NFI Group Inc. (NFI) Earnings Call Transcript & Summary

So welcome, ladies and gentlemen. On behalf of UBS, I'd like to introduce the NFI Group, who we are excited to have at our conference this year. For those of you who don't know, NFI has a long corporate history, and today, the leading independent global bus manufacturer with a significant presence in North America and Europe as well as Asia. NFI's brands are well-recognized industry leaders in all sectors where they operate, from the new flyer transit buses to MCI, motor coaches and Alexander Dennis double-decker buses. NFI is committed to providing innovative and sustainable mobility solutions to municipal commercial industries. So with that, I'd like to turn the presentation over to Paul Soubry, CEO to provide additional detail on the company. [Operator Instruction] So with that, Paul, I'll let you take it away.

Thanks, [ Jason ]. Just for the group's awareness, I have 2 people with me. One is Pipasu Soni, our CFO, that joined us just in December of last year following the retirement of our 30-year tenured CFO; and Stephen King, who's the Director of our Group Investor Relations and Corporate Development. So I thought what I'd do, [ Jason ], is just we have a deck on loaded, and I thought we'd just high level walk our audience through kind of where we've come from, what we're working on and where our business is today. So I'm now on Page 2 of our deck. Look, we are now, as you mentioned, one of the leading global independent bus and coach manufacturers, and that's all we do. We're not part of automotive giants like Daimler or Volvo. We are able to focus on our core business. And if you look at us 10, 15 years ago, we talked all about product. And now we spend all of our time thinking about mobility, about solutions and about the environment sustainability. And so our mission and vision have dramatically changed and expanded in scope, both what we think about as a business, how we generate revenue and how we support our customers. So I move to Slide 3 now, and so this is just a little bit of a history over the last 10 years of our business. In the early 2000s, the business went through a couple of private equity flips that went public as an income deposit security or a stapled security. And it was 2009 when the private equity investors finally left the business. And so what this chart really shows is the evolution and growth of our business, which is a combination of organic product and market growth, but also the assembly and acquisition of a number of key brands both domestically as well now internationally with Alexander Dennis. And so pro forma, we're now USD 3.2 billion in revenue. On Slide 4, we are now kind of a portfolio of key products. On the top left, you see that we are -- in the core history of the business is around a company called New Flyer, which is the largest transit bus manufacturer in North America. And the key to that product and product line is the fact that we offer our vehicles in diesel, natural gas, hybrid, battery electric, trolley electric and now fuel cell electric. Top right, the acquisition following the North American growth of New Flyer was MCI, as [ Jason ] mentioned, which includes now the market leader in both public and private motor coaches in North America and again, multiple propulsion systems. On the bottom right, we acquired a couple of years ago, a smaller bus business called ARBOC, which is headquartered in Indiana. And the reason we liked ARBOC is as we move in the future of electrification, autonomous and so forth, we felt that having a portfolio of products up and down in terms of size, price point and capability will be critical. ARBOC is the leader in North America in low-floor cutaway small bus business and medium-duty shuttles. On the bottom left, we just were successful last year after many years of trying to acquire the world leader in double deck, Alexander Dennis, headquartered in Scotland, with facilities in Europe, in the U.K. -- sorry, North America and Asia is absolutely the dominant player as well as the single largest bus manufacturer in the U.K. And then finally, bringing it all together, we have a spare parts business that is quite elaborate and diversified that sells everything from bus and coach parts, not only for our products, but for others. The next slide, Slide 5 just talks a bit about our strategy and areas of focus when it comes to technology. Top left, first and foremost, our strategy has been to be a leader in pushing the envelope on zero-emission buses. To do so, the solution associated with the infrastructure, the charging, the depot strategy is part and parcel. And so we launched a vehicle innovation center a couple of years ago around zero-emission technology but also have got into the business now of assisting our customers with sourcing, deploying and standing up infrastructure solutions. Bottom left, one of the things that