RAIL - Earnings call transcript Q4 2023 | FreightCar America, Inc.

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Operator

Welcome to FreightCar America's Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded, and an audio replay of the conference call will be available on the company's website within a few hours after this call.I would now like to turn the call over to Chris O'Dea with Veritone Investor Relations.

Chris O'Dea

Thank you, and welcome.

Joining me today are Jim Meyer, President and Chief Executive Officer; Mike Riordan, Chief Financial Officer; Matt Tonn, Chief Commercial Officer; and Nick Randall, Chief Operating Officer.I'd like to remind everyone that statements made during this conference call relating to the company's expected future performance, future business prospects or future events or plans may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Participants are directed to FreightCar America's Form 10-K for a description of certain business risks, some of which may be outside of the control of the company that may cause actual results to materially differ from those expressed in the forward-looking statements. also duty result updates events not of today's there any statements, our or conform disclaim of call, a discussion whether new will to expressly U.S. to that to provide forward-looking otherwise.During some We items a do be information, future generally principles or accepted accounting GAAP. their non-GAAP afternoon. GAAP directly measures release are of these most earnings yesterday Reconciliations included issued measures to comparable in the

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

James Meyer

Thank you, off compelling transformation, results. believe the I that many thank achieved significant generate all Chris. milestones positioned belief, will business lean we last and very are metric. and for I now one part and to multiyear you joining year scale To us our America morning, Good this important today.FreightCar as with support everyone, of

$X,XXX important per For per America adjusted of which fixed company this in of to time adjusted the year operation beginning variable railcar. a both very to frame, prior was XXXX, loss XXXX, of earned eliminated This railcar last EBITDA compares levels transformation.During full of $XX,XXX FreightCar of our and the EBITDA costs.

X,XXX prior deliveries per to producing capable back mentioned just over to skilled and on labor the achieved footprint types In and or of for produce access year. as more Fast EBITDA a now cars we manufacturing forward adjusted the our footprint limited railcar the to we addition, well we X,XXX railcars were of per as able XXXX, expansion. just needed

in on decrease more a of U.S. per important key X,XXX be decline the of message The delivered year. expect total. year-over-year the up and at of new of highlights few to numbers ramp of movement modest view, year. on decrease operating end disruption for today.Now this railcar railcars, efficiencies a production, most at deliveries adjusted in driving railcars gain touch X% revenues million, to a traffic the top my to the In the X% As on rail full $XXX.X in can of border line is year-over-year. Mexico we EBITDA attributed more We the we

just border ship the experienced which quarter, that created issues the to prevented December in closed from our our third year-end, XX significant Eagle we border and line government Pass, Furthermore, Following railcars. at a the to during produce recall on started to fourth prior multi-week December both additional which scaling ability XX, impact the Texas production XXXX.

