Record backlog of $12 billion with significant year-over-year improvement in gross margin and Adjusted EBITDA2
All figures quoted in U.S. dollars unless otherwise noted. Comparisons are to 2023 Q3 results:
- 2024 Q3 revenue of $711 million; 994 equivalent units ("EUs") delivered, with 243 EUs, or 24% of total deliveries being battery- and fuel cell-electric buses ("ZEBs").
- Total gross margin of 12.2%, with Manufacturing gross margin of 7.5% compared to 0.7% in 2023 Q3.
- 2024 Q3 Net loss of $15 million; Net loss per Share of $0.13, and Adjusted Net Loss per Share2 of $0.04.
- 2024 Q3 Adjusted EBITDA2 of $53 million. Free Cash Flow of $2 million and Total Liquidity2 position of $146 million.
- New orders of 1,050 EUs and total ending backlog2 position up 53% at 14,590 EUs (valued at a record $12 billion), ZEBs represent 41% of total backlog2.
- Aftermarket segment continues outperformance with revenue of $153 million and $34 million of Adjusted EBITDA2.
- Updated guidance for Fiscal 2024, with Adjusted EBITDA2 range of $210 to $240 million (compared to $69 million in Fiscal 2023); reaffirmed 2025 Adjusted EBITDA2 target of greater than $350 million.
Key financial metrics for the quarter and for the last twelve months are highlighted below:
| in millions except deliveries and per
Share amounts | 2024 Q3 | Change1 | 2024 Q3 LTM | Change1 | ||||||||
| Deliveries (EUs) | 994 | (5 | %) | 4,594 | 21 | % | ||||||
| IFRS Measures3 | ||||||||||||
| Revenue | $ | 711 | 0 | % | $ | 3,077 | 19 | % | ||||
| Net loss | $ | (15 | ) | 62 | % | $ | (24 | ) | 92 | % | ||
| Net loss per Share | $ | (0.13 | ) | 69 | % | $ | (0.20 | ) | 94 | % | ||
| Net cash (used in) generated from operations | $ | (45 | ) | (18 | %) | $ | 53 | 145 | % | |||
| Non-IFRS Measures2,3 | ||||||||||||
| Adjusted EBITDA2 | $ | 53 | 375 | % | $ | 185 | 681 | % | ||||
| Adjusted Net Loss2 | $ | (5 | ) | 88 | % | $ | (23 | ) | 83 | % | ||
| Adjusted Net Loss per Share2 | $ | (0.04 | ) | 90 | % | $ | (0.20 | ) | 88 | % | ||
| Free Cash Flow2 | $ | 2 | 105 | % | $ | (16 | ) | 88 | % | |||
| Total Liquidity2 (including minimum liquidity requirement of $50 million) | $ | 146 | (14 | %) | $ | 146 | (14 | %) | ||||
| Return on Invested Capital2 (ROIC) | 5 | % | 6 | % | 5 | % | 6 | % | ||||
| 1. | Results noted herein are for the 13-week period ("2024 Q3”) and the 52-week period ("2024 Q3 LTM”) ended September 29, 2024. The comparisons reported in this press release compare 2024 Q3 to the 13-week period ("2023 Q3") and 2024 Q3 LTM to the 52-week period ("2023 Q3 LTM") ended October 1, 2023. Comparisons and comments are also made to the 13-week period ("2024 Q2”) ended June 30, 2024. The term "LTM” is an abbreviation for "Last Twelve Month Period”. | |
| 2. | Adjusted EBITDA, Adjusted Net Loss, and Free Cash Flow represent non-IFRS measures; Adjusted Net Loss per Share and Return on Invested Capital ("ROIC") are non-IFRS ratios; and Total Liquidity and Backlog are supplementary financial measures. Such measures and ratios are not defined terms under IFRS and do not have standard meanings, so they may not be a reliable way to compare NFI to other companies. Adjusted Net Loss per Share is based on the non-IFRS measure Adjusted Net Loss. ROIC is based on net operating profit after tax and average invested capital, both of which are non-IFRS measures. See "Non-IFRS Measures” and detailed reconciliations of IFRS Measures to non-IFRS Measures in the Appendices of this press release. Readers are advised to review the unaudited interim condensed consolidated financial statements (including notes) (the "Financial Statements”) and the related Management's Discussion and Analysis (the "MD&A"). | |
"While our production recovery continued, a seat significant supplier, specified by our transit customers, negatively impacted third quarter North American operations. This disruption, and its cascading impacts, lowered our quarterly deliveries, new vehicle production rates and led to higher-than-expected quarter-ending inventory balances. We are working directly with that supplier's leadership team to action a recovery plan that is expected to improve their performance through early 2025. The plan includes their engagement of an external operations consultant, the use of third-party labour and dedicated onsite resources from NFI overseeing production.