we lagged as an industry was smart vehicles. And in the last 4 or 5 years, the effort around getting telematics and connected vehicles, uploading manuals from remote or versions of software, the ability to diagnose a bus from a distance and not have to have on-call field crews and so forth in terms of investment of people and so forth. Top right, what we're starting to see now in our world is real research around driver assist programs. And we see those in our cars and our vehicles, but now making their way into mainstream transit. And then finally, our strategy has been almost on all of our platforms to be propulsion agnostic; meaning, as much as we like the thought of moving ultimately to clean, green, all-electric vehicles, it is costly, it is a different capital structure, and there is an incredible learning curve for operators. And so we have chosen to be able to offer exactly the same proven platforms with multiple propulsion systems. Slide 6 shows you a little bit of the profile of our business now with the addition of Alexander Dennis. And so we are now about 70% of our customers are private -- or sorry, are public. Our current revenue is dominated by the United States, 81% in North America, but now in introduction in both U.K. and Europe and Asia Pacific. And finally, you see we're starting to create balance of the different types of products between transit buses, motor coach, smaller vehicles and the aftermarket spare parts support. Slide 7 is really just to try and show our investor base that we have now gone beyond North America. Anybody that's close to the bus or coach market realizes it is very much a replacement-oriented industry. And so improvement in results comes from improving our factories and our efficiencies. It comes from global sourcing strategies. But it also comes from sharing of technology and reach to be able to grow domestically as well as internationally. And so with the addition of Alexander Dennis, we now have a strategy for North America, for Europe and U.K., but also for the Pacific Rim. Slide 8 is a busy chart. There's 4 charts, but I wanted to show a little bit about how the markets have a little bit of seasonality or cyclicality associated with them, but also are very different. The top left is the transit buses market in North America. And you'll see for the last 10 years that, that market has shown nice, slow, steady growth. The motor coach market, top right, is far more susceptible to economic changes in shocks and will be again here as it relate to the COVID pandemic. Even if you took your pen and wrote over top of it, you'd see a stable industry impacted by 9/11, recovered, impacted by global financial crisis and then somewhat of recovery for the last couple of years. This is the single biggest part of our market -- our business that would be impacted by COVID, which is the shuttle or private motor coach business. The bottom left is this business in the U.K., where we have north of 70% market share. And that market share has grown steadily over less. So as the market has actually slowed down in the U.K. and is now poised for recovery, we have actually dominated with Alexander Dennis in terms of improving market share. And probably the most important slide in this whole deck for us as we look forward to the bottom of Slide 8, Page 8, is the concept of bid opportunities. Our industry is not like housing starts or automotive, where you have great public information around market size, scales and shifts. So 10 years ago, we created a concept called the bid universe, where we -- every single week, we recalibrate the total number of public bids that have hit the street, the number of public bids and units that are in play. And then what we do is add up our customers' 5-year fleet replacement plan expectations. So what the chart on the bottom shows you over the last couple of years, we've started to see a nice recovery of the active bids in place and the opportunities on the street. And more importantly, for the next 5 years, the sheer expected replacement factor of transit buses and public motor coaches in Canada and United States has actually grown now to record levels. So while we are stumbling a little bit through the realities of COVID and the dynamics around funding and ridership, long-term public transit is the key backbone, if you will, or spinal cord of moving people for the vast majority of every city in the world. Slide 9, I think, is important to try and [ say to you ], "So what did COVID do to our business?" And there's 4 major buckets, as I said earlier. The first one is North America transit bus. To date, we have had limited cancellations. Because as far as I know, we've only had one contract that was selling for 15 options that have been canceled. There have been transit agencies that are managing their way through COVID that have asked us to reschedule their fleet. The North American motor coach market has