Q4 2023 FreightCar America Inc Earnings Call
Welcome to freight car Americas fourth quarter 2023 earnings conference call.
Operator: Welcome to FreightCar America's fourth quarter 2023 earnings conference call. This time, all participants are in listen-only mode.
At this time all participants are in a listen only mode.
Operator: For those of you participating in the conference call, there will be an opportunity for your questions at the end of today's prepared comment. Please note this conference is being recorded, and an audio replay of the conference call will be available on the company's website within a few hours after this call. I would now like to turn the call over to Chris O'Day with Riverton Investor Relief. Thank you.
Participating on the conference call there will be an opportunity for your questions at the end of today's prepared comments. Please.
Please note. This conference is being recorded and an audio replay of the conference call will be available on the company's website within a few hours. After this call.
I would now like to turn the call over to Chris Our day with forever to Investor Relations.
Thank you and welcome joining me today are Jim Meyer, President and Chief Executive Officer, Mike <unk>, and Chief Financial Officer, Matt Tonn, Chief Commercial Officer, and Nick Randall Chief operating officer, I'd like to remind everyone that statements made during this conference call relating to the company's expected future performance future business prospects or future events or plans.
Unknown Attendee: Joining me today are Jim Meyer, President and Chief Executive Officer; Mike Riordan, Chief Financial Officer; Matt Tan, Chief Commercial Officer; and Nick Randall, Chief Operating Officer. I'd like to remind everyone that statements made during this conference call relating to the company's expected future performance, future business prospects, or future events or plans may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Participants are directed to FreightCar America's Form 10-K for a description of certain business risks, some of which may be outside of the control of the company and may cause actual results to materially differ from those expressed in the forward-looking statement. We expressly disclaim any duty to provide updates to our forward-looking statements, whether as a result of new information, future events, or otherwise. During today's call, there will also be discussion of some items that do not conform to U.S. generally accepted accounting principles, or GAAP.
Named food forward looking statements as defined under the private Securities Litigation Reform Act of 1995.
Participants are directed to freight car Americas Form 10-K for a description of certain business risks some of which may be outside the control of the company that may cause actual results to materially differ from those expressed the forward looking statements. We expressly disclaim any duty to provide updates to our forward looking statements, whether result of new information future events or how they watch.
During today's call. There will also be a discussion of some items that do not conform to U S generally accepted accounting principles or GAAP.
Unknown Attendee: Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the earnings release issued yesterday afternoon. The earnings release for the fourth quarter 2023 is posted on the company's website at FreightCarAmerica.com, along with our 10k, which was filed yesterday after market. With that, let me now turn the call over to Jim for opening remarks. Thank you, Chris.
Conciliations up these non-GAAP measures to their most directly comparable GAAP measures are included in the earnings release issued yesterday afternoon our.
Our earnings release for the fourth quarter 2023 is posted on the company's website at freight car America Dot com, along with our 10-K, which was filed yesterday aftermarket.
With that let me now turn the call over to Jim for opening remarks.
Thank you Chris Good morning, everyone and thank you all for joining us today.
James R. Meyer: Good morning, everyone, and thank you all for joining us today. FreightCar America achieved many significant milestones last year as part of our multi-year transformation, and I believe that we are now positioned to scale the business and generate compelling results. To support this belief, I will lead off with one very important metric.
Great Call America achieved many significant milestones last year as part of our multiyear transformation and.
And I believe that we are now positioned to scale the business and generate compelling results.
To support this belief.
I'll lead off with one very important metrics.
James R. Meyer: For 2023, FreightCar America earned $6,658 of adjusted EBITDA per rail car. This compares to a loss of $18,020 of adjusted EBITDA per rail car in 2019, which was our last full year of operation prior to beginning the transformation. During this time frame, the company eliminated very important levels of both fixed and variable costs. In addition, our prior manufacturing footprint limited the types of cars we were able to produce, as well as access to the skilled labor we needed for expansion. Fast forward to 2023.
For 2023 freight car America.
$6658 of adjusted EBITDA per railcar.
This compares to a loss of $18020 of adjusted EBITDA per railcar in 2019.
Which was our last full year of operation prior to beginning the transformation.
During this time frame the company eliminated very important levels of both fixed and variable cost.
In addition, our partner manufacturing footprint Ltd. The types of cars, we were able to produce.
As well as access to skilled labor, we need it for expansion.
Fast forward and back to 'twenty to 'twenty three.
James R. Meyer: We achieved the just-mentioned Adjusted EBITDA per railcar on just over 3,000 deliveries, and we have a footprint now capable of producing 5,000 or more railcars per year. As we ramp up production, we expect to gain new operating efficiencies driving more adjusted EBITDA per railcar on more railcars in total. In my view, this is the most important message today.
We achieved the just mentioned adjusted EBITDA per railcar on just over 3000 deliveries.
Our footprint now capable of producing 5000 or more railcars per year.
As we ramp up production, we expect to gain new operating efficiencies driving more adjusted EBITDA per railcar on more railcars in total.
In my view this is the most important message today.
Now to touch on a few key highlights for the full year.
