NFI Group ((TSE:NFI)) has held its Q4 earnings call. Read on for the main highlights of the call.
NFI Group’s recent earnings call presented a mixed yet cautiously optimistic outlook for the company. The discussion highlighted significant achievements, particularly in order backlog and financial recovery, underscoring strong performance in the aftermarket segment and improvements in supply chain health. However, challenges such as seat supply disruption, lower demand in the UK market, and potential tariff risks were also noted, tempering the overall positive sentiment.
Record Backlog and Orders
NFI Group celebrated a milestone with its highest annual orders ever, achieving a total backlog of 9,489 equivalent units. This represents a 55% increase from 2023, culminating in a total value of $12.8 billion by the end of 2024. This record-setting achievement underscores the company’s robust demand and strategic positioning in the market.
Strong Financial Recovery
The company reported a remarkable 77% year-over-year increase in quarterly adjusted EBITDA, contributing to a $145.2 million improvement on a fiscal year basis. This financial recovery is further highlighted by net earnings of approximately $19 million, marking a $21 million gain compared to the previous year.
Aftermarket Segment Performance
NFI’s aftermarket segment delivered exceptional results, achieving $157.1 million in revenue and $32.8 million in adjusted EBITDA, reflecting increases of 16% and 11% year-over-year, respectively. This performance contributed to a record year for the segment, showcasing its vital role in the company’s overall success.
Supply Chain Improvement
Significant strides were made in improving supply chain health, with the number of high-risk, high-impact suppliers reduced from 50 in 2022 to just three by the end of 2024. This improvement is a testament to NFI’s strategic efforts to stabilize and enhance its supply chain operations.
Seat Supply Disruption
Despite the positive developments, NFI faced significant disruption from a primary North American transit bus seat provider. This issue resulted in the loss of approximately 100 units of planned fourth-quarter deliveries due to missing seats, highlighting a critical area of concern.
Challenges in UK Market
The UK market presented challenges with lower-than-expected demand, leading to reduced delivery expectations from Alexander Dennis. However, the aftermarket business in the UK continues to perform well, providing a silver lining amid the challenges.
Potential Tariff Risks
Concerns were raised regarding potential 25% tariffs on imports between the U.S. and Canada, which could impact production costs and pricing. This risk is particularly pertinent to the private motor coach market and remains a critical factor for future planning.
Forward-Looking Guidance
Looking ahead, NFI Group anticipates continued growth in 2025, with adjusted EBITDA projected between $320 million and $360 million and revenues ranging from $3.8 billion to $4.2 billion. However, the company remains vigilant about potential tariffs and changes in U.S. funding dynamics, which could pose risks to its growth trajectory.
In conclusion, NFI Group’s earnings call painted a picture of cautious optimism, with significant achievements in order backlog and financial recovery. While challenges such as supply disruptions and market-specific issues persist, the company’s strategic initiatives and strong aftermarket performance provide a solid foundation for future growth.