FreightCar America, Inc. (RAIL), a number one producer of freight automobiles, reported sturdy monetary outcomes for the second quarter of 2024, with vital year-over-year progress in income and a file excessive in adjusted EBITDA.
The corporate’s strategic growth and operational effectivity had been mirrored within the robust efficiency, together with the very best order consumption for the reason that fourth quarter of 2014. FreightCar America additionally raised its full-year income and adjusted EBITDA forecasts, indicating confidence in sustained progress and an enhanced product portfolio.
Key Takeaways
- FreightCar America’s Q2 income surged by 66% year-over-year.
- The corporate achieved a file adjusted EBITDA of $12.1 million.
- New orders totaled 2,916 models, valued at $285 million, marking the very best since This autumn 2014.
- A major multiyear tank automotive conversion order was secured, broadening product choices.
- Full-year income is forecasted to be between $560 million and $600 million.
- Adjusted EBITDA steerage for the total yr is raised to between $35 million and $39 million.
- The corporate has a robust money place with $39.4 million and no debt, setting a stable basis for future progress.
Firm Outlook
- FreightCar America anticipates delivering between 4,300 to 4,700 railcars within the full yr.
- Income from the tank automotive conversion order is predicted to be acknowledged beginning in 2026.
- Plans to recapitalize the stability sheet are underway, geared toward enhancing free money circulate era.
Bearish Highlights
- SG&A bills elevated as a consequence of mark-to-market changes on stock-based compensation awards.
Bullish Highlights
- The corporate delivered all new automobiles, together with conversions, resulting in a year-over-year earnings enhance.
- The fourth manufacturing line operated at full capability all through the quarter.
- Gross margins for freight automobiles are projected to stay industry-leading for the yr.
Misses
- There have been no vital misses reported within the earnings name.
Q&A Highlights
- The corporate addressed progress in resolving working capital points from the earlier yr.
- FreightCar America mentioned their readiness to provide new tank automobiles following the design approval for 4,000 models.
- Executives outlined the corporate’s give attention to business and operational excellence initiatives to service debt and drive progress.
FreightCar America’s second-quarter efficiency indicators a sturdy turnaround and strategic positioning for future growth. With a robust order ebook, a give attention to operational excellence, and a wholesome stability sheet, the corporate is poised for continued success within the railcar manufacturing {industry}. Traders and stakeholders could sit up for income recognition from new ventures, such because the tank automotive conversion order, which is able to contribute to the corporate’s monetary power within the coming years.
InvestingPro Insights
FreightCar America, Inc. (RAIL) has proven a outstanding efficiency with its second-quarter outcomes, and these achievements are additional highlighted by the real-time knowledge and insights from InvestingPro. Listed here are some key metrics and suggestions:
InvestingPro Knowledge:
- Market Capitalization: $89.27 million
- Income Progress (Quarterly): 66.39% for Q2 2024
- Adjusted EBITDA: $24.48 million for the final twelve months as of Q2 2024
InvestingPro Ideas:
1. Analysts predict that FreightCar America might be worthwhile this yr, aligning with the corporate’s optimistic outlook and raised forecasts for income and adjusted EBITDA.
2. The corporate’s inventory has skilled a robust return during the last month, with a 31.13% value whole return, reflecting investor confidence following its newest earnings report.
For these taken with a deeper evaluation, InvestingPro presents extra insights on FreightCar America, together with extra InvestingPro Ideas to assist traders make knowledgeable choices. At present, there are 14 extra suggestions accessible at: https://www.investing.com/professional/RAIL
These insights underscore FreightCar America’s strategic expansions and operational efficiencies which have led to its robust monetary efficiency. The corporate’s stable progress prospects and anticipated profitability are important concerns for traders monitoring the railcar manufacturing sector.
Full transcript – Freightcar America Inc (NASDAQ:) Q2 2024:
Operator: Welcome to FreightCar America’s Second Quarter 2024 Earnings Convention Name. Right now all members are in listen-only mode. [Operator Instructions] Please observe that this convention is being recorded. An audio replay of the convention name might be accessible on the corporate’s web site inside a number of hours after this name. I might now like to show the decision over to Chris O’Dea with Riveron Investor Relations.
