Q3 2024 FreightCar America Inc Earnings Call
Speaker Change: [music].
Operator: Welcome to FreightCar America's Third Quarter 2024 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. For those of you participating on the conference call, there will be an opportunity for your questions at the end of today's prepared comments.
Welcome to freight car America's third quarter 2024 earnings conference call. At this time all participant lines are in a listen only mode for those of you participating on the conference call there will be an opportunity for your questions at the end of today's prepared comments. Please note. This conference is being record.
Operator: Please note this conference is being recorded. An audio replay of the conference call will be available on the company's website within a few hours after this call.
Speaker Change: Good and the audio replay of the conference call will be available on the company's web site within a few hours. After this call I would now like to turn the call over to Chris I would tell you with forever on Investor Relations.
Chris O'Day: I would now like to turn the call over to Chris O'Day with Riveron Investor Relations. Thank you and welcome. Joining me today are Nick Randall, President and Chief Executive Officer, Mike Riordan, Chief Financial Officer, and Matt Tong, Chief Commercial Officer.
Chris: Thank you and welcome joining me today are Nick Randall President and Chief Executive Officer, Mike Riordan, Chief Financial Officer, and Matt Tonn, Chief Commercial officer, I'd like to remind everyone that statements made during this conference call related to the company's expected future performance future business prospects or future events or plans may.
Chris O'Day: I'd like to remind everyone that statements made during this conference call related to the company's expected future performance, future business prospects, or future events or plans may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Participants are directed to FreightCar America's Form 10-K for a description of certain business risks, some of which may be outside of control of the company, and may cause actual results to materially differ from those expressed in forward-looking statements. We expressly disclaim any duty to provide updates to our forward-looking statements, whether as a result of new information, future events, or otherwise.
Chris: I include forward looking statements as defined under the private Securities Litigation Reform Act of 1995.
Chris: It's been sort of directed to freight car Americas Form 10-K for a description of certain business risks some of which may be outside of the control of the company and may cause actual results to materially differ from those expressed in forward looking statements.
Chris: Expressly disclaim any duty to provide updates to our forward looking statements whether as a result of new information future events or otherwise during today's call. There will also be a discussion of some items that do not conform to U S. Generally accepted accounting principles or GAAP reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included.
Chris O'Day: During today's call, there will also be a discussion of some items that do not conform to U.S. generally accepted accounting principles or GAAP. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the earnings release issued this morning.
Chris: The earnings release issued this morning our.
Chris O'Day: Our earnings release for the third quarter 2024 is posted on the company's website at FreightCarAmerica.com, along with our 8K, which was filed pre-market this morning.
Chris: Our earnings release for the third quarter 2024 is posted on the company's website at freight car mirror, a dot com along with our 8-K, which was filed premarket. This morning.
Nicholas Randall: And with that, I will now turn it over to Nick for a few opening remarks. Thank you, Chris. Good morning, everyone. And thank you all for joining us today. This quarter marked another strong step in building on momentum from our record-setting start of the year. I am pleased to report we remain on track to achieve our annual goals. We continue to execute our strategy of driving efficiencies at our state-of-the-art facility, enabling us to meet unique needs of our customers by producing premium railcars, conversions, and re-bodies, along with providing exceptional parts and services.
Chris: And with that I'll now turn it over to Nick for a few opening remarks.
Thank you Chris Good morning, everyone and thank you all for joining us today.
Nick Randall: This quarter marked another strong step in building on momentum from a record setting starts the year.
Nick Randall: I am pleased to report we remain on track to achieve our annual goals, we continue to execute our strategy of driving efficiencies at all stages of the art facility enables us to meet unique needs of our customers by producing premium rail cars conversions and re bodies, along with providing the exceptional parts and.
Nick Randall: Services.
Nicholas Randall: In terms of financial performance, we grew top line sales significantly, increasing 83% over the prior year period and delivered another quarterly consistently solid gross margins of 14.3% and a second consecutive quarter of robust operating cash This quarter highlights our differentiated product offerings and ability to deliver on our commitments with operational We managed multiple changeovers throughout the quarter marked by robust shipments to the customers. During the quarter, we were pleased with our performance as we delivered 961 railcars, just shy of last quarter's record output at our operating facility. We stand out in the industry due to our unique manufacturing capabilities and our operational flexibility enable us to meet diverse customer needs.
Nick Randall: In terms of financial performance, we grew top line sales significantly increasing 83% over the prior year.
