FreightCar America (RAIL) 12 Nov 242024 Q3 Earnings call transcript

Welcome to FreightCar America's Third Quarter 2024 Earnings Conference Call. Please note, this conference is being recorded. 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 Riveron Investor Relations.

Thank you, and welcome.

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

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

provide disclaim to it's future any statements whether new to result otherwise. events or expressly forward-looking duty a our of information, updates We

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

was freightcaramerica.com earnings with posted on at XXXX for our the is Our company's morning. website X-K, third of the this release quarter filed which premarket along

now for it Nick And remarks. with that, I will few a turn opening over to

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

I'm report in strong to annual step start momentum year. our from the a to another building marked quarter This remain pleased goals. on achieve record-setting to we track our

by with parts and unique needs services. facility, exceptional driving producing at customers state-of-the-art meet enables our and it us of strategy continue our conversions providing to rebodies premium railcars, execute efficiencies to We along of our

consistently performance, robust line prior consecutive gross increasing of we second quarter solid financial over and margins operating delivered and sales of cash the significantly, another XX.X% of a top quarterly terms and In year period XX% grew flow.

excellence. We on to the throughout managed shipments highlights quarter, operational commitments offerings multiple robust and marked our differentiated with product This customers. ability by changeovers our deliver quarter the to

our railcars, we we facility. were due at improve us flexibility, and By delivering of quarter, in XXX quality. our our as differentiated business manufacturing performance last pleased to delivered out new unique meet During operational our stand capabilities shy industry the and the We with enable diverse customer earnings our to quarter's record we operating output products, just secure needs.

Unlike range on manufacturing commercialization partner nimble, to competitors This projects strategy options. with distinct us Our nearly also leasing at manufacture our allows both freely a appeal focused our smaller and by all of is efficiently routes independent as stay market with as larger specialized orders. approach and take exclusive handle providers. we supported lease, orders well role wide enhances more as financing

we ourselves customers' meet with positioning shippers consistently As needs, can key flexibility win our proof to our to high-quality work. of partner

our and payloads This For structure hoppers maximize including time being that additional the enhancements, value designed solutions design our efficiency. underscores large of operating customer customers. be optimization transport tailored produced covered is specific of refined which to our at this facility, purposely will we've line our requirements. This lightweight provide first covered help the capacity cubic and for have that hopper, we high address

secure we flow XX%. differentiated share This orders industry being despite and this steady down high-quality strong quarter terms trailing On been presence market orders of was hallmark the have industry across inquiries. capturing commercial and a roughly our of of continue dynamics, X% of through the across by basis have discipline we September, a while market third portfolio. portion continued we outperformance grow XX-month as In historically momentum of has overall our to slower to sequentially activity, year orders gained regarding a

industry this stable, remain railcars our expect our business to pipeline momentum grows. And replacement we further for Demand support largely model as tracking cycles.

year, year forecasted a railcar narrowing As We're and the to $XX are in our year-over-year million, out range between the market increase our reaffirming representing XX% midpoint adjusted confident and EBITDA million position. by the delivery at revenue our we expectations $XX we close full look and raising of midpoint.

we see ahead, on prospects. to product demand and strong across have will Looking various continue long-term a XXXX look as we forward growth lines positive impact to executing and enter our

growth and to and focus our business Our product our to drive a fourth carry on the share clear, this is through platform In momentum results excited capturing and market eyes, significant a manufacturing operational delivering year-to-date demand thrives my meeting consistently versatility. continuing quarter, build leveraging to strong into cash remains portfolio, enhancing generation. achievement, we're proven our sustained that

turn call will market more the discuss to for to then our that, I financial and on over the results. detail to Matt next With Mike

Nick, you, morning, Thank and everyone. good

with and end We the into year. heading of are well positioned pleased our progress are the

approximately $XX.X million. For we railcars, XXX the of for third quarter at closed XXXX, valued orders

industry and large captured on a hoppers. led . of hoppers by across Excluding covered strong flat in cube we basis, gondolas orders racks, cars, XX-month tank and auto XX% improvements continuing open-top cars performance trailing and

Our improving our team, every delivers is at process. executing stage of share strategy market that value our a commercial the testament to

on to route specific customer true as a is pure-play well as providing differentiator. manufacturer, our options a to Our product as requirements focused market offering meet

earnings tank volume. reduce served of Further, to to types by expand including continue portfolio enhancements long-term include portfolio, our offerings. reported evidence XX% that our of our we of recent ownership. DOT-XXXR is cars, than tank -- cost our efficiency conversions And better railcar enhancements railcar finally, rail to strengthen our car DOT-XXX current QX all existing on order Our car call, product as of for capabilities carload and

car these approximately ensure needs. $XXX to mix a efforts diverse meet of customer We types valued railcars of a we equate with that at All of the quarter ended million. third X,XXX healthy backlog

and experienced have solid strong maintain activity many spending types, including conversions. We interest pipeline a car inquiry healthy and

expected focus loadings of the declines remain improvement our macro relatively and slight by XX-year agricultural out largely coal on terms flat, posted for growth, mandated supporting chemicals we dwell, the we as continued railcars replacement within at dynamics car foreseeable by and commodity and groups, in hit year-over-year Petroleum, segments. consistent positive during indicators, with the X-year and these performance car see traffic quarter, loadings. continued tracking velocity industry year-over-year demand car including close carload X.X% car railcars future, year in new averages With Looking just key however, experience which their XXXX rates each rail rail down largely driven retirement. environment as driven railroad supports traffic principally each their XX,XXX to

