NFI Group Inc.

Thank you, Karina. Good morning, everyone, and welcome to NFI Group's fourth quarter and full year 2019 results conference call.

This is Stephen King, NFI's Group Director, Corporate Development and Investor Relations speaking. Joining me today are Paul Soubry, President and Chief Executive Officer; Glenn Asham, Executive Vice President and Chief Financial Officer, who after 28 years retires this month and his successor Pipasu Soni.

For your information this call is being recorded and a replay will be made available shortly. On this morning's call, we will be walking through a new financial results presentation that can be found in the Investor Section of our website.

We will call out the Slide number referred to as we walk through the presentation. Starting with Slide 2, I'll remind all participants and others that certain information provided on today's call may be forward-looking and based on assumptions and anticipated results that are subject to uncertainties.

Should any one or more of these uncertainties materialize or should the underlying assumptions prove incorrect, actual results may vary significantly from those expected. You are advised to review the risk factors found in the NFI's press releases and other public filings on SEDAR for more details.

During today's call, we will be highlighting certain fourth quarter and full year 2019 results and provide comparisons to the same periods in 2018. In addition to the new results presentation, we encourage all participants to review the full year audited consolidated financial statements, and the associated management's discussion and analysis often known as MD&A and press release that are posted to our website and on SEDAR.

We also want to remind listeners that NFI's full year consolidated financial statements are presented in U.S. dollars, the company's functional currency, and also all amounts referred to are in U.S.

dollars unless otherwise noted. Finally, we know that ADL financial results have been incorporated in the NFI's operations from the acquisition date of May 28, 2019 onwards.

The MD&A includes historic financial information as well as the separated post acquisition ADL results. Readers will note an enhanced approach to reporting which follows extensive discussions held with our coverage analysts and various investors to learn from best practices, streamline our reporting and improve the readability of our material.

On this morning's call, Paul will start with 2019 highlights. Glenn will take us through the financial results, Pipasu will review our balance sheet backlog and 2020 guidance.

And finally, Paul will provide some market insights comment on COVID-19, also known as coronavirus, and discuss NFI's outlook. Following that, we will open the call to analysts questions.

Turning to Slide 3 of our presentation, we explain the implication of NFI's adoption of IFRS 16, which took effect December 31, 2018. IFRS 16 is the accounting standard which specifies how to recognize, present and disclose leases.

This standard provides a single lessee accounting model requiring less leases to recognize assets and liabilities for all major leases. We elected to utilize the modified retrospective approach and adopting the standard and accordingly comparative information for 2018 has not been restated.

Our Q4, 2019 numbers reflect the adoption of IFRS while the comparative numbers have not being restated. Our MD&A clearly identifies the impact of the adoption of IFRS 16 on our financial results.

And I recommend listeners review that information. The table provided on this slide gives a summary of IFRS 16 impacts on our Q4 and full year results.

I'll now pass it over to Paul Soubry to provide highlights for fiscal year 2019.

Thanks, Stephen. And Good morning ladies and gentlemen.

Like Stephen, I'd like to recognize Glenn Asham, who is retiring later this month. In more than 28 years at NFI Glenn has seen it all and has been tremendously loyal friend and partner.

We wish him well his retirement with his lovely wife, his children, grandchildren, and his snowmobiles. I'm also very pleased we've been able to attract someone of Pipasu Soni's education, experience and background to join our team.

Glenn and Pipasu have worked together for the past two and half months on a seamless and orderly CFO transition. And I'm thrilled with the progress that Pipasu and Stephen King and our finance team have made for enhancing and clarifying our reporting materials.

So I'll refer now to the deck that Stephen talked about. I'm on Slide 4 of our results presentation.

The fourth quarter 2019 was a milestone for NFI as we delivered a record 1845 equivalent units, our highest quarterly revenue and adjusted EBITDA ever, which was primarily driven by the transformative acquisition of Alexander Dennis Limited or ADL plus a substantial quarterly deliveries from New Flyer, MCI and ARBOC. As investors will know, we were challenged with increased work in process or WIP for most of 2019 resulting from the ramp up delays that are new Kentucky based Park Fabrication facility or KMG.

And the learning curve associated with several new malls entering the vehicle production at both NFI or certain with New Flyer and MCI. As projected we reduce the majority of the excess WIP inventory and actively managed accounts receivable in the quarter, which significantly lowered our debt and total leverage.

Leverage declined by over 50 basis points from a peak of 3.75 times at the end of the third quarter of 2019 to 3.24 times at the end of the year. The strength of the fourth quarter has provided us with increased confidence as we look forward to 2020 and our focus on growing top line revenue while driving adjusted EBITDA, free cash flow and earnings per share improvement.

