Q1 2024 NFI Group Inc Earnings Call

Operator: Good day, ladies and gentlemen. Thank you for standing by.

Good day, ladies and gentlemen, thank you for standing by welcome until and if I could first quarter 'twenty 'twenty four financial results conference call.

Operator: Welcome to the NFI Group First Quarter 2024 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 11 on your telephone. You will then hear an automatic message advising that your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Stephen King, Vice President of Strategy and Investor Relations. Please go ahead.

At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session. Just a question. During the session you will need to press star one on your telephone.

The automatic message advising Yohan <unk> Suisse. Please note that today's conference is being recorded.

Now I'll hand, the conference I'll, let you speak of House, Stephen King Vice President of strategy and Investor Relations. Please go ahead.

Stephen King: Thank you, Olivia. Good morning, everyone. This is Stephen King speaking.

Thank you Olivia good morning, everyone. This is Stephen King speaking joining me today are <unk>, President and Chief Executive Officer, and Brian Smith, Our executive Vice President Finance and Chief Financial Officer.

Stephen King: Joining me today are Paul Soubry, President and Chief Executive Officer, and Brian Dewsnup, our Executive Vice President of Finance and Chief Financial Officer. On today's call, Paul and Brian will provide an update on our financial results, the operating environment, market demand, and our outlook. This call is being recorded, and a replay will be made available shortly.

Today's call, Paul and Brian will provide an update on our financial results the operating environment market demand and our outlook.

This call is being recorded and a replay will be made available shortly.

Stephen King: We will be using a presentation that can be found in the investor section of our website. While we will be moving the slides via the webcast link, we will also call out the slide number as we move through the presentation. Starting with slide two, I would like to remind all participants and others that certain information provided in today's call may be forward-looking and based on assumptions and anticipated results that are subject to uncertainty. Should any one or more of these uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary significantly from those expected.

We'll be using a presentation that can be found in the investors section of our website, while we will be moving to slide via the webcast link we will also call out the slide number as we move through the presentation.

Starting with slide two I would like to remind all participants and others that certain information provided on todays call maybe forward looking based on assumptions and anticipated results that are subject to uncertainties.

Should any one or more of these uncertainties materialize or should the underlying assumptions prove incorrect actual results may vary significantly from those expected. In addition, certain financial measures. We reference today are not recognized earnings measures do not have standardized meanings prescribed by international financial reporting standards or IRS, we advise listeners.

Stephen King: In addition, certain financial measures we referenced today are not recognized earnings measures and do not have standardized meanings prescribed by International Financial Reporting Standards, or IFRS. We advise listeners to review the risk factors, financial definitions, and non-IFRS measure statements found in our press releases and other public filings on CDAR for more detail. We also want to remind listeners that NFI's financial statements are presented in U.S. dollars for companies reporting currency, and all amounts referred to are in U.S. dollars unless otherwise noted.

To review the risk factors financial definitions and non <unk> measure statements found in our press releases and other public filings on SEDAR for more details.

We also want to remind listeners that enterprise financial statements are presented in U S dollars, the company's reporting currency and all amounts referred to are in U S dollars unless otherwise noted.

Stephen King: On slide 3, we've included some key terms and definitions referred to in this presentation. Of note, Zero Emission Buses, or ZEBs, consist of battery electric, hydrogen fuel cell electric, and trolley electric buses. Equivalent units, or EUs, is a term we use for both production slots and delivery statistics.

On slide three we've included some key terms and definitions referred to in this presentation of note zero emission buses or Zed consists of battery electric hydrogen fuel cell electric and trolley electric buses equivalent units or use is a term we use for both production slots and delivery statistics.

Stephen King: Slides 4, 5, and 6 provide a brief overview of our company. For those interested in a more in-depth introduction to our business, including our mission, vision, and ESG-related materials, please visit the investor section of our website. In short, NFI Group is a global independent bus and motorcoach solution provider that is leading the evolution to zero emission mobility. We are purpose driven and exist to build vehicles that move the world's most precious cargo. We move people.

Slides four five and six provide a brief overview of our company for those interested in a more in depth introduction to our business, including our mission vision and ESG related materials. Please visit the investors section of our website.

In short <unk> group is a global independent bus and motor coach solution provider that is leading the evolution to zero emission mobility.

We are purpose driven and exists to build vehicles that moved the world's most precious cargo.

Stephen King: Slide 7 provides NFI's latest zero-emissions statistics. Since 2015, NFI has delivered over 3,800 EUs of ZEVs that have completed over 180 million electric service miles in more than 150 cities in six countries. Our infrastructure solutions team has also delivered over 475 chargers, totaling 75 megawatts of charging capacity since 2018. Demand for ZEBs continues to accelerate, with a record 39% of our backlog being ZEBs, and based on our analysis, more than 50% of anticipated North American Transit customer purchases over the next five years will be electric vehicles. We continue to project that at least 40% of our 2025 deliveries will be ZIP. I'll now pass it over to Paul to walk us through an overview of results for 2024 Q1. Thanks, Stephen.

We move people.

Slide seven provides the enterprise latest zero emission statistics since 2015 enterprise delivered over 3800 and use of depth that have completed over 180 million electric service miles and more than 150 cities in six countries. Our infrastructure solutions team has also delivered over 475 charges totaling <unk>.

One five megawatts of charging capacity since 2008.

Demand for <unk> continues to accelerate with a record 39% of our backlog beans, ebbs and based on analysis more than 50% of anticipated North American transit customer purchases over the next five years will be electric vehicles. We continue to project that at least 40% of our 2025 deliveries will be depths.

I'll now pass it over to Paul to walk through an overview of results for 2024.

Paul Soubry: Thanks, Stephen. And good morning, everyone.

Paul: Thanks, David and good morning, everyone and thanks for joining us today and I'm really pleased to report we are very happy with our Q1 performance and in fact exceeded our internal plan.

Paul Soubry: Thanks for joining us today. And I'm really pleased to report we're very happy with our Q1 performance and, in fact, exceeded our internal plan. On slide 9, we provide a summary of our first quarter for 2024. Our financial results show continued positive improvement in our seasonally slowest quarter, with double-digit growth in vehicle deliveries and revenue, significant improvement in margin performance, and a record total backlog with a value now at nearly $12 billion. Well, as expected, certain legacy inflation-impacted deliveries had a negative impact on our quarterly results. We knew this would happen.

Paul: On slide nine slide nine we provide a summary of our first quarter for 2020 for our financial results show continued positive improvement in our seasonally slowest quarter with double digit growth in vehicle deliveries and revenue significant improvement in margin performance and a record total backlog with a value down nearly $12 billion.

Paul: Dollars.

Paul: Well as expected certain legacy infected legacy.

Paul: Inflation impacted deliveries had a negative impact on our quarterly results. We knew this would happen. We have completed the majority of all the remaining contracts, which will help drive further margin improvement and growth as we move through the year of 2024 and into 2025.

Paul Soubry: We have completed the majority of all those remaining contracts, which will help drive further margin improvement and growth as we move through the year of 2024 and into 2025. On the demand front, we saw record orders in the first quarter, with 5,421 equivalent units added to our backlog. This resulted in a year-over-year increase in new orders of 189% and a trailing 12-month book-to-bill ratio of 117%. Our option backload conversion rate also showed an expected recovery, now reaching 49% for the first quarter of 2024.

Paul: On the demand front, we saw record orders in the first quarter with 5421 equivalent units added to our backlog.

Paul: This resulted in a year over year increase of new orders of 189% and a trailing 12 months book to bill ratio of 117%.

Our option backlog conversion rate also showed as expected recovery now, reaching 49% for the first quarter of 2024.

Paul Soubry: Year over year, bus and coach deliveries were up 42%, quarterly revenue was up 38%, and adjusted EBITDA was up 360%. Gross margins within the manufacturing segment were up 520 basis points, reflecting an improvement in vehicle manufacturing efficiency and line entry rates, while still being impacted by what I described earlier as our legacy impacted contract. Our aftermarket segment delivered yet another quarter of record performance with $160 million in revenue, up 15% year-over-year, and $38 million of adjusted EBITDA, up 27% year-over-year. These results were primarily driven by increased volume in North America, by pricing improvements, and by enhancing our product mix. As mentioned, NFI's backlog has now reached a record $11.7 billion, consisting of over 14,750 equivalent units.

Paul: Year over year bus and coach deliveries were up 42% quarterly revenue was up 38% and adjusted EBITDA was up 360%.

Paul: Gross margins within the manufacturing segment were up 520 basis points, reflecting an improvement in vehicle manufacturing efficiency in line entry rates, while still be impacted as what I described earlier as our legacy impacted contracts.

Paul: Our aftermarket segment delivered yet another quarter of record performance with $160 million in revenue up 15% year over year and $38 million of adjusted EBITDA up 27% year over year. These results were primarily driven by increased volume in North America by pricing.

Paul: And by enhancing our product mix.

As mentioned antibodies backlog has now reached a record $11 7 billion consisting of over 14750 equivalent units.

