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

So good morning, everyone. I would like to welcome you to the Annual and Special Meeting of Shareholders of NFI Group Inc. My name is Stephen King. I'm the Vice President, Strategy and Investor Relations at NFI. So great to see so many people in person. This is our first in-person AGM since 2019, after 3 years of virtual meetings. So good to see not just floating heads on a screen. So we're going to start with a land acknowledgment. So also known as a territorial acknowledgment. So I acknowledge that I reside on that NFI's head office is located on Treaty 1 territory, the original lands of the Anishinaabeg, Cree, Oji-Cree, Dakota, Lakota, Dene peoples, and the birthplace and homeland of the Métis Nation. The land we are meeting on today has for many millennial have been the traditional territory of indigenous nations, including the [indiscernible] and most recently, the Mississaugas of the Credit River. We respect and give honor to the indigenous people's history on this land and recognize First Nations, Métis and Inuit people's ongoing contribution in our neighborhoods and communities today. Following the formal part of today's meeting, there will be a management presentation and an opportunity for shareholders to ask questions. We have 2 microphones at the back of the room, and we'll let you know, when we're available for questions. In addition, just so everyone knows in the room, as we live in a virtual hybrid world these days, we're also webcasting today's AGM. So, it is being recorded, it will be on our website and people are joining us live right now. We won't be taking questions through the webcast. We'll just be taking questions in the room. I'll now turn it over to our President and Chief Executive Officer, Paul Soubry.

Thank you, Stephen. As Stephen said, welcome to our in-person and hybrid virtual session. It's been a challenging last few years for our people, our customers, our people, our team, our Board of Directors and clearly for our shareholders. We look forward to providing you with an update on our business and outlook during the management presentation, later this morning following the formal portion of our meeting. I'd now like to introduce the Honorable Brian V. Tobin, Chair of the Board of Directors of NFI Group, who will provide a welcome to today's meeting, and then take us through the formal portion of the meeting. Before I do that, a little background. Brian has been the Chair of our company since it went public in 2005 and also served as a Director and Chairman of several other Canadian publicly traded companies. Brian previously served as the premier of Newfoundland and Labrador and also served as a member of the Canadian Parliament, holding several senior cabinet positions in our federal government. In addition to being the chair of NFI today, Brian is also the Vice Chair of the BMO Financial Group and Chair of the BMO Nesbitt Burns. So after almost 18 years, Brian, upon the completion of today's meeting, he will retire formerly as the Chair of NFI's Board. And Brian originally reached his term limit, 2 years ago. But agreed on the request of the Board to extend to 1-year terms, so extensions to help us manage through the ramifications, implications of COVID, but also get back on our feet relative to supply chain disruption in our banking and credit relationships. Brian has been a tremendous champion for our company, and for a lot of us personally. And his contributions to us over the last 2 -- nearly 2 decades as a director of partner and leader cannot be underestimated. So we have a chance to celebrate Brian's contributions yesterday. And just on behalf of our entire leadership team, Brian and the rest of the Board, thank you for everything you've done for us, and I hope you have a bit of spare time in the future. So over to you, Brian.