James R. Meyer: Now to touch on a few key highlights for the full year. We delivered revenues of $358.1 million, a decrease of 2% year over year, on deliveries of 3,022 railcars, a decrease of 5% year over year. The modest decline in top line numbers can be attributed to disruption in the movement of rail traffic at the U.S. and Mexico border at the end of the year. Following the border issues we experienced during the third quarter, the government closed the border at Eagle Pass, Texas, from December 18th to the 27th, which created a multi-week impact on our ability to both ship and produce railcars.
We delivered revenues of $358 $1 million, a decrease of 2% year over year.
Deliveries of 3022 rail cars.
A decrease of 5% year over year.
The modest decline in topline numbers can be attributed to disruption and then move on a rail traffic at the U S. Mexico border at the end of the year.
Following the border issues, we experienced during the third quarter.
And the government closed the border at Eagle pass, Texas from December 18th to the 27.
What's created a multi week impact on our ability to both ship and produce railcars.
Furthermore, recall that our fourth production line.
James R. Meyer: Furthermore, recall that our fourth production line started just prior to year-end, which prevented significant additional scaling in 2023. With the resumption of rail service at the border, combined with our manufacturing facility now fully online, our teams are well prepared to meet demand. In addition to these headwinds, foreign exchange also impacted our results.
Started just prior to year end, which prevent that so that's what got additional scaling in 'twenty to 'twenty three.
With the resumption of rail service not the border combined with our manufacturing facility now fully online.
Our teams are well prepared to meet demand.
In addition to these headwinds foreign exchange also impacted our results, but despite these which combined were approximately $5 million headwinds for the full year.
James R. Meyer: But despite these, which combined were approximately $5 million in headwinds for the full year, we delivered full-year adjusted EBITDA of $20.1 million, versus $8.4 million in 2022, an improvement of $11.7 million, or approximately 139%, on slightly less revenue, as we expanded our gross margin profile by 460 basis points from the prior year, achieving an industry-leading 11.7% for the full year. In terms of our operations, we achieved several key milestones in 2023. Notably, we completed the build-out of our Castanos, Mexico manufacturing facility.
We delivered full year adjusted EBITDA of $21 billion.
First is eight $4 million in 2022 an improvement of $11.7 million or approximately 139% on slightly less rebate now as we expanded our gross margin profile by 460 basis points from the prior year.
Achieving an industry, leading 11, 11.7% for the full year.
In terms of our operations, we achieved several key milestones in 'twenty to 'twenty three notably we completed the build out of our guests Domino's, Mexico manufacturing facility.
James R. Meyer: We now have the capacity to seamlessly manufacture an annual volume of 5,000 plus railcars, for 10-15% of the annual demand for North America. Moreover, I am extremely pleased with the high level of operational excellence our team has already been able to demonstrate. Combined with the ongoing execution of our commercial strategy, I am confident in our ability to further enhance the quality of our earnings as we utilize the full potential of our capacity and operational and commercial strategies. Some of which will be evident when Nick speaks about our Outlook for 2024 in a few minutes. Turning to the fourth quarter, revenue decreased 2% year over year to $126.6 million on deliveries of 1,021 railcars, both lower than expected, purely due to challenges around the already mentioned border closure and rail service disruption.
We now have the capacity to seamlessly manufacturer annual volume of 5000 plus railcars.
Our 10% to 15% annual demand for North America.
Moreover, I am extremely pleased with the high level of operational excellence, our team has already been able to demonstrate.
Coupled with the ongoing execution of our commercial strategy.
Cockpit and our ability to further enhance the quality of our earnings as we flex the full potential of our capacity and operational and commercial strategies.
Some of which will be evident what next speaks to our outlook for 2024 in a few minutes.
Turning to the fourth quarter revenue decreased 2% year over year to $106.6 million on deliveries of 1021 railcars.
Lower than expected purely due to challenges around the already mentioned border closure and rail service disruption.
James R. Meyer: Despite these headwinds, our gross margin increased 600 basis points to 9.6% compared to the fourth quarter of 2022, and adjusted EBITDA increased $5.3 million versus the same quarter of the prior year to $6.5 million, which equates to $6,357 per rail car. And this is in the face of an approximately $2.7 million impact on adjusted EBITDA from the last end-of-year shipments and effects. As you are most likely aware from other industry participants, order activity took a pause in the fourth quarter, with FreightCar America securing 135 orders.
Despite these headwinds our gross margin increased 600 basis points to nine 6% compared to the fourth quarter of 2022.
And adjusted EBITDA increased $5.3 million versus the same quarter of the prior year to $6 $5 million, which equates to $6357 per railcar.
And this isn't a face amount of approximately 2.7 million dollar impact in the quarter on adjusted EBITDA.
The last end of your shipments and effects.
As you are most likely aware from other industry participants order activity took a pause in the fourth quarter with freight car America, securing 135 orders.
James R. Meyer: I will say that activity has picked up significantly since the start of the new year, but activity is still facing inertia from the high levels of caution being exercised by customers. We believe this inertia is due to caution with complex spending in view of mixed confidence in the economic outlook, elevated interest rates, which directly impact leasing costs, and the Improvement in Railroad Performance Metrics, which has led some buyers to re-evaluate new quantities needed. Despite the softness, we have line of sight to production of 4000 to 4400 railcars in 2024, which will allow us to achieve some of the scaling and levering we are so eager to demonstrate. With that, I will next turn the call over to Matt to discuss the market, then Mike for a more detailed view of 2023, and finally to Nick to preview 2024. Matt.
