Q3 2020 NFI Group Inc Earnings Call
Oh, just mine are on mute please.
Please be advised that todays conference is being recorded.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Claire any for their assistance. Please press star gas I would now like to turn the call over to your speaker today Stephen King. Please go ahead.
Thank you Amy good morning, everyone and welcome to NFV group's third quarter 2020 results Conference call. This is Stephen King Enterprise Group Director Treasury, corporate development and Investor Relations speaking.
Joining me today are Paul two brief President and Chief Executive Officer, and pass through Sony Executive Vice President Finance and Chief Financial Officer.
As Amy mentioned this call is being recorded and a replay will be made available shortly on our website on this morning's call we will be walking through the financial results presentation that can be found in the performance and reports section of our web site, we will call out the slide number referred to as we walk through the deck.
In addition to the results presentation, we encourage all participants to review the consolidated financial statements and the associated management discussion and analysis and press release, all posted to our website and on SEDAR.
Starting with slide two I would remind all participants and others that certain information provided on today's call may be forward looking based on assumptions and anticipated results that are subject to uncertainties should any one or more of these uncertainties materialize or should the underlying assumptions prove incorrect actual results may vary significantly from those expected.
You are advised to review the risk factors found in enterprise press releases and other public filings on SEDAR for more details.
We also want to remind listeners that enterprise financial statements are presented in U.S. dollars, the company's functional currencies and all amounts for two are in us dollars unless otherwise noted.
On today's call Paul will start with a recap of the quarter and then for boss, who will take us through the financial results and our progress on the end if I forward initiative. Paul will then conclude with some market insights and discuss why that was.
With that well open the call to analysts questions I'll now pass it over to Paul.
Thanks, Steven and good morning, ladies and gentlemen, first I'd like to acknowledge that today is November 11th is remembered stake Memorial day observed in the Commonwealth member States to remember the members of the armed forces who died in the line of duty we are grateful to those who have given their lives for their country.
Before I get into the details of the quarter for first time listeners.
Those not familiar with an outside group how quickly provide some background on our business.
Starting on slide three Edify group is a leading global independent bus and coach manufactured with operations in 10 countries and more than $100000. How does a 5000 vehicles and service our business is diverse with over 450 combined years of bus and coach experience of our individual companies.
Turning to slide four.
<unk> Fixe history of growth and profitability is built on organic growth product improvement vertical integration and strategic acquisitions.
Over the last decade, our business went through two major phases first from 2010 to 2014, we consolidated the North America transit space through several acquisitions and also began our lean operational journey.
From 2015 to 2019, we diversified our business by entering the North American market space acquired our fiberglass suppliers entered the low floor cutaway business and finally, we expanded globally by acquiring Alexander Dennis just last year as you can see from the slide both our revenue adjusted EBITDA tripled from 2010 to 2019.
On slide five we highlight that we are much more than just a vehicle manufacturer. We're now a total mobility solutions provider and a leader in technology development.
And the point is the strongest zero emission bus offering in the marketplace today offering battery electric fuel cell electric and electric trolleys with the Industrys widest range of battery electric bass transit vehicles, ranging from single deck to double deck and articulated buses and motor coach variance in.
In 2018, we identified that infrastructure is one of the main challenges for operators and we lost it infrastructure solutions business to support our customers with their transition to zero fleets.
We're driving change with the associated advanced driver assistance systems, including a ton of this technology and we're focused on telematics and connected vehicles, allowing agencies and operators to improve their performance fine.
Finally, we're driving the evolution of a zero emission future with the largest zero emission bus or the b capacity in North America, and the UK and unlike our competitors, we have the capability to produce diesel natural gas hybrid and zero emission buses. This is a key differentiator as it allows us to continue building traditional propulsion products for our custom.
As they make their transition to zero mission over the decade next decade or more.
On slide six the third quarter of 2020 saw strong improvement from the lows of the second quarter, but we continue to be dramatically impacted by the covert pandemic.
During the quarter were able to reopen all of our manufacturing apart fabrication facilities with a focus on ensuring the health and safety of our team members, our suppliers and our customers well.
While our facilities have resumed operations, we've adjusted our production rates to match the current market demands.
Offered order deferrals and backlog and expected New vehicle awards. This reduction is essentially especially true within the private operator segments of our business, including North American motor coach and the UK business.
As COVID-19 has created challenges for our markets, we moved quickly to reduce our cost and preserve cash flow.
A significant portion of our costs are variable and linked to production, we focused on reducing from overhead and admin costs wherever possible. During the past six months, we've we've eliminated significant costs through staffing reductions and while we were able to remove certain cost immediately the size international scope of our business combined with the multiple production facilities and after.
Market distribution centers requires us to take a thoughtful approach.
We wanted to ensure that we did not make cuts that would impact or or long term capacity or competitiveness or ability to deliver for customers and win New awards.
Capacity will discuss these cost reduction efforts in detail when he walks us through the end if I forward our company wide transformation initiative that will ensure we emerged a simpler leaner business with fewer business units and a reduced footprint.
Well, our third quarter performance was in line with our expectations.
Was impacted by several non onetime nonrecurring items for which we normalized these includes severance and restructuring as well as covert related charges.
With the third quarter complete we again reiterate our full year adjusted EBITDA guidance of 145 to 155 million. In addition, our liquidity remains strong and we're focused on prudently managing our cash flow and de leveraging our balance sheet. We continue to believe that our cash position and our credit capacity under our existing credit facilities.
Sufficient to fund operations meet financial obligations as they come to provide the necessary funds for capital expenditures dividend payments and other operational needs.
Based on our anticipated cash flow generation, we do not expect to utilize the incremental sidecar facility that we put in place in April 2020 recall that this facility was implemented as insurance to ensure we had enough financial resources to whether the cobot stormed about Howard how deep it God.
The fact that we have not needed to use it speaks the real deal the resiliency of our business.
We had a covenant waiver in place for total leverage her total leverage ratio TLR, which measures total leverage against adjusted EBITDA on a trailing four quarter basis on all our facilities until September 28 2020.
Point Covenant, then resumed a more relaxed levels based on a pro rated calculation that excluded the second quarter of 2020 results. The company now expects that the combination of lower trailing adjusted EBITDA in 2020 combined with the company's current debt profile on the ongoing uncertainty created by coal that.
Impact compliance with the TLR covenants, starting in the first quarter of next year.
We're in late stage negotiations with our banking partners to obtain further covenant relief I look forward to announcing the details of that very soon.
Slide seven shows our deliveries in the quarter and the backlog at the quarter end during the quarter, our backlog declined slightly due primarily to deliveries outpacing New awards as some awards continue to be delayed due to the pandemic.