Paul Soubry: The average selling price for our vehicles in the backlog also increased by 19% year over year, reflecting a higher portion of zero emission vehicles and the pricing actions we've taken in contracts from mid-2022 onwards to reflect the impacts of inflation and preferential products. We added several major orders during the quarter, including the largest combined order ever at our company, up 3,090 equivalent units or 2,090 buses through two contracts with the City of New York and the New York Our focus on working capital management was another bright spot, with improvements in working capital days both year over year and sequentially from the fourth quarter of 2023.

Paul: The average selling price for our vehicles in the backlog also increased by 19% year over year, reflecting a higher portion of zero emission vehicles and the pricing actions. We've taken in contracts from mid 2022 onwards to reflect the impacts of inflation and preferential product mix.

We added several major orders during the quarter, including the largest combined or ever at our company up 3090 equivalent units were 202090 buses through two contracts with the city of New York and new.

Paul: New York Transit Authority.

Paul: Our focus on working capital management was another bright spot with improvements in working capital days, both year over year and sequentially from the fourth quarter of 2023. This helped us maintain a strong quarter end liquidity position, even as we increased inventory balances to improve production efficiencies and with increased production rates.

Paul Soubry: This helped us maintain a strong quarter-end liquidity position even as we increased inventory balances to improve production efficiencies and increased production rates. On slide 10, we show our quarterly inventory balances compared to the line entry rate. Line injury rates saw an increase of 19% from the fourth quarter of 2023, reflecting our ongoing production ramp-up to meet our customer contract. We project line entries will continue to show increases in 2024 as we ramp up to meet our production demand and improve production efficiency.

Paul: On slide 10, we show our quarterly inventory balances compared to the wine entry rates.

Paul: <unk> saw an increase of 19% from the fourth quarter of 2023, reflecting our ongoing production ramp up to meet our customer contracts. We protect line entries will continue it will continue to show increases in 2024, as we ramp up to meet our production demand and improved production efficiencies the ramp up will be phased approach as well.

Paul Soubry: The ramp up will be a phased approach, as we always said, matching consistent supplier performance with labour availability and our customers' ability to inspect and accept vehicles. We're being measured as we ramp up to ensure that we do not build up offline buses as they generate significant rectification and interest costs and require significant investments in work and process inventory. Inventory balances were up $25 million, with work in process and finished goods increasing slightly, reflecting higher vehicle input costs. We also saw some customer acceptance delays impacting certain deliveries that were planned for the end of the quarter, pushing them into the second quarter. That happens nearly every quarter.

Paul: All we said magic consistent supplier performance with labor availability, and our customers' ability to inspect and accept vehicles were being measured as we ramp up to ensure that we do not build up offline buses as they generate significant rectification and interest costs and required significant investments in work in process inventory.

Paul: Inventory balances were up $25 million with work in process and finished goods, increasing slightly reflecting higher vehicle input costs. We also saw some customer acceptance delays impacting certain deliveries that were planned for the end of the quarter pushing them into the second quarter that happens nearly every quarter.

Brian Keith Dewsnup: Our raw material inventory balances came down in the quarter, but remain elevated driven by higher input costs for electric vehicle components and from the carrying of safety stocks reflected in our supply chain performance, and will continue to do so as it improves. As our supply chain health improves and we continue to reduce high-risk suppliers, we anticipate we'll be able to lower safety stock levels back to pre-COVID performance levels. We are very pleased with our performance across the business in the first quarter, and we delivered on our targets, which sets up well for the rest of this year. I'll now ask Brian Dewsnup to walk us through the highlights of our first quarter results and provide some insights into our outlook.

Paul: Raw material inventory balances came down in the quarter, but remained elevated driven by higher input costs for electric vehicle components and from the carrying of safety stocks reflected in our supply chain performance.

Paul: We'll continue to do so as it improves.

Paul: As our supply chain health improves and we continue to Rus high risk suppliers, we anticipate we'll be able to lower safety stock levels back to pre Covid performance levels. We are very pleased with our performance across the business in the first quarter and we delivered to our targets, which sets up well for that exit the rest of this year.

Paul: I'll now ask Brian do some to walk us through the highlights of our first quarter.

Brian Keith Dewsnup: Our results and provide some insights into our outlook.

Brian Keith Dewsnup: Thanks, Paul.

Brian Keith Dewsnup: Yeah, I'm now 60 days into my new role as the CFO, and I'm pleased to report it's been a great experience so far. We have great financial and accounting teams across the business, and I'm excited about the outlook and the future of NFI. I'm also happy to report that we've completed our search for my replacement as president of NFI Parts and ARBUC, and I'm delighted to say that our target candidate, who's an experienced business leader and currently a chief executive officer, has accepted our offer. We look forward to making a formal announcement in the near term.

Brian Keith Dewsnup: Yes, I'm now 60 days into my new role as the CFO and I'm pleased to report it's been a great experience so far.

Brian Keith Dewsnup: We had great we have great financial and accounting teams across the business and I'm excited at the outlook in the future of <unk>.

Brian Keith Dewsnup:

Speaker Change: Also happy to report that we've completed our search for my replacement as a president of NFA parts of our Bakken I'm delighted to say that our target candidate candidate who is an experienced business leader and currently Chief Executive Officer has accepted our offer and we look forward to making a formal announcement in the near term.

Brian Keith Dewsnup: Picking up on slide 11, our multi-year backlog remains strong with a significant increase in option orders, which now extend all the way up to 2029. Year-over-year, we saw heavy-duty transit bus deliveries up 67%, low-floor cutaway and medium-duty deliveries were up 6% year-over-year, primarily driven by cutaway volumes. Coach deliveries were down slightly, which is typical during this time of the year.

Speaker Change: Picking up on slide 11.

Speaker Change: Multiyear backlog remains strong with a significant increase in option orders, which now extend all the way out to 2029.

Speaker Change: Year over year, we saw.

Speaker Change: Heavy duty transit bus deliveries up 67% low floor cutaway and medium duty deliveries were up 6% year over year, primarily driven by cutaway volumes.

Speaker Change: Coach deliveries were down slightly.

Speaker Change: Which is typical during this time of the year.

Brian Keith Dewsnup: Turning to slide 12, overall gross margin improved year over year to 9.5%, up from 6.9%. However, the aftermarket gross margin percentage was essentially flat year-over-year. Manufacturing gross margins improved year-over-year to 3.7% as compared to negative 1.5% in the first quarter of 2023. However, margins are down sequentially, reflecting a typical seasonalally, seasonalally, seasonality profile on a slower Q1, as well as delays in certain deliveries moving into the second quarter of 2024. We anticipate that manufacturing margins will see a significant improvement as we move through 2024, driven by improved production efficiencies, fewer legacy inflation-impacted contracts, and stronger pricing on contracts bid in 2023 and 2024.

Speaker Change: Turning to slide 12, overall gross margin improved year over year to nine 5% up from six 9%.

Speaker Change: The aftermarket gross margin percentage was essentially flat year over year manufacturing gross margins improved year over year to three 7% as compared to negative one 5% in the first quarter of 2023.

Speaker Change: Margins are down sequentially, reflecting a typical seasonally seasonal seasonality profile and a slower Q1 as well as delays in certain deliveries moving into the second quarter of 2024.

Speaker Change: We anticipate that manufacturing margins, we'll see a significant improvement as we move through 2024, driven by improved production efficiencies fewer legacy inflation impacts of contracts and.

And stronger pricing on contracts bid in 2023 and 2024.

Brian Keith Dewsnup: On slide 13, we provided a chart showing segmented adjusted evita dating back to 2020. The manufacturing segment was down slightly on a sequential basis as compared to the fourth quarter of 2023, which reflects our typical Q1 low seasonality combined with the impacts of geographic and production measures. Certain deliveries moved in the second quarter of 2024 as well. The Aftermarket segment delivered a record quarter at $38 million.

On Slide 13, we provided a chart showing segmented adjusted EBITDA dating back to 2020.

Speaker Change: Manufacturing segment was down slightly on a sequential basis as compared to the fourth quarter of 2023, which reflects our typical Q1 low seasonality combined with the impacts of geographic and production less.

Speaker Change: Certain deliveries moved in the second quarter of 2024 as well.

Speaker Change: Aftermarket segment delivered a record quarter at $38 million.

Paul Soubry: Pre-cash flow saw a 26% improvement from the same period in 2023 to a negative $21 million, but it was down from the fourth quarter of 2023. Free cash flow benefited from increased cash generated from operating activities offset by higher interest expense and cash capital expenditures. We saw a positive cash generation from working capital of $9.6 million given the increase in deferred revenue mentioned earlier. Our total liquidity ended at $166 million, down from $188 million as of the end of 2023 but up from $124 million in the first quarter of 2023.

Speaker Change: On slide 14.

Speaker Change: Free cash flow saw 26% improvement from the same period in 2023 to a negative $21 million, but was down from the fourth quarter of 2023.

Speaker Change: Free cash flow benefited from increased cash generated from operating activities offset by higher interest expense and cash capital expenditures we.

Speaker Change: We saw positive cash generation from working capital of $9 6 million given the increase in deferred revenue mentioned earlier.

Speaker Change: Our total liquidity ended at $166 million down from $188 million as of the end of 2023 and up from $124 million in the first quarter of 2023.