I will say that activity has picked up significantly since the start of the new year, but it's still facing inertia from the high levels of caution being exercised by customers.
Believe as a nurse shows due to caution with capex spending and view of mix confidence in the economic outlook.
Elevated interest rates, which directly impact leasing cost.
Improvement in railroad performance metrics, which has led some buyers to reevaluate new quantities needed.
Despite the softness we have line of sight to production of 4000 to 4400 railcars in 2024.
Which will allow us to achieve some of the scaling and levering we are so eager to demonstrate.
With that I will next turn the call over to him after discussing the market then Mike for a more detailed view of trying to find a tree.
Finally connect a preview 2024.
Matt.
Thank you Jim and good morning, everyone.
Matthew Youssef Elkott: Thank you, Jim, and good morning, everyone. Throughout the majority of 2023, we experienced healthy inquiry activity with an increase in total orders booked versus the prior year. For the full year 2023, we won orders totaling 3,491 railcars valued at approximately $397 million. This represents the largest annual order total since 2019 and a 5% increase in order intake compared to 3,306 orders booked during the prior year. Orders in 2023 by customer segment, including class one railroads, left soars, and shippers, remain consistent, as has the continued addition of new customers. We ended the year with a backlog of 2,914 railcars, valued at approximately $348 million, representing increases of approximately 19.2% and 20.9% year-over-year, respectively. For the fourth quarter, we booked orders for 135 cars, which highlights the lumpiness we sometimes see from quarter to quarter.
The majority of 2023, we experienced healthy inquiry activity with an increase in total orders book versus the prior year.
For the full year 2023, we won orders totaling 3491 railcars valued at approximately $397 million. This.
This represents the largest annual order total since 2019, and a 5% increase in order intake compared to 3306 orders booked during the prior year.
Orders in 2023 by customer segment, including class, one railroads lessors and shippers remain consistent as has the continued addition of new customers.
We ended the year with a backlog of 2914 railcars valued at approximately 348 million representing increases of approximately 19, 2% and 29% year over year, respectively.
For the fourth quarter, we booked orders of 135 cars, which highlights the lumpiness, we sometimes see from quarter to quarter for many freight segments as Jim alluded to earlier customers are simply taking longer to fully analyze the timing of their new railcar purchases.
Matthew Youssef Elkott: For many freight segments, as Jim alluded to earlier, customers are simply taking longer to fully analyze the timing of their new rail car. From a market perspective, rail service, including rail velocity and dwell times, is trending above their five-year averages. Overall, we view these metrics as positive for a healthy rail environment that will drive more freight to rail and ultimately increase new rail car demand. However, customer feedback indicates that the balancing of improved rail service, and its impact on fleet utilization, higher commodity and raw material prices, and the commensurate increases in lease rates for new equipment, along with general uncertainties of the economy, all factor into their decision and timing of new rail car acquisition. It isn't a matter of when or if, but when customers will make buy decisions.
From a market perspective rail service, including rail velocity and dwell times are trending above their five year averages overall, we view. These metrics is positive for a healthy rental environment that will drive more free corral and ultimately increase new railcar demand custom.
Customer feedback indicates that the balance sheet of improved rail service and its impact on fleet utilization higher commodity and raw material prices and the commensurate increases in lease rates for new equipment, along with general uncertainties of the economy, all factor into their decision and timing of new railcar acquisitions.
It isn't a matter of when but.
But when customers will make buy decisions.
Matthew Youssef Elkott: As an industry, we expect to remain in the cycle of new rail car demand tied closely to replacement levels, and we are aligned with most other forecasts for total rail car delivery falling in the range of 35,000 to 40,000 plus rail cars for the full year 2024. As Jim mentioned, Castano's plan is hitting us right now with four lines of production fully operational. The completed Castano campus is truly a differentiator for our brand and positions FreightCar America for growth, with the ability to deliver both more volume and a broader range of car types to our customers. Back to the commercial front, we are seeing solid momentum again in bid activity in Q1. However, as I referenced earlier, the environment may remain somewhat lumpy quarter to quarter as customers manage through the aforementioned factors and dial in the timing of when new rail cars are needed.
As an industry, we expect to remain in the cycle of new railcar demand tied closely to replacement levels and we are aligned with most other forecast for total railcar deliveries falling in the range of 35000 to 40000 plus railcars for the full year 2024.
Jim mentioned, the custodians plant is hitting its stride now with four lines of production fully operational.
The completed Spaniel's campus is truly a differentiator for our brand and position us for a car America for growth with the ability to deliver both more volume and a broader range of car types to our customers.
Back to the commercial front, we are seeing solid momentum again and bid activity in Q1, however, as I referenced earlier, the environment remains somewhat lumpy quarter to quarter as customers manage through the aforementioned factors and the timing of when new railcars are needed.
