Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to FreightCar America’s Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Stephen Poe with Alpha IR. you. Thank

begin. may You

Stephen Poe

welcome. and you, Thank

Company’s relating include future may business future statements Joining call me Reform as statements Officer; Tonn, and Executive everyone Meyer, Commercial are defined Riordan, Chief future conference Private expected Jim or that Act remind Mike to Matt I’d Securities XXXX. President or Litigation events during performance, the Financial to this plans forward-looking prospects Officer. under Chief the like today made Officer; Chief and of

Participants to may are Form those materially as We of the whether disclaim for information, of directed cause our a expressed to FreightCar XX-K risks, result control may a statements. America’s business of certain updates actual some events forward-looking description forward-looking in results differ the the or otherwise. new statements, be of any Company from expressly future provide that duty of to which to outside

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

for on freightcaramerica.com was release quarter earnings is market. website our filed along XX-K, fourth after posted Our XXXX yesterday the of with the at Company’s which

remarks. few that, With to over let me now opening call for a turn Jim the

Jim Meyer

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

its very and a a important transformation another story. story FreightCar year growth transition finished and to America turnaround from

important the accomplishments full for year. Here are some our most of

of above versus of outlook EBITDA million. full deliveries year-over-year. our $XXX.X of increase We adjusted improvement million, an delivered $XX.X provided XXXX, $X.X of We $X.X of of on an increase year-over-year of million an in loss delivered and XX% XX% million a revenues X,XXX year railcars, previously

received Including full, is focused our order improvement year, production $XX.X year end of million $XX.X are XXXX, million. shortly versus the flow first for generating an in positive of our on of of essentially million XXXX XXXX, and delivered use after XXXX full orders the cash book. we since operating our a current $XX.X We schedule now

continue America built industry watch strong. that optimism, cautious railcars FreightCar by demand is the to While for is we with the rail fact

a invest without and a X X world-class manufacturing and car double fully to By late capacity. from fabrication and X summer axle In less have We this produce lines, paint have fully in hours units per continue capable X,XXX-plus than We facility year to have a shops. to our we located year, production build Texas. shop paint and campus wheel now total, shop to production expect and able then will lines stress. we undue by

important preferred as term an nonconvertible affiliate replace of of very yesterday, Pacific and we Investment which, extinguish when Also, our entered financing debt announced refinancing, will our May, Company. with stock all a in a with it current closed into Management partner,

of Here aspects are more several the of transaction. this financial important

confidence which markets, the is support given this foremost, state and continued and future This of the the current banking. partner, in of uncertain and potential growth confidence especially has PIMCO, of financial transaction First the economy to volatility capital business. our demonstrates true, the

cash improvement approximately year This equates in dividend we or to flows. PIK to will $XX a growth. the facility. closing invest additional fees And the to provides a closing at have preferred to tied additional the cash million significant capital pay our new the the to the cash with in on excess Next, The at by in operating phase next this in reduction ABL provided $XX us transaction in accelerate initiatives million additional per basis. stock is of expected approximately of plus capital deal, additional option payment-in-kind an on

extinguishing the We environment. a loan preferred, market helpful will also current to on which the is term loan structure be expected fixed move in obviously from a to on variable the dividend rate

the debt and sheet, transaction in most balance cost in eliminating the by from this lower Finally, our a of refinancings position better future. financial places for further us

happy our still capital reshape this are with and we on first important step more financing focused we in intently lower-cost While to are the achieving future. conventional structure,

talk views comments. to with turn will I about few few commercial for Mike, on call XXXX first, Matt? starting a in But the Matt over and a our I’ll minutes. Matt

Matt Tonn

Thank you, Jim, morning, and good everyone.

from fourth sales a with quarter. We then production well-coordinated year in starting year the in production had a the capacity for lines two the matching and XXXX, available third full line

company, for which in a our strength and product metric customers also the XX% increased XXXX. for X,XXX for in internal the the X,XXX we offering, importantly, same of new by is were which for number full and mind, We after-sales Very the we year to of since quarter. XXXX, service. have important fourth railcars, With that and in talent orders our sales done testament of true an took XXXX, booked technical the

