NFI Announces Battery Recall Agreement with XALT

Core Viewpoint - NFI Group Inc. has entered into a master settlement agreement with XALT Energy to address costs related to a battery recall, which is expected to enhance NFI's zero-emission bus capabilities and financial position [1][2][3] Financial Impact - The settlement includes cash payments, personnel transfers, and asset contributions, providing approximately 75% to 80% recovery against NFI's original $229 million provision for the recall [2][5] - NFI recorded a warranty provision expense of $229 million during Q3 2025 for the replacement of batteries on about 700 vehicles affected by the recall [5] - The cash payment from the settlement, expected by December 31, 2025, will increase NFI's total liquidity of $386 million by approximately 26% on a pro-forma basis [7] Operational Enhancements - The settlement will facilitate a smooth transition for the battery recall program and improve visibility in NFI's battery supply chain [3] - NFI plans to utilize XALT's inventory of new battery cells for a new electric bus battery offering in 2027, supporting its significant electric bus backlog [7] - The agreement includes the hiring of 21 personnel from XALT to oversee the recall and support NFI's electric bus operations [7] Future Outlook - NFI anticipates that cash outflows related to the battery replacement will occur over 18 to 24 months, with 35% to 45% of expenses (approximately $70 to $90 million) expected in 2026 [8] - The settlement will be reflected in NFI's fourth quarter financial results, improving quarterly net earnings and total liquidity [6][8]