RAIL - Earnings call 3 2023 | FreightCar America, Inc.

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Operator

Greetings, and welcome to FreightCar America third quarter earnings conference call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, [ Victoria Rosman ], Investor Relations. Thank you, Ms. Rosman, you may begin.

Unknown Attendee

Thank you, and welcome.

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

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

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

market. third the XXXX along after on was earnings freightcaramerica.com, release Our for the website company's which yesterday quarter filed at is post with X-K, our

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

James Meyer

due as migraine railroads quarter together X related line well of today. our issues focus our changeovers, for all continued services headwinds that contributing us in team's in our the to towards discipline This shipments you FreightCar line. commercial the halt that top enhancing comes delivered and muted large favorably thank and which on joining as limited everyone, morning, quality operational another America Good of quarter highlighted to earnings. Mexico our despite

points simply timing quarter expanded margin both the achieving from the during time, basis same approximately same than related. Adjusted to an $X.X during both we decreased quarter last additional EBITDA industry-leading by XX.X% $XX.X to railcars, At railcar. XXX our an per year XX% quarter. lower on expected or deliveries generated quarter million of and prior XX the $X,XXX increased year-over-year the gross Revenue versus million of profile the third

This do us to railcar. room been the we I we aforementioned extremely particularly laid labor business materialize, in fruits the creates quality along see pleased have the do and several per believe, line, there gross line importantly, to a a top towards. to for to perfectly margin of headwinds. am groundwork years we of a company. continue groundwork operational vis-a-vis on potential to now ample more the and straight the face from The is, spot working not we expect we to profitability continue this by progress in being the of to believe lay in the business achieved improve muted we while the driven last be begin our our with commercial position Most is belief, scale

fourth the the from across and pleased the ranging are line quarter proud. during third manufacture lines. completion Castaños X,XXX the America long beyond at production manufacturing production signifies railcars FreightCar us beyond to volume facility to of completion the our now The of all of annual X seamlessly has and anticipated campus capacity X,XXX

fourth in line for starting another we this yet now from this milestone quarter. first the fourth line see in the the up and deliveries produced company, We will are moment

supply which mobilize what to on about our a the excellence vertical X,XXX are the about ease how we design and manufactured, When fixtures, railcar. operational railcar opportunity industry and empower we the it traditions. achieving chain us, flexibility operational us, and per means and, our continued believe it and for talking be represents production speak and and put management finer jigs is invariably and measured quality in team in excellence, profitability margin gross point railcars company our To and an can we bedrock tooling, train, of course, levels nearly right This the significant and our is with in of of integration, deep of we members.

larger operational and undertaking we small is where is America products Complementing concurrent very the It position. have that have we the dominated of to important that of successfully some remaking in is diverse how to position of much a competitors. excellence that true establish positions. another and of and which a in differentiated achieved growing number now we unique It fit equally company's our important work by commercial and a begin and FreightCar market-leading an is industry share portfolio

constant of Our want that customers larger or development. respect and products is a with and offering product are Continuous under to our concept. products improvement goal a most that simply and operations, not to equally our improved. and review bidding is part engineering being offer our to product Like simple, as are an applies consideration the alternative is as not factory process. simply constantly It

match our also that we and current customers customer's needs. to commercial prospective believe in deliver and product are true, equipped as is to invest all best time a that specific we the It each required and technical solutions company, smaller better order between teams

a manufacturer. not We are one-size-fits-all

excellence, customers give railcars, This our off-the-shelf our level Rarely an Our the we long-term margins. car favorably substantial make want. this customization believe every exact and investments of to they our generated them time by is the design. from is to and operational is contributes and buying supported goal gains when

align team worked do aforementioned we the that with to fact business the leases. has that with value our along incredibly compete our customer not on hard Thirdly, groups

of not backlog large that respond critical on will partner we so to are compete this business focus finally, customers. but is This to Backlog it readiness the to to when is approach to we group acquiring optimal to Our what model. Fourthly, years quantity as with the a of between our and takes acquired balance backlog customer large with and we be discounting drawbacks very continue our backlog is providing to important needs. planning, believe fulfill, and of practices. of result mindful instead

