FreightCar America(RAIL) - 2025 Q2 - Quarterly Results

Performance Overview and Outlook This section details the company's second-quarter 2025 financial and operational results, management's strategic insights, and the reaffirmed full-year 2025 guidance Second Quarter 2025 Performance Highlights In Q2 2025, FreightCar America reported lower revenue and railcar deliveries compared to the prior year, but achieved a significant gross margin expansion of 250 basis points to 15.0%, with net income substantially boosted by a one-time tax valuation allowance release Q2 2025 Key Financial and Operational Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $118.6 million | $147.4 million | (19.5%) | | Railcar Deliveries | 939 units | 1,159 units | (19.0%) | | Gross Margin | 15.0% | 12.5% | +250 bps | | Net Income | $11.7 million | $8.2 million (GAAP) | +42.8% | | Adjusted Net Income | $3.8 million | N/A | N/A | | Adjusted EBITDA | $10.0 million | $12.1 million | (17.4%) | | New Orders | 1,226 railcars | N/A | N/A | | Backlog (Units) | 3,624 units | N/A | +300 units QoQ | | Backlog (Value) | $316.9 million | N/A | N/A | - Net income of $11.7 million was significantly impacted by a $51.9 million benefit from a valuation allowance release, which was partially offset by a $47.6 million non-cash adjustment from the change in warrant liability[4] - The company generated positive operating cash flow of $8.5 million and Adjusted Free Cash Flow of $7.9 million during the quarter[1] Management Commentary Management attributed strong margin performance to commercial excellence, improved productivity, and a richer product mix, expressing confidence in a future railcar replacement cycle and highlighting strategic investments in tank car capabilities - CEO Nick Randall highlighted key performance drivers: - Increased utilization across four production lines and improved productivity - A richer product mix resulting from disciplined pricing - Agile responsiveness to customer needs, particularly in rebuilds and conversions[3] - Strategic outlook from the CEO includes: - Belief that underlying fundamentals point to a meaningful replacement cycle ahead - Continued investment in tank car capabilities to strengthen cost position and create long-term value[3] - CFO Mike Riordan noted the company's financial strength, marking the fifth consecutive quarter of positive operating cash flow, reflecting a sustainable cash generation engine[6] Fiscal Year 2025 Outlook FreightCar America has reaffirmed its full-year guidance for fiscal year 2025, anticipating growth in railcar deliveries and Adjusted EBITDA, with revenue expected to be relatively flat compared to the previous year at the midpoint of the range Fiscal Year 2025 Guidance | Metric | Fiscal 2025 Outlook | Year-over-Year Growth (at Midpoint) | | :--- | :--- | :--- | | Railcar Deliveries | 4,500 – 4,900 Railcars | 7.7% | | Revenue | $530 - $595 million | 0.6% | | Adjusted EBITDA | $43 - $49 million | 7.0% | - The company does not provide a reconciliation for its forward-looking Adjusted EBITDA guidance due to the difficulty in forecasting necessary adjustments without unreasonable effort[5] Consolidated Financial Statements This section provides the condensed consolidated balance sheets, statements of operations, and cash flow statements for the reporting periods Condensed Consolidated Balance Sheets As of June 30, 2025, total assets significantly increased to $328.1 million, driven by higher cash, inventories, and deferred income taxes, while total liabilities also rose, mainly due to increased accounts payable and customer deposits, improving the total stockholders' deficit to $(83.5) million Selected Balance Sheet Data (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents and restricted cash | $61,353 | $44,450 | | Inventories, net | $107,102 | $75,281 | | Total current assets | $204,024 | $145,031 | | Total assets | $328,093 | $224,216 | | Total current liabilities | $129,755 | $80,825 | | Total liabilities | $411,555 | $374,489 | | Total stockholders' deficit | $(83,462) | $(150,273) | Condensed Consolidated Statements of Operations For Q2 2025, revenues declined to $118.6 million from $147.4 million in the prior-year period, with gross profit remaining stable at $17.8 million due to improved margins, resulting