Nick Randall: Period and delivered another quarterly consistently solid gross margins of 14, 3% and a second consecutive quarter of robust operating cash flow.
This quarter highlights our differentiated product offerings and the ability to deliver on our commitments with operational excellence.
Nick Randall: We managed multiple change of us throughout the quarter marked by robust shipments to the customers.
Nick Randall: During the quarter, we were pleased with our performance as we delivered 961 rail cars just shy of last quarter's record output operating facility.
Nick Randall: We stand out in the industry due to our unique manufacturing capabilities using our operational flexibility enable us to meet diverse customer needs.
Nicholas Randall: By delivering differentiated products, we secure new business and improve our earnings quality. Our commercialization strategy is also distinct, with nearly all market routes supported by independent financing options. This focused approach allows us to stay nimble, efficiently handle smaller orders, and take on specialized projects as well as larger orders. Unlike competitors that both manufacture and lease, our exclusive manufacturing role enhances our appeal as we continue as we can partner more freely with a wide range of leasing providers. As proof of our flexibility to meet our customers' needs, we can partner with key shippers, positioning ourselves to consistently win high-quality work.
Nick Randall: By delivering differentiated products, we secured new business and improve our earnings quality.
Nick Randall: Initialization strategy is also to states with nearly all market route supported by independent financing options.
Nick Randall: This focused approach allows us to stay nimble efficiently hand, the smaller orders and take on specialized projects as well as larger orders.
Unlike competitors that both manufacturer and lease all exclusive manufacturing role enhances our appeal as we can because we can partner more freely with a wide range of leasing providers.
As proof of our flexibility to meet our customers' needs. We can partner with key shippers positioning ourselves to consistently win high quality work for a large covered hopper, we have refined design enhancements, including lightweight structure and high cubic capacity to provide additional optimization of prop customers. This will be the first time it produces.
Nicholas Randall: For our large covered hopper, we have refined design enhancements, including lightweight structure and high cubic capacity that provide additional optimization for our customers. This will be the first time we've produced this design of covered hoppers at our operating facility, which is being purposefully designed to help maximize payloads and transport efficiency. This underscores the value of our tailored solutions that address specific customer requirements. In terms of market dynamics, while the third quarter was slower regarding industry activity, we have continued to grow our market presence by capturing historically strong proportion of orders and inquiries. On a trailing 12-month basis through September, we have gained 3% of share sequentially, despite orders across the overall industry being down roughly 20%.
I Couldnt help us at all pricing facility, which has been purposely designed to help maximize payloads and transport efficiency.
Nick Randall: This underscores the value of our tailored solutions that address specific customer requirements.
Nick Randall: In terms of market dynamics, while the third quarter was slower regarding industry activity. We have continued to grow our market presence by capturing historically strong portion of orders and inquiries on a trailing 12 months basis through September we have gained 3% of chefs sequentially despite orders across the overall industry.
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Nicholas Randall: This steady flow of momentum and outperformance has been a hallmark of our commercial discipline this year as we continue to secure high quality orders across differentiated portfolios. Demand for railcars remains stable, largely tracking the placement cycles. And we expect this industry momentum to support our business model further as our pipeline grows. As we look to close out the year, we are confident in our market position.
Nick Randall: This steady flow of momentum and outperformance has been a hallmark of our commercial discipline. This year as we continue to secure high quality orders across differentiated portfolio.
Nick Randall: Demand for railcars remained stable largely tracking the placement cycles and we expect this industry momentum to support our business model further as our pipeline grows.
Nick Randall: As we look to close out the year, we are confident in our market position.
Nicholas Randall: We're reaffirming our full year revenue and railcar delivery expectations and raising the midpoint by narrowing our forecasted adjusted EBITDA range between $37 million and $39 million, representing a year-over-year increase of 89% of the midpoint. Looking ahead, we continue to see strong demand across various product lines will have a positive impact as we enter 2025 and look forward to executing on our long term growth process. Our focus remains clear, enhancing our product portfolio, capturing market share and leveraging our proven manufacturing platform to drive sustained growth and cash generation. In my eyes, delivering strong results year to date is a significant achievement.
Nick Randall: We're reaffirming our full year revenue and railcar delivery expectations and raising the midpoint by narrowing our forecasted adjusted EBITDA range between $37 million and $39 million, representing a year over year increase of 18, 9% at the midpoint.
