NFI Group Q2 Earnings Call Highlights

NFI Group (TSE:NFI) reported higher second-quarter revenue, earnings and cash generation as increased production, improved backlog conversion and record aftermarket results supported its operational recovery. The bus and motor coach manufacturer also raised its fiscal 2026 revenue and adjusted EBITDA outlook while outlining financing actions intended to improve its debt maturity profile.

“The second quarter represented another important step forward for NFI and showcased the strength of our backlog and aftermarket business,” President and Chief Executive Officer John Sapp said on the company’s fiscal 2026 second-quarter conference call.

NFI delivered 1,232 equivalent units during the quarter, up 14.5% from a year earlier. Revenue rose 18.6% to approximately $1.03 billion, while adjusted EBITDA increased 47% to $104 million. The company reported net earnings of $17.4 million, compared with a net loss of $160.8 million in the prior-year period.

Production Growth and Margin Improvement

Transit bus deliveries increased 22% year over year to 911 equivalent units, driven primarily by higher North American production and sales, partly offset by lower U.K. deliveries. Motor coach deliveries rose 7.6% to 142 equivalent units, supported by public motor coach volumes. Medium-duty and low-floor cutaway deliveries declined 9.1% to 179 equivalent units following several quarters of elevated activity.

Manufacturing gross margin increased to $98.2 million, or 11.5% of revenue, from $75.2 million, or 10.6% of revenue, a year earlier. Chief Financial Officer Brian Dewsnup said the improvement reflected stronger sales mix as NFI converted backlog, higher deliveries and better fixed-cost absorption.

Dewsnup said manufacturing gross margin declined modestly from the first quarter because of higher overhead associated with the unwind of work-in-process inventory. Management also said some units originally planned for first-quarter delivery were carried into the second quarter, benefiting quarterly results.

Manufacturing adjusted EBITDA totaled $70.7 million, while its last-12-month adjusted EBITDA reached a record $276 million, according to the company.

Management said stronger supplier performance, labor availability and greater operational stability contributed to improved efficiency. Sapp said the company had cleared through older work-in-process inventory, including units affected by a prior seating issue.

Record Aftermarket Quarter

Aftermarket gross margin rose to $55.3 million, or 31.4% of revenue, compared with 26.4% in the previous year’s second quarter. Aftermarket adjusted EBITDA increased 38.6% to $42.3 million.

The company attributed the segment’s results to sales mix, pricing, tariff management and higher volume tied to FIFA World Cup activity. Sapp said certain transit agencies may have purchased ahead of anticipated World Cup-related needs, which could result in lower demand from those customers in the second half.

Still, management said it continues to see growth in the core aftermarket business, supported by aging customer fleets and the company’s parts, service, training and field-support offerings. Stephen King, vice president of strategy and investor relations, said higher operating costs and parts needs associated with older buses can encourage agencies to replace vehicles, but can also support aftermarket demand when fleets remain in service longer.

Cash Flow, Leverage and Financing

NFI generated $159.1 million of operating cash flow during the quarter, compared with cash used in operating activities of $69.6 million in the prior-year period. Free cash flow was $20.7 million, compared with $15.7 million a year earlier.

The company said cash flow benefited from stronger operating performance, lower cash interest payments, the unwind of work-in-process inventory and receivable collections. It expects to invest in working capital during the third quarter to build inventory ahead of a seasonally stronger fourth quarter.

Liquidity ended the quarter at $520 million, while total leverage fell to 2.81 times. The company expects leverage to remain around current levels in the third quarter because of working-capital requirements, but said it remains positioned to reach its 1.5-times to 2.5-times leverage target as it heads into 2027.

After the quarter ended, NFI extended its first-lien facility by one year to July 2030 and completed a private placement of C$350 million in senior unsecured notes due July 2033, carrying a 6.625% interest rate. The proceeds were used to repay a C$50 million Manitoba loan and reduce borrowings under the first-lien facility.

The company expects to redraw on the first-lien facility in January 2027 to repay C$338 million of convertible debentures that mature at that time.

Guidance Raised as Backlog Supports Outlook

NFI raised its fiscal 2026 outlook and now expects revenue of $4 billion to $4.2 billion and adjusted EBITDA of $385 million to $415 million. It also increased expected cash capital expenditures to $55 million to $65 million, citing investments in new products and facilities.

Management expects year-over-year improvement in the third quarter, though it said the period is typically seasonally slower because of summer manufacturing shutdowns and lower customer acceptance activity. Deliveries and revenue are expected to decline modestly sequentially from the second quarter. NFI expects the fourth quarter to be its strongest period, aided by higher delivery activity in private coach and international transit markets.

At quarter-end, NFI’s total backlog stood at 14,483 equivalent units, valued at approximately $12.5 billion. Firm orders represented 6,271 equivalent units, with options accounting for 8,212 units. Management said the modest decline in backlog reflected higher second-quarter deliveries and slower new orders related to customer timing rather than a weakening demand environment.

Active bids in NFI’s North American public bid universe totaled 6,195 equivalent units, up 6% from a year earlier, while five-year forecasted customer demand was 26,000 equivalent units. Sapp said the company has not seen a broad-based pause in transit agency activity despite uncertainty surrounding future U.S. transportation funding.

NFI said its guidance incorporates current and known U.S. and Canadian tariffs, including proposed Section 338 tariffs announced in July, but does not include possible future tariff or trade-policy changes. Management said tariff exposure remains manageable through localized manufacturing, contractual terms, pricing actions and aftermarket distribution capabilities.

About NFI Group (TSE:NFI)

Leveraging 450 years of combined experience, NFI is leading the electrification of mass mobility around the world. With zero-emission buses and coaches, infrastructure, and technology, NFI meets today's urban demands for scalable smart mobility solutions. Together, NFI is enabling more livable cities through connected, clean, and sustainable transportation. With over 9,000 team members in ten countries, NFI is a leading global bus manufacturer of mass mobility solutions under the brands New Flyer® (heavy-duty transit buses), MCI® (motorcoaches), Alexander Dennis Limited (single- and double-deck buses), ARBOC® (low-floor cutaway and medium-duty buses), and NFI Parts¿.

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