NFI Group Inc.

Ladies and gentlemen, thank you for standing by. Welcome to NFI 2023 fourth quarter and full year financial results 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 will 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 like now to turn the conference over to Stephen King, Vice President, Strategy, and Investor Relations. Please go ahead.

Thank you, Michelle. Good morning, everyone, and welcome to NFI Group's fourth quarter and full year 2023 results conference call. This is Stephen King speaking. Joining me today are Paul Subri, President and Chief Executive Officer, Papasu Soni, our outgoing Chief Financial Officer, and Brian Dusniff, our newly appointed Chief Financial Officer. On today's call, Paul and Papasu will provide an update on our financial results, the operating environment, market demand, and our outlook. Brian will introduce himself and provide some insight on our financial guidance and his areas of focus as he assumes the CFO role. This call is being recorded and a replay will be made available shortly. We'll be using a presentation that can be found in the investor section of our website. While we'll be moving the slides via the webcast link, we will also call out the slide numbers as we go. Starting with slide two, 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 referenced today are not recognized earnings measures and do not have standardized meanings prescribed by International Financial Reporting Standards, or IFRS. We advise listeners to review the risk factors, financial definitions, and non-IFRS measures 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. the company's reporting currency, and all amounts referred to are in U.S. dollars unless otherwise noted. On slide three, we've included some key terms and definitions referred to in this presentation. Of note, zero-emission buses, or ZEVs, 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 four, five, and six provide a brief overview of our company. For those interested in a more in-depth introduction to our business, please visit our investor section the NFI Group website. Slide 7 provides the latest statistics showcasing NFI's leadership in zero-emission transportation, what we call the ZEVolution. Since 2015, NFI has delivered 3,603 EUs of ZEVs that have completed over 150 million electric service miles in more than 150 cities in six countries. Our infrastructure solutions team has also installed over 445 chargers totaling 72 megawatts of charging capacity since 2018. Demand for ZEBs continues to accelerate. 36% of our current backlog are ZEBs, and based on our analysis, we see over 50% of anticipated customer purchases over the next five years being electric vehicles. We continue to project that at least 40% of our 2025 deliveries will be ZEBs. Sustainability remains a key component of our strategy, a core company value, and critical to our broader ESG program. On slide 8, we outlined some of our 2023 sustainability initiatives including the establishment of a sustainability council made up of company executives and leaders with direct oversight from our board. And we also embedded ESG into our long-term executive compensation program. Our ESG report for 2023 is in final stages of development and expected to be issued in May 2024. To find out more, please visit the ESG section of our website. Moving to slide nine. Earlier this month, we announced that Brian Dusniff has been appointed Executive Vice President and Chief Financial Officer of NFI Group, effective March 1, 2024. Brian joined NFI through our acquisition of North American Bus Industries, or NAVI, in 2013, where he was the CFO. Prior to his new position, Brian acted as the Head of Strategy, leading the due diligence and acquisition of MCI, and then went on to be the President of NFI Parts, where he played an instrumental role in consolidating numerous aftermarket businesses into one parts business, grew revenue, combined distribution facilities, improved margins, and lowered overall costs. Brian also led our Arbok shuttle bus manufacturing business since 2022. We'll hear more from Brian later this morning. I will now pass it over to Paul to walk us through the high-level financial results for the fourth quarter.

Thanks, Stephen, and good morning, everyone. I'm on slide 11, and I'll provide a brief summary of the quarter. Starting first with demand, which remains strong with 143% sequential quarterly increase in new orders, and a full-year backlog book-to-bill ratio of 113%. The option backlog conversion rate also showed healthy recovery, now reaching 41% for the fiscal year of 2023. Year-over-year, bus and coach deliveries were up 19%. Quarterly revenue was up 15%, and adjusted EBITDA was up 642%. Gross margins also recovered well, reaching 11%, reflecting a strong contribution from the aftermarket business and a seasonally strong quarter from the previous market. Our aftermarket segment delivered yet another quarter of outperformance and its strongest year ever, with $551 million of revenue and $120 million of adjusted EBITDA. These results were primarily driven by increased aftermarket sales in North America, favorable product mix, and management of our freight costs and logistics. NFI's backlog remains very robust at $7.9 billion with over 10,500 equivalent units. The average selling price for vehicles in our backlog also increased by 22% year-over-year, reflecting a higher proportion of zero-emission vehicles and pricing actions that we've taken in contracts mid-2022 onwards to reflect the impacts of inflation and a changing product mix. We also ended the fourth quarter of 2023 with a very high number of equivalent units in bid award pending at a record 3,832 equivalent units, where we now wait a formal customer paperwork, which will position us for another period of backlog growth in 2024. Slide 12 highlights the dramatic improvement in supplier performance, where the number of high and moderate risk suppliers has continued to decline. We continue to experience some disruption from certain parts or components, but these are generally short-term delays of a few weeks related mostly to supplier labor availability at their facilities. We are keeping certain suppliers at our medium risk rating as even though their on-time delivery has improved significantly, and we do this to monitor their performance as they ramp up their production to meet our increased line entry rates. Slide 13 shows our quarterly inventory balances and line entry rates. Working capital declined by $64 million in the quarter as we banned to lower finished goods and work in process inventory. This was somewhat offset by higher raw material inventory balances that we put on hand to support stable supply and increase in receivables reflects the increased deliveries in the quarter. Our line entries were down slightly in the quarter, primarily the result of two holiday periods, which included U.S. Thanksgiving and the Christmas holiday break. We project line entries will show improvement in 2024 as we continue to ramp up our production. The ramp up will be phased approach, as we've talked consistently over many years, matching the supply of labor and supply availability from our customers' abilities to inspect and accept these vehicles. We are being measured as we ramp up to ensure that we do not see a buildup of offline buses or work in process as they generate significant rectification and interest costs. I'll now ask Papasso to walk us through the highlights of our fourth quarter, our full year 2023 financial results, and after which Brian and I will provide some insights into our outlook. Over to you, Papastu. Thanks, Paul.