Nick Randall: Looking ahead, we continue to see strong demand across various product lines will have a positive impact as we enter 2025 and look forward to executing on our long term growth prospects.
Nick Randall: Focus remains clear.
<unk> product portfolio, capturing market share and leveraging our proven manufacturing platform to drive sustained growth and cash generation.
Nick Randall: And my eyes, delivering strong results year to date is a significant achievement and we're excited to carry this momentum into the fourth.
Nicholas Randall: And we're excited to carry this momentum into the fourth quarter, continuing to build a business that thrives on consistently meeting demand to our operational versatility.
Nick Randall: To build a business that thrives on consistently meeting demand.
Matt Tong: With that, I will next turn the call over to Matt to discuss the market, and then to Mike for more detail on our financial results. Thank you, Nick, and good morning, everyone. We are pleased with our progress and are well positioned heading into the end of the year. For the third quarter of 2024, we closed orders for 739 railcars valued at approximately $94.1 million. Excluding tank cars and autoracks, we captured 22% of industry orders on a trailing 12 month basis, led by continuing strong performance across open top hoppers and improvements in flat cars, gondolas, and large cube covered hoppers.
Nick Randall: Operational best agility.
Speaker Change: With that I will next turn the call over to Matt to discuss the market and then to Mike for more detail on our financial results.
Matt Tonn: Thank you Nick and good morning, everyone. We are pleased with our progress and are well positioned heading into the end of the year for the third quarter of 2024, we closed the orders for 739 railcars valued at approximately $94 $1 million, excluding tank cars and auto racks, we captured 22% of industry orders on a trailing.
Matt Tonn: 12 month basis led by continuing strong performance across open top hoppers and improvements and black cars gondolas and large cube covered hoppers.
Matt Tong: are improving market share as a testament to our team, executing a commercial strategy that delivers value at every stage of the process. Our route to market as a pure play manufacturer, as well as our product offering focused on providing options to meet specific customer requirements, is a true differentiator. Our current product portfolio serves better than 60% of all car types by volume. Further, as reported on our Q2 earnings call, our recent order for tank car conversions of existing DOT-111 to DOT-117R tank cars is evidence of our capabilities to expand our offerings. And finally, we continue to strengthen our portfolio, including rail car enhancements that include car load efficiency and reduce long-term cost of rail car ownership.
Matt Tonn: Our improving market share is a testament to our team executing our commercial strategy that delivers value at every stage of the process.
Matt Tonn: To market as a pure play manufacturer as well as our product offering focused on providing options to meet specific customer requirements is a true differentiator.
Matt Tonn: Our current product portfolio sort of better than 60% of all car types by volume.
Matt Tonn: As reported on our Q2 earnings call. Our recent order for tank car conversions of existing D. O T 111 to D. O T 117, our tank cars is evidence of our capabilities to expand our offerings and finally, we continued to strengthen our portfolio, including rail enhancements railcar enhancements.
Matt Tonn: That include carload efficiency and reduce long term cost of railcar ownership.
Matt Tong: All of these efforts equate to a healthy mix of car types that ensure we meet diverse customer needs. We ended the third quarter with a backlog of 3,611 railcars valued at approximately $372 million. We have experienced healthy inquiry activity and maintain a solid pipeline spanning many car types, including strong interest in conversion. Looking at the macro rail environment during the quarter, rail traffic in terms of car loadings remain relatively flat, just down 1.7% year over year, and largely driven by continued declines in coal car loadings. Petroleum, chemicals and agricultural commodity groups, however, each posted positive year over year growth.
Matt Tonn: All of these efforts equate to a healthy mix of car types that ensure we meet diverse customer needs.
We ended the third quarter with a backlog of 3611 railcars valued at approximately $372 million.
Matt Tonn: We have experienced healthy inquiry activity and maintain a solid pipeline spanning many car types, including strong interest in convergence.
Matt Tonn: Looking at the macro rail environment during the quarter rail traffic in terms of car loadings remained relatively flat just down one 7% year over year and largely driven by continued declines in coal car loadings petroleum chemicals and agricultural commodity groups. However, each posted positive year over year over year growth.
Matt Tong: which supports our continued focus on these car segments.
Matt Tonn: Which supports our continued focus on these car segments.
Matt Tong: With carload traffic expected to experience slight improvement as we close out 2024 and railroad key performance indicators, including velocity and dwell, largely tracking within their five-year averages, we see industry dynamics supporting new car demand consistent with 40,000 railcars each year for the foreseeable future, principally driven by replacement rates as railcars hit their mandated 50-year retirement.
