 23% versus nan anterior year. The alteration was chiefly owed to continued accumulation against backlog and little orders successful definite categories.

Class B and Class B orders person normalized pre-covid levels and backlogs for these businesses stay astatine astir 10 to 11 months of production. We did person exemplary twelvemonth 2023 cancellations of Class A and towable units. Our backlog has remained complete 1 twelvemonth for totes businesses. We judge that a information of these cancellations will beryllium replaced pinch upcoming exemplary twelvemonth orders arsenic dealers measure inventory levels during nan outpouring trading season. We proceed to expect nan Recreation conception backlog to diminution passim nan twelvemonth arsenic we support normal accumulation activities and to exit nan fiscal twelvemonth astatine a much normalized level of 4 to 6 months production.

The outlook for nan recreation conception remains nan aforesaid arsenic what we described successful December. Although location was a gross and EBITDA displacement betwixt nan first and 2nd quarter, we proceed to expect astir 45% of afloat twelvemonth income and net to hap successful nan first half of nan year.

Turning to Slide 8. I Cash utilized successful operating activities totaled $6.9 million. Trade moving superior connected January 31 was $352 million, an summation of $4.3 cardinal compared to $348 cardinal astatine nan extremity of fiscal '22. The summation was chiefly a consequence of accrued inventories, partially offset by an summation successful accounts payable and customer advances. The accrued inventory equilibrium includes $20 cardinal of further chassis, which returned to levels much successful statement pinch nan pre-Covid period, arsenic I noted earlier. We spent $3.8 cardinal connected superior expenditures wrong nan first quarter, resulting successful a rate outflow of $10.7 million. Net indebtedness arsenic of January 31 was $227 million, including $23 cardinal of rate connected hand. We declared a quarterly rate dividend of $0.05 per stock payable connected April 14 to shareholders of grounds connected March 31. And -- astatine 4th end, nan institution maintained ample liquidity was astir $286 cardinal disposable nether nan ABL revolving in installments facility, and our nett debt-to-EBITDA leverage ratio was 2.1x astatine nan debased extremity of our stated target scope of 2x to 2.5x.

Turning to Slide 9. Today, we are reaffirming our afloat twelvemonth outlook for nett sales, adjusted EBITDA, adjusted nett income and free rate flow. We are updating nett income to bespeak ineligible matters and restructuring-related charges that incurred successful nan first quarter. As a result, nan scope of nett income was lowered to $13 cardinal to $32 million. The outlook for gross remains successful nan scope of $2.3 cardinal to $2.5 billion. Growth of 3% astatine nan midpoint is expected chiefly from nan F&E and Commercial segments, while nan Recreation conception is expected to stay level to down debased azygous digits versus nan anterior year. Adjusted EBITDA remains successful nan scope of $110 cardinal to $130 cardinal pinch astir 40% occurring successful nan first half of fiscal 2023 and 60% successful nan 2nd half. Guidance for adjusted nett income remains successful nan scope of $42 cardinal to $60 million, and we proceed to expect rate conversion to beryllium 90% aliases greater pinch free rate travel successful nan scope of $39 cardinal to $55 million.

Finally, we stay committed to our roadworthy representation for shareholder worth creation and a balanced usage of capital. This originates pinch a beardown equilibrium sheet, integrated investments successful our businesses, nan sustainable dividend argumentation and targeted stock repurchases. As we proceed to measure our portfolio of businesses, location whitethorn beryllium opportunities for strategical M&A, including tuck-in acquisitions aliases divestitures. However, our contiguous privilege is to thrust execution pinch nan existent portfolio, summation our completion and shipment rates and complete bequest value units wrong nan backlog truthful that we statesman to recognize nan caller pricing tiers enacted complete nan past year.

Thank you again for joining america connected today's call. And pinch that, operator, we would now for illustration to unfastened nan telephone up for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first mobility is from nan statement of [indiscernible].

Unidentified Analyst

It's [indiscernible] connected for Mig this morning. So Mark, you gave a really bully summary astatine nan opening of nan telephone astir nan existent initiatives that are underway. But you've been interim CEO for astir 30 days. Obviously, you're not caller to nan company, but I would conscionable wonderment benignant of astatine a precocious level, really your imagination for rev mightiness disagree from your predecessor.

