Mr. Paul Soubry reports
NFI PROVIDES UPDATE ON FOURTH QUARTER 2023 DELIVERIES, ORDERS, BACKLOG, AND FINANCIAL GUIDANCE
NFI Group Inc. has released an update on its deliveries for the 13-week period ended Dec. 31, 2023 (fourth quarter 2023), and provided an update on its orders, backlog and financial guidance as of the end of Q4 2023. All figures related to Q4 2023 and fiscal 2023 included in this press release are unaudited and will be finalized prior to the release of NFI's audited financial results.
All amounts shown in this press release are in United States dollars unless otherwise indicated.
"NFI finished 2023 strong as our team delivered buses, coaches and aftermarket parts in line with our expectations," said Paul Soubry, president and chief executive officer, NFI. "Our actions to mitigate supply disruption and increase manufacturing production resulted in a 19-per-cent increase in year-over-year deliveries and lowered work-in-process inventory. The demand environment remains very healthy, with new orders driving 22-per-cent backlog growth since the end of 2023 Q3 to over 10,500 units valued at nearly $8-billion. We expect the first quarter of 2024 to be even busier from a demand and award perspective, with potential to record our highest number of quarterly awards ever, further enhancing our market-leading position.
"NFI is positioned well for fiscal 2024, where we expect significant adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] growth, a return to net profit, and a reduction in debt leverage ratios. Our updated fiscal 2024 adjusted EBITDA guidance range of $240-million to $280-million reflects our expectations for a significant increase in deliveries and strong performance from the aftermarket segment. These positives are somewhat offset by the delivery of remaining legacy inflation-impacted contracts, some of which were planned for 2023 delivery, and operational labour inefficiencies as we ramp manufacturing production to meet heightened demand and execute on our secured backlog. We remain confident in our medium-term targets to deliver over $4-billion of revenue in 2025, with a quarterly run rate in the fourth quarter of 2025 that, annualized, would deliver $400-million of adjusted EBITDA."
Highlights:
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NFI delivered 1,227 equivalent units (EUs) in Q4 2023 and 4,001 EUs in fiscal 2023, a 19-per-cent increase from Q4 2022 and a 32-per-cent increase from fiscal 2022;
- Expected Q4 2023 quarter-end work-in-process inventory of 914 EUs, a decrease of 211 EUs from Q3 2023;
- For fiscal 2023, aftermarket segment expected to deliver more than $500-million in revenue and over $100-million in adjusted EBITDA -- the strongest performance in NFI's history;
- Anticipates positive overall cash flows in Q4 2023, with an expected ending liquidity position of $180-million, up from $169-million at the end of Q3 2023;
- NFI received orders of over 2,100 EUs in Q4 2023, generating an ending backlog of over 10,500 EUs, with over half being firm orders;
- Total backlog value at the end of Q4 2023 of almost $8-billion, an increase of approximately 22 per cent from Q3 2023.
Total backlog does not include over 3,800 EUs of new firm and option orders that were pending at the end of 2023 Q4, where approval of the award to NFI had been made by the customer's board, council or commission, as applicable, but purchase documentation had not yet been received by NFI and are therefore not yet included in the backlog.
The company cautions that the figures presented above are preliminary, unaudited and subject to change as management completes its quarter-end and year-end financial procedures.
Guidance update
Projected revenue and adjusted earnings before interest, taxes, depreciation and amortization for fiscal 2023 are expected to surpass the midpoint of the company's guidance ranges set forth in its Nov. 8, 2023, press release. For fiscal 2023, NFI anticipates a revenue range of $2.7-billion to $2.8-billion (unchanged), and an adjusted EBITDA range of $45-million to $65-million (unchanged).
Following a detailed financial review of its backlog, expected new awards, expected aftermarket performance, supply chain conditions and investments being made into operations and new products, NFI is maintaining its overall revenue guidance for fiscal 2024 of $3.2-billion to $3.6-billion, but is updating its adjusted EBITDA guidance range to $240-million to $280-million (previously $250-million to $300-million).
The change in adjusted EBITDA guidance for fiscal 2024 is based on the expected impacts of:
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The delivery of remaining legacy inflation-impacted contracts (now representing approximately 10 per cent of first half 2024 deliveries);
- Timing of certain zero-emission bus awards causing some deliveries to shift into 2025;
- Growth in backlog and demand for buses and coaches, with NFI electing to maintain operations at NFI's Pembina, N.D., facility (originally planned for closure in 2023) to support this increased demand;
- Longer-term investments to relaunch double deck bus production in North America (with expectations for positive adjusted EBITDA contribution in 2025 and beyond);
- Expected improvements in aftermarket segment performance based on 2023 outperformance;
- Improved margins on bus and coach contracts secured in 2023 and the benefits of overhead cost mitigation efforts.
Based on expected revenue growth and associated investments in working capital, adjusted EBITDA guidance, cash capital expenditures, lease payments and cash taxes, NFI anticipates that its current and expected liquidity will be sufficient to finance operations (including working capital), capital investments and bonding requirements in 2024 and the longer term. In 2024, NFI expects to lower its overall debt leverage ratios from adjusted EBITDA growth rather than significant debt repayments.
For fiscal 2025, NFI maintains its target to achieve $4-billion of revenue and now expects to deliver adjusted EBITDA of over $350-million, with adjustments to reflect the timing of manufacturing production ramp-up and certain electric vehicle deliveries. NFI expects that it will achieve an annualized run rate of $400-million of adjusted EBITDA by the fourth quarter of 2025. NFI will provide additional details on its outlook, fiscal 2024 guidance and 2025 financial targets with the release of its audited fiscal 2023 results.
Guidance and targets above are driven by numerous expectations and assumptions. Please see NFI's Nov. 8, 2023, press release and the Q3 2023 management's discussion and analysis, as well as NFI's March 1, 2023, press release and the fiscal 2022 management's discussion and analysis. The guidance and targets are also based on several factors and expectations, including the supply chain performance, consistent availability and training of labour, a higher percentage of zero-emission bus sales (which provide a higher revenue and dollar margin benefit), the mitigation of inflationary pressures, end markets recovering in line with management expectations, growth in international markets, aftermarket parts sales and continuous improvement initiatives. The guidance and targets are also subject to various risks and other factors.
About NFI Group Inc.
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.
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