"As a result, period ending liquidity2 declined during the quarter, reflecting higher inventory balances stemming from the impact of seat disruption, higher cost zero-emission buses and the expected seasonality impacts of bus builds for private markets, in advance of the busier fourth quarter. This decline was somewhat offset by our successful efforts to increase progress payments and milestone billings from customers plus the use of our Export Development Canada performance guarantee program.
"We anticipate a busy finish to this year with improved margin performance as we deliver buses, recover seat disrupted deliveries, continue our strong aftermarket performance and add several large-scale multi-year orders to our backlog. We are also actioning multiple strategic initiatives to capitalize on record customer demand for NFI's market leading position, this includes expanding our Canadian transit bus production which will free-up U.S. capacity and provide more targeted resources to North American transit operations. These efforts best position NFI to generate sustainable financial growth and shareholder value through 2025 and the longer-term," Soubry concluded.
Segment Results
Manufacturing segment revenue for 2024 Q3 decreased by $9 million, or 2%, compared to 2023 Q3, driven by lower North American heavy-duty transit bus deliveries, which were impacted by supply disruption primarily linked to seat supply. This was offset by higher motorcoach and low-floor cutaway bus deliveries and higher overall manufacturing segment average selling price per unit delivered. On an LTM basis revenue increased by 20.7%, reflecting higher deliveries in all product segments.
Manufacturing operations experienced a net loss of $5.8 million in 2024 Q3 compared to a net loss of $39.9 million in 2023 Q3. The reduction in net loss was driven by improved gross margins and higher motorcoach and low-floor cutaway deliveries. Manufacturing Adjusted EBITDA2 improved by $32 million, or 222%, compared to 2023 Q3 and Manufacturing Adjusted EBITDA2 as a percentage of revenue showed continued improvement, increasing from (3%) in 2023 Q3 to 3.1% in 2024 Q3. These increases were driven by improved gross margins and favourable sales mix. On an LTM basis, Manufacturing net loss and Adjusted EBITDA2 both showed significant improvement, reflecting higher deliveries and improved gross margins.
At the end of 2024 Q3, the Company's total backlog2 (firm and options) of 14,590 EUs increased by 53% from the prior year. This increase is driven by the record number of awards received year-to-date ("YTD”). During the quarter, NFI added 1,050 EUs of new orders, an 8.2% year-over-year improvement, supporting an LTM book-to-bill ratio of 115.4%. Backlog2 for 2024 Q3 has a total dollar value of $12.0 billion, and the average price of an EU in backlog2 is now $0.82 million, a 19.5% increase from 2023 Q3.
Aftermarket segment delivered another quarter of strong revenue of $153 million, an increase of $10 million, or 7%, compared to 2023 Q3, driven by increased volume in North American public and private markets. 2024 Q3 Aftermarket segment net earnings increased by $2.2 million, or 8.1%, compared to 2023 Q3. The increase was primarily due to improved sales volume, pricing adjustments and favourable product mix. Aftermarket Adjusted EBITDA2 was $34 million, an increase of $3 million, or 8%, year-over-year, primarily driven by the same items that improved net earnings. Aftermarket Adjusted EBITDA2 as a percentage of revenue was strong at 23%. On an LTM basis, Aftermarket net earnings and Adjusted EBITDA2 increased by 22.4% and 20.0% respectively.
Net Loss, Adjusted Net Loss2, and Return on Invested Capital2
In 2024 Q3, the Company incurred a net loss of $15 million, representing a $25 million, or 62% improvement from 2023 Q3, driven by increases in revenue and gross profit and lower interest expense.
Adjusted Net Loss2 for 2024 Q3 of $5 million improved from 2023 Q3 Adjusted Net Loss2 of $38 million, as a result of the same items that impacted net losses, adjusted for unrealized fair market gains related to the Company's prepayment option on second-lien debt, plus other normalization adjustments including non-recurring restructuring and past service and pension costs.
2024 Q3 ROIC2 increased to 5.3% from (1.0%) in 2023 Q3, primarily due to the increase in Adjusted EBITDA2. The invested capital2 base increased due to a gradual increase in long-term debt, temporarily higher working capital balances and an increase in the fair market value of the prepayment option on the Company's second lien debt.
Liquidity2
The Company's Total Liquidity2 position, which combines cash on-hand plus available capacity under its senior first lien credit facilities (without consideration given to the minimum liquidity requirement of $50 million), was $146 million as at the end of 2024 Q3, down $33 million from the end of 2024 Q2. Total Liquidity2 position was negatively impacted by a $35 million investment in working capital, driven by increased inventory balances for raw materials and work-in-process, reflecting higher input costs for ZEB components, the impact of seat supply disruption and higher carrying balances to support consistent supply across other components. Offsetting increasing in inventory were higher deferred revenue amounts of $48 million, reflecting the Company's success in improving payment terms with customers.