Michael Anthony Riordan: As a company, we will continue to maintain a disciplined commercial process, a collaborative approach to developing solutions for our customer-specific rail car needs, and secure business that aligns with our financial goals. I'll now turn the call over to Mike for comments related to our financial performance. Thanks, Matt. And good morning, everyone.
As a company we will continue to maintain a disciplined commercial process a collaborative approach to developing solutions for our customer specific railcar needs and secure business that aligns with our financial goals.
I'll turn the call over to Mike for comments related to our financial performance Mike.
Okay.
Thanks, Matt and good morning, everyone.
Michael Anthony Riordan: I'll begin with an overview of the fourth quarter financials and then touch on the full year 2023 highlights, some of which Jim already mentioned in his opening remarks. First, let's turn to the fourth quarter results. Consolidated revenues for the fourth quarter of 2023 totaled $126.6 million with deliveries of 1,021 railcars compared to $129 million on deliveries of 1,150 railcars in the fourth quarter of 2022.
I'll begin with an overview of the fourth quarter financials, and then touch on the full year 2023 highlights some of which Jim already mentioned in his opening remarks.
First let's turn to the fourth quarter results.
Consolidated revenues for the fourth quarter of 2023 total of $126 6 million with deliveries of 1021 railcars compared to $129 million on deliveries of 1150 railcars in the fourth quarter of 2022.
Gross profit in the fourth quarter of 2023 was $12 1 million with a gross margin of nine 6% compared to gross profit of $4 6 million and gross margin of three 6% in the fourth quarter of last year.
Michael Anthony Riordan: Gross profit in the fourth quarter of 2023 was $12.1 million, with a gross margin of 9.6%, compared to gross profit of $4.6 million and a gross margin of 3.6% in the fourth quarter of last year. Despite relatively flat deliveries due to the adverse impact of the border closure in the quarter, we significantly expanded gross margins, supported by an even more efficient production process and robust commercial strategy. With our facility entering a new phase with all production lines operating beginning December 2023, we anticipate further gross margin improvement throughout 2024. SG&A for the fourth quarter of 2023 totaled $7.7 million, up from $6.3 million in the fourth quarter of 2022, primarily due to a year-over-year increase in stock-based compensation, as the fourth quarter of 2022 had a favorable fair market value adjustment for certain cash-settled Consolidated operating income for the fourth quarter of 2023 was $268,000, compared to an operating loss of $6.2 million in the fourth quarter of 2022.
Despite relatively flat deliveries due to the adverse impact of the border closure in the quarter, we significantly expanded gross margin supported by an even more efficient production process and robust commercial strategy.
With our facility entering a new phase with all production lines operating beginning December 2023 we anticipate further gross margin improvement throughout 2024.
SG&A for the fourth quarter of 2023 totaled $7 7 million up from $6 3 million in the fourth quarter of 2022, primarily due to a year over year increase in stock based compensation as the fourth quarter of 2022 had a favorable fair market value adjustment for certain cash settled awards.
Consolidated operating income for the fourth quarter of 2023 was $268000 compared to an operating loss of $6 2 million in the fourth quarter of 2022.
Michael Anthony Riordan: The increase in consolidated operating income in the fourth quarter of 2023 was primarily driven by increased gross profit offset by a $4.1 million impairment charge related to our last tranche of rail cars in our lease fleet. In the fourth quarter of 2023, we achieved adjusted EBITDA of $6.5 million compared to $1.2 million in the fourth quarter of 2022, primarily driven by increased operational efficiency. Again, as Jim highlighted earlier, our fourth-quarter adjusted EBITDA was muted due to the U.S.-Mexico border closure in December that prevented shipments of finished goods as well as the continued strengthening of the Mexican peso. In total, these were a headwind of approximately $2.7 million in the quarter.
The increase in consolidated operating income in the fourth quarter of 2023 was primarily driven by increased gross profit offset by a $4 $1 million impairment charge related to our last tranche of railcars in our lease fleet.
In the fourth quarter of 2023, we achieved adjusted EBITDA of $6 5 million compared to $1 2 million in the fourth quarter of 2022, primarily driven by increased operational efficiencies.
Again as Jim highlighted earlier, our fourth quarter adjusted EBITDA was muted due to the U S. Mexico border closure in December that prevented shipments of finished goods as well as the continued strengthening of the Mexican peso.
In total these were a headwind of approximately $2 7 million in the quarter.
Michael Anthony Riordan: While the effect of foreign currency will always exist, we implemented a foreign currency risk management program in the third quarter of 2023 that will reduce the impact on our earnings in future periods. For the fourth quarter of 2023, our adjusted net income was $2.4 million, or a loss of $0.07 per share, compared to an adjusted net loss of $8.1 million, or $0.31 per share, in the fourth quarter of last year. Justin, that loss accounts for the impact of certain non-cash items and non-recurring items, such as the $4.1 million impairment on leased rail cars, as well as the change in fair market value of our warrant liability, which fluctuates each quarter in line with the change in our share price during the period. Capital expenditures for the fourth quarter of 2023 were approximately $3.8 million related to the timing of payments for work that was finished at the end of the third quarter to For the full year, it was $12.7 million.
Oh, the effective foreign currency will always exist, we implemented a foreign currency risk management program in the third quarter of 2023 that would reduce the impact on our earnings in future periods.