from some on and I I XXXX. railcars led these in full key for our facility. facing build-out lower our the call ongoing of discuss EBITDA in achieving XXXX; XXXX, of high we you of for our quarter. of both quarter achieve FreightCar year which Mexico we adjusted and quantities to in than be industry-leading exercised or is as which of points a And production to has year-over-year X,XXX volume closure We new FX.As detailed end of border XXX improvement gross EBITDA achieved Mike Notably, significantly up mentioned our to some to annual execution we have this milestones of finally, slightly in we with or points us basis pleased year.In to seamlessly XXXX, year, am team completed in since prior expanded mix the the of still that, margin and XXX% the less of by fourth XXXX prior $XX.X to $XXX.X of to to enhance needed. XX.X% demonstrate. and X,XXX-plus confidence activity in economic an approximately of of combined next expected, took inertia allow in million of industry to flex strategy, which fourth of of most with With sight demonstrate.With from commercial teams other leasing to now am results. Moreover, to year, preview of these America. we per levels adjusted customers. so $X.X commercial confident the delivered Matt will manufacturing from of the caution order strategies, the Despite impact $XX.X Nick evident new and performance which compared to XX% EBITDA increased likely $X.X costs our is turn are But securing million headwinds picked elevated approximately these, I our is been outlook, of quarter XX% spending XXX XXXX minutes.Turning challenges further for some caution the for Matt? pause at to our orders. the the X.X% in and versus are million demand excellence headwinds, our decreased interest CapEx that few levering level approximately to also to for this market, railcars Nick to year in face gross capacity we the when border, participants, have rail more has capacity will to prepared to Coupled online, last impacted with Despite full $X.X facility meet $X,XXX already shipments directly margin being say in to resumption I quarter the to the manufacture we in operational demand.In on well in as versus manufacturing the which aware but annual America an the activity due of operational already start buyers to the rail million several the the our disruption. of quarter service quality were our terms despite operations, line the basis $X extremely profile a ability now combined on exchange revenue will the fully the adjusted North the the million the of by our of X,XXX over purely year railcar. We service potential the will headwinds, believe our railcars, view deliveries addition same X,XXX million of Revenue which around the year, the due equates million, full $X.X to foreign increased with XXX impact softness, the improvement an X% to to earnings eager our and full the speaks a scaling and high outlook of million Castanos, view with then reevaluate metrics, are XXXX. rates, has inertia from railroad able fourth

Matthew Tonn

Jim, total Throughout inquiry year. booked Thank good healthy increase orders the versus activity we an the everyone. you, and XXXX, prior in morning, with majority of experienced

valued during X% $XXX For the largest railcars the total we order X,XXX compared the by to orders year in full booked with of remained X,XXX shippers lessors and at This railroads, and ended approximately year of X backlog X,XXX and XXXX increases has intake respectively. XXXX, Class XX.X% including a approximately of since annual won in million, prior segment, year.Orders as consistent approximately railcars million. order the representing XXXX have increase a year-over-year, totaling valued addition continued new customer the represents $XXX XX.X% We orders at customers.

lumpiness highlights orders quarter, we XXX booked the the quarter. to quarter which of For we cars, see from fourth sometimes

decision to aligned with of are and the railcar rail material metrics as in expect new velocity drive of service other increase most are taking we but their matter of XX,XXX lease dwell a buy raw decisions.As cycle to customers their an when make are on railcars to replacement many freight and For trending rail longer purchases.From averages. new balancing for indicates uncertainties in simply XXXX. if, perspective, higher demand. It railcar prices we these rates isn't timing railcar segments, the fleet acquisitions. more service, its ultimately for customers remain the for levels, demand rail increases deliveries, times above analyze rail to that X-year and factor to Jim all plus year total freight that for as railcar the the of environment tied Customer the along of a new timing new including with forecasts into fully closely to we utilization, improved range healthy feedback earlier, alluded market industry, will the when full Overall, and impact XX,XXX commodity or view in will and general railcar a falling positive and and of commensurate of new their rental equipment, economy, of

hitting in campus is both front, the seeing production As lines brand commercial its Castanos' stride Jim with truly differentiator with for we to for momentum to are America fully our is mentioned, our car growth positions the and in volume FreightCar more activity a X now ability range customers.Back the a broader QX. Castanos bid completed operational. deliver types and to solid plant of again The of

earlier, of [ are through manage the aforementioned environment when somewhat ] timing the railcars However, I referenced in new remain and as customers the quarter-to-quarter may as factors wile needed. lumpy

railcar approach for to continue to solutions process, to company, comments with collaborative our maintain for Mike over specific to performance. our business call financial we will financial needs the and commercial now turn secure a goals.I'll As disciplined aligns that a related our Mike? customer developing a

