FreightCar America (RAIL) 8 Aug 232023 Q2 Earnings call transcript

Welcome to FreightCar America's Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. An audio replay of the conference 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 Riverton Investor Relations. Please go ahead.

welcome. and you Thank

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

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

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

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

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

at and do. second our to everyone, realize what thank for pursue us impressive continue world-class quarter to morning, Good we delivered all we become efforts FreightCar as joining today. you results America and

on quarter increased XX% million deliveries XXX of railcars. the Revenues year-over-year to for $XX.X

of the new produced I a we finish that leverage all, work best more all to will XX.X%. our efficiencies. thereby which operations the add very during quarter the further the quarter, we and quarter to much construction dialing and more make impact our the results further gross And respectable of second headwinds currency performance, improved to foreign much, margin commendable. our still still that the continued improve manufacturing During plan of operations of the have to and we absorbed during do in

As we our the our be performance. efficiency new and in standards industry, peers setting best to stated the manufacturer before, in for is goal quality, have overall

characterized quarter strong our to This to even while customers. value efforts well, these allowing achieve us stronger results delivering

As leadership us for premier satisfaction extensive great Nick Chief is guide the operational of to first companies. to Nick will Randall. excellence, and part Q&A. a addition the be the of higher available as at announced customer the Nick our on Operating and today to our commitment He delivering is performance. of with we manufacturing us team even call superior during and brings quarter levels of appointment Officer, record track experience part a our will

by business, and U.S. all America now a time, on Mexico the challenging business and After approximately campus a railcar online, manufacturing the completion a about long to producing undertook of simultaneously in amount. X of railcars, I the those is state-of-the-art manufacturing and conditions manufacturing we Castaños. brought it think years integrated might campus nearing the which team substantial FreightCar best envisioned minute, global of extremely were finally manufacturing a midst this in transferred in the pandemic, X vertically construction, margins to we operations just of Mexico, while for years are X-year And complete and generating in in add

margins. fully can expect functional facility, world-class, X,XXX maintain X,XXX per With we of readily the cars produce to to and year manufacturing without our completion strain industry-leading

best us, to to preserving best produce different of defined the world-class in quality, means efficiency, the types we flexibility while products. achieving best on-time As calls, prior delivery

transaction completed shares. in These with mark financing exit work from Investment Pacific financial loans our significant part cars. position. remaining calls, included planned another reached quarter, over term as into we successfully the of off the on the preferred majority strengthen business converted Furthermore, from Management and of our couple the key that which by the have progress quarter, last just fleet, selling we of the the leasing During lease further transaction, as X Company exit and during milestone XXX our the the we steps, our to delivering discussed leasing we

to initiatives. reduced which growth for debt The flexibility us our focused gives ABL, greater on to future has balance remain the the sheet and financing on much that the just team core been of allows

So margin quarter our balance revenue progress sheet. strengthening represented in important the in growth, driving total, second expansion and

this our I'll for address point, year. guidance At the

EBITDA our from raising year adjusted range million. million to million are a -- of $XX between guidance between and previously stated $XX $XX guidance full range from and million $XX We

is for In guidance to of $XXX which X,XXX XXXX we addition, reaffirming fiscal are and based between X,XXX between production forecasted the railcars. and on revenue our of million, be $XXX million in range

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

Jim, and you, everyone. Thank good morning,

activity to aging the for our replacement with remained fleets. railcar industry the solid level of our inquiries, of demand products demand During and quarter, order largely tied

XXXX. railcars quarter the valued This represents increase with valued order of at the first orders first we XXX orders versus half second $XX fiscal totaling of For XXXX, railcars closed an $XXX half at for million XX% X,XXX million.

valued We approximately EBITDA. yielding of adjusted X,XXX with lines $X million million. production quarter X at a our a ended current railcars the backlog in We strong quarter with $XXX had

line increase having line in team As flexibility. available at the for production to pipeline commercial Jim continues The completing our sight. XXXX, build our our mentioned, Castaños fourth should fourth is fiscal and

uncertainties FreightCar affirm loadings railcar XXXX. pose of we macroeconomic forecasts environment of deliveries market overall railcars XX,XXX conditions in the and industry in weakness Although

customer remains pipeline range with diversified strong across types. a car Our indicating railcar sales inquiries demand of

segments fleet, see of utilization customers' retirements. with in to in lessor car continue We railcar to due part tight some our supply combined high

percentage on being direct customers. achieving of manufacturing prove our committed fully partner of noncompetitor, FreightCar focus a an position high Our increasing attractive excellence from railcars, our manufacturer continued relationships. customer to exit customers of unique our leasing pure-play position with and as our these America a deepening and lessors for continues supports With a our supplier as all

On the maintaining bring operating our business front, focus value our goals. with that substantial suit discipline, on and commercial to align steadfast are our strategic a deals prioritizing customers, we with

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

Thanks, everyone. good morning, Matt, and

quarter Jim opening deliveries million expansion of totaled of second As of the for quarter, deliveries the $XX.X delivered XXX second margin and XXXX discussed second million XXXX. for in railcars gross top with line in quarter to on Consolidated his growth revenues remarks, $XX.X significant year-over-year. railcar compared XXX of we the