Speaker Change: Total liquidity was slightly impacted negatively by our volume ramp up but positively impacted by the same items as free cash flow.

Speaker Change: The net results being draws on our north American and UK secured facilities.

Paul Soubry: Total liquidity was slightly impacted negatively by our volume ramp-up, but positively impacted by the same items as free cash flow, with the net results being draws on our North American and UK secured facilities. On slide 15, our net quarterly loss of $9 million decreased by $37 million with higher deliveries, revenue, adjusted EBITDA, and unrealized gains offset by increases in interest and financing costs. We provide a reconciliation from net loss to adjusted net loss, normalizing for unrealized gains on foreign exchange, gains on the cash conversion option on the convertible to ventures, gains on our interest rate swap, and other normalization adjustments, including non-recurring restructuring and past service and pension I'll now turn the call back to Paul. Thanks, Brian.

Speaker Change: On slide 15, our net quarterly loss of $9 million decreased by $37 million with higher deliveries revenue adjusted EBITDA and unrealized gains offset by increases in interest and financing costs. We provided a reconciliation from net loss to adjusted net loss normalizing for unrealized gains on foreign exchange.

Speaker Change: Gains on the cash conversion option on the convertible debentures gains on our interest rate swap and other normalization adjustments, including nonrecurring restructuring and past service pension cost.

Paul Soubry: Thanks, Brian. It's now an opportunity for me to provide some insights into where our business is today and give you some context for our outlook. I'm now on slide 17. Here, we highlight our new order activity for the quarter. As I previously mentioned, we had our highest quarterly new orders in our history at 5,421 EUs, driving total orders, LTM, to 9,669 EUs. In addition, we also have 365 EUs in bid award pending that were at the end of the quarter.

Speaker Change: I'll now turn the turn the call back to Paul Thanks, Bryan. It's now an opportunity to provide some insights into where our business is today and give you some context for our outlook.

Paul: Now on slide 17.

Paul: Here, we highlight our new order activity for the quarter as I previously mentioned, we had our highest quarterly new orders in our history at 5421 <unk> drive a total orders LTM to 9660 <unk>. In addition, we also have 365 using bid award pending that were at the end of the <unk>.

Paul Soubry: We expect that we'll convert to new awards in 2024. On slide 18, we always provide an update of what we call the bid universe, our key public demand metric for North America. Total active bids include 5,410 EUs, including 3,940 EUs where we have bids submitted, and another 1,470 EUs that we're working on proposals as we speak. Active bids declined in the quarter as we converted the large awards I referred to earlier with New York, but also awards from New Jersey and other prominent customers.

Paul: <unk>, we expect that will convert to new awards in 19 2024.

Paul: On slide 18, we always provide an update of the what we call. The bid universe are key public demand metric for North America.

Paul: Total active bids include 5410, eus, including 3940 use where we have bid submitted and another 1400 70 years that we're working on proposals as we speak.

Paul: Active bids declined in the quarter as we converted the large awards I referred to earlier with New York, But also awards of New Jersey, and other prominent customers. Our five year customer bid forecast is now at 21350 equivalent units and combined with the active bids I just talked about supports our view that bus and coach demand will continue.

Paul Soubry: Our five-year customer bid forecast is now at 21,350 equivalent units, and combined with the active bids I just talked about, supports our view that bus and coach demand will continue to remain strong, reflecting a solid funding environment. On slide 20.

Paul: <unk> remained strong reflecting a solid funding environment.

Paul: On slide 20.

Paul Soubry: I'm going to provide a bit of a summary, some key market updates. First, in the United States, the FTA announced funding for their 2024 Low-No, Low or No Emission Grant Program, which we refer to as the Low-No. This year, there are $1.1 billion in grants available for buses and associated infrastructure.

Speaker Change: I'm going to provide a bit of a summary, some key market updates.

Speaker Change: First in the United States, the FDA announced funding for their 2024, low no low or no emission grant program, which we refer to as the loan growth. This.

Speaker Change: This year, there are $1 $1 billion in grants available for buses associated infrastructure and if I had a record performance on last year's 2023 loan program being the main partner on over $200 million of grants and we expect even stronger performance of 2024, given the recent changes to the competitive landscape.

Paul Soubry: NFI had a record performance on last year's 2023 Loan Owing Program, being the named partner on over 200 million in grants, and we expect even stronger performance in 2024, given the recent changes to the competitive landscape and with one participant leaving the U.S., one more participant leaving the U.S. market, and recently are in the process of closing their business, and one actively trying to recover from emerging from their Chapter 11 restructuring with a new owner. In the United Kingdom, the Zero Emission Bus Regional Areas, or ZEBRA, program, continues to drive electric and fuel cell bus procurements.

Speaker Change: And with one participant, leaving the U S. One more participant, leaving the U S market and recently or in process of closing their business and one activity actively trying to recover from emerging for their chapter 11.

Speaker Change: Our restructuring with a new owner.

Paul Soubry: The latest round of funding supports the procurement of 955 zero emission vehicles, and we expect Alexander Dennis will benefit from this round of funding, formerly called ZEBRA II, as it has secured numerous contracts from the previous funding round. Finally, I want to comment on the continued efforts to strengthen the bus manufacturing industry in the United States. As we advised earlier, on February 27th of this year, I presented at the White House Roundtable, and we discussed key recommendations for immediate changes to U.S. bus contracts.

Speaker Change: And the Kingdom of zero emission bus regional areas are Zebra program continued to drive electric and fuel cell bus procurements. The latest round of funding supports the procurement of 955 zero emission vehicles, and we expect Alexander Dennis will benefit from this round of funding, formerly called Zebra to as they are secured numerous contract.

Speaker Change: From the previous funding rounds.

Speaker Change: Finally, I want to comment on the continued efforts to strengthen the bus manufacturing industry in the United States.

Speaker Change: As we advised earlier on February 27 of this year I presented at the White House round table like we discussed key recommendations for immediate changes to the U S plus contracts. This roundtable was followed by the immediate release from the FDA of what they call. It Dear colleague letter, which clarified that the U S transit agencies can award contracts with progress payment structures.

Paul Soubry: This roundtable was followed by the immediate release from the FTA of what they call a Dear Colleague Letter, which clarified that U.S. transit agencies can award contracts with progress payment structures, they can complete price adjustments on legacy firm contracts, and they can include price indexing on new firm price contracts. It also called for active efforts to try and reduce the amount of radical customization on new bus orders. We continue to advance our efforts on multiple fronts, as outlined in the FDA guidance letter.

Speaker Change: They can complete price adjustments on legacy firm contracts and they can include price indexing on new firm price contracts. It's also called for active efforts to try and reduce the amount of radical customization on new bus orders, we continue to advance our efforts on multiple fronts as outlined in the FDA guidance letter where.

Paul Soubry: We're actively discussing pricing adjustments with a number of customers, although the impact may not be as large as we had. We only have a few legacy inflation-impacted contracts remaining in our current backlog. We also actively progress payment structures on both existing and newly bidding contracts, embedding them in our newly bidded contracts. We are now vetting contract lodgings for price indexing on new orders whenever possible. We project that the FDA's guidance and the willingness of transit agencies, combined with our aggressive actions, should have a positive impact on our future financial performance in future periods, especially as it relates to working capital investment. Now turning to slide 21.

Speaker Change: Actively discussing pricing adjustments on a number of customers, although the impact may not be as large as we have we only have a few legacy inflation impacted contracts remaining in our current backlog.

Speaker Change: We also have actively progressing payment structures on both existing and embedding them in our newly bid contracts.

Speaker Change: We narrow embedding.

Speaker Change: Contact lenses for price indexing on new orders wherever possible, we project the FDA guidance and the willingness of transit agencies combined with our aggressive actions should have a positive impact on our future financial performance and future periods, especially as it relates to working capital investments.

Speaker Change: Now it's <unk>.

Speaker Change: Turning to slide 21.

Paul Soubry: We are confident in reaffirming our 2024 financial guidance and our 2025 targets for fiscal 24. We provided, and we anticipate double-digit revenue growth, triple-digit adjusted EBITDA growth, and improved free cash flow. We will see an increase in cash CAPEX as we catch up on some of the deferred maintenance and invest in continued product development and growth projects. We anticipate zero emission buses to be 30% to 35% of our total deliveries in 2024, growing to over 40% in 2025.

We are confident in reaffirming our 2024 financial guidance and our 2025 targets for fiscal 'twenty. Four we provided we anticipate double digit revenue growth triple digit adjusted EBITDA growth and improved free cash flow.

Speaker Change: We will see an increase in cash capex as we catch up on some of the deferred maintenance and invest and continued product development and growth projects. We.

Speaker Change: We anticipate zero emission buses to be 30% to 35% of our total deliveries in 2024 growing to over 40% in 2025.

Paul Soubry: We've also provided our 2025 targets, which include adjusted EBITDA greater than $350 million, and we expect to reach a $400 million annualized adjusted EBITDA run rate by the fourth quarter of 2025. The multi-year growth in our financial production is driven by a combination of volume recovery, production efficiencies, improved product pricing, and an increased number of higher margin zero emission bus deliveries. We also expect to deliver the majority of legacy inflated buses.