For the fourth quarter of 2023, our adjusted net income was $2 4 million or a loss of seven cents per share.
To an adjusted net loss of $8 1 million or <unk> 31 per share in the fourth quarter of last year.
Adjusted net loss of accounts for the impact of certain noncash items and nonrecurring items, such as the $4 1 million dollar impairment on leased railcars as well as the change in fair market value of our warrant liability, which fluctuates each quarter in line with the change in our share price during the period.
Capital expenditures for the fourth quarter of 2023 were approximately $3 8 million related to the timing of payments for work that was finished at the end of the third quarter to complete the fourth production line at our <unk> facility.
The full year it was $12 7 million.
Michael Anthony Riordan: With the completion of our fourth production line, we expect future capital spend to decrease considerably and to primarily be in a maintenance cycle. We estimate our maintenance cycle to be approximately half to three quarters of a percent of revenue. For the full year 2023, we completed our expansion work, which included increasing the capacity of our vertically integrated fabrication shop, as well as production lines three and four. Justin for the full year was $20.1 million, an $11.7 million increase or 139% improvement from 2022.
With the completion of our fourth production line, we expect future capital spend to decrease considerably and so primarily b and a maintenance cycle.
We estimate our maintenance cycle to be approximately half to three quarters of a percent of revenue.
For the full year 2023, we completed our expansion work, which included increasing the capacity of our vertically integrated fabrication shop as well as production lines three and four.
Adjusted EBITDA for the full year was $20 1 million.
An $11.7 million increase or 139% improvement from 2022.
Michael Anthony Riordan: As Jim mentioned earlier, while we are very pleased with our 2023 results, foreign currency and the December border closure were headwinds to our earnings of approximately $5 million. However, due to the favorable cost structure of our Crestanios footprint and the operational leverage we designed into our transformed business, we reported our second consecutive year of positive operating cash flow. Cash generated from operating activities was $4.8 million in 2023 compared to cash flows from operating activities of $11.5 million in 2022, a $6.7 million decrease because of the border closure in the final weeks of December that led to a large buildup of inventory as we were unable to ship finished railcars.
As Jim mentioned earlier, while we are very pleased with our 2023 results foreign currency and the December border closure were headwinds to our earnings of approximately $5 million.
Due to the favorable cost structure, but gastonia is footprint and the operational leverage we design into our transformed business.
Ported our second consecutive year of positive operating cash flow.
Cash generated from operating activities was $4 8 million in 2023 compared to cash flows from operating activities of $11 5 million in 2020 to $6 $7 million decrease because of the border closure in the final weeks of December that led to a large buildup of inventory as we were unable to ship finished railcars.
With that financial overview I'd like to now turn the call over to Nick for a few remarks on our outlook.
Nicholas J. Randall: With that financial overview, I'd like to now turn the call over to Nick for a few remarks on our outlook. Thanks, Mike. I want to start by highlighting some key strategic developments from the past quarter. Our team has continued to reach major achievements, successfully doubling our on-site paint capacity, building product across all four of our production lines, insourcing the significant majority of our fabricated parts, and growing our workforce in Mexico. All of this was achieved while making our plants amongst the safest manufacturing facilities in North America.
Thanks, Mike.
I want to start by highlighting some key strategic developments from the past quarter.
Our team has continued to reach major achievements successfully doubling our onsite paint capacity building product across all four of our production lines insourcing. The significant majority of our fabricated parts and growing our workforce in Mexico.
All of this was achieved while making our plants are amongst the safest manufacturing facilities in North America.
Nicholas J. Randall: These achievements underscore our commitment to our customers, our employees, and our shareholders. In terms of operations, despite the challenges we faced in 2023, including border disruptions, we made significant progress in increasing productivity, optimizing the supply chain, and improving our assembly processes and capabilities. These improvements are critical to our long-term success and reflect our dedication to operations. Our priorities for the upcoming year remain unchanged.
These achievements underscore our commitment to our customers our employees and our shareholders.
In terms of operations. Despite the challenges we faced in 2023, including water disruptions, we made significant progress in increasing productivity up to me is optimizing the supply chain and improving our assembly processes and capabilities. These improvements are critical to our long term success and.
Our dedication to operational excellence.
Our priorities for the upcoming year remained unchanged. The team will continue to focus on executing our operational and commercial strategies, while working to build our backlog and deliver high quality products on time to our customers.
Nicholas J. Randall: The team will continue to focus on executing our operational and commercial strategies while working to build our backlog and deliver high-quality products on time to our customers. We also remain committed to creating opportunities for further improvements in our capital structure and driving continued improvement in our cash generation moving forward. With the disruption associated with our 2023 plant expansion work behind us, I believe we can expect a better year, especially when considering the combined benefits of more volume, more productivity, and implementing even more operational excellence initiatives. For the full year 2020-2024, we are forecasting revenues between $520 million and $572 million, up approximately 52.5% year-over-year at the midpoint of the range. This expectation is based on expected deliveries between 4,000 and 4,400 railcars, an increase of approximately 39% at the midpoint of the range.
We also remain committed to creating opportunities to further improvements in our capital structure and driving continued improvements in our cash generation moving forward.