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

at by our the impact partially efficiencies foreign planned we manufacturing currency realization fluctuations, our Castaños offset the facility. While profile of from improvement of continue to negative see margin our in

quarter second stock-based SG&A of price for a the quarter second that movement in XXXX versus of the the compensation driven increased change share quarter million the quarter XXXX, $X.X due XXXX totaled million, second to share of the the by during up of during XXXX. $X.X from second in larger price in

the liabilities quarter cash beginning accounting been consistent more the move an as year existed SG&A should eliminate of instruments. that This mark-to-market during subject stock-settled forward, million that to compensation be we at additional will to certain from each in the Moving had of awards stock-based converted $X.X period.

the profit. for in income The million to consolidated of income income quarter million second XXXX in primarily operating second driven of the quarter increased compared XXXX XXXX. operating gross in $X.X of was second Consolidated increase operating by was the $X.X of quarter

quarter, a that proceeds which both large $X.X of the to were sale During used to on we resulted of fund Castaños as a was tied continued portion of the a The credit build-out sold and our legacy revolving to $XXX,XXX lease our settle a in our lease campus portion million. gain well of approximately as fleet. facility proceeds fleet,

opportunities. certain balance our of extinguishment. extinguishing to a we and during legacy ongoing driven our debt credit combined that compensation quarter lease our the focus million by commitment in term our XXXX on When loan our enable a loan future by preferred facility this cost gross in $XX.X this quarter a partially debt The fleet, for actions loss fleet with awards sheet. Additionally, and our issuance of to of through a consistent offset loss excellence, strengthen net take operational on stock-based monetize are $X.X convert advantage should refinance refinanced growth-focused with second to million taken million lease profit extinguishment, capital resulted our $XX.X the on our strong gain us on term a lower share

by driven $X.X and realized to EBITDA the increased $X the supply quarter operating second continued quarter XXXX, achieved and our compared second XXXX In manufacturing adjusted teams. of primarily of of million in volume efficiencies by chain we million

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

the as capital expenditures Capital million should is expanding the footprint. $X expenditures of our XXXX we were build-out continued quarter approximately Mexico manufacturing for decrease second Once completed, considerably.

revenue capital to X.XX% to going We expect X.X% forward. expenditures be of approximately recurring

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

years. Thanks, attesting and our were of Mike. qualities several efforts Overall, strong, over past quarter inherent performance the to our second results the

and timely the half look we financial dedicated of our delivery and second to current of As year, team ahead performance. continuing improved to show remains execution this commitments seamless level of to an the

complete future, that the build topics by now nearly the the of team continue and manufacturing come to of and have our an array fruition. campus excited to growth We're may prospects we

its macro the While and what questions collective on sets near the FreightCar certain it concerns that is whatever America deliver mind generate will industry team on. is the term, regarding economy and/or may

Our for team thank satisfaction for to goals on over growth, questions. us entire address now and to want operating the is and customer strategic grow. That and for team deliver concludes then right our realizing determined I'll and as can hard call operator work these and remarks, your setting the to today superior support excellence, to prepared for the our their look you, goals. I so continue and objectives and to turn our joining we your committed we

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

start your production outlook the for This I Justin. question to on a remainder wanted the is year. Brady with on of for

the quarter you which second You year. of as quarter? color of the maintained cars third deliveries in half pertains us the delivered X,XXX Could just those on delivery to give a the year expectations fourth on guidance, your your it and little cadence full over implies

you Mike, do want that? to address

Castaños Sure. the going ramp of number the QX to facility. deliveries, QX. be even. spread X,XXX But heavier give see the is not be we're we the guidance with the but consistent than a on as to going We past, we will specific not see little very complete up will

a And with I margins. could maybe follow up on question gross

the through first that call, expected the quarter noted margin you year. sequential you On improvement of remainder the

some Given meaningful the step-up could stands give expectations and we quarter the today? quarter, third in saw color for your around fourth second quarter here as it you

I'll time, for the Brady, every it course, the as the this it Jim. was really this this at way. QX, business. try by is by was capability influenced excellence what It address was factory. driven of quarter is operational business of the well. particular was and quarter your mix It of as obviously, great demonstrates to is, a a it question really also,

think was per car. produced about strong. And I the So $XX,XXX per this was especially adjusted EBITDA vehicle quarter

that the And on very rest the you and for that. down provided a a do steps if that's little the can big year, math So look number. of bit, the at you guidance

performing I of the this level higher story but quarter margin gross total, us. was at, gross nice to margin company is So the at perform in for than on expects been takeaway it's a think particularly the

sense. some Okay. Great. the second just year. That half question order makes a Maybe of finish expectations with -- your could the I over on

weaker the the Could in were half like of first around timing. mentioned orders You up relative in to you pick give color orders a because half? to release you little expecting that? Are that second the