Speaker Change: We have also provided our 2025 targets, which include adjusted EBITDA greater than $350 million and we expect to reach a $400 million annualized adjusted EBITDA run rate by the fourth quarter of 2025.

Speaker Change: The multi year growth in our free channel financial projections is driven by a combination of volume recovery production efficiencies improved product pricing and an increased number of higher margins to zero emission bus deliveries. We also expect to deliver the majority of the legacy inflated.

Paul Soubry: Legacy inflation-impaired Contracts in the first half of 2024 and continued strong performance of our aftermarket. We have maintained our ROC target of greater than 12% for 2025, with the potential for outperformance on this metric as we lower debt balances and see improvements in working capital investments and customer milestone payments. On slide 22, we provide details on our total leverage covenants and debt maturity dates. The chart on the left provides our current total leverage of 7.8 times, which is expected to decrease rapidly in 2024 and throughout 2025. We provide our coveted requirements on the graph, and we project to be below those coveted levels as we move through those periods.

Speaker Change: The legacy inflation impacted contracts in the first half of 2024 and continued strong performance of our aftermarket we have maintained our RBC target of greater than 12% for 2025 with a potential for outperformance on this metric as we lower debt balances and see improvements in working capital investments and customer milestone payment support.

Speaker Change: On slide 2022, we provide details on our total leverage covenants and debt maturity dates the chart on the left provides our current total leverage of seven eight times, which as expected decreased rapidly in 2024 and throughout 2025.

We provide our covenant requirements on the right on the graph and we project to be below those covered levels as we move through those periods.

Paul Soubry: We provide this chart to provide directional expectations and how we think total leverage will significantly progress over the coming years. In 2024, the majority of this leverage reduction is driven by adjusted EBITDA growth, while in 2025 it is a combination of EBITDA growth and a combined with strong free cash flow generation to support our active debt repayment plan. We could see even faster deleveraging based on progress made on bus manufacturing contract structures in the United States and our overall success in increasing customer deposits and milestone billing. We provide details on our debt maturities to provide insight into how we think about the balance.

We provide this chart to provide directional expectations in how we think total leverage will significantly progress over the coming years in.

In 2020 for the majority of this leverage reduction is driven by adjusted EBITDA growth. While in 2025. It is a combination of EBITDA growth and a combined with strong free cash flow generation to support our active debt repayment plans.

Speaker Change: We could see even faster deleveraging based on progress made on bus manufacturing contract structures in the United States and our overall success in increasing customer deposits and milestone billings, we provide details on our debt maturities to provide insights into how we think about the balance sheet. The.

Paul Soubry: The first major maturities are in April of 2026, when our senior secured North American and UK facilities mature, and our senior unsecured government loan facilities also mature at that time. In January of 2027, our 5% $250 million convertible debentures mature, and in August of 2028, our 14.5% second lien debt matures. We are actively focused on lowering our interest expense, and as we look at significant deal averaging in 2024 and 2025, we'll be looking to increase our financial flexibility in those periods by focusing on implementing a lower-cost debt structure in advance of our senior facilities maturing.

Speaker Change: The first major maturities or in April of 2026, when our senior secured North America, and UK facilities mature in our senior unsecured government loan facilities also mature at that time.

Speaker Change: In January of 2027, or 5% $250 million convertible debentures mature in August of 2028, our 14th 5% second lien debt matures.

Speaker Change: We're actively focused on lowering our interest expense and as we look at significant deleveraging in 2024 and 2025, we will be looking to decrease our financial flexibility in those periods by focusing on implementing lower cost debt structure in advance of our senior facilities maturing we will.

Paul Soubry: We will provide additional details as we advance these efforts. Of note, in April 2024, NFI and the Manitoba Development Corporation, or MDC, entered into an amendment agreement on our existing unsecured facility with the province, reducing the fixed interest rate to 0% per annum, which was previously SOFR plus an applicable margin.

Speaker Change: We'll provide additional details as we advance these efforts.

Of note in April 2024, <unk> in the Manitoba Development Corporation or MDC entered into amendment agreement on our existing unsecured facility with the province, reducing the fixed interest rate to zero percent per annum, which was previously sulfur plus an applicable margin.

Paul Soubry: Turning to slide 23, we provide some directional commentary on our projected seasonality for 2024. The first quarter of 2024 was in line with our expectations for a sequential decrease in adjusted EBITDA, and as the first quarter is typically our slowest period in private markets, and it was also impacted by legacy price contracts, we were well aware. Based on the first quarter, in a view that will deliver approximately 35% of our annual adjusted EBITDA in the first half, this suggests a range of $156 million to $182 million of adjusted EBITDA in the second half. On this chart, we also highlight the directional growth and gross margins per EU, excluding depreciation and amortization in manufacturing.

Turning to slide 23, we provide some directional commentary on our projected seasonality for 2020 for the.

Speaker Change: The first quarter of 2024 was in line with our expectations for a sequential decrease in adjusted EBITDA and is the first quarter is typically our slowest period in private markets and it was also impacted by legacy price contracts, we were well aware of.

Speaker Change: Based on the first quarter and our view that we will deliver approximately 35% of our annual adjusted EBITDA in the first half. This suggests a range of $156 million to $182 million of adjusted EBITDA in the second half.

Speaker Change: On this chart. We also highlight the directional growth and gross margins per EU excluded depreciation and amortization in manufacturing as you can see on the chart in 2020 to Q1, we had 4630 of gross margin per EU in 2023 Q1 this grew to $15834.

Paul Soubry: As you can see on the chart, in 2022 Q1, we had 4,630 dollars of gross margin per EU. In 2023 Q1, this grew to $15,834. And now, in Q1 of 2024, it was $334,566. As we move through 2024 and 2025, the directional growth is near doubling this metric and derived largely from our known and contracted backlog, reflecting improved product mix, more volume, efficiency improvements, and significantly better pricing. On slide 24, we highlight the increasing average price of each unit in our total backlog. This amount is increased for both heavy duty transit buses in dark blue and motor coaches in light blue. Year over year, heavy duty buses were up 18%, while coaches were up 9%.

Speaker Change: And now in Q1 of 2024, it was $334566 as we move through 2024 and 22 five the directional growth is near doubling of this metric and drive largely from our known and contracted backlog, reflecting improved product mix more volume and efficiency improvements and signet.

Speaker Change: <unk> better pricing.

Speaker Change: On slide 24, we highlight the increasing average price of each unit in our total backlog. This amount has increased for both heavy duty transit buses in dark blue and motor coaches in light blue year over year heavy duty buses were up 18%, while coaches were up 9%.

Paul Soubry: These pricing changes were driven by a combination of higher zero-emission orders, inflation-adjusted pricing, and improved margins in our new contracts. This improved pricing margin supports our guidance and our targets for 2025. So before we open up the call to Q&A, I just want to summarize where we are. The first quarter was another major step in our recovery. We saw year-over-year growth in all major financial metrics, and the aftermarket segment delivered another record quarter.

Speaker Change: These pricing changes were driven by a combination of higher zero emission orders inflation adjusted pricing and improved margins in our new contracts. This improved pricing market supports our guidance and our targets for 2025.

Speaker Change: So before we open up the call to Q&A.

Speaker Change: I just want to summarize where we are at the first quarter was another major step in our recovery, we saw year over year growth in all major financial metrics in the aftermarket segment delivered another record quarter, our backlog achieved another record at $11 7 billion driven by our highest quarterly new awards ever the quarter did have some <unk>.

Paul Soubry: Our backlog achieved another record at 11.7 billion, driven by our highest quarterly new awards ever. The quarter did have some drag from legacy-impacted contracts, which we expected, but we have delivered nearly. The operating environment at our company continues to see some challenges in certain areas of supply and some labor availability, two areas that we are actively managing. While supplier performance has seen significant improvement, some high-risk suppliers remain for plastics, seating, and certain electrical components.

Speaker Change: <unk> from legacy impacted contracts, which we expected, but we have delivered nearly all of those remaining contracts the.

Speaker Change: The operating and private environment at our company continues to see some challenges on certain areas and supply and some labor availability to areas that we are actively managing.

Speaker Change: While supplier performance has seen significant improvement some high risk suppliers remain in plastics seating and certain electric a components supplier challenges are primarily related to their labor efficiency as activity and availability as they recover their operations in parallel with us on the labor front, we continue to secure the people we need.

Paul Soubry: Supplier challenges are primarily related to their labor efficiency, effectiveness, and availability as they recover their operations in parallel with us. On the labor front, we continue to secure the people we need, and, in fact, we added 210 new team members during just the first quarter of this year alone, and are actively managing for the requirements for the rest of the year. Subsequent to quarter-end, we received that two-year interest waiver on our $50 million Canadian loan from the Government of Manitoba.

Speaker Change: And in fact, we added 210, new team members during just the first quarter of this year alone and are actively managing for their requirements for the rest of the year.

Subsequent to quarter end, we received that two year interest waiver on our $50 million Canadian loan from the government. Manitoba. This waiver was a major milestone and provide by the government's efforts to support growing businesses, Manitoba within the green economy and allows us to continue to reinvest in our facilities our products and our people.