Thank you very much, Paul, for your very generous remarks. On behalf of the entire Board, let me say welcome to everyone to today's meeting, including those who are joining us virtually from wherever you are. It's been fantastic to hold this annual meeting of shareholders in person, while also being live streamed. It's been a couple of years since we've been able to get together face-to-face and hold such a meeting. It's been an exciting journey for me as Chair of the Board for the last 17, almost 18 years, Paul, since I first joined this board. I've had the opportunity to witness part of the evolution of NFI Group from humble beginnings in Winnipeg through multiple acquisitions, different product lines and propulsion to today, as the leader in Zero-emission mass transportation. And I want to say there is absolutely no doubt in my mind, notwithstanding the challenges of the last few years, and they have been significant, not just for New Flyer, but for many players in this space, who rely upon a supply chain that literally moves around the world and the disruption that supply chain. I want to say that very clear, the best is yet to come. I think it's important to remind ourselves that we know as a corporation had a lead. And we know as a corporation, as a management team and as a Board, had a win. It was only a couple of years ago, we were enjoying a $300 million EBITDA performance. It is not a stretch to say that with the challenges of the last few years, finding resolution the focus again on a solid, more improved supply chain with the capacity of this management team to once again win with a record backlog, $6.7 billion backlog, largest we've ever had with margins, the biggest we've ever enjoyed. It's fair to say that the best is yet to come, and is on its way. We have a diverse Board with expertise in governance, sustainability, finance, technology, strategy and a solid working relationship between the Board and the management team. Our Board has continuously added new, unique and diverse expertise with insights in the different markets, technology and competitive dynamics, ESG and ops. So I'm pleased that the Board has chosen one of our own, Wendy Kei, to take on the role of Board Chair at today's meeting. Wendy joined this Board a year ago at this time, and she's been an important and invaluable addition to our Board. And having had the pleasure of working directly with Wendy as we have all on this Board, I'm absolutely thrilled that she's going to step into the role of Board Chair effective in just a few minutes. Wendy's brought a diversity of professional experience and skill sets, including senior finance, corporate governance, ESG, M&A and audit leadership to our team. She currently also serves as the Chairperson of the Board for Ontario Power Generation. In 2022, she was honored as a fellow from the Institute of Corporate Directors and named The BMO Celebrate Women on Board's 2022 honoree in 2020. She was selected one of Canada's top 100 most powerful women. So Wendy, Congratulations. I know you'll lead this company very well, better than ever. And I look forward to watching you and the corporation's continued success. It's also my pleasure to welcome Jannet Walker-Ford, who's been nominated to serve as a new independent director on NFI's Board. Welcome, Jannet. Jannet has more than 2 decades of diverse public and private sector experience across multiple industries and as a tireless advocate for equity and transportation and the power of public transit to transform communities. Since February of 2021, Jannet has been the Senior Vice President, National Transit and Rail market lead with WSP USA, a leading engineering and professional services consultancy firm, of course, we know them well. They're based in Montreal, and they are growing rapidly, year over year over year. In this role, Jannet leads the growth strategy, the technical delivery of rail, bus, intercity rail systems and project management practices, as well as innovative approaches for the delivery of Zero-Emission, automation and bus rapid transit technologies, perfect fit for NFI and Jannet's tremendous experience will be a very strong asset to NFI's Board and providing advice to the management team. Welcome on board. As you've seen, and you'll hear from Paul in his presentation, 2022 has been an incredibly challenging year for NFI. Global supply chain disruptions created operational inefficiencies. We saw rapid inflation by have it with pricing and bids. Countering those negatives was a record bid environment, as I said earlier, for NFI's products, and I'm incredibly proud of this management team we've worked closely with the Board throughout to navigate to the challenges to deliver for our customers. The Board remains , and I can tell you we just had the opportunity to spend a lot of time together, over the last couple of days. This board remains fully and I want to stress that fully confident in management and their capability. I know the directors of the Board are excited to see NFI's execution as it realizes a bonded benefits of the significant investments we've made in battery, electric and fuel cell propulsion and infrastructure and telematics and internal fabrication capability. There's no doubt in my mind that NFI will lead the transition to zero-emission bus and coach transportation and remain the market leader today and remain the market leader in the future in product, in market share and in workforce development. Thank you again. And my pleasure to serve as Chair of the Board of Directors of NFI Group and I look forward to the company's near- and long-term solid future. We will now proceed with the formal portion of today's meeting. And on behalf of the Board, I wish to express thanks to those shareholders who have submitted their proxies in advance. Only shareholders or their proxies are, of course, entitled to take part and vote at this meeting and they make the best use of our time. I will move and second the proposals, which are called for in the notice of this meeting. Meeting will now come to order. I'll ask Mr. Colin Pewarchuk, the Executive Vice President, General Counsel and Corporate Secretary of the Corporation to act as the Secretary of the meeting; and Paul Allen of Computershare Investor Services, Inc., the transfer agent of the corporation's common shares, to