absolutely been impacted, as I mentioned a minute ago. 93% of all the private motor coaches in North America are parked. And so we think from 2020 and 2021, maybe beyond, we're going to see a slower potential growth or recovery of that private motor coach market. Internationally, the vast majority of public transit is provided by private companies that do it on a profit basis. And so we have not seen massive competition [indiscernible] deferrals or delays in the desire for us to build buses. And finally, our parts business through the entire COVID crisis has continued to operate supporting our customers, both in the public and private environment. So the bottoms chart basically says, what have we done? The first thing we did when COVID hit the shores of North America in kind of March is we chose to idle our production. And we chose the word idling very carefully because we didn't want to burn off all of the inventory inside our factories and therefore making restart very difficult. So we basically put tools down with spare parts in place and idled the vast majority of our people, but kept a number of people on for critical support, spare parts selling and any factory maintenance we had to do. We also worked with our supply chain. As you can imagine, we have a very sophisticated supply chain. And so we worked with our supply chain, both in delaying and managing and renegotiating some of our [ payables ], but also ensuring that we didn't have a crazy amount of redundant inventory in the system. We then went after liquidity. And so we focused on reducing all the possible areas where we could eliminate, reduce or delay cash burn. We furloughed north of 8,000 people, and we got very aggressive in terms of managing our cash outspend. We also then successfully went out and got north of $300 million of additional debt capacity that could help our total leverage. We went after cost reduction. And you'll see -- as you start to see our results for this year, we fundamentally made some serious impact on our cash burn and our costs as well as we took out a number of people permanently and specifically in the MCI business where we felt that the volume wouldn't recover. And finally, pleased to report that in the last couple of weeks, we have now started our production backup of all our factories. But rather than turning the switch on from 0 back to 100 miles an hour, we chose to phase the start-up of the facilities but also stage the pace at which we get back to pre-production levels, and we are well into that process. By the second week in June, we expect all of our facilities back up and running. I'll hand it over to Steve now to talk a little bit about some of those specific initiatives as well as the realities of our markets and our business performance. Over you, Steve. Slide 10.

Perfect. Thanks, Paul. So as Paul mentioned, our focus really became, as we went through COVID, on lowering our cash burn. So thankfully, the majority of our costs are related to production. So as Paul mentioned, as we idled production and we lowered our variable costs, but our fixed cost, and our cash conversion was our other primary focus. So as things mentioned on this slide, accelerated our public collections with a lot of our trended agency customers, worked with our vendors to extend some of our payment terms, lowered our discretionary spend, elimination of travel, capital spending was lowered to just critical projects. And then one of the biggest things we had to do, unfortunately, was a challenge, was to cut our dividend by 50%, but it was prudent given the challenges with COVID-19. But we also -- looking holistically at all of our stakeholders, obviously, that impacted our shareholders, but we also did a lot of things internally, salary freezes, Board -- suspended payment of Board fees and a cut of management salaries of 20% to 50%, deferrals of tax payments and withholding of executive bonuses. So really across the board from all employees all the way up through to the Board, everybody took some measures to lower cash expenditures. Next slide is really important, I think, to talk about our liquidity and what we did to strengthen our balance sheet. We started in September '19. Just because in 2019, we did have some challenges with our work-in-progress inventory or work-in-process inventory. We had started a new parts fabrication facility in Kentucky. It was a strategic facility because it helped us with our Buy America requirements because to get the -- to avail of the U.S. funding, the 80% federal funding in the United States. You have to meet Buy America requirements, and they had increased from 65% to 70% last year for the components and subcomponents. So we've done some more in-sourcing through this KMG, Kentucky facility, but we did have some hiccups as we ramped up that facility that caused a buildup of WIP because supply lines or production lines throughout our business weren't getting