Q4 2021 NFI Group Inc Earnings Call
Thank you for standing by and welcome to the N F. I group's fourth quarter 2020 financial results Conference call. At this time, all participants are in a listen only mode.
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. Please be advised that today's conference is being reported if you require any further assistance. Please press star zero and thank you I would now like to hand, the conference over to Stephen King Mr. King. Please go ahead.
Thank you Jack good morning, everyone and welcome to NFA group fourth quarter and fiscal year 2020 results Conference call. This is Stephen King <unk> Group Director Treasury, and corporate development and Investor Relations speaking and joining me today are <unk>, President and Chief Executive Officer, and <unk> Soni Executive Vice President Finance and Chief Financial Officer.
For your information on this call is being recorded and a replay will be made available. Shortly on this morning's call. We were walking we will be walking through our financial results presentation that can be found and the investors section of our website.
We will be moving to slides via the webcast link, but we will also call out the slide numbers referred to as we walk through the presentation for participants on the phone.
Starting with slide two I'll remind all participants and others that certain information provided on today's call.
And maybe forward looking and 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're advised to review the risk factors that identifies press releases and other public filings on SEDAR for more details.
We also want to remind listeners that <unk> financial statements are presented and U S dollars the company's functional currency and all amounts referred to are and U S dollars unless otherwise noted.
On slide three we've included some key terms and definitions to referred to for you to refer to as we go through the presentation of note zero emission buses and reserve as we refer to them consist of battery electric hydrogen fuel cell electric and trolley electric buses equivalent units is the term we utilized for our production and delivery.
The majority of the book the majority of our vehicles represent one equivalent unit while on articulated 60 foot bus takes two production slots and therefore is equal to two equivalent units.
I'll now pass it over to Paul who will recap the quarter.
Thanks, Steven and good morning, everyone before I get into the details of the fourth quarter and year end 2020.
For first time listeners and those not as familiar with MSI group, how quickly provide some background on our business, specifically, our leadership position and zero emission battery electric and fuel cell electric mobility, and how we plan to drive the transition to a cleaner electric future what we like to call. This evolution.
Now turning to slide for <unk>.
<unk> is much more than just a vehicle manufacturer, where total mobility solution provider and a leader and technology development are offering includes fully turned full turnkey solutions of infrastructure installations vehicle production aftermarket support training telematics and parts.
We have the strongest zero emission bus offering and all of our core markets with the widest range of zero emission mass transit vehicles, ranging from single deck to double deck articulated buses medium duty and motor coach variance.
We have for more than 50 years of we have more than 50 years of electric bus experience and <unk> zero emission buses are and service and more than 80 centuries 80 cities in four countries are.
<unk> Zeb's have completed more than 20000 electric service models, and we have delivered 1371 CEB since 2015, including 389 in 2020 or 9% of our full year's deliveries.
And if I have the capacity to produce up to 8000 equivalent units annually and we anticipate that 20% to 25% of our 2021 production will be zero emission buses and more than doubling that percentage we saw in 2020.
In 2018, we identified the infrastructure, we're charging infrastructure one of the main challenges for our offers which led us to launch our infrastructure solutions business to support our customers and their transition to zero emission fleets.
This business has been growing very well with revenue of $24 $7 million and 2020 infra.
Infrastructure acts as a differentiator for <unk> as it helps create stronger relationships with our customers, while also allowing us to control the infrastructure installation and coordinated with the vehicle delivery to ensure on time service and performance.
Now turning to slide five 2020 is a year that we soon won't forget as.
As we begin the year, we began the year, we had a plan that would see us deliver record results and we're off to a great start with a solid first quarter.
And then on March 23rd COVID-19 became a reality as we idled nearly every one of our facilities and.
The pandemic took hold and our geographies few of us could ever imagine the dramatic impact that would have on our world our customers our people and our business.
However, we saw a strong finish to the year.
Exceeding our revised 2020, adjusted EBITDA guidance that we provided in August.
But results continue to be impacted by the Covid pandemic as we move through 2021.
Our company wide transformation initiatives launched in August titled NFIB forward achieved its targets for fiscal 2020.
And if I forward is designed to make us a simpler leaner company with less overhead and SG&A fewer business units and a reduced footprint.
2020 results from and a phy forward includes $17 million and adjusted EBITDA savings and an additional $1 million and annualized free cash flow generation.
We remain focused on deleveraging and strengthening our balance sheet and in December we completed amendments to our credit facilities, which now provide us with relaxed covenants as we recover from the impacts of pandemic that will help us guide us for 'twenty, one and 22.
We have also terminated the unused $250 million sidecar facility and in March we closed a $250 million Canadian bought deal equity financing that will drive liquidity and improvements to our leverage with expectations that will be below four times total leverage and 2021 and below three times for the end of 2022.
With the fourth quarter and full year 2020, now complete we can again reiterated our 2021, adjusted EBITDA guidance of $220 million to $240 million.
Turning to slide six our backlog declined slightly at year end by 378, you use as deliveries outpaced New awards.
Driven by pandemic related delays based on our experience. So far this year and 2021, we continue anticipate that we will see increased order activity. As previously delayed orders are released our backlog remains a positive strength for MSI and sets a solid foundation for our future.
Deliveries were down within transit, but we saw a strong finish to a very difficult years, the decline and deliveries was primarily due to COVID-19 impacts, but Q4 2019 by comparison was also a very successful.
Successful period.
Private motor coach deliveries were down nearly 40% year over year, reflecting the impact of the pandemic medium duty and low floor cutaway deliveries were up 21% year over year, reflecting a strong demand, which remains encouraging I'll now ask for pass through to take us through our financial results. Thank.
Thank you Paul.
Turning to slide seven and our Q4 performance saw a significant improvement from the third quarter of 2020, but continued to be impacted by the pandemic total revenues declined by 22, 5% when compared to Q4 2019, driven by the lower deliveries Paul discussed.
Our adjusted EBITDA saw year over year decline of 37, 4%.
In response to decline and revenue we've been focused on lowering both variable production cost and fixed general and administrative expenses through the NFL forward initiative.
Free cash flow was down by $20 million quarter over quarter, as we saw lower adjusted EBITDA and higher maintenance capital expenditures turning to slide eight.
Our fiscal 2020 performance was down from fiscal 2019 due to the impacts of COVID-19 total revenues declined 16, 4% from fiscal 2019, and addition to lower deliveries. We also saw lower private aftermarket part sales as operators idled fleets.
Full year adjusted EBITDA decreased by 51% as we continued to incur fixed operating costs on a lower revenue base. These negative impacts were somewhat offset by government grants received through wage subsidy programs on a yearly basis free cash flow decreased by 82, 9% primarily driven by the <unk>.
Idling of production facilities, and the second quarter, which resulted in our second quarter free cash flow loss of $43 1 million <unk>.
<unk> liquidity at the end of 2020 was $233 5 million and increase of $24 2 million from 2019 Q for.
The liquidity does not include the cancel sidecar or funds from the equity offering which will further strengthen our position.
And if I believes that our liquidity provides us with the flexibility to pursue operational and strategic goals, such as investments and <unk> zero emission products and electric propulsion technology investments under EFI forward and other potential growth opportunities. In addition, we remain focused on returning capital to shareholders through dividends.