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

good begin, I through results. financial talk everyone. To will the of an overview and Thanks, morning, Matt, quarter's

results and Third quarter significant were financial margins. delivered year-over-year strong revenue healthy as growth we maintained

million totaled XXXX with in revenues $XX.X deliveries $XXX.X for of Gross quarter quarter third million of in compared was deliveries XXX of third $XX.X with to gross XXXX last of quarter and compared of the railcars, XXXX of XXX profit margin a profit of XX.X%, the the to Consolidated the XX.X% gross quarter million third of year. railcars on third margin million gross of $X.X in

number compared shift by the gross year was to delivering with of prior a conversion railcars mix in performance year the Lower prior cars. delivered primarily a period, driven margin as

types basis as the of we quarter delivered improvement the points XXX of second saw a periods. XXXX saw Additionally, between sequential we in favorable from a comparable car mix

gross benefits the FreightCar our to at moving anticipate by facility of margins full continue industry-leading forward, ongoing We driven operating capacity.

the SG&A to third XXXX. of XXXX totaled of the $X.X third flat for quarter quarter million,

XXXX, operating railcar by we Excluding compared the periods. year, from the $X.X achieved of between we stock-based driven deliveries leverage further compensation, the increased the highlighting of of prior to million, SG&A built XXXX, XXX the revenue substantial third business of a In our decreased million percentage as in model. EBITDA basis quarter $XX.X quarter adjusted points primarily third into comparable

impact net For of XXXX, warrant in income change such fair third share, or loss change year. the million net the compared period. each line per net third in items Adjusted a charges our of $X.X or to as nonrecurring our which of adjusted the value fluctuates quarter noncash of and of $X.XX income during for the share in $X.X $X.XX diluted last quarter the per price income was liability, quarter with million adjusted of the certain share in market accounts

million. $XXX the has for the million due share the noncash during quarter appreciation price quarter. approximately recognized full a and million of been XXXX of charge were to our to in Capital a million quarter, $X.X capital third to the warrant spend liability our our $X forecasted we range During $X for expenditures year narrowed

to on mentioned we quarter's flow generation last I continue our strengthen capabilities. call, As cash

operating since generation quarter second representing This flow, cash of in the first largest we quarter cash $X.X quarters and delivered positive million consecutive XXXX. of quarter, the operating operating cash flow in flow back-to-back the

in million have $XX.X borrowings our credit revolving result, As outstanding currently hold a we facility. and no cash on

cash are our through generation, strengthen and shareholders. for strong answers. sheet well questions we As and value overview, continued in capital open structure -- I'd and financial growth invest With cash our like our flow creation positioned for now to that the enhance line balance to we

Capital first Our Mark question Instructions] Reichman [Operator is from Markets. Noble with

those plus ask enhance recognizing of XXXX I just please you is car production the the sustainability about introductions. was a in XX% discuss could of tank that for ahead along product the Would margin key question in reason ingredients margins product beginning gross and that the conversions tank that car I the And with mix? base margin quarter, including XXXX XXXX, wondering

Sure. This Thanks, Mark. is Mike.

we minimal and in gondolas, at terms healthy quarter like of And hoppers mix, a of lines saw said, number was what mix, changeover. we this X flat So a capacity with operating cars. open-top strong full we very had really,

utilization results. So the facility of it's optimizing just a lot the financial of

cycle. expectation to higher I then was thought? a continues administration, thoughts changes Matt wondering track incoming demand tariffs? just that mentioned growth if Or that with what And your are the Trump regarding potential replacement for the the economic the for And

the it, take part part of take I'll first will Matt on second So the tariffs. take and

Yes.

demand, tell railcar drive overall demand look new it it per new fall seems and a as at economic -- car it's perspective really to I we to what When growth. to that replacements. I early drive we still to happen think will online demand, an coming to year this look within at XX,XXX demand from plants little tied relates may that's

be years XX,XXX. demand a there's to next years, new cars the will to out XXX,XXX-plus the drive they're There required in the above doesn't would retire in the cars that horizon, for XX that X catalyst Looking replacement north beyond really industry seem of old. XX

tariffs terms of company any has and of the date, currently not tariff, impact expect business, the not of on as future tariffs in And our business had directly affect today. any our to do we

one then final question. And just

to update If balance recapitalize you the provide an could on just plans sheet.