bit quarter-to-quarter of smaller. orders like I'll -- our or of a and longer to And company, to over make order look obviously, Matt. the helpful either over a slightly it's time. probably me while that, we little look bigger intake, quarterly intake can pay turn with couple smaller The Let you, start a attention more periods it to as

our was the If you about book-to-bill over half, X.X. ratio first look

X quarter. Matt I'll important, it this metric if the So to and on you the particularly over that it preface particular timing pipeline quality before any Matt, of just in comment to influences your is in discussion? turning But want

have sometimes the and of it Brady, customers, as probably really Yes, the through funnel order about continued think way for it's their I out pushes that's have all the when with we about approval Jim's To we internal in things we sales getting point, best rest strength to established, go expect the think current we the of answer pipeline, timing is we all. That's processes just the year. activity customers where conversations out.

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

to want I a capacity more. just understand Jim, question bit the

I mentioned this year. does up Castaños year in, capacity X,XXX once second running, per it Does capability? in When think and output to incremental the you next year? your up cars total or that that of half X,XXX goes like capacity that is to kick in kick

line being expect people, line and we'll railcars so very, to -- we the of it's be we'll a move we're a putting while month. it use up use actually it And in we this think very the whether both that of to line. sort it going on down, empty as it's now really choose ways, however the or line at producing that plant point swing campus, Well, fourth line business. beneficial of done, in used about way. nearly that ultimately we're ramping is over available use Matt, enormously which and weeks it, think the ramping we're to which on a we down it's then next line, how fourth those Having an producing or And have as case shovels in

business said building. past much you I we're, able if in call if very X all all the efficiencies line X,XXX And and to as of not X we feel utilizing So prepared remarks we're know, very in you're said additional cars pure it's what more from X on it, line, the between the the X,XXX in comfortable and capacity on utilizing lost we've as a swing fourth off today, then fact, because time coming we But a out standpoint, the in of as as using per lines it shrinking changeovers. being other year lines. you're depends to put that

yes. Yes. sense, That makes

So can your beyond you of percentage current is talk maybe about for XXXX? also backlog what

think But of at I math front kind of moment. don't you that in have ranges us the the think with we given do you. we've I the can

have guidance June our second the You have and you you and dollar our number. back books year -- of backlog XX, value full can the on the into obviously delivery from as half

variable it that's second assuming the be be and for would second only activity to hard is the the the for guess are half activity order same-year much order how of I No, would -- gauge in half the how -- delivery? you the of like much in for

times. factor locked 'XX, yes, is this lead point, at especially for practical ahead. fiscal in supply and business our and loaded purposes that So when you all We booked, -- go

-- good is Yes. order Jim, still still to solid. the activity the I inquiry it's mean, order and activity is that see

guess to grow next seems I the half. obviously first pretty it very pretty meaningfully, deliveries right? year in orders You had strong feasible

we're I call and earnings us this don't XXXX. of quarter XX, talking having point, yet. about ourselves want the ended really Well, just a And Matt, on XXXX start June I get to think at ahead

But of terms do the capacity another efficiency start degree the well more XXXX is to there there it to to about at that capacity, it available In really concept. order point. available this of similar capacity cars I'd a of the -- be line will intake on talking available with would as swing be certainly do as speculative because rather

that. do we're not So to ready

stuff? nitty-gritty -- Okay. X%. normal a up there Is more Fair went it's couple mix questions. The just ASP maybe just like The more by of enough. -- slightly

That's mix-driven, be normal. would Matt. that Yes,

solid. orders Okay. has I of order said you you guys remained August? been week the -- first July activity pretty has know Did the And receive in and

We'll report on that in the next quarter.

to something talk us quarter, have next Matt. Let about

of just say the minute end everybody to few I introduce words. give just a there we take here to a to Before Nick like call, couple would and and Nick out a seconds

good and morning. Jim, Thanks,

talent delivering to privilege to increasing America. is support our fueled what focus success team across all comes processes. It level as me, excellence team details of And covered FreightCar our and cars. to from freight build that continue proud for to that and of Chief years by on delivers the of I'm in mix over an but gone and construction which really from capabilities increasing ground in potent organization value player just about operate, enthusiastic role has really in has delivered what a excited to operational me a what We the look agile building continually have, down to with important and I of years to see journey an company this about in quarter. in of system Operating an satisfaction. we an success the has of decades campus incredibly My breaking forward industry-leading of the it X that team my that XXX operating and unbelievable relentless Mexico of to foundational take Castaños. It's a I'm last with pursuit team. that I foremost, to and think is to simultaneously leading the this First levels history, America an we on a already, great greater continuing experience have is flagship really recently installing the operations we truly and me Jim, we're level those joining the creation. and also Officer. in on value of industry because of joined on benefit comprehensive customer Mike the Matt of incredible all I FreightCar second operations in

the to very Nick, team. you, and all again, have fortunate on we're, you Thank

that morning. our discussion think this concludes I

forward you QX and to for talking once very thank on in, look calling So again you. we much to call. Thank all again, you our

This you. concludes Thank call. conference today's

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