Turning to slide nine I'll outline our net earnings and the adjustments that we've made to reflect the impact of onetime non recurring items.
Q4, net earnings were $8 5 million or <unk> 14 per share for year, we had a net loss of $157 7 million driven by lower production volumes extraordinary COVID-19 costs and nonrecurring restructuring costs associated with production reductions and the other.
Forward initiative fiscal 2020 results were also lower as a result of a $58 million goodwill impairment charge related to <unk>.
And motor coach operations incurred in 2020 Q1 and.
Adjusted net earnings for 2020, Q4 were $8 2 million or <unk> 13 per share for fiscal 2020. The adjusted net loss was $47 2 million or negative <unk> 75 per share.
Quarterly adjustments include $6 4 million and exceptional costs related to COVID-19 and nonrecurring.
Restructuring charges, we also adjusted for Mark to market and unrealized foreign exchange gains and a detailed reconciliation of adjusted net earnings is in the appendix of this presentation on slide 22 and 'twenty three.
Turning to slide 10, we outline the expected benefits of EFI forward.
And anticipated cost savings from ratify forward will show up in three areas of our financials lower direct material costs, lower manufacturing overheads, and lower SG&A expenses and aggregate and if I forward.
<unk> is expected to deliver and 8% to 10% reduction to both manufacturing overhead and SG&A based on the 2019 run rate.
In 2020, we generated $17 million and adjusted EBITDA savings and an additional $1 million and annualized free cash flow and 2021, we will add another $30 million of adjusted EBITDA savings for a total run rate of $47 million driven by the combination of new Flyer and Mci business units.
On the consolidation of <unk> parts, and Adi North America parts operations and as we realized full run rate savings from actions carried out in 2020.
In 2022, we expect to be able to consolidate additional facilities, which combined with further administrative reductions will generate an additional $13 million and savings.
And finally in 2023 will achieve and other $7 million to bring total expected annualized savings to $67 million. These.
And these cost reductions will generate significant volume leverage when markets recover we will grow revenues on a lower fixed cost base.
With dropped through to adjusted EBITDA, We also expect $10 million and additional cash flow savings on top of the adjusted EBITDA benefits.
During 2022% to 2023.
These savings are driven by a decrease in cash leases and the benefits of a central Treasury team. In addition to these items we continue to explore.
Other cash generation opportunities, including a significant focus on working capital and we anticipate that we will need to make a small full year working capital investment and 2021 to account for increased Zeb production.
On Slide 11, you will see a summary of the financial guidance. We have provided for 2021, which includes the following revenue of $2 eight to $2 9 billion with VEB is expected to make up $20 to 25% of 2021 manufacturing revenue adjusted EBITDA of $220 million to $240 million.
For significant volume drop through from cost base reductions generated from <unk> forward cash.
Capex of $50 million, which includes maintenance capex $15 million for NFS forward initiatives and other smaller projects and adjusted ETR of approximately 31%.
I also wanted to add a comment on seasonality, we expect a decline in Q1 year over year, but anticipate year over year revenue and adjusted EBITDA growth in quarters, two three and for a reminder to listeners than in 2021, Q1, Q2, and Q3 will be a 13 week period, while Q4.
We will be a 14 week period for the total fiscal year, a 53 weeks and 2021.
I'll now turn the call over to Paul to discuss the factors driving our 2000 and 'twenty, one guidance and longer term outlook.
Thanks for that too so now I am on slide 12, and I want to price it at a little bit of color on our end markets.
So despite the decline of the total bid universe and the long term demand for transit vehicles remains intact, and we anticipate there will be growth and procurements and 'twenty, one 'twenty 'twenty, one and beyond as Covid restrictions are lifted and government funding is released and overall positive sign is that only a few transit rfps and the past year have.
Cancel even with the ongoing pandemic as.
As we turn to slide 13, we outlined that we are seeing unprecedented government support for zero emission transit vehicles and.
In February of 2021, the Canadian government announced an eight year $14 9 billion public Transit funding program, which includes $5 9 billion and dedicated project fund starting in 2021, and and ongoing permanent funding of $3 billion per year, beginning in 2026 to 2027 and the announcement the largest <unk>.
<unk> transit investment in Canadian history includes a focus on zero emission electric transit buses.
We're very excited about this development.
Based on our U S experience with permanent and predictable for the transit gives transit agencies much better visibility as they can plan current and future year Procurements. In addition to that funding. The Canadian government is fully supportive of the mandate they've given the Canadian and infrastructure bank and $1 $5 billion of financing support to assist with that transition.
And at the local transit agency.
And the United States, the proposed invest and America Act, the investing and a new vision for the for the environment and surface Transportation Act, which was originally drafted and June of last year is a $494 billion Draft Act that Haynes debt, providing significant funds for improvements to U S infrastructure, including transit vehicles.
The draft, specifically focused on reducing the U S carbon footprint and assisting with conversion to electrified mass transit and this includes $1 7 billion and proposed funding for zero emission buses and a five fold increase from the depressed precedence or press.
Our predecessor, the fast act the.
And we invest and America is a five year act that provides transit agencies with longer term visibility as they execute on their plans and we are encouraged to hear the news and insights from and priorities from the bite and Harris administration.
The recent announcement of a U S. One nine trillion stimulus package is also encouraging.
It not only provides a dedicated relief funds to help agencies impacted by the pandemic. It also provides funding for infrastructure capital projects in 2009, and 2010 stimulus packages increased bus procurement activity and there is a potential that we could see some acceleration orders driven by the stimulus funds in combination with a new multi year funding package.
I'll also note that stimulus package for the first time had about $2 billion focused for the motor coach operator recovery in the United States.
And the U K the government announced the 10 point plan for a green industrial Revolution in November of 2020, which includes a national bus strategy that we will see that we will see more than 4000 and zero emission vehicles put into service and funding within the UK and Scotland has already started to flow.
And is the leader in North America, and the UK for zero emission buses and would benefit from the increased transition to zero emission buses.
At this point, we anticipate <unk> will make up 20% to 25% of our overall production and 2021, and we are well positioned regardless of how fast or how slow the transition actually occurs.
And if I can manufacturers EPS at all of its facilities and ADL has already delivered the most CEB and the U K Mci is now selling and innovative battery electric coach and our box electric equity charge, which was unveiled earlier this week or sorry last week is now and testing.
We received our first order for the other equity charge for six buses within two days of the <unk> launch.
Slide 14 outlines the annual market deliveries and North American heavy duty transit since the end of 2019.
And as an industry, we cooperate through it.
Media publications and we are finally awaiting the 2020 actual delivery data.
To be consolidated by and external source, but we anticipate a significant day line in 2020 actuals before we start to see and improvement in 2021 and steady growth to follow.
We anticipate that NFIB maintained or grew our market share in 2020.
On slide 15, you can see how our private customer markets have been dramatically impacted by the COVID-19, pandemic that North America and motor coach deliveries were down 58% as operators idled their fleets due to immediate decreased demand for tourism travel Convention sports University employee transportation.
We expect the private motor coach market will recover over time as travel restrictions are lifted and as vaccines are rolled up but full recovery will take time with continued challenges throughout 2021.