We of typically ended with year railcars XXXX even the online booked orders advance capacity we into last booked is the quarter first not extending essentially in million. XXXX. next additional of we although -- with we year at year, our production brought this close, current orders $XXX quarter of schedule the now significant And full backlog Hence, the valued XXXX. end the of for with X,XXX at talk a do in

premium in preferred a product a of as our our as has America and service. as unique and is And we industry. been a place Our This efforts, requirements on cementing orders believe FreightCar for result manufacturer the lane. itself focus on the with who quality that company is customers

healthy headwinds closely past and retirements Railcar for below X-year average, generally railcar economic industry key the and demonstrate on the remain, and we have and that some our economic storage overall, said, fundamentals. continue the car to potential new With business railcar remain X to deliveries numbers monitor continues years. indicators uncertainty outpaced impact While the sector.

industry, the prospects optimistic but about cautiously about much are we more it. short, our own optimistic in So within

of to review a over Mike? turn With our for Mike the financials. that, I’ll call

Mike Riordan

which year everyone. in good and highlights, XXXX Matt, an then quarter his overview Thanks, the opening touch of begin some fourth with the remarks. already morning, mentioned Jim full on financials, of and will I’ll

to results. First, the let’s fourth quarter turn

Consolidated of quarter an to XXXX XXXX, revenues for year-over-year fourth year-over-year. compared with railcar of the XX.X% increase totaled $XXX quarter of million an of million $XX of XX.X% the fourth increase in deliveries X,XXX,

we the continued calls our supply of by again While discussed units of the we were lower-margin of chain and quarter, in deliveries were railcar profitability pressures. the cars orders we pleased impacted previous and margins with produced and number earnings the gross as our on quality

in was with $X.X And to Through of period X.X% same in the in X.X% fourth margin we the million balance across by XXXX. Gross year. the improvement compared XXXX quarter beginning see last profit year. $X.X of prior the continued fourth the taken will improvement margin quarter, XXXX was gross million in of to the Company the actions quarter compared first

totaled quarter SG&A line of fourth of quarter with XXXX. in for the in $X.X the XXXX million, fourth $X.X million

reminder, to current and low-cost to structure we a committed add manufacturing our continue as SG&A even capacity. scale As maintaining we’re our production

quarter lower the of driven to the Consolidated $X.X and loss on income XXXX. for a million fourth profit gross compared operating loss leased operating primarily of the XXXX by quarter operating of impairment fourth of $X.X fourth in in quarter $XX,XXX railcars. was was million XXXX Consolidated

year. which achieved positive equivalent was last XXXX, we adjusted In million, the of same $X.X fourth a EBITDA period to the of quarter

the excludes certain of our loss fair For Mexican the $X.X onetime year. the an loss $X.X last the $X.X noncash $X.XX warrant charges value adjusted railcars, income or share was million VAT the to quarter fourth of of quarter, share $X.X net the in per fourth change of adjusted net $X.XX as liability. leased Adjusted compared or $X.X net the of the cost per million and loss to nonrecurring million in impairment on and million noncash market due such million impact

the market warrant the change resulting the the quarter, share fluctuates period. in reminder, liability primarily fair change a from in during each As price of our value

amortization Interest comparable million primarily of expense the the by compared in fourth This fourth deferred in financing fee XXXX million in XXXX. between was the quarter increase $X of periods. to an was noncash driven quarter $X.X

footprint. expenditures for quarter were as fourth expanding the continued Capital $X.X our XXXX approximately million manufacturing of we

it For the full year, was million. $X.X

and step-up be additional line for investments, increase our $XX expenditures in-house fourth including will approximately million expansion support will paint a blast capabilities. increased production to CapEx and it our XXXX, This in capital of ahead we to Looking have year. capacity, the in further expect and fabrication

in chain inefficiencies large producing XXXX. we of a EBITDA orders generated period for improvement of spite did supply challenging for the are projects, improved XXXX, of full For significant year a full $X.X year top Adjusted million taken $XX.X from number included profitability. which We challenges. million, during growth pricing coupled was with achievements, this line particularly expansion the proud and by our a