With the disruption associated with a 2023 tenths expense you work behind US I believe we can expect to progressively better yet, especially when considering the combined benefits from more volume more productivity I'm, putting even more operational excellence initiatives to what.
For the full year 2022 'twenty three 'twenty four we are forecasting revenues between $520 million and 572 million.
Approximately 52, 5% year over year at the midpoint of the range.
This expectation is based on expected deliveries between 4000 to 4400 railcars, an increase of approximately 39% at the midpoint of the range.
Nicholas J. Randall: We expect, adjusted at EBITDA, guidance between $32 million and $38 million for the full year, representing a year-over-year increase of 74.1% at the midpoint and further underscoring the power of our transformation strategy. Finally, we expect positive operating cash flow for the third consecutive year. I am truly excited about the opportunities that underpin our guidance for 2024 and also mindful of the potential challenges that we need to be prepared to manage through. I want to express my gratitude to our customers, our employees, partners, and shareholders for your continued support. I will now turn over to Jim for a few closing remarks. Thanks.
We expect adjusted EBITDA guidance between 32 million and $38 million for the full year, representing a year over year increase of 74, 1% midpoint and further underscoring the power of our transformation strategy.
Finally, we expect positive operating cash flow for the third consecutive year.
I am truly excited about the opportunities.
Our guidance for 2024, and also mindful of the potential challenges that we need to be prepared to manage through.
I want to express my gratitude to our customers our employees partners and shareholders you'll continue to smoke.
I will now turn over to Jim for a few closing remarks.
Thanks, Matt.
James R. Meyer: I will come back to the theme we started today's call with, and that is today FreightCar America is a vastly better company defined by a full array of railcar products, with some of those products being the preferred car type in the industry. We are also a company defined by our people and their commitment to give our customers what they want and 24-7 accessibility for the leadership team. We're also defined by our manufacturing campus in Castano.
I will come back to the theme, we started todays call with and that is today freight car America is a vastly better company.
Fine by a full array of railcar products.
Some of those products being the preferred car types in the industry.
We are also a company defined by our people and their commitment to give our customers what they want and 24 seven accessibility to the leadership team.
We're also defined by our manufacturing campus in guests Thanos.
James R. Meyer: The newest and most efficient factory in the industry. Our factory is our showroom, and it is the place we want our customers to experience before they make their purchase decision. And finally, we are defined by a transformed cost structure and competitiveness. As a result, our customer base is growing, our repeat customer base is growing, and shareholders and the industry will be better off for it. As Nick pointed out, our priorities for the upcoming year remain unchanged.
And most efficient factory in the industry.
Our factory is our showroom and it is the place we want our customers to experience before they're making their purchase decisions.
And finally, we are defined by a transfer of our cost structure and competitiveness.
As a result, our customer base is growing our repeat customer base is growing.
And shareholders and the industry will be better off for it.
As Nick pointed out our priorities for the upcoming era remain unchanged. The team will continue to focus on executing our operational and commercial strategies and demonstrate the power of scale and leverage that we believe exists in the business.
James R. Meyer: The team will continue to focus on executing our operational and commercial strategies and demonstrate the power of skill and leverage that we believe exists in the business. We also remain committed to improving our capital structure and driving incremental cash generation. All of us have great expectations for FreightCar America.
We also remain committed to improving our capital structure and driving incremental cash generation.
All of us have great expectations for freight car America.
James R. Meyer: And given what has been achieved under the most difficult of circumstances, I am extremely confident in the team and direction of the company. In closing, as I have mentioned quite some time ago now, we have been planning for the next generation of leadership and continuity. So let me also comment on the other press release issued last night. I will be stepping down as President and Chief Executive Officer effective May 1. Nick, our current Chief Operating Officer, will assume the role of President and CEO and join our Board of Directors at the same time. Nick has been second in command for nine months now, and I do not believe it is necessary to do a full reintroduction.
And given what has been achieved under the most difficult circumstances.
I'm extremely confident in the team and direction of the company.
In closing and as first mentioned quite some time ago now.
We have been planning for the next generation of leadership and continuity.
Let me also comment on the other press release issued last night.
I will be stepping down as president and Chief Executive Officer effective may one.
Nick our current Chief operating officer will assume the role of President and CEO and join our board of directors at the same time.
Nick has been second in command for nine months now.
I knew I do not believe it necessary to do a full reintroduction.
James R. Meyer: He is an operations expert, customer and product-centric, and came to us from a division of one of the most admired companies in the world, Berkshire Hathaway. Nick shares my values and my vision for the company, and I believe that he, Mike, Matt, and the rest of the team will deliver for our shareholders. My role will continue with FreightCar America. We're also starting on May 1.
He is an operations expert.
Customer and product centric.
Came to us from a division of one of the Boston admired companies in the World Berkshire Hathaway.
Nick's shares my values and my vision for the company.
And I believe that he and Mike and Matt and the rest of the team will deliver for our shareholders.
My role will continue with freight car America. We're also starting on May one.
