RAIL - Earnings call transcript Q1 2022 | FreightCar America, Inc.

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Operator

Greetings, and welcome to FreightCar America's First Quarter Fiscal 2022 Conference Call. [Operator Instructions]. I would now like to turn the conference over to your host, Lisa Fortuna, Investor Relations. Please go ahead, ma'am.

Lisa Fortuna

Thank you, and welcome.

Jim Financial and Chief Officer; are Mike Executive Commercial today Chief Riordan, and me Meyer, Chief President Officer; Officer. Joining Matt Tonn, this statements the Act to call future future Litigation events like remind Reform may that of under or made I'd include the plans forward-looking Securities everyone business prospects relating defined expected company's during to or future as performance, XXXX. statements conference Private of results certain which FreightCar to Form for business America's the risks, of of expressed may some differ be Participants company are directed statements. those control may a XX-K the of to outside that description forward-looking from in the cause materially actual disclaim whether or expressly our otherwise. duty result to future updates forward-looking as events We statements to of any provide a new information,

there their discussion that a GAAP call, directly today's or of U.S. accepted be to also not measures do included issued Reconciliations the accounting will measures most items GAAP. non-GAAP generally press morning. principles to release conform in this comparable are these some of During

Our turn Jim the opening today. our the and XXXX website quarter be company's over for call me first is few freightcaramerica.com on which let now after that, posted the at With will filed for market a the to XX-Q, release remarks. earnings

James Meyer

Lisa. you, for morning, all Good Thank and today. joining you thank

and XXXX. years in delivered X our release, you build revenue first double-digit FreightCar in in quarter press momentum since today's the nearly started We XXXX. As on strongest saw America gross continues the of to result margin quarterly first

getting to safety, the the business manufacturer several to on be To over last our years, efficiency. goals and better best quality be every means us, there. in be best call to manufacturer said in I've from the the best and nearly they keep As are the

short, we And a at through outperformed positive manufacturer our is by Matt we In on quality in XXXX relatively manufacturing of the than more the Our very the position company are than efficiency. we XX:X challenge income efforts growth Then proxy detailed comments. and see continue we and But for differentiating by flawless, it's performance business high in warning QX best industry as signs percentage much off. beyond. paying to operating the to our larger remain will level, trends as long-term in was our look a good basis. provide we industry for safety to competitors performance a forward order inquiries more progress and strong. further the do becoming more

overall as well We are, economy. however, the in as the space carefully trends watching

call, said reminder, a and decisions however, as As planning the on our related firm based are on orders. we last production all to of

to in well in footprint performance continues be the prepare we as Furthermore, the to will by we our scale XXXX. continue manufacturing Castanos new to first on and evidenced operation financial to ready run capitalize of demand. quarter Our very improving

very supply efficiency. through continue on to be headwinds because running with improvement currently latter operational railcars. specifically I our team's navigate with pressure improving remain the our will our to inflationary I X an with more Our line and business XXX real of a Despite chain X mentioned company. quarter just these first just ability the in to of works. shop proud strong mitigate the profit lines and gross that We and year-over-year. which not fabrication achieved up challenges were XX.X%, is that XXX% with shop was million more bring put the results, lines, revenues further benefits on effects. barometer this reading gross margin to fabrication growth, and challenges of continue production of for $XX.X the we double-digit Along our financial good feel said, a top but But in-house could

progress the In and still results with still implementing respects, up and many quarter, better processes. ramping building hiring, we While facility, during improve. we learning we training are and the achieved out pleased also how where and can are the we are on

in much targets as past, to transition in we know, reluctant on of Castanos. the have forward-looking way provide As been the focused ensuring to the we you successful were

We time for time first a the to revenue a least in are introduce pleased at long guidance.

