NFI:TSX Q3-17 Investor Update. November 8, 2017

Transcription

1 0 NFI:TSX Q3-17 Investor Update November 8, 2017

2 1 NFI Group Q3-17 Highlights Forward Looking Statements and Non-GAAP Measures are defined in APPENDIX B. LTM Performance: Revenue: US $2.35B Adjusted EBITDA: US $304.4M Return on Sales: 13.0% Net Debt: US $467M Total Leverage: 1.55X ROIC: 15.4% FCF: US $135.5M Payout Ratio: 39.7% Fully Diluted Market Cap: ~$C 3.5B (3) Current Production Backlog: 2017 Production Target: 3,800 EU Firm Orders: 3,806 EU = $2.1B Options: 6,731 EU = $3.3B LTM Book-to-Bill Ratio: 128% Common Share (TSX:NFI) (4) Shares Outstanding: 62.9M 60-day average Daily Volume: ~ 225K Scale combined with Leading Share in all Markets Long standing Relationships with High Quality Customer Base Technology Leadership with Greenest Product Offering Experienced Team focused on Growth & Diversification Strong Financial flexibility and performance North Americas #1 heavy-duty transit bus and motor coach OEM and #1 aftermarket parts and service supplier Market leading installed fleet with >70,000 transit buses and motor coaches currently in service (~50% share of Canadian and US installed base) Compliant with Buy-America and Canadian content policies (with 2/3 s of manufacturing capacity located in the US). Founded in the 1930 s, both New Flyer and MCI have established relationships with nearly all domestic transit authorities and currently sell to 24 of 25 of the largest agencies. MCI sold to 29 of the top 50 motor coach operators in last year and has equipment with virtually all of top 50. Strong reputation and long standing sales/service/parts relationships with hundreds of motor coach operators in Canada and US Leading in-house engineering and new product development capability Offer the industry s broadest range of green propulsion options: clean diesel, diesel-electric hybrid, natural gas, and zero-emission (electric trolley, batteryelectric and fuel cell). NF leads the industry having delivered >6,400 transit buses powered by electric motors (including hybrids, trolleys, battery-electric and fuel cell-electric). Employs over 5,800 people with ~50% located in the US Successful track record of positioning the business for growth, increased profitability and proven cash flow generation Extensive LEAN transformation and OpEx experience with proven increased operating margins Demonstrated ability to complete accretive acquisitions, achieve synergies and solid integration Business operates in USD with ~90% revenue in US. Flexible cost base with 89% of expenses variable. Proven financial performance and predictable cash flow reducing leverage (~1.5X). Consistently increased dividends. Currently $1.30/share (~2.6% yield). Dividend = C$1.30/share (1), Yield: ~2.4% (3) TSR (2) : 17 YTD = 37% (3) 16 = 47% 15 =115% (1) Effective May 10, 2017 the Dividend increased by 37.5% to C$1.30 per share annually. Paid quarterly. (2) Total Shareholder s Return ( TSR ) is calculated by the growth in capital assuming dividends are reinvested each time paid. (3) Calculated using closing TSX market price as at November 1, 2017 (4) NFI is included in S&P/TSX: Composite Index, Equal Weight Industrials Index and Composite Shareholder Yield Index

3 2 NFI Group+ Business Strategy Facilities, Processes & Products Market Leading Positions in Bus/Coach/Parts Business and Revenue Stream Revenue, EBITDA and CashFlow Optimize, Defend, Diversify & Grow What How To provide Canadian and US operators with the best buses, services and value in the industry Migrate from selling buses to providing solutions and deliver best value and support for life of our products focusing on lowest Total Cost of Ownership Provide complete offering: Bus ( Workhorse of the Fleet ) supported by Parts, Service & Valued Added services Lead the market in innovation, reliability and quality Excel at customer support, response and follow up Operate as a world class OEM using LEAN principles, Quality Roadmap and Safety Culture Be recognized as an Employer of Choice with an industry leading safety culture Excel in engineering, supply chain, strategic sourcing and appropriate in-sourcing Continuous pursuit of eliminating waste and cost reduction to improve competiveness Operate as a responsible, sustainable and environmentally conscious business Operate with an appropriate and flexible capital structure Perform Deliver while seeking Diversification and Growth Balance the needs and expectations of our Key Stakeholders: Employees, Customers and Shareholders Lead the North American transit bus and motor coach industries, pay appropriate dividends and deliver strong TSR Seek to diversify to ensure longevity and sustainability: Product (type of bus) and/or Market (Public vs Private) and/or Geography (North America vs International).