And finally on that chart in the UK, the transit market, where private operators operate public routes. The market was significantly impacted and was down 65% and the first half of 2020, but finished the year to better position and ended down 24% ADL responded to these market impacts by adjusting production of the Scottish facilities rationalizing chat.
Production and AD skill Ford UK location, and we're moving fixed costs for reduction and significant administrative and overhead positions.
There is no doubt that COVID-19 impact, our 2020 plans and results, but long term buses and coaches will recover and we will play a critical role as cities reopened and there'll be bumps on the road as we recover to normal run rates, but government funding that transition to zero emission vehicles and private market recovery combined with the structural changes.
Through our NFC for initiative will make us a more competitive and cost efficient competitor.
Slide 16 provides.
Some insight into and targeted trajectory over the coming years, if the peso outlined we're extremely well positioned for the near term and the long term with expectations for top line growth and strong performance improvement.
At our 2021 Investor Day, we announced 2025 targets of three 9% to $4 $1 billion and revenue and $4 to $450 million adjusted EBITDA.
For.
Representing a revenue CAGR of more than 8% and on an adjusted EBITDA CAGR of more than 16% through that five year period, our 2025 targets will be driven by our focus on bus and coach.
We have a strong public and private customer base with long standing relationships. In addition, ADL will grow into new markets that are underpinning our recurring revenue part stream.
We have the largest the EBIT capacity in North America, and and and the U K with proven track record and delivering electric vehicles and will lead the markets transition to a zero emissions future with expectations at 35% to 40% of our production by 2025 will be zero emission more than tripling. The current 2020, the EBIT levels and Ford has been a tremendous.
Access so far and its initiatives will create volume deleverage as will deliver higher revenue on a lower fixed cost base going forward and finally, we will continue to invest and our people our products and our business and where current returned capital to shareholders through our dividend strategies.
Now I'll turn it back to Stephen to summarize today's discussion followed by that we'd be glad to open the call up for analyst questions. Steven Thanks, Paul turning now to slide 17, I'll recap this morning's call and if I as 2020, Q4 and fiscal year performance demonstrate <unk> resiliency strong backlog position and ability to respond to the ongoing ex.
And I'm, a reality with COVID-19 pandemic.
Although we anticipate 2021 deliveries, but will remain lower than pre COVID-19 levels. We are positioned for market recovery and have already seen strong improvements from NFIB forward to drive volume leverage we view 2021 as a transition year.
Falling credit amendments plus our recent equity raise we are a much stronger balance sheet.
And with our cash flow generation, we now have the flexibility to evaluate strategic investments to grow our zero emission battery electric and hydrogen fuel cell businesses. We continue to see unprecedented unprecedented government support for transit This will help drive order activity and growth and the future.
We continue to innovate and disrupt ourselves and the market and we're excited about the future of NOI, we've had numerous new product launches and announcements to start the year, including the level for automated new Flyer AAV, the new battery electric our book equity and <unk> next generation hydrogen fuel cell bus each each tool.
Sooner and rollout the next generation of new Flyers electric vehicles, and new Mci Electric coaches, we are leading this evolution to a zero emission future with strong 2021 guidance and 2025 targets that would see us drive top line growth and even better margin performance.
And I will now open the line for questions. Jack Please provide instructions to our callers.
At this time, if you'd like to ask a question. Please press star one on your telephone keypad to withdraw your question press the pound key Chris Murray with ATB. Your line is open yes.
Yes, thanks folks good morning.
Hey, Chris.
You may.
Maybe I'll ask you. This question because certainly there's been maybe some changes and the market even over the last six months.
For the past year in terms of the number of folks that are either getting into the electric vehicle.
And market.
And all kinds of different ways call on everything from small kind of wait and stuff that you see in our market rate up to.
School buses transit buses medium duty buses.
I guess the question I have for you is how do you think the market dynamics play.
And what is looking like a market that could be much more fragmented over the next few years in terms of you guys maintaining share.
Well, it's a good question, Chris and of course, we are all Washington.
And with <unk>.
Keen interest on what's happening with these recent stack announcements and all of these EV buses are companies, making a whole bunch of noise and excitement about entering the zero emission vehicle space. The vast majority of them. If you really look into it or truck or van or that type of oriented market and.
And our space, we have the core and legacy competitors of new Flyer, and Gilead <unk> and Nova we have ever on National that's part of the Rev Group, we've seen and the last number of years of course for Terra is not new they've been around for whatever 14, and 15 years, but for Terra and then of course BYD.
The only real new player to our space that has announced anything and a direct competitor and what we offer really is the announcements of rival spak and of course their plans and their vehicles are not and had been sold and serviced and plans to try and start to test.
Those vehicles.
Transit type environment and in the fourth quarter of this year.
And not so sure I see a massively different competitive dynamic.
Everybody's got their different strategies of how far down the chain. They are in terms of battery Assembly.
Battery management system control.
And so on and so forth in the smaller space that might be an area, where we see some change going forward because some of these electric let's call them van or small truck producers in theory could migrate over to the cutaway type space that at this point and time, there really isn't a defined.
A direct competitor to our businesses, which only reinforces why we think Chris this.
Our strategy of optimizing our battery sourcing our battery management type strategy. Great example, the fact that we're able to bring the <unk> charged to market. So fast is we basically took the guts and the brains out of the new Flyer Excelsior zero emission vehicles, and we're able to port that over to the <unk>.
And in record time, so I think that kind of a broader strategy helps us defend from current competitors, but also any potential new competitors I'm not so sure I agree with that we're going to see a much more different fragmented competitor base and the next couple of years in our space.
Okay fair enough.
And then and just one follow up to that question does that.
And a lot of ways and you talked about the smaller market does that give you some more opportunities with our block or the cutaway to actually start thinking about offering electrified auctions.
It's a really good question, Chris because as you know that space traditionally was by.
Chassis from GM Ford Freightliner, whoever and slap a body on the back and no disrespect to that space, but not the most attractive vehicles and had a life span of five to seven years type targets for cutaway.
And the last couple of weeks as we've launched this electric ex splits we've actually had an awful lot of conversations with our dealer network on their customers and what actually shrinking the equity even further and.
Potentially even cannibalizing the large size of that cutaway space and so that scalability dynamic that we're really focused on and the ability to really know how to build that.
That medium duty class, which actually looks and smells a lot like a heavy duty I think Mike might bode well for us.
And the game and.
Talked lots are with the team at our Bakken and Chris at New Flyer and his tech team, but the whole dynamic about ultimately what will the core Oems Ford and GM do in terms of electric chassis offering the jury is still out there of how that may impact the pure cutaway space and the smaller vehicles plus as I said the cutaway historically was a five.
For seven year vehicle of course, you're going to put up a 100 grand if not more batteries and that youre going to want to think about the time horizon on the lifestyles vehicles, which could shift that market. Okay.
That's great.
Other questions for me first you know there is some media reports out this morning and that the government of Canada might be looking to put some additional dollars into electrification of transit.
And this follows on from announcements from the Canadian infrastructure Bank I guess in the fall.
And to understand if you can give us any color on if this is vitor new dollars are recycled dollars and I think originally the goal was to build for electric vehicles, which when I think about your capacity and what you guys can do and even whats available seems like a pretty big stretch.