act as the scrutineer. Notice calling the meeting was mailed to shareholders on March 30, 2023, and we received confirmation from the corporation's transfer agent as to its mailing. Just prior to the start of the meeting, I received a copy of the preliminary scrutineers' report on attendance. There are 60 shareholders holding 45,819,728 common shares presented in person or by proxy at this meeting. This represents approximately 59.4% of our outstanding common shares as of the record date. I've been advised by the scrutineers that a quorum of shareholders is present, and I, therefore, propose to proceed with the business of the meeting and in proceeding with the meeting, I propose to conduct the vote on each matter by a show of hands. I now declare that the meeting is regularly called and properly constituted for the transaction of business. The first item of business is the presentation of the consolidated financial statements of NFI Group Inc. For the fiscal year ended January 1, 2023, and the auditor's report thereon. A copy of the financial statements, together with management's discussion and analysis of operating results and auditors' report were included in the corporation's annual report, which has been mailed to shareholders requesting copies and is also available on the corporation's website. The corporation's consolidated financial statements and auditor's report are hereby tabled for purposes of this meeting, and no further action is required. We'll now proceed with the appointment of auditors and the authorization of directors to fix their remuneration. I move and second that delight -- Deloitte LLP, the appointed auditors of the corporation to hold office until the next Annual Meeting of Shareholders and that the directors be authorized to fix their remuneration. You've heard the motion, all in favor? Contrary, if any? I declare the motion carried. The next item of business is the election of directors. The 10 directors are to be elected, and information regarding the proposed nominees is set out in the information circular appeared in connection with the meeting. I now declare the meeting open for nomination and I have the pleasure of nominating Phyllis Cochran. I would ask that you would stand upon your name being called. Larry Edwards, Adam Gray, Krystyna Hoeg, Wendy Kei, Paulo Nunes, Colin Robertson, Jannet Walker-Ford, Katherine Winter; and Paul Soubry. Thank you all. As directors of the corporation to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed. The corporation's amended and restated advanced notice bylaw provides that nominations of directors by shareholders must be received by the corporation, at least 30 days in advance of the meeting in order to be valid. And as no such nominations were received by the corporation prior to the deadline, the nominations are therefore closed. In accordance with the corporation's majority voting policy for a nominee to be elected and remain as a director, he or she must receive no less than a majority of the votes cast in favor of his or her election. Based on the number of votes cast by proxy in advance of the meeting in respect of each nominee, I can report that all of the nominees have received a majority of votes cast for their election. And therefore, I now declare that they've been duly elected directors of the corporation to hold office, until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed. Congratulations to you all. The next item of business is to consider, and if deemed appropriate, to pass an ordinary resolution in the form set out in Schedule A to the management information circular to continue, amend and restate the third amended and restated shareholder rights plan agreement dated May 7, 2020, between the corporation and Computershare Investor Services, Inc., as rights agent. The rights plan is designed to provide the Board of Directors with additional time to assess an unsolicited takeover bid for the corporation and where appropriate, to give the Board additional time to pursue alternatives for maximizing shareholder value. The rights plan is also designed to encourage fair treatment of all shareholders and to encourage a potential acquirer to proceed by way of a permitted bid, which requires the takeover bid to satisfy specified minimum standards designed to promote fairness. The rights plan, I stress, was not adopted in response to any specific proposal to acquire control of the corporation, nor is the Board currently aware of any pending or threatened takeover bid for the corporation. To be effective, the ordinary resolution must be adopted by a majority of the votes cast by shareholders represented today and entitled to vote at the meeting, excluding shareholders, we're not independent shareholders for the purposes of the rights plan. If the ordinary resolution is approved, the corporation and Computershare Investor Services, Inc. as rights agent, will enter into a fourth amended and restated shareholders' rights plan agreement, which will take effect today. I move and second, that the resolution with respect to the continuation, amendment and restatement of the third amended and restated shareholders rights plan agreement of NFI Group Inc. in the form as set out in Schedule A to the management information circular be passed as an ordinary resolution of the corporation. You've all heard the motion and all in favor? Contrary, if any? There being none, I declare the motion carried. The last item of business is the approval on an advisory basis of the corporation's approach to executive compensation. I move and second to approve on an advisory basis and not to diminish the role and responsibilities of the directors, that the shareholders accept the approach to executive compensation disclosed in the management information circular. You've all heard the motion. All in favor? Contrary, if any? I declare this motion carried as well. The formal items of business, as set out in notice of meeting have been dealt with. And if there is no further business to be brought before the meeting, I move and second that the meeting now terminate. And now declare the meeting terminated. Now that the formal part of the meeting is concluded, I am delighted to turn things over to Wendy Kei to say a few words as the Chair of the Board of Directors of NFI. Madam Chair, the gable is yours.

