- Earnings call transcript Q3 2022

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Operator

Greetings, and welcome to FreightCar America's Third Quarter Fiscal 2022 Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Stephen Poe, Investor Relations. Thank you.

You may begin.

Stephen Poe

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 earnings afternoon. principles to release conform in yesterday comparable are these some of During

Our turn Jim the opening market. along on freightcaramerica.com of company's quarter which the over for call me third XXXX few at posted our let now filed that, is yesterday website With XX-Q, was for after a the to with release remarks. earnings

Jim Meyer

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

to for the I'm as again company produced I our priorities. power and of campus our employees and discuss world-class continued to their another by our to railcars. a The record we campus scale America as would on quarter, we FreightCar was dedication this continue manufacturing I number work thanking in new proud Before continue like team to Castaños. and of we our quarter work this evident once of potential begin incredibly build strategic hard execute as

I'll on-time capabilities levels is we railcars quality few expand a and the pace, to transformation the more highest at to more are of and about and talk produce continuing in we Our performance. our minutes. invest as transformation on more prudently

quarter me results. let Now third our of provide an overview

year yesterday's growth and XXX FreightCar new As of from XX% to year delivered adjusted which watermark high increase facility. EBITDA year the for as saw during results digits third accepted release, grew million new a during pressure of period XX% same well in quarters. cost. $X.X ago. were year-over-year, which and by profitability America a items our our you earnings our third-quarter lower-margin the again cars downward the had $X.X prior been muted These debt as an and set freight quarter, in made top to deliveries earlier of operating the million we in out ago, our elevated $XXX,XXX a $X.X two and were to the of that a the Manufacturing put income gross margin, on of said, at double a million bottom financial compared railcar deliveries orders of loss That cycle line achieved

our beginning profile the these before orders expect to and completed We margin fourth be to year-end strengthen in for quarter. legacy

railcar and alternative sales fundamentals companies, comes in many macroeconomic persistent overall our and to are and Overall, so not both we skilled retaining including issues related other what more chain exploring actively from relates is uncertainties, positive inquiries The goal strategies not to Unlike costs. with the seeing hiring are we it freight of workers. addition, aspect as a environment more we reduce In the these terms are challenges. than industry caution aspect experiencing not. to supply positive inflation is high and

to for the business winning and company team remains margins. sales that Our on good accretive intently focused is

schedule business. previous us some we with provides cost flexibility select size I've in calls, how our As and and on highlighted structure

a continue and in to believe Castaños. also As we we very the strategic business, performance progress are on now it quarter. important complete, during build Northern firmly railcars new we increasing in make that our and as and started ourselves Construction is we positioning company's initiatives third world-class online overall Mexico successfully significant And we run manufacturer the with benefits bringing shop and come. fabrication to the of

completed of Axle the us expansion also and machine and our now axles AAR allows to certification We wheel have shop that in-house.

units. in the will additions to of in benefits alluded and to from producing have these we both further addition meaningful efficiencies more As previous bring scaling calls,

for XXXX. Additionally, last months, volume pace remarks, than in railcars as be continue to the of which X,XXX we delivered I growth all is we and my that deliver, of impressed by In new over year. can produce opening mentioned the nine railcars substantial our on in footprint first more

for reminder, a of between forecasting XX% we revenue $XXX year-over-year up $XXX be midpoint XXXX, the and million to are the full the As million, approximately year range. at

continue related turn quarter the continue that delivering to between done projecting of With to to the We moving work Matt of deliveries the an third I X,XXX and approximately to like more achieve believe range. we to FreightCar chains full be and growth much commercial is call Matt? as while supply summary, and and the it, would to potential America a environment to are is In macroeconomic improved new the that, facility poised also comments at normalize. for envision forward. now few also scale there midpoint profitability our X,XXX our XX% year-over-year be and we to as we railcars, increase over as

Matt Tonn

Jim, you, good everyone. Thank morning, and

are the specific rates the the strong consistent replacement speaking, reporting we orders our front, in needs. fleets the third mostly of with Largely railcars. customers leasing feedback with commercial the signs are quarter XX,XXX On which rail customers our positive demand is of lease annually, cycle support with demand on on to from their renewals. see railcars utilization line lease their that Industry marketplace improving new in continue for for

quarter, in storage seen total quarter. during increase a we remain activity railcar types a our total almost Additionally, fall there since the are XX% slight second storage. fleet multiple XX% July in of the assets again in just in stored stored that XXX,XXX After car over reported in American supporting tight railcars XXXX. have the last in cars This supply, the inquiry in healthy figures of the drop quarter is with or long-term peak North rail