Mark Skonieczny

Yes. I think, and arsenic we've talked before, and arsenic I said successful my prepared remarks, nan imagination really is intact from what we laid retired successful nan Investor Day. So from my perspective, it's really which I radiated retired passim nan comments here, it's really astir section execution and making judge that we tin ramp successful nan -- for illustration successful our Amblin facilities, but besides get aft nan WIP units successful bid to get nan astir throughput present successful nan short term. So arsenic you saw successful nan commercialized group successful Q1 arsenic we sewage loosening proviso chain, we were capable to accelerate nan completions and get done nan mostly of our backlog that was caught successful pinch -- truthful that's really been my focus, and I spent nan past 3 weeks present successful nan 30 days going to different facilities. And really, that's been my attraction is really do we make judge that we return advantage of nan loosening proviso concatenation and really are we going to get nan units successful WIP, but besides much importantly, support nan starts that we request erstwhile we look retired into nan future. So it's really a balancing enactment of maintaining our starts for nan future, but besides making judge we get done these WIP units that we've highlighted complete nan past fewer quarters.

Unidentified Analyst

Got it. And possibly benignant of keeping on that line, it sounds for illustration -- well, I mean, proviso concatenation and labour constraints are improving successful ambulance, but possibly not rather location and fire, it sounds for illustration they're going to -- those issues are going to amended done nan year. But possibly talk astir nan issues successful fire, possibly immoderate soul related, immoderate outer related and benignant of really those challenges benignant of amended arsenic we advancement done nan year.

Mark Skonieczny

Yes. So arsenic I noted successful nan prepared remarks, we look astatine fire, we've said complete nan past fewer quarters here, that's astir apt nan business unit, fixed nan civilization quality of that merchandise that had nan astir units successful WIP. So and we haven't been capable to get retired arsenic galore units arsenic we expected, fixed nan proviso concatenation challenges, which I deliberation were much acute successful those erstwhile you talk astir sole-source civilization products. So first off, we sewage to get nan constituent supply. And past second, to your constituent is, really do we astir efficaciously get that out. When I talk astir hold, I'm very encouraged connected my astir caller visit, nan measurement alteration that has happened location pinch each nan changes we've made, not only replacing nan leadership, nan wide head that was location pinch 1 its afloat time, but besides a batch of activity they've done successful regards to worldly flow. Just arsenic an example, they accrued their expertise to beryllium build nan definite units by 33% wrong a period clip frame. So we've sewage a batch of momentum successful that Holden facility, that's pinch a 30-day alteration of nan activity squad there. So I consciousness very bully there. And past our different businesses, it really comes down to taking advantage of nan proviso concatenation and getting those units successful and produced.

Unidentified Analyst

Got it. Okay. And past my last question. I'm judge arsenic these issues get rectified that nan profitability will follow. But F&E has been benignant of astir breakeven for nan past 5 quarters. How do you benignant of diagnose what nan issues person been location from a profitability standpoint? And what nan outlook is for nan ramp successful EBITDA separator done nan twelvemonth and possibly moreover beyond this year?

Mark Skonieczny

Yes, I still deliberation we’re into what we had said before, astir apt our exit complaint will beryllium little than what we primitively expected fixed our Q1 results and past immoderate of nan effect of these units going into Q2, for illustration we said, we will beryllium profitable successful Q2, and nan ramp that we’re seeing successful nan Amlasobviously will let america to get to nan pricing tiers quicker, and it will beryllium much of a resistance from occurrence conscionable getting done nan whip unit. So arsenic those units are older, we evidently person much labour connected those units and immoderate inefficiencies. So that’s really important present getting those units retired and we look astatine consolidated F&E, it hasn’t importantly changed from an exit rate, but nan wide floor plan will be, for illustration you said, it will inclination much gradually passim nan year.

Operator

Our adjacent mobility is from nan statement of Jamie Cook pinch Credit Suisse.

Jamie Cook

I conjecture 2 questions. First, conscionable nan comments you made astir nan portfolio, looking astatine acquisitions and divestitures. Can you conscionable talk to nan criteria that you would usage to measure which businesses should beryllium core, not halfway and/or wherever you'd beryllium willing connected nan acquisition side? And past my 2nd question, could you conscionable -- connected nan value cost, really affirmative do we expect value costs to be? And tin you talk to benignant of nan pricing trends by segment?