Any thoughts around that.
Funding and how that actually might roll into something we see.
And being a little more tangible for you folks.
Well, it's a really good question and I.
And the opportunity yesterday Cristal participated in our Canadian club luncheon and Toronto like 1000 participants listening online and the panel.
Here's our view on that first of all I don't I don't know, we don't know the actual logistical details of how that kind of funding makes its way into the public transit environment, but here's the elevator speech as I see it which I think really net net is a fantastic moving for Canada. The.
And the Canadian government has.
The current.
Liberal government made a commitment and the election and plan to put four to 5000 electric vehicles on a road and a five years pretty ambitious with no real details of how they were going to do that.
And B they started off with his commitment to allow the Canadian infrastructure bank and dedicated $1 $5 billion pool to think about how to facilitate transit agencies.
Pulling their capex forward and basically CIB, taking the risk on future savings, but really.
Ed Turbocharging, if you will the pace at which we can look at adoption of <unk> and Canada, both vehicles and the charging infrastructure and then a couple of weeks ago. We saw that big announcement of the federal government to think about dedicated funding more and the line of what we see and the United States. All of that I think bodes really really well I wouldn't expect us to see big orders and the next couple of.
Months, but quite honestly that is a game changer for the Canadian public transit environment and it isn't just a vehicle strategy. It is a green zero emission environmental congestion type strategy, all balanced or bundled into kind of one overall, it's the first time I've been here 12 years for first time, we've seen the federal government and Canada come out with that strong of a book.
The statement, but also economics around making that happen Devils and the details, but I'll tell you I'm really really encouraged.
Okay, Great and then just one kind of a technical question for me.
But on the 'twenty, one 'twenty two 'twenty, one guidance, you've talked about a 31% effective tax rate.
I mean, we just saw the UK increase I guess corporate taxes by about five points to 24%.
And just any thoughts I guess two parts on this one.
And does your 31% kind of.
Incorporate that tax change.
And then to structurally for years, you guys have always paid higher effective tax rates and I appreciate part of that and how.
Essentially new Florida got structured a bunch of years ago as a public entity, but is there anything for you guys can do to bring that back to what I would call a more normal rate and most corporation space.
Hi, Chris This is per policy. So just kind of following up on that question. We are reviewing some options for the tax for bringing down that ULC. The seven points that we kind of incur without UFC.
So we have been investigating that we've got some options on the table. We're working that I think from a tax rate perspective, we do feel like from our perspective that the 31% is in line with our expectations and this.
Salt process. There is just a couple of things number one is as you know the tax rate does give us the tax rate percentage, just does get a little bit goofy from time to time as you've seen and the reason is because there is a couple of things that happened for us as you may already know like for this year for 2020, we have the goodwill that was non deductible and then we had some FTC foreign <unk>.
Ex credits and then our beat tax which was a little bit of an issue, but we feel like for 2020, when we should be fine with.
With that and then and just and just on the UK tax that you mentioned the UK tax that isn't effective until 2023 from what from what I've read so far.
Alright. Thanks, that's helpful folks I'll turn over the line. Thanks.
Thanks, Chris.
Mark Neville with Scotiabank Your line is open.
Hey, good morning, guys.
And then maybe just some of the 2021 guide on the VEB can you maybe just help everyone sort of bridge the gap.
And I think it's 2025% for 'twenty one it was 9% last year and I think it's 6% of your backlog so just.
And sort of help us sort of bridge, the ramp and sort of how to think about that.
Youre talking about the percentage of our vehicles that are zero emission.
Yeah, I think and 6% of your current backlog, but it's 2025 per cent of the guide for manufacturing for 2012 <unk>.
So theres a couple of things that are happening I think and Mark we've talked a little bit about this and passed and our materials and becoming more and more prominent.
First of all the Canadian customers don't have significant backlogs historically, they haven't been really multi year contracts. Some have but most of them have been kind of one year buys so that wouldn't be in the backlog and therefore would be any orders on zero emission and Canada would be additive to that percentage.
The second issue is the United States. Obviously, you have the federal funding you have the changes and the FTE rules a couple of years ago, where you can't just put a whole bunch of options on there and then shop the options around they have to be intended for a specific audience of customers. Consequently, what's happened and the last two or three or four years as the <unk>.
Advent of state schedules, which means that the pick one the state of Florida puts together, a schedule and California has them and others, where multiple operators can buy office state approved schedule and of course, because those schedules don't have defined quantities. They are effectively up by and in some cases potentially multi year.
They go immediately to a firm order they don't sit and an option and backlog to start and of course, there are only announced that point does not have the signing of the state schedule, but actually had appeal has received from our customers. So those are the biggest thing the other part that I would suggest and the next couple of years as we're starting to see we will see more pure zero emission on.
Rfps hit the street, including.
Both electric vehicles, but also fuel cell vehicles.
Yeah, Paul I'd, just add to that debt.
And what you mentioned about Canada, and similar experience and the UK for the operators and not so much in backhaul and Thats true for later cycle.
And do the calc and then I would say to mark that more of the <unk> on our firm backlog that our option and backlog because they have that kind of shorter tenor.
Okay.
Maybe just the concluding in Butler for the infrastructure solutions business.
And I think that's the first time, we give the number on that so appreciate that I guess, one on just curious sort of the growth you saw on that business. This year and I guess just bigger picture. When you think about that business I mean, I don't know if my math is correct, but and 25 million might be roughly 10% of your <unk> sort of manufacturing revenue.
That's sort of how we should think about that business and is it something that grows alongside.
To your reserve or would this be something and maybe grows and access of sort of what you see in the manufacturing side, yes, It's a really good question and insight Mark because.
And we'll take half good luck and have smart people on our team, but we we kind of fell and the infrastructure solutions a couple of years ago. When we got frustrated with the first deliveries and the customer may not being as ready or the installation as.
And our correct or efficient relative to the vehicle deliveries. So that business is actually really started to take off rough order of magnitude, maybe 60% of all of the ceb's competitions, and where we win there is a zero emission infrastructure requirement as part of that RFP.
So what Chris and team have done so far is effectively being able to say to the customer. If you want to include infrastructure and your RFP or alongs and your bus RFP or alongside and on a separate RFP absolutely. We will participate there are some customers that have a much broader CD strategy for example, zero mission refuse vehicles our vans.
Our heavy equipment that they're having a broader strategy so they've taken the aggressive position that installing their own charges.
So I would suggest as far as we can kind of tell the next couple of years as the as the more customers take on zero emission that we're going to continue to see that 50 or 60% of the time will be involved and the charging strategy the.
And the bigger discussion and then long term is do we offer that as a service and itself independent of our bus and is there even more of and expansion into a model where.
We work with finance, here's our other scenarios, where in addition to just responding the RFP and putting the charters in place of course, the design the optimization and working with them on whether it's depot were on route charters, but a broader strategy of bringing together a whole package which includes.
Service and includes financing and May include telematics energy optimization, and so on and so forth I'd say, it's a space to watch for US clearly, it's a critical part of the success of the vehicles, it's not like the old days, where you just put diesel into a vehicle wherever it comes from and life is good there is a lot of complexity here and it's a complete game changer for <unk>.