Our ability to deliver profitable results highlights the importance of our backlog and the visibility that it affords us we anticipate that we will see increased order activity in the first half of 2021 as previously delayed orders are released which will help rebuild our backlog.
Our backlog is heavily weighted towards public transit agencies, where government agencies make longer term multiyear orders deliveries were down slightly was in transit, but down 32% in motor coach, reflecting the immediate impact that COVID-19 had on our private operators medium duty and low for cutaway deliveries were up significantly as demand remains high.
Hi.
I'll now ask capacity to take us through the detailed financial results over to you Professor.
Thank you Paul and good morning, everyone turning to slide eight our third quarter performance saw significant improvement from the second quarter of 2020, but it did see some decline on a year over year basis due to the colored Nike pandemic manufacturing operations resumed during the period, but at lower production levels and private markets continued to be challenged by the pandemic.
Leading to revenues declining by 8.5% when compared to Q3 2019.
Adjusted EBITDA also saw a decline year over year, we lowered variable overhead costs to match with production, but experienced unfavorable fixed overhead and ask DNA absorption. We are strategically removing fixed cost from the business to right size our operations free cash flow was down by 10.2 million as we saw lower Ajay.
Adjusted EBITDA and higher interest expense somewhat offset by reduced cash capital expenditures and cash taxes.
Turning to slide nine I'll outline our net earnings and the adjustments that we've made to reflect the impact of onetime nonrecurring items.
During the quarter, we had a net loss of $24.9 million or 40 cents per share. While some of this loss was due to the same items that impacted adjusted EBITDA. The main drivers on a tax adjusted basis were 16.8 million COVID-19 related costs, and 17.5 million and severance and restructuring costs.
After adjusting for these items plus mark to market gains and unrealized foreign exchange gains. Our adjusted net earnings was 5.7 million or nine cents per share. We provided a detailed reconciliation of adjusted net earnings in the appendix of this presentation on slides 20 and 21.
Now turning to slide 10 in July 2020, we launched and if I forward and initiative that will transform identify group into an integrated operating company as Paul mentioned.
And at the beginning of our call. We've completed several acquisitions that today have run as independent businesses, we see significant opportunities for financial improvement through business combinations and through the rollout of common platforms and systems across the head up by group.
That's the power of the Edify forward initiative with the efficiency gains we get from integrating the businesses, we generate significant returns for our shareholder base, while continuing to offer world class mobility solutions. The anticipated cost savings will show up in three areas, our financials lower direct material costs lower manufacturing overhead.
And lower SGN a expense in aggregate edify forward is expected to deliver an 8% to 10% reduction to both manufacturing overhead and asked today based on 2019 run rate.
We anticipate generating 18 million of savings in 2020, driven by a combination of lower material costs and the benefit of restructuring initiatives in 2021, we'll add another 29 million in savings for a total run rate of 47 million as the new fired MPCI business units run as one combined.
Business, we consolidate the edify parts in North America parts operations, and we realize full run rate savings from actions carried out in 2020.
In 2022, we expect to be able to consolidate plants within our North American network, which combined with further administrative reductions will generate an additional 13 million in savings and finally in 2023 will achieve 7 million to bring total expected annualized savings to 67 million.
These cost reductions will generate significant volume leverage when markets recover we will grow revenues on a lower fixed cost base would drop through to adjusted EBITDA.
We also expect an additional 10 million in cash flow savings over the period of 2020 to 2023, driven by a decrease in cash leases as we reduce our total facility footprint.
And the benefits of a central treasury team to lower interest and banking cost. In addition to these items. We continue to explore other cash generation options, including a significant focus on working capital.
One of these working capital improvement projects was our recent sale of Npis pre own coach pool for approximately 19 million cash.
As the pandemic had caused significant challenges in the North American private motor coach market by immediately and dramatically decreasing demand for pre on motor coaches and putting pressure on market values that divestiture of the asset pool was prudent and directly aligned with the strategy of going up by four it will also help to ensure that edify he has well positioned when the.
Coach market recovers from the pandemic.
We will continue to disclose the impacts of edify forward within our financial results as we achieved them. In addition, we will also discuss the F. I for program in detail at our January 2020 Investor Day.
Steven will discuss later this morning, I'll now turn the call over to Paul to discuss our outlook. Thanks.
Thanks for passive circling back to my earlier comments on 2021 being a transition year I'll comment now on how cobot Nineteena has impacted our end markets starting on slide 11, our discussions with transit operators suggest long term demand for transit vehicles is intact I will point out that our active bid universe, which is bids in.
Process of bids already submitted are up 20%, 27% year over year. The five year total bid numerous continues to fluctuate and turn it reflects a reduction in expected motor coach public demand.
An overall positive sign is that only a few transit RF piece have been canceled to date, even with the ongoing pandemic.
In other developed with respect to or does the fact that the orders are smaller and total size and with fewer options. This trend predates predates COVID-19, and it's something we've been developing as agencies make the transition disease the bees.
As an essential service government support is critical to public transit will matter. The political affiliation there was a desire to fund public transit in all of our major markets.
Yes government has been especially strong support of the transit through the pandemic through a variety of stimulus packages on slide 12.
Right, but overview of some of the support it.
In addition, the government support the recent us elections highlighted that there's an overwhelming public support for public transit, where 13 out of 15 transit related ballot measures were pass. These results add to the 32 public transit measures already passed by voters in 2020, a 92% win rate.
For the year the measures represent more than 38 billion in new funding for U.S. public transit.
Longer term the potential successor to the fast Act was unveiled in June of 2020 through the investing in a new vision for the environment and surface transportation Americas also known as the invest in America Act.
This 494 billion act aimed at providing sufficient funds for improvements to U.S. infrastructure, including transit.
The dress, specifically focused on reducing the U.S. carbon footprint and assisting with the conversion to electrified mass transit vehicles.
This includes 1.7 billion and proposed funding for zero emission buses a five fold increase from the fast Act.
The invest in America Act as a five year proposal, which provides transit agencies with longer term visibility as they execute on their capital plans.
The act is not yet approved but as a significant and positive step in the right direction. In addition, we're pleased to see that the fast act extend for one more year to provide transit agencies with more confidence while the U.S. works through the impact of the elections and a new administration. The stated priorities by the U.S. President elect Joe Biden on investment environment.
Environmentally friendly public transit is very encouraging.
The movement to battery or fuel cell electric buses continues to be a trend across in the face of various markets and there is potential that the recovery from COVID-19 may accelerate this transaction this transition.
A recent development supports the continued expectation of increased demand for CBS was the Canadian government October one 2020 announcement of 1.5 billion in financing through the Canadian infrastructure bank to support the adoption of zero emission buses and charging infrastructure. The financing is expected to be delivered over a 24% to 36 months.
Period.
