Earnings call transcript Q1 2023

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Operator

Greetings, and welcome to FreightCar America First Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. A brief 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, Investor Relations. ahead. go Please

Stephen Poe

welcome. and Thank you,

Joining me Officer; Tonn, and Executive Meyer, Commercial are Riordan, Chief Jim Mike Matt President Financial Officer. Chief today Officer; Chief and

call statements I’d Litigation future performance, Reform Private statements or plans during everyone as to or prospects, the that Act events include like this expected XXXX. remind business conference Securities may relating future future defined to Company’s the made forward-looking under

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

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

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

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

Jim Meyer

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

in changeovers the flow the three quarter. chain factory the At of point, in challenges, during these Also, full XXX our Mexico remain the one typically than QX line, our FreightCar we guidance this up gross of taken to with more adjusted line included per and by provided This results, quarter. and expect the for quarter. confident year. would through sequential we we of supply actions of in improvement revenues experienced America continued million $X.X quite began expectations margin significant in results a within which deliveries railcars, to delivered completed our million. Castaños, EBITDA $XX on or mitigate line ramp driven We for

highlights point inquiry more be although intake bill sales Matt a to continued will detail, this that would our our X.X with strong of quarter. like to I cover book very in ratio levels and to order out

to production is year, this full and in Mexico simultaneously win remainder campus remove closure then Our and order are goals focused the The our the very Roanoke FreightCar and resulting to multi-year best the for fixed the unneeded suited and factories much being restructuring starting building is create directly essentially able America and Company. undertook, schedule in setting on of for have we for of now now finally we capacity business, book XXXX. to Shoals with cost Danville, we the business the

better longer we our decision-making. making a To recent any time commercial than degree living greater much history, days in the excessive decisions when are and in no our at capacity clouded

When shared on our of for last would update I focused I on laser these the to just like initiatives. spoke, FreightCar XXXX priorities. these America we remains and you few team a executing strategic priorities

capacity be be campus, capability. reduction footprint. of to lines This production a X,XXX run per the manufacturing U.S. half overall terms our prior on both X,XXX expected of represents importantly, First, capacity and approximately and expand we have year. is in and to available profitable build cars to four the clear goal continued our X,XXX equally To been always X,XXX business to the of has capacity, to units on of

efficiency and vertical to just capability integration. mentioned refers The directly

cost. part we industry. supply over direct and It in-house control to the is can manufacturer goal and more more that our is of a than even chain, be of Making manufacturer, best world-class Our industry be gives the to quality this. in everything us irrespective

by envisioned We and additional summer, end will delivery areas outfitted, our are on fully of currently the campus. have shop the of infrastructure exterior handling the campus as material available, production at pace fabrication fourth to complete line point and the we the which and Castaños in

as unloaded, put lines how processed, of into thought taken much to to railcars actual the is then received, material and have the the themselves. have as We construction we

railcars about will million focus end approximately combined starting Our foot of the simply on railcars building X the summer activities and square of building be facility. not the both, and

very day. getting close this to We’re

we sheet our the quarter a to as is This during expected for close Company. important we executed affiliate our balance As of call, term very Pacific with current on highlighted refinancing our sheet Management during Investment partner, transaction to an and last a XXnd. financing May

accelerate cost most And balance debt in financings on from to will the in on approximately reminder dividend our the preferred. on a eliminating do us year of with Company place to equates it basis, phase what improvement it of invest Two, rate sheet, on will growth. term cash a transaction the additional Three, better for Company also for next the a transaction new payment-in-kind a option will operating position loan the million the flows. further in the existing PIK variable loan we or the our pay by structure to initiatives will which as from provide the a to approximately million this $XX provide finally, stock final in the lower preferred and move per $XX brief fixed One, the to this for will In future. cash on dividend company. in

few call turn a the commercial now for I’ll comments. Matt Matt? to over

Matt Tonn

and everyone. you, Thank good Jim, morning,

off strength long-term both activity started continue for by customers. on demand encouraged year We products our new a the order and strong and note and the to be of by

this XXXX. X,XXX $XXX X,XXX XXX% orders book-to-bill nearly at a represents versus for a with X.X of railcars QX and For we $XXX at ratio booked in bookings million. quarter, We valued million, quarter valued order backlog the railcars the increase of approximately ended and of

on orders We very are now booking much XXXX. focused for

quality car the order We of and the continued the overall, broad of a by inquiries includes pipeline are types. encouraged which in range strength

off report term with conditions, market continue customers the to utilization five-year full have at fleets. their renewals XX% lessor to overall fleet near -- improvement to of along over fleet needs increased use. near to and and their evaluate alike in Railcars lease retirements. railcar Shippers active railroads average leveled due our rates in their lease railcar with stored of Turning

of All a this supply environment in many has led to quality to an higher tighter in segments securing car favorable business.