In a few minutes Pipasu will discuss our 2020 outlook, but it's important to know that as our business has evolved with a broader product mix and increased geographic diversification, we've decided to provide financial guidance for 2020 rather than units by model type. We've made this change to assist analysts and investors to gain a holistic understanding of our more diversified global business and to minimize the complexity around trying to project specific quarterly performance.

On Slide 5 we outline our record delivery performance for 2019 with all product lines reporting significant improvement in the fourth quarter. I will note that heavy duty transit includes both New Flyer and Alexander Dennis units, motor coach includes MCI and Plasten motor coaches and of course medium duty and low for cutaways is restricted to ARBOC.

With that I will now ask Glenn to take us through the detailed financial statements.

Thank you Paul and good morning everyone. I'm thrilled to participate in my final quarterly results call with NFI.

It'd be my honor and privilege to be part of this wonderful little privately held Canadian bus company that is growing up to the world leader. Turning to Slide 6, the fiscal 2019 NFI reported record revenue of US $2.9 billion and improvement of 15% from fiscal 2018.

The increase we're doing by the addition of ADL as strong fourth quarter somewhat offset by lower deliveries from New Flier, MCI and ARBOC during the first three quarters of 2019. Fiscal 2019 adjusted EBITDA was 322 million, an improvement of 2% from 2018.

Adjusted EBITDA increased due to strong fourth quarter results and the addition of ADL, offset by challenges earlier in the year related to chassis supply to ARBOC the learning curve challenges of new products and New Flier and NCI, ramp up challenges at KMG and margin pressure within the coach business. Adjusted EBITDA as a percentage of revenue declined from 12.5% in 2018 to 11.1% in 2019.

This change was driven largely by the addition of ADL whose global business has a different margin profile, than NFI's traditional North American business and the previously mentioned operational challenges. Turning to segment results on Slide 7, the manufacturing segment saw significant growth in revenue and adjusted EBITDA in the fourth quarter of 2019 with total revenue of 801 million up 39% from the prior year, and adjusted EBITDA of 86 million an improvement of 18% from 2018.

Full year revenue was up 16% to $2.5 billion while adjusted EBITDA was down by 20 million or 7%. Slide 8 shows aftermarket business, which saw significant revenue growth in both the quarter and on a full year basis with improvements of 37% and 11% respectively.

This growth was driven by addition of ADL and positive product mix offset by reduced Setra sales, part sales due to Daimler's 2018 cancellation of MCI's distribution rates agreement or DRA relating to the distribution of Daimler's Setra motor coaches and parts. After market adjusted EBITDA grew by 6% in the fourth quarter and 1% for the full year, as additional top-line growth and stronger product mix was offset by the addition of ADL selling general and administration costs and decreased contribution from lower Setra part sales.

Turning to Slide 9, NFI's fiscal 2019 earnings per share of $0.93 decreased by 64% primarily as a result of adjustments for purchase price accounting related to ADL, higher interest as a result of acquisition of ADL plus the build-up of work in process and higher income taxes. Adjusted net earnings of $1.65 per share, which is normalized for the non-recurring non-cash accounting adjustments related to ADL plus strategic corporate cost restructuring at retail compensation, historic tax adjustments, past service costs and the impact of unrealized gains and losses on interest rates and total returns loss was down by 39%.

A reconciliation net earnings to adjusted net earnings is provided with additional details in the appendix to the presentation. I'll now turn the call over to Pipasu who will discuss our balance sheet, cash flow and forward guidance.

Thanks, Glenn. It's great to be part of such a dynamic organization.

Picking up on Slide 10. NFI Group is pleased to report our fourth quarter execution efforts successfully achieved our goal of lowering total leverage.

Leverage at the end of 2019 was down by 51 basis points to 3.24. We continue working towards our target total leverage range of 2 to 2.5 times which is expected to be assumed approximately 18 to 24 months post acquisition of ADL.

The company's track record of deleveraging following a significant acquisition is evident from this chart. Turning to Slide 11, as illustrated in the table, NFI's free cash flow for 2019 improved slightly due to higher adjusted EBITDAand lower cash capital expenditures offset by increased interest and taxes.

Declared dividends grew by 18% driven by NFI's increased dividend per share rate of $1.70. With the increase in dividends, the fiscal 2019 payout ratio is 50%, up from 43% in 2018.

As NFI continues to focus on debt reduction, the more expects to maintain dividends at the current rate for 2020. Although such dividends are not assured potential dividend increases will be considered going forward as total leverage is decreased per the ADL acquisition plan.

From the chart on the right, NFI's return on invested capital metric or ROIC decreased to 9.7%. The decline in ROIC was a result of several factors including margin pressure within the coach business, poor performance of KMG.

The recovery efforts to burn down the excess WIP caused by KMG Parts disruption, the learning curve on new models, increased investments -- invested capital related to the acquisition of ADL, which has a different mix and lower EBITDA margin profile than NFI's legacy operations. And, as previously mentioned, accounting adjustments, and onetime strategic project costs related to the ADL acquisition.

