NFI Group Inc. (“NFI” or “the Company”), the leading bus and motor coach manufacturer and parts distributor in North America, today announced its deliveries, order activity and backlog update for the 13-week period ended March 31, 2019 (“Q1 2019”). Year-over-year comparisons reported in this release compare Q1 2019 to the 13-week period ended April 1, 2018 (“Q1 2018”) and previous quarter comparisons compare Q1 2019 to the 13-week period ended December 30, 2018 (“Q4 2018”).
In its March 13, 2018 results press release, NFI advised that Q1 2019 production throughput and deliveries were negatively impacted by abnormal factors including: adverse winter weather conditions which caused missed production days and delayed customer inspections, new model launches, which impacted production line efficiencies, and chassis supply disruption for select ARBOC vehicles
Deliveries, Order Activity, and Option Expiry
NFI delivered 903 equivalent units (“EUs”) in Q1 2019, a decrease of 90 EUs compared to Q1 2018. For the 52-week period from April 2, 2018 to March 31, 2019 (“LTM Q1 2019”) NFI delivered 4,224 EUs, an increase of 294 EUs from the 52-week period April 3, 2017 to April 1, 2018 (“LTM Q1 2018”). Total inventory at March 31, 2019 increased 165 EUs from the previous quarter to 688 EUs.
|NFI Deliveries (EUs)|
|Cutaway and Medium-Duty|
|LTM Q1 2018||2,749||1,018||162||3,929|
|LTM Q1 2019||2,803||983||437||4,223|
* Heavy-Duty Transit Q1 2018 and LTM Q1 2018 deliveries include 17 EUs from MiDi bus sales under the terminated joint venture with Alexander Dennis Limited.
NFI’s new orders in Q1 2019 totaled 909 EUs, which included firm orders of 708 EUs (valued at $284.1 million) and option orders of 201 EUs (valued at $78.4 million). In addition, 126 option EUs were converted to firm orders (valued at $53.7 million).
Total reported orders do not include 106 EUs of new firm and option orders that were pending at the end of Q1 2019, where approval of the award to NFI had been made by the customer’s board, council, or commission, as applicable, but purchase documentation had not yet been received by NFI and are therefore not yet included in the backlog.
NFI’s LTM Q1 2019 Book-to-Bill ratio (defined as new firm and option orders divided by deliveries) was 93%, an increase of 6% from LTM Q4 2018.
in Quarter (Firm and Option EUs)
LTM (Firm and Option EUs)
|Option EUs Converted in Quarter to Firm||Option EUs Converted LTM to Firm|
Note: LTM refers to the last twelve months ended at the end of the quarterly period indicated
The majority of public transit contracts bid by both New Flyer and MCI, have a term of five years and include both firm orders and options. The following table shows the number of option EUs that have been exercised or expired annually over the past five years, as well as the current backlog of options that will expire each year, if not exercised.
|A. Options Expired||965||504||550||331||741||248|
|B. Options Exercised||1,149||1,339||2,064||1,404||1,795||126|
|C. Remaining Options by year of expiry||925||1,189||1,630||2,334||933|
|D. Conversion Rate % = B / (A+B)||54%||73%||79%||81%||71%|
NFI’s option conversion rate can vary significantly from quarter-to-quarter and should be looked at on an annual or LTM basis.
Backlog and Production
At the end of Q1 2019, NFI’s total backlog was 10,587 EUs (valued at $5.16 billion) compared to 10,833 EUs (valued at $5.35 billion) at the end of Q4 2018.
|Total Backlog (EUs)||Firm Orders||Options||Total|
|Ending backlog at Q4 2018|
New orders in Q1 2019
Deliveries in Q1 2019
Cancelled/expired in Q1 2019
|Ending Backlog at Q1 2019||3,576||7,011||10,587|
|Total Backlog (EUs)||Firm Orders||Options||Total||$B US|
|Heavy-Duty Transit Buses||2,878||6,035||8,913||$4.34|
|Cutaway and Medium-Duty Buses||182||–||182||$0.03|
|Ending Backlog at Q1 2019||3,576||7,011||10,587||$5.16|
The majority of NFI’s backlog relates to New Flyer transit buses for public clients with some of the backlog consisting of units from MCI and ARBOC. Customer options for ARBOC vehicles are held by dealers, and therefore are not included in the NFI backlog, but are converted to firm backlog when vehicles are ordered by the dealer.
Transit buses and motor coaches incorporating clean propulsion systems, including compressed natural gas, diesel-electric hybrid, and zero-emission buses and motor coaches (“ZEBs”, which consist of trolley-electric, fuel cell-electric and battery-electric buses), represent approximately 40% of the total backlog. ZEBs alone represent approximately 4% of total backlog.
Total shipments by NFI Parts for Q1 2019 increased by 7.2% compared to the previous quarter and decreased by 8.4% compared to Q1 2018. The lower shipments in Q1 2019 compared to Q1 2018 was largely due to lower bid activity during the period, primarily from the motor coach market. ARBOC aftermarket parts orders and shipments are not included in these figures as they are not material.
Market Demand and Outlook
NFI’s Bid Universe metric attempts to reflect active public-sector competitions in Canada and the United States and to provide an overall indicator of active bid activity and anticipated heavy-duty transit bus and motor coach market demand. It is a point-in-time snapshot of: (i) EUs in active competitions, defined as all requests for proposals received and in process of review plus bids submitted and awaiting customer action, and (ii) management’s forecast based on public customer projections of expected EUs to be placed out for competition over the next five years.
