REV Group (REVG) Q4 2025: Specialty Vehicle Backlog Climbs 5.3% as Integration with Terex Advances
REV Group delivered a step-change in specialty vehicle profitability and backlog, underpinned by operational execution and disciplined cost management. The pending Terex merger now shapes the strategic narrative, with integration planning and facility investments aimed at sustaining margin gains and throughput. Management’s focus on execution, cash generation, and targeted automation sets the stage for a new phase of scale and efficiency post-transaction.
Summary
- Backlog Expansion Signals Demand Durability: Specialty vehicle backlog rose, reflecting resilient municipal and emergency vehicle demand.
- Operational Discipline Drives Margin Breakout: Efficiency initiatives and cost control delivered record segment profitability.
- Strategic Integration with Terex in Focus: Merger planning and facility investments aim to accelerate value creation in 2026 and beyond.
Performance Analysis
REV Group’s fiscal fourth quarter showcased robust specialty vehicle sales growth and margin expansion, even as recreational vehicle (RV) markets remained flat. Specialty vehicle segment sales increased 18% year-over-year (YoY) excluding the exited bus business, driven by higher shipments, favorable mix in fire apparatus, and price realization. This segment now anchors the company’s performance, with adjusted EBITDA margin reaching 13.9%, a 220 basis-point improvement YoY and well above historical levels.
RV segment sales were essentially flat, reflecting ongoing end-market weakness and dealer caution, though category mix improvements and cost alignment helped lift segment EBITDA modestly. Company-wide, disciplined inventory management and supply chain coordination enabled a $58 million reduction in inventory, supporting record free cash flow of $190 million. Backlog for specialty vehicles increased 5.3% to $4.4 billion, maintaining a book-to-bill above one and reducing backlog duration to roughly two years as throughput improved.
- Specialty Vehicle Throughput Surges: Higher unit shipments and mix drove both revenue and margin gains, outpacing original volume guidance.
- RV Segment Remains Challenged: Flat sales masked continued weakness in Class B, with Class C showing relative strength.
- Cash Generation Supports Flexibility: Strong operating cash flow and lower net debt provide a solid merger foundation.
REV’s operational improvements are translating to the bottom line, with margin gains and cash flow supporting both reinvestment and shareholder returns, even as the company transitions toward its merger with Terex.
Executive Commentary
"We are excited to be joining forces with Terex and to be embarking on the next chapter of our organizational transformation, creating an even stronger company with new opportunities to leverage our combined scale and operating systems to drive additional growth through product innovation and even greater efficiency."
Mark Skonechny, President and CEO
"Specialty vehicle segment backlog of $4.4 billion increased 5.3% versus the prior year. With higher throughput and shipments year over year, the increase in the backlog reflects continued strong demand for fire and emergency vehicles and a full year book to bill ratio greater than one times, which is in line with our expectations entering the fiscal year."
Amy Campbell, Chief Financial Officer
Strategic Positioning
1. Specialty Vehicle as Core Value Driver
The specialty vehicle segment has cemented its role as the company’s growth and profitability engine, benefiting from secular demand for fire and emergency vehicles. Backlog growth and throughput improvements signal durable end-market strength, supported by municipal tax receipts and population trends. The segment’s margin expansion reflects both scale and ongoing operational initiatives, positioning it as the centerpiece of post-merger value creation.
2. Operational Excellence and Lean Execution
Management’s focus on lean practices, workflow sequencing, and automation has yielded tangible improvements in line efficiency and scheduling discipline. Facility investments in automation and robotics are targeted at bottleneck areas, such as aerial and branded facilities, with the aim to further expand capacity and reduce cycle times. These process improvements have not only boosted output but also improved delivery consistency and working capital turns.
3. Cash Discipline and Capital Allocation
REV’s record free cash flow and reduced net debt reflect rigorous working capital management, enabled by tighter inventory controls and supplier collaboration. The company balanced reinvestment with shareholder returns, deploying $121 million through buybacks and dividends. This financial flexibility will be critical as the company integrates with Terex and pursues further operational upgrades.
4. Merger Integration and Talent Strategy
The Terex merger is being approached with a “best athlete” philosophy, with leadership teams from both companies conducting hands-on diligence and integration planning. The intent is to preserve REV’s core strengths and segment leadership while leveraging Terex’s scale and operating systems. Integration is designed to minimize disruption, with segment management teams remaining in place to maintain momentum.
Key Considerations
This quarter marks a strategic inflection as REV Group pivots from standalone execution to merger integration, with a clear focus on sustaining operational gains and leveraging specialty vehicle leadership.
Key Considerations:
- Backlog Quality and Duration: Improved throughput has shortened specialty vehicle backlog duration, but sustained order intake will be crucial as normalization trends emerge.
- Facility Modernization Payoff: Ongoing investments in automation and targeted expansion aim to further lift efficiency and margin, but require careful execution to avoid operational disruption.
- RV Segment Volatility: Flat sales and a 20% YoY backlog decline in RVs highlight continued end-market headwinds, with Class C as a relative bright spot.
- Integration Execution Risk: Merger planning is robust, but successful synergy capture and culture alignment will determine the ultimate value realized from the Terex transaction.
Risks
Integration complexity and execution risk loom large as the Terex merger advances, with any misstep potentially eroding operational momentum. RV segment softness and dealer caution could persist, pressuring consolidated growth. Tariff volatility and inflation remain ongoing cost risks, though largely matched by competitors in core markets. Municipal demand normalization is underway, which could temper specialty vehicle backlog replenishment over time.
Forward Outlook
For fiscal 2026, REV Group did not provide formal guidance due to the pending Terex merger. Management emphasized:
- Integration planning is underway, with leadership focused on synergy capture and operational continuity.
- Facility investments and automation initiatives will continue, aiming to further boost efficiency and margin.
Management highlighted that segment teams remain intact to preserve operational momentum and that the merger structure allows for a “lift and shift” approach, minimizing disruption during integration.
Takeaways
REV Group exits FY25 with operational momentum, a specialty vehicle-driven backlog, and strong cash conversion, but faces a period of transition as Terex integration planning accelerates.
- Specialty Vehicle Outperformance: Margin and backlog gains underscore the segment’s centrality to future value, with secular demand and operational execution as key drivers.
- Integration as Next Growth Lever: The Terex merger is a catalyst for scale and efficiency, but successful execution will hinge on talent alignment and process harmonization.
- RV Market Remains a Watchpoint: Ongoing Class B weakness and cautious dealer behavior could weigh on consolidated results absent a retail recovery.
Conclusion
REV Group’s Q4 performance validates its operational transformation, with specialty vehicle strength and disciplined cash management offsetting RV market headwinds. The Terex merger now dominates the forward narrative, with integration planning and targeted investments aiming to sustain and scale recent gains. Investors should monitor both synergy realization and backlog trends as the company enters its next chapter.
Industry Read-Through
REV’s results reinforce the durability of municipal and emergency vehicle demand, with secular tailwinds and operational execution driving margin expansion. Peers in specialty vehicles and fire apparatus may see similar backlog normalization as throughput improves, while automation investments are likely to become industry standard for efficiency gains. RV sector weakness and dealer caution remain industry-wide headwinds, suggesting continued pressure for manufacturers until retail demand rebounds. The Terex-REV integration will be a key case study for specialty manufacturing M&A, highlighting the importance of talent retention and process harmonization in post-transaction value creation.