Matt Tonn: With carload traffic expected to experience slight improvement as we close out 2024 and railroad key performance indicators, including velocity and dwell largely tracking within their five year averages, we see industry dynamics supporting new car demand consistent with 40000 railcars each year for the foreseeable future principally driven.
Matt Tonn: Replacement rates cause railcars hit their mandated 50 year retirement.
Michael Riordan: I'll now turn the call over to Mike for comments related to our financial performance. Thanks, Matt. And good morning, everyone. To begin, I will talk through an overview of the quarter's financial results. Third quarter financial results were strong as we delivered significant year over year revenue growth and maintain healthy margins. Consolidated revenues for the third quarter of 2024 sold $113.3 million with deliveries of 961 railcars compared to $61.9 million on deliveries of 503 railcars in the third quarter of 2023. Gross profit in the third quarter of 2024 was $16.2 million, with a gross margin of 14.3%, compared to gross profit of $9.2 million and gross margin of 14.9% in the third quarter of last year.
Matt Tonn: I'll now turn the call over to Mike for comments related to our financial performance Mike.
Mike Riordan: Thanks, Matt and good morning, everyone to begin I will talk through an overview of the quarter's financial results.
Mike Riordan: Third quarter financial results were strong as we delivered significant year over year revenue growth and maintained healthy margins consolidated.
Mike Riordan: Revenues for the third quarter of 2024 or $113 $3 million with deliveries of 961 railcars compared to $61 $9 million on deliveries of 503 railcars in the third quarter of 2023.
Mike Riordan: Gross profit in the third quarter of 2024 was $16 $2 million with a gross margin of 14, 3% compared to gross profit of $9 2 million and gross margin of 14, 9% in the third quarter of last year.
Michael Riordan: Lower gross margin performance as compared to the prior year was primarily driven by a mixed shift in railcars delivered, but the prior year period delivering a number of conversion costs. Additionally, we saw a sequential improvement of 180 basis points from the second quarter of 2024 as we saw a favorable mix in car types delivered between the comparable periods. We continue to anticipate industry-leading freight car gross margins moving forward, driven by the ongoing benefits of our facility operating at full capacity. SG&A for the third quarter of 2024 totaled $7.5 million, flat to the third quarter of 2023.
Mike Riordan: Lower gross margin performance as compared to the prior year was primarily driven by a mix shift in railcars delivered with the prior year period, delivering a number of conversion cars.
Mike Riordan: Additionally, we saw a sequential improvement of 180 basis points from the second quarter of 2024, as we saw a favorable mix in car types delivered between the comparable periods.
Mike Riordan: We continue to anticipate industry, leading freight car gross margins moving forward driven by the ongoing benefits of our facility operating at full capacity.
Mike Riordan: SG&A for the third quarter of 2024 totaled $7 5 million flat to the third quarter of 2023.
Michael Riordan: Excluding stock-based compensation, SG&A, as a percentage of revenue, decreased 503 basis points from the prior year. Further highlighting the substantial operating leverage we built into our business model. In the third quarter of 2024, we achieved adjusted EBITDA of $10.9 million, compared to $3.5 million in the third quarter of 2023, primarily driven by increased rail car deliveries between the comparable periods. For the third quarter of 2024, our adjusted net income was $7.3 million, or $0.08 per diluted share, compared to adjusted net income of $0.8 million, or a loss of $0.12 per share in the third quarter of last year.
Mike Riordan: Excluding stock based compensation SG&A as a percentage of revenue decreased 530 basis points from the prior years further highlighting the substantial operating leverage we've built into our business model.
Mike Riordan: In the third quarter of 2024, we achieved adjusted EBITDA of $10 9 million compared to $3 $5 million in the third quarter of 2023, primarily driven by increased railcar deliveries between the comparable periods.
Mike Riordan: For the third quarter of 2024, our adjusted net income was $7 3 million or <unk> <unk> per diluted share compared to adjusted net income of zero point $8 million or a loss of <unk> 12 per share in the third quarter of last year.
Michael Riordan: Adjusted net income accounts for the impact of certain non-cash items and non-recurring charges, such as the change in fair market value of warrant liability, which fluctuates each quarter in line with the change in our share price during the period. During the quarter, we recognized a $110 million non-cash charge for our warrant liability due to the appreciation in our share price during the quarter. Capital expenditures for the third quarter of 2024 were approximately $1.5 million, and our full-year forecast of capital spend has been narrowed to a range of $5 million to $6 million. As I mentioned on last quarter's call, we continue to strengthen our cash flow generation capabilities.