based to between million stated approximately year million, X,XXX $XXX through at of range. forecasting deliveries the we an be the as we to from projection to midpoint discipline have range a on profit year-over-year continue operations levels full from are guidance proceed strong the will X,XXX midpoint over a our of and X,XXX to railcars. railcars, of of For percentages manufacturing well, performance excellence. between And margin that, XXXX, year, of very X,XXX focus cost approximately the This and delivery XX% previously to focus is In like of XX% gross our to increase revenue financials. only and we call for up up of on our of better now summary, between is the the gross and our continue and expected $XXX dollars. the performing same and Mike? would turn scale the Mike to expect we our on industry with improve I review as conditions to we With team get

Michael Riordan

increase improvements million gross of first a morning, the quarter in quarter million in product mix Further, the totaled first the in periods XXXX. everyone. delivered our XXX% $XX.X increased an compared from of our of year-over-year. first evidenced generated delivered $XX.X revenues top increase shifted comparable XXX the XXXX quarter increase selling the We XXXX year-over-year Consolidated Thanks, and first of in margin. price the cars. coupled XXXX, between Jim, quarter significant an financial to with average The in for railcars company's in railcars pricing by year-over-year, quarter of the first deliveries steel XXX XX% line good results to in and as stronger and XXX%

the $X.X up to activities and an manufacturing for million, period of the $X million quarter loss the the operating was compared million is fourth margin primarily first $X.X stock-based Manufacturing operating quarter compared of for by Consolidated the loss manufacturing first XXXX strong $XX.X of totaled of quarter quarter of the quarter quarter increase same the of million stock was XX.X% stock $XX.X in the previously the operating to million in operating This first Gross quarter XXXX during increase million to quarter operating in of largely driven first in year. from year quarter quarter in the million discussed, quarter. noncash in was income to costs in in from movement million, X.X% $X.X the SG&A due amortization XXXX, for of first XXXX, XXX consecutive Our to company's first first the of the XXXX million XXXX loss by first driven consecutive the gross compensation points quarter price. operating was in and of of first quarter for of basis associated $X.X is the first first to to 'XX. XXXX XXXX by of price. XXXX. stock-based of prior prior was The expense took the the a the Consolidated that million that, primarily in $XX.X XXXX the XXXX. the positive of first tied increase income, Interest compared the of first in was for quarter $X.X was financing largely after the was place profit of compensation in business. in to company's SG&A offset increase $X.X first that tied increased the gross an loss sixth in with XXXX. XXXX movement of refinancing profit deferred quarter in compared was quarter significant as

fair As a issued market warrants liability financial change calculation. reminder, quarter is The financing and net the per impact with marked with in our income value value transactions our each statements. warrant share the impacting directly earnings our to

price noncash item, market liability million same loss adjusted In the during XXXX, first adjusted primarily quarter the quarter $X.X the the Again, EBITDA fair to achieved of value in reflecting million. the this period in stock $X.X $XX.X last the year. change our EBITDA is charge of change For million XXXX, first positive the noncash an a of due to the warrant was of in of quarter. we compared

and Now first million $XX of and moving cash to cash of $X.X with including We equivalents, to compared XXXX cash approximately loan the the $X under availability were the finished quarter -- quarter the first million expenditures balance XXXX. sheet. for quarter of draw restricted delayed million. the for Capital

and on and expect fabrication last to our As we of second announced axle in these expansion investments to by increase X in previously internal the and X our respectively. year. CapEx as capital complete bulk wheel the and expect and XXXX, spending of XXXX the by half our of of lines capabilities call, XXXX production we midyear timing the our in to stated we early earnings complete year-end Due projects, be

each $X For and between forward up from X railcars. line approximately and per will bring now of the to railcars between CapEx We to X,XXX we additional X,XXX year, and capacity year believe on of that bring our full million. our projection believe the X,XXX million than we XXXX, as additional production will $X railcars look on still more range doubling lines, we X,XXX capacity approximately original

as manufacturing expanded operating maintaining with benefit of our current structure the SG&A we committed our leverage structure. operational as are our Importantly, from expect our profile footprint. we adjusted sales well to Therefore, aligned to directly EBITDA keeping the

positive for the revenue comments, As outlook noted are opening our to Jim's in our XXXX. EBITDA of excited full adjusted provide reiterate and year expectation we

which the deliveries Looking have we term. into production lower pace will both changeovers short lines, the the in of second on multiple quarter, will

changeovers production year. few our second that and to see like forward. the for quarter commercial financial pickup half Matt to a a of Matt? moving now comments the turn deliveries remainder over of With is significant call will and the the However, only this we dual I'd in to overview, of for and period during related first year, the the