Chris O’Dea: Thanks, and welcome. Becoming a member of me in the present day are Nick Randall, President and Chief Government Officer; Mike Riordan, Chief Monetary Officer; and Matt Tonn, Chief Industrial Officer. I might prefer to remind everybody that statements made throughout the convention name referring to the corporate’s anticipated future efficiency, future enterprise prospects or future occasions or plans could embrace forward-looking statements as outlined below the Personal Securities Litigation Reform Act of 1995. Members are directed to FreightCar America’s Type 10-Ok for an outline of sure enterprise dangers, a few of which can be exterior of management of the corporate and will trigger precise outcomes to materially differ from these expressed within the forward-looking statements. We expressly disclaim any responsibility to offer updates to our forward-looking statements, whether or not because of new data, future occasions or in any other case. Throughout in the present day’s name, there can even be a dialogue of some objects that don’t conform to U.S. usually accepted accounting rules, or GAAP. Reconciliations of those non-GAAP measures to their most immediately comparable GAAP measures are included within the earnings launch issued yesterday afternoon. Our earnings launch for the second quarter of 2024 is posted on the corporate’s web site at freightcaramerica.com, together with 8-Ok, which was filed yesterday after market. With that, let me now flip the decision over to Nick for a number of opening remarks.
Nick Randall: Thanks, Chris. Good morning, everybody, and thanks all for becoming a member of us in the present day. As you might recall, over the previous 5 years, we now have undergone substantial transformative initiatives to diversify our product providing and deepen our present buyer relationships, all whereas strategically repositioning our operations at a considerably decreased price base. By means of the primary half of the fiscal yr, we’re showcasing simply that, as we reap the advantages from our complete transformation. We’re delivering world-class operations and business excellence as we meet the wants of our prospects’ necessities. Moreover, we’re additional creating our presence as a premier producer of railcars, with a confirmed runway for progress as we proceed to execute on our robust momentum. When it comes to our second quarter outcomes, revenues grew 66% over the prior yr on deliveries of 1,159 railcars, and we achieved a file adjusted EBITDA of $12.1 million at our new facility. As a reminder, this comes off the heels of a robust first quarter by which we achieved a file 99% progress in income and 192% progress in adjusted EBITDA. By means of the primary half of the yr, we now have captured traditionally excessive ranges of orders and inquiries in addition to made developments in increasing our market share consistent with our ongoing dedication to driving worthwhile progress. Business knowledge confirms that we’re rising our market presence within the railcar segments that we function in, together with lined hoppers, which represents the most important product phase of automotive varieties within the house. We’ve got additionally made vital progress in broadening our product choices with a significant multiyear tank automotive conversion order, which is an important element of our subsequent section of progress. Lastly, we just lately celebrated the milestone of delivery our 10,000th railcar out of our Castanos facility, a outstanding milestone that highlights our imaginative and prescient to be the premier producer within the {industry}. As we now have mentioned earlier than, rail gear demand stays wholesome, with steady {industry} dynamics offering confidence in our means to seize constant inquiries and orders inside our goal market. This spans throughout our diversified portfolio and versatile manufacturing traces that present us with the flexibility to execute in any market setting. When it comes to order exercise for the quarter, we obtained internet orders of two,916 models valued at $285 million, the very best we now have seen for the reason that fourth quarter of 2014. With substitute charges projected to be near 40,000 automobiles for the total yr, as steady {industry} demand outlook provides us continued confidence in our enterprise mannequin and our means to additional develop our pipeline. I wish to now broaden on an thrilling replace that I discussed earlier concerning our product choices. With our lengthy legacy within the railcar conversion house and expanded manufacturing capabilities, we had been in a position to safe a big multiyear tank automotive conversion order. This expands our portfolio of choices even additional and establishes our footing throughout the tank automotive house. This multiyear contract is a big stepping stone for us and aligned with our strategic imaginative and prescient to additional elevate our market presence, meet our prospects’ wants and additional optimize our manufacturing capability for large-scale initiatives. The second quarter additionally marks the third consecutive quarter of delivery over 1,000 models from our Castanos facility. This demonstrates that the technique and effectiveness of our operations are in full impact and offers confidence in our means to understand our capability thresholds to provide between 4,000 and 6,000 railcars per yr. Trying forward, we stay dedicated to sustaining this momentum by capturing high quality orders with a pointy give attention to sustaining our business self-discipline. This implies delivering the most effective worth proposition tailor-made to particular person buyer wants, offering distinctive consideration and repair, whereas placing the appropriate stability of backlog, high quality of earnings and order amount. I wish to conclude my feedback by relating our outlook for the rest of the yr 2024. With this quarter’s spectacular efficiency and robust order momentum, we’re assured in our market place by means of the again half of the yr and are elevating our steerage accordingly. We’re elevating our forecasted income to between $560 million and $600 million, up roughly 62% year-over-year on the midpoint of the vary. This expectation is delivered — primarily based on anticipated deliveries, which we’re additionally elevating to between 4,300 to 4,700 railcars, a rise of roughly 48.9% on the midpoint of the vary. We’re additionally elevating our forecasted adjusted EBITDA steerage to between $35 million and $39 million for the total yr. This representing a year-over-year enhance of 84.1% on the midpoint. Lastly, we proceed to count on optimistic working money circulate for the third consecutive yr. As we transfer ahead, our focus stays on enhancing our sturdy product portfolio, gaining market share, each with new and present prospects, and in persevering with to leverage our confirmed manufacturing platform to drive sustained progress. We’re effectively positioned to profit from the present {industry} traits and executing our strategic initiatives with precision. With the stable basis we now have constructed, I’m assured in our means to scale and seize new alternatives out there. Our unwavering dedication to innovation, high quality and buyer satisfaction will information us as we create worth by means of continued progress. With that, I’ll subsequent flip the decision over to Matt to debate the market after which to Mike for a extra element on our monetary outcomes.