Outlook
Management anticipates improvements to revenue, gross profit, Adjusted EBITDA2, Free Cash Flow2, net earnings, and ROIC2, in the near-and-longer term, as the Company ramps up production, executes on its backlog2, delivers a higher number of ZEBs, grows its aftermarket business, and benefits from the growing demand for its buses, coaches, parts, and services.
Management believes market demand is evident through the Company's continued new orders and an extremely strong public transit funding environment in North America and other international jurisdictions. This funding environment drives the Company's North American bid universe which currently has active bids of 5,533 EUs, and a five-year forecasted customer demand of 20,690 EUs. In addition, the Company has seen improved competitive dynamics within the North American market, leading to the Company recording its highest new awards ever in 2024, with expectations for further large awards in the fourth quarter of the year. NFI has also seen overall market demand within private coach and international transit markets grow, driven by increasing ridership, travel and return to work initiatives. These demand factors are expected to drive additional new orders going forward.
As referenced in the Company's risk disclosure, the highly customized nature of NFI's products can result in specific suppliers having an adverse impact on the Company's operations and new vehicle production, as currently evidenced by seat supply disruption. The Company anticipates that there may continue to be challenges in receiving certain components as suppliers recover their operations and as NFI increases production of ZEBs (where the supply chain is not as established as in traditional propulsion systems). Overall, NFI has seen a significant improvement in its moderate and high-risk suppliers, with only two high risk suppliers remaining out of the Company's top 750 suppliers, driven by a combination of improvements in global supply chain health and actions taken by NFI's supply and sourcing teams.
NFI is advancing its program to increase new vehicle production line entry rates, which were up 6.5% year-over-year, but down by 9.0% from 2024 Q2, as the Company manages certain supply disruptions and lower labour efficiency with new team members improving their production throughput while NFI increases overall ZEB production.
Updated Financial Guidance
Based on YTD performance and expectations for the fourth quarter, NFI has updated its financial guidance for Fiscal 2024, as originally disclosed on January 17, 2024, to reflect the following:
- Impacts of seat supply disruption on North American transit operations and expected impact on 2024 Q4 results
- Expected fourth quarter deliveries reflecting the Company's inventory, production schedule and backlog2
- Aftermarket performance and expected fourth quarter sales
- Timing of certain zero-emission bus deliveries in North America and the U.K.
| Previous 2024 Guidance | Updated 2024 Guidance | 2025 Targets | ||||
| Revenue | $3.2 to $3.6 billion | $3.1 to $3.3 billion | ~$4 billion | |||
| ZEBs (electric) as a percentage of manufacturing sales | 30% to 35% | 20% to 25% | ~40% | |||
| Adjusted EBITDA2 | $240 to $280 million | $210 to $240 million | >$350 million (with a $400 million annualized run rate by the fourth quarter) | |||
| Cash Capital Expenditures | $50 to $60 million | $50 to $60 million | ~$55 million | |||
| Return on Invested Capital2 - provided for 2025 targets | >12% | |||||
NFI continues to target 2025 Adjusted EBITDA2 of greater than $350 million based on anticipated volume growth and margin improvement, underpinned by firm backlog2 and expected aftermarket performance. In addition, disrupted North American transit deliveries from 2024 are all contractually sold, and the units that are not delivered in 2024 will be shipped in 2025. The Company is currently completing its annual operating plan for 2025, factoring in the impacts of seat supply disruption, and the improving competitive dynamics in North America, among other factors. NFI will provide an update in the first quarter of 2025. Please refer to the Company's 2023 Q4 and Fiscal 2023 MD&A for details on the assumptions that drive 2025 targets, as well as certain applicable risks.
Given the heightened investment in inventory, NFI is continuing specific actions to improve its near-term liquidity position including the following:
- Seeking advanced payments from customers for vehicles impacted by seat disruption that are currently in inventory
- Advancing discussions on further milestone payments, deposits and advanced billings from customers within Canada, the U.S. and the U.K.
- Utilizing the performance guarantee facility with EDC to lower letter of credit requirements
- Negotiating improved payment terms with select suppliers in North America and the U.K.
NFI anticipates that its current cash position and capacity under its existing credit facilities, combined with its expected fourth quarter performance, and anticipated success in obtaining progress payments or milestone payments from customers, alongside access to capital markets, will be sufficient to fund operations, meet financial obligations as they come due, and provide the funds necessary for capital expenditures.
NFI's guidance and targets are subject to the risk that the current seat supply disruptions are extended and/or exacerbated beyond management's current expectations, and the risk of additional supply or operational disruptions.