prices. support repair fall railcar is scrapping years. than life near indicator cost railcar of outpaced prices scrapping in three asset their types scrap XXXX, has demand. important Despite since book often for car scrap March value, a nearly Another replacement the activity continue to greater end in peak of is and will railcar this of With many deliveries

double-digit of car types formal include customers a range more and their activity saw increase remain inquiry wide and Our specifically, bids quarter-over-quarter on fleets. replacing as focused a issued, aging

are includes well-matched FreightCar Our new of sales diverse America's for needs funnel a whose portfolio. customers existing to mix and product railcars

customers We of America activity order for continue design inquiry options idle With offers railcar see to in for and over conversions. history, FreightCar to conversions assets. underutilized dozens XX,XXX repurpose and railcar our looking delivered

Our company's focus been our on car sustainability decades. cornerstone for has lighter-weight three and over designs a brand engineered of

environmental As railcar. producing in other the minimizing will and repurpose materials reuse the an conversion of materials design typical all of our example, an construction the necessary recycled, or existing all-new with structure over of impacts components raw railcar XX%

quarter. to activity. the for Turning order railcars booked We during orders XXX

value backlog year, of million total with over end. first total an orders X,XXX aggregate approximately increased nine at backlog of railcars and the with booked at XX% quarter each months $XXX For a the year-over-year.

proposition interest previously, with to cognizant impact and can of Mike disciplined acceptance well Mike? business. benefits. by potential Despite our all stated a downturns With economic strong with accepted call that and have how environmental macroeconomic that, market and now we guidelines. industries, uncertainties, Like our the I'll over shipment to are our pricing these of in rail As turn a remain are review of we rate financials. our aligned value orders profitability approach we for hikes remains

Mike Riordan

Matt, good Thanks, morning, and everyone.

significant remarks, top in to growth alluded line opening Jim his year-over-year. As delivered we

in profitability these we by for complete within both lower positioning however, improve margin anticipate will freight costs our cost orders sequential lower that year-end, the a was profitability have margin impacted projects and elevated in component. of material us on to business Further, before improvement. period. We Our number freight income be inbound underway the quarter,

quarter small XXX an third increase an XXXX future. in compared company's be was a quarter to downward of year-over-year. may freight While the the opportunity revenues $XX.X ago. XXXX, Consolidated of railcars the million the $XX.X year relatively for The quarter contributor in from totaled pressure XXX to important third a to XX% million and XX.X% increased railcars, the in up deliveries

from to significant in legacy the orders. of noncash XXXX. quarter last the quarter primarily to accounting prior tandem the compensation price million, of quarter gross awards third related SG&A quarter was was profit for largely in a the year. second decreased the during in $X.X mark-to-market totaled XXXX, due in of compared with million XX.X% the was quarter. XXXX period from the third the increased for $X.X increase the to company's million, stock-based X.X% million The XXXX of value margin X.X% compared to same the third margin this in year. $X.X share increase Gross lower-margin gross SG&A in Sequentially, $X.X Our up

we our scale maintaining structure manufacturing SG&A reminder, and capacities. committed while are a we our low-cost current production As to add

expect result, operational footprint. from adjusted expanded benefit of directly EBITDA we As our a leverage the to the

$XX.X comprehensive last income strengthens at P&L. employer is XX% positive EBITDA, both offload the And the company. market quarter comparable plan the gross significantly, Manufacturing $XX.X pension exposure continue of to action XXXX, operating our from third third compared we income XXXX losses of for to awards In $X.X the of mitigating and period a an to primarily loss year. revenue the or first XXXX, we the a liability third on million operating for income operating operating loss movement reflects loss to loss in accounting stock-based of a the compared million an of as loss by quarter actuarial Going quarter XXXX third conditions, settlement quarter period. to into most to XXXX. historical liabilities. EBITDA able $X.X adjusted pension XXXX of $X.X on by and approximately of excluding company's future. out compensation through accumulated was adjusted its other million we the $X.X further SG&A, benefit achieved adjusted cost This of $XXX,XXX of consistent in in million the of million generated XXXX nine balance expect driven of same was of mark-to-market forward, of was noncash of for loss $XX.X manufacturing This the the improvement million million XXXX. quarter operating Consolidated historical favorable significant million. million EBITDA of we of to to certain the were quarter in we sheet compared relatively the $X.X the no third Based grow months $X.X Consolidated third in remain

As income will was we the our insight items. effect earnings the discussed on to a adjusted provide provide liability net reporting figures in other true This and to be warrant and compensation indicated earnings clarity of moment, in to the share profitability. release, press are greater company's stock-based now noncash further per