supplies on a regular cadence. So then that did create some buildup of WIP. But thankfully, by the end of '19, we put all that behind us. We'd caught up, we'd lowered our WIP at the end of the year and improved our liquidity. Q1 is typically a period where our liquidity dips a bit as we start to build up WIP after we have a very busy fourth quarter within -- across our business in sales. So then we start to build up our WIP in the first quarter of the year for future sales. Then obviously, as COVID started to strike, we focused on cash generation. And thankfully, we generated $100 million of positive cash between March and April. And we also, as Paul mentioned, entered into some new credit facilities, including a $250 million sidecar, which we generally view as an insurance policy. We don't actually want to dip into that facility. We have a $1.25 billion revolving credit facility, which we had in place pre-COVID, which is our general facility that we like to use. But just being prudent to strengthen the balance sheet, we entered into this new credit facility. And as well, prior to COVID, we had been working on a U.K. credit facility to help fund ADL's operations. So we didn't have as many international transactions, just helped save us on tax and interest expense. So you'll see there at the beginning of May, we had over $550 million of liquidity. So in great position as we work through COVID-19. And a very important part of our business, which we definitely focus on is our backlog. So what that is, is firm and option orders that we have with transit agencies. This is around the world. So this is North America and U.K. and Asia. And so you'll see there that we have over 10,000 -- almost 11,000 units in our backlog as of the end of the first quarter. And so that really gives us visibility as to what we're going to build in future years. So what we have in our backlog for 2020, a lot of that will be built in 2021. And then we have options that you'll see in the bottom right here that extend all the way to 2024. So we have some visibility. Now they get converted. You kind of see a range there from 70% to 80%, but typically in and around that 75% range. So it gives us future visibility as what we're going to build in future years. And what our opportunities look like beyond 2020 and into 2021. On Slide 13 is our historic revenue. Paul mentioned this at the beginning. You'll see our growth profile and our split between manufacturing and aftermarket, which have both been growing. Adjusted EBITDA here on the right-hand side obviously came down a bit. There were some challenges that I mentioned before with Kentucky and then some production challenges in 2019. But as well, we also added the ADL business. The ADL business does have a lower margin profile, just given some of the dynamics around their manufacturing, less in-sourcing and also competitive dynamics of some of the markets they work in, in U.K. and Asia. Prior -- you can see our Q1 2020 LTM number. Prior to COVID, we had provided guidance of $320 million to $350 million for 2020, and that was our plan. And to be -- the year had started really on target. Unfortunately, with COVID now, and we've had to withdraw our guidance because of that. But we were very pleased with how 2020 was shaping up from both an EBITDA and a margin perspective. As I flip to Slide 14. You see our business generates a lot of free cash flow. We have a great history of dividends, and dividends is really important to us. We don't have a target payout ratio for the business. But we've generally been in kind of that 50% range most years. On the right-hand side, you see our chart, we've obviously made a lot of investments, the light blue here in CapEx and equipment. So we've invested a lot in the business. There's been multiple things, KMG, one of those, plus other strategic growth projects. So you'll notice that our ROIC, our return on invested capital, has come down slightly. Some of that driven in '19 and Q1 2020 is primarily driven by the fact that we've made all of these investments either in KMG or extension of our Anniston facility or other capital projects as well as the acquisition of ADL. But we haven't necessarily gotten the returns because it's been so early in that process. So as KMG ramps up and we put the challenges of 2019 behind it, as ADL grows, we expect that ROIC will improve. Slide 15 just gives you a summary of where we've been putting money. So you'll see we're -- obviously, we've put a lot of money back into the business. We've done a lot in acquisitions to grow our business and diversify, but we've also returned significant capital to shareholders. Those figures are in Canadian dollars because that's -- we're traded on the Canadian Stock Exchange. So you see $339 million. So dividend is a very important part of our story. So even though we made the cut, it's still very important to us to have that dividend going forward