Mike Riordan: Adjusted net income accounts for the impact of certain noncash items and nonrecurring charges such as the change in fair market value of warrant liability, which fluctuates each quarter in line with the change in our share price during the period.
Mike Riordan: During the quarter, we recognized a $110 million noncash charge for our warrant liability due to the appreciation in our share price during the quarter.
Mike Riordan: Capital expenditures for the third quarter of 2024 were approximately $1 $5 million and our full year forecast of capital spend has been narrowed to a range of $5 million to $6 million.
Mike Riordan: As I mentioned on last quarter's call. We continued to strengthen our cash flow generation capabilities. This quarter, we delivered $7 2 million in operating cash flow, representing the second consecutive quarter of positive operating cash flow and the largest operating cash flow generation in back to back quarters since the first quarter of 2017.
Michael Riordan: This quarter, we delivered $7.2 million in operating cash flow, representing the second consecutive quarter of positive operating cash flow and the largest operating cash flow generation in back-to-back quarters since the first quarter of 2017. As a result, we currently hold $44.8 million in cash and have no outstanding borrowings on our revolving credit facility. As we strengthen our balance sheet through strong cash flow generation, we are well positioned to enhance our capital structure and invest in continued growth and value creation for our shareholders.
Mike Riordan: As a result, we currently hold $44 8 million in cash and have no outstanding borrowings on our revolving credit facility.
Mike Riordan: As we strengthen our balance sheet through cash strong cash flow generation, we are well positioned to enhance our capital structure and invest in continued growth and value creation for our shareholders.
Michael Riordan: With that financial overview, I'd like to now open the line for questions and answers. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.
Speaker Change: With that financial overview I'd like to now open the line for questions and answers.
Speaker Change: Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker phone it may be necessary to pick up your handset before.
Operator: And for participants using speakerphone, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: For pressing the star keys.
Mark Reichman: Our first question is from Mark Reichman with Noble Capital Markets. Please proceed. Yeah, would you please discuss the key ingredients for a 14% plus gross margin quarter, including the product mix? And the reason I asked that question is that recognizing that the tank car conversions in 2026 and 2027 could enhance margin, along with tank car production beginning in 2028. I was just wondering about the sustainability of base margins ahead of those product introduction.
Speaker Change: Our first question is from Mark Leach been with noble capital markets. Please proceed.
Yeah would you please discuss the key ingredients for <unk>.
Speaker Change: 14%, plus gross margin quarter, including the product mix and the reason I asked that question is that recognizing that the tank car conversions in 2006, and 2027 could enhance margin along with tank car production beginning in 2028 I was just wondering about the sustainability of base margins.
Speaker Change: Ahead of those product introductions.
Michael Riordan: Sure. Thanks, Mark.
Mike Riordan: Sure. Thanks, Mark this is Mike.
Michael Riordan: This is Mike. So in terms of mix, like we said, we had a very healthy mix, strong gondolas, open-top hoppers, and flat cars. And really what we saw this quarter was four lines operating at full capacity with a minimal number of changeovers. So it's just a lot of utilization of the facility, optimizing the financial results. Matt mentioned that, you know, demand continues to track the replacement cycle.
Mike Riordan: So in terms of mix, we like we said we had a very healthy mix strong gondolas open top hoppers and black cars and really what we saw this quarter was four lines operating at full capacity with a minimal number of changeovers. So it's just a lot of utilization of the facility optimizing the financial results.
Mike Riordan: And then.
Matt mentioned that you know demand continues to track the replacement cycle.
Mark Reichman: And with the incoming Trump administration, I was just wondering. The expectation for higher economic growth changes that thought, or what are your thoughts regarding the potential for tariff?
Speaker Change: With the incoming Trump administration and I was just wondering.
Speaker Change: What's the expectation for higher economic growth changes that thought or or you know what are your thoughts regarding the potential for tariffs.
Matt Tong: So Matt might be takes the first part of it, and I'll take the second part on Terrence. Yeah, I think as it relates to demand, I still it's a little early to tell what will happen from an economic perspective to drive growth. When we look at overall demand, and we look at new plants coming online that may drive new rail car demand, it seems to fall within this 40,000 per year car demand that's really tied to replacements. Looking out on the horizon, there's 250,000 plus cars that will retire in the next five to 10 years, they're north of 40 years old.