order production for responsive perfect material us for that and our long customers' short enough allow to scheduling, be and is planning one allow well-managed to to is book enough A to needs. us

right focused attention and in So is backlog needs, excellence our quantity. of maintaining summary, individual quality balance commercial customer value proposition service best having for on the and and the

revenue of point, the million range rail are guidance we to million, service like which At be of guidance concerns for would is over our address lowering to our $XXX continued in this planned $XXX based year. the of in now quarter third X,XXX to of disruption, revenue fiscal XXXX on X,XXX I shifting the This for quarter quarter to to Due XXXX. first our the our our into shifting revenue forecasted fourth railcars. shift fourth and into with production some some quarter our timing a of is

EBITDA unchanged. our guidance range remains Importantly, adjusted full year

We year are and adjusted to $XX expectation our EBITDA million between be $XX full for reaffirming million.

over few I will call Matt comments. commercial now turn the for a to

Matthew Tonn

morning, you, everyone. and Thank Jim, good

and of products quarter, During healthy. inquiries, order our our level activity demand for the remain

of approximately XXXX, $XXX For valued million. valued represents $XXX order for closed railcars we an This the increases quarter orders $XXX of with at a railcars approximately quarters of the at XXXX. versus year-over-year, XX% railcars X X,XXX orders million approximately respectively. totaling the increase XX% representing We million, third with X,XXX quarter year-to-date fiscal X,XXX of ended backlog at XXX% approximately valued approximately and of first

team that customers' better now from with line new new XXXX having Jim for mentioned, be to needs Castaños the to continues meet to pipeline first of and shipments the The our is line our As available increase sales our for complete, the line delivered fourth build in fourth will quarter. production scheduled ability fiscal fourth railcars.

freight market industry macro issue continue and the approximately in the at loadings, of weakness of with deliveries the border XX,XXX uncertainties, Although railcars railcar pose XXXX. we environment to forecasts in migrant overall agree

sales commercial railroads lessors, remains still has activity across and to with customers replacements that Our range including largely includes is by Jim. of our proposition consistent who as the customer inquiries railcar diversified development segment, strong types. of value shippers customer car and outlined by remained a tied new Order Class X pipeline indicating demand

discipline. to continues team with sales Our operate

aligns strategy each strategic value both growing, to of providing our needs that fortifies customers long-term ensures includes goals, a with disciplined business. deliver customers decision our that is our which our our commitment the our approach substantial strategic backlog. prioritize maintaining and the with objectives, direction core and business, value to furthering of Our aligns to reinforcing overarching while business This a to healthy well-managed

Mike our related the comments Mike? now performance. for over I'll turn financial call to to

Michael Riordan

Thanks, good Matt, morning, everyone. and

in and These deliveries year-over-year gross our remarks, for the third were cost in despite we proving a achieved transformation. decrease discussed EBITDA opening success Jim adjusted the delivered expansion. structure margin growth of As his year-over-year, significant quarter,

while base cost profitability at to us provides scale the industry our Our delivery with business demand agility maintaining variable levels. highly lower to

Consolidated revenues third XXXX XXXX. of totaled million quarter deliveries $XX.X $XX.X of of railcars to for XXX third XXX compared quarter deliveries with in the on million the railcars of

the production gross strong quarter, in quarter the performance. gross lower continue of deliveries efficiencies, gross impact driven increased the and we margin compared margin with year. last quarter Gross Despite profit a was to of X.X% gross by third coupled adverse expand of third the with million $X.X in in our foreign and currency to margins commercial of XXXX XX.X% profit million $X.X of of

was totaled XXXX of quarter million, talent. loss as from million XXXX third third having as in consolidated the driven charge in invest income quarter $X.X quarter recruit $XX.X million as the Increase operating third operational for income in $X.X to of historical quarter the well of an and XXXX. settling the pension XXXX increased noncash we of $X.X third primarily up XXXX the compared related for operating profit by the gross in operating to liabilities. of third of third continue an to SG&A quarter million was XXXX quarter million $X.X Consolidated of in