In addition, the guidance and targets do not reflect potential escalated impact on supply chains or other factors arising directly or indirectly as a result of geopolitical risks and ongoing conflicts in Ukraine, Russia, Israel, Palestine, and the Middle East. Although NFI does not have direct suppliers in these regions, additional supply delays, possible shortages of critical components or increases in raw material costs may arise as the conflicts progress and if certain suppliers' operations and/or subcomponent supply from affected countries are disrupted further. In addition, there may also be further general industry-wide price increases for components and raw materials used in vehicle production as well as further increases in the cost of labour and potential difficulties in sourcing an increase in the supply of labour. See Appendix B Forward Looking Statements for risks and other factors and the Company's filings on SEDAR at www.sedarplus.ca.
Third Quarter 2024 Results Conference Call and Filing
A conference call for analysts and interested listeners will be held on Thursday, November 7, 2024, at 9:00 a.m. Eastern Time (ET). An accompanying results presentation will be available prior to market open on November 7, 2024, at www.nfigroup.com.
For attendees who wish to join by webcast, registration is not required; the event can be accessed at https://edge.media-server.com/mmc/p/oaotv724/. Attendees who wish to join by phone can dial 1.888.596.4144 and use the Conference ID 2577984. NFI encourages attendees to join via webcast as a results presentation will be presented and users can also submit questions to management through the platform. The results presentation will be available at www.nfigroup.com.
A replay of the call will be accessible from about 12:00 p.m. ET on November 7, 2024, until 11:59 p.m. ET on November 6, 2025, at https://edge.media-server.com/mmc/p/oaotv724/. The replay will also be available on NFI's website at: www.nfigroup.com.
About NFI Group
Leveraging 450 years of combined experience, NFI is leading the electrification of mass mobility around the world. With zero-emission buses and coaches, infrastructure, and technology, NFI meets today's urban demands for scalable smart mobility solutions. Together, NFI is enabling more livable cities through connected, clean, and sustainable transportation.
With over 9,000 team members in ten countries, NFI is a leading global bus manufacturer of mass mobility solutions under the brands New Flyer® (heavy-duty transit buses), MCI® (motor coaches), Alexander Dennis Limited (single and double-deck buses), Plaxton (motor coaches), ARBOC® (low-floor cutaway and medium-duty buses), and NFI Parts™. NFI currently offers the widest range of sustainable drive systems available, including zero-emission electric (trolley, battery, and fuel cell), natural gas, electric hybrid, and clean diesel. In total, NFI supports its installed base of over 100,000 buses and coaches around the world. NFI's common shares ("Shares”) trade on the Toronto Stock Exchange ("TSX”) under the symbol NFI and its convertible unsecured debentures ("Debentures”) trade on the TSX under the symbol NFI.DB. News and information is available at www.nfigroup.com, www.newflyer.com, www.mcicoach.com, nfi.parts, www.alexander-dennis.com, arbocsv.com, and carfaircomposites.com.
For investor inquiries, please contact:
Stephen King
P: 204.224.6382
Appendix A - Reconciliation Tables
Reconciliation of Net Loss to Adjusted EBITDA and Net Operating Profit after Taxes
Non-IFRS measures in the appendices of this press release have been denoted with an "NG". Please see the "Non-IFRS and Other Financial Measures” section.
Management believes that Adjusted EBITDANG, and net operating profit after taxesNG ("NOPAT") are important measures in evaluating the historical operating performance of the Company. However, Adjusted EBITDANG and NOPATNG are not recognized earnings measures under International Financial Reporting Standards ("IFRS") and do not have standardized meanings prescribed by IFRS. Accordingly, Adjusted EBITDANG and NOPATNG may not be comparable to similar measures presented by other issuers. Readers of this press release are cautioned that Adjusted EBITDANG should not be construed as an alternative to net earnings or loss determined in accordance with IFRS as an indicator of the Company's performance and NOPATNG should not be construed as an alternative to earnings or loss from operations determined in accordance with IFRS as an indicator of the Company's performance. See "Non-IFRS Measures" for the definition of Adjusted EBITDANG. The following table reconciles net loss to Adjusted EBITDANG based on the historical financial statements of the Company for the periods indicated. The Company defines NOPATNG as Adjusted EBITDANG less depreciation of plant and equipment, depreciation of right-of-use assets and income taxes at a rate of 31%.
| ($ thousands) | 2024 Q3 | 2023 Q3 | 2024 Q3 LTM | 2023 Q3 LTM | ||||
| Net loss | (14,993 | ) | (39,926 | ) | (24,190 | ) | (286,396 | ) |
| Addback | ||||||||
| Income taxes | 360 | (4,546 | ) | (15,644 | ) | (31,662 | ) | |
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