And if I may is the leader in North America, and the UK for zero emission buses and would benefit from Inc. increased transition Dizzy piece. We currently have the vehicles on trial in major cities in North America, and the UK and New Zealand.
Phebe orders are growing and now make up 8% of our part of our total backlog up 4% at the same time last year and makes up 26% of our active bid universe.
New Flyer can manufacturers. He he believes that all of our facilities HDL has the delivered the most the bees in the UK and M.C.I. is now selling its innovative battery electric coach and our box Electric Atlas Shuttle bus is currently in testing.
On slide 13, you can see how our private customer markets have been dramatically impact by the cobot pandemic as motor coach offers depend heavily on tourism travel conventions sports and employee transportation they'd been challenged by the negative impact in immediate impacts of the pandemic.
In North America Motor coaches.
Deliveries through the first half of 2020 are down 57% and over 80% of coach industry employees have been furloughed.
We expect the private motor coach market will recover as travel restrictions are lifted and vaccine does ruled out but this will take time and we expect the market will continue to be challenged well through 2021.
Recent positive vaccine development at announcement are currently and we view them as positive towards private and public market recoveries.
In the UK transit market, where private operators operate public groups. The first half of 2020 deliveries were down 65%, reflecting the impact of lockdown in travel restrictions across the UK.
As HDL reported by adjusting production.
HDL adjusted production at Scottish facilities, rationalizing chassis production as the Gilbert location and ruling fixed costs through a reduction in administrative positions. We are working closely with customers to plan for 2021 and beyond as many many bus vehicles need replacement.
We do expect that it will be overall improvement in fiscal 2020, and free deals delivery activity as a deal delivers more vehicles to customers in Germany, and Ireland and also sees growth in its Asia Pacific markets.
The positive contribution from various market speaks to the strength of PDL market diversity.
Within our aftermarket segment, we continued to expect demand for heavy duty transit parts as operators in North America International markets complete regular maintenance and invest in additional products to come complete clean and protect their vehicles.
The large fleet of active essential service transit vehicles provides us with visibility and generally we're current revenue stream. The private component of the aftermarket business, which is primarily MC ideal coaches will be continue to be negatively impacted by the operators either in their vehicles.
The private component of the parts business represents about 30% of that segment's revenue and we expect those parts sales will recover over time as businesses reopened and leisure and business travelers resumes.
Turning to our financial outlook on Slide 14, as I mentioned earlier on the call. We reconfirmed our adjusted EBITDA guidance within expectations will deliver two to 145 and 155 million for fiscal 2020, which would represent a $52.3 million or $62.3 million of adjusted EBITDA during the.
Fourth quarter of 2020.
We also reconfirm our expectations that our plant property plan equipment expenditures will be approximately 25 million for fiscal 2020 look.
Looking forward based on our current market conditions and expected future demand, we anticipate that 2021 financial results, we'll seek significant improvement over fiscal 2020, but we also see 2021 as a transition period with the impacts of cobot pandemic continue to create challenge for end markets management as certain visibility on components in it.
As expected 2021 results driven by our firm backlog expected option conversions and anticipate New awards, but delays in public awards decreased.
Private sector demand and uncertainty surrounding the timing and magnitude of government stimulus create some year for full year 2021 results. There is no doubt that COVID-19 has impacted our 2021, but long term buses and coaches will recover and we will plan a critical role and will play a critical role as the spinal cord of cities.
Around the world there will be bumps in the road as we recovered to normal run rates, but market recovery combined with structural changes made by our and if I forward initiative will make us a more competitive and more cost efficient market leader I'll now turn it back to Steven to summarize todays discussion.
Reviews, and if I investment thesis and introduce our plans for 2021 Investor day. Following that we'll open the call up to Alexs question, Steven Thanks, Paul sticking to slide 14, I'll recap this morning's call.
And if I as Q3, 2020 performance demonstrates enterprise resiliency strong backlog position and ability to respond to the ongoing economic realities of the COVID-19 pandemic during the quarter. Our facility successfully resumed production the strong health and safety processes in place to protect employees, we have strong liquidity and currently have no concerns with our cash flow generate.
Turning to our cash flow position, we anticipate that we'll need covenant relief in 2021, mostly due to lower trailing adjusted EBITDA and we are in detailed negotiations with our banking partners.
Overall markets remain challenged but we continue to see strong active bids with potential for awards in 2021 current backlog in 2020 deferrals provide a base for 2021 volumes, but we do expect lower than pre COVID-19 levels with 2021 being a transition year, primarily in private markets and if I as the leader in GBS in North America in the UK.
Okay adoption is increasing and stimulus funding with support acceleration and get more of the bees into the market.
The private motor coach market is expected to take a number of years to recover but we are seeing some positive signs in sports and vaccines and travel active active travel will drive increased activity.
And if I forward is a primary focus across the group the various initiatives that are underway will position in a fight for recovery drive volume Leverages and improve our margins.
Slide 15 provides key points and what we believe makes and refine attractive investment I won't go into detail on these items will highlight that we are entirely focused on bus and coach with a strong public customer base and recurring revenue part stream, we have the largest CB capacity in North America in the UK proven track record in delivering electric vehicles and will lead the mark.
His transition to a zero emission future.
And if I forward initiatives will create meaningful volume leverage when markets recover and we deliver revenue growth will do so with a lower fixed cost base and finally, we invest in our business and return capital to shareholders through dividends and share repurchases.
Finishing on slide 16, I'm excited to announce our virtual Investor day is happening on Monday January 11, 2021. This year's event will be especially exciting as we lay unveil our plans to drive the future of mobility, including updates on the evolution to zero emission fleet growth of our infrastructure solutions business, how we plan to leverage telematics and connected.
It goes to create stronger relationships with customers and the numerous advanced driver assistance projects, we are investing in to make vehicles safer for operators customers and communities. The Investor Day. We'll also provide details on the various end up by four projects in say two environmental social governance efforts were SG identify and provide a forward look.
Outlook, we hope you can all join US for this exciting event details on how the RSVP can be found on our website more and more information, including the agenda for the event will be released in December we'll.
I will now open the line for questions Amy Please provide instructions to our callers.
Thank you at this time, we'll be conducting our question and answer session and ask a question. Please press Star then the number one on your telephone keypad. Your first question comes from the line of Mark with Scotia Bank Mark Your line is open.
Hey, good morning, guys.
First first thanks to the sequential improvement.
So good there.
Maybe just on the outlook.
I appreciate all the detail.
I guess from a high level of thinking about Q4, and then into 2021 I got I know you haven't provided guidance for 2021, yet but.
I'm thinking about the Q4 run rate you sort of adjust your production I know Q4, Q4 is typically seasonally stronger, but I think part of that's coach somebody that doesn't come back.
I'm thinking about 2021, if I sort of take Q4.