Turning to Slide 12, we have provided a pre and post ADL acquisition revenue profile by customer, geography and product category. The graph clearly shows that following our acquisition of ADL NFI's business is significantly more diverse with broader product offerings of vehicle types and aftermarket parts and operations in more than 10 countries.

We have diversified from being a North American public transit vehicle manufacturer to a diversified global bus and coach business with nearly 20% of our revenue generated outside of North America and 30% coming from private customers. Turning to Slide 13, we've highlighted our backlog which represents one element of our business stability over multiple years.

For 2019 year ending backlog was 10,742 EUs with a total value of 5.2 billion. The middle chart of the page highlights the age of the options expirees that extend out to 2024 while NFI's backlog is primarily related to our North American heavy duty transit operations within New Flyer and ADL, MCI and ARBOC both started 2020 with a strong firm order backlog.

As Paul mentioned at the start of this call, we have now decided to provide financial guidance for fiscal 2020, including a range adjusted EBITDA. The detailed guidance ranges can be seen on Slide 14.

I'll provide some clarification on how these ranges were calculated and some context on the potential outcomes that can impact our guidance. Adjusted EBITDA for 2020 of 320 million to 350 million is based on our expectations of mid teen revenue growth.

Assisted by a full year of ADL operations our existing vehicle backlog and anticipated new vehicle orders plus margin improvement at NFI's KMG parts fabrication facility shifts from a loss position to profitability with operations no longer delaying new vehicle production. The guidance range does not include any potential impact from COVID 19 which Paul will discuss.

While we do not anticipate a repeat of 2019 challenges, the lower end of our adjusted EBITDA range is based on scenarios where production has negatively impacted by some of the same factors we experienced this past year plus any additional weather delays and supply disruptions. We expect our cash capital expenditures in fiscal 2020 to be between 45 million and 55 million following elevated periods in 2017 through 2019 for growth projects.

With the majority of 2000 spend being maintenance projects. Our adjusted effective tax rate is anticipated to be between 31% to 33% based on enterprise corporate structure, operating jurisdictions and existing and proposed tax legislation.

It excludes the impact of purchase accounting adjustments related to the acquisition of ADL and other onetime items which may increase the expected ETR. We continue to expect free cash flow conversion to be in the range of 45% to 50% of adjusted EBITDA based on our historic experience.

Before handing it over to Paul, I want to highlight that I've included a few dependencies in our deck to assist with your review. Financial highlights summary for the fourth quarter and a full year of 2019 and non IFRS reconciliation tables for both 2018 and 2019.

With that, I'll turn it over to Paul.

Thanks Pipasu. As you've heard throughout this call, we achieved a record fourth quarter 2019 and we executed in our WIP production plan.

We're pleased with our performance and optimistic about where we go from here. Overall, our end markets performed in 2019 as expected and we are the market share leader in all of our core markets, according to industry sources the North American heavy duty transit market delivered 6,753 EUs in 2019 up 4% over 2018.

New Flyer market share was 41.2% down slightly by about 1% from previous year, mostly as a result of previously mentioned operational challenges we experienced it in the first three quarters of the year. According to the American buses association survey, the North American motor coach market had 2053 deliveries in 2019 and as expected was down about 10.2% over 2018.

The good news is MCI market share was 46.1% or up 1.2% from 2018 as our new models continued to penetrate the market. While ADL operates in a number of markets its largest as the UK transit market, where data is calculated based on new vehicle registration data provided to the Society of Motor Manufacturers and Traders.

As anticipated, the market was down 13% to 1728 EUs delivered in 2019. ADL earned an incredible 72% market share in the UK, up 5% from 2018.

Other ADL markets remain broadly stable with Hong Kong moving past its peak delivery cycle. Zero emission buses accounted for 7% of all ADL 29 deliveries and ADL remained the market leader in UK zero emission buses.

Overall, we continue to have a positive outlook on our end markets as public transit remains a primary method of transportation for millions of users. The age of the population is increasing and numerous jurisdictions are implementing strategies to improve accessibility through advanced mobility solutions, while improving air quality through the migration to zero emission propulsion technology for both buses and coaches.

While the overall outlook is positive. We do anticipate continued competitive pressure in some areas, with softness in sub-segments and geographic regions.

The timing of zero emission bus transitions expected to continue to impact projected awards, deliveries and margins during fiscal 2020. In addition, we continue to anticipate several contract wins, but with smaller firm numbers per order.

The increased use of state contracts for procurements and long -- and fewer long term option orders and agencies increase their purchases of ZEBs but we want to maintain flexibility and propulsion type during their transition. Overall, these market dynamics play into NFI's strength of being propulsion agnostic on proven platforms for bus and coach.