Castaños This, structure footprint. leverage therefore, and the directly to favorable our operational cost speaks positive of

As XXXX, has significantly touched the cash of XXXX, $XX.X used flow activities and in quarters $XX.X improvement. million on improved first our of in last compared cash the operating a time operating with positive I’ve since million generated activities highlighted two for and XXXX to from cash Jim operating earlier, million $XX.X in

few I’d overview, remarks. financial call the back over that Jim for to With to closing a like now turn

Jim Meyer

Mike. Thanks,

overview the positive an our by XXXX. our within demand Let we cautiously market And quite on are our Once it to and priorities we again, on conclude of me are and outlook railcars. position providing the for market. as relates optimistic

and the very inquiries schedule number production is XXXX receive Our full, we of encouraging. is essentially to for continue

for in will We XXXX, and continue we’ll more expand XXXX. growth even to in prepare

of $XXX This of deliveries approximately approximately an year range. range. at X,XXX we’re to For railcars, of XXXX, the X,XXX between full increase forecasting year-over-year at is and based midpoint XX% million million, the XX.X% of $XXX on up the expected the the midpoint of projection between revenue

and EBITDA very adjusted the XXX% for full at million year-over-year Additionally, turnaround. guidance represents year. of are significant $XX between million demonstrates the the This further a we of midpoint our $XX increase fruits introducing and of

for expect positive operating we second flow cash year. consecutive the Finally,

better outlook. fiscal increasingly have our for results this year clarity are confident on the and in in time we a We had than long have very anticipated

this put Outside of will the impressive how structure. manufacturing leverage and capital workforce hand, have continue and in and best and in that next to business we Mexico. focus the our for continue discussions year we these to to our build priorities, for key future team the around further The have an to improvement execute dedicated year together opportunity campus create be in backlog for deliver important

our remarks, so concludes the questions. the address turn over now can that your and we prepared call to operator That I’ll

Operator

from Stephens. the Our comes Instructions] Justin question Long with [Operator line first of

Justin Long

guidance So, seems maybe deliveries imply so the just about around that think orders, the to to start orders year with you you that you’ve that laid XXXX year-to-date far received the when and X,XXX out year. somewhere it ended backlog this the in commentary for I with, around

see if math and back just double I that is So, wanted to correct.

Matt Tonn

won’t we get it’s specifics, Justin, Yes, that. more but than significantly into the

Justin Long

Okay. like But terms guess capacity mentioned it’s higher That’s from that an helpful. could guidance, it you than significantly railcars I delivery your Got to guidance. feels be produce it. And in of XXXX. that increase

outlook us why reason So strategic a maybe help potential you you’re kind that builds to think for or within could range? if there’s upside limiting that through delivery of

Jim Meyer

Yes.

this morning. is Jim. Good Justin,

guidance volume expect and guidance We’re at with -- to what lines build It’s production the and this we’ve see for year. we X is that’s the full associated given running time, obviously.

time line and That of start Is new and decide when number to X decide up train this ramping come bring or add year Every we to start that? number beyond a production we shifts’ down worth to is line, there opportunity line question people. production X. to really on to production a X if X ramping upside going we up of we

at but it’s hand decision near-term that a investment. we’ll right outlook And just orders what the make depending looks significant not like. in on the time longer-term So,

the really the upwards to of on summarize line. And ramping up off to a is So X whether running. lines guidance we we on in that depend we’ve going investing is up production kind and of have move for and given view longer-term fourth that the

Justin Long

margin gross that into guess you way of guidance you these better? in us level for that’s adjusted through that help terms in supply it. terms the helpful. visibility Got XXXX, EBITDA of of And That’s any assumption think provided the baked outlook of chain issues and some have to the I getting