Speaker Change: So Matt might be takes the first part of it and I'll take the second part on <unk>, Yes, I think as it relates to demand I still its a little early to tell what will happen from an economic perspective to drive growth when we look at overall demand.
Speaker Change: And we look at new plants coming online that May drive new railcar demand it seems to fall within this 40000 per year.
Speaker Change: Car demand thats really tied to replacements.
Speaker Change: Looking out on the Horizon, There's 250000 plus cars that are that will retire in the next five to 10 years or north of 40 years old.
Michael Riordan: There doesn't seem to be a catalyst beyond the replacement demand that really would drive new cars required for the industry above 40,000. And in terms of the tariff, to date, the company has not had any tariffs directly affect our business. And we do not currently expect any future impact of tariffs on our business as of today.
Speaker Change: There doesn't seem to be a catalyst beyond their replacement demand that really would drive new cars required for the industry above 40000.
Speaker Change: And in terms of the Terra to date. The company has not had any tariffs directly affect our business and we do not currently expect any future impact of tariffs on our business as of today.
Mark Reichman: Just one final question, if you could just provide an update on plans to recapitalize the balance. Sure, so that still remains our strategic objective to accomplish this year. We're working towards that and we'll provide more updates as we have them to provide. Thank you very Thanks Mark.
Speaker Change: And then just one final question. If you could just provide an update on plans to recapitalize the balance sheet.
Sure so that still remains our strategic strategic objective to accomplish this year.
Speaker Change: We're working towards that and we'll provide more updates.
Speaker Change: As we have done to provide.
Speaker Change: Thank you very much.
Speaker Change: Well, thanks, Mark Thanks, Matt.
Brendan Mccarthy: Our next question is from Brendan McCarthy with Sidotian Company. Please proceed. Hey, good morning, guys. Thanks for taking my questions. I just wanted to start off with the guidance or the guidance increase for the midpoint of adjusted EBITDA for 2024. What supports that increase there?
Speaker Change: Our next question is from Brendan Mccarthy with Sidoti and company. Please proceed.
Speaker Change: Hey, good morning, guys. Thanks for taking my questions I, just wanted to start off with the guidance or the guidance increase for the midpoint of adjusted EBITDA for 2020 for what supports that that increase there.
Michael Riordan: Sure, so the continued strong performance that we've had through the first three quarters with plan optimization, cost optimization, and then just getting towards the end of the year, we just have a little more visibility in and see the path to higher anticipated adjusted EBITDA for the full year based on how we performed year to date with the high gross margins thus far. Got it. Okay, thanks for that.
Speaker Change: Sure so.
Speaker Change: Continued strong performance that we've had through the first three quarters with plant optimization cost optimization, and then just getting towards the end of the year. We just have a little more visibility in and see the path to higher anticipated adjusted EBITDA for the full year based on how we performed year to date with the high gross margins thus far.
Speaker Change: Got it okay. Thanks for that and then looking at the Liberty deliveries in the third quarter.
Brendan Mccarthy: And then looking at delivery deliveries in the third quarter, which of the variability looking at deliveries compared to the second quarter of this year?
The variability looking at deliveries compared to the second quarter of this year.
Nicholas Randall: Morning Brendan, it's Nick. You know, our plant has as we do some changeovers and we change from one product to another product, there's just some timing issues as as you complete those changeovers, whether those shipments end up the corner of the quarter. So Q2, we were lighter on changeovers than we were on Q3, which explains the entire variance in total number of cars shipped, you know, 961 cars shipped. is a solid throughput for us based on our guidance of 4,300 to 4,500 units. So we're still on track for that and I don't expect to see anything that stops us from meeting that expectation.
Speaker Change: Good morning, Brian.
Our plants has as we do some changeovers and we changed from one product to another product, there's just some timing issues as.
Speaker Change: As you complete those changeovers, whether those shipments and out of the quarter. So Q2.
Speaker Change: Lighter on changeovers that we were in Q3, which explains.
Speaker Change: The entire variance and so it doesn't cause ships.
Speaker Change: 961 cost shifts.
Speaker Change: As.
Speaker Change: Throughput for US based on our guidance of 4300 to 4500 units. So we're still on track for that and I don't expect to see any unintended stops us from meeting that expectation.