Matthew Tonn

good everyone. Thank morning, you, Mike, and

activity. his alluded Jim in railcar see continues to the As to comments, industry positive

remained beginning inquiries par in early we the last Our during witnessed and year. on healthy with activity fourth the of quarter quarter the

of good their to XX ago. during year, business By number inquiries in diverse than markets. industry indicator. railcar fleets expand older largely the orders Order and was us produced positive strong and total was we a the upgrade the were this expect Castanos XXX commencing have of broad of types, more comprised operation orders and car business of The of there types are for we Additionally, different select of that types and months the end a XX railcars in X,XXX will since to need reflection customers about another These we are range in railcars. actual a quarter. booked receiving also mix activity nature

with us continue of provides we exposure back face assets. for replacement With call strong optionality While which demand raw part rail material business said, few that due to over now to I'll our in and Jim? material pricing, Jim a impact aging headwinds, this new pricing. inflationary raw scrapping to large remains persistent a conversion railcars relatively the customers' reduces environment directly closing With to in that, for remarks. high activity and turn specialty component our continued

James Meyer

Thanks, Matt.

of Now me you remind XXXX beginning of priorities at our expectations for let out laid and this that strategic year. the we briefly

full profitable expect EBITDA on for on the year remain we First, XXXX. track an basis be to and adjusted fiscal

the we on expect that bottom on directly the shop. foot bring our Axle wheel of good additions and of shop our progress results. Second, fabrication to we expansion square our line with and will and impact mid-XXXX, XXX,XXX These operational completed facility. track Castanos are expansion have efficiencies remain By making significant our

fourth a line the We expect during are third XXXX. also production to start to in a on quarter have pace line fourth and ready

smooth I'm will In be and the in As units during Mike are to double business now to today's due down last profitable X,XXX Board the transition significant search press singular to a focus. in announced growth. release, and in we restructured and a and approximately capacity expect XXXX. in from working of We on we lines year. as America X,XXX rest our the these fundamentally was step and CEO expect plan closely closing, his course. This alluded FreightCar have a my our with the position I to several for positioning to to remarks, for the years per comprehensive as successor,

of Additionally, Directors involved with an member the transition I does and business improved our Board of as the heavily future profitability intend the remain are for Growth, scale the to active once business. occur.

meet that flex now the to best-in-class will continue prepared on remarks, sizes ability We America address customer to customer with the I'll in That turn and be questions. FreightCar call industry to to and our order can concludes operator the focus as We demand. to product determined and leader so the for the quality differentiating a specifications manufacturer over satisfaction. we your remain

Operator

Instructions]. [Operator

is Our with Sellers Stephens. first question George from

George Sellers

guess So guidance is high capacity. start, total to the I delivery annual the end updated your of

just And you out in that your little then are you I And the discuss year? a could year. confidence reaching the for So the differently, in reach entirely gives you that more your visibility need you do that? the backlog of get said sold remainder to target? guess, orders Or to to XXXX maybe

James Meyer

you Matt, first? that don't address why

Matthew Tonn

booking now for line and remains really pockets George, strong I space. for very think says opportunity of and focus addressing a is part right what on 'XX. There backlog But big orders inquiries we've beyond. it got our on 'XX a is some of our

James Meyer

this Jim. George, is

relates a good year consistently per question, of is the volume to units your rest said that thumb of it As line. of rule X,XXX pretty we've per