4 3 NFI Group Total Shareholder Return TSR includes capital appreciation and dividends paid. Calculated using closing TSX market price as at November 3, 2017 Acquired assets of US Composite Supplier Acquired US part fabricator in 2010 NFI converted from IDS to Common Share Acquired North America s leading manufacturer of motor coach & parts/service Acquired US manufacturer of HD transit buses & parts distributor Acquired Can/US Composite Supplier Acquired Orion (transit bus parts business) from Daimler S&P/TSX Composite Index Global bus body manufacturer equity investment in NFI Source: FactSet, Company filings

5 4 NFI Group Proven Leadership with extensive Industry Experience Paul Soubry President & CEO, NFI Group Wayne Joseph President, Transit Bus Ian Smart President, Motor Coach Brian Dewsnup President, Aftermarket Parts Joined New Flyer in 2009 as President and CEO after 24 years with Standard Aero. Holds a Bachelor of Commerce, attended Exec Ed at Harvard Business School and the Institute of Corporate Directors. In 2003, was named a recipient of Canada s Top 40 under 40 award, inducted into the CME Manufacturing Hall of Fame in 2014, and recognized as Canada s 2016 CEO of the Year by the Financial Post. Joined New Flyer in 2008 as VP Operations and then assumed responsibility as EVP Transit Bus. Prior held executive positions in bus manufacturing for over forty years with NABI, Blue Bird and Flxible, and then at BAE Systems. Holds a Bachelor of Science in Business Administration and an Accounting Degree and is Certified in Production and Inventory Management (CPIM). Joined New Flyer in 2011 as EVP Aftermarket and prior held various executive positions at Standard Aero for 15 years - one of the world s largest independent aviation service companies. Lead the project to privatize and conduct LEAN implementation at a United States Air Force Base. Holds a Bachelor of Science in Industrial Engineering. Forrmely NABI s CFO since 2006 (which NFI acquired in 2013), and then VP Business Development of New Flyer. Led the acquisition of MCI and became VP & GM Aftermarket. Prior served as Controller of Johns Manville's-Waterville operations, and held various capacities at Ford Motor and Visteon. Holds a Bachelor's in Mechanical Engineering, Masters in Mechanical Engineering, and an MBA in Finance. Glenn Asham CFO, NFI Group Joined New Flyer in Obtained chartered accountant designation and holds a Bachelor of Commerce. Prior worked with Deloitte providing client services in the areas of accounting, auditing, taxation and management consulting Colin Pewarchuk, General Counsel, NFI Group Joined New Flyer in Prior practiced law with Aikins, Macauley and Thorvaldson and was a Banking Officer with Royal Bank of Canada. Holds a Bachelor of Commerce in Finance and a Bachelor of Laws. Janice Harper EVP HR, NFI Group Joined New Flyer in Holds a Diploma in Creative Communications, a Certificate in Human Resources, is a Charterer Professional in Human Resources (CPHR), a HR Compensation Committee management designation and a BA in Communications. David White EVP Supply, NFI Group Joined New Flyer in 1998 as Corporate Controller, and became Vice President Supply Management in Prior worked for Deloitte as a Chartered Accountant. Holds a Bachelor of Commerce in Finance and obtained Chartered Accountant designation.