James R. Meyer: I will begin serving as the company's executive chairman, which will allow me, in conjunction with Nick and the rest of the board, to focus on strategic and other topics of utmost importance to our future. With these changes, we are not stopping or changing our agenda. Instead, we are preparing to accelerate as a vastly healthier and more formidable company. With that, I will ask the operator to open the lines for Q&A. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Will began serving as the company's executive Chairman, which will allow me in conjunction with NEK and the rest of the board.
Focus on strategic and other topics of the utmost importance to our future.
With these changes we are not stopping or changing our agenda.
Instead, we are preparing to accelerate at a vastly healthier and more formidable company.
With that I will ask the operator to open the lines for Q&A.
Thank you well.
Well now be conducting a question and answer session.
If you'd like to ask a question. Please press star one from your telephone keypad, a confirmation tone will indicate your line is in the question queue do.
Let me first start to feel like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: One moment, please, while we poll for questions. Thank you. And our first question is from the line of Justin Long with Stevens. Please proceed with your question. Thanks, and good morning. Morning, Justin. Good morning.
One moment please poll for questions.
Thank you and our first question is from the line of Justin Long with Stephens. Please proceed with your question.
Thanks, and good morning.
Good morning, Justin.
First of all let me say to both Jim and Nick Congrats on the transition and I, maybe wanted to start there with a question for you Nick as you step into this role it sounds like from the prepared remarks that overall strategy isn't going to change, but Jim I think.
Justin Trennon Long: First of all, let me say to both Jim and Nick, congrats on the transition. And I maybe wanted to start there with a question for you, Nick, as you step into this role. It sounds like, from the prepared remarks, the overall strategy isn't going to change. But Jim, I think you mentioned there could be some opportunities to accelerate the trajectory of the business going forward. So, Nick, as you make this transition, what are some of your priorities for you out of the gate? And do you have any thoughts on ways we can enhance or accelerate the current plan? Thanks, Justin. Thank you for the congratulations. Thank you very much. Yeah, let me give you an example, as Jim mentioned, I've been here for nine months now.
You mentioned, there could be some opportunities to accelerate the trajectory of the business going forward. So Nick as you make this transition what are some of the priorities for you out of the gate and do you have any thoughts on ways, you can enhance or accelerate the current plan.
Thank you Justin and thank you for the congratulations. Thank you rich Yeah, let me give a as Jim mentioned I've been here for nine months now so.
Nicholas J. Randall: So I've had a significant amount of time to spend on the ground in our Castanos facility in Mexico to get very integrated and sort of very close to the processes we have, the investments we've made, the facility that exists down there. And I will tell you that in my first nine months, it's truly impressive what a great facility there's been placed in and expanded over the last two or three years. I think the team has done an outstanding job on what they've accomplished in Costanos.
I've had a significant amount of time too.
And then on.
On the ground in all casinos facility in Mexico to get very integrated in sort of very close to the processes. We have the investments. We've made the facility that exists down there and I would tell you in my first nine months is truly impressive and what a great facility.
It is being placed in Santos and <unk>.
Expanded over the last two or three years.
I think the team has done.
An outstanding job on what they've accomplished in Santos I also believe there is more to come from our continuous operations and our approach to operational excellence. So I think there's we said it's the same priority our priority is to drive that operational excellence that benefit prior.
Nicholas J. Randall: I also believe there is more to come from our continuous operations and our approach to operational excellence. So I think there's, we said it was the same priority, our priority is to drive that operational excellence, our priority is to drive all of those cost take-out initiatives to remove non-value-added work in Costanos, so we'll continue to do that, the teams have been embarked on that, and we'll continue to push that through so that that reflects in our bottom line from a cost performance. I think, um, improving operations is not just a one-shot deal. It's not something we do over a three month period and then leave.
She has to drive one of those cost takeout initiatives to remove non value added work into Dallas. So we'll continue to do that the teams have been embarked on that and we will continue to push that through so that that reflects in our bottom line from a cost performance perspective into standards.
I think.
Do you have an operation that is not just a one shot deal it's not something we do over a three months period and leave it. It is a process of continuous process. It pursues excellence. So we continue to do that from an operational perspective.
Nicholas J. Randall: It is a continuous process that pursues excellence, so we continue to do that from an operations perspective. Priority is really to, you know, Now that we've built this capacity, to be able to fill that capacity and expand our products to meet what our customers require or what the industry requires. And I'm thinking externally, you know, to spend more time with customers and key stakeholders so that we can help our customers win so that we win their work, win the entitlement to have their work.
Our priority is really to.
Now we built this capacity is to be able to fill that capacity and expand.
Products to you know.
Meet what our Christmas require or what the industry requires.
And if they can extend it up to spend more time with customers and key stakeholders that we can help our customers win so that we win that work when the when the and tightened to have their work and I'll, let Willie.
Nicholas J. Randall: And I'll work with existing customers, new customers, Matt and the team to make sure that our products and services clearly meet what our industry needs or expects over the coming 12, 18, 20 years. So that's what I've kind of learned just in the last nine months. I think that covers your question, but if not, let me know.
Customers, new customers, Matt and the team to make sure that all products and services clearly meet what our industry needs or expects that come in 12, 18 26 months period.
So that's what I was kind of late just in over the last nine months.
I think that was your question, but if not let me know.
It does and thank you for that and maybe the shift to the performance of the business.
