M Cameron Doerksen analyst at the National Bank said :Q1 2024 results - NBF first look Q1 results ahead of forecast; guidance unchanged NFI Group reported its results for Q1 ended March 31st. Results were ahead of NBF and consensus forecasts. Overall results: highlights (all numbers in USD) • Revenue was $723 million versus NBF at $671 million and the consensus of $672 million. Manufacturing revenue was $563 million versus our estimate of $536 million. NFI delivered 1,127 new bus equivalent units in Q1 versus our forecast for 1,000 and 792 delivered in Q1/23. Aftermarket revenue was $160 million versus NBF at $135 million. • Adjusted EBITDA was $34.0 million versus NBF at $28.7 million and the consensus of $30.3 million. Manufacturing EBITDA margin was -0.4% versus NBF at positive 1.0%. Note that NFI indicates that it has now largely delivered low-margin/inflation-impacted buses in its backlog with margins expected to trend more positively in future quarters. The Aftermarket margin was 23.5% versus NBF at 21.0%. • Reported adjusted loss per share was $0.13 versus NBF and consensus both at a loss of $0.15. • Liquidity stands at $166 million versus $188 million at the end of Q4/23 and NFI’s covenant level of $50 million (the company generated $10 million from working capital in the quarter versus our expectation for a draw on working capital). Company expects to see a slight decline in liquidity in Q2 as it invests in working capital to support higher production rates. Backlog grows significantly • NFI’s backlog sits at 14,783 firm orders and options worth $11.7 billion (was 10,586 EUs at $7.9 billion at the end of Q4/23). Q1 was the largest order intake in the company's history at over 5,400 EUs. Backlog is expected to grow further through the year. Backlog average selling price is up 19% y/y. Guidance unchanged • NFI is still calling for $3.2-$3.6 billion in revenue and $240-$280 million in EBITDA in 2024 versus our current forecast for revenue of $3.4 billion and EBITDA of $259 million (consensus at $3.4 billion and $243 million, respectively). For required disclosures, please refer to the end of the document. 2 | Page • For 2025, the company continues to target $4.0 billion in revenue and $350+ million in EBITDA compared to our forecast for revenue of $4.0 billion and EBITDA of $359 million (consensus at $4.0 billion and $349 million, respectively). Our initial take: positive We maintain our Outperform rating and C$18.00 target on NFI Group shares while we review our model. Better than expected Q1 results give us confidence in the company's ability to meet its 2024 guidance and the better than expected cash performance should alleviate any lingering investor concerns that the company could test its liquidity covenants in the first half of 2024. Furthermore, the record backlog and improved pricing provide visibility on improving profitability and cash flows through 2025 and beyond. We value the stock by applying a 7.0x EV/EBITDA multiple to our 2025 forecast. NFI will hold a conference call Friday morning at 8:30 a.m. ET (at https://edge.media-server.com/mmc/p/zeudch8z)