Mark Skonieczny

Yes. I deliberation overall, I guess, Jamie, from an acquisition perspective, we said, erstwhile you look astatine our businesses, erstwhile we're successful nan occurrence and ambulance space, you're astir apt talking astir smaller tuck-ins, which is accordant pinch what we've said previously. And past wrong our commercialized group, erstwhile you talk astir nan 3 really different businesses there, we're not talking astir adding a 4th leg. So if you were going to adhd thing successful that space, it'd beryllium much tangential. So -- but again, arsenic I talked successful my remarks, my existent attraction correct present successful nan short word is to reside nan -- our throughput and what's successful our soul 4 walls here. So I person really different than my aged CFO role. We're evidently ever looking for opportunities, and we person definite criteria that we would meet. But again, it's not thing that's apical of mind correct now fixed nan betterment floor plan we person present successful nan short term.

Jamie Cook

Then it was value cost?

Mark Skonieczny

And past value costs overall, we will spot immoderate connected nan F&E side, location will beryllium a operation arsenic we get done nan units and we are value costs affirmative successful each of our businesses. There is unit wrong nan recreation side. As you know, we took advantage of pricing past year, and we were up of immoderate of nan ostentation curve. So we’re seeing pinch discounting, we’re still capable to sorb immoderate of nan discounts would still beryllium price-cost affirmative location and still beryllium separator accretive to that – to nan wide business. And past connected nan commercialized side, we stay value costs positive. A batch of those person much dense business increases. So we’ve been beautiful proactive to make judge arsenic we get surcharges from our proviso guidelines that we’re passing those connected done to nan customer. So I deliberation from an wide perspective, you would expect america to beryllium much value costs positive, arsenic we’ve talked astir arsenic we exit nan twelvemonth successful those 3 businesses successful occurrence & emergency and commercialized and past recreation, we’re still looking astatine really that marketplace is going to play retired pinch immoderate nece’sary discounting arsenic we move forward.

Operator

Thank you to each participants. Our adjacent mobility is from nan statement of Jerry Revich pinch Goldman Sachs.

Jerry Revich

Yes. And Mark, congratulations connected nan beardown 4th present wrong your first 30 days. I conscionable want to inquire nan really beardown commencement to nan twelvemonth versus first expectations driven by amended proviso concatenation performance. Obviously, it's ace early successful nan year, but nan guidance is untreated. Would you qualify that arsenic upside consequence to nan separator outlook if nan proviso concatenation capacity continues on this track? Or are location immoderate factors possibly wrong F&E that are holding you backmost from saying that we're astir apt search towards nan precocious extremity of nan scope astatine this point?

Mark Skonieczny

Yes, I don't deliberation I want to spot different 4th play retired here, Jerry, and we'll perpetrate to a tightening of that scope into Q2 for illustration we usually do traditionally. Obviously, past twelvemonth was anomaly, but nan erstwhile year. So we'll tighten nan range. I do -- arsenic I spell retired these facilities, I want to get a amended consciousness connected what nan separator floor plan and really execution is going to beryllium and starts and completions much importantly. So we really do person bully momentum, and we're capable to spot that successful commercialized connected nan conversion that they did successful nan quarter. So I'm encouraged by that arsenic good arsenic nan recreation proceed to support a beardown conversion successful nan merchandise that proceed to waste nan Bs and Cs. So I really want to hold conscionable different 4th until I get my hands astir nan full portfolio present and wherever we're going to extremity up.

Jerry Revich

Fair enough. And past wrong nan RV statement of business, really do you deliberation astir nan baseline level of request because portion of nan logic we're going to person orders successful nan $100 cardinal per 4th scope arsenic you outlined, is because conscionable nan backlog is truthful long. What do you spot arsenic nan sell-through rate? Or what do you spot arsenic nan underlying level of request arsenic you're reasoning astir perchance what that business mightiness look for illustration successful '24?

Mark Skonieczny

Yes. Like I said, I deliberation it's been accordant pinch what we've -- and I deliberation nan strategy we've talked astir again up of our skis present and managing to a trough, particularly successful our Class A business. So we've been beautiful successful. There's nary uncertainty arsenic different group person said, too, that we're seeing immoderate driblet successful nan request connected nan Class A, but that really hadn't been participating successful nan upturn and our towable vulnerability is evidently a batch little than what you're seeing from our competitors. So we proceed to beryllium connected allocation successful our high-end Class C business. So that's different -- we still spot beardown request successful that market. So I would expect it's really a operation betwixt nan categories. But ultimately, we thought these are beautiful frothy backlogs, and we were looking to get to a much normalized level by nan extremity of nan year. We still deliberation that will hap present successful that, for illustration I said successful my quoted remarks. So again, request will spot nan trading play here. I've been capable to participate successful a mates of nan trader shows. And I deliberation postulation has mostly been successful statement aliases up, but woody conversions person been much of a challenge. So -- but we're still seeing nan strength, arsenic you spot successful our numbers present successful nan higher-margin products that we sell.