As my run rate per quarter add on.
Some of that applied for benefits.
Sort of getting in the ballpark of sort of what you're thinking for next year again, maybe their stimulus and maybe there's a vaccine that sort of the Walker, but is that at least right now a reasonable way to think about next year.
Well, thanks, Bart good questions and lots in that and of course, you know, we went a little bit longer to try and tell the story of all the moving pieces.
You know Q4, historically had quite a component for our business that had a transactional motor coach sales and of course all of US remember that the changes in the Americas.
Yes tax structure that then allows for significant opportunities and accelerated depreciation we had a massive sale of.
Our coach has probably been more coaches in the fourth quarter that we don't anticipate this year. So what we've got for fourth quarter basically as all of our slots are filled.
We're.
We're running.
Effectively at slightly lower production rates not Q4 effectively is.
Maybe I'll ask a pass through to talk about how it relates into the 2021 forecast, we see a full year increased quite substantially from the current 145 to the 155.
Obviously the change in U.S. administration has an impact how fast that kind of discuss.
Discussion around stimulus or any kind of additional support for the U.S. public transit in Canada. We now see this discussion with the government decaying infrastructure Bank, which is now you know rattling through the discussion with various transit operators.
We also have on the on the cost side as we described lots of Takeouts of Atossa, how would you articulate or provide insight into Mark's comment about run rate relative to Q4 and 2021, Yeah, I guess the way I'm kind of saying it right now Mark as you know as I kind of think about Q1, obviously, there's going to be a little bit of a mix component that we're going to have a kind of going into Q1.
So when we think about the run rate, obviously, it and if we compare it to Q1 of 2000 2020.
Most likely will be slightly less than what we're seeing in Q1 2020, and we'll obviously provide more detail at the investor day, but to.
To kind of give a little bit more detail on back on the move to electrics that out that we're experiencing as well.
Okay.
Helpful. Maybe.
I appreciate that.
Just ask about the covenant relief.
No I would assume it's a much easier conversation to have today than it was four or five months ago.
Got it sort of it Doesnt sound to me that there's sort of any maybe material sort of give backs or.
And I guess, what I'm thinking about the dividend just negotiate if at all maybe it's hard to comment that just curious your thoughts on that.
Yes, yes.
For me I would say you know as we kind of think about the covenants I mean, one of the things that you have all your already realized that Paul has mentioned it as well as Stephen but when you look at the back half of 2020 versus the back half of 2019, if you're starting to just do the math right. We're roughly I think 180, when we were in the back half of 2019 were roughly 120 ish.
More in the back half of 2020. So you know as we think about it you know and and we started thinking about our covenants, we feel pretty good in terms of getting through 2020, and we feel fairly tight maybe in Q1 2021. So we said hey at this stage, let's just go ahead and get the relief. The banks are very supportive of it we've got great.
Results from from our banking partners, and then I think to Steven's point add to Paul's point, no liquidity concerns whatsoever, we should be close to 200, plus liquidity without the sidecar by the time, we exit this year and we're just making sure that we meet our leverage covenant kind of going forward, but just have some relief.
Just in case, so should be kind of a viewpoint is the way I kind of think about it but again, Steven you're you're running treasury first anything else that you are things I may be missing, though I think you covered all the key points Pos who I would just reiterate as we mentioned as we do our cash flow forecast in dividends is an important part of the story and obviously, we made the cut earlier this year, but.
Being able to continue the dividends at the current levels is important to us and so that's.
It's something we factored into our cash flow forecast has proposed to mention around where we think our liquidity levels will be so confident in the cash position and confident we'll get this.
This amendment done with the with our banking partners.
Okay. That's helpful sorry.
Last question that process or did you say.
Despite exiting your 200 million of liquid then is that sort of apples to apples for 14 now.
Yes, so I'm basically taking out just so you know I'm taking out the sidecar facility whenever I get that number.
Okay.
All right. Thanks, guys all pass fine thanks.
Your next question comes from the line of Chris Murray with ATP capital markets. Chris Your line is open yes.
Yes. Thanks, guys. Good morning, So maybe to follow up on marks question just to maybe make it a little clearer.
You previously thought about or talked about it being about.
Just a hair over $1 billion leveraged by the end of Q4 is that has that maybe a better way to think about it.
Yes, I think thats still the plan in from a net debt perspective, Chris obviously working capital is a little bit higher this year because of some of the private market.
HDL and M.T.I.
Private market coaches and private market vehicles.
So I think yeah, that's kind of the right number to think about for net debt.
Okay. So that kind of implies you're going to have to have earnings et cetera of about 50 million in EBITDA plus plus.
I'm going to guess and working capital recovery in Q4 than is that the way to put it all together to get to get there.
Yes, that's the right way to think about US we I can I think we said 52 to 62 million of adjusted EBITDA in the fourth quarter based on our guidance. Some working cap improvement there is always some at the end of the year.
And then but we won't get as much as we would have seen in 2019, just because of that like Paul mentioned private coach is usually our busiest period in the fourth quarter, but some working cap improvement and so yeah. If you put all that together, that's and that's why I think.
The POS you mentioned, it's more of a 2021 issue on the covenants as we're looking at trailing EBITDA has dropped significantly from 2019 to 2020.
This is Paul just another point of color.
You will have read in our materials and we talked about today, we liquidated our pre owned coach pool.
We really didnt feel that that pool was going to turn their significant costs in exercising those coaches managing them updating them.
You know what our facilities and so forth what we usually see this time of year is obviously as as I mentioned, the burn down of our new coach inventory and of course, I think we talked about it last quarter. We have now stopped inducting new motor coaches, we did that a couple of months ago, we still have new coach motor coach inventory.
He on hand, both at LMCA.
And so the trick for US obviously as we move into 2021 is we've got to burn down that that new coach inventory over time by relieving ourselves as a pre own coach pool, we solely focused now on the on transactions associated with getting rid of new coaches that should help the the net debt level as we move through 2021.
Okay, great and actually that was sort of another one of my questions. So at this point you have no more used coach on.
Is that the right way to think about it.
Exactly right.
Okay.
Good and then I guess my next question because it's it's maybe.
The least clear part of how this thing evolves can you talk a little bit about the UK market.
Your thoughts around stimulus and whatever this bill would be and how soon or what kind of impact are you guys thinking about as we go into 21 in terms of maybe report rebuilding some of the order books for LTL in the UK Mark.
It's a really good question, Chris and you'll remember when we acquired HDL.
We were quite bullish on on.
On HDL for 2020 in 2021, because the UK market had gone through kind of four or five years of a slow down on replacement factor said, so we saw a bunch of pent up demand as we started the year most of the ideal customers in the UK were talking and we were deeply negotiating quite a significant ramp up to the business jet.