EBITDA operational In discussed primarily of and commercial achieved quarter $X.X we adjusted third XXXX, driven Jim million increased excellence of by million quarter compared in initiatives the $X.X of third to the XXXX, previously. that

adjusted of quarter $X.X $X.XX quarter was income loss share of last net per net of third million the $X.X $X.XX loss year. to share the million a compared For of in adjusted or third per XXXX, an or our

calculating our related accrued the for income treated quarter. GAAP, preferred common shares earnings a resulting earnings per shareholders in to as dividends when U.S. to share our per reduction share, net Under negative available are to

million the end we completed for third Capital be quarter to timing quarter. outflows line Castaños fourth that our the during expenditures approximately of quarter payments of further finished third were the the at of fourth will at of facility. There the related as for work the XXXX construction $X cash

decrease However, should XXXX. is complete, expenditures now considerably that capital build-out the in Mexico

to guidance. Now turning

based full our As XXXX disruptions from and year adjusting impact $XXX railroad At our forecast migrant on Jim $XX previously are which between of to between the lower railcars. we previously delivery mentioned, due million, guidance issue, EBITDA full the million same adjusted X,XXX to stated reaffirming X,XXX of $XXX to is the revenue and guidance the year million. $XX are million be we of time,

has a of this our us the enabled time. in journey to made have proud Reflecting foundation several challenge. strength business such a we Inherent business on maintain our on past line short external the bottom very despite the been achievements has of solid years, are we

operational achieve laid have for Our commercial initiatives margins. us the industry-leading excellence and foundation to

provide turn, combination managed scale our in profitability. and operational lines X as business we growth variable carefully believe, to the should cost we bottom create production. ahead, of of leverage structure should Looking in our This, line our significant significant highly SG&A

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

James Meyer

And is you, that future our me our let other wrap relationship with piece one to with remarks our Thank work, up of important debt and structure and extremely formal Mike. PIMCO.

also prevailing with reliability we uncertainties at proved stronger much the ensure time. As was ago. future, challenging that would you After the would America exactly creation have during not liquidity of we partner to X know, the and be necessary to believe the multiple that aligned in options time of necessary but a partner. company PIMCO our the new support, for position only provide this the a a evaluating FreightCar all years

move beneficial shares has will always our look to shared business vision. for improve we been a our forward and the by chapter as strength, Now preferred and continues PIMCO what to effectively has our This very as conclude been capital demonstrate structure, relationship FreightCar America. held we out of this take

I permit. occur, Although state I on details with this do just might provide you cannot this additional our done to get to soon want when as as intention conditions

a very what deliver goals. In of today, next pleased company financing several with I'm sit transitioning set team hold closing, out the years goals and the these how we we for and continue us. PIMCO quarter-by-quarter as the continues of the to to on prospect

lines Q&A. operator Thank ask open will you. for the the I to that, With some

Operator

with from [Operator comes Inc. line Instructions] Stephen first The question Long Justin the of

Justin Long

the disruption? quarter And little like Maybe could way those there to everyone with and the both Is you up think to cadence. be impact you a saw start delivery that from that the the U.S.-Mexico but about cross-border in maybe fourth that secondly, will issues about deliveries talk quarter, it the a sounds made first more saw quarter. bit in

James Meyer

of fluid. obviously, ebbing on line to Justin, of had the bit in it sort quarter. our us this -- protection we this. of hard Jim. abated us given, level kind bit just of based what itself. It adjustment quickly situation. the the we've and this get as can. gives we is you I out and We're behind might of the they a more flowing specifics on comfortable a We for really temporarily tell range yet. can ebbed but think thing against turbulent is the based know happen in range little we are can quantify predict. on It's top disruption the It's just We're with doing don't -- revised with not has we a a really our and the we and working I as best experienced, what factory sure wish is daily hoping What But railroad and adjustment flowed. It clarity of third guidance guidance to this. has

Justin Long

in bow it. a And year that, fourth quarter versus full if deliveries on Got the implies at the guidance, it third. just to I than more put maybe doubling look the delivery a of

of So that to at achieve better order hit get we're you do you that? kind need the the state seeing the on of Or disruptions today? what can in border based to steady