Jerry Revich

Got it. And lastly, tin I inquire successful occurrence & emergency, immoderate changes successful nan team. Can you conscionable talk astir immoderate philosophical changes from a manufacturing footprint standpoint? Can you grow connected that point?

Mark Skonieczny

Yes. I don't deliberation from a manufacturing footprint standpoint, we did denote nan -- we do person different COE, Center of Excellence for our TDA product, which is up successful EFT, which was a property merchandise that we took out. We took nan opportunity to do that. So now we person a chassis COE successful Charlotte, which we've talked astir antecedently that came pinch Spartan and effort arsenic good pinch our TDA. So erstwhile you look astatine our full portfolio and our operating footprint, it's really wrong those individual factories now, really do we make judge that we tin optimize what we person to do. And it's really successful nan short term, it's a balancing of really we're going to group up nan statement to get done immoderate of these WIP units and that sacrifice nan starts for nan units that we request to proceed to build, right? So it's really do you look astatine it from a short word pinch nan oculus of really do you summation throughput from a semipermanent position arsenic well. So that's really nan intent a batch of my visits are to spell and spot really we tin optimize successful nan existent situation is not hurting our starts and our expertise to make nan gross we request successful nan future.

Jerry Revich

I admit nan discussion. Thank you, Mark.

Operator

Thank you. Our adjacent mobility is from nan statement of John Joyner pinch BMO Capital Markets.

John Joyner

So wrong SME, I mean, I conjecture it's benignant of somewhat of a multipart question, but person you seen immoderate cancellations? And past benignant of fixed nan ample and increasing backlog there, I mean, I guess, what are nan risks that immoderate of these bookings, if you haven't seen them, nan what are nan consequence of immoderate of these bookings possibly commencement to get canceled? And past has nan inability to get units retired nan door. I mean, has that affected immoderate areas of your marketplace stock aliases wide benignant of customer satisfaction?

Mark Skonieczny

Yes. No, John, it really hasn't. When you look astatine our -- truthful I would qualify -- and we're talking astir fires here. But connected nan occurrence side, we do person ample backlogs. But nan quoting activity and bidding activity is beautiful normalized here. And erstwhile you look astatine erstwhile we're going successful to bid, we're much aliases little connected apical of nan different large players successful nan marketplace here. So we're not losing thing connected lead times. Everyone has these extended lead times based connected nan existent market. From a cancellation perspective, we conscionable haven't knowledgeable that successful nan past. We're dealing with, arsenic you know, a mostly of these are municipalities that person a bunch of tary cycle. And arsenic we called successful my prepared remarks, we still proceed to spot precocious levels of deposits. So municipalities person nan money. They want their units, and that's really my focus. I didn't mention successful my prepared remarks, but I did person an opportunity to meet pinch respective of our dealers wrong nan 4th to, not conscionable our our facilities. And everyone is conscionable asking erstwhile they're going to get their units, and that's really our attraction present is really quickly we tin get nan units out. And truthful I don't deliberation it's impacting our marketplace stock and nan biddings beautiful accordant pinch what we've seen successful nan past. And truthful there's decidedly thing that I would opportunity that we're not wrong nan marketplace from a lead clip position connected what we're seeing.

John Joyner

Great. And possibly this is – I don’t cognize an understatement, but there’s been surely a batch of transitions of group presidents and different activity complete nan past fewer years. But – truthful I conjecture really do you position nan existent bench? And are location immoderate different openings that still request to get filled?

Mark Skonieczny

No, not currently. That's again arsenic we've talked astir before, we person changed respective of wide managers, and that's 1 of my attraction present arsenic I sojourn these plants is gathering pinch those wide managers. I deliberation we person a very beardown chair erstwhile talk astir section execution. They're bringing backmost Mark and Randy, I deliberation that was very good received from nan transmission pinch Mark's experience. He's been successful nan manufacture moreover aft leaving way nan first time. So we've gotten awesome remarks location from a transmission position and past pinch Randy's operational excellence and driving nan COO role. So I deliberation from that perspective, I consciousness existent bully astir what I've seen truthful acold successful my business. And obviously, I was a CFO previously, truthful I've been portion of nan sinterview process. So I deliberation nan chair is very beardown astatine nan section level wherever nan execution has to happen.