And agency, who never have that skill set inside their machine.
To this point and time at least from a bus perspective.
Okay.
On the maybe the 30 40 per cent that theyre doing it themselves or have their own strategy.
Is there and are you or is there an opportunity where you're providing consulting services around that even if youre not maybe selling.
On the infrastructure with it.
Yes, let's let's put it this way markets really more advisory and consultation upfront as part of the kind of the selling and marketing and relationship process, but.
New York City for example decide to put it in the charger they have way more resources and a way broader and are dealing direct with the.
Charging providers and the energy.
Utilities, and so forth, but I wouldn't say no, but it's not going to be a prominent part of our business got it and maybe just one last one just for propulsion just on the free cash flow guidance or not guidance for free cash flow for 2020, one and we've got the EBIT the guys and we've got Capex Guide I. Thank you for working cap would be.
Small investment this year and then just on the tax.
On the 31% effective tax.
Sort of representative of what your cash losses will be and.
And that's where on interest expense post the equity offering.
Yes.
Yes, no I would I would say that that it should be and in line with what we should expect from from our perspective.
Yes.
Oh, sorry go ahead.
And I was lucky.
Yes, so we're sort of I think like we said to do expect a small investment and working capital for the year.
I think mostly as we said driven by the kind of more heavy investment and zero emission buses.
As capacity, just mentioned, yet and I would say that 31% cash tax kind of equivalent to regular tax.
And I think overall from free cash flow to historic profile has been kind of 50% of adjusted EBITDA, but now we've got higher interest expense in 2021.
So just back to that interest.
Yeah, and I think Mark just just the working capital piece, which Steven alluded to we're expecting the battery cost will be obviously significantly more of Thats why were talking a little bit more about and and the testing takes a little bit longer with that.
So that's the thought process with having just a little bit of a working capital play that or increase that we're going to deal with.
Okay, alright, thanks, a lot guys I appreciate it.
German study with Laurentian Bank your line is open.
Hi, good morning, everyone.
Hello.
Yes. So my first question would be.
Whats the feedback that you guys are getting from your customers primarily the transit agencies.
Are they comfortable with what they have right now are there sort of waiting for some of these stimulus packages before they can sort of put and the orders.
I think thats a good observation.
These guys have gone through Hell this past year with.
And I'm trying to continue to provide service and driver issues and.
Our reduced passengers and local funding dynamics and so forth.
Every transit agency has and some cases, a five or a 10 year fleet replacement plan anyway, and <unk> been updating the of course, the political pressure on the public pressure last couple of years to think about zero emission.
As them in many cases doing pilot or demo projects and so forth.
As they get back on their feet from both up and more normalized operational perspective and.
And start to think about rejuvenating their fleet replacement plans for stimulus or economic support packages and Canada. The UK.
In the U S are going to have a massive impact debt what I would suggest is their pace or their desired pace of adoption keep in mind that these are putting most of our business is public transit agencies. Those vehicles have been funded by taxpayer dollars. Many of those vehicles have useful life left for them and so it's going to be a very difficult political sell to.
Take vehicles off the road that still have economic or useful life just to jump on to a zero emission dynamics. So those things all will play into which is why we've been very.
I'd say cautious are clear on our direction about adoption and it isn't in our minds on a revolution. This market a snap back from massive volume demands and the short term, it's going to be a replacement strategy over time. There is no question, though that zero emission again, whether it's battery electric or fuel cell electric or and some customers Troy.
Electric is going to be take on more and more prominent as part of that decision.
That's great and just going back to the infrastructure solutions spot.
The $25 million that you have there is some sort of recurring revenue within there or is that just the so this is that you all for and you charge it and just maybe on add on their debt once the.
Zero emission buses growth do you see that any debt would impact your after market business, because I've read that generally evs require less maintenance and traditional ice engines.
It's a good question, so first and foremost the service that we provide today is something is as follows we respond to and RFP. They want us to assess their situation and they show us the.
And the location of their vehicles they show us the routes they felt walk us through there.
The root strategies going forward.
And then would propose whatever charges makes sense, whether it's at depot or at on route we would work with the various suppliers to try and get the right combination of price performance location support and so forth, but the vast majority of our infrastructure solutions revenue is getting paid to install the chargers sourced them install them.
And get them up and running and so forth.
Whether there will be ongoing revenue stream associated with servicing are supporting those charges is let's call. It still up to be determined. The second part of your question is there is no question that over the next 20 or 25 years, our parts business is going to be impacted by vehicles, requiring electric vehicles as rooms from requiring spare parts.
Our caution you that though however, the vast majority of the parts that will be impacted by zero emission or things like engines, or let's say brakes and both of those cases.
We are involved and the spare parts support largely and our brake dynamic where we're the largest provider of share brake parts and in America and in Canada, but on the engine side companies like Cummins or on the air conditioning side Thermo King and all these other guys. They have their own spare parts support infrastructure and so the the transition to zero emissions will have.
Les and impact on our business, but there is no question, our spare parts business as a long term will be it will be.
Which is why we've looked at different revenue sources, whether it be infrastructure solutions or monitoring are telematic support for those kind of things that have revenue potential and the.
That's great color and just maybe last from my end.
So I remember you had mentioned that you have for new Flyer weekly production units have gone down to about 45 per week in the first quarter is that still the case, where it has it improved and maybe and sort of bigger picture on the production side and so youll capacity is about 8000 units for you I'm just wondering thats net.
Is there a glimpse sort of rightsize debt capacity I would assume debt.
In the coming future, we don't see that you're going to hit that total for it.
Yes, so two questions.
<unk> the first DSR rate of production is still approximately 45 a week.
And the daily meetings at our company you'd see that we literally are adjusting production schedules based on orders auction option conversion states.
<unk> schedule buys and so forth as well as customer decisions on when to take them and so forth. So we're adjusting that schedule literally every week and the trick then and the strategy through 'twenty, one and into 'twenty. Two is to ensure we have level loading across our plants.
And we harder than it actually sounds the second issue is the gap between what we currently build and our Max capacity, there's lots and lots of variables for the percentage of the different types of vehicles has an issue on labor efficiency.
A single bus or and articulated bus that then has two production slots has a massive impact on on the production efficiency and so forth so not to be too simplistic, but mix and volume and propulsion type has quite a dramatic impact on the ability to run efficient factories.
And your insinuation about can we take out costs are right size thats exactly what we have been doing and through our NFS forward initiatives. Both on the cost of running factories, if you will as well as the overhead Miss J&J associated with it but that's built into our forecast that we are effectively doing that.
Okay. Thank you for your time I appreciate it thank you for the questions.
Cameron Duerksen with National Bank. Your line is open.
Thanks, Good morning.
And Ken.
And so maybe.
And maybe you can just talk a little bit about your degree of visibility on the back half of 2021.
You have sort of highlighted as is usually the case higher deliveries in Q3 Q4.
At this point and the year Whats your I guess your degree of confidence in Q3, and Q4, what kind of visibility do you have.
As you know every business is different because on the motor coach and world effectively because we're not really building for private customers right now.
Our effectively slots are all sold in terms of its and execution strategy.