Nicholas J. Randall: And thank you for that. And maybe I'll shift the conversation to the performance of the business. You called out a few times the $5 million impact that you saw from FX and the issues at the border. Could you specifically or could you break that out in terms of how much of that $5 million was related to the border issues and maybe provide an update on how those issues at the border are playing out here? Sure, Justin. I'll start by breaking out.
You called out a few times the 5 million dollar impact that you saw from FX and the issues at the border could you specifically could you break that out in terms of how much of that 5 million was related to the border issues and maybe provide an update on how those.
Issues at the border or playing out year to date.
Sure Justin I'll start with breaking out so easy border contributed about $1 3 million and over the course of the year. It was $3 7 million on FX for that breakout.
Michael Anthony Riordan: So the border contributed about 1.3 million, and over the course of the year, it was 3.7 million on FX for that breakout. In terms of the border closure, I'll turn that one over to you. Yeah, I'll do that.
In terms of the border closure I'll turn that one over yes.
Nicholas J. Randall: So just so you know, a couple of things on the border closure: just to note that the timing of the border closure was right at the end of week three of December, which gives you little time to sort of respond in time for the quarter. So what we've done since then is we've got a much closer management relationship with the rail operators, so we have a better view of what to expect, and we've also got a better, closer management, daily review of what's happening and where it's going to impact so we can be better prepared and better mitigated for future or any extended or surprise border closures. I will tell you right now it's better than it was in Q Okay, that's helpful. And I guess the last one from me: you gave the guidance for 2024. And it implies pretty significant growth across the board.
So just so that I mean, there's a couple of things on the border closure just to note was at the end of Q4.
Timing of the border closure was right at the end of sort of week three of December which gives you a little time to sort of.
Respond in time for the quarters, so what we've done.
Since then is we've got a we've got a much closer management with the rail the rail operators. So we have a better view of what to expect and we've also got a better closer management.
Daily review of what's happening and where it's going to impact. So we can be better prepared embedded mitigated for future or any extended it'll surprise at border closures.
I will tell you right now it's better than it was in Q4 from a.
OTA and Liberty expectation.
Okay. That's helpful and I guess the last one for me you gave that guidance for 2024, and it implies pretty significant growth across the board, but is there any additional color you can provide on the quarterly cadence of that guidance, if we think about.
Justin Trennon Long: But is there any additional color you can provide on the quarterly cadence of that guidance as we think about the timing of deliveries and margin performance of the business, things that may be fluctuating based on mix or other factors? Thank you, Anna, for responding to that. Sure, I'll start with, you know, we're not going to give specific quarterly numbers, but I will say we'll see sequential improvement throughout the year. Q1 will be our lowest. As I mentioned, we didn't start production on our fourth line until December. So you can understand there'll be ramp-up production costs, etc. going on in Q1 that will mute those results compared to the rest of the year when that fourth line is fully up, utilized, and running at full capacity, and the learning curves from hiring the new crews.
The timing of deliveries and margin performance of the business things that may be fluctuating based on mix or other factors.
Mike do you want to respond to that.
Sure I'll start with you.
We're not going to give specific quarterly numbers, but I will say, we will see sequential improvement throughout the year Q1.
B, our lowest as I as I mentioned, we didn't start production on our fourth line until December So you can.
Understand there'll be ramp up production costs etcetera going on in Q1 that will mute those results compared to the rest of the year when that fourth line is fully utilized and running at full capacity and the learning carriage editor from hiring the new cruise so youll see that scale up throughout the year with Q1 being the low point.
Justin Trennon Long: So you'll see that scale up throughout the year with Q1 being the low point from a gross margin perspective. Okay, and from a delivery perspective, would you expect a similar cadence, one quarter being the lowest and then building through the year? So on that one, as we talked about with the border closure, there's a hangover from Q4. So deliveries in Q1 will actually be a little higher, given how much was kind of sitting on property. And as you look through our financials, you'll see there was just over $23 million of finished goods, or about 200 rail cars finished on property, that would have been Q4 that are gonna fall into Q1. So Q1 deliveries will actually be a little high as a result of the border closure hangover falling into Q1.
From a gross margin perspective.
Okay and from a delivery perspective would you expect a similar cadence <unk> being the lowest and then building through the year.
So on that one you know as we talked about with the border closure, there's a hangover from Q4, so deliveries in Q1 will actually be a little higher given how much was kind of sitting on property and as you look through our financials Youll see there is ill.
Just over $23 million of finished goods or or about 200 railcars a finish.
Finished on property that would have been Q4 theyre going to fall into Q1, So Q1 deliveries will actually be a little high as a result of the border closure hangover fallen into Q1.
Okay very helpful. Thank you for the time.
Michael Anthony Riordan: Okay, very helpful. Thank you for the time. Thanks, Justin. Thank you. Thank you. At this time, we've reached the end of our question and answer session, and this will also conclude today's conference. You may disconnect your lines at this time. We thank you for your participation and have a great day.
Thanks, Jessica Thank you.
Thank you.
At this time, we've reached into a question and answer session and this will also conclude today's conference you may disconnect. Your lines at this time, we thank you for your participation and have a great day.