NFI Group Inc.

Good day and thank you for standing by. Welcome to the NFI 2023 Q3 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Stephen King, Vice President of Strategy and Investor Relations. Please go ahead.

Thank you, Roseanne. Good morning, everyone, and welcome to NFI Group's third quarter 2023 results conference call. This is Stephen King speaking, and joining me today are Paul Subri, President and Chief Executive Officer, and Papas Susoni, Chief Financial Officer. On today's call, we will provide an update on our third quarter 2023 results, the bid and order environment, and our outlook. This call is being recorded and a replay will be made available shortly. We will be using a presentation that can be found in the investor section of our website. While we will be moving the slides via the webcast link, we will also call out the slide number as we go. Starting with slide three, I would like to remind all participants and others that certain information provided on today's call may be forward-looking and based on assumptions and anticipated results that are subject to uncertainties. Should any one or more of these uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary significantly from those expected. In addition, certain financial measures we reference today are not recognized earnings measures and do not have standardized meetings prescribed by International Financial Reporting Standards, or IFRS. We advise listeners to review the risk factors, financial definitions, and non-IFRS measures statements found in our press releases and other public filings on CDAR for more details. We also want to remind listeners that NFI's financial statements are presented in U.S. dollars, the company's reporting currency, and all amounts referred to are in U.S. dollars unless otherwise noted. On slide four, we've included some key terms and definitions referred to in this presentation. Of note, zero-emission buses, or ZEBs, consist of battery electric, hydrogen fuel cell electric, and trolley electric buses. Equivalent units, or EUs, is a term we use for both production slots and delivery statistics. Slides 5, 6, and 7 provide a brief overview of NFI. NFI is a Canadian-headquartered global independent bus and motor coach solutions provider that is leading the evolution to zero-emission mobility. For those interested in a more in-depth introduction to our business, please visit our investor website. Slide 8 provides the latest statistics showcasing NFI's leadership in zero-emission transportation, what we call the ZEVolution. Since 2015, NFI has delivered 3,361 EUs of ZEVs that have completed over 140 million electric service miles in more than 150 cities in six countries. Demand for ZEVs continues to accelerate. Based on our data, we see over 50% of anticipated customer purchases in the next five years being electric vehicles. and 36% of our total backlog are now ZEBs. We continue to anticipate that at least 40% of our 2025 production will be zero-emission buses. Given the backdrop of our products and solutions, sustainability and ESG, or environmental, social, and governance, is of critical importance to NFI. Sustainability is a key component of our strategy, a core value, and influences how we make decisions. In 2023, we established a sustainability council made up of company leaders with direct oversight from our board. We also built ESG-related targets into our executive compensation program. To find out more, please visit the ESG section of our website, where you'll find five years of our ESG reports and other related policies and charters. I'll now pass it over to Paul and Papaso to walk us through the financial results.

Thanks, Steven, and good morning, everyone. So we'll give you a bit of a highlight on the quarter. Papaso will give you the details. So I'm beginning on slide 10 with a summary. Demand remains very strong. The North American total public bid universe remains at a record high, and NFI saw a 114% increase in total orders year over year. Funding for public transit is a major driver for this increase, but private markets have also seen increases with MCI orders up 47% year over year, Alexander Dennis orders up 136%, and Arbok orders were also up 93%. Third quarter consolidated results saw a 34% increase in new vehicle deliveries, a 38% increase in overall revenue, and a 184% increase in adjusted EBITDA. Our aftermarket segment continued to deliver another strong quarter of outperformance, with revenue up 21% year-over-year and with record quarterly adjusted EBITDA. Results were primarily driven by increased sales in North America, favorable product mix, and management of our freight costs and logistics. NFI's backlog remains strong at $6.6 billion, or nearly 10,000 equivalent units, with the average selling price for vehicles in our backlog increasing by over 20% year-over-year. This reflects a higher proportion of zero-emission vehicles and the pricing actions we have taken to reflect the impacts of inflation. We also ended the third quarter with over 1,800 equivalent units in bid award pending. which should position us very strong for another very strong quarter of backlog growth in the fourth quarter. Quarter and net working capital remained elevated, however, at $462 million, primarily due to higher accounts receivable and inventory balances. Work in process inventory declined from the second quarter as we started completing of buses missing components and shipping those buses to customers. Countering this reduction, we saw finished goods increase, which is typical for our business as we head into a busy fourth quarter. And we also had certain buses that were not completely ready for customer delivery. Raw materials also increased as production ramps up, and we consciously chose to carry additional inventory to mitigate against potential parts shortfalls as the supply chain recovers. As we move into 2024, we anticipate lower overall working capital balances and improved working capital days as we reduce work in process, and work with our customers on final bus acceptance. On slide 11, it highlights our overall supplier performance. Supplier risk ratings continue to show improvement, although certain components remain challenged, including items in this quarter like high-voltage cables. As many of our suppliers are also increasing production to meet higher demand, we are keeping them on a moderate risk rating to ensure that we work closely with them and monitor their performance as we ramp up our own production levels. Slide 12 shows that we continue to increase new vehicle production rates, with our third quarter line entry rates up 10% from the second quarter. This increase came from the addition of over 240 new direct and indirect team members, primarily in North America. We will continue to ramp up production throughout the rest of 2023 and into 2024 using a phased approach, matching consistent supply with labor availability. Production ramp ups take time in our business as we need to hire and train new team members while also ensuring customers can handle delivery and inspection processes that are required to finalize performance on a contract. By 2025, we expect line entries to be back around the 1,500 units a quarter range, approaching 2019 levels, driving deliveries of approximately 6,000 equivalent units in 2025. The pastor will now walk you through the highlights of the third quarter financial results, and after that, I'll provide you some insights into our outlook.