Prior to Colby I think it was in early February the UK government than Prime Minister announced a 5.1 billion plan to support and assist private operators with a conversion to to clean and Green vehicles. In addition to other things like some bike path and some other initiatives throughout the UK.
So obviously coal that changes everything all of those operators were still operating but slowed down the number of buses on the road the frequency of operation and so forth. So we go through a period from kind of March or April to now where those operators are unsure of the pace of recovery of ridership and therefore fair box and therefore income.
The UK government, obviously in parallel to the cobot dynamic is working through the Brexit dynamics, the dialogue with the government and with the operators actually the last I'm going to say month to 45 days is actually heated up quite positively about something in the next month or two that could be really unique to rebuild.
The the schedule for LTL for Twentytwenty one.
So as we sit here today I've got nothing other than dialog discussion interest activity to tell you about further volume for Alexander dentists in the UK, we talked a little bit about rationalizing our capacity and so we basically had three production facilities and we've now rationalize that downturn.
Two.
And so we also believe that as that market recovers and as we move into 2021, we start to see some of those orders come through we've also got a reduced cost base, which will only enhance the profitability of Alexander Dennis going forward.
So I wish I could point to a specific bill or a specific announcement, we know that that stuff is actually coming and very positive of late and as soon as we get any pause or any firm indications. We'll obviously announce that the good news about HDL is that they have been able to secure some work now as you know in Germany that we deliver the pilots we're now planning.
For the first tranche to be built in the UK, starting in 2021, and a very significant order what secured for Ireland.
So that you know a lot of positive stuff in about 80 element last couple of months and we expect a significant recovery and its performance as we head into 2021.
Okay. Thanks, guys. That's all my questions.
Thanks, Chris.
Your next question comes from the line of Kevin Chiang with CBC, Kevin Your line is open.
Hi, good morning, everybody. Thanks for thanks for taking my questions here.
Maybe just first off.
Sense of how Youre.
Customers are feeling.
I recognize.
There's a lot of government and bipartisan government support for public transportation, you saw a bit of a debt.
Universe quarter over quarter, you saw a little bit of a pickup in cancellations. Just wondering are you seeing a little bit of fatigue in your customer base, just given how long it seems to be.
How long it's taken to get a second stimulus bill.
Is that because I want to welcome.
What would it take to get these orders flowing through in 2021, we need to see how a definitive fiscal bill passed in the U.S. for for transit agencies to kind of putting the orders reflect mixture.
Well look it's a good comment and a good question.
All of US are fatigued with with the covert dynamic in every sense of the word every day, we come to the work and find out how many people have tested positive for the people around them that have tested positive and then they've got to do a test it and so on and so forth our customers continue.
There was a bit of a recovery and ridership and then we saw the wave two and then a slow down and so forth I.
I will tell you our comp our conversations with the public transit agencies of late are actually starting to be a lot more encouraging a lot more positive. These guys are resilient I mean, they've gone through.
Funding cycle, they've gone through extensions of bills, they've gone through all that other stuff and yet they're warriors and operate all day long every day to support the public transit. These in every city.
I would suggest is a couple of positive things most of the operators are good partners have now gone through with let's call. It a trial phase on zero mission, whether its battery electric or or of late more and more of trying hydrogen fuel cells and realizing range performance, how they're going to deal with that charging infrastructure strategies and so forth so that.
The pain, we had last year of we don't know what this means for operation I think a lot of them have I've got enough experience now to to have a view of what they want to do the second issue is they were waiting for a second round of stimulus that hasn't happened.
Even in the last couple of days, we're seeing more and more announcements about we may see something in late November or December, which I think our operators are seeing as positive.
But there is a a generally a positive sentiment around you know.
President elect biden and his views around public transit and the need to fundamentally invest in kind of lean green infrastructure.
Infrastructure associated with it so I would say there clearly you know these guys have gone through hell and they've been frustrated, but but they are warriors and they really responded the last little while.
In conversations with Us I'll, just give you a staff for example.
Kevin you've been to our vehicle innovation center in an Anniston, Alabama, we took that now online and over the last two or three weeks Weve had for virtual sessions were getting between 85 and 100 customers. Each time on those virtual calls and so the engagement in interest is really really strong some of which will obviously want.
To try and share with with you and others at the Investor Day in January 2021 on the private side you don't.
They're still movement in activity for the private shuttle type operators, but those.
Small or even medium sized privately owned motor coach operators that are relying on sports or leisure or travel and so forth are still depressed and we expect that as I talked in our notes here that to go through 21, and potentially even a little bit longer. So we're not planning on a massive recovery for that portion of the business.
But that's that's very helpful.
If I could maybe just a couple of modeling questions one with them.
Hold your your guidance for the year.
Highlighted a sequential recovery in your business.
Just wondering when you look at the.
Offsets from the government support programs.
First what would you anticipate in terms of Q4 and is this growing kind of in line with what you would expect when they're late when you introduce your guidance in 2020.
A little bit higher than you anticipated or or maybe maybe below what you had anticipated this given your pizza recover.
Well I think if you'll remember that we started the year with.
320 to 350 guidance for 2021, obviously the immediately when Covance hit Us in March we had no. How we had no idea how long or how deep.
We went from March to August with no guidance out there trying to understand what to do and you know our whole focus was on shutting or facilities or idling them, but also the safety of our employees.
When we started back up really in earnest.
In late July and August we set our guidance based on what we had for known slots. We knew that there wasn't going to be very many private sales and it was really about known.
Sold slots. This year. The reason, we still have reiterated guidance set as a 10 million dollar range. If you will for Twentytwenty is is the reality of the cobot impact on our business every day about it you know absenteeism challenges delivery challenges with customers Inspector dynamics and all that other stuff look we're really.
Confident we don't have to worry about selling anything in the fourth quarter of this year, it's about executing and delivering and we're managing extremely well notwithstanding all those daily bumps bruises, but as we had to move into 2021.
And we're filling up our slots through the first half of the year, we're relatively confident and all these positives that were starting to see around government interest around potentially UK stimulus the Canadian government and so forth, we think bodes well for the back half of next year, but that's really where our focus is right now is selling the slots for the back half of next year.
I think we have to do that to to add to your question just at a very high level. You know when we think about the UK furlough program, we're thinking somewhere in the 1 million range getting that into Q4 2000.
Okay, and then you know for the PSU stuff, we obviously got that built in but we're kind of working that because there is a little bit of uncertainty we will get that last okay.
Okay, you've been building the frontier.
Maybe just last one for me I'm sure, you've all who Oh just how.
How cheap the capital is I guess for a lot of new mobility companies are looking to enter into the electric vehicle space further.
Full vehicle space.