Our of has changeovers of that executed. somewhat the orders, mix course, real better experience the than number Combined and the the better. to to better factory as with, and been run date continues

units the line of lines reason capacity we'll the future get running. the that X,XXX our today sort we're about board. now per we part that's Starting X other of X,XXX a as said quarter, describing third of once range year So fourth have the on we to

we're quite and good we for our And about corresponding the the in revenue. so year, feel forecast volume confident

George Sellers

more sounds and I like growth. you also areas orders then about getting some replacement you Matt. some the Could then are there's And to that where you're of but related you're that sort demand? helpful. made, seeing of on That's It replacement industries comments the Okay. disparate more demand, areas demand guess growth talk that

Matthew Tonn

Yes.

of right the given scrapped what into next the years. can I seeing couple replacement strength we you over increase the of demand areas strength as hopper Fertilizers, in is select we're given to of cars demand without seeing majority now. I mill demands, both getting course obviously, in specialty But of of number some in specific well are of Steel replacement the gondolas that say markets. gondolas area as are markets, an of continues on covered strength, the an area be and of think the think -- market.

George Sellers

Got it.

filled to has little the as terms in bit push have pricing trended little pricing, on up been more of a Okay. how bit? recently? you And a able price then backlog Or has

Matthew Tonn

improvement think competitive some all our getting we chain that I they're a be cars signs and challenges is that lease into to through seeing capture materials new raw starting specifics, we're rates which over starting as the improved working still slight positive lease entering in without improvement specialties. increases some We in anticipate time. We're George, the market. supply the is of see customers We're marketplace. what remain talking pricing on the to in able some to relatively on to in front, a and

point. to really elaborate hard price are this specifics on at to . increases So

James Meyer

still dealing I is add that, other been on the environment obviously, quite just some now. would extremely high it's have for inflationary And end, the an with pressures time steel Jim. we're on with end. this competitive one and all George,

more up way to of As best been the rightsized keep be our We're any also this suits a from out you've in more performance keeping of in as of by as to to gives think stay bring with bit Mexico time. lines market. little our we've company. we part rightsized forecasting later I executed in rightsized seen bit on what -- bit business that the gross the a said, part pick on to see you that that's important to the some ourselves and our selective it ourselves But number there was maybe We've the And move strategy careful, point. a us a capacity other standpoint, the others. versus that opportunity margin times, we in

Operator

Our from Elkott Cowen. next with question is Matt

Matthew Elkott

planned personal? this on is about Or And congratulations like on the you there the feel something you something about purely topic, Jim, this? strategic, just can there Is is a strategic to and staying pass And maybe do timing? about if And this talk now the looking the . have to gotten the baton also and someone guys succession you've externally point for process maybe internally company else. you if you talk can started And the CEO. future retirement. where

James Meyer

Matt. Yes,

And been has support of will wasn't don't So of push correctly. Quite to company. always been stay I the restructuring I away through what quite got by really be My I us. been strategic. work mean will for what the and working is goal about an on of of every very be and way far now growth. behind in I thrilling. just I wasn't will to not this for interesting or past be from don't phase That's hopefully, the will today. Directors, company, Directors. And or where can, be know we've frankly, we period of this the without I too Board We've to amount to what company action. active that business platform. that's terrific the has fixing find member this This been getting accomplished reason, time, I it a the and the way plan sit you strategic helping Board it continue of good

at just that and to to the very XX/X for the point. high this reasons. company. with I'm of chair expectations company. always And have plan the, I'll but so it, personal And ever frankly, I much step for have, very call involved to younger more leave -- stay out swivel this going position I'll than personally and somebody

Matthew Elkott

the Barring market it last insight, for increased into downturn? this That's you a then market Does anything barring dynamics, trajectory freight it market to helpful maybe pretty switching months, environment deliveries turns favorable in and of unexpected XX XXXX, and supply-demand have very demand And look conditions. the should on Does railcar -- it. the say. look back which the I like been Jim. quarterly like it basis? continue Got will would a

Matthew Tonn

But some that. demand Yes. at crystal the of us levels on indicators activity, when have I levels. support order look key inquiry and replacement ball. I inquiry think of and the levels, Matt, None

as year. positive next dynamics remain think the into go in the I very still marketplace we .