James Meyer

there When into Yes. in we those the out today the math the of built quarter, outbound consistency you to pessimism, We're get what of on will, level fourth a as sit you that on freight. numbers. do we're if confident projecting actually in is the

saw we the And feeling end we It's a higher quarter, number pretty a than so comfortable in that. lot by -- towards And taken the of obviously we're little -- were QX. you the factor third line. surprise we're with other number bit the that's have that at the of fourth up additional shipments the with a end. which prevented And now is starting fact in quarter to the thing fourth in volume production the

Justin Long

line. will the expected. by Got on, implies it. fourth wanted margins maintained about than That's And a down the fact encouraging on EBITDA hit that topic at guidance second question fair adjusted see the That revenue to guidance point that you came despite or to was was be midpoint. I better originally the XX% the it

driving that So can you specifically bit about talk more what's margin a little upside?

James Meyer

comments. Yes. any additional This again, jump Nick Mike have then with Jim on I'll is or and

to X-plus thing And what we principle talking excellence. built to about about years. the we and this for call commercial been root, business has we've it what operational working now the as that taken is internally encompass say on surely -- have is excellence. towards think I our And of expanded this is

brand-new manufacturing Our envision. for in have training campus, plant of build proceeded is and we we this have the We straight our invest there built could about business down we workforce. possibly just we to way continually producers, the doors efficient railcars as opened to the most specifically years being side. And -- it since X -- now then lean in of we've smallest efficiency the the you designed the know, big on

gross obviously, are with they our now. So margins where -- pleased we're right pleased, we're very

pleased the to opportunity. to EBITDA work us exciting line. more so a And on that's deliveries. never not think I is are this what's most few see We There's for Progress is come. is There's straight more finished.

past strongly over favorable So will be. certainly XX, been it don't months. the trend XX the has assume But

may further we forward. not improvement trajectory, stay expect of same progress and going While the level it on

the of this we is how us. envisioned it's So how demonstrating run us, with and part we business. we're it's And

with those gross car. gross still very the EBITDA we're that at or We more profit good So happy about metrics. to knowing Again, come. per are to like or all there's that margin obvious look feel things

Justin Long

Okay. me. look one And the I if step-up maybe But be Mike. This in revenues. at for last implied one might and for deliveries guidance for quarter, big more the fourth

Assuming down the come quarter it SG&A fourth the stayed steady, to to relative that will gross margins imply pretty third. seems in

wondering else? maybe fair or that, on was that's you I So if mix assumption? color there's provide driving something if it's a And what's can any

Michael Riordan

numbers and start we're would we're that the line. to to going observation, one running what astute fourth people you. costs of that that's We're thing bringing that's fixed in an line. tell to going before or the training on fourth drive That's in, quarter have lot Sure. The a the actually that

will in into that all run drag at XXXX. full on so [ and rate fully And line itself the before efficiency quarter running ] a it abates fourth provide margin temporary in

Operator

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

Matthew Elkott

the on think know in how gross exit the should margin? about be Jim, fourth expected if bit a about sequentially, margin quarter but it's I anything XXXX, Mike down about the says for we can it gross the And Staying the question, you rate talk margin to QX? beyond or

Michael Riordan

Sure.

lines. if basis QX, exit a in see starting of XXXX see line, you fourth you're full on with sequential running and QX at in looking year as step down associated the mentioned, an start-up QX annual costs given But that you the just rate X, on I where As up us overhead will a the X that. and efficiently

be would what XXXX beyond capable of. decent and a XXXX at we're and holistically looking think of I indication

Matthew Elkott

Okay.

the can match XXXX? So you exceed gross or XXXX you it margin in feel comfortable

Michael Riordan

have what commercial that's place, excellence initiatives the focused with operational we -- our we're that's and in say And on.