Matthew Tonn: Thanks, Nick, and good morning, everybody. We proceed to see improved rail service metrics, contributing to an total wholesome {industry} setting within the second quarter. As Nick talked about earlier, we’re aligned with the {industry}’s forecast of railcar deliveries to be within the vary of 40,000 to 42,000 railcars in 2024. General, we see a continuation of demand carefully tied to replacements and within the vary of 40,000 railcars yearly for the foreseeable future. For the second quarter 2024, we closed internet orders for two,916 railcars valued at roughly $285 million. The primary half of the yr has proven sturdy exercise as we skilled the very best degree of orders since our transformation in Mexico, together with substantial progress in each our backlog and shipments. As anticipated, for a lot of freight segments, prospects are nonetheless taking longer to completely analyze the timing of their new railcar purchases. However total, we’re seeing constant inquiries because of our versatile commercialization technique. With the robust momentum within the first half of the yr, our manufacturing line is basically offered out, and we’re positioned effectively to shut out the rest of the fiscal yr inside our anticipated vary. Moreover, our portfolio stays a wholesome mixture of automotive varieties making certain we meet various buyer wants. We ended the second quarter with a backlog of three,833 railcars valued at roughly $382 million, representing the second highest degree we now have seen since 2016. Inside our North American addressable market of present automotive varieties, we now have realized market share positive factors throughout the quarter for orders throughout gondolas, flat automobiles and open-top hoppers. These automotive varieties serve a diversified buyer base, are frequently in demand and important to industrial and agricultural market segments of our economic system. Our improved market share is a testomony to our staff executing the business technique, targeted on delivering worth in each step of the method. Along with sustaining robust momentum inside our present automotive varieties, as a part of our plans to develop our product portfolio, we now have just lately secured a big multiyear deal to transform over 1,000 present DOT-111 tank automobiles to the federally mandated DOT-117R tank automobiles over a two-year interval. Railcar conversions have been core to our enterprise over our storied historical past, together with the supply of over 15,000 conversions and rebodied railcars. This new settlement showcases considered one of our key competencies, whereas additionally increasing {our capability} as a dependable companion throughout the tank automotive market phase. Our Castanos facility is supplied to deal with giant sale conversion initiatives effectively and our historic presence and experience in railcar modifications had been among the many main components that helped us safe this win. By getting into into the tank automotive house, we aren’t solely increasing our addressable market and buyer base, however demonstrating our means to ship tank automotive upgrades, engineered for optimum security and efficiency. I’m happy by our demonstrated capabilities to function at greater capability ranges and meet buyer calls for. Our facility was purpose-built to take care of the agility wanted to fulfill buyer necessities, and we’re executing on these priorities, whereas our gross sales staff focuses on rising our pipeline to fulfill our expanded capability for varied automotive varieties. I am going to now flip the decision over to Mike for feedback associated to our monetary efficiency. Mike?