Jim Meyer

Yes.

and on the and priorities. very are start, over it Mike. generation, Where me EBITDA much flow. we start is pass is operating as cash Justin, is company, let to I’ll a X other focused I’ll One then

that’s on plan Mike we where I’ll priorities And so, as as about comment business, it think our are. further two operate gross to relates margin. and your our let question

Mike Riordan

low our EBITDA, what is So keep previously revenue I’d cost how we’ve about that talked we given and and relatively say SG&A amount. we’ve adjusted and and fixed

I modeling kind for think could from you purposes. into So, back margin those, of gross

Justin Long

through provide as and on you the I continuing Got we issues any margins alluded of know first supply those to gross in thereafter. year? color getting But you chain progress the cadence the better it. can quarter then the

wanted I sure that Just make understood kind progression. to of

Mike Riordan

Sure.

Jim Meyer

Go ahead.

Mike Riordan

Sure.

I we mentioned, XXXX And significant margin we’ve our in QX. even and those pretty supply fourth see going a actions to to this QX, we’ll QX of year, the quarter to in as address relative chain better taken to So in balance we’re see to increase see the for issues. several favorability rate the margin ourselves in of continue then the as

Operator

Our TD next with question the line comes Cowen. of from Matt Elkott

Matt Elkott

as exit maybe throughout give gross just gross the you us margin a year the of maybe as you the to far ballpark expect on Is can commentary progression like Helpful way year. any the margin? there where

Jim Meyer

Jim. Matt, guidance this hi, is not margin. on morning, gross given We’ve good

You’re on giving supposed to congratulate EBITDA. guidance us for

Matt Elkott

merited. I that. certainly It’s like definitely helpful. That’s seeing Congratulations.

Okay.

So there side -- EBITDA directionally, yes, the directionally us at been guidance. in way obviously, the XXXX? a might you where has complex, the can see any expense look get what like bit because I to give least Is capital interest you structure line what maybe think guys

Mike Riordan

Sure.

our as of the are for close -- the you’ve seen loan. out out release, term So, the in Both and stock issued preferred those traded rates. the we traded in we relatively

addition, is which But for variable see filing, the there interest on As we trading from a close it’s our loan a term the dividend mentioned, now. pretty fixed it’s is on key structure rate basis reduction the structure. XX-K to as then, see the XX.X%, you year to refinancing. costs our and the to of interest going which of expense an fees, borrowing part And in lowering is approximately we’re ABL related million a this in annual a $X

Matt Elkott

there? any Is Got color count? I there guess, the share that it. volatility count -- And Okay. share on any

Mike Riordan

any volatility the share on shouldn’t There count. be

Matt Elkott

you authorization switching what us then, And a give have any in the And thing. on you to guys some more a is I this color long-term stands? tank that Is tank markets here. update operational be to But a Okay. maybe back get and a might for eventually end car I you application not the on there it? stuff. It’s know that? on progress car near-term when thing. know bit update or as color where end it markets any can

Jim Meyer

again. Jim is this Matt, Yes.

now for of X and market, car guess, the So, designs, X cover a really are have that tank tank approval I the first percentage favorable car update of we types AAR car market. is core the the will, if disproportionately you

year. So, we’ve approval got designs this

As we’ve already full. noted, our factory is essentially

that And we’ll building don’t move in about year. cars And time. do tank talk that it we to so, at expect current the when be into direction, we calendar obviously

We’re not today. prepared

prevent nonhazardous would of present reduced which risk -- of it, terms the terms in In profile. obviously -- so vegetable how of do of in significantly that enter we other the obviously, the market, we I subsegments types and liquids cargo to oils like space, a

with near well and other continued best about priorities, we the -- campus a we it’s in relationship. this enter we as timing the choose as and it When it’s at right how entering our the term we’re with of it, customers. sequencing building point, long-term that including want out believe partnering to use to and investing it with So,

Matt Elkott

helpful. that’s Yes, Okay.