Thank you for your time and attention at today's meeting. While NFI has faced a number of challenges in the past 3 years, the company is on a path to recovery. And, I look forward to continue to work with the Board and the leadership team, in order to realize those opportunities that we have in front of us. Our Board is focused on supporting and overseeing the operational and financial improvements. On environmental, social and governance, or ESG targets, and on driving long-term value, sustainable value for you, our shareholders. With Brian leaving, I've got some tough shoes to fill, but I do look forward to the opportunity. And that concludes it. I'm going to hand it back to now Stephen King. Thank you.

Thanks, Wendy, and thanks, Brian, for the formal part of the meeting. Now we are going to move into a management presentation. So our CEO, Paul, is going to come back up and give that. And then after that, we'll take questions. And so over to you, Paul.

Thanks, Brian, and Wendy and Stephen. So this morning, we had our investor call following our results, a series of questions that were very helpful and insightful. This is a summary of our business of kind of how we got to where we are today, and where we're going. Obviously, a cautionary statement to the appropriate words as well as a couple of key terms. I'll point out a few, obviously, to us, motor coaches and buses are a certain size and definition. We use the expression ZEB a lot, or ZEB depending on which side of the border you're on, zero-emission buses. And to us, that's a battery electric bus, a fuel cell electric bus or an electric trolley. And primarily, the other thing is we take everything back to an equivalent unit status. Most of our buses have one production slot. But when you deal with an electric -- sorry, articulated bus or a bendy bus, you have multiple production slots. And so we normalize everything back to an equivalent unit basis. So you'll see some metrics on that here. So who is NFI? And we have really tried you'll see the second to evolve our business, not just to be a Canadian or American supplier of transit buses to be a diversified business. And also to be a position that we're a leader in the market, it's not just market share and size and positioning, but also in terms of leader of technology propulsion systems. And so we're really, really excited about where we were going. COVID and supply chain set us back. Brian talked about this expression ZEvolution. Our belief is that our industry is well on its path, and we will be the first full transportation industry around the planet that actually gets transportation -- public transportation will be the first to be fully Zero-Emission. And so, we coined this expression ZEvolution. So it really is an evolution to Zero-Emission, and we're going to lead it. The other thing that's been important to us. And in fact, that the expression -- our ESG expression that Wendy alluded to in our ESG commitment is something that was actually written in 2006, and we set the vision at that time to be -- to deliver a better product to have a better workplace and ultimately, to create a better world. And we take that very seriously as our business. We can make a massive impact on the environment. The thing that we've tried to do over the last couple of years is notwithstanding the bumps and bruises of COVID and supply chain is to evolve from a product provider to a solution provider. And it is not trivial for an operator to go from filling diesel buses or coaches and operating them to move to a Zero-Emission world. Everything about it is different. Sure, it looks the same, but everything from the propulsion systems to the monitoring, the telematics, the maintenance, the battery health and management, the charging infrastructure, where the energy is coming from into those things. And so, our belief is that we had to evolve in some cases, bring to the table solutions to our customers, in some cases, us bring it and support them with it, and in some cases, bring all that together. So we've gone from a provider of vehicles to a provider of an ecosystem, and that will continue to evolve, and you'll see that through the evolution of our financial statement. It's pretty remarkable when we started. John Marinucci and Brian Tobin took this business public in 2005. Three secondary offerings from 2005 to 2008, ultimately, private equity left, 2009, we're a pure public company as an income deposit security. So every petty that came in, we gave a supplier and employee. We paid rent, taxes, interest and then we handed the rest of it back to shareholders. And the ability to actually grow and develop our business was we felt inhibited. In 2009, we set that path to start to diversify our business and to grow. And so the story of -- in the gray shaded areas is actually quite remarkable. In 2012, we had 2 competitors for sale. One was owned by Daimler. One was owned by Cerberus, Navi and Orion and we had Marcopolo, one of the world's largest manufacturers Brazilian headquartered looking to come to North America. And we in this room, I think [indiscernible], we convince Marcopolo to invest in our business, and we would then work to rationalize the transit space in North America, and that really proves successful. The challenge for us then is we had 47% market share, pushing the technology in the space, but