Paul Soubry: This waiver was a major milestone and provided by the government's efforts to support growing businesses in Manitoba within the green economy and allows us to continue to reinvest in our facilities, our products, and our people. With four months of the year behind us, we are confident in our ability to execute on our plan, and we again reaffirm our 2024 expectations for double-digit growth in revenues and deliveries, triple-digit growth in adjusted EBITDA, and positive free cash flow generation in the second half of the year. So thanks for joining us. With that, we'll now open the line for analyst questions. Olivia, if you can please provide instructions to our callers. Oli, please.

Speaker Change: With four months of the year behind US we are confident in our ability to execute to our plan and we again reaffirm our 2020 for expectations for double digit growth in revenues deliveries triple digit growth in adjusted EBITDA and positive free cash flow generation in the second half of the year.

So thanks for joining with that we'll now open the line for analyst questions. Olivia If you can please provide instructions to our callers.

Operator: Ladies and gentlemen, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1 1 again. Please stand by while we compile the Q&A roster. Now, the first question comes from the line of Chris Murray with ATB Capital Markets. Your line is open.

Olivia: Ladies and gentlemen to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question simply press Star One again, please standby, while we compile the Q&A roster.

Olivia: No first question coming from the line of Chris <unk> with HEB capital markets. Your line is open.

Christopher Allan Murray: Bye, Chris. So I guess the first question is just going back to think about where we are with getting the legacy issues out of the way. So in the quarter or ending the quarter, at least you put in some commentary that you think that you're beyond most of the inflation-impacted production. A couple of questions on that.

Chris: Yes, hi, guys good morning.

Chris: Hi, Chris.

Chris: So I guess the first question is just going back to think about where we are.

Chris: With getting the legacy issues out of the way.

Chris: So in the quarter, our ending the quarter at least you put in the you put in some of the commentary that you think that you are beyond most of the inflation impacted.

Christopher Allan Murray: I mean, of what was done in Q1, how much of that was kind of naturally just delivered? But how much of that was also, you did make mention of the fact that you received some pricing adjustments. So I guess, you know, how much of this was also impacted by previous orders you thought you were going to have an issue with may not be, you know, not as much of an impact as we go into Q2 and forward.

Chris: Production.

Speaker Change: A couple of questions on this I mean.

Speaker Change: What's been.

Speaker Change: What was done in Q1, how much of that was.

Speaker Change: Kind of naturally just delivered but how much of that was also you did make mention of the fact that you received some pricing adjustments.

Speaker Change: So I guess.

Speaker Change: How much of this was also impacted by previous orders you thought youre going to have an issue with that may be not as much of an impact going into Q2 and forward.

Paul Soubry: Well, it's a good question, Chris, because it's, you know, it's kind of if that and we've had improved results on new price contracts, and we still have those legacy. The pricing recovery or adjustment agreements we're making with customers today had no impact on first quarter results. We'll start to see those through the rest of this year and into next year. So, you know, if you look at the pure EBITDA and the ratios, if you will, from the first quarter compared to the fourth quarter, we had a significant number of those low-margin contracts go through the system.

Speaker Change: Well, it's a good question, Chris because it's kind of embedded we've had improved results on new price contracts that we still have those legacies.

Speaker Change: The pricing recovery or adjustment.

Speaker Change: Agreements were making with customers today had no impact on first quarter results, we will start to see those through the rest of this year into next year. So if you look at the pure EBITDA off the in the ratios. If you will off the first quarter compared to the fourth quarter. We had a significant number of those low margin contracts go through the system none of.

Paul Soubry: None of it got the benefit of any price adjustment, because price adjustments are still kind of few and far between at this point on legacy contracts. As I said, there are only a couple left that have any real impact. The biggest issue from that Dear Colleague letter is around milestone payments. And that's part of the reason we were confident in our liquidity forecast because we have started to see some really significant responses from customers on entertaining legacy payments or, sorry, milestone payments on legacy contracts.

Speaker Change: It is the benefit none of it got the benefit of any price adjustments.

Speaker Change: Adjustments are still kind of few and far between at this point on legacy contracts as I said, there's only a couple left that have any real impact the biggest the biggest issue from that Dear colleague letter is around milestone payments and Thats part of the reason we were confident in our liquidity forecast because we have started to see some real significant response from customers.

Speaker Change: On entertaining legacy payments.

Speaker Change: Milestone payments on legacy contracts.

Paul Soubry: I'm sorry, but that would be so what you're talking about actually making retroactive payments for where you actually are in the production.

Speaker Change: Sorry that would be so when you are talking about like actually making retroactive payments for where you actually are on the production cycle.

Paul Soubry: Effectively, yeah, bringing payments forward, not retro, but bringing them forward from the historical dynamic where it was delivery, customer acceptance, invoice, and then 30 or 45s to get paid. We are starting to see advanced payments through the build process today, as opposed to only when we deliver the vehicle.

Speaker Change: Effectively yes, bringing payments forward, not retro, but bringing them forward from the.

Speaker Change: The historical dynamic where it was deliver customer acceptance invoice and then 30 or $45 to get paid we're starting to see advance payments through the build process today.

Speaker Change: As opposed to only when we deliver the vehicles.

Christopher Allan Murray: That's great. And then maybe we should just think about the aftermarket just to make sure we're not getting too ahead of ourselves here. I mean, a very, very strong core, you know, pretty solid margin. Is there something unique going on in the aftermarket right now? Is there a special program or something like that we maybe should be aware of? I think what we're always cautious of is that from time to time, you know, you get too excited about these margins and you run a mid-20s margin, and that's not sustainable longer term. So just any thoughts around the composition of what's driving that record performance would be great.

Speaker Change: Okay, that's great.

Speaker Change: And then maybe just thinking about the aftermarket just to make sure. We're not getting too ahead of ourselves here I mean, very very strong quarter pretty solid margin.

Speaker Change: Is there something unique going on in the aftermarket right now is there a special program or something like that we maybe should be aware of.

Speaker Change: Just what I think what we're always cautious of is that from time to time when you get too excited about these margins and youre running mid twenty's margins and that's not sustainable longer term.

Speaker Change: Any thoughts around the composition of what's driving that.

Speaker Change: Record performance would be great.

Paul Soubry: Yeah, and so it is a really insightful question because, you know, we worried at the end of the year about whether customers had kind of stockpiled their shelves, specifically public customers, because they didn't trust our suppliers' confidence in their supply chain. But that doesn't seem to be the case.

Speaker Change: Yes, and so it is a it's a really insightful question because.

Speaker Change: We worried at the end of the year of whether customers had kind of stockpiled their shelves specifically public customers.

Speaker Change: Because they didn't trust, our or our suppliers it'll confidence in their supply chain.

Paul Soubry: We had a solid fourth quarter; we had a solid first quarter. I think some of the stuff that we're doing is what's enhancing our performance as opposed to industry issues. Yeah, we always have campaigns or projects. We've got a big mid-life project going on in Hong Kong that you're aware of that's on the tail end. We've got a mid-life program going on in San Francisco. We've got one going on in Chicago.

Speaker Change: That doesn't have to seem to be the case, we had a solid fourth quarter with a solid first quarter I think some of the stuff that we're doing is what's in enhancing our performance as opposed to the industry issues. Yes, we always have campaigns our projects. We've got a big midlife project going on in Hong Kong that Youre aware of that down the tail and we've got a good life.

Speaker Change: Graham Golar on in San Francisco, We've got one going on in Chicago, but those are disproportionately large or impacting our results. Most of it comes from really reaping the benefits of what Brian did historically of bringing all of the parts businesses together and tightening up our cost base, reducing the number of stocking locations and improving the throughput.

Paul Soubry: But those aren't disproportionately large or impacting our results. Most of it comes from really reaping the benefits of what Brian did historically of bringing all the parts businesses together and tightening up our cost base, reducing the number of stocking locations, and improving the throughput. That's the first.

Paul Soubry: The second issue is that we continue to work on our basket of parts. You know that we've added all those parts together, the Navis, the Orions, the New Flyers, the MCIs, Alexander Dennis, and so forth. And Brian's team over the last couple of years tried to kind of respond to some of the customer's needs for different levels of parts, if you will, you know, good, better, best type mentalities around, you know, pick one windshield wipers or something where you do not have multiple price points.

Speaker Change: That's the first the second issue is we continue to work on our basket of parks and you know that we've added all those bus the bus parks together. The Nab is the Orion that new Flyers, the Mci is Alexander Dennis and so forth.

Speaker Change: And Brian's team over the last couple of years tried to kind of respond to some of the customers needs of different levels of parts. If you will good better best type mentalities around pick one windshield wipers or something where you have multiple price points. The other thing that we've been really aggressive with with some of our competitors struggling too.

Paul Soubry: The other thing that we've been really aggressive with, with some of our competitors struggling, you know, to exist, some of them pulling out of the US market, some of them completely going away, we've gone back and are working with our customers to aggressively try and support their ongoing parts needs. Some of them are common parts that we provide. And so, understanding the cross reference numbers and so forth.

