FreightCar America(RAIL) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated revenues for Q2 2022 totaled $56.8 million, a 52% increase year-over-year from $37.4 million in Q2 2021 [21] - Adjusted EBITDA was positive at $2.3 million, compared to an adjusted EBITDA loss of $3.1 million in the same period last year [27] - Gross margin increased by 630 basis points to 11.6% compared to 5.3% last year [22] - Cash used in operating activities decreased significantly from $44.1 million in Q2 2021 to $2.4 million in Q2 2022 [33] Business Line Data and Key Metrics Changes - The company produced and delivered 468 railcars in Q2 2022, a 50% increase from 313 railcars in Q2 2021 [21] - The company was awarded 1,045 new orders during the quarter, a 38% increase quarter-over-quarter [16] - SG&A expenses decreased to $4.1 million from $6.3 million in Q2 2021, primarily due to stock-based compensation adjustments [23] Market Data and Key Metrics Changes - Inquiry levels remained robust, with a slight increase in diversity among customer types, including more shipper inquiries [16] - The company noted that while there is cautious optimism among customers, some market participants are pausing due to rising interest rates [18] Company Strategy and Development Direction - The company is focused on scaling the business and driving profitable growth while maintaining a disciplined approach to order acceptance [10] - Expansion projects are progressing, with expectations to complete a new assembly building and additional production lines within the next six months [11] - The company raised its full-year revenue forecast to between $340 million and $360 million, up from a previous range of $320 million to $340 million [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain and inflationary headwinds but expressed confidence in the company's ability to navigate these challenges [12] - The company is optimistic about its production capabilities, expecting to deliver upwards of 2,000 railcars in the second half of the year [15] - Management emphasized that profitability is the new standard for the company and highlighted the importance of maintaining operational efficiency [36] Other Important Information - The company welcomed three new members to its Board of Directors, bringing extensive financial and strategic leadership experience [38] - Capital expenditures for Q2 2022 were approximately $1.8 million, with expectations for increased spending in the second half of the year [30] Q&A Session Summary Question: Can you provide color on the quarterly cadence of deliveries expected in Q3 and Q4? - Management indicated that Q3 and Q4 deliveries are expected to be comparable, with a gradual ramp-up of the third production line in Q4 [43][44] Question: What does the normalization of margins in the back half of the year mean? - Management expects a normalization of gross margins based on product mix but did not provide specific margin percentages [45][46] Question: Is there potential upside to the high end of the delivery guidance this year? - Management clarified that the guidance remains consistent and does not imply additional deliveries beyond the stated range [53] Question: What percentage of the current backlog is for deliveries in 2022 versus 2023? - Management confirmed that the production schedule is locked for the remainder of the year, with the backlog primarily for 2023 [54] Question: How does the company view the macroeconomic conditions affecting the industry? - Management acknowledged the cautious sentiment in the market but emphasized that demand for railcars remains healthy [60][62] Question: Why did the company turn down approximately 1,000 orders? - Management stated that the decision was based on a disciplined approach to order acceptance, focusing on profitable business opportunities [63] Question: Is the industry becoming more disciplined in pricing? - Management expressed a desire for more discipline in the industry but noted that pricing remains aggressive [65]