our ability to grow is relatively limited. And, so we decided that we'd look for diversification. The most obvious candidate was to move adjacent into motor coaches. And so MCI was acquired Ironically, New Flyer founded in 1930 in Winnipeg, MCI in 1932 in Winnipeg, the largest transit player in North America and the largest motor coach player. And so that really brought together critical mass and diversification opportunities. You can see the growth of our revenues through that period. When we go through 2017 and 2018, a couple of things happened. We had some challenges in our supply chain. And so, we increased our ability to fabricate some level of our own parts. We took over a couple of suppliers that were making fiberglass forest, and we invested in a business called ARBOC, which we believe ultimately having a family of product from smaller cutaway kind of shuttle buses all the way up through single buses and articulated buses and motor coaches. Especially as you look out 10, 15 years, the element of autonomous buses is going to make it into our space. And our belief is that smaller buses are probably going to be a key part of that autonomous story. So we wanted a family. So ARBOC was required. And then, the real prize for us was to go global. And so Alexander Dennis that Colin Robertson had led for many years, was an opportunity for us to acquire our first step outside North America. And you can see the growth of the business. We bought a bunch of money mid-2019. We put a plan in place to take on now a global strategy, and of course, COVID changed everything. And you see the free fall of our business over the last couple of years. Yes, we've had revenue, it has not been profitable. So what we are projecting, and you heard our targets on our call, you see in our materials, is to get back north of $4 billion in revenue and north of $400 million of adjusted EBITDA by 2025. And, this doesn't require a miracle. We have a product. We have the facilities. We have a market's recovery with massive government funding supporting it. We now have products that are moving to Zero-Emission with considerably higher sale prices and considerably higher margins. Our supply chain is getting better. It is now an execution story, not a demand or a market dynamic. We don't build stuff to put it on the shelf. We're building based on customer demand, and we're really good at it, and we're on our way back. So here's the snapshot of our business as we stand today. Now 70% of our business is in North America with the addition of Alexander Dennis, the dominant player in the U.K. as well as a leading player in Asia. You can see that we are really starting to diversify the pie of where we do business. The bus business, the transit bus business is still the largest part of the business. It has both New Flyer product, as well as Alexander Dennis product. We have motor coaches now at 17% and a small portion still in these small cutaway or shuttle buses. But our aftermarket business cannot be underestimated. It's north of USD 400 million of revenue, an extremely profitable business. And every single customer that has a bus need spare parts. And so what we've been trying to do is to optimize our machine, improve the ability to plan, buy, source material to support our customers. And as you will see from our results this morning, the aftermarket business actually is one that carried the day, over the last 2 years and quite frankly, it continues to do very well both domestically as well as internationally. And of course, the other thing that back to our ZEvolution commentary buses are changing and the propulsion systems are changing. So one is where we're at today, roughly 21% of our deliveries last year were at Zero-Emission and we're headed to somewhere in the neighborhood of 40% to 50% by the time we get to 2025, and I'll tell you a little bit more about that in a second. What's really important to us here is we can actually change the world. We can have a massive impact with our product on the environmental dynamics that we live and breathe all day long. So this little chart on the far -- your far left -- by far left, your -- sorry, the far left, my right, is what we use every day when we went through COVID. Every time we made a decision, we said if we make this decision, what does it mean for our shareholders? What does it mean for our people and what does it mean for our customers? And then, tried to keep us balanced. We didn't send everybody home. We did send 2,000 people home, but we kept people around knowing we had future. And in today's environment, we need critical and core skills, both engineering and supply and accounting and operations and those kind of things. At the end of the day, our customers also went through health, and many of them continue to go through health. Ridership is different. They're labor base. There are technology changes and so forth. And at the end of the day, I like you, I'm a shareholder and watching our share price dramatically drop and the value of our business be severely impacted, is we think we've hit the lows and we're excited about going somewhere in the future. We've worked really hard at the values in our business. We've done, I think, a really good job of trying to keep our company on the straight and narrow, communicating to our employees and our shareholders and our