Speaker Change: To exist some of them pulling out of the U S market.

Speaker Change: Some of them completely going away, we've gone back and are working with our customers to aggressively try and support their ongoing parts needs. Some of them are common parts that we provide and so understanding the cross reference numbers and so forth, but some of it is us just really starting to lay in some material to help our customers through those periods of <unk>.

Paul Soubry: But some of it is us just really starting to lay in some material to help our customers through those periods of transition on other brands. And I think, you know, I wouldn't project the cagger that we've seen over the last couple of years going forward in the parts business. But we've seen tremendous volume growth, good, solid margin improvement, and massive efficiencies in our own machine. So, you know, look, parts performed a little bit better than we thought in the first quarter.

Speaker Change: <unk> on other brands and I think.

Speaker Change: I wouldn't project the CAGR that we've seen over the last couple of years going forward in the parts business, but we've seen tremendous volume growth good solid margin improvement and massive efficiencies of our own machine. So.

Speaker Change: Look parks performed a little bit better than we thought in the first quarter really pleased to see that going on the response from our customers to us stepping up has been very positive. So we continue to expect parts to be a very important solid contributor part of our business through 'twenty four and 'twenty five.

Paul Soubry: I'm really pleased to see that going on. The response from our customers to us stepping up has been very positive. So we continue to expect parts to be a very important, solid contributory part of our business through 24 and 25. All right, I'll leave it there.

Christopher Allan Murray: All right, I'll leave it there. Thanks, guys. Thank you, Chris. Thank you. And our next question, coming from the line...

Speaker Change: Alright ill leave it there thanks guys.

Speaker Change: Thanks, Chris.

Operator: Thank you. And our next question comes from the line of Jonathan Mussane with CIBC, Elanis Elfman. Good morning. Thank you for taking my question. Can you provide us with a

Speaker Change: Thank you.

Speaker Change: And our next question coming from the line of Jonathan Wolfson with CIBC. Your line is open.

Good morning.

Jonathan Wolfson: Thank you for taking my question can you provide us with an update on what Youre seeing on competitors I believe we have seen Soliris syndicate that are just looking to enter the north American transit market.

Jonathan Mussane: Sure, let's look in the rear view mirror first, to some extent. We saw Nova's announcement last year to leave the US space and focus on Canada. So, you know, that's actively happening late in the year.

Speaker Change: Sure, let's let's look in the rearview mirror first to some extent.

Speaker Change: We saw <unk> announcement last year to leave the U S space and focus on Canada. So.

Speaker Change: That is actively happening late in the year, we saw Eldorado national owned by Rev Group decided to literally just shut their business down there last inputs I think are happening this quarter with I think the last plus leaving their facility, let's call. It in August or September so they will be removed from the market.

Paul Soubry: We saw Eldorado National, owned by Rev Group, decide to literally just shut their business down. Their last inputs, I think, are happening this quarter with, I think, the last bus leaving their facility, let's call it August or September. So they'll completely remove the Terra from the market. For Terra, it went through the bankruptcy or Chapter 11 reorganization process, came up, is owned now by Phoenix Motor Corp, and is now planning to restart the production. You know, it's a difficult dynamic for them.

Speaker Change: For Taro went through the bankruptcy or chapter 11 reorganization process process came up owns now by feet explore cope corporate are now planning to restart.

Paul Soubry: They've got a lot of unhappy customers. I've got a new owner that's going to have to mop up, if you will, or support the existing fleet but also try and sell stuff going forward. On the news competitor front, we have seen a number of companies over the years talk about showing up. Van Hool had talked about standing up a facility in Tennessee, but that never happened.

Speaker Change: The production, it's a difficult dynamic for them they've got a lot of unhappy customers.

Speaker Change: Got a new owner that is going to have to.

<unk> up if you will or support the existing fleet, but also try and sell stuff going forward.

Speaker Change: On the newest competitor front.

Speaker Change: We have seen a number of companies over the years talk about showing up.

Speaker Change: <unk> who'll had talked about standing up the facility in Tennessee that never happened. In fact, then hold themselves have just gone through a chapter 11 reorganization process.

Paul Soubry: In fact, Van Hool themselves have just gone through a Chapter 11 reorganization process in, I believe it's in, Belgium, and are in the process now of being taken over by another Belgian bus company called VDL. At this point in time, we know, they have no indication that they're showing up in the U.S. We are aware that Solaris has made announcements of wanting to come to the United States. We know that New York City has given them an order for five firm and 85 options that are a test fleet paid for by local money and by state money.

Speaker Change: I believe it's in Belgium and are in the process now of being taken over by another Belgium bus company called PDL at this point in time, we know have no indication that they're showing up in the U S.

Speaker Change: We are aware that Soliris has made announcements of wanting to come to the United States. We know that that New York City has given them an order for five firm and 85 auctions that are a test fleet paid for by local money by state money. So it doesn't have a buy America dynamic.

Paul Soubry: So it doesn't have a Buy America dynamic. When and if they will show up in North America is still unclear. And then the other company that's been talking aggressively about showing up is a company called Ebusco, which I believe is domiciled in France and today actually makes their products with a build partner in China. They, too, had plans and announcements to show up in the US, but have shelved those plans and made an announcement that they're not coming. So hopefully that gives you a bit of color on the public transit space I see. Thank you.

Speaker Change: When and if they show up in the UK in the North America is still unclear and then the other company thats been talking aggressively about showing up.

Speaker Change: Is a company called E bus co, which I believe is domiciled in France, and today actually makes their products with a build partner in China. They too have had planned that announces the shelf in the U S and have shelved those plans have made announcement that theyre not coming so hopefully that gives you a bit of a color on the public transit space.

Paul Soubry: And if I can just ask one more question. Do you have any concerns around the shift in demand in the event the administration in the U.S. Well, you know, when we go back in time and look at funding from the FTA on public transit? It's kind of been bipartisan. The amount of money for light rail buses has gotten higher and higher and higher over the last two decades, and we're now at record levels.

Speaker Change: I see thank you and if I can just ask one more question do you have any concerns around shifts in demand in the event the administration in the U S changes.

Speaker Change: Well.

Speaker Change: When we go back in time and look at funding from the FTA on public transit.

Speaker Change: It's kind of been pipe partisan the amount of dollars for rail light rail buses has gotten stronger and stronger and stronger over the last two decades, and we are now at record levels, but the Biden Harris administration has done has added a lot more money associated with zero emission vehicles electric and hybrid, but also sort of electric and hydrogen but also.

Paul Soubry: What the Biden-Harris administration has done is added a lot more money associated with zero-emission vehicles, electric, and hydrogen, but also charging infrastructure. The last time that Mr. Trump was in power, he signed the FAST Act that was in place at that point in time.

Speaker Change: Charging infrastructure.

Speaker Change: The last time that Mr. Trump was empower he honored the fast act that was in place at that point in time. The Republicans are very vocal about it and as such as ESG dynamic around emissions every city in the U S is battling congestion, we're seeing more big cities around the world put in congestion taxes in city centers.

Paul Soubry: The Republicans are very vocal about, and it's not just an ESG dynamic around emissions, every city in the U.S. is battling congestion. We're seeing more big cities around the world put in congestion taxes than cities said. So our view is that we may see some, you know, some noise around programs going forward or around the funding dynamics and so forth. But there is tremendous, tremendous demand to rejuvenate fleets to deal with the environmental dynamic, but also that congestion dynamic.

Speaker Change: So our view is that we may see some some noise around programs going forward or around the funding dynamics and so forth. There is tremendous tremendous demand to rejuvenate fleets to deal with the environmental dynamic, but also that congestion dynamic.

Paul Soubry: And so, you know, it could happen at this point in time. Our industry is monitoring it, talking about it, talking to both parties. You know, we ourselves are running around Capitol Hill and talking to both parties at the Senate and at the House level. At this point in time, we have no indication that there's going to be any fundamental change at this point in time. Okay, thank you.

Speaker Change: And so it could happen at this point in time, our industry is water monitoring it talking about it talking to both we ourselves are running around capital Hill and talking to both parties at the Senate. The house level at this point in time, we have no indication that there's going to be any fundamental change at this point in time.

Speaker Change: Okay. Thank you I'll jump back in the queue.

Speaker Change: Thank you.

Operator: And our next question coming from the lineup, Daryl Young with the CFL, your line is open.

Speaker Change: Thank you.

Speaker Change: And our next question coming from the line of Daryl Young with Stifel. Your line is open.

Daryl Young: Hey, good morning, guys.

Daryl Young: The first question is just around EV bus development, and I know you guys have a history of continuous improvement and constant innovation. So, I'm just wondering if the EV models that you have today are pretty much set, or are there new technologies, new configurations, or components coming down the pipe that could maybe change how your production goes? I guess where I'm coming from is just, you know, are there risks related to things like the battery drain or whatnot that could come into view because of upgrades or new improvements to EV models, or are we kind of at a standardized product?

Daryl Young: Hi, Dara.

Daryl Young: First question is just around the EV bus development.

Daryl Young: Development.

Daryl Young: I know you guys have a history of continuous improvement and constant innovation. So I'm just wondering if.