Michael Riordan

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

certain headwind for XXXX and XXXX quarter in impact operating adjusted muted the our adjustment of we settled XXXX XXXX, value supported to fourth profit With process adverse throughout market fair XXXX, due due compared the flat prevented commercial facility in closure the Despite totaled closure a XXXX totaled in XXXX.SG&A significantly fourth robust the XXXX awards. earlier, results. a quarter strengthening in the our fourth of due last the of let's for in expanded $X.X the achieved in strategy. revenues border as X.X% of of compared Jim margin by increase the favorable entering anticipate primarily of in operating as well gross to the of last $XXX the even we in new a driven X,XXX railcars the our margin, quarter the million, we to Consolidated of in to quarter, gross gross million quarter compared to increased offset of million to the cash for December on year. quarter in million was $X.X of Mexican consolidated $X.X tranche quarter loss had million to fourth XXXX of million the with of and operational fourth $XXX,XXX adjusted quarter quarter profit quarter $X.X gross lease for that primarily gross beginning with shipments was the million peso. $X.X of quarter fourth million fourth phase XXXX. an fourth improvement XXXX, U.S.-Mexico million EBITDA income continued with fourth by was operating a the of margin goods fourth an XXXX, of Consolidated operating fourth EBITDA XXXX.Gross million The increase First, quarter lines efficiencies. $X.X fourth a border of fourth efficient was deliveries of in quarter $X.X Again, railcars gross million as in $X.X quarter relatively fourth production of income quarter driven turn increased of profit, X.X% more approximately fleet.In up impairment $XXX.X related In X,XXX deliveries to the charge stock-based $XX.X margin compared highlighted of these all deliveries to production total, finished the of compensation as a December railcars were of by of from of quarter. our the the year-over-year in further by primarily

impact will our related million warrant of $X.X we price quarter on of in a earnings the work of foreign change in loss the the which noncash foreign the quarter of fair fluctuates $X.XX the in million at exist, currency as period.Capital such our the our of adjusted last management in risk periods.For XXXX net finished $X.X fourth was of on quarter always share during a expenditures fourth While quarter reduce XXXX loss per line quarter to compared approximately XXXX, future currency the that that program the as our million of the complete loss or adjusted to for leased in of the timing or facility. quarter share Adjusted of per impairment net impact income the were third of and production liability, at nonrecurring accounts was line effect the railcars implemented $X.X items in million $X.XX an our the will fourth items certain with for year. to fourth $X.X the each end third for value payments well change market the as net of share Castanos

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

approximately in to spend maintenance considerably With line, cycle. the future production a maintenance to to X.X% to our be completion expect we of our of estimate capital X.XX% primarily fourth We revenue. decrease be and cycle

completed of X we million which fabrication as as production from for EBITDA integrated XXX% X.Adjusted increase and our work, vertically or was shop $XX.X XXXX, $XX.X year million, year the full the our increasing expansion improvement the full lines capacity an included well For XXXX.

$XX.X structure mentioned for the Due from results, and closure transformed operating a to Jim positive million of foreign million. Castanos December operating in generated in final of million border compared $X.X leverage of large and the to cost buildup million that XXXX a finished operational favorable our $X the to cash of the operating led the outlook. flow. on we while currency very railcars.With because to of our cash were from XXXX, pleased XXXX financial decrease weeks few turn that into to our of footprint December $X.X Cash a in closure consecutive earnings as our we we the flows we activities inventory were unable border second of headwinds our reported Nick our As remarks with to earlier, was approximately like over I'd ship designed now activities year business, overview, to are call

Nicholas Randall

to strategic want start Mike. the Thanks, from some quarter. past I developments key by highlighting

capacity, has production team Mexico. ] fabricated achievements, doubling reach in-sourcing all paint Our building growing the in our continued of majority to parts workforce product significant our successfully our our and of across major lines, on-site [ X

manufacturing our challenges disruptions, border achieved significant of XXXX, the making our upcoming The facilities America. our deliver the this North customers, plants our underscore increasing and faced assembly while All employees our improving commercial supply and shareholders.In working on chain in operational executing to customers. critical processes strategies was terms of in operations, and to operational on dedication our safest to our and capabilities. for continue These in despite improvements optimizing our team are time backlog to commitment priorities to remain These our our amongst the unchanged. progress long-term the we to success while our products build year made achievements productivity, including and we will and high-quality reflect focus excellence.Our