customers about what's important to us as a company. Our Achilles heel really started not at the beginning of COVID, of course, like us, like every business, shut your business down, stay home, people get COVID ripple through your factory. The real Achilles for us started halfway through the end of the first quarter of 2021. This chart on the light blue shows you what we call medium risk suppliers or moderate risk and severe impact, meaning we don't have it has a massive impact on the production line. The dark blue shows you the severe risk and severe impact. And those are the ones, can literally shut our plants down or you start building a bus and you don't have a wiring harness, you finish the bus, but then you got to take the bus part offline to put the wire harness to put the bus back together and so forth. So, it escalated as we go through 2022, at the same time, as inflation went through the roof. So we got hammered with having no parts, therefore, labor inefficiency and nonproductivity as well as hyperinflation. We saw a little bit of a reprieve, as we got to the third quarter of last year, and then it got worse again. The great news is our supply teams have managed like crazy to get it down today where we have 7 suppliers that are really today, the ones that are high high-risk severe impact. So as we said on our call today to our shareholders, we're not out of the woods yet, but it is materially better than it's ever been, which is why I think our results in the first quarter were strong. So, the medium risk suppliers, what David -- what our team does is they leave anybody on the medium risk that we're managing, monitoring these people until they've demonstrated they can provide 6 months of uninterrupted supply. So we're babysitting through this process. We think by the end of this year, both of these lines will be down back to somewhere in the neighborhood of 2 or 3 suppliers that we'll manage through. And remember, we're building highly complex, highly customized vehicles. So it's not like it's a standard product, and we don't have the ability to alternate. If this doesn't fit, I'd put this in. Highly customized needs are very highly sophisticated supply chain. So what that has all meant for us through this period all the way back to 2019, we were line entering roughly 1,500 units a week. And as COVID kicked in, and that as supply kicked in, supply chain downs as we kept lowering what we were putting in our business. The problem is you're putting something in knowing it at parts you're going to create off-line work in process. And consequently, our working capital started to grow. We saw a little bit of a reprieve in the fourth quarter of last year, but we also slowed down dramatically the number of units we put into our machine. The good news in the first quarter is we're now starting to ramp up our production capacity more going into the system. At the same time, though, we're sucking up working capital, which is why it's so critical for the next period of time for us to relieve the working capital, generate the cash flow and get back onto the growth path of our business. And our plan, as we move through the second half of this year, is to slowly ramp up our capacity. And it's the kind of business where you don't go from 40 a week to 60 a week, you go from 40 to 41 for a couple of weeks to 42 for a couple of weeks. So it's a very slow. People, the issue, skills as well as labor as well as parts. The other thing we've tried to do, I think with some great success, but a lot of blood, sweat and tears is to mitigate wherever we could. So what we've done is going back to our supply chain. We've done, I think, a great job of trying to continue to manage price inflation, surcharges and those things. We've lowered the production rates to more of a level, where we think we'll have the parts to be able to build the bus, and we could manage our way through that. wherever we could, we've gone alternate source. The other dynamic is, historically, we buy an end item. We buy a module or electronic component. We never sourced the electric chip in there or subcomponents. So we're now 2, 3, 4 levels down in the supply chain actually trying to define the product better, but also sourcing the stuff to mitigate some of the future risk associated with it. We have increased our inventory levels. I know some people who have been to our plants. Most of our plants have inventory that's point of use, rather than 6 or 7 or 8 days of inventory online, we have 20-plus days of inventory. So we get [ anywhere ] right now. We've got twice as much inventory online, and we still have this off-line WIP. So our WIP situation will actually recover as we move through the end of the year. We've also reengineered our process where possible to give our engineering teams more time to do the engineering upfront because every bus is different, as well as the supply teams more time to source it. And we've done everything we can to try and mitigate the loss of key skills in our workforce. So yes, we kept on a lot of people, both direct labor and direct labor because we know our future is -- we have demand and contraction volume. It's been a pretty cool year so far, everything from some tremendous awards, working with United Way in our community, launching some fuel cell electric vehicles, for example, in the U.K. We have a really