For or the second $X.XX took million $X.X per the $X.X the or per an between third driven place adjusted quarter a loss year. of quarter the by in periods to compared to of the as $X.XX the result of XXXX. in last third XXXX improvement an primarily compared that million fees deferred share was of net of amortization in was adjusted quarter in financing quarter, million This million XXXX. was net of an third loss Interest our in expense third increase share, half refinancings $X.X $XX

million change Again, quarter, million. the from liability were resulting to a During price charge quarter. fair noncash quarter, primarily we our the noncash quarter. XXXX warrant we build-out fluctuate of of the this in third value the for Capital quarter $X.X our fabrication finalized due shop the item during the as change the that each $X.X of expenditures of the in is market a during share recognized approximately

to bulk of the calls, earnings quarter timing our this the As of capital have previous spend in due at year. funding the fourth occur projects Castaños, we mentioned various of in expect we to

year, and CapEx million. $X expect full the $X For we to range still between million

to of continues decreased highlighted our of in by from increased XXXX. Sequentially, from third million, by $XX line associated cash with of operating in our operating Cash production activities activities through $XX.X increased quarter. operating last the has $XX.X quarter and As third driven XXXX cash quarter levels prior production higher the startup the through specifically used third the quarter the million level quarter, spend, at the to million improve. in primarily used fourth inventory volume both

outlook our the full to year. for Turning

As Jim Jim $XXX remarks. X,XXX already call overview, financial now and and X,XXX previously $XXX that delivery railcars, respectively. to like over few I'd mentioned, to a between guidance we million for are stated revenue With and and reaffirming the million our back turn closing to

Jim Meyer

Thanks, Mike.

Let the me priorities ahead as to XXXX. of final an we XXXX of by our quarter goals providing conclude and overview look and enter

First, year expect in adjusted we on remains it and note. EBITDA the the to for us quarter the and focus XXXX, out fourth to high close allow a strengthen

I currently more expect efficiently. we third highlighted, as half effectively we These in have at on with of remain manufacturing well first XXXX. line already our to allow in changeovers a to and the expansion completed have the of as line production production as campus fourth important projects. capacity already in starting production conducted have is ready will be double line track the and start-up, several Castanos Second, A our

also improving overall financial as refinancing explore options it to debt our We relates to continue structure. and our

success certainly on continued flexibility terms. and will growth to and to us more more significantly this provide allow favorable Our levers happen

call Before I to surrounding environment. the to the our reemphasize the the turning the over future in all optimism macroeconomic even the of uncertainties would face for like operator,

annual translated Castanos $XX after last Mexico of As facility, various our mentioned And on better to above moving savings environments. call in putting profile, in us of has a transition savings shareholder remain The restructured expect even annualized approximately our in this cost to succeed planned in million. cost $XX fixed market our year, to position we to million February build-out the year.

prudent to the market a headwinds. continue chain realistic continued softening potential will about be and supply we of ahead, impacts Looking and

so to as plans capitalize completing company's in to to ever turn we the expect fruition, of now our address than questions. remarks, over to us. bring concludes your what all to canvas the the new the next However, the our continue future forward and buildout more call before operator so We to history. and will market come be to can prepared the That the we able on upswing railcar look I'll that

Operator

Instructions]. [Operator

of Stephens. question first line the Please Justin Our is question. Long your with from coming with proceed

Justin Long

Thanks, and morning. good

Matt Tonn

Good Justin. morning,

Justin Long

and activity. to fourth maybe about wanted the the So I quarter-to-date to step and implies inquiry decent guidance what if look it's at quarter, up the And I ask start, it in order production. a for

around we from backlog can if your wanted to customers you you're a what like quarter. sense fourth just in So the get market the feel based into on the hearing as move demand grow

Matt Tonn

Yes, a I has that inquiry level up, year. here. enter as think reported, Matt next Justin, to and we capabilities activity our backlog morning Good high confidence I bid been activity and build as got in we've into of

Justin Long

Okay.

you sequentially... grow in to the fourth backlog the expect So quarter would

Jim Meyer

up backlog order when can first year, Just information to frames When intake XX%, keep Matt look nine time year up of longer and this because another over last slightly bit you months little in is is of a mind says, the months intake, the often of is piece to XX%. be as the compare first order a you lumpy. nine the

funnel about feeling and discussions the quantity the the team sales of for sure. and quality is So good

Justin Long

to not be helpful. sight are the XXXX guidance Okay. And you you're now. market like But of you your do inquiry in production a XXXX? there's going up today. to pipeline, point, That's I And the when your of to in in know line think crosscurrents for feel Jim, activity directionally that about there lot provide right