While there are significant discussion about the adoption of ZEBs and the entrants of tentative offerings of all electric bus manufacturers in North America. In 2019 ZEBs represented 8.9% of the total market.

So while it has grown it still remains a relatively small segment. We're proud of our leadership positions in ZEBs and the fact that all of our facilities can now manufacturers zero emission buses, which we believe will provide us a competitive advantage as the market grows.

To say we've been pleased with the addition of ADL to the NFI Group is an understatement. We continue to see this transformative acquisition as a platform for growth, with ADL being the largest bus and coach provider in the UK, and the global market leader on double deck vehicles.

With an established presence in numerous geographic jurisdictions. While conversion to IFRS is behind ADL and the synchronization of many our policies are now deployed.

Our investment case continues to hold strong as many of the pieces of the world's leading diversified bus and coach company are now in place New Flyer, MCI, ARBOC, ADL and NFI parts, we can now pivot our attention to focus on overall sourcing opportunities, overhead cost efficiency, leveraging shared technologies, and building our combined strengths. Like the entire world, we're well aware of the COVID-19 or coronavirus.

While NFI has been experiencing some minor supply delays, the virus has not yet materially impacted NFI's production operations, nor has the company experienced any adverse impact on delivery of our products. Additional supply delays and possible shortages of critical components may arise if the disruption of certain suppliers operations and or there's some sub-components supply from China or elsewhere continues to escalate.

Such occurrences or negative impacts of the outbreak on customer demand for products to potentially have material adverse effect on NFI's operations. NFI is monitoring the dynamic situation, actively accessing supply chain alternatives and the developing appropriate mitigation plans.

We've implemented policies for essential travel only and deployed employee awareness updates and advanced hygiene programs at all of our facilities. We've also deployed it, expanded IT capability, LAN capability and put remote work concepts in place where appropriate.

From a customer perspective, it's hard to generalize while every operator's different some insights are possible for each of our major segments. First, and as you might expect, all operators are laser focused on the health and safety of their employees and customers and our cleaning and disinfecting their vehicles multiple times each day.

In North America we have not seen any impact on public agency bus procurements, but if the virus continues to spread and prevention policies are put in place, things like travels and inspectors could impact our bills or a bus and coach delivery and acceptance. Private North American operators are seeing reduced ridership in certain segments, mostly in the line haul and tour and charter road space.

If this reduction continues due to the spread of virus, it could potentially impact demand of our new and proven motor coaches. Some of our international customers are experiencing reduced ridership, while all these customers are providing a public service.

Most, if not all are private companies and many are publicly traded. Through to the commercial pressures if significant reductions in ridership continue it may delay capital spending decisions and therefore potentially delay fleet replacement plans having said all that I want to reiterate that to date we have not seen any material impact on vehicle manufacturing or deliveries or orders from COVID 19 at NFI.

Finally, NFI parts business continues building momentum from Q4 2019 and is showing a strong Q1 2020. With respect to COVID 19 a number of our customers are now reaching out to check if NFI will have sufficient supply on hand to support their spare parts fees going forward.

And again, to date no major impact has been experienced. Given that it's really impossible to forecast, accurately forecast the impact of COVID 19 on NFI.

The company is not included any adjustments related to the 2020 guidance that Pipasu provided or any other outlook information contained herein or in our MDA. Anyone that has watched NFI over the past few years, we'll know that our business experiences seasonality due to the nature of each of the unique market segments and the very annual production of vacation schedules of each of our production facilities.

We continue to expect that the first quarter will be the company's slowest period with potential to be slightly down or flat to prior year with increased activity expected to occur in the second, third and fourth quarters. As always, vehicle deliveries may shift from quarter to quarter depending on timing of client inspections and each customer's own unique acceptance process.

To summarize, I'll turn to Slide 15 in our deck. After a challenging year, we finished 2019 strong and now have our WIP under control across NFI group.

KMG is stabilized and we are profitable in 2020 and we'll be profitable in 2020 with continued post 2020 as it begins to manufacture parts for other NFI group companies. ADL has been a tremendous addition and we look forward to the growth that they can provide us.

We lowered our leverage and that we expect to continue with a plan to get back to our targeted 2 to 2.5 times range, driven by strong adjusted EBITDA and free cash flow performance all while continuing to pay a healthy dividend. As we look at 2020 and beyond, our business cases poised for growth in both top line, adjusted EBITDA, free cash flow, and earnings per share.

Ladies and gentlemen, thanks for joining this call. Together with the eclectic experience of over 422 years of design, building and supporting bus and motor coach experience, and more than 105,000 vehicles on the road every day.

More than ever we’re proud of NFIs history, and we're excited about our future. We'll now open the line for questions.

Carina please provide the instructions to our callers.

Thanks, folks. Good morning.