Daryl Young: The EV models that you have today or are pretty much set or are there new technologies, new configurations are components.

Daryl Young: Coming down the pipe that maybe change how your production goes I guess, where I'm coming from is just our.

Daryl Young: Are there risks related to things like the battery drivetrain or whatnot that could come into view because of upgrades or new improvements to review models or are we kind of out of standardized product now.

Paul Soubry: It's a good question, Daryl, because all we get to do is pick up a paper and see changes in technologies and, you know, battery manufacturers and cell chip manufacturers and so forth. And of course, we're all watching the automotive world, you know, blockbuster volume projections, and then it's slowing down on the retail front. So we've got to kind of break it up into a couple of buckets. And again, as you know, I'm a longwinded, but just some color.

Speaker Change: It's a good question Daryl because all you had to pick up the paper and see changes in technologies and battery manufacturers and sell a chip manufacturers and so forth and of course, we're all watching the automotive world blocked.

Speaker Change: Blockbuster volume projections and then it is slowing down on a retail front.

Speaker Change: So we got to kind of break it up into a couple of buckets and again as you don't along with it but just some color.

Paul Soubry: Historically, and before NFI acquired Alexander Dennis in the UK, Alexander Dennis had partnered with BYD, and we were putting ADL bodies on BYD electric chassis that came out of the UK. And I'm going to estimate or guesstimate that about 2500 of those vehicles were absolutely first movers in the UK. Our involvement was largely around building the bus, completing and delivering it. In the last year and a half, we have converted almost all of them; we have one left of the platforms where we ourselves are the designer, the manufacturer, the source of the manufacturer, the integrator on the chassis. And we are not now delivering, we still have some in the bill sketch, but we're not bidding or proposing ADL chat, ADL bodies on BYD chats.

Speaker Change: Historically before NFC.

Speaker Change: I acquired Alexander Dennis in the UK outdated has had partnered with BYD and we were putting ADL bodies on BYD electric chassis that came out of the U K.

Speaker Change: And I'm going to estimate or guesstimate about 2500 of those vehicles were absolutely first movers in the UK.

Speaker Change: Our involvement was largely around complete building the blast completing and delivering.

Speaker Change: In the last year and a half we have converted almost all we have one less of the platforms, where we ourselves are the designer the manufacturer the source of the manufacturing integrator on the chassis and we are not now delivering we still have some in the build schedule, but we're not bidding are proposing ADL chat ADL bodies on BYD chassis and.

Paul Soubry: And so we have a whole suite of new products; the backlog and the order book on those new products in the UK with our own integral chassis have been really, really good. It's not like the technology is massively different, but things continue to progress. The amount of kilowatts per hour that go on the bus, the placement of the batteries, the packaging, and so forth, it's something we are current on and monitoring and advancing as we go forward. In North America, we have a couple things that have happened.

Speaker Change: So we have a whole suite of new products, the backlog and the order book on those new products in the UK with our own.

Speaker Change: <unk> chassis has been really really good.

Speaker Change: It's not like the technology is massively different but things continue to progress the amount of kilowatts per hour that go on a bus the placement of the batteries the packaging and so forth.

Speaker Change: It's something we are current and monitoring and advancing as we go forward.

Speaker Change: In North America, we have a couple of things that have happened originally we saw diesel and natural gas and then we had a period of let's call. It eight or 10 years, where we all were playing with different types of cereal apparel hybrids that we saw the introduction of in terms of legitimate production of battery electric vehicles.

Paul Soubry: Originally, we saw diesel and natural gas, and then we had a period of, let's call it, eight or 10 years where we all were playing with different types of serial or parallel hybrids. Then we saw the introduction, in terms of legitimate production, of battery electric vehicles. And at first, we thought we'd have very few batteries, but you'd have on-route charging throughout the cities. It's proven to be way more difficult to put the charging infrastructure in place than anybody ever imagined.

Speaker Change: And at first we thought we'd have very little batteries, but you would have on route charging throughout the cities that has proven to be way more difficult to put the charging infrastructure in place that anybody ever imagined and so what's happened over the last couple of years is that we know are relying less on on route or on demand charging and way more on bus.

Paul Soubry: And so what's happened over the last couple of years is that we are now relying less on on route or on demand charging and way more on a bus that has enough battery to be able to be charged and do its route for the day. So I think our largest battery packs in North America, our transit buses, are something like 650 kilowatts, which then has implications for the charging infrastructure and the depth when those But our strategy was to continue to evolve the size of the battery packs and also to be actively involved in the installation, sourcing, and deployment of the chargers. So we understand how that ecosystem works.

Speaker Change: But that has enough batteries to be able to be charged and do its route for the day. So I think our largest battery packs in North America. Our transit buses are something like 650 kilowatts, which then input it has implications for the charging infrastructure and the depth of those things, but our strategy was to continue to evolve the size of the battery packs, but also to be actively involved.

Speaker Change: In the installation sourcing and deployment of the charges. So we understand how that ecosystems, where at this point in time, it's not like there's new technology, that's going to displace a battery electric bus the batteries will get smaller and more efficient and cheaper and all this other stuff over time, and we will continue to evolve, but the envelope of our bus was designed to be able to handle.

Paul Soubry: At this point in time, it's not like there's new technology that's going to displace a battery-electric bus. The batteries will get smaller and more efficient and cheaper and all this other stuff over time, and we will continue to evolve. But the envelope of our bus was designed to be able to handle any of those different propulsion systems and has proven to be extremely robust in service. What has happened in the last couple of years that's kind of new is that we've seen more and more interest in hydrogen-electric buses.

Any of those different propulsion systems and has proven to be extremely robust and service.

Speaker Change: What has happened in the last couple of years Thats kind of quote unquote, new is that we've seen more and more interest in <unk>.

Paul Soubry: And so think of it very simply that the bus is exactly the same as a battery electric bus, but in its case, it has fewer batteries, and the fuel cells' job is to top up the batteries to make it a range extender. And where 10 years ago we thought hydrogen would be an alternative to batteries, it's now a support or an ancillary support to the battery. If you asked us today, we would say if the demand was 100% for zero emission vehicles, we'd say in our forecast, 85% to 80% would be battery, and 15% to 20% would be fuel cell.

Speaker Change: Hydrogen electric buses and so think of it very simply that the bus is exactly the same as the battery electric bus, but it is case it has less batteries and the fuel sales job is to top up the batteries to make it a range extender.

Speaker Change: 10 years ago, we thought hydrogen would be an alternative to battery, it's now a supporter and ancillary support to the batteries.

Speaker Change: Asked us today, we would say is if the demand is 100% for zero emission vehicles, we'd say in our forecast, 85% to 80% will be battery and 15% to 20% would be fuel cell fuel cell is not for everyone. Because you have to have fairly sophisticated and extensive fueling stations or.

Paul Soubry: Fuel cells are not for everyone because you have to have fairly sophisticated and expensive fueling stations or hydrogen generation capacity or availability. So we're seeing some customers have a multi-product strategy where they've got some battery electric, and some fuel cell for some of those long routes that need additional range. So long answer, Daryl, but I think we're safe to say technology will continue to evolve. Battery and fuel cells will carry the day with advances in some of the technology for inverters and electric motors and so forth.

Speaker Change: Hydrogen generation capacity or availability.

Speaker Change: So we're seeing some customers have a multi product strategy, where they've got some battery electric some fuel cell for some of those long routes that need additional range. So long answer Darryl, but I think we're safe to say technology will continue to evolve.

Speaker Change: Battery and fuel cell will carry the day with the advances in some of the technology on Inverters and electric motors and so forth, we will watch to see things like solid state batteries over the next decade of how that how that comes into play and so forth at this point in time.

Paul Soubry: We'll watch to see things like solid-state batteries over the next decade and see how that comes into play and so forth. At this point in time, you know, us and our competitors are all kind of dealing with roughly the same technology. The trick really is around deployment and integration into our vehicles and ensuring that they're reliable.

Speaker Change: Our asset our competitors are all kind of dealing with roughly the same technology. The trick really is around deployment and.

Speaker Change: And integration into our vehicles and ensuring that the reliable.

Daryl Young: Got it. That's a terrific color, Paul. And I guess just to ask maybe a slightly different way as well, as you ramp up over the next 12 months and what's in the backlog and coming down the pipe today, would those be pretty standard and proven designs on the EV side that are coming through the pipeline, or are there new model iterations that are layering into the production lines? Yeah, thanks for that question.

Speaker Change: Got it Thats terrific color Paul.

Speaker Change: And I guess just.

To ask maybe a slightly different way as well.

Speaker Change: As you ramp up over the next 12 months and what's in the backlog and coming down the pipe today.

Speaker Change: Would those be.

Speaker Change: Pretty standard and proven designs on the EV side that are that are coming through the pipe or are there new model iterations that are layering into the production lines.

Paul Soubry: Yeah, thanks for that question. And just to clarify, I think I was talking to Chris a minute ago.