John Joyner

Great. Okay. Maybe conscionable connected that benignant of akin topic, if I may. – aft implementing furloughs past year, peculiarly successful nan ambulance division, I mean, I guess, wherever are your staffing levels guidelines today? I mean, are you adequately astatine levels that you need? Or are you benignant of still carrying much labour than you would need?

Mark Skonieczny

No. So that is from a -- and that was much tied to nan ambulance wherever we had furlough because we didn't person chassis past year. We are successful nan ramp-up phase, and we've been very encouraged by nan caller hiring arena arsenic we commencement to ramp up. Remember, we had said successful nan erstwhile quarter, we weren't going to adhd much labour backmost until we had amended visibility of chassis, and we now person that pinch astir of nan plants having visibility done Q3 pinch nan existent chassis connected hand. So they've been hiring astatine nan extremity of nan Q1, and we've been getting immoderate very qualified candidates. So we are seeing a loosening of nan labour marketplace a small spot here. So I would opportunity that based connected our existent ramp rates, we person nan group basal to present connected nan units we have. We do person built-in ramps successful nan back, and we're continuing to activity connected programs to bring connected much labour efficaciously here.

John Joyner

Okay. Excellent. Thank you for your time.

Mark Skonieczny

Yes. Thank you.

Operator

Thank you. [Operator Instructions] Our adjacent mobility is from nan statement of Mike Shlisky, Davidson. Please spell ahead.

David Johnson

This is David Johnson connected for Mike. You mentioned beardown orders of schoolhouse buses and terminal trucks successful commercial, but location wasn't overmuch commentary connected sweepers. I was wondering if you tin remark connected what you're seeing successful that merchandise line.

Mark Skonieczny

Yes. The sweepers, they're successful statement with, I guess, they telephone a normalized tally rate. So thing intentional of leaving them out. I deliberation nan intent pinch that to opportunity nan specialty businesses, which see some nan terminal trucks and nan thoroughfare sweepers.

David Johnson

Got it. And possibly nan past question, I want to move backmost to recreation. With liking rates being what they are, do you get nan consciousness that recreation dealers are unwilling to restock moreover erstwhile nan inventory levels are low? Do you request to spot little rates earlier they really banal up?

Mark Skonieczny

I deliberation and a batch of -- I've had these questions previously. The dealers are going to put connected their tons what sell, and we've been very -- what we've talked astir earlier is erstwhile you look astatine immoderate of nan products we have, if your units are being accepted by nan market, they're going to put connected units that really move and we look astatine immoderate of our products, they person quicker move rates than what we're seeing successful nan competition. So that's immoderate of nan things that we're trading nan dealers on. So -- and they spot it. So they're asking for a merchandise for illustration I talked about, our Class C business is still connected allocation pinch immoderate of our dealers they're asking for much of that merchandise because it is turning. And our inventory levels still are little than pre-Covid. So we still person not gotten a normalized inventory level yet. So location will beryllium an inflection constituent astatine immoderate constituent here, but we haven't reached it yet.

David Johnson

Got it. That’s it for me. I’ll hop backmost successful nan queue.

Operator

Thank you. There are nary further questions astatine this time. I would for illustration to move nan level backmost complete to Mark Kinisky for closing comments.

Mark Skonieczny

Yes. Thank you, operator. So erstwhile again, I’d for illustration to convey everyone connected nan telephone for joining america this morning. I’d besides for illustration to convey our labor for their difficult activity successful this quarter. So truthful far, I americium pleased pinch nan momentum demonstrated astatine galore of nan businesses arsenic we exited nan first quarter, and I look guardant to resuming my tract visits complete nan adjacent respective weeks. As I’ve said successful nan past, I judge there’s a awesome nett woody worth to beryllium created astir by improving nan processes we power wrong nan 4 walls aliases operations and nan pricing and multi-sourcing actions enacted complete nan past 1.5 years position america for moreover greater opportunities. So we will proceed to attraction connected circumstantial needs and solutions of individual businesses to accelerate nan starts and completions successful bid to trim our backlogs.

So, I look guardant to updating you connected our advancement erstwhile we study 2nd 4th results successful June. Thank you, again.

Operator

You whitethorn disconnect your lines astatine this time. Thank you for your participating.