Guys, maybe we just talked -- maybe a little bit about the guidance. And just maybe if you can give me -- give us a little bit more granularity on some of the moving parts of getting there.

So I think you just said kind of revenue growth expected. I was wondering if you could give us some color on how you think that's going to move between the parts business and the manufacturing business.

And as well, just what kind of sightlines you have in terms of the loading as we go into 2020?

Thanks, Chris Paul here. So, you know and all the other analysts know as part of our discussions and survey and reviews of how we approach guidance given this mix of the business.

The way we built it up as we went back to every single of the business units. We looked at mix of units, we looked at margin in the firm portion of the backlog margin, the options we expected to convert and margins that we expected to bid on proposed contracts going forward.

We then, kind of had an upside downside for each of the businesses we rolled that all together. So as we said in our speaking remarks this morning, we expect kind of a mid-teen growth that is a blend of both the manufacturing and the parts business.

Now the person itself has a different dynamic going forward. Because now we add the blend of ADL parts which is a combination of the UK parts business, and the North American parts business rolled up into one total sales type roll up from an overall company perspective.

The units makes it very difficult given average sales price, average mix, now geographic differential on mix, for example, the margin in the Hong Kong or in Singapore is different than the UK, which is different than North America and so forth. We try to embed in the margin discussion in our margin range that recovery from KMG from a loss making to a breakeven to a profitable business and that's been rolled into that upside downside, if you will, on the range of the margin -- of the EBITDA for the business.

Does that help?

Yeah, I just want to get an idea is you put out some numbers are to your point be -- I'm kind a gauge the confidence you have of how much of the -- how much of the years already filled and ready to roll. And so you're basically just to your point rolling up kind of some known knowns as opposed to trying to figure out where to sell the rest of the year.

All right. So we don't obviously, and I've always struggled a little bit of disclosing of the percentage of slots sold versus the total slots open and so forth.

Maybe some color by business might help. The New Flyer business, as you know is a complete contractual business.

We've seen a migration over the last couple years from large multiyear contracts with very large procurement quantities that helps fill up big blocks schedule over the year. Chris, challenged in the last couple years with those smaller total orders, but also a smaller form firm and a smaller backlog element of it.

As we started 2020 and the start of this year, the portion of slots that New Flyer has sold relative to total slot is about the same as it was last year. And so the vast majority of the year is filled.

Chris and his team still have a number of units that needs to be contracted and then say call it the next 60 or 90 days that would fill up the total manufacturer's scheduled for the year. But we're in a pretty good place having said that, the whole world now with coronavirus and so forth adds an element of uncertainty.

MCI, a different business now, MCI as we know is roughly two thirds to three quarters commercial customers. The rest being public operators, the public portion of MCI is effectively booked for the year.

So it's far more of an execution story. The private side of the business is a combination of a couple of large fleet operators and then all kinds of ones and twos.

Again, I would say that MCI starts the year in about the same place, if not a little bit healthier than we saw last year. Alexander Dennis is a very different business because now you have all the different geographic considerations and of course some of the big contracts in the past, let's call it five years, such as the peak in Hong Kong demand and some other things now rolls out over to a broader customer base.

I would like an ADL situation similar to what I described with New Flyers that a good portion of the year is effectively contracted work and therefore it's an execution story more than we've got to worry about where the work's coming from, having said that, a portion of ADL is transaction and a portion of the Plaxon business is like MCI, one or two or X number of units at a time. ARBOC as you know is business that doesn't sell direct to the customers it sells through dealers.

And of course we are working to the contract that the dealer has with the end operator and now it's a mix of both cutaway type businesses as well as our buses story as well as medium duty. I would put ARBOC in the category, again, closer a little bit to the New Flyer camp where a good portion of the areas contracted, but we still have to actually win and convert orders, if you will, between now and call it the end of the third quarter to be able to execute by the end of the year.

So that's the four major segments from a manufacturing standpoint. And of course as you know from the aftermarket for rough order of magnitude above 40% of our aftermarket is contractual.

Whether it's a vendor managed inventory contract or whether it's a, you know, we have a certain customer, we have their windshield wiper contract for five years kind of thing. So above 40% of that business is contracted, the rest of it is a transactionally oriented or kits or batch buys and so forth, which is why the parts businesses is a little bit more difficult and delicate to forecast.

Hopefully that without getting too definitive around percentages hopefully that gives you some color of why we're far more confident this year at executing it in a range of EBITDA and we're able to give that guidance.

Okay, fair enough. Just kind of quick clarification on the CapEx.

Should I assume that that CapEx number also includes the principal portion of lease payments?

No, that would be over and above.

Okay, great. And then just my last question, if you go back to the investor day, the comment that you made on some of the larger electric vehicle awards were that they were probably going to be 18 to 24 months out.