6 5 #1 Market Share in Transit Bus Heavy-Duty: Xcelsior Launch in 2009 based on >20 years experience with low floor transit buses. Primary targets are metropolitan & urban fleets Offered in 35, 40, and 60 lengths and with the industry s widest range of propulsion options: clean diesel, diesel-electric hybrid, natural gas, and zero-emission (electric trolley, battery-electric and fuel cell). HD Transit Bus Share (2016 market is ~5,800 units) Active Canada/US HD Transit Bus Coach Fleet ~85,000 California Owned by REV Group 5% 1% 19% Montreal and New York Owned by Volvo Truck & Bus Average Age of the HD Transit Fleet: US = 7.8 years, Canada = 7.3 years Source: APTA Public Transportation Factbook 2016 California Privately Owned by Henry Crown and Company 30% 45% Orion Parts and NABI acquired by NFI in 2013 Source: New Flyer Database & Management Estimates

7 6 Transit Bus Market Segments in Canada and US Transit Market Segments and primary targets 24 of the 25 largest Transit Agencies operate NF supported transit buses Metropolitan Fleets 17 operators 39% of installed fleet Urban Fleets 200 operators 45% of installed fleet Municipal Fleets 900+ Operators 16% of installed fleet New market entrants focusing only on battery-electric buses: Source: New Flyer Database & Management Estimates

8 7 #1 Market Share in Motor Coaches New Coach Private New Coach Public Pre-Owned Coach J Model Targets the mid-range to luxury segments J Model #1 selling coach in N.A. private market NA Distributor of Daimler s SETRA coaches D Model Targets the mid-range segment Buy America compliant D Model is the #1 selling coach of all time in N.A. Trade-in option to support new coach sales (~350 annually) Coaches are refurbished at MCI s service centers and various 3 rd parties Motor Coach Share: 2016 market ~2,400 units Active Canada/US Motor Coach Fleet ~55,500 units Turkey Owned by Sabanchi Group Average Age of the Motor Coach Fleet: US and Canada = 9 years Source: ABA Motor Coach Census, published February % Quebec and New York Belgium & Macedonia Privately owned 26% 28% Mexico Owned by Volvo Truck & Bus 50% 1% 26% 23% 39% Negligible Deliveries to date MCI Share increased by 1% in 2016 Spain US Source: New Flyer Database & Management Estimates

9 8 Motor Coach Market in Canada and US Market Segments and primary targets Private Market Segment Definitions Transit Fixed Route/ Line Haul Tour & Charter Conversion 12% of installed fleet 34% of installed fleet 52% of installed fleet 2% of installed fleet Public Private Private Private Source: MCI Database & Management Estimates

10 9 NFI Group Annual Deliveries and Market Demand Source: NFI/MCI Database & Management Estimates 7,000 6,000 5,000 4,000 3,000 2,000 1, , ,347 5, %19.6% 1,050 1,500 6,236 5, % 25.8% 1,864 2,051 Transit Bus EUs delivered in Can/US Total New Flyer Market Share 5, % 1,272 4, % 1,731 5,212 1,871 4,333 1,585 4,047 1,422 5,065 2,115 5,284 2,164 6,032 2,258 5,933 2,025 5,154 1,814 5,109 1,656 5,010 1,868 5,128 2,437 5,533 2,457 5,795 2,569 80% 70% 60% 50% 47.5% 44.4%44.3% 41.8%41.0% 40% 36.7%35.9%36.6% 37.4% 37.3% 35.1% 34.1% 35.2% 32.4% 30% 20% 10% 0% 7,000 6,000 5,000 4,000 3,000 2,000 1, ,485 1,492 60% 62%63% 2,990 1,862 2,824 1,767 2,381 1,190 Motor Coaches delivered in Can/US 50% 2,330 1,479 MCI Industry Market Share 63% 2,048 1,514 74% 69% 1,475 1,022 1, %60% 62% 57% 56% 51% 52% 1,752 1,050 2,099 1,292 1,852 1,056 1,820 1,012 1, , , % 46% 42% 38% 37% 39% 40% 1, , , , , % 70% 60% 50% 30% 20% 10% 0% LTM New Bus/Coach Deliveries (EUs) Public Bid Universe & Active Transit Bus Opportunities (EUs) 1,200 1,100 1, ,7851,795 1,7391,656 1,704 1,752 1, FY 2017 expected deliveries = 3,800 EUs 577 3,207 3, , ,191 2,2552,3482,3922,4372,4552,4672,4712, ,5113,574 3,653 3,753 4,000 25,000 3,500 3,00020,000 2,500 15,000 2,000 1,50010,000 1,000 5, Operator RFPs Issued. EUs for Proposals in development Bids submitted by NFI and EUs awaiting award NFI forecasted EU buys in next 5 years