Paul Soubry: In the UK, we've effectively just completely rejuvenated the model lines with our own electric vehicle chassis and, at the same time, taking the opportunity to do some styling and design upgrades on the vehicles. In the North American transit environment, what we're offering today will have some tweaks and some evolution and minor styling changes. But for the foreseeable future, we're not talking about new products entering our portfolio other than some of the work that we're doing today on some of the smaller or medium class vehicles.

Speaker Change: Thanks for that question and just to clarify I think I was talking to Chris a minute ago in the U K, we're effectively just completely rejuvenated the model aligns with our our own electric vehicle chassis and at the same time taken the opportunity to do some styling and design upgrades on the vehicles in the North America Transit environment.

Speaker Change: What we're offering today, we will have some tweaks and some evolution minor style issues, but the foreseeable future, we're not talking about new products entering our portfolio other than some of the work that we're doing today on kind of some of the smaller or medium class vehicles, and we're actually doing some really cool.

Paul Soubry: And we're actually doing some really cool cooperation between Arbok, Alexander Dennis, and New Flyer on what some of that smaller bus opportunities might look like and what the electrification of that fleet might be. But it's not new stuff. I will say that on the motor coach front, you may remember from your previous roles that we at the MCI front historically had two different platforms, a J platform and a D platform. And we took it about five years because of the order book.

Speaker Change: <unk> between our block Alexander Dennis and New Florida, what some of that smaller bus opportunity might look like and what the electrification that fleet might be but its not new stuff I.

Speaker Change: I will say that on the motor coach front, you may remember from your previous.

Speaker Change: Rolls that we at the Mci front, we historically had two different platforms, a J platform and a deep platform and we it took us about five years because of the order book. We are now completely out of the old <unk> model, we're into a new <unk> model, which is built on a common line as the J.

Paul Soubry: We're now completely out of the old D model. We're into a new D model, which is built on a common line as the J. So, you know, Winnipeg has been the beneficiary of some very significant improvements in design, layout, and flow of the business.

Speaker Change: So Winnipeg has been the beneficiary of some very significant improvements in design layout and flow of the business, but our efficiency associated with that common platform is really starting to kick in zero emission adoption and motor coaches at this point is really around the motor coaches that operate inside cities and go home every night given the charging diner.

Paul Soubry: But our efficiency associated with that common platform is really starting to kick in. Zero emission adoption in motor coaches at this point is really about the motor coaches that operate inside cities and go home every night, given the charging dynamics. And so some of the larger, let's call it employee shuttle type dynamics, you know, Facebook, Apple, Google, those kinds of genentech companies in the Bay Area are using electric motor coaches. But we're not yet seeing electric motor coaches going across the country.

Speaker Change: And so some of the larger let's call it.

Speaker Change: Employee shuttle type dynamics, Facebook, Apple, Google those kind of Genentech.

Speaker Change: In the Bay area are using electric motor coaches, but we're not yet seeing electric motor coaches going cross country.

Daryl Young: Got it. That's great, Culler. Thanks, Paul. I'll jump back in the queue. Yeah, man.

Speaker Change: Got it that's great color. Thanks, Thanks, Paul I'll jump back in the queue.

Speaker Change: Thanks Darryl.

Operator: Thank you, and I'm showing no further questions at this time in the phone queue. I will now turn the call back over to Stephen.

Speaker Change: Thank you.

Speaker Change: And I'm showing no further questions at this time.

Speaker Change: I will now turn the call back over to Steven.

Stephen King: Thanks, Olivia. I have one question from Cameron Doerksen. It came in through our webcast. Can you provide an update on what you are seeing for demand in the competitive environment in the UK market? And, secondly, can we see pricing improvements on new orders at Alexander Dennis, similar to what we're achieving in North America?

Steven: Thanks, Olivia I have one question from Kamran direction came in through a webcast at can you provide an update on what you were seeing for demand and the competitive environment in the UK market and second part of the question are we seeing pricing improvement on new orders at Alexander Dennis similar to what we're achieving in North America.

Paul Soubry: So, good question, Ken. Let's separate the two then. Demand in the UK, if we go back in time, one of our investment theses in Alexander Dennis was that the UK market had started to drop in kind of a post-Olympic time frame, and we saw, I think, the trough of the market, ultimately, be 2023, but start to degrade in 2017, 18, 19, and so forth. And we started to see an aged fleet in the UK.

Olivia: So a good question, Ken let's separate the two than demand in the U K. If we go back in time, one of our investment thesis and Alexander Dennis was that the UK market had started to drop and kind of post Olympics timeframe and we saw I think the trough of the market.

Olivia: Ultimately be 2023, but start to degrade in 2017, 18, 19, and so forth and we started to see an aged fleet.

Paul Soubry: As they recovered from COVID first, and then global supply chain dynamics and economic realities, the market and demand for the overall fleet are now starting to recover to get closer back to what it was pre-COVID. It's not there yet, but the overall demand for buses in the UK is on the recovery, very pleased. You've got an aged fleet that is costing these private operators money and making it difficult for them to be profitable.

Olivia: In the U K as they recovered from Covid first and then global supply chain dynamics, and economic realities that market and demand of the overall fleet is now starting to recover to get closer back to what it was pre COVID-19 is not there yet but the overall demand for buses in the U K is is on the <unk>.

Olivia: Very pleased you've got an aged fleet that is costing these private operators that are making it difficult for them to be profitable with respect to the pricing. The fact that we know are not putting our selling and Alexander Dennis body on a BYD chassis. The fact that we are now selling an integrated ADL design has enhanced.

Paul Soubry: With respect to pricing, the fact that we are now not putting or selling an Alexander Dennis body on a BYD chassis, the fact that we are now selling an integrated ADL design has enhanced our offering. Therefore, demand is up, and our pricing and margin is also better. There's a political dynamic in the UK that's different, for example, than in the United States. In the United States or Canada, there are public transit agencies that have various types of government funding, local funding, and federal funding. You have special programs like the FTA Loan Oak.

Our offering therefore demand is up and our pricing and margin is also better.

Olivia: There is the political dynamic in the U K that's different for example than in the United States in the United States.

Olivia: The public Air Canada public transit agencies that have various types of government funding local funding federal funding you have special programs like the FCA low note in the UK environment.

Paul Soubry: In the UK environment, these are private operators that bid on routes, Stagecoach or First, for example, and then make money from the fare box. And they have had a really, dramatically difficult time over the last four or five years. What happened to the adoption of zero-emission technology? You have that, what I referred to in my notes today, the Zebra scheme, and now the Zebra 2 scheme, or the SCOTZ, the Scottish Zero Emission Bus Scheme, which have been helpful to actually generate private operator purchases of zero-emission vehicles, which has also helped, given our product offer.

Olivia: These are private operators that bid on routes Stagecoach or first for example, and then make money off the fare box and they have had a really dramatically difficult time over the last four or five years.

Olivia: What's happened to adopt zero engine zero emission technology, you have what I refer to in my notes today of the Zebra scheme and now the zebra <unk> scheme or the Scott Z. The Scottish zero emission bus schemes that have been helpful to actually generate private operator purchases of zero emission vehicles, which has also help given our product offering.

Paul Soubry: You know, the difference in the UK is you have kind of two major providers. You have us at a company called Rightbus, but you also have the dynamic of competing as international operators and some Chinese guys. For example, Yutong sells buses through an importer in the UK. So it's a very different market. It's recovering. Pricing is better. Zero emission bus technology is faster than North America, but it also has an international competitive dynamic.

Olivia: The difference in the U K as you have kind of two major providers you have offset a company called Wright bus, but you also have dynamic of competing as international operators in some Chinese guys. For example, Utah sells buses through an importer in the U K. So it's a very different market. It's recovering pricing is better zero emission adoption is faster.

Olivia: In North America, but it also has international competitive dynamic.

Paul Soubry: So hopefully, Stephen, that gives Cameron what he was looking for. Yeah, I hope.

Speaker Change: So hopefully Stephen that gives camera he was looking for.

Stephen King: Yeah, I hope so. I think that I think that was a good response. Okay, we're going to wrap it up there. No further questions on the portal or on the phone line. Just a reminder for everyone, we have our AGM later this morning at 11 a.m. Eastern. Information on joining that is on our website, and also our ESG report. Our annual ESG report for 2023 will be released later in May, so you'll see an announcement for that soon in the near term, and that, as well, will be available on our website. As always, if anybody has any questions, please reach out anytime. All of our contact information is on our website and in our press release. Thanks, and have a great day!

Stephen King: Yes, I hope so I think that I think that was a good response.

Speaker Change: We're going to wrap it up there is no further questions here on the portal or on the phone line.

Speaker Change: Just a reminder for everyone. We have our AGM later this morning at 11, a M. Eastern information for joining that is on our web site and also our ESG report our annual ESG report for 2023 will be released later in May So youll see an announcement for that soon in the near term and that as well will be.

Speaker Change: Payable on our web site as always if anybody has any questions. Please reach out anytime all of our contact information is on our website and on our press release.

Speaker Change: Thanks, and have a great day.

Operator: That does conclude our conference for today. Thank you for your participation, and you may now disconnect.

Speaker Change: That does conclude our conference for today. Thank you for your participation and you may now disconnect.

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Speaker Change: Dan.