And I think you'd indicated that there was an order out of the Pacific Northwest, which could be maybe one of the earlier ones, but that one actually it looked like it materialized earlier. Is there some shift in what you're seeing in terms of some market, is there some dynamic that's happening where some transit authorities may be moving faster than you originally thought in terms of being able to convert the orders?

It's a really good question, Chris. And it's a little bit delicate to answer because every customer, every operator we see on environment is funding is different.

And then overlay that with the fact that the fact that expires in the end of the third quarter of this year. And then overlay with that there's an election cycle.

And now of course overlay that crazy dynamic around the coronavirus and people's laser focus on today. But to say that there's been a shift, I would say is kind of not yet we continue to see a whole bunch of operators, trying to take advantage of unique funding like the LoNo program with the FTA and so forth to buy batches of buses or to be able to convert an order that they thought originally they were going to put out for -- sorry an RFP that they said they put out for diesel but they're now are hybrid have gone for ZEB.

As I said in our statement in North America, specifically the transit space, that markets is about 8% or 8% plus if you will the total market. So what's happening as we expected, we have seen some bigger RFPs, which is really nice to see in terms of 100 or so types plus or minus quantities.

But we are still in that dynamic where the reality of every transit agency trying to figure out how they're going to fund the incremental cost of an electric bus, but also fund the capital costs associated with infrastructure. And then trying to figure out in their own unique environments where the energy is going to come from which then dictates the strategy of depot charging versus on route and so forth.

I would not characterize it as a shift, I would characterize it consistently the way we've seen it as we walked through 2019. The good news is that with the exception of some challenged operators, or maybe some of the competitive product maybe not performing in the market place.

We're seeing teething pains, putting a new fleet in of electric buses and getting their chargers infrastructure up to speed and then the reliability unless there's lots of learning and teething pains associated. But we're starting to see good solid recurrent execution, if you will, or output of those buses and then meeting their delivery cycles or their operating cycles during the day.

And that's really really positive key thing for the future. I will reiterate that we do not see electric bus or zero emission, whatever whether it's electric fuel cell or electric trolley as a revolution.

This is going to be a continued evolutionary scenario over the next call it 5,7,10,12, 50 years, which again, I believe what Chris and Ian and Colin have done, if you will and now at the ARBOC business of multi-propulsion approach to work with operators through that transition I think bodes well for our offering. And we're pretty pleased with the bid universe but also our success and win rate on zero emission opportunities.

All right, sounds great. And Glenn, congratulations on your retirement.

Thank you.

Thanks. Good morning.

I'm wondering if you could maybe discuss a little bit the UK market and the opportunities for ADL. We've had Prime Minister in UK made an announcement about a big investment in buses in the country.

And I don't think the details have been fully released. But I just wondering what you think the opportunities are there for ADL?

It's a really good question Cam. Because we know and we you saw like going through the diligence and acquisition and of course the integration of ADL, we just saw a couple of years slowdown of that market.

And again, as we announced in our remarks today, we saw another slowdown that year. The inverse though in terms of ADL's market share, they've been doing a really good job with conventional propulsion systems, but also their leadership around the zero emission buses.

So, you know, remember to and most of our investors and analysts will know this but the operators of UK are private operators who fit in and operate basically an essential public service. And so the businesses kind of a different operating cost, steering ratio, and so on and so forth the way they operate their fleets.

As we look into 2020 we're and again, notwithstanding who knows the impact of coronavirus in the next short term or medium term but the dynamic of we're starting to see those operators really, really looking at multi-year replacements and upgrades, but also being very encouraged by the stability now if you will, of a UK government that has a majority, has a strategy and now is willing to make that commitment. And as you've said, we have not seen details of that transpires and how any subsidy assistance and support to electric vehicles goes in.

But again, just like New Flyer and just like MCI, ADL has been very aggressive with multiple propulsion strategies, whether it's diesel or hybrids or now a zero emission. And again, we think we poised for good solid growth as the UK gets through its whole Brexit dynamic, but also sets itself forward for reinvestment in the country and of course a federal government strategy on that.

So, it's hard to be specific, but in our multiyear plan, we're pretty excited about the opportunity of the UK. Combine that with the challenges as we all know with respect to ADL largest competitor, which is another company that went through administration and is now in the process of trying to kind of reorganize their business and recompete, we've been the benefactor of being that good solid supplier and the timing for our acquisition of ADL couldn't be any better.

Okay. No, that's good.

Maybe a second question for me and it's maybe a history lesson to some extent. I think maybe the concern out there is that this COVID 19 will trigger a more broad based recession in North America.

I'm just wondering if you can just remind us or talk a bit about what the experience, particularly on the North American public transit side of the business, what the experience was in 2009 as far as order activity and any benefit from your infrastructure spending and that sort of thing from a simulation point of view. I mean, I realize it was a bit of a different scenario back then with the credit crisis, but just maybe talk us through what New Flyers specifically saw from transit agency during that period?