11 10 NFI Group+ Manufacturing, Fabrication and Service Footprint MCI - Winnipeg, MB Parts Fabrication, MCI D Model Shell Assembly Complete J Model manufacture New Product Development Fiberglass Fabrication NFI - Winnipeg, MB Parts Fabrication Fiberglass Fabrication Bus Shell Assembly New Product Development Pembina, ND MCI D Shell Completion Renton, WA NFI Service Center WA AB SK ND MB MN ON QC NY Montreal, PQ MCI Service Center Arnprior, ON NFI Service Center Jamestown, NY Part Fabrication/Assembly WI Hayward, CA MCI Service Center Opening Nov-17 Ontario, CA NFI Completion & Service Center CA ` IL IN OH KY WV PA NJ Elkhart, IN TCB Part Fabrication Blackwood, NJ MCI Service Center Wausaukee & Gillete, WI Fiberglass Fabrication Los Alamitos, CA MCI Service Center TX AL FL Anniston, AL NFI Bus Manufacture Parts Fabrication Fiberglass Fabrication Crookston, MN NFI Bus Completion St Cloud, MN NFI Bus Manufacture Fiberglass Fabrication Dallas, TX MCI Service Center Des Plaines, IL MCI Service Center Winter Garden, FL MCI Service Center

12 11 + The Industry s most comprehensive Parts offering Widest bus and motor coach product inventory, industry leading distribution network with shortest delivery times. Added value through unique offerings (Kits, Mid-life upgrade programs, Vendor Managed Inventory, KanBan, etc). New MCI website offering state of the art on-line sales and distribution features.

13 12 NFI Group Environmental Leadership through Propulsion Options Clean Diesel Natural Gas Electric Trolley Hybrid Electric Battery Electric/ Fuel Cell Xcelsior 35, 40, 60 D Model 40, 45 * J Model 45 with 35 in development MCI ecoach in Development * MCI is the only motor coach OEM offering alternate fuel coaches in the NA market today New Flyer Leadership in Zero Emissions Buses NF estimates 283 zero emission buses ( ZEBs ) were delivered in 2016 by the industry to Canada/US operators, of which NF delivered 241 EUs (8.3% of NF s total transit production), resulting in 85% ZEB market share. NF has delivered >6,800 transit buses powered by electric motors (including hybrids, trolleys, battery-electric and fuel cell-electric). NF received contracts for 190 ZEB EU s in Q including NYCT (New York) and SFMTA (San Francisco) At the end of Q3, NF also had 271 ZEB EU s in award pending orders (awaiting formal documentation from the customer) including: LA Metro (LoNo & 60 ), MBTA (Boston), Utah Transit Authority, OCTA (Orange County), SunLine Transit (Palm Springs), Translink, AC Transit (Oakland) Active ZEB Bid Universe at the end of the quarter totaled 699 EU s, with total ZEB Bid Universe of 2,152 EU s (10% of the total). Battery-electric J Model 45 motor coach currently in development at MCI

14 13 NFI Group Investing for the Future Battery-Electric Xcelsior Vehicle Innovation Centre FRP Acquisitions New D Model CRT with Vestibule 35 Model J & ecoach Prototypes SF Bay Area Service Center IT Harmonization at MCI and Parts

15 14 NFI Group+ Financial Performance Sales ($M US) Adjusted EBITDA ($M US) 2,500 2,000 1,500 1, ,274 2, ,539 1,451 1, ,865 1, ,132 1, Q3 LTM Q3 LTM Bus Aftermarket Bus Aftermarket Quarterly Adjusted EBITDA ($M US) Return on Invested Capital Adjusted EBITDA LTM Adjusted EBITDA % 16% 14% 12% 10% 8% 6% 4% 2% 0% 6.2% 548 ROIC = 8.6% 8.5% 12.2% % 1, % Q3 LTM Average Invested Capital for the period Net operating profit after tax Average invested capital for the period Return on Invested Capital 1, Millions