and return capital to shareholders. And in 2018 to 2019, we did a fairly large share buyback program. Obviously, we're focused on deleveraging now post ADL, but share buyback and dividends is definitely part of the capital strategy. Slide 16, important, just especially within the context of COVID-19 to talk about some of the funding. Government support is -- for transit is very, very strong within most of our major markets, especially within the United States. As I mentioned before, through the FDA, most bus procurements are funded 80% federally and 20% state and local. And so you can replace -- you can avail of that funding profile if you have a vehicle that is 12 years old or has 500,000 miles. And so most transit agencies do use that funding. Recently, as we went through COVID-19, a lot of transit agencies you'll read the news have been under challenges with lower ridership and operating costs and challenges to their budgets. So thankfully, the U.S. government in -- towards the end of April, early May announced a $25 billion funding package called the CARES Act. This funding can be used for operational costs and capital costs. A lot of transit agencies are using it for operational cost to help fund some of those deficits. But some transit agencies will use it for capital. And a good thing about the CARES Act is it doesn't have a term limit. It's extended. There's no limit on timing. And as well, transit agencies can waive the 80% rule. They can actually use 100% federal funding for robust procurement through the CARES Act. More recently, just last week, government announced another $15.75 billion in additional transit funding to help again support transit agencies that are going through challenges. We expect there'll be continued funds coming through following COVID-19. I know just today, House Committee tabled the Investment in America Act (sic) [ INVEST in America Act ], which is -- which will replace the FAST Act, which was the last funding cycle or should replace the FAST Act, and that's a massive funding for rail transit, transportation, buses, numerous projects. So there'll be more to come, I'm sure, on that in the coming weeks and months. Canada has not made any announcements yet on specific COVID-19 related funding. But the lib for federal government here, the liberal government, in the fall, as part of their election platform, had announced that they would want to create a special fund for the procurement of 5,000 electric transit and school buses. So again, just strong support from transit at the federal level. And then in the U.K., pre-COVID in February 2020, the government there had announced a $5.1 billion funding package to upgrade bus and cycling routes, which included the procurement of 4,000 zero-emission buses. So again, just highlighting the strong support for Transit pre- and post-COVID. And just in summary, on Slide 17 is our outlook. Obviously, 2020 results will have some challenges as we work through COVID. We did lose production for April and May. And now we have restarted, and there will be a step-up towards that. But the great news, as Paul mentioned, the public market outlook remains good, remains strong. We may see some orders deferred from 2020 into 2021. But the 5-year bid universe is very strong. Approximately 30% of that is on zero-emission buses. And a good thing, which we've been very pleased is RFPs, so request for proposals from transit agencies in North America, continue to hit the street. So transit agencies even through COVID-19 have been issuing RFPs for new procurements. I talked about the government stimulus and government programs. The market that Paul mentioned, motor coach will be under pressure in 2020. There's no doubt about that and potentially into early 2021. We mentioned here a bit about our quarterly results. So as you're doing your modeling, you can take a look at that, about the challenges around Q2 and Q3, Q4 year-over-year. Backlog in great position. And finally, one point we want to talk about. We are doing more. You'll see that we've acquired a lot of companies, and we've been operating a bit more as a holding co rather than an operating co with those companies. So now with our new CFO and other individuals within the organization, we're focused on a very -- like a larger strategic project to switch more to a operating company to take advantage of potential synergies, more centralized functions and more centralized view across the business. So with that, I'll now open up the line for questions.

So thanks, Paul and Steve. I think a couple of questions just coming in, but I think you guys touched on sort of the bid pipeline, the number of RFPs. But I guess, maybe if you can elaborate a bit more just on some of the discussions you're having with transit agencies in this environment and how they're looking at ridership recovery and sort of their fleet plans going forward, I think that would be helpful.