And to some extent and the cutaway and and the.
And the Equis at on our book, although they have still some open slots and some variability and let's call. It Q4.
And the new Flyer case.
We probably have the most fidelity just given the nature of the bid dynamic for sold slots the customer orders awaiting purchase orders and all these other things and as you know we don't release, our orders until we actually physically get a purchase order from a customer I would suggest that.
When we look at for example, Chris is forecast for the year and he has upside downside, it's probably the tightest range.
And of any of our businesses. So I would say, we have a pretty high degree of confidence of being able to sell the slots that we have still open which either come from a new award or largely from and options conversion or in some cases.
State schedule kind of buy in.
And the U K.
And to tell you the last two or three months, Paul Davis has done a fantastic job of solidifying.
The first three quarters of the year.
In terms of actual build schedule and the fourth quarter is starting to come into into clarity. The parts business has actually started off maybe a little bit better than we thought and the first quarter compared to the fourth quarter, which is actually quite encouraging so all that to say camera theres always risk and our business plan. We gave you a range of kind of 220.
For 240 for for the year on adjusted EBITDA, but I would suggest we're in a better place. This year than we were last year at this time on the confidence of filling the slots and executing to it.
Okay, No that's very helpful and just.
Second question for me just on buy America, and Theres been a lot of news and in the press about that.
And by American provisions for any infrastructure spending.
In the U S. Obviously, you guys are fully buy America compliant but.
Is there any I guess anything you are hearing that would suggest there might be any changes to the buy America percentages or perhaps with a new.
Long term kind of fast act type builds and there might be any change with buy America I, just wanted to sort of thoughts around and what youre seeing on that front.
And really good question and we've spent an awful lot of time talking about it of course.
You and the others will remember we went from 60% U S content to 65 now to 70, the rules around what must physically happened and the United States have not changed I can tell you with a pretty solid degree of confidence that our Intel our lobby efforts our work with apt and the trade associations has no.
We don't see anything yet that there is any words or draft legislation or anything about changing the percentages are changing the final Assembly works.
I will caution you on our readers are list for our investors that in many cases, the media will confused by American with buy America and of course, we live and the buy America rules of that 70% and U S content and Finalization by American It gets often bundled together that's really around it.
Infrastructure or physical roads, and bridges and those kind of things and I think that's an area, we're going to see potentially more changes under biden and Harris.
But the short answer is at this point and time, Ken we haven't seen or heard anything that would change the rules on the road for us going forward.
Okay, and just on that I mean, obviously with CEB is becoming more popular these changes and supply chain or the value of supply chain and is there any any adjustments to the rules that would reflect maybe the eligibility of certain components.
Zero emission bus.
Well.
Fantastic and very insightful question, because when we first started the <unk> journey.
Yes.
Chose our primary battery supplier a company called <unk> out of Michigan to be U S manufactured sales going into a manufactured module that then shows up on our place that we put into a battery pack and install and into the buses.
And our competitors were sourcing their cells offshore and then packaging them in America and that is as per the buy America rules.
L as a sub component and therefore as long as the component itself meet 70% content, we're fine so.
And what Youre going to see is our strategy about self sourcing where it comes from how we package. It who it comes from is going to evolve over time, but it sure feels like the U S government up to this point and time has not changed their rules of their minds around origin of cells, having said that we've also seen president biden and have lots of discussion.
<unk> orders around everything around mining as well as cell manufacturer, which clearly the United States is behind the rest of the world on that May change and the future, but our strategy. There as you know is not to be manufacturing cells, we want to be the smartest and most agile buyer of sales and be able to adapt both from a technology.
As well as the cost per kilowatt hour type strategy and I'm really quite encouraged by what David White and our team and Chris started up and doing on that front I think will be very competitive.
Okay, No that's great I appreciate it thanks very much.
And.
Daryl young with TD Securities. Your line is open.
Good morning, everyone.
Hi, Darryl.
Quick question for me on the.
And the longer term target of 400 $450 million of EBITDA.
You sort of touched on.
Parts of the market share question and I'll have related to it with Christine's question, but I'm just trying to get a sense of.
What assumptions went into that and debt.
And what makes it.
I think you referred to it as a conservative target. So maybe just where some of that upside comes from.
So this is this is for possibly so let me kind of walk you through how we did this so one other things. We did was we went through each individual.
Thus our region or whatever the case may be right and we looked at the transition of what we think from each one of our product categories right. Each one of our buses and what we would expect and each year and then what the transition would be for those and I think we come back to saying you know what we feel comfortable with that as we stand today is because a couple of things right.
<unk>.
We took a we took kind of a midpoint approach through that process. So it was fairly detailed moving went through that process number two is I guess, where I go back a little bit is with our with our edify forward initiative and the and the cost savings, we're going to get out of that we should start getting some volume leverages some of our markets pick up and we took a conservative approach.
And when our markets will pick up on that so.
That's the thought process a couple of quick things is sometimes if you do the backward math you would say, we did about $330 million and 2019.
We did a full year of ABL and then we add.
The $65 $67 million of NII forward, you start getting and that $400 million range.
And I know there is a mix shift and some other things, but that's kind of why we say we feel good about the number.
Okay, great and.
And then just a second question in the past on the on the EBIT side, you've referred to the.
And the dollar margin being roughly the same as a traditional diesel bus, but the but the percentage margin declining.
Would there be an expectation that over time as battery cost come down and maybe be able to recapture some of that margin and you'd see on margin expansion.
Leading up to that sort of 2025 target, yes, that's exactly part of the way we worked our model to some extent in a diesel environment, we buy a diesel engine and we get and actually get the transmission. There is the competitive dynamics. The cost is of course the price is the price we embedded the way we build our pricing up from a kind of a cough.
Plus if you will doesn't allow for much margin as the bus gets more expensive and the battery world. We got some new dynamics a battery cell costs are coming down and we will continue to go down which goes back to my point previously to I can't remember as Mark's question, but we don't want to get too deep on any one cell supplier or anyone battery management.
Packager, because we want to be as agile as we can over the next 10 to 15 years to make sure that we get the best technical solution, but the best price solution. So there is margin opportunity and that the second dynamic is we now have margin opportunity. We didnt have before we make our own battery, let's call it Pak and.
And closures, we have other fabrication capability inside that whole value chain, we can either make or buy certain software or battery mash up all of those kind of things.
Today, we're starting to see the zero emission margins look a little healthier than we may have originally intended.
Question is could it be going forward on competitive intensity, how much of that savings are we going to build to keep and how much we're going to have to handover the customer to ensure that we're market competitive.
But I would tell you today compared to a year ago.
Confidence that our batter and we can maintain our margins and our battery world is the fact and proven compared to conventional is probably higher today than it was a year from now as that game starts to get more mature, but also as the volume start to happen.
And.
Great. Thanks.
Just to follow up on that I think just to make sure that we're clear on what we did say was our margin dollars for our evs are higher than our.
Conventional right and the percentage was lower so just just for clarity sake.
Okay perfect. That's it for me thanks, guys.
Thanks, Joe.
Thank you and Macdougall with Stifel. Your line is open.
Good morning.
Hi, Maggie.
Couple of questions here first one is a housekeeping question, so youre and if I for cost savings it looks like and tumor.