special facility announced in Alabama that we call the vehicle innovation center that's become the think tank and the collaboration vehicle for electric and Zero-emission vehicles in the United States that's sitting in our facility. We've worked with our government partners. We cheered on a team that didn't make it past the first round. So good luck, I believe. And the highlight was for the second time since I've been here in 2009. Brian and I hosted then Vice President, Joe Biden, our facility and State Cloud; and we had Vice President, Harris, come to our facility earlier this quarter. And it was really cool because Joe Biden at the time talked about how we were setting the pace of the industry going to hybrid electric vehicles, and she said, even better, now you've set the pace for Zero-Emission vehicles and she knowledge us, as the market leader in the United States. Lots of wins last year, and you'll see through our metrics of the size of the order book, a number of our customers had options with a firm year and then auction years. A lot of the options in the last 2 years have expired because lots of our customers are not renewing the options associated with diesel or natural gas buses. That's the bad news. We lost options. The good news is we replaced those options now with Zero-Emission options for the most part. And so major customers, everything from here, TTC in Toronto, New York, Stagecoach, one of the largest operators in the U.K., New Jersey and so forth. We've really done a good job with bidding, winning at considerably better pricing and replenishing our backlog. So we're very pleased with our going forward. Zero-Emission game, we're not going back. Not only are we leading it in share, but we're leading in technology. And so you see a variety of the vehicles we're now offering, including what our friends in the U.K. Alexander are doing. Where they're taking the leadership role and changing the definition of how electric chassis works and embedding the batteries, and now coming to the market later this year with our own chassis associated with Zero-Emission. Our vehicles have 115 million miles of Zero-Emission operations so far, which is pretty amazing, when we see some of these start-ups or stacks talking about, we've got X buses on the road and Y buses. We've got 105,000 buses on the road. And we already in the stand of the last 5 years, put 150 million electric miles. So we're learning a lot and doing very well. 52% of our public bid universe, so transit agencies, primarily in North America are now asking for the next couple of years of Zero-Emissions. So 1 in 2 now, and it's getting to continue to grow 36% of our backlog today is Zero-emission. And today, we have a capacity to build any kind of product in any of our production lines. And so with the Zero-emission evolution happens faster. We can build more Zero-emission, as it slows down based on funding and customers and operators availability or charging strategies, we can adapt accordingly. So a few other strategies or statistics that will help to put in context we're in this game, and it's a game we're winning. The other reality from a holistically as a business is we're right in the eye of the whole dynamic of ESG, the environmental, the social and government dynamics. Any statistic will show you the vast majority, probably 35% of all emissions come from transportation. And we're right in the middle of the lead in that. And so our view, we've heard the light rail is going to put you out of business and Uber and Lyft are going to put you out of business. Public transit is the spinal cord of every city. And then, isn't going to change. Sorry, it isn't going to change. The other reality is you people in Toronto know, it's easy to say a subway line is going to be extended, and it's 10 or 12 years later and it's x billions of dollars. The fact that we now have Zero-Emissions that look better, that are more efficient to drive that have WiFi that if all these things, cities can fundamentally change their carbon footprint with buses, way faster and win more economically than before. So we're sitting right at the epicenter of being able to change transportation and Zero-Emission. This chart on the left -- yes, your left shows you the guidance we gave out at the end of last year. I think, when we sit here a year from now, you're going to see the pace of this curve. Right now, as I said, 23% of what we delivered last year was Zero-Emission. Our current guidance and we look at our products and our customers and our markets is we think by 2025 right now, it's about 40% of what we deliver. If I was a betting man, I think that number is going to be closer to 50% by the time we're sitting here next year. The pace of adoption is changing dramatically. The other thing that reflects my confidence in that, this is our zero-emission buses as a percentage of our backlog. So back to 2021, 13% of our backlog was Zero-Emission. And today, it is 36%. So 1 in 3 buses in our backlog is either a battery bus or a fuel cell electric vehicle. The other thing that's really important is that we got lacked, if you will, by supply chain last year that we had firm contracts with customers and we couldn't get price relief in many of them. We've been very aggressive at reflecting that in our bids going forward. We've adjusted our cost base. We've worked with