I So The... no guess. tank liquid cars, flammable

Jim Meyer

the flammability. into market enter to not be would goal our -- Not and the

Matt Elkott

nonflammable the not or create date of liquids push retrofitting making everybody in you for so in if area? to that Do calendar you advantage can DOT-XXXJ that replacement an next nonflammable move might of the in liquid opportunity DOT-XXXR, opportunities Okay, do you that think tank is else the cars, or you have maybe the the cars guys initially market. busy non-DOT-XXX think up take year could

Matt Tonn

question. I’ll the have likely a occur, probably for be Matt, the bode intend impact are good opportunities well demand for that service, just that year us. prepared some an would for. that will going comments, regulation to it’s believe which But I on is to cars that And ago. for that nonhazmat do that to [indiscernible] in say to Jim’s we create believe we and

Matt Elkott

one on is end be to those not easing on two other Some head easing you then components? supply dramatic? are? Okay. the expect follow-up. we’ll XQ. have by fronts. then And the do sudden know but beyond just XQ Are in Or us and a year? optimal, you And going just meaning even an what they supply the labor to issues is Can and Justin optimal it about be builders the issues idea issues process, had of chain chain space asked be this, the towards of give I and gradual a the more going to

Jim Meyer

with this of little be a issues, getting Jim. and pinpointed that start States supply faster than are them, with be with of them lot Without the is all of a with and chain Tier not the also suppliers, It’s struggled would but Matt, our going that. United our hiring. material their a in who I’ll turn, Tier Xs have They, to here, gradual. Xs too have lot in struggled Xs. labor

-- it’s the on-time assortment ship way cars to our the reads on unwanted delivery. end. day. So, inefficiencies were of in built, on come it’s And sorts output they get in it’s adds be intended built all it just don’t everybody just time, our affecting when papers the to obviously, they about issues don’t shipped, intended get they’re been and whole and don’t parts that when every And everybody’s of so

our we’re helpful a going with to much, XXXX having all, we purposes visibility year, QX And gives Some at for even practical planning to longer suppliers. look this frankly, us horizon tremendously is what as what both that much this be building of the building positives in we’re all it and of is and full to first point, parties. by at

that’s So, improvement. important an

A year. further is as his this got second in around online, investing comments our we’ve where fabrication be mentioned piece shop Mike monies we’ll

to or the control, the over the internal course our the make, that better capacity of calendar this that of the we can performance. We’re planning double is we capability more And essentially year. fab shop our for on-time more it

opportunity. second that’s So, a big

a lines. And again, to across up we additional that piece, that. the and proceed we be which our effect, fact will is feeding running as in shop assembly year have coming is now the the But and first capability fab

big two are those So, factors.

history and a of then, the where supply team understanding chronic through And course, to And through that have the year, good points chain of very we the of extent. we obviously what last all some around went has pain worked are.

it So, year. completely, be doesn’t managed leave better we us expect substantially but to calendar this it

Matt Elkott

very That’s maybe sheet. back it. helpful And Got switching Okay. insight. the then, balance to

million guys what Sorry if I drove Can but $XX missed reduction it, sheet us just that? had a balance inventory. walk you through you in

Mike Riordan

This Mike. Sure. is

very So, the flow part price. lower-cost as crew Inside XXXX, is of rate year-over-year high saw out itself that inventory in cost inventory that as comparing steel it’s moved steel inventory in our was as the year. down a replaced way through XXXX, throughout reduction reduction at and we moved we with of you’re a

Operator

There are no remarks. further questions back hand Jim for call over in the closing queue. I’d like Meyer the to to

Jim Meyer

talk Have for it keep next quarter. today’s I’ll and day, we’ll you brief. joining a to Thank great all you call.

Operator

your this you teleconference. gentlemen, conclude for and participation. Ladies does Thank today’s

You time, at may your wonderful and disconnect lines a day. have this

FreightCar America (RAIL) 28 Mar 232022 Q4 Earnings call transcript