At the end of Q1 2019, the total Bid Universe was 24,532 EUs, an increase of 4.7% from Q4 2018, while the active Bid Universe increased by 24.1% in the quarter. The Bid Universe EUs fluctuate significantly from quarter-to-quarter based on public tender activity procurement and award processes.
Bids in Process
|Forecast New Procurements over next 5 Years|| |
Total Bid Universe
The number of active bids in Q1 2019 and ongoing discussions with public transit agencies throughout the U.S. and Canada supports management’s belief that there will be an increase in the number of requests for proposals and public tenders issued in Fiscal 2019 and 2020, when compared to 2018 activity. While management anticipates increased bid activity, it cautions that the individual awards may be smaller in size with fewer options or shorter contract terms while transit agencies develop plans for future battery-electric vehicle adoption.
Procurement of heavy-duty transit buses and motor coaches by the public sector is typically accomplished through formal multi-year contracts, while procurement by the private sector is typically made on a transactional basis. As a result, NFI is unable to create a Bid Universe metric for private sector buses or motor coaches. Cutaway and medium-duty buses manufactured by ARBOC are also typically sold on a transactional basis through third party dealers who hold contracts directly with the operators. Bids are submitted by and contracts are held with non-exclusive dealers and therefore there is no NFI Bid Universe metric for cutaways and medium-duty buses.
Management believes the significant investments the Company has made in new product models, ZEBs, facility upgrades and LEAN manufacturing processes, parts fabrication, and IT harmonization will permit NFI to defend its leading positions in core markets.
Based on the Q1 2019 chassis supply disruption for select ARBOC low-floor cutaway vehicles, management is updating its Fiscal 2019 delivery guidance to reflect lower anticipated ARBOC deliveries. ARBOC continues to focus on its higher medium-duty bus offering which has been performing well with customers and is expected to make-up 10% to 15% of ARBOC’s total deliveries. The higher margin medium-duty deliveries will help offset some of the impact felt from decreased low-floor cutaway deliveries. No changes have been made to heavy-duty transit or motor coach delivery guidance. Management’s Fiscal 2019 guidance is now revised to 4,410 EUs, a decrease of 45 EUs from previously reported expected deliveries, and is expected to comprise the following vehicle types:
|Motor Coach||Cutaway and Medium-Duty||Total|
|2,845 EU||1,065 EU||500 EU||4,410 EU|
NFI Parts continues to focus on strategic initiatives to counter competitive intensity including: additional focus on vendor managed inventory (“VMI”) programs, an enhanced product offering, increasing parts sales for cutaway vehicles and capitalizing on the implementation of a common IT platform. Due to the nature of the aftermarket parts business, parts sales remain difficult to forecast resulting in quarter-to-quarter volatility which at times can be material.
NFI’s Q1 2019 earnings are expected to continue to be negatively impacted by several factors, including: the previously mentioned abnormal factors impacting production and deliveries, ongoing start-up expenses of KMG Fabrication, (NFI’s new Shepherdsville, KY parts fabrication facility), margin pressure in the private motor coach segment and decreased overhead absorption from lower deliveries. The Company’s annual delivery schedule has an element of seasonality due to the nature of each market segment and the annual production and vacation shut-downs of each manufacturing facility. As a result, deliveries are expected to trend higher in the second quarter and the fourth quarter of the year as compared to the first and third quarters.
As previously noted, extreme winter weather during Q1 2019 negatively impacted the timing of several New Flyer and MCI deliveries. There is also the potential for spring flooding in Manitoba, North Dakota and Minnesota in Q2 2019 that could impact deliveries. Management is monitoring the potential flood risk carefully and will advise the market if a material operational impact occurs.
NFI’s Commitment to Environmental Social Governance
As part of NFI’s ongoing commitment to transparent reporting and governance it recently published its inaugural Environmental Social Governance report. The report provides details on numerous employee programs at NFI as well as performance metrics related to health and safety, diversity and inclusion and environmental impact. The full report can be found at https://www.nfigroup.com/site-content/uploads/2019/03/Environmental-Social-Governance-Report-2019-web.pdf
NFI’s Q1 2019 Financial Results Announcement and Conference Call Details
NFI intends to release its Q1 2019 financial results after market close on May 8, 2019. A conference call for analysts and interested listeners will be held on May 9, 2019 at 8:00 a.m. (ET). The call-in number for listeners is 888-231-8191, 647-427-7450 or 403-451-9838. A live audio feed of the call will also be available at:
A replay of the call will be available from 11:00 a.m. (ET) on May 9, 2098 until 11:59 p.m. (ET) on May 16, 2019. To access the replay, call 855-859-2056 or 416-849-0833 and then enter pass code number 7840939. The replay will also be available on NFI Group’s web site at www.nfigroup.com.
NOTE: All dollar amounts in this release are stated in U.S. currency. Canadian dollar amounts have been converted based on an exchange rate of U.S. $1.00 = CAD $1.3363 to calculate the value of the Canadian contracts in this release. One EU represents one 30-foot, 35-foot or 40-foot heavy-duty transit bus, one medium-duty bus, one low-floor cutaway bus or one motor coach. An articulated transit bus, which is an extra long transit bus (approximately 60-feet in length), composed of two passenger compartments connected by a joint mechanism represents two EUs.
This release was originally published on the New Flyer website. You can view it here.