Thanks, [ Jason ]. So there is no question that every rider -- every transit agency or every transit provider in the world to ridership is significantly down. And so everyone continued to operate to some extent through the primary days of the COVID pandemic, and some of them have made some pretty good progress of getting back to somewhere near close to normal level. The dynamic of getting people on a bus, though, there's a bit of a phobia in terms of, hey, wait a minute, I'm in an enclosed space with lots of close people. And so we've been working really hard with our customers on a whole series of, we called it, Clean and Protect of products or systems, everything from driver barriers, barriers between passengers, fogging equipment for the buses, UV lights that go into the air conditioner for treating the air and so on and so forth. We are seeing some transit agencies limit the number of people that can go on a bus. And so that has meant more buses in some cases on the road than normal and higher frequencies, which actually has helped to some extent with ridership. There is going to be a dynamic of ridership recovery through the rest of this year and maybe into next year. Having said that, this is not an elastic industry where you shut down and stop overnight and then it's fundamentally harmed. Once the world gets back to some level of normal, you still need to move people through cities. And whether it's a subway or a light rail or a bus, there is not enough cars, there is not enough Ubers and so forth, there's not enough parking spaces to have everybody go in a car. So our discussion with transit agencies is around immediate production around their ability to accept new buses because they have to have teams that take equipment off old buses and put it on new and inspectors and all those kinds of dynamics. But most transit agencies, if not all of them, have a 5- to a 10-year fleet replacement strategy. And while disrupted and changed in the short term, they still have dynamics around longer-term fleet upgrades. And so that's -- in the public environment, that's the conversation that we've had around rejigging schedules as opposed to don't build my buses. The fact that we continue to see fleet replacement plan total higher than they were before is positive. And the fact that we're seeing RFPs continuing hit the street higher than they were last year are all signs that this temporary dynamic of COVID is just that. And that the local transit agencies, once they get their heads around financing and funding and federal programs and the replacement of the current hybrid transportation bill and so forth, that they'll get back to some version of operating. We may see some dynamics of ridership last a little bit longer than any one would have hoped. But they're still essential services. You have to move people through cities. And whether there's, not to be too simplistic, but whether there's 35 or 45 people in the bus, that bus is still moving through those routes. So that's why our view is the public transit dynamic is really speed bumps at this time as opposed to the public motor -- or the private motor coach market, which will take a longer time to recover back to anywhere near normal.

Yes. We've been tracking some new data sources, Moovit, Google Maps, Apple Maps that have kind of come around since COVID-19 that have been tracking public transit ridership. And based on the data we've seen, obviously, there's been a drastic drop in March and April, but it seems like from some of those data sources, it seems to have hit the trough and is now starting to come back. So Paul -- as Paul mentioned, time line to be determined, but at least it's starting to look a bit more encouraging that people are starting to resume transit ridership.

Okay. That's very helpful, guys. Another question here. And again, I think just within the presentation, you guys definitely touched on it. But given one of your strengths is definitely being propulsion-agnostic and in light of this environment, just kind of -- can you comment on sort of how you view electrification and zero-emission bus adoption being impacted, I guess from all this? And you had mentioned Canada has shown some strong support, but do you see maybe the focus of transit agencies kind of moving elsewhere from these 2 trends?

Well, public transit, to some extent, starts with the politicians. And there's not many cities in North America that have not investigated, demoed or tried or piloted or have made a commitment to by 2030 or 2040, whatever the date is to, move to zero-emission technology. The challenge is that there's an economic reality. Capital cost, and as Steve mentioned, where the U.S. government is paying for 80% of the capital cost of the bus and the local operator pays 20% of the match, to be able to afford more expensive capital assets, electric buses as well as the charging infrastructure, you got to pull the money forward. And yet all of the operating and maintenance costs are paid for by the local municipalities, which is why the FDA sends some really creative stuff beyond their normal funding methodologies with special funds to try and demo pilot projects and so forth. Our view is that the ultimate movement to zero-emission is not if, it's when. It's a timing dynamic. And it goes back a lot to the funding reality. Having said that, the economics of operating an electric bus, it costs more upfront, but you have less operation maintenance cost downstream. And our crude math shows that over a 12- or a 15-year total cost of ownership, the lines actually cross. And so right now, the number of electric buses on the road in Canada and United States is somewhere around 400 or 500 electric vehicles out of 85,000 transit buses. It's not massive, which is part and parcel to our strategy. We fundamentally believe that the movement is going to be evolution, not revolution. I mean nobody is going to hand in an old fleet tomorrow and expect to buy a whole bunch of electric buses or fuel cells. But over time, we'll migrate there. And so that strategy of offering exactly the same type of bus with multiple propulsions allows us to move and support that operator. So a simple example, New York City. They have natural gas, diesel, hybrid and battery electric buses from New Flyer, all on the same platform. And they can -- training, spare parts, orientation, maintenance, all those things are common across those platforms, with the exception of the propulsion system. So that strategy of having those multiple propulsion offerings allows us to be completely flexible and agnostic, not pushing a customer into one direction of one propulsion system over the other. The reality of the funding in the next little while and the new Highway Transportation Act and stimulus dollars, no question, there's an issue about maybe the pace or the take-up on electric vehicles. But I go back to the fact that we can offer them clean diesel, natural gas or hybrids to move along that zero-emission propulsion road map, which really bodes well for many of the politicians' desires around, a, clean; b, newer vehicles, green; and then ultimately, that whole congestion dynamic in cities, trying to get more people into a comfortable, prudent, environmentally conscious vehicle in major cities and not traffic jams and those kinds of elements. So we may see as -- in short, we may see, [ Jason ], a dynamic. But at the end of the day, fundamentally, we believe, 20, 25 years from now, we're not going to be selling diesel buses anymore and probably not even natural gas. They will largely be electric platforms.