16 15 NFI Group Operating Performance $80 Adjusted EBITDA per new EU delivered ($000 US) $70 $ $ $ $30 $ $10 $0 Aftermarket EBITDA Margin % 22% 20.5% 20.6% 20.6% 20.9% 21.8% 20.0% 20% 18.3% 18.6% 18.8% 18.6% 19.8% 18.6% 18% 17.1% 16.3% 16% 15.4% 16.2% 16.0% 14% 14.8% 14.7% 14.6% 14.6% 14.0% 14.2% 12%

17 16 NFI Group Book-to-Bill Ratio, Backlog and Option Conversion 6,000 5,000 4,000 3,000 2,000 1,000 - Public Customer Book-to-Bill consistently >100% for 18 of last 19 Quarters Order Intake vs Deliveries Q3 LTM New Orders (EUs) LTM Deliveries (EUs) LTM Order Intake / Deliveries 300% 250% 200% 150% 100% 50% 0% 10,000 8,000 6,000 4,000 2,000 0 Total Backlog (Firm and Option EUs) MCI Public backlog added in Q4-15 Firm Deferred Order Firm Option Deferred Order Option US Customer deferred Order was removed from backlog in 2013 following 5 years of inaction. Firm = 3,806 EUs Options = 6,731 EUs Equivalent Units Option History and Current Status (EUs) 2, % 86% 79% 90% 2,000 73% 80% 70% 1,500 54% 60% 35% 50% 1,000 40% 30% % 10% - 0% Options expired Options exercised Current option expiry Conversion rate Conversion rate % is calculated as, Options exercised / (Options expired + Options exercised)

18 17 NFI Group+ Cash Flow Performance 2017 Q3 LTM Adjusted EBITDA to Free Cash Flow ($M) Free Cash Flow and Dividends (C $M) Q3 LTM Free Cash Flow Dividends Free Cash Flow and Net Earnings ($/share) Free Cash Flow and Dividends ($US) $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $ Q3 LTM Free Cash Flow per share (C$) Earnings per share (US$) $200 $150 $100 $50 $0 45% 46% % 55% % Q3 LTM 80% 70% 60% 45% 50% Free Cash Flow ("FCF") Dividends Declared FCF as a % of Adjusted EBITDA 40% 30% 20% 10% 0%

19 18 NFI Group+ Strong Balance Sheet with low Leverage Total Debt ($US M) = $467M (Senior Debt + Revolver Drawn - $15M Cash on hand) Revolver Drawn* 0 Undrawn Accordian** $75M Senior Secured Debt $482M Undrawn Revolver $334M * $9M drawn against Letters of Credit ** Use of Accordian facility requires Lender Approval Total Leverage Ratio* vs Credit Covenant Q1 17-Q2 17-Q3 Total Leverage *Under NFI Senior Credit Agreement, Total Leverage Ratio did not include Convertible Debentures as debt.

20 19 NFI Group + Capital Allocation Policy Invest in current business and growth Growth includes both Organic and M&A Invest in LEAN manufacturing to improve quality & cost effectiveness Invest in vertical integration of critical supply Four acquisitions completed from 2010 to Seeking additional M&A (Tuck-in and Growth). Maintain Balance Sheet flexibility Prudent use of Leverage Provide liquidity for fluctuating working capital requirements Seek normal operations between 2-2.5X leverage Add leverage to fund accretive acquisitions capable of reducing leverage through earnings Return capital to Shareholders Common Share Dividend Sustainable distributions. Paid consistently since IPO in Now paid quarterly. $0.585 Annual dividend rate (C$) Dividend Payout Ratio $0.62 $0.70 $0.95 $ % 140% 120% 100% 80% 60% 40% 20% 0% Foundation of Capital Allocation Policy is built on a strong balance sheet and an operating model providing consistent and predictable cash flow