How do you think the competitive environment I know a lot of these players don't have actual buses or vehicles, yet, but you know a fear that as you get through this recovery, you're going to see more competition or more pricing pressure or no.
Customer thing anything that suggests anything worth some on the competitive front as you look up the next few years.
Well look we've had people come and go in our space over the years and as you know the dynamics in North America are in the public transit space and even the private motor coach are dramatically different in our world and somebody showing up with electric truck or electric.
Car getting through Altoona getting through the customization of the vehicle to meet those customers in some cases, having to meet Shaker table tests and all these other things is not simple and I'll just point to one of our competitors that is only the provider they're going out for 14 years and they have.
Sub 600 vehicles on the road.
And so this is why we're so focused on making sure investors as an understand this is not an off the shelf product. It is highly custom and highly engineered and highly unique for each operators there are incredibly challenging and difficult testing environment that we have to get through with our customers.
And then there is the whole dynamic of the charging infrastructure and the pace at which and the experience of which you know that the operator needs and the OEM needs provides to put those vehicles and service and so I go back to I am very comfortable of our competitive position given what we offer today given our evolution.
To the zero emission given the fact that we're the leader both in electric and trolley, but also in the fuel cells that we can we can migrate as those customers want to migrate at the pace, but we're still taken orders today for conventional diesel vehicles hybrid vehicle natural gas vehicles. It is not a light switch and so anybody showing up tomorrow that says.
I can sell a vehicle to you Mr customer in a public environment really hasn't got a lot of traction your point around competitive intensity is I would suggest no different today than it's been in the past you know there is the is the desire to want to fill slots in the short term the desire like us and our competitors to want to build up the backlog.
You know some of our investors look at us and say Oh, My God, you're burning down your backlog, we look at as thank God, we built up a backlog and thank all we have the flexibility to manage with our customers today on option conversions and states schedules as we've talked about which has been a massive part of the order in the last little while to be able to support that customer we are.
Seeing some spot buys now that maybe we didn't see in the past you know in the last six months I can think of a handful of operators that said, Hey look I found a unique way of getting some funds I want a batch of buses can you deliver quickly and the fact that we can build any kind of vehicle in any one of our facilities, whether its diesel natural gas hybrid gap electric or fuel cell.
Allows us to be able to respond in a responsible pricing manner not having to tank price. There are some situations, where there's very aggressive pricing no question, but I wouldn't say, that's the predominant part of our market today.
That's great color. Thank you very much and thats it from me.
Thanks, Kevin.
Your next question comes from OLED Lang Cameron Doerksen with National Bank Financial Cameron Your line is open.
Thank you good good morning.
I guess what are the one of the questions are what are the thesis is that we can grow here.
You know on the sort of the effects of the pandemic is that more people will move away from the city's there'll be therefore less need for public transit I mean, I don't necessarily agree with that thesis, but I'm. Just wondering if you are hearing from any of your transit.
Customers.
That there perhaps in their long term planning are making an accounting for that potentiality. I mean is there any change in what transit agencies are planning as far as replacement of buses or new buses that would lead you to be worried about.
I guess, a smaller market five years down the road.
Well, there's there's it's a really good question Cameron I think you're right. It is very topical and we see it all day long in the news about you know more locked down and more work from homes and so forth.
We I can honestly say that we havent heard it as a major theme from a group for many of our customers around public transit is no longer needed or needed at a fraction of what it was.
I think there's also tremendous political pressure in every city in North America, let's call it or even the UK or Hong Kong to want to push not not less but more public transit for two reasons a the congestion continues to be massive in major cities and trying to get you know dramatic to say to get more people.
In their cars are more people in a number but that that's a congestion dynamic. The second part of that is now that public transit truly has green and zero emission elements to it we're hearing almost the opposite to what you just identified in terms of more politicians in more cities are wanting to find a way to get more people back into public transit that.
It's both.
Congestion positive, but also environmentally friendly.
And I think we're going to see more and more of that especially with.
The Green agenda of the next administration that talks about the environmental footprint and impact and the same thing with Canada for that matter and in a massive way I've had the benefit of talking to many federal ministers, who are really trying to marry a public transit agenda with a green agenda.
And the fact that we now can deliver vehicles that look and smell and feel and Wi Fi and operation and comfort and noise way different than it's been a 10 year old vehicle. In addition to that zero emission dynamic has lots of attraction for politicians. There is no question certain businesses are going to say we were successful at some people working at home.
And we may see a slight drop off in some of those people that use to Trump to work, but essential service providers still need to get work you can't manufacture stuff from home and on and on and on so we're we're not seeing a massive trend against the use of public transit nor are we hearing from our customers.
Okay. That's very helpful and just a follow up you mentioned that.
Discussions with with cash.
Canada are.
Are you able to maybe describing a lot more detail. How this this infrastructure funding for green buses in Canada is going to work and when we might actually see that translate into some orders for you.
Well, we were obviously learning as it was rolled out had the opportunity of speaking to diminish the mckenna and others. The people at the Canadian infrastructure back the premise and the theory and the strategy of the sea ideas. It kind of goes as follows to just to make it as simple they want to go to public transit agencies in Canada and say you offer.
Key to conventional fleet that cost you X y or Z said, you have future savings if you move to zero emission in terms of maintenance costs fuel costs, and so forth and maybe even sparing ratios. The key investor Bank wants to be able to help operators finance the upfront purchase of electric or zero emission vehicles electric or fuel cell and then.
To help them with the charging infrastructure and therefore pay for the upfront money with the future savings and act as a facilitator now, let's see I'd be hasn't been in the in the bus support gain before but they bring a lot of public private partnership and a lot of project management experience and so look it's fresh in its new there's lots of interest in discussion.
You know, we're kind of a tale of two cities in Canada. We've got the bigger cities that have tried electric vehicle that understand what it means that are starting to get their vision clear on how and when and why and where they're going to charge them as opposed to some of the smaller cities that haven't yet done that I don't expect a massive number of orders, but I do expect to start to see some announcement associated with that.
As we move into 21, and Paul I'd, just add I guess said, Canada, obviously, a great market for us on the CBS Vancouver, Toronto Montreal lot of the Big cities have new Flyer bus is in service and so you know obviously open to this candidate infrastructure bank.
But I think its leaves us really well position like you said for longer term.
Okay. That's very helpful. Thanks very much.
Thanks Kim.
Your next question comes from the line of Dahlman, Saudi with Laurentian Bank non than your line is open.
Hey, good morning, everyone and thanks for taking my questions.
So just going back to the Covenant relief thought is that relief just with the first quarter or are you anticipating for Q2 next year in Q3 as well.
Well, thanks moment, thanks for calling in and appreciate you picked up coverage recently think of the Covenant relief has not.
The need for actual credit dollars or cash flow or liquidity, it's more around covenant calculations and as per passenger and Stephen both alluded to.