Jim Meyer

XXXX quarter Well, of going when to we fourth we're XXXX. about not talk finished the

our are in answer going more mind, save in time of it our them. heart your I there. definite feels timing for at call yes. physical is buildings of we and prudent to us teasers a takes put we're of the Every and one guidance, up Keep equip So to think, growing capacity. But specific the question, one

physicals time. And so getting a takes the in is place that process

people currently so to we what's matched them will as know to know, begin All and the with that once everything time. we we appropriate. think did done, timing staff the on in And get And be then as at then schedule was the based and very we we build -- everything produce. that

goes one for product quarter of date. been we efficiency facility of The every other continue out by to which the and that we've good is us be the to amount impressed that we do really a is dynamic, have by, getting

real So a that's been positive.

how efficiencies keep on to now along much of we production said and and also full. we with playing we matches whether on people affect efficient see much ramp continues running lines line we as we two how will play our got we going So as All have. We're backlog get produce the we've depend and it a a and in speak. right how to we changeovers, to our more will to line or lines the fourth slow careful which a see third add just how further continue comments, that out doing product the use That business. bring out it more of

Justin Long

question last much last little could maybe to just how for color structure, release bit the the of moving if cost fourth in of quarter. of then see in And margins a adjustments there lot a into night. anticipating gross were the you're wanted more in Okay. I give you pickup terms me, a And on

using that comment viewing you're So G&A adjusted a as for going going the on we forward? back us sense clean can just as that number what that give should SG&A, be base you to

Mike Riordan

that Justin. I'll one, Sure. go backwards on

excluding believe won't to expect on give see we stock be improvement and for the margin we able sequential beyond. to that SG&A, QX then maintain comment, on And So we'll specifics SG&A. we to relatively going number a forward is mentioned, in but comp, as percentages, consistent gross the

get quarters, the XXXX. that in we type in we headed of And had see as profile first to we're where runway. two and like we is previously, our to same margin the stated the we back As effort

Justin Long

appreciate I time. Thanks. the it. got Okay,

Mike Riordan

Justin. Thanks,

Operator

Thank you.

Our line question. Elkott from next with Matt proceed question with coming Company. Cowen is of and the your Please

Matt Elkott

Good Thank you. morning, guys.

question. to orders the Just lower should margin Mike, to follow that be hear XQ up on the before year-end. good completed

XQ, going we to in than did a are we cars in of lower higher lower-margin mix Now have those or XQ?

Mike Riordan

a in lower lower the percentage QX. The cars will margin be in next

Matt Elkott

Okay. we cars That's deliveries? know. substantially of they should to -- basically in be good XXXX, -- none in And shouldn't XXXX those have should then

Jim Meyer

Matt, this Jim. is

at to about those the been process fair think I have no, simple have question the XXXX. a again, delivered. QX our is certainly long your factory next we'll specific call, bit will call, And talk cars through the answer and

Matt Elkott

and of And helpful, is what Got versus current with for backlog it. Mike XQ percentage also, That's help Jim the is any Jim. and beyond? -- what is percentage the backlog for XXXX

Mike Riordan

I delivery guidance play work could Well, will you QX. date, our out to how back think on on of the that math in much and backlog based deliveries the

Matt Elkott

irrelevant Well, I are guys of in? lead in because wasn't kind that times, I orders what of for level is same sure within count were times factoring you're that's quarter if into lead delivery taken orders quarter deliveries? you the for Or factoring too long guess, to

Jim Meyer

we Yes. material and taking If the for fourth all orders if question correctly. really I time lead your your quarter scheduling of ordering times question some and ago, stopped because correctly, understood understood I

Matt Elkott

think I No, Yes. answers it. that

a is us back you and for so backlog, we if get So that to guidance number, into the of tell -- XQ remaining okay, of percentage back 'XX? what delivery the can

Jim Meyer

remaining what the is... Of backlog, Well...

I'll it answer majority way. it. large of So this The

Matt Elkott

when them And guys looking Is more bit freight what you And expecting Or you talk know. you're this That's it. costs. did actually mention much to did a at as mentioned about matter moderating looking steps had of little Jim, Can to to not this. up then, you Got anticipated? they alleviate you good go ways as into you're them you taking? moderate? were a Okay.