Brendan Mccarthy: Understood. Thanks, Nick. And then looking at gross margins for the full year and just considering the the guidance raised on on the midpoint of adjusted EBITDA, is it still reasonable to expect gross margins for 2024 to come in slightly below that of 2023? I think that was that was the expectation heading into the year just with the with the kind of hiccups in last quarter with the border issue. Is that still a reasonable expectation? You know, I think from materially will be in line with last year, I would say it's a good expectation. But materially in line with last year, the low single digits on gross margin for the full year.
Nick Randall: Understood. Thanks, Nick.
Nick Randall: And then looking at gross margins for the full year and just considering the rig.
Nick Randall: The guidance raise on the midpoint of adjusted EBITDA.
Is it still reasonable to expect gross margins for 2020 for it to come in slightly below that of 2023, I think that was the expectation heading into the year just with the with the kind of hiccups in the.
Speaker Change: Last quarter with the border issue is that still a reasonable expectation.
Speaker Change: I think from.
Speaker Change: Materially will be in line with last year I would say is a good expectation.
Speaker Change: But materially in line with last year, the low single digits on gross margin for the full year.
Brendan Mccarthy: And that's mainly held back by Q1, as we talked about on the past couple calls, that was a lower gross margin quarter. Right, right. Okay.
Speaker Change: And that's mainly held back by Q1 as we've talked about on the past couple of calls that was at a lower gross margin quarter for us.
Speaker Change: Right right. Okay. One more question for me just looking at the tank car conversion market.
Brendan Mccarthy: One more question for me, just looking at the tank car conversion market. I guess, have you had further conversations with with potential customers or customers on you know, just an uptick in deal flow there? Yeah, Brendan, this is Matt. Overall, the pipeline is very strong across multiple car types, including what we see in terms of activity and interest on the tank car conversion. So that is clearly a focus we remain engaged in as we go forward. Understood.
Speaker Change: Have you had further conversations with.
Potential customers are customers on.
Speaker Change: Just an uptick in deal flow there.
Matt Tonn: Yes, Brendan this is Matt overall, the pipeline is very strong.
Multiple car types, including what we see in terms of activity and interest on the tank car conversions. So that is clearly a focus we remain engaged in as we go forward.
Brendan Mccarthy: Thanks, Matt. That's all for me.
Speaker Change: Understood. Thanks, guys. That's all for me.
Operator: Thank you Brendan.
Thanks, Brian.
Mark Reichman: Our next question is a follow-up question from Mark Reichman with Noble Capital Markets. Please proceed. Thank you. I just had two follow-ups. The first is on the parts sales business. And I was just wondering, you know, if, if let's say, for example, the Trump administration undoes some of the, like, the carbon emissions rule and and coal fired power plants, you know, retirements get extended or delayed. You see that as having a net positive effect on those... Real Real Roads that are basically just hanging on to their existing coal cars and and having a greater need to extend the lives on those through part sales.
Speaker Change: Our next question is a follow up question from Mark Richmond with Noble capital markets. Please proceed.
Mark Richmond: Thank you I just had two follow ups. The first is on the parts sales business and I was just wondering you know if if let's say for example, the Trump administration and does some of the like the carbon emissions rule and and coal fired power plants, the retirements get extended or delayed.
Mark Richmond:
Mark Richmond: Do you see that as having a net positive effect on those real real roads that are basically just hanging on to their existing coal cars.
Mark Richmond: And having a greater need to to extend the lives on those through parts sales I mean, what are the real drivers are of your part sales as a coal cars.
Michael Riordan: I mean what are the real drivers of your part sales? Is it coal cars?
Michael Riordan: If you could just provide a little visibility there and and also the growth profile of that business.
If you could just provide a little visibility there and also that the growth profile of that business.
Michael Riordan: Unknown Speaker Sure. Hi, Mike, this is Mike. Yeah, to answer your question, you know, the delay in retirements of coal plants would have a net positive impact to our historical part sales or the core of it, which is replacement parts for the large coal fleet that FreightCar America has out in the market as well as its ABC fleet. In terms of growth patterns, you know, we've seen substantial growth, as you'll see in the footnotes year over year in our parts business, and we continue to expand that not only in the coal and ABC markets, but in general, we view there being an attractive growth profile in helping supply aftermarket parts to class two, three railroads and repair shops.
Mike Riordan: Sure Hi, Mike This is Mike.
Speaker Change: Yeah, So to answer your question.
Speaker Change: The delay in retirements of coal plants would have a net positive impact to our historical part sales of the core of it which is replacement parts for the large coal fleet that freight car America has out in the market as well.