I think that's a really good point. And you know, we didn't put it in our remarks because it's hard to predict that.

The last time we saw this, you're absolutely right. We saw the federal government, step up with a stimulus program as some of our investors wherever we actually hosted a town hall with the Vice President then and I think six or seven of the major ministers, if you will, in terms of a strategy for a stimulus.

We may find ourselves in a situation where recession challenges in operators and cost structures associated with COVID-19 where the federal government steps in, in addition to maybe assisting individuals that have been affected, but more importantly affecting and trying to get people back into public transportation and using that as a job creation vehicle. And we may actually see a stimulus just for fun, that some rough order numbers in 2008 in North America, there was about 5,200 units delivered, which was a 200 units or so delivered compared to higher than the previous year in 2009 that jump to 6,032 in 2010, it jumped to 5933.

So we saw two good solid years as a result of government stimulus, hard to plan on, hard to bank on, but there is a possibility and a high probability that a seamless approach may actually help some of what a New Flyer delivers, ARBOC and potentially even MCI and ADL in North America and frankly around the world if there's other stimulus approaches.

I have a question on the seasonality and the guidance. I believe there's a comment that EBITDA is expected to be down slightly for Q1.

Could you explain what businesses are causing that?

Well, thanks Jonathan. It's Paul here.

Of course, as you know it's a contract business. Every customer has its own delivery schedule, its own acceptance methodologies, inspection and acceptance both on site and once it gets to our customers facilities.

So the seasonality well, it traditionally is low in the first and then recovers in the second and then low in the third, primarily because of plant shutdowns or holiday and vacation periods and so forth and then is stronger in the fourth as well as we have across the business. As we have forecasted 2020 and as we look at every single bus that's online, and every single contract.

Our current projection is that the first quarter could be flat to down relative to previous year. Again, that's part of the reason why we felt moving to a full year adjusted EBITDA guidance range, takes out the importance of anybody trying to project one quarter over the other.

And we wanted to provide our investors a little bit insight around expectations for first quarter.

Okay, so, no color on whether that's in the motor coach business or the public transit business in North America, for example?

Well, again at the risk of being a little bit protective about our individual customers and our individual market segmentsand so forth. This is based on a unit by unit market by market build up and a product line build up.

You'll know that we actually did a great job of effectively burning off and delivering a whole bunch of the WIP in the fourth quarter. MCI had a strong quarter, if you will in the fourth and so forth.

I'm not sure I can point to any specific segments or business that sticks out as predominantly higher or lower if you will at this point from last year.

I think I would just add, that same as you mentioned, Paul in your remarks, quarter to quarter things move back and forth. And so if you look at ADL, if you look at in our MD&A, you can see their historic information for '18 and '19.

And pretty big swings from Q1 to Q2. And I think, that just depends on the customers and the region and where the vehicles are being delivered.

So same type of expectation this year. It's just kind of things moving between quarter to quarter.

So as we said, Q2, 3 and 4, we expect growth. And Q1 kind of flattish to down just because of that movement of deliveries.

Okay, thanks. And on the 2020 guidance.

I think some investors are concerned about the impact that COVID-19 could have on broader economic demand with potential implications for the private sector. So, could you tell us what your guidance is assuming today for the motor coach market for 2020?

Well, as you know, Johnson we don't break out the guidance. We've rolled it all up into one because of the movement.

We have effectively projected MCI plus the Plaxon portion of ADL to be flat to up year-over-year. So it's rolled up into the overall unit.

I will remind investors and analysts that our projection of 320 to 350. And that range does not include any implications or projection associated with the coronavirus.

I will also remind that I was pretty explicit in my notes to date we have not had any material impact on our ability to get parts, our ability to get people to work to build buses. Could that change?

It might change, we have not rolled that into our forecast. The overall business because of the nature of building 7000 or 8000 units a year, every single day we're always in a bit of a firefight mode in terms of making sure that we get parts to the production line and David White the head of our global supply, who works every day with across those businesses.

You know, kind of like in the yesterday's discussion that the results or an implication from coronavirus today hasn’t had a material impact or differential than a year ago fighting the same kind of fires in terms of supply to the point of used installation across those businesses. It's not a same product.

It's an every single customer and every single part is different. And so we're being able to manage that as you know, because of the nature of our business and the large proportion of US and publicly funded contracts, we live in a buy America world where now 70% of the content has to be US origin.

Having said that, an engine that comes from Cummins, for example, has international parts on that engine. And so it's not just our direct supply, but it's the indirect supply based on those guys, sub-components that may have an impact on our business.

I'll go back to, we're comfortable today based on keeping this guidance in place and have not reflected on a COVID impact on it.

Okay, thanks. And one question on the Q4 earnings.

The corporate segment expense was particularly low. I appreciate that incentive compensation was down.