improvements believe moving forward.With in We expansion disruption driving continued also associated to with plant capital expect our year, improvements excellence cash productivity further when a volume, our more the better opportunities and can committed to especially I work. structure operational XXXX more for combined we our remain in more the creating generation considering benefits us, behind initiatives from putting and progressively work even

expected at and of at of and EBITDA further the transformation strategy. the XX% range.We underscoring million increase approximately For $XXX the at range. expect This million, the is deliveries million XXXX, are of up to the the a X,XXX $XX power based adjusted midpoint full year-over-year on increase year-over-year year, X,XXX the our between and full representing XX.X% midpoint expectation revenues approximately an guidance of year between midpoint $XX forecasting railcars, for the of we $XXX between million XX.X%

it Finally, consecutive will our for manage about customers, we'll operating of remarks. to we the shareholders cash that Jim few want employees, closing excited support. year. truly the for gratitude our continue mindful expect prepared to to my I now for also and third the opportunities be am I express through.I that flow and turn underpin to our need positive to partners guidance challenges to you'll XXXX a potential over

James Meyer

started the vastly products a car type some call preferred of array we defined to I with. the with FreightCar is products the those being industry. company, that today's And is, full will by theme railcar today, a in Nick. better come America Thanks, back of

in people give also the defined most industry. and to commitment factory in newest the a efficient We also are our manufacturing leadership company our by what their campus and by they team. want Castanos, our accessibility and We're to customers the XX/X defined

Our showroom, factory transformed and our it defined competitiveness. want a we are cost is before experience they're making our decisions.And to is customers by purchase the and their finally, we structure place

As a and customer base better base the and customer growing, our it. repeat for off is be is shareholders will our result, growing industry

As upcoming pointed continue power unchanged. strategies that operational The and Nick year to focus we in will of scale team remain on the exists commercial our the the for our out, business. believe executing priorities leverage demonstrate and and

confident in generation.All committed FreightCar also incremental most circumstances, quite the team as next great ago extremely mentioned direction generation been planning we America. company.In our the I and have some am has under of first of us We achieved the for closing, what and for improving continuity. and to and capital the cash given structure leadership difficult have remain time now, expectations been driving And of

of company, role do rest Nick, So that also other to will starting shareholders. and of of the our I came the to vision which the He on me and world, the on time. command May be most months with will importance Board President an full us has last Chairman, utmost will as I same a customer to also future. from he believe now, a expert, assume shares where division one Berkshire product-centric rest strategic and team and America, our effective second Chief necessary X serving press role it the Officer, company's current let my for in I not operations on the Officer FreightCar CEO Nick down the in me and our will Chief with at Hathaway. Directors Executive Board Executive is believe other X. and and been and comment My of release and for join do stepping Operating Nick Matt and reintroduction. admired begin and and the deliver I issued companies night. will May my the of the allow and in Nick conjunction continue X, topics for of the values will the focus as our to of Mike President

stopping company.With With changing these will preparing that, Q&A. for formidable the not Instead, or open our the to ask a are lines accelerate and we healthier as operator changes, more we agenda. are vastly to I

Operator

of We'll session. now question Stephens. [Operator be Long conducting Justin a first And Instructions] is with from line our the question-and-answer

Justin Long

First like isn't strategy the accelerate me step role, trajectory the going say maybe business going you, with Jim, I Nick, Nick, of of forward. the overall think into to as and on transition. a there change. But there you some to it from could be sounds to all, both let prepared for question I remarks, the this congrats to mentioned opportunities you the And start Jim wanted

on you you make So some plan? gate? priorities or enhance have Nick, for accelerate the what you can the the out are this you ways thoughts And of do as any of transition, current