needed. by recent for trended the the service Railcar speed, levels, to quarter for metrics loadings have first reporting XXXX Railroads, key to are train quarter. Further Association American their of yet XXXX favorably cars return of indicate first online including but and dwell the advances

more to ultimately and demand more freight rail, However, for railcars. support new continued drive in-service improvement will

align XXXX as a last and and forecast XX,XXX business now stated of railcars. between that tied replacement we deliveries with For is calls, we earnings during remain to cycle XX,XXX demand and in largely

across customer While robust value to with signaling margins on goals. demand there be uncertainties, continues to of remain the and healthy customer and broad to car some with railcar inquiries sales We and deliver types. both, financial pipeline discipline our conversations, range aligned on economic deals remains that a our focused are

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

Mike Riordan

morning, good Matt, Thanks everyone. and

our successful financial We operational team as building, with anticipated performance strong our in production are first line with pleased and schedule. execution, quarter delivering railcars our delivered

million XXXX already first $XXX the X,XXX million prior And of for the $XX.X railcars changeovers deliveries revenues the with quarter. also we in on quarter railcar to XXXX multiple totaled deliveries in of compared first undertook as $XX deliveries and quarter, in million on of the XXX Jim of Consolidated XXX. quarter railcar line of mentioned,

of XXXX margin $X.X was margin quarter X.X% first of profit the in gross first of quarter, $X.X last the X.X% and and Gross gross million gross profit the in XX.X% gross quarter of margin with gross a and of to of million profit in year. million $XX.X prior compared

improvement to supply profitability to in sequentially, largely significant experienced actions due We challenges. our chain mitigate taken

during our the over well continued efforts, course realize see from that of as facility the the manufacturing to our complete remainder these in expansion as of expect summer. as of improvement will the XXXX We we profile efficiencies we margin

income XXXX. of in stock-based the the $XX.X with The quarter previously of quarter In the SG&A to totaled of million, compared first quarter operating Sequentially, XXXX million XXXX. was of fourth first in non-cash XXXX. the quarter discussed. operating in consistent of by periods in the for of from primarily fair for compensation. reduction first XXXX large the as the an first comparable Consolidated quarter XXXX, $X.X consolidated recorded first quarter XXXX the XXXX in adjustment increase income down was in for first loss SG&A between quarter of operating driven a of million was quarter SG&A of value first $X.X $XXX,XXX we the

the to challenges in XXXX. as $X.X had the sequential adjusted to EBITDA the first chain to back $X.X that primary the Again, address realizing. are quarter quarter driven prior actions one XXXX. quarter XXXX, achieved of in was volume compared half three first supply driver XXXX taken $X.X we In improvement adjusted year, to by and in XXXX, prior million compared in the of of the changeovers Compared first the we was million reduced in the quarter the quarter first of in of now EBITDA the we million,

of or market income last the of adjusted in per $X.XX first XXXX, $XXX,XXX of price to compared quarter excludes our the $X.XX loss warrant loss million value is share change affected liability share For non-recurring first quarter of per Adjusted net fair the during an the directly in or $X.X net by loss due impact that $X.X adjusted million to in net the was quarter. of share our movement the year.

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

a fabrication fourth we investments of the previously line, CapEx our and be capital remainder expect increase in $XX in fiscal year including production This expansion As and year. approximately increased for further support for to capabilities. million of spend it up communicated, step blast paint will our capacity, full in-house additional and have this the will

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

Jim Meyer

of a Thanks, now of our Mike. year. overview for remainder provide this outlook the I will brief

and within for creating demand very the We remain the on positive also railcars. we our for position are ourselves market

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

anticipated results we for XXXX clarity our gives previously reaffirming us remainder our have in The of ranges. the confidence stated guidance on

$XXX an between full expected that of approximately of approximately that range. of X,XXX XX% forecasting railcars, projection midpoint million the X,XXX XXXX, year-over-year are the based and XX.X% deliveries for the and range. reminder, a revenue midpoint is of of at up As This between increase million, $XXX we on year at

EBITDA of million XXX% adjusted for at guidance forecasting the of million year-over-year midpoint. between year. a full This also $XX are represents and We increase $XX the

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

manufacturing footprint year, our balance Castaños, backlog production to executing will And to the improving and For year, profitable an open building this opportunities impressive our on in next of our into for focused driving capital this is structure. our already further improve us schedule, of on even growth. continue all team

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

Operator

ahead. first go [Operator Long with question Instructions] Justin comes Please Stephens Our Inc. from

Justin Long

question to I on start outlook. wanted production with a the

You first line alluded the had changeovers in quarter. the you to

situation of XQ quarters was around how get should to guidance and more I production if XQ. you So, the that. give to for be over to consistent terms love ramp little color could bit a the next or course several to it’s just thoughts where year a you’re of I’d the the in production maybe But the expecting your implied the wondering of pretty remainder

Mike Riordan

Yes, Justin.

going would up deliveries. look the in So, a to QX couple next ramp QXwith forward, further consistent on to pretty quarters we expect

Justin Long

Okay. That’s it. Got clear.

