Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NFI Group Inc (NFYEF, Financial) reported a 375% increase in quarterly adjusted EBITDA, contributing to a $161 million improvement on a last twelve months (LTM) basis.
- The company achieved its highest gross margin since Q1 2021, improving to 12.2%.
- NFI Group Inc (NFYEF) secured new orders of 1,050 equivalent units in the quarter, up 8.2% from the previous year, with a record backlog of USD12 billion.
- The aftermarket segment delivered exceptional performance with $153 million in revenue and $34 million of adjusted EBITDA, up 7% and 8% year-over-year respectively.
- The company has made significant progress in securing prepayments and embedding milestone payments in contracts, positively impacting liquidity and cash flows.
Negative Points
- NFI Group Inc (NFYEF) faced a significant disruption due to a North American seat supplier's non-performance, leading to a loss of approximately 79 equivalent units of planned third-quarter deliveries.
- Working capital remains elevated due to increased zero-emission bus production and higher input costs.
- The seat supply disruption is expected to continue for at least the remainder of 2024, with potential risks extending into 2025.
- The company had to slightly adjust its 2024 financial guidance due to the seat supplier disruption, now expecting adjusted EBITDA between $210 million to $240 million.
- The UK market is experiencing increased competition, particularly from foreign competitors, impacting NFI Group Inc (NFYEF)'s cost base.
Q & A Highlights
Q: Can you explain the impact of the seat supply issue on your revised guidance for Q4?
A: Paul Soubry, President and CEO, explained that the seat supply issue has significantly impacted deliveries, with 79 buses affected in Q3 and currently about 113 offline. The supplier's performance deteriorated due to operational challenges, and NFI has intervened to assist in recovery. The wide range in Q4 guidance reflects uncertainty in the supplier's recovery pace, not the likelihood of recovery.
Q: How quickly can you rectify the seat issue once the seats arrive?
A: Paul Soubry noted that while installing seats is not as simple as adding a taillight, the process varies depending on customer inspection requirements. Some customers may inspect buses on-site, while others may require inspection at NFI's facility. The complexity of the process contributes to the wide range in Q4 guidance.
Q: What are the potential impacts of the seat supply issue on liquidity, and why did you seek a waiver for additional liquidity?
A: Brian Dewsnup, CFO, stated that the waiver was a precautionary measure due to initial concerns about the seat supplier's recovery. NFI has since gained confidence in the supplier's recovery, and the waiver ensures access to additional liquidity if needed. The expectation is not to use it, but it provides security in case of further disruptions.
Q: How does the current competitive environment and backlog pricing affect your 2025 outlook?
A: Paul Soubry highlighted that the competitive environment in North America has improved, leading to better margins. The backlog reflects higher average selling prices due to increased zero-emission vehicle orders and improved margins. The 2025 outlook is positive, with significant growth expected, although the UK market remains competitive.
Q: What is your view on the potential impact of the new US administration on public transit funding?
A: Paul Soubry expressed confidence in continued bipartisan support for transit funding, as it addresses congestion and pollution issues. The Infrastructure Investment and Jobs Act is in place until 2026, and funding will support purchases beyond that. NFI's propulsion-agnostic approach allows flexibility to adapt to any changes in funding priorities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