Understood. We've got one more question here. I guess on the M&A side, and it's been historically a pretty important part of your strategy with ADL recently and a movement to Europe. I guess in light of this environment and some of the initiatives you guys spoke about, potentially M&A could be on hold. But what do you guys see, let's say, we returned to normal, an M&A focus could be to really help bolster this business and some of the European, Asian markets or elsewhere, how would you see that going forward?

Well, thanks for the question because I think it's a good one. And you're absolutely right. I mean if you go back in our history on that slide, we tried to fix our business, we changed the capital structure, we acquired a number of players in the North American transit space and trying to -- and we rationalized those. We then moved and pivoted to add a motor coach business, different revenue base, some of the same customers, but very different, public versus private and so forth. We then started to bring in-house or acquire certain level of our own part fabrication capability to take advantage of increased Buy America rules, but also profit potential. And that movement to get Alexander Dennis did 2 major things for us. One, it added the world leader of double deck, which has made a big, big impact. There's 1,000 double deckers in North America operating today. So we now actually have that in our portfolio. But more importantly, Alexander Dennis has shown that they know how to market develop, started out in Scotland, England, Ireland, went to Pacific Rim, Hong Kong, Singapore and New Zealand, came back and went into Mexico, went into North America and most recently won some neat work in Switzerland and Germany. And so what they have that we don't have is a global focus for sourcing and development, build partners in certain parts of the world as well as some organic capability. But what they have is that innate capability expertise around market developing. And so M&A, in the short term, no question, the fact that we've struggled through this COVID dynamic as an industry on orders, we are continued and laser-focused on getting our leverage down and reducing our debt levels to something we're more comfortable with, something in the 2.0 to 2.5x total leverage range. Having said that, part of our desire to have the sidecar in place was that we may find opportunities coming out of this pandemic that make sense to add to our strategy from a global perspective. We're not making decisions for 2020 or 2021. We'll make it for the long-term health and balance and perspective of our business. The cool part for us is that we're the largest in the world of those independents. We have flexibility. We have now opportunity, as Stephen said, to migrate to some level of an opco where we're sharing technologies and optimizing back office. And therefore, going after our cost perspective and are cost competitive. So we'll continue to watch and learn and look. At the same time, make no mistake, shareholder return, total leverage is absolutely where the total focus is in the business today.

Very clear. I appreciate that, Paul. I'm looking here. I don't think we have any more questions. So any sort of concluding remarks you want to leave investors? I'll pass it to you.

Well, look, thanks to -- [ Jason ], to you and the UBS team for including us in this conference. Again, a very different dynamic for all of us over the computer. We're a really neat success story of a business that grew up focused on one market that is now diversified. The game is changing in terms of propulsions and dynamics. But that reliable bus in a city core is absolutely critical as well as the movement of people across different parts of the world. And so we really believe that we've got the tools and the portfolio. We've got an opportunity to optimize the cost structure of our business. And we have the ability to pivot going forward depending on the types of product, size, vehicles, like propulsion platforms and so forth. So while the next 12 months is going to be continue to rough ride for us and anybody else, long term, we believe bus and motor coach transport is a critical part of moving people around the world, and that we think we've got a very, very good opportunity to continue to grow and diversify our business. So thanks for the opportunity.