Jim Meyer

Sorry, Justin. Hi. It’s Jim.

we continue couple a so then next Mike the consistent a on So, next quarters margin margins fourth to improving that’s on And see kind quarters then smooth count. as the the -- just ramp of of unit -- next it, piece of quarter yes, and as on -- said, the deliveries, couple in well. unit for on the of expect

Justin Long

margins. kind that of about the cadence gross of my delves Well, into next question

or mix the reasonable over should the to or expect that be of? the line we is sequential rest quarter of anything year each in there terms it is other remainder year of changeovers the of improvement aware So,

Jim Meyer

Yes. quarters. I -- anticipated See, doing so We’ll we’ve far go see your and of question. out yes. improvement been that over next so, couple this We’ll long, the

Justin Long

or that it the to given seeing and good was a Okay, great. is levels pipeline, essentially reasonable fact it’s this that next versus two, the quarter the do given be there? of last there, some you and XXXX flow terms orders encouraging you and to you can of of activity think think in on some front. of around of quarters? needs you’re have order amount that slowdown then, we’ve thoughts Do expect out And just a flow replacement still or converting a sustained production to hear the macro order those bit that couple do inquiries what are out uncertainties But, the any inquiry seen little full

Matt Tonn

Yes.

the right? customers customers’ significant from head, needs fluctuations quarter-to-quarter. your replacement interest levels be on we’ll having, We we’ve -- covered it, the -- the So, we’re discussions internal think but with on activity consistent own not timing approval quarter-to-quarter. based the we to in There’ll expect base, that a approval I order offering. based product processes, from and on significant hits think activity the relatively changes have we’re consistent comment some expecting needs, on think I conversations the our of have nail based on in inquiry customer

Justin Long

one for an you operating is expectation on be And Okay. Great be think year. to sheet. to will you me cash mentioned flow for cash positive the Do positive think hear. I free balance well? last as this flow Jim,

Mike Riordan

this Justin, to flow positive. expect We is Hey Mike. be operating cash do

we’re facility. I will cash little think free expanding still be the tougher, a given flow

facility we This major year, of that million last As is so down $XX capital to build expenditure -- still mentioned, is there. CapEx. there’s out

So as year. at harder I complete a look we us the one’s for think that to little

Operator

Matt ahead. from question Elkott Please Cowen. Next go comes TD with

Matt Elkott

the Good you. dynamic the morning. to just and understand Thank orders. I want of backlog

all for beyond to for going forward, booked are you going to the or XXXX? Going are you’re be be taking XXXX because orders

Matt Tonn

accurate, Matt. That’s

Matt Elkott

Okay.

-- only the end. X,XXX from about cars you case, at high if this to backlog the need that’s if cover current delivery your guess, even I we year’s So take

So, mostly cars. you are Are for XXX left with about those XXXX deliveries?

Matt Tonn

beyond. ‘XX We’ve Yes. got and go into that orders

is So, that’s -- factual. math your

Jim Meyer

it’s preponderance But is what’s great the XXXX left of that. -- from

Matt Elkott

builders. then, somewhat seen number, Okay, -- which your with it. we’ve a is order other it’s with good got what And inconsistent order the

more orders solid. there that coal Are orders Your number? car look in

Matt Tonn

No. That I can tell you.

Jim Meyer

car -- that no have Matt comments comment know I on type. But in just coal You as build to we that. just some say, don’t we cars there made, is to on certainly Matt, the our real pretty demand everybody our around The has is industry a out steady positive to for been railcars demand levels replacement there us. articulating. seems be for as

just size discussions quality the every quarter details but X.X to number the we not the quality about or going behind be these inquiries, a so, QX the And is discussions. feel But the ratio, like total book-to-bill obviously. with very of good the and also of not of

we pretty good. So, feel

Matt Elkott

of Okay. years by bit demand, coal tightness. you judge know cars That’s good we of getting I a to know. you or a Jim, there next in I think see will that recovery. Do if that built coal couple rates and cars have the not? lease is seen somewhat mean, actually of

Matt Tonn

utilized. built. quite inquiries So, out well coal Matt, that have pretty I’ll share been been since just It’s have there. some cars been there fleet time is The

politically, demand. we it would see guess -- some in significant seen in environment, You’ve the seems unlikely fluctuation seems increase politically mostly a It I both current loadings. just given that

have eventually, we a that away I don’t something to replacement. focus coal demand. goes see you there will long-term that’s view completely. be some level where will But, I and don’t primary of significant type car think think as