And $2 million and change laying around somewhere so wondering if you could just give us a bit of and update in terms of where your friends and accessories.
And then perhaps and then its color on terms of cadence and savings that we should expect two occurrence and we go through 2020, one and 2022.
And to help with modeling expectations.
Hi, Maggie this is per policy. So let me let me I'll give you a little bit of a high level. So we are finding a lot of savings and our NII forward right and but we are taking a little bit of a conservative approach. So our conservative approach is really when we think about our material savings, we're finding savings and the EV space et cetera, as we kind of move forward.
But one other things we're doing is we're taking a little conservative approach because as we think about the competitive dynamics, we're trying to determine if some of that is going to be given and the price right. So.
That's why we're that's why we're just slowly ramping up from the 65.
Versus going all in until we kind of see how those dynamics play out Hey, Maggie.
There's all kinds of sub projects Hunter NFIB forward.
We call and match, but the combination of the parts businesses of Adi and MSI and North America. There is the rationalization and some of our fiberglass manufacturing facilities. There is the combination of our.
Our Bakken Adi and North American manufacturing facilities, and so forth. So of course, we put plans in place we do the math, but as we've been executing on some of that stuff.
Size of the opportunity is starting to look a little bigger on a few of those projects and Thats why its capacity said, we've inched it up from kind of a 65% to 67 and the original cadence that we provided of how much we'd see in 2020 versus 'twenty one versus 'twenty. Two is still approximately the same the targets that the project's actual execution are kind of right on track.
Jack from a milestone perspective, and slightly ahead from a savings perspective.
Okay great.
Very helpful and.
Second question here circles back a bit and Chris asked on top of the call.
Taxes, and increased increasing and the U K and then we're looking at and.
Commodity pricing basically across the board with the exception and maybe a couple.
Up significantly and we haven't yet got to the point of wage inflation, but there is a proposed a minimum wage increase and the U S potentially down the road and it's been a very long time since we've had inflation of any kind, but it is something thats been true north.
And so.
I'm wondering if you could help us understand how and.
Wage and raw material input cost inflation and AEP passed on and.
B, perhaps dealt with and then other manner.
So it's a good question so.
As for passive said.
And the broader and the first part of your question on the broader average or effect.
Effective tax rate.
A delay before the UK tax increase comes into 2023, as you said, who knows whats happens and and Canada. The U S. Over the next period of time, we are taking a broader look at our you will see structure and the tax structure of the business to see we've got some ideas about how that may be.
And the ability to be changed or modified going forward and stay tuned to look for that from a cost perspective remember a couple of things first of all labor is probably 8% to 10% of the cost of a bus.
So it has an impact of labor goes up but it's not a massive impact. The second issue is that the vast majority of what we buy is components or sub components or parts as opposed to pure raw material that we buy and ste.
Deal or aluminum or.
Our stainless and carbon steel or stainless steel.
When we put our bids together remember that what we do is we will get a quantity that's firm and the quantity of this auction will know the configuration. We then will basically get a cost and bill of material, which includes multiyear pricing and then we will add it targeted dollar margin. So we effectively bid.
Based on a kind of a cost plus dynamic what's inflation effects impacted and it.
The raw material and a bus might be 20000, plus or minus $1. It's an impact but it's not massive so we work with are the mills and the providers to get.
As far out pricing as we can and of course that dynamic is very short term and and orientation.
So then the real risk becomes our contracts that we've already got in place that have auctions. The good part of those contracts is almost all of them. If not all have some kind of purchase price escalators that allows us to actually increase price based on inflation. So if somebody had a very simplistically on new contracts in 2020.
And options for 'twenty, one and 'twenty two we have price escalators, if they convert those options and those out years to handle the vast majority if not all or in some cases, even more than inflation. So we work off of purchase price and disease. So it's not a perfect science that we're pretty well protected around the risk associated with those things.
Okay, great. Thank you and then one final question for me just switching gears and.
Looking at the motor coach industry, and North American and U K. It's obviously then.
No.
And having a bit of a recession for at least a few years now.
And clearly and reopening happening in many parts of the economy.
Smarter or not but it sounds like taxes just ripping.
And we're thinking of Andy and off and going and fully open and so I guess my question here.
There's likely to be a gradual recovery and your motor coach business.
<unk> continued to and as shown on a normalized.
What is the competitive landscape is going to look like by the time, we get there and I know there's been some challenges in the industry from your competitors.
And just curious to hear your view on that and how that may impact your positioning.
Improve.
This is one of the things we spent an awful lot of time on so if we just go back and into the beginning of 2020 or even into 2019 and before the motor coach market in North America is not one homogeneous markets. There are sub segments right. So there's the tour and charter guys, which is probably half the market and these guys are moving sports teams or church group.
Or and some cases regional tour and charter and some cases national and so forth that market has been decimated nobody's moving.
The other major market is the line haul guys the greyhound or the Mega bus type people and of course universities have been stopped interest cities kind of stops so that price has been decimated and then the other kind of segments or the government type operators of motor coaches, which has continued.
The limo guys or the.
And the employee shuttle type things.
So.
There's a couple of things in terms of the market and our personal dynamics and we stopped building commercial motor coaches and stopped as if we're not doing it now, but it's not like we've stopped we've just idled the production lines.
The second thing is we have finished goods inventory not as much more than we would have wanted to but again COVID-19 made that market stopped overnight.
So we've got something like 160, 170 motor coaches on the shelf, if you will and various configurations. So as the motor coach market starts to recover our ability to sell a finished product relatively quickly is pretty high.
And of course, that's one place that we're actually quite encouraged last week.
Chris Ian start smart and I and our Mci team hosted a conference call with about 200 different operators and the United States and Canada and had a conversation about how do they feel about the market what's going on there is actually a little bit of a sentiment of more positive excitement of recovery later this year, where 234 months ago and were told you it wouldn't have been.
Until 2022, so fingers crossed.
The fourth part of that discussion is as you'll remember last year.
We made the strategic decision to liquidate our pre owned coach pool that that was roughly 350 units and so unfortunately, we took a balance sheet write down we received the cash we got rid of those units. The good news as it as there is a recovery in addition to having units on the shelf for and a lot that we can sell we've now got a clean balance sheet associated with <unk>.
Used coaches and that we can be a little bit more creative and flexible on trade and as going forward as that market recovers.
So.
I think we've done a really good job of containing the cost a really good job of optimizing the combination of new flyer and Mci into one operating business.
There's lots of things that we're learning about more technology transfer it harmonization and so forth.
And that market recovers and I firmly believe it will.
That were and I think a really good place.
Our competitors.
One of the biggest one of our competitors is a privately held company called ABC. That's an importer of eventful coaches I have to believe theyre, having some interesting times from their balance sheet and cash flow perspective the.
And the other one is <unk>, which is owned by Volvo, who continues to kind of participate in the marketplace and I.
And I don't know it we'll see how it goes to the exciting part is we're also ready for the electric.
Dynamic when it hits motor coach and it's already started we already have orders for electric coaches that we're actually building right now so it's going to be a slow recovery, but I believe it will recover and the next couple of years and and we're in a good place.
Thanks, Paul and thanks, very much I think line.