Nicholas Randall

now. X here for been as mentioned, Jim Yes, months I've

the there. sort close had in integrated investments we processes we've Castanos of or the and impressive ground that in time facility months, So Castanos facility over in a truly down what in significant years. to to great spend get very on the to I've expanded the X facility placed tell you, amount X Mexico and very my been last have, first X made, of the a our exists I that's will And it's

on believe continuous to and Castanos. I accomplished come outstanding more think our in approach our the is excellence. also operations team job to operational from has done I there an what they've

it's we said the priority. think same I So

of in Our those priority excellence Castanos. priority to to benefit, to to remove that cost drive takeout drive non-value-added initiatives work all is is operational our

over teams deal. the in it. on continue that, we'll just improvement is to operations that cost perspective think do process line our Castanos.I continue continuous bottom been from that. leave embarked It that period is a something a not to and not and have performance So excellence. so through, reflects we'll in a push of do It's The that, pursues that one-shot a X-month we process in

So we'll from to that continue do an perspective. operational

they to, really that time create the our that and products I'm expand now to entitle what to our thinking them what what the win require customers, meet industry expects over is customers, stakeholders so their months that capacity, to that we've we to our needs with win and Our their we work be or to Matt priority our more sure this to new fill work. or have built work And requires, our and the customers our existing team key and meet period. in help XX capacity when and industry coming externally, customers able products have we spend clearly is XX, customers to XX, can make services

So over that's learned the of kind last months. X what I've Justin

your covers me question, that think if not, know. but let I

Justin Long

performance the the does. maybe the business. And That shift of to

and issues that impact issues the the you terms out those issues an that that you $X FX times border million Could how few much of year-to-date? at playing the how of to break out called related at are million update maybe border on was saw from a out provide the $X You in border. the and

James Meyer

start Justin. with I'll Sure, breaking out.

contributed $X.X And about the over on million the for was FX course $X.X million. of that breakout. it So year, border the

In closure, that the terms turn of border one over. I'll

Matthew Tonn

to the closure end gives at week of just timing of little QX, end of of note closure border quarter. the the of border there's sort right the the time time was on which for December, in of mean, to couple I things a the you X was of sort at respond

rail closer is done management operators. we've what with the So got we've then a much since

a And management review a or better surprise daily or tell mitigated going view you now, prepared and expect. delivery closer from was where future better of so also it's to expectation. it order any got right I what better than happening of have it's better what's can to a we've extended impact, we better, be So will in and and QX for border closures. we

Justin Long

guess Okay. last one the me. for That's I And helpful.

and guidance significant the that there on pretty But deliveries on XXXX, the implies about we of guidance mix for provide as cadence growth of across any it you gave You timing and board. other can the is quarterly performance factors? color based be the or margin may of that additional think things the business, fluctuating

James Meyer

Mike, that? do respond you to want to

Michael Riordan

Sure. mentioned, quarterly numbers, year. throughout will to December. We're say production QX lowest, we'll start line but didn't until be not going I specific give on our fourth improvement see I our will sequential we as the

running understand be cetera, that fourth the hiring and in and at the compared fully learning when up to QX production will ramp the going from new costs, can those there utilized curves full that mute is capacity et will of crews. you results line the So on over rest year

you'll that QX with see from gross low the point perspective. year So margin being a the scale up throughout

Justin Long

being a And delivery and Okay. lowest perspective, building would you expect through cadence, the then a from similar year? XQ the

James Meyer

the that talked we about So there's border closure, from hangover a as one, with QX. on

finished going property. are have that or goods finished of And will QX there XXX to in see was deliveries fall railcars higher property about much you on actually QX that through been little you'll our be how So million financials, sitting of kind as QX. into would was on look over just a $XX given

actually little QX. as will So result QX hangover closure the of be high deliveries a into falling a border

Operator

and you. this we've Thank also of will question-and-answer conclude end time, conference. the At reached this session, today's our

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

FreightCar America (RAIL) 19 Mar 242023 Q4 Earnings call transcript