Jim Meyer

So, Matt, presumably I market for someone when coal as make, first cars. the coal in just summarize car we’re new whole that the would phone would the discussion call still

from I successfully order quite to piece the forget we demonstrate, more of to have broad have. car the forget has business. going the the have days now what transitioned that never several We of think clearly coal the are past our quarters portfolio intakes But or company last importantly, centric --

that’s that think at this -- well done point. a job I

Matt Elkott

we’ll not. -- would not continuing, mean, sense. but mean if is replacement you I coal but story, will to Thermal makes would imagine I point but at coal Yes. said, is that Matt a as anywhere. it’s some be No, going decline metallurgical zero, going modest coal. there that need, coal Definitely secular have not need which

lower in will many but the next this be that being where to of range. to cars XX,XXX end Jim, be on year thoughts XX,XXX you this in industry question, with think towards expecting next range, are a I’d the to Matt other deliveries hear One and your year. love deliveries maybe year similar industry and year

Matt Tonn

as that stated probably closer Well, and think, think, of I little high range, to XX comments, my I XX bit I point -- XX,XXX a the to XX,XXX.

range. up years indicates I in we on consistent could relatively think following of that marketplace hitting the those the as from cycle strain as look I see XX,XXX we’ll think in it, XX,XXX don’t replacement look that and but not out years horizon. some numbers years I and the currently demand, stay anything we and some be we’re a in There maybe out in quite

Matt Elkott

one with your comments, of on then the side, What’s have And the in question your access missed from prepared the labor labor. perspective? sorry it but if a builders I lot picture labor Okay. issues had to

Jim Meyer

Jim, Yes. number commented feel as our any of labor good times. We again. about we’ve

key workforce a Our of Company. is the strength

up today, ramped Mexico nothing we as footprint the growth continue market it a our to employees. labor And we’ve on the essentially years relates our rounded reasonable expectations. in from and skilled least employees ability and, X,XXX to brought good demand ago support at to feel As to three we’ve about

Matt Elkott

and yes, we chain of labor rest be feel do more you and or and quarters you achieved -- and to disruptions largely go do stuff take coming behind like the it’s if like the all together, in the can components you Jim, supply efficiencies ahead. that access feel

Jim Meyer

be world question. when standards. very the just the manufacturer class not our words best industry be to by is industry any to they’re and that love serious, we’re we goal say I in and Look,

going are aspect, every improving to in be always including efficiencies. We

around we constructing X you running, the build still it operations. earlier, summer. this that on piece us campus then in will, we are dust, of will settle as dial improving just if XXX about -- railcars. And we can said square -- million essentially to a mind, as I And in foot and will the continuing acre, Keep sometime will focus

bringing on just We’re still large shop. fabrication our

to we’re double working of already shop. the In fact, get we capacity out the fab

the same efficient. our things shop. doing All us paint make in these We’re more

receive on materials. incoming now focused and we We’re also how very process

as in of be XX no, it continuous we be is part And especially really to the improvement dial XX think should a next over meaningful campus. always I months So, going us. this new to

Matt Elkott

helpful. maintained you your I last tone but one kind a your basically, all largely guidance That’s level and improving the sounds more solid traffic know and be and this guys of would number, And gotten interest question, Okay. given which surprising inquiry rail macro being down color stuff have order on has Jim. more rail improvement of just is this it like source positive, your -- the tone, apparent any service high bit. rates helpful. and Is in seem your

Jim Meyer

three through get, business play a for very is done are right-sized retool position where capacity with we now number industry. available We Yes. XX,XXX, only of great to capacity, piece running view a is a times, not those glad just It’s completely something XX,XXX was we’re also what the in for as about keep reengineer fixed And the to as Look, with going we win, done years was question. a the efficient last any we’ve days. of ago what every we it with factory. all And were of And in very try the railcars. carrying to cost long and tone, a cost-efficient the talked business we’re lane must have over now you what it’s order not us but kind because Company. noticed to factories that put important burdensome positive. very I’m the that we’ve three

behind the able where finishing as adjusting look And it’s to being And construction and level, the our new our so, on size, especially capacity, fill between working. on all we to and campus that’s rightsizing still confidence, we focus be smart and that’s us. just soon business capacity the now to are out because, best new

And going think to it’s so, better. just keep we getting

Operator

questions at Jim further time. for would I to the like turn no to are back this over There closing comments. Mayer floor

Jim Meyer

forward you. for joining day. to And on talking all you we’ll call. Thank today. you Thank a our the great look to call QX Have

Operator

This concludes teleconference. today’s

time. a have You you may your your Thank disconnect this at and great for participation, lines day.

FreightCar America (RAIL) 10 May 232023 Q1 Earnings call transcript