Matthew Elkott

then And the with to deliveries? rise -- improve continue improvement gross expect in we should to well the as margins

James Meyer

Well, of to than not going Matt, we're already give given. guidance sort further we've

every the its own we focused has I will for we this it. as economics. guidance, come think our I certainly take you we you you, and business. business remain guidance. gross laid gross adjusted baseline piece It EBITDA. every obviously a work expectation of with. year is you dollars heavily we've order we particular gross the revenue margin But the on of given volume And deliver now, have profit running margin key first day-to-day quarter very of now which can out for of from that know, very out tell And part a

We That's world are felt no every longer in business. business ago piece with in must-win capacity today such just years where piece in not that position working the of that our that like we new company. a found was we're several ourselves our of

So that. think I'll kind it of I leave at

Matthew Elkott

is guys railcar mentioned earlier, X broad-based. has or types. one, driven for more by as the been cycle much you historically, the Jim And and X railcar Okay. industry, the Matt, cycle, This

line you upside that to just the you theoretically, lot relates as to types to changeovers. of because previous have railcars partly types you're margin line you margins, what does is So a cycles case when of mentioned, after that a in of changeovers? you this Jim, as of orders you the because want it do Or go to do limit of relative -- don't being lot reason, what selective

James Meyer

of the margin it be to the we're comments lines factors the through for in And that's both running QX. All the the quarter And stuff that's remainder those, less year. in. Well, after partly, again, what all our -- once the now, at our the into changeovers . we we got the and orders going in orders hot currently building. And it. as we're going hard which least we've backlog, running through we're in said pretty part we're We're earlier, in attributed this very business plays managing to profitability. well. a for growth factory for or gross depends on and harder go on

Matthew Elkott

last sense. question Makes you, Matt. one just And Jim for for then or

types hoppers guys are I already? in? historically, we right think open the the guys And you shipments a you highest there are and aggregates, now. are for are hoppers, not guys probably group other mentioned of on of and sandstone, traffic built covered Or for railcars. being you demand have participating a go-to rail the enough because Is that market couple cars

Matthew Tonn

that's market so for. we known -- have and that in do Yes, a been participate

of With spending, those that bodes that carrying cars require the well for stone. obviously infrastructure in aggregate types companies various

So portfolio. we benefit while entire in see FreightCar's that area that some to positive a be certainly would signs

Matthew Elkott

But it's not in necessarily? currently reflected backlog the

Matthew Tonn

a market getting into just that that's specifics, Without participate in. would Yes. do say we I

that We cars those delivered . some of markets. those have serve

Matthew Elkott

then after scrapping And utilization fleet talk of is scrapping. continues elevated to for you We're fleet over below at levels. more -- be for right replacement still that are replacement whole being Industry Matt, now? below Okay. still despite say industry the X.X at the about cars. levels X levels we're It still Matt, years we're builds scrapping. of And did full years XX%. utilization you would

Matthew Tonn

would say anecdotally, from the maybe I that talked get I we that know of are that. we've high But utilization. rates is would experiencing responses to don't back say they I customers

if you that and 'XX excess in our were. So a were think that near scrap was probably years cars XX,XXX -- X year almost in mentioned deliveries rates the fact XXXX factor scrapped. last XXXX rates, the -- it, outpacing you in I I solid of replacement row, both X outpacing think and

positive least given -- demand looking I for think . of demand at fact. at, a a cycle you're period continued that time,

Operator

And I the would for turn reached Meyer have remarks. session. back question-and-answer Ladies to end call like of the the and closing to Jim gentlemen, we

James Meyer

Thank call. joining today's you all for

future stage successes and to the of forward America about are We a in growth, the FreightCar all look as we good enter our day. you Have of we with excited next future. sharing our

Operator

you. concludes conference. today's This Thank

You participation. your may time. this at disconnect your for Thank lines you

FreightCar America (RAIL) 10 May 222022 Q1 Earnings call transcript