But where there any reversals, related to the yearend accounting that you would call out for us as we think about a reasonable run rate for that segment going forward?

I think the only thing I'd add, you called out obviously our incentive programs, we've had the adjustment of our provisions and obviously those long-term pieces covers sort of three years worth of grants. So they have fairly significant impact given what’s happened to [indiscernible] business and the market share price over the last one year period.

Hey, Jonathan, one of the things we also did in the back of our presentation, you'll see our walks that you can see for each quarter that provides our one-timers in the walk to EBITDA.

Hey, thanks for taking the question. Glenn, congrats on retirement.

I heard spring in Winnipeg is beautiful. Maybe just, I appreciate that COVID 19 is difficult to forecast and you're not the only company facing this issue, and that it hasn't had a material impact on your operations to date, but as I guess you seem to have planning for whatever could come out of this and maybe a more worst case scenario.

Are you thinking about or when would you think about maybe inventoring, maybe higher value parts that maybe more supply chain constrained if we do face bigger issues around importing products from wherever your suppliers are getting them from into North America, is there something you're looking at to determine whether you'd want to carry more inventory than normal so they can maintain your manufacturing capabilities?

It's a really good comment and it goes beyond all that, but each of the businesses literally has daily call, not only from, as a result of COVID, but anyway associated with that very complex supply chain coming in. I would suggest that we know the critical parts, in some of our cases where just in time, if you will, or five or six days inventory on the shop floor at some of our businesses.

We have a warehouse function preproduction entries that we have a little bit of contingency stock in there. We're absolutely doing everything we can to try and get this.

The good news is that based on being a contractual business, almost all of our businesses that really knows what they need to build between now and say, the half year if you will or as we move into. So we're laser focused on every one of those parts.

To say that we've been able to kind of push that out and decide prebuys or pre stocking of certain parts. I would say that's part of the normal business we do all day long.

And we're adding that oversight. Other things, you can imagine everything we're doing, we've killed the non-essential travel, we've done some creative stuff on the IT systems for example.

We've prebought a whole bunch of laptops. And we've added a whole bunch of LAN and WAN capability so that if you have to have certain levels of people to work from home.

Of course we have a manufacturing business that it's impossible to do from home if you have a customer support function. Spare parts function, engineering, Product Management, customer program management and all these other things that could be done virtual and remote.

So, we're obviously trying to do like every other business understand the implications. Today, it hasn't been a material impact.

We've seen some of our customers impacted, as I mentioned, but that hasn't changed any to date knock on wood any procurement or any of the build strategies we have for this year.

That's great color. And then I noticed that maybe more recent phenomenon.

But energy prices have totally collapsed this week. And maybe there's a view that oil prices and thus diesel and all the components energy products that come out of oil will be cheaper for a longer period of time.

And I know one of the things you said at your investor day and I think at previous calls is that just doing like a simple payback. You can make the argument for an electric bus that over the lifespan of a bus you would be positive after 10 years or so.

Given what energy prices are now, is there any sense that people may look at the payback differently? And that might change how people look at long term electric bus demand or people so pretty committed to this because there's other environmental benefits for doing it?

Well, it's interesting that you phrase that because absolutely, it may change the economic curvefrom a 10 or 12 year crossing if you will from the total cost of ownership of an electric versus a diesel bus. But as we've seen, the vast majority of the desire for electric is not an economic decision.

In most cases, it's a political, environmental, social decision. And because it's not anything turns on a dime, these are multiyear decade long types of strategies.

I think that bodes well for our strategy whereas a competitor that shows up with a customer with only electric bus offering. And we can offer electric we can ask for hybrid, natural gas and so onand so forth.

Ironically, we've had a couple of customers tell us yesterday that they've actually used the reduction in fuel prices as a way to lock in their fuel strategies for a bit of a longer period of time to give them some runway of flexibility on their op costs. So I think your comment is absolutely valid it may tweak or change the curve of adoption, but it will not fundamentally change the migration to electric.

And again, the good news is we're able to provide any type of propulsion system with that customer, and also currently commonality what they have today over that transition period. I think that really bodes well for all of our product lines.

I'll leave it there. Thank you very much.

Great. Thank you, Carina.

Thanks everyone for joining us call. Before we terminate, I just wanted to remind listeners that we'll be hosting our Annual General Meeting on Thursday, May 7th at the Fairmont hotel in Winnipeg.

The event starts at 2:00 PM CST. And also finally, I just wanted to mention too, that yesterday you may have seen on our website, we launched a community benefits program with the Transportation Diversity Council within New Flyer, and it's a pioneering agreement, the first of its kind in America.

And so we just wanted to highlight that and if you want to see more details, obviously the full release is on our website and the whole, the entire community benefits program is on the website as well. Thank you very much.

Have a great day.