21 APPENDIX A 20 Bus Market Segments (2016) GLOBAL BUS MARKET ~420K/YR CANADA/US BUS MARKET ~56K/YR

22 APPENDIX B + FORWARD LOOKING STATEMENTS, FINANCIAL TERMS, DEFINITIONS AND CONDITIONS 21 FORWARD LOOKING STATEMENTS This investor presentation contains forward-looking statements relating to expected future events, including the integration of the acquired business into New Flyer s existing business and expected synergies, the diversification and growth of the combined bus, motor coach and aftermarket parts businesses. Although the forward-looking statements contained in this investor presentation are based upon what management believes to be reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward-looking statements, and the differences may be material. Actual results may differ materially from management expectations as reflected in such forward-looking statements for a variety of reasons, including risks related the ability to implement the operational changes necessary to achieve the intended synergies, acquisitions, joint ventures and other strategic relationships with third parties (including liabilities relating thereto), the covenants contained in the Company s new senior credit facilities could impact the ability of the Company to fund dividends, market and general economic conditions and economic conditions of and funding availability for customers to purchase buses and to purchase parts or services, customers may not exercise options to purchase additional buses, the ability of customers to suspend or terminate contracts for convenience and the other risks and uncertainties discussed in the materials filed with the Canadian securities regulatory authorities and available on SEDAR at Due to the potential impact of these factors, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law. FINANCIAL TERMS, DEFINITIONS AND CONDITIONS References to EBITDA are to earnings before interest, income taxes, depreciation and amortization, gains or losses on disposal of property, plant and equipment and unrealized foreign exchange losses or gains on non-current monetary items. References to Adjusted EBITDA are to EBITDA after adjusting for: the effects of certain non-recurring and/or non-operations related items that have impacted the business and are not expected to recur, including non-recurring costs relating to business acquisitions, product rationalization costs, impairment loss on equipment and intangible assets, equity settled stock-based compensation, gain on bargain purchase of subsidiary company, fair value adjustment to MCI s inventory and deferred revenue, proportion of the total return swap realized, loss on derecognition of long-term debt and costs associated with assessing strategic and corporate initiatives. Return on Invested Capital ROIC is calculated by dividing Net Operating Profit After Tax by Average Invested Capital for the period. References to Net Operating Profit After Tax are to Adjusted EBITDA less depreciation of plant and equipment and income taxes. References to Invested Capital are to shareholders equity plus long-term debt, obligations under finance leases, other long-term liabilities, convertible debentures and derivative financial instrument liabilities less cash. Management believes EBITDA, Adjusted EBITDA, ROIC and Free Cash Flow (as defined below) are useful measures in evaluating the performance of the Company. Free Cash Flow means net cash generated by operating activities adjusted for changes in non-cash working capital items, interest paid, interest expense, income taxes paid, current income tax expense, effect of foreign currency rate on cash, defined benefit funding, non-recurring transitional costs relating to business acquisitions, costs associated with assessing strategic and corporate initiatives, product rationalization costs, defined benefit expense, cash capital expenditures, fair value adjustment to MCI s inventory and deferred revenue, proceeds from disposition of property, plant and equipment, gain received on total return swap settlement, proportion of the total return swap realized and principal payments on capital leases. However, EBITDA, Adjusted EBITDA, ROIC and Free Cash Flow are not recognized earnings measures and do not have standardized meanings prescribed by IFRS. Readers of this presentation are cautioned that EBITDA, Adjusted EBITDA and ROIC should not be construed as an alternative to net earnings or loss determined in accordance with IFRS as an indicator of New Flyer's performance, and Free Cash Flow should not be construed as an alternative to cash flows from operating, investing and financing activities determined in accordance with IFRS as a measure of liquidity and cash flows. A reconciliation of net earnings and cash flow to EBITDA and Adjusted EBITDA, based on the Financial Statements, has been presented In Management s Discussion and Analysis of Financial Condition under the heading Reconciliation of Net Earnings to EBITDA and Adjusted EBITDA and Reconciliation of Cash Flow to EBITDA and Adjusted EBITDA, respectively. A reconciliation of Free Cash Flow to cash flows from operations is provided under the heading Summary of Free Cash Flow. New Flyer s method of calculating EBITDA, Adjusted EBITDA, ROIC and Free Cash Flow may differ materially from the methods used by other issuers and, accordingly, may not be comparable to similarly titled measures used by other issuers. Dividends paid from Free Cash Flow are not assured, and the actual amount of dividends received by holders of Shares will depend on, among other things, the Company's financial performance, debt covenants and obligations, working capital requirements and future capital requirements, all of which are susceptible to a number of risks, as described in New Flyer s public filings available on SEDAR at All figures are in U.S. dollars unless otherwise noted.