Michael Riordan: Thanks, Matt, and good morning, everybody. I am going to start with an summary of the second quarter’s monetary outcomes. We’re extraordinarily happy with our second quarter outcomes as we delivered year-over-year income progress, file quarterly profitability and file orders at our Mexico facility. Consolidated revenues for the second quarter of 2024 totaled $147.4 million, with deliveries of 1,159 railcars, in comparison with $88.6 million on deliveries of 760 railcars within the second quarter of 2023. Gross revenue within the second quarter of 2024 was $18.4 million, with a gross margin of 12.5%, in comparison with gross revenue of $13 million and gross margin of 14.6% within the second quarter of final yr. Decrease gross margin efficiency as in comparison with the prior yr was primarily pushed by the second quarter of 2024 delivering all new automobiles versus the prior yr comparable interval, together with deliveries of automotive conversions. Moreover, we noticed a sequential enchancment of 550 foundation factors from the primary quarter of 2024 as we noticed a good combine in automotive varieties supply, coupled with our fourth manufacturing line working at full capability for your entire quarter. We count on our freight automotive gross margin will stay the industry-leading ranges for the total yr as we proceed to understand the operational efficiencies of our facility working at full capability. SG&A for the second quarter of 2024 totaled $8.5 million, up from $5.9 million within the second quarter of 2023, primarily as a result of second quarter of final yr having a good mark-to-market adjustment on sure stock-based compensation awards. Excluding stock-based compensation, SG&A as a share of income decreased to 150 foundation factors from the prior yr as we proceed to take care of disciplined SG&A spend. Because of the enterprise mannequin we designed, this creates vital working leverage to our backside line as our manufacturing output reaches full capability. Within the second quarter of 2024, we achieved adjusted EBITDA of $12.1 million in comparison with $8 million within the second quarter of 2023, primarily pushed by elevated railcar deliveries between the comparable durations. For the second quarter of 2024, our adjusted internet earnings was $6.3 million or $0.05 per diluted share in comparison with adjusted internet earnings of $2.1 million or $0.02 per share within the second quarter of final yr. Adjusted internet earnings accounts for the impression of sure non-cash objects and non-recurring objects such because the change in honest market worth of our warrant legal responsibility and a good nonrecurring money merchandise throughout the second quarter of this yr related to the litigation settlement associated to our former lease fleet. Capital expenditures for the second quarter of 2024 had been roughly $1.3 million, and our full yr forecast of capital spend stays unchanged at $5 million to $7 million. Lastly, I am happy to report the progress on considered one of our main strategic targets: strengthening our money circulate era capabilities, which we now have made outstanding progress on throughout the quarter. We at the moment maintain $39.4 million in money, no excellent borrowings on our revolving credit score facility and generate sturdy working money circulate. The working capital headwinds we incurred within the fourth quarter of final yr totally resolved themselves within the first quarter, ensuing within the normalization of our working capital and the era of $31.9 million in working money circulate throughout the first half of 2024. With our stability sheet in a wholesome place and the continued execution on business and operational excellence initiatives, our enterprise is poised to effectively service the debt we incurred to assist our transformation and finally, positions us favorably for continued progress and worth creation for our shareholders. With that monetary overview, I might prefer to now open the road for Q&A.
Operator: [Operator Instructions] And our first query from the road of Mark Reichman with Noble Capital Markets. Please proceed together with your query.
Mark Reichman: Sure. So I used to be curious, when will your stock numbers start to replicate the tank automotive conversion order that is mirrored within the backlog? Or possibly ask one other manner, when will the income get acknowledged from the order?
Matthew Tonn: From the stock perspective, Mike, I am going to allow you to deal with that. However on the timing of the order is admittedly tied to our prospects’ demand. They’re on the lookout for supply of the automobiles to be accomplished by the 2029-time body, which is the mandate — the federally mandated time-frame, we glance to start out that program up considerably in 2026. Mike, do you need to set a bit?
Michael Riordan: Sure. So 2026. And as we famous, it is a two-year program. So you would be modeling that ’26 and ’27. So you will not see any stock construct within the close to time period. You will not actually see something of that nature till very early ’26.
Mark Reichman: After which might you simply elaborate on the trail in the direction of producing new tank automobiles? I imply do you suppose you’ll be prepared by 2028?
Matthew Tonn: Effectively, let me reply that in 2 two steps. One is the marketplace for tank automobiles is round about 8,000 models a yr. We’ve got design approval for — covers about half of that, it is about 4,000 of the 8,000 addressable market. So we’re accredited to take obtain orders at any time a buyer needs to put them. There is a interval of labor to be performed to configure the plant for it, however that may be aligned with when prospects need to place them. However we might count on that merely as a result of conversion work in 2026. After which in parallel, be ready to tackle new tank automobiles after that interval.
Mark Reichman: Okay. After which my ultimate query is, Michael, can you present any particulars on plans to recapitalize the stability sheet?
Michael Riordan: Sure. So I am going to say that, that’s nonetheless considered one of our main strategic targets for this yr is to finish that this yr, which might be very useful to our free money circulate era going ahead.
Mark Reichman: Thanks very a lot.
Operator: [Operator Instructions] Right now, this concludes our question-and-answer session. This additionally concludes in the present day’s convention. Thanks in your participation. It’s possible you’ll now disconnect your traces presently, and have an important day.
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