You know, we're doing a little bit of preventative medicine here to make sure that we don't run into any of those challenges as we move through 21 and 22 the term of the the next agreements Stephen that you're working with the banks has what kind a window associated with it yes. So I think we're looking at longer term lease I think you know obviously when we did this the first time in April.
The world was a different place and nobody really knew what the impacts of COVID-19, we're going to look like the longer terms. So this time, we are going with the view of less that's extended a bit longer so kind of through 2021.
We'd have this relief and then the covenants in all.
Would come back, but it kind of step down levels to get us back to our path.
As we mentioned I mean, our trajectory is we still want to get to our target leverage of two to two and a half times.
But that's going to take time now as we recover 2021 being a bit of a transition year and then 2022 2023 getting back to you know pretty cold with level. So I think.
2021, it's not just the first quarter I would say, we're looking at more kind of full year 2021 to have heightened covenant levels and some relief because of the trailing.
2020 numbers, and then 2020 to getting back to kind of a more normal profile.
Okay. That's great color, thanks for that and just on the NN Fivefold plan I understand if I heard it correctly that you have consolidated some facilities in l. from three to do.
They're morphosys factory consolidations that are in plan and if you could provide some color on there.
So so far here.
Here's what's happened then you'll remember when we announced and if I forward, we had kind of a business unit rationalization. So that was new flyer and M.C.I. coming together, that's effectively complete were now continuing to work on the the combined Oregon as well as the one system approach that.
Well, obviously give a lot more color in January on.
From a facility perspective or sorry, the other combined combination of businesses was the north American parts business of AI, and if I parts and that is well in process and that will be completed by the end of this year from a facility perspective, we've already got the UK dynamic from three production centers, if you will to too.
We've already rationalized the some of the fiber glass manufacturing sites. Just this past year, we eliminated one of the sites in Winnipeg and we're in the process of combining two left to the facility's left and when a peg down into one that will be completed by early 2021, and then we're in the process of looking at all of our other.
Their facilities in North America, we've got a project team that deep into the study of that Weve effectively provided some color in our come calculation in our go forward plan of how much money. We think we can take out of the overhead, but there were no definitive decisions made yet on which facilities at what pace.
The other thing on that is we did we did shut down two service centers.
On the M.C.I. side as the private market slowed down and effectively stalled so in Spartan Chris started were able to rationalize the Los Alamitos Service Center in California, and we were also able to eliminate a service center in Winter Garden, Florida. Those are now complete.
Okay. That's all very helpful. Then maybe just last one from my end.
Mechanical segment I mean are you seeing any pricing pressure is on the public side of this business and just maybe how much customization goes into more coaches because I'm, assuming there's going to be a big inventory in the market overall the markets getting very competitive.
So a couple of things happened first of all the reflection or the dynamics and motor coach or kind of three different types first of all when we sell a motor coach to a public operator, like New Jersey Transit or New York those vehicles are highly customized no different than a transit bus there.
They are usually obviously multiyear contracts with large orders, but they are highly customized.
When it comes to private operators Theres kind of two ends of the spectrum. The larger operators have their own unique specs not just paint and delivery in inside but some level of customization.
So that's kind of what end of that spectrum and in many cases some of those are a little bit larger quantity and volume. The other end of the spectrum is mostly configured orders not customized so think of it this way we offer.
Customer a vehicle that has you know this level of trim more this level of interior or this type of engine and those kinds of things and we build most of those buses what we call fast tracks are effectively generic vehicles that we build put in inventory and then do any final little customization for a customer. So your question about the demand.
Basically as soon as cobot really hit and there was locked down and all kinds of restrictions you had this massive dynamic of actually no orders, it's not as if pricing was crazy there weren't any orders and that's why we effectively stopped the induction of new commercial vehicles and Csos and that's why we also liquidated the pre owned coach.
Pool, because we don't know how deep and how long that pandemic is going to happen.
Your next question comes from the line of Jonathan Lammers with BMO capital markets. Jonathan Your line is open.
Good morning.
I'll bother you with a modeling question do you have the production rates with you for North American transit and public sector motor coach lines.
For Q3 and Q4.
Sorry, you want to know the induction rate or the delivery rate.
The production rate.
At the plants.
Before on recent calls we talked about.
You know I think I believe an 85%.
I've run rate.
That rate at the end of Q2 going into Q3.
Yeah, I'm not exactly sure I understand we.
We started the year.
With something like let's say on the North American MPCI front of about 20 units a week and about two thirds of that are private customers and one third of that is public customers as we got into the third quarter, we stopped inducting commercial vehicles with a private and we ended up content.
Moving to operate on the public demand. So our current build rate on motor coaches is somewhere around seven or eight vehicles a week.
Okay.
On the motor on the new Flyer side, we started the year at a production rate of somewhere around 55 vehicles, a week and we are now operating at somewhere around 45, or so plus or minus and of course as you know when you come to our facilities. That's also depend on whether they're 40 foot or or 60 foot.
Our two halves, which have a different impact on labor efficiency, but roughly 55 down to 45 and that's the sustained rate. We're working out right now does that help.
That's very helpful. I'm just trying to.
Determine.
What's going on with the unit deliveries they were way above my forecast for Q3, and they look like they're on track to be below for Q4, I mean, you've explained that the transactional coach side for Q4 well.
What would you have with you how many.
Units were delivered from.
Q2 inventory.
This year versus last year.
I'm not sure we have the debt kind of level of detail, but we can try and help you work through.
Some of that stuff offline.
Most of it this way the year has been not normal because.
We could build a bus inducted build it but depending on the customer acceptance and inspection getting across the border or getting to our facilities or in some cases delegating self inspection to us and then we deliver to the customer and they inspect onsite has had quite a dramatic impact on the month to month week to week actual delivery so that the.
The cadence of inputs and outputs is quite out of whack this year.
Okay. Thanks, and then maybe.
Maybe offline, we can maybe offline John who we can help you with maybe.
Maybe a little more color as you try and think about evaluating in projecting the business. The good news for fourth quarter as we don't have to worry about selling a slot we have to focus on just the cost.
Execution and then the other dynamic around as we're now and second waves and we've got different levels of lock down the customer inspection and then customer acceptance dynamic and then the year, maybe a little bit different than what we have experienced in the past.
I think Paul I'd, just echo that comment happy to chat otherwise Jonathan offline, but I think as you mentioned 2020, such a different year. You've had the addition of HDL plus Kobe selling out of inventory trying to finish whip. During Q2, even more facilities were finished that it makes it more difficult to do that you know what.
We used to be able to do kind of pre HDL preempt Cie.
You know the business you could really just do that inventory.
I don't flow through so it's definitely much more complicated in 2020 with a different production levels and different production levels is different for different markets.