From the line Omar.
Thanks magazine.
Jonathan Lamers with BMO Your line is open.
Thanks.
Paul I appreciate all the commentary on the competitive picture for motor coach and.
And new Flyer.
On Alexander Dennis how do you see either.
Or is that <unk> products is competitively positioned in terms of price and value for the UK and Europe.
It's a really good question, Jonathan and here's a couple of things we were first Alexander Dennis at that time, the strategy was to team with BYD and Thats now go on three or four years back.
That has gone really really well.
And the partnership where BYD provides the chassis, we bought it and deliver to the customer and.
And so forth.
The competitive pressure from a couple of the other guys and the U K, namely.
Up there and.
Our friends at Wright bus Wright bus as you know went through kind of a chapter 11 and type event.
A year and a half ago now.
We are and a really good place with the size of vehicles and the types of vehicles, meaning single Decker double deck.
We made a deal without with BYD that we actually will now start to build their chassis. So it will be a far more about build and UK type position.
And even better now that the government is stepping up to provide economic support to private operators for zero emission adoption.
It is and this firm and as hard as if you will in United States with buy America percentages, but theres, a build and Britain type mentality around those awards and so I think what Paul and the team over there has done is really well really good in terms of the quality of the product, but now the integrated deeper integration with Alexander Dennis.
And so the the exporters for the importers, if you will into the U K have not up to this point some of the other Chinese type players made any real major traction.
In Europe.
As you know we had a couple of key targeted areas, we got into Switzerland, and we're now and too.
And Northern Island, we're into.
Germany and the strategy there is going to be different it's going to be integral type.
Alexander buses Alexander Dennis buses with our own battery strategy. This is where the partnership and coordination with new Flyer comes into play, but how we package them.
The strategy associating sourcing sales battery management systems and so forth.
But remember in mainland Europe, we are very much targeted at this point as opposed to mainstream.
<unk> term I really quite like Alexander Dennis.
For the position.
Okay, Thanks, and a couple of questions for capacity on.
On the guidance.
Within the new Flyer for.
<unk> cost savings numbers that you've provided to US are you able to break out those by segment what portion will be on parts versus manufacturing.
Yes that one we do have that kind of information and Jonathan and we may want to follow up with you on that one.
Yes, I think Jonathan and the.
And our MD&A, we breakdown within the manufacturing and aftermarket segment what was savings for 2020.
So if you and the detail.
And <unk> as a breakdown between the two segments and then and kind of keep said similar profile I think but as things go on we'll continue to update I guess on exactly where the savings are so every time and our MD&A will reported kind of where the savings were recorded.
And then and again the mix to between the areas as <unk> mentioned earlier.
Cereals manufacturing overhead and then SG&A.
Okay, Thanks, and on the 2021 EBITDA range.
Range.
On.
Does that include government grants and subsidies and are you able to.
Provide a sense of what range.
It might be reasonable for this year.
Yeah. So I mean, that's something that's a little bit variable right now and some of our cases, what we do know today, we are looking at those subsidies into our readiness to Jonathan's point, we have included and assessments are an estimate.
Sure off the top of my head on on the exact number of what whether it UK federal support for the <unk> program and Canada. It is embedded in our 220 to $2 40, so it's not additive.
The issue I guess will be is ultimately what do we achieve our accomplish as opposed to what our estimate for US I don't think we provided a guidance on how much we think we'd get in 2021, specifically associated with Susan.
Sure.
No we have not.
Okay, and I'm, just thinking it's relevant for rolling forward to 2022, alright. Thanks for your comments.
Thank you John.
Kevin Chiang with CIBC Your line is open.
Okay.
And on everybody.
And if I could if I could go back to maybe some of the comments around.
And maybe looking at.
Strategic investments and your zero emission bus.
Portfolio and.
When you look across the landscape for transportation.
To be obviously, the acceleration across multiple modes to electrify.
Transit just wondering how important it is as you sit here today and the early innings too.
To secure that supply chain and looked this morning, you saw Gms was looking to build a second battery plant with LG Chem and.
And and just given the size of the transit bus market, which is which is arguably relatively small compared to the total vehicle market.
Is there and this necessity on your part to kind of secure that supply chain. So that so that you're not caught and the <unk>.
Situation, where youre not able to get battery modules to essentially build those battery packs and and you.
Facilities and are you seeing anything now just given there seems to be some supply chain.
Apply chain constraints already here and in 2021.
So we have not been disrupted on cell supply today from exalt or a 1% to three and batteries from today.
For our businesses, nor the BYD supply of chassis to our friends at Alexander Dennis So thats.
And where we are today and your comments about surety of supply going forward as everybody is chasing and electrification is absolutely valid and so we are actively and deeply engaged in wherever we go on self sourcing that we have not only a relationship with ultimately who might package those batteries, but.
Ultimately securing our own portion of that source of supply that is absolutely fundamental to our business because youre right. The battery electric portion of buses compared to the demand for vehicles, whether it be cars or trucks or whatever else is going to be huge so were deep deep and that and that is effectively a core confidence or a strategic imperative for our business to ensure we.
Have that supply.
And.
Okay.
When you think of that battery.
And I guess, the electric battery supply chain and the battery packs now.
Done a good job.
Historically, we're kind of in sourcing more of the manufacturing so they can capture more margin.
Can you continue to move up.
What I'll call, the battery supply chain or or or.
For example, crude and battery modules, just not something you want to get into or is that something youre also looking looking out today.
Well I would say no Kevin and here's why we've seen all these Z bus EV bus companies, all these facts and whatever and make all these unbelievable promises around <unk>.
Volume of vehicles, but also battery pack manufacturing and infrastructure or energy and all this other stuff look at the end of the day, we need battery going on our bus just like we need a window or a seat and the pace of change not only the technology the energy density.
The range performance.
The health and life of a battery as well as the price is going to continue to change and so our strategic decision is not to beat and be there but to be the best smartest buyers of that stuff and the most agile so that we're not overly pregnant or married to a certain supplier at the end of the day no disrespect.
To all the cell guys, but they are largely going to end up very similar and commodities and we need to be really really smart on agile on how we move that and as your question on previously the ensuring we are source of supply is absolutely fundamental to our business and that's what we're focused on but I don't think youre going to see us moving too far down the chain and investing money and <unk>.
And that's changing at a rapid pace with some pretty big gorillas and a whole bunch of other guys trying to play in that space, we want to be agile and efficient as possible.
That's that's helpful I'll leave it there.
That's helpful for me. Thank you very much everybody. Thanks, Kevin Thanks, Kevin.
There are no further questions at this time I would now like to turn the call back over to Stephen King for closing remarks.
Thanks, Jack and thanks, everyone for your questions and for joining US today before we wrap the call. We will remind everyone that we will be holding our annual general meeting virtually on Thursday may <unk> 2021, we will also issuer Q1 and 2021 results on the same day.
Details on how to join the AGM will be posted to our website and finally before we wrap just wanted to mention that we are launching a new ESG component of our website.
And we should have that up soon and we'll have our latest ESG reports.
And will be published in May 2021, as well.
Thanks, everyone have a great day.
This concludes today's call. We thank you for your participation you may now disconnect.