Jim Meyer

Yes.

as capability for throwing a early bit going increasing component it cost some our freight believe I'm it a think probably into become really get want don't primarily, still because And to same a been there answer on -- -- And lot pretty think there's us. too resource some cost reporting reduction, don't I -- on We've the on to little I strong secondly, get little general, opportunity. We years we have our of I several it, resources want we've structure. has with material not Matt. those and we we have now, been things so it's share we on heavy competitors. into an cost our just now specific reduction. to focused One, freight many too we're are of although at rather But it's bit now for details some that. fully very

Matt Elkott

it. Got

think market expecting this with we're more replacement about Matt. you on all a even is recently cautious year? demand And so. still of the line, going XX,XXX question up of Okay. beyond Jim, for activity XXXX you because for in most interest order the this which to think deliveries for in rates But for cars at then talking bit least supportive and industry Because be the that XX,XXX and I Are than were expectations I mentioned cars for Matt, by you, uncertainty? people's I up maybe broader or of think, number industry you basically inflation and economic a year. industry

Matt Tonn

Yes.

your maybe average think, I X-year Matt, But moving basis, expect different improved a on deliveries replacement in the think based I of next overall go-forward than point, on then discussions little what we've maybe with I look seen as our into years. and think to something average well. at you demand year trillion see are we past if we to a customers bit

that to reality next XX,XXX order point, cycle deliveries the look sorry, that expectations somewhere foreseeable bit the year related But demand are we to to I XX,XXX your little is future. that think are long a particularly So -- XX,XXX improved. term, in -- think for we're really orders activity range, improved, I at in of

Matt Elkott

I tightness talking and industry certain still in base like now? there's and certainly, are maybe number railcars. shortages of that Is types sometimes of and industry a so, railcars even broad the seeing but Got right seems still to tightness would it. Matt, case? suggest utilization mean, think, And freight it you the shortages from I people,

Matt Tonn

canvas of Yes, types would that their you by It's the upper XXs. companies, on in certainly the say where the major several outweighing absolutely there's availability. in And we are. ones. utilization demand if you'll tightness some the largest reported widely marketplace the is see I is that card the And leasing been

Matt Elkott

just balance with Okay. going sheet back a maybe Mike question. to then Got it. And

the think, increase inventory. in think talk and this fourth I consecutive forward, about quarter-end should you inventory about we how going Mike? bit Can a

Mike Riordan

Sure.

throughout you've increased the As seen we've deliveries. year, increased production,

a you Now line. can from see the a we've added be And to year full as third very guidance, QX going is quarter. heavy

grown So normalization now start that fourth it. some we But with out, line levels we line. have expect until going production up inventory the production inventory has commensurate would third our forward of we

Matt Elkott

a broader How Okay. just we a of bit of some general did question. do you feel about sheet understandable And cash I in reasons the for a see in decline mentioned. mean you financial then balance so? into any would going need or about Or questions the more about broad just position next in sheet capital be you how helpful. year XXXX? may you like your balance Do feel you your feel

Mike Riordan

Sure.

higher some in level expansion prices. as earlier addition of into lines. and But feel line quarter. of the is placed three in this we our high mentioned, the at fund inventory business the good the from that, is to think I inventory still used at year a that front that when it production the in at financial third us, was of end to about positioned third for quarter We're primarily production position. was I Cash very obviously,

steel out a down on see you still steel start to in you higher-priced with costs your lower-priced coming relief the So future into with inventory. replace do as you look input as steel

Matt Elkott

just And sneak more in let Okay. just me Got question. it. one

deliveries half or not you the do the based beyond Do of the first versa. for backlog look have feel vice cadence half a you in think to unusual -- orders the of we right on second of now? it's your deliveries your XXXX for As and manufacturer QX, weighted how like

Jim Meyer

has I deliveries this XX it's with operational with one And I'll growing been line. with line, growth we -- next after in think, -- Matt, for started been bringing footprint mind what again been I year. with would you added a this all accelerated footprint. we just this new factory. about much, expect expect quarter. out a mean now of Jim. has business, completely is online online we'll would The a the what months. a start growing XXXX a And second, now we're the of pretty talk one bringing Keep third

all get it's as natural in up business. will this -- we So normalized run come to the our rates

Matt Elkott

Thank Thanks, much, Jim. you Great. so Thanks, Matt. Mike.

Jim Meyer

you. Thank

Mike Riordan

Thanks Matt.

Operator

end concluding management for We floor like the of question-and-answer to any over to I session. have would reached the back turn remarks. additional our

Jim Meyer

Thank you today's look year thank beyond. more Well, company XXXX all in joining and you, for the and strong for closing out for have call. a a We forward and growth to preparing good day.

Operator

your this gentlemen, and for participation. Ladies you does conclude today's thank We teleconference.

this You may time. disconnect at

FreightCar America (RAIL) 9 Nov 222022 Q3 Earnings call transcript