Matthew Elkott

Mike, sheet. you, I How of then, And a to just much that balance of Okay. big a in increase on I the know, couple since inventory. want related have to had you significantly the questions be delivered to side, a of up. receivable cars and built accounts went went having down you had issues? the and On bright being unable because border cash of is

balance lot So the of of dynamics gauge parts. the a different you help at Can the QX? end just moving of us sheet

Michael Riordan

definitely. Yes,

see through -- is you wet higher delays between planned border the would issue footnote and material, And in of in we given XX-Q, the breakout have you'll inventory inventory at the that caused. goods. inventory go there than the in and raw the So that QX finished ] as a [

goods still but finished than which year, see last wet You'll for really in and shipments obviously transit ] also cash expect off that to guidance is that our It's see much expect that is off we compared ship is the QX higher do last year, importantly, high, our based And the elevated year. is and unable we to to outlook, to for fully we property. delivery be all [ haven't get on products but off. the flow positive operating come you

Matthew Elkott

tell in unable delivered were you to the third to built issues? border many be Are of were how and guys able us cars quarter the because

Michael Riordan

not I'm share now. right able number that to

Matthew Elkott

next quarter? any in something then anticipating were the want new Or more line happened? I remarks. Jim, for you X they the that were into to mentioned changeovers year? on -- And line And changeovers to the planned and just Okay. for Jim response XQ planned third are already in they that switch prepared to

James Meyer

there nothing unplanned these No, changeovers. Yes, was line in Matt.

really may time year frame. the our February type You was in of business for recall, book the cemented

it product at getting some The we there. the was us to time, service coming with surprises no out. same had coming. the issues So was surprise It rail

line larger changeovers happen of changeovers. unplanned they equal not these that. and But There's and terms in In line are be ones. all nothing to big again, -- were

to quarter quicker What we couple fourth the have is of implement changeover. in line a much smaller,

to for setting one So the opposed expect the out any time up producing in essentially run Again, enablers of time the of get fourth to of ability as for product. product to use our why quarter. all so using the to we much product

Matthew Elkott

backlog the then And here. back to switching it. Got

possibly the a just this of is purely second there this inflation highest ASP costs? since and Is think backlog is mix? your highest Or ever. XXXX I XQ higher and a function favorable

Michael Riordan

back Obviously, sell are car have combination it's think little are of higher all the a if a also types a costs the not bit car types both. than been look you of same steel they decade, we're price. would I but building,

selling our And look when the you at cars the that's average backlog. price, speak to higher going of mix in so to well as

Matthew Elkott

Got it.

cancellations know to that general. are by one deliver me for ability kind question other cars pretty the getting customers border continue? cars I the some them did if is this that constrained cancel they in concerned a looks when there -- quarter. But orders. who I here. need have final of is you remains Just might the But in if like disruptions solid, how guys issues it and not is are risk third you supply mean, demand disruptions not any

James Meyer

And been orders we very I the a days don't order The cancellations. certainly out time car mean, outbound like mean record cancellation steady in long, I a view and aren't measured things. I've as drawn think on these is that is I here, we delivery track not without delivering a had don't any we've I -- accepting risk. any associated weeks. seen with Matt, recall. or that months type of particular particular take have in

as So we would risk. very view low that

Matthew Elkott

it. Jim, final one. Got And one

to I might same should kind you when sticking about? that you to will few been providing talk expect the XXXX. you'll any get providing metrics you imagine last As Or the think we be we you've of be for new February, Do guidance metrics for quarters?

James Meyer

or running without too it might is have pull of whether most some those fewer have haven't that, we we can provide certainly the And Matt, we'll close edge it. sort certainly I the our We'll goal that the to really thought won't later always think to discussions. we same. provide We upon Well, expand not about back provide we visibility And metrics. on. of

it at this year, enhanced. was see. So what We'll least the guidance be will possibly

Operator

closing to today's would question-and-answer like over Meyer floor comments. session. I the for Jim turn now to concludes This

James Meyer

thank always, the everyone, the support as Well, of for look our we to company. call proceed abreast everyone and joining we and interest your of Thank for progress us you, as next forward today. forward. you keeping And

you, have day. So nice a and thank

Operator

This you. Thank teleconference. concludes today's

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

FreightCar America (RAIL) 7 Nov 232023 Q3 Earnings call transcript