Speaker Change: <unk> fleet.
Speaker Change: In terms of growth patterns, we've seen substantial growth as youll see in the footnotes year over year in our parts business and we continue to expand that.
Speaker Change: Not only in the colon AVC markets, but in general we view, there being a attractive growth profile and helping supply aftermarket parts to class II, three railroads and repair shops.
Mark Reichman: Thank you, and then the second question is just a follow-up. You can kind of back into it from your guidance, but so like, you know, the first quarter, that was obviously a weak margin quarter. Second quarter is 12.5%, third quarter, 14.3%. So what are kind of your expectations for the fourth quarter? Do you see those kind of going back in a 12.5% range, or what are kind of the drivers, you know, for the fourth quarter? Sure. So, you know, we don't generally give quarter by quarter, but from the insinuation, you can see, you know, we will be expecting gross margins to decrease sequentially from Q3 to Q4 based on our full year guidance.
Speaker Change: Thank you and then the second question is just a follow up.
Speaker Change: Back into it from your guidance, but so like you know the first quarter that was obviously a weak margin quarter. The second quarter was 12, 5% third quarter of 2014, 3%. So what are your kind of your expectations for the fourth quarter.
Speaker Change: Do you see those kind of going back and a 12, 5% range or what or what are the kind of the drivers.
Speaker Change: For the fourth quarter.
Speaker Change: Sure.
We don't generally give quarter by quarter, but from the insinuation you can see we will be expecting gross margins to decrease sequentially from Q3 to Q4 based on our full year guidance and a lot of that comes in with the timing of changeover. So the deliveries were down as timing of changeovers is at the very end of Q3, which prevented some shipments in the last two.
Michael Riordan: And a lot of that comes in with the timing of changeover. So, you know, the deliveries were down as timing of changeovers was at the very end of Q3, which prevented some shipments in the last two weeks that otherwise would have had deliveries on pace with Q2. And some of that's going to be mixed driven as we continue to expand market share and get into markets. We'll see a little bit of mixed shift away from where we were in Q3, which will bring us down slightly sequentially, but still north in double digits, as we expect to end full year as well.
Weeks that otherwise would have had deliveries on pace with Q2.
And some of that is going to be mix, driven as we continue to expand market share and get into your markets.
Speaker Change: We'll see a little bit of mix shift away from where we were in Q3, which will bring us down slightly sequentially.
Speaker Change: But still in double digits.
Speaker Change: As we expect to end for years as well.
Brendan Mccarthy: Okay, great. Thank you very much.
Speaker Change: Okay, great. Thank you very much.
Operator: Welcome.
Operator: This will conclude our question and answer session.
Speaker Change: Youre welcome.
This will conclude our question and answer session I would now like to turn the call back over to Nick Randall for further remarks.
Nicholas Randall: I would now like to turn the call back over to Nick Randall for further rebar. Thank you.
Nicholas Randall: I just wanted to close in summary, a couple of things. We grew our top line significantly, increasing 83% over the prior year period and delivered another quarter consistently solid gross margins of 14.3%. We have a strong cash position of $44.8 million with no outstanding borrowings and are well positioned with consistent courses of strong operating cash flow generation. We captured 22% market share on a robust order intake gaining 3% sequentially on trailing 12 month basis. And we raised our midpoint of adjusted EBITDA guidance for the full year and we continue to see strong demand across various product lines that will have positive impacts as we enter 2025 and look forward to executing on our long term growth.
Nick Randall: Thank you I just wanted to closing summary.
Nick Randall: Things.
Speaker Change: We grew our topline significantly increasing 83% over the prior year period and delivered another quarter of consistently solid gross margins of 14, 3%.
Speaker Change: We have a strong cash position of $44 $8 million with no outstanding borrowings on our well positioned with consistent close to strong operating cash flow generation.
We captured 22% market share on a robust order intake getting 3% sequentially on trailing 12 month basis and.
Speaker Change: And we raised the midpoint of adjusted EBITDA guidance for the full year and the concerns continued to see strong demand across various product lines that will have positive impacts as we enter 2025 and look forward to executing on our long term growth prospects.
Operator: With that, I would like to thank everyone for participation and have a great day. Thank you.
Speaker Change: With that I would like to think it won't have a precipitation and have a great day.
Operator: This will conclude today's teleconference. You may disconnect your lines at this time.
Speaker Change: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time.
Speaker Change: Yeah.