Okay. Thanks.
And just circling back to Paul's comments about.
The new public funding measures.
That were approved on the ballots recently, representing I believe you set up to $38 billion.
I know, it's hard to generalize.
The wide range of different measures out there, but we are those generally for operating budgets or capital budgets and.
You know how positive do you see that being four.
Yeah the.
Activity universe.
I'm going to say, Jonathan it's probably too early to tell you know what we see obviously as the headlines from not only our customers and what the details that were on the.
Valid agendas, but also the summaries from the trade associations.
A couple of pieces of commentary a lot of these are effectively taxes that are then applied for multi years or or in perpetuity around the fuel tax or a sales tax or a.
GAAP tax or sign some kind of a dynamic in soles locations. Most of them are kind of a percent levy and they're not specifically defined whether they're capital or operating costs. Our perspective is net net anything that benefits the public transit agency from the cash flow in their business ultimately allows them.
The fleet rejuvenate their fleets or to think about.
Cost versus capital costs. The other thing that I'll point out as we looked at that list a what was on the ballot and whatever 97% of net palace and B.
Is that they're actually quite well diverse across America, I mean, they range from Seattle to Portland to Denver to California to the East Coast and so you know when we talk to our trade associations again, all of our operators are going through Hell, but net net there seems to be a really positive sentiment from the.
American public around the desire to want to push public transit and Green public transit.
I'm not sure I can give you any color yet on how that translates into an actual you know bid universe for 2021, obviously as we get into our Investor Day, we'll do some more research and try and tell that story to give a little bit more color of of quantum or whether it's capital or operating costs net net I think it's very positive.
And Paul maybe I'll just mention one thinks we had mentioned it earlier.
Yesterday Senate Appropriations 2021.
So there is discussion obviously the fast act was extended for a year, but getting funding was only extended till December this year, but the act's extension was until September 2021, now there is a strong appetite to pass a bill that would fund the fast act for till next year. So that's another positive step in addition to all the approvals coming.
Now the election, and you know the president elects view on funding for public transit it looks like there is an appetite for to.
To fund and passed the Bill before December 11th that would fund the fast Act for another year well talk Stephen the transportation housing Appropriations Bill that you described in the Senate yesterday.
Not only extending its until September of next year, but it's a plus up over current funding of $570 million. So a very very strong indication and of course. This is a senate right. So it's not necessarily aligned with that with the next administration very positive for us.
Maybe one follow up question on that that commentary I appreciate all that.
Based on the.
Existing level of fast Act funding.
Where do you see industry volumes, returning to 6000 units per year eventually.
You know once the.
Customers are stabilized.
Speculation on my part, Jonathan, but yes I do.
You know if you just take the 85000 transit buses in North America today in operation you look at the average age of that fleet, which is somewhere around eight years, plus or minus given the slow down and buys this year. It will only move up a little bit given the desire and the interest in in funding and the funding associated with zero.
Mission, our view is that yes that 6000 is definitely attainable it won't be in 2021 is my view, but.
But we're going to start to see recovery at this point in time, we do not have a really good forecast of actual deliveries for 2020, but my guess is it's going to be a couple of thousand down from that 6000 level once all the dust settles.
But I do think we're going back to that level.
Makes perfect sense. Thanks for your comments thank.
Thanks, John.
Our final question comes from the line of Gary Young with TD Securities. Your line is open.
Good morning, guys.
Just one quick one for me with respect to.
Electric buses and some of the pilot programs that have been going on across across the U.S., obviously, a lot of destructive distraction this year.
Just curious if there's been any any major takeaways because I think some of them have now been in operation for a year plus.
In terms of timing of orders and.
Major takeaways on competitors or anything like that.
Well the timing of orders as we highlighted and you can see in the notes in our materials Daryl around.
The percentage of our active as well as the percentage of the total bid universe that is zero emission clearly, it's almost a factor of two of what we saw last year. So the interest and attention is definitely there a couple of takeaways from a technical or a stack or a scoping dynamic.
First you and if you go back a couple of years in our perspective, we and most of the industry thought that we would have.
Batteries small battery quantity on a bus that we'd have charging throughout the infrastructure in the last year and a half that clearly has shifted to more operators wanting to have less on route charging.
As a concept and more depo charging so they have much more flexibility in operation.
The other challenge to the other learning the other deployment.
NAMIC is how important the charging infrastructure strategy and partnership relates to the the bus sale, we can point to a number of situations, where we sold a bus. The operator took responsibility for the charging deployment hasn't gone all that well communication dynamics electronics and so forth until this only reinforces.
What Chris the team is doing is getting closer and closer to the customer of offering vehicles and charging solutions as a bundled up offering. In addition, it provides the operator with a single let's call it belly button or a single person to work with to make sure. Its optimum the third thing I'll point to is that we've gone in and out of.
The fuel cell dynamic you may remember back in 2010, we did a bunch of fuel cells for the Vancouver Olympics. The fuel cell was the propulsion mover with big his extensive maintenance was complex and so forth.
We then kind of pivoted well, it's got to be a battery electric world I would say in the last year or two or three and again, Chris as guys will tell US a story of the January Investor day, but the concept now is a fuel cell being a range extender. So its a battery electric bus you've got a much smaller fuel cell. Some onboard hydrogen that allows you to keep talking up the bad.
Murray's, which then allows the operator, we more flexibility on range and so that now the days of saying its electric bus and only electric bus solution is clearly past us and fuel cell has its place for many operators depending on their geography their temperature, there topography, and so on and so forth and so what.
You'll see at our Investor day as his discussion around.
A one size doesn't fit all but be every customer will have a different dynamic based on their political environment, they're funding environment their technical aptitude.
Their history with.
Fuel cells battery electric hybrids or whatever and I think that the trick for us and the success that we've had is that we can actually offer all of those variance to our customer depending on their unique needs and we've got lots of case studies, where we'll have a political environment come and say well, what's the range of your but some will say well it depends.
So many factors that in many cases, the onboard energy uses a disproportionate amount of of energy for HVAC or heating or cooling or whatever and this goes back in terms of that deep working with an operator into.
In terms of a solution unique to their operation, which also then mean somebody showing up with the vehicle and just trying to sell the vehicle is really at a disadvantage as opposed to that integrated solution.
Gotcha, Okay, great. Thanks, guys. So I'll leave it there given time.
Thanks, Joe.
This concludes our question and answer session I will now turn the call back over to Stephen King for closing remarks.
All right. Thanks, Amy and thanks, everyone for joining us. This morning, we look forward to speaking with you all again at our January Investor Day, and so I'll just remind everyone that will be Monday January 11, 2021, and the information will be available on our website and will send out the agenda for that session. In December. Thank you have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].