in a net income of $11.7 million or $0.34 per diluted share after a significant income tax benefit Q2 Statement of Operations Summary (in thousands, except per share data) | Account | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Revenues | $118,623 | $147,416 | | Gross profit | $17,821 | $18,430 | | Operating income | $7,707 | $13,134 | | (Loss) on change in Warrant liability | $(47,630) | $112 | | Income tax (benefit) provision | $(52,688) | $2,497 | | Net income | $11,679 | $8,177 | | Diluted EPS | $0.34 | $0.11 | Condensed Consolidated Statements of Cash Flows For the first six months of 2025, the company generated $21.3 million in cash from operating activities, a decrease from $31.9 million in the prior year due to a larger investment in inventories, resulting in a net increase in cash and cash equivalents of $16.9 million for the period Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $21,322 | $31,875 | | Net cash used in investing activities | $(353) | $(2,269) | | Net cash used in financing activities | $(4,066) | $(30,796) | | Net increase (decrease) in cash | $16,903 | $(1,190) | | Cash at end of period | $61,353 | $39,370 | Reconciliation of Non-GAAP Financial Measures This section reconciles non-GAAP financial measures including Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and Adjusted Free Cash Flow to their most directly comparable GAAP measures Reconciliation to EBITDA and Adjusted EBITDA The company's Adjusted EBITDA for Q2 2025 was $10.0 million, a decrease from $12.1 million in Q2 2024, with the reconciliation from a pre-tax loss of $41.0 million primarily involving adding back interest, depreciation, and a significant $47.6 million non-cash expense from the change in fair value of warrant liability Adjusted EBITDA Reconciliation (in thousands) | Line Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | (Loss) income before income taxes | $(41,009) | $10,674 | | Depreciation & Amortization | $1,550 | $1,414 | | Interest Expense, net | $4,382 | $1,847 | | EBITDA | $(35,077) | $13,935 | | Change in Fair Value of Warrant | $47,630 | $(112) | | Other Adjustments | $(2,535) | $(1,723) | | Adjusted EBITDA | $10,018 | $12,100 | Reconciliation to Adjusted Net Income Adjusted net income for Q2 2025 was $3.8 million, compared to $3.5 million in the prior-year quarter, adjusting GAAP net income of $11.7 million by excluding the $47.6 million non-cash warrant liability expense and the $51.9 million benefit from the release of a tax valuation allowance Adjusted Net Income Reconciliation (in thousands) | Line Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net income | $11,679 | $8,177 | | Change in Fair Value of Warrant | $47,630 | $(112) | | Release of Valuation Allowance | $(51,872) | - | | Other non-GAAP adjustments | $(2,535) | $(1,723) | | Income tax impact on adjustments | $(1,060) | $1,555 | | Adjusted net income | $3,842 | $3,471 | Reconciliation to Adjusted EPS The company reported an Adjusted EPS of $0.11 for Q2 2025, slightly higher than $0.10 from Q2 2024, calculated by adjusting GAAP diluted EPS of $0.34 for the per-share impact of non-cash items like the change in warrant liability and the release of the tax valuation allowance Adjusted EPS Reconciliation | Line Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Diluted EPS | $0.34 | $0.11 | | Change in Fair Value of Warrant | $1.43 | $- | | Release of Valuation Allowance | $(1.55) | $- | | Other non-GAAP adjustments (pre-tax) | $(0.08) | $(0.06) | | Income tax impact on adjustments | $(0.03) | $0.05 | | Adjusted EPS | $0.11 | $0.10 | Reconciliation to Free Cash Flow and Adjusted Free Cash Flow In Q2 2025, FreightCar America generated $8.5 million in cash from operations, resulting in Free Cash Flow and Adjusted Free Cash Flow of $7.9 million after $0.6 million in capital expenditures, compared to an Adjusted Free Cash Flow of $51.5 million in the prior-year quarter Adjusted Free Cash Flow Reconciliation (in thousands) | Line Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash flows provided by operating activities | $8,528 | $57,197 | | Purchase of property, plant and equipment | $(608) | $(1,303) | | Free cash flow | $7,920 | $55,894 | | Accrued dividends on Series C Preferred stock | - | $(4,427) | | Adjusted free cash flow | $7,920 | $51,467 |