Sure.

year. our this as updates towards So objective have accomplish and We're that, strategic to to that still them more provide working we'll remains we provide.

McCarthy with Brendan from is Sidoti & question Company. next Our

off the I just increase midpoint start adjusted the that increase EBITDA of for for guidance guidance wanted supports to or with there? What the XXXX.

Sure.

quarters through margins path the to So continued thus just in, X cost that just for the then performance the year-to-date and how end with more had anticipated far. EBITDA And the strong we full of optimization, year little optimization. year, see we performed the with plant getting adjusted based the the a we've gross higher visibility towards have first on high

Got it.

Okay. deliveries And this deliveries the drove at in the looking the variability quarter, second third to quarter compared at what of looking then year?

Nick. it's Brendan,

over product we you some pend some do change plant we complete just another changeovers from those product. -- as those one There's as the Our changeovers issues and shipments whether timing quarter. has to

lighter were entire of guidance on cars than which based on on our a of shipped us variance for explains So solid we we XXX is QX, total to the cars X,XXX number shipped. in throughput changeovers units. QX, X,XXX were

that, for I from anything see to expect and track that on still we're us meeting that don't stops So expectation.

still Understood then expectation with in XXXX? slightly quarter the that with hiccups EBITDA. year was issue. expect think to expectation? raise into for at adjusted the reasonable in kind heading gross that still the considering border to looking margins come below a the Nick. margins of the it on that the the of gross I Is last just reasonable the and year just midpoint full of for guidance XXXX And Is

for single in held past by we'll couple year. gross last low materially, as lower And gross we calls. full That the the quarter be think on a on that's I talked line the a digits last good expectation, year. line mainly materially for of about I QX, would say with was back margin in it's with margin year, us.

Right, right.

One for me. question Okay. more

market. Just at I on looking flow conversion further car potential customers an the uptick conversations guess you have tank there? or with in had deal just customers

including the what on conversion. multiple pipeline car strong Overall, activity this in see Matt. types, tank interest of we is and is across Yes, Brendan, very the car terms

in, is as focus we a forward. engaged remain we go that clearly So,

with Markets. question a Mark next Noble Reichman Our is from follow-up question Capital

had just X I follow-ups.

wondering real hanging also could are to little existing a If cars just to mean lives basically their Trump sales? on on your of The first coal of delayed. of coal a profile the the having effect need provide does let's -- business. carbon on sales? roads or I the drivers if, growth it parts part what and as rule administration those see for the that positive there those sales extended And that is some to power and plants, like parts just say, extend you retirements are the coal-fired through was just rail greater and Is net emissions you on visibility I cars? the that Do the example, having the and get business? a

Yes, delay as coal sales core market in coal our EVC that parts would to net as or this plants question, out of the America its which FreightCar your in retirements the Mark, fleet. it, have Sure. positive the the fleet historical large is is has a Mike. replacement for impact of to well parts

II we've to growth an continue there in see the shops. substantial repair we in general, that and patterns, as you'll In Parts and view in supply being parts year-over-year coal in business, helping in aftermarket we and but expand profile footnotes railroads growth only terms not growth, seen of markets, attractive ABC Class to X the our

question second follow-up. a the And just is then

kind can that margin into -- it quarter, the back from guidance. your first was quarter. obviously so But a of You weak like

quarter quarter, second The XX.X%. is XX.X%, third

your the fourth the you kind the of for in going So, what kind quarter? of are the those are see kind back Do what your -- of XX.X% expectations range? for a fourth quarter? drivers Or

Sure.

our we can to And gross guidance. of QX we But see the that of you a lot with from give decrease changeover. don't full be quarter-by-quarter. will based generally to So the expecting margins insinuation, on QX from sequentially in comes year timing

timing deliveries X had the in otherwise some on deliveries have which prevented So end the were at the of weeks down as QX. pace of shipments that It changeovers. would QX, very was last with

going that's market mix-driven the of be as expand some continue And to markets. into and we share get to

bring year as were north in as We'll see a little which slightly QX, bit us full But from end down we of in mix well. to sequentially. shift away expect still will digits we where double

This the Nick question-and-answer to will would conclude session. I further our like for now Randall turn to call back remarks. over

to of gross top close year Thank over XX% prior the wanted I We another and our of quarter couple consistently you. in delivered margins summary, grew XX.X%. increasing things. period solid of significantly, just with line

well cash of consistent a cash outstanding position strong and with strong of course positioned $XX.X have with are generation. million operating flow We no borrowings

the on positive of and guidance a long-term year, for will full share We our our lines on see we EBITDA enter X% captured impacts basis. raised prospects. we sequentially continue various growth product we forward to And strong gaining that midpoint across market order executing XX% have trailing as demand on XXXX look a adjusted to robust intake, XX-month and

With for would that, have day. participation, everyone to I a their like thank and great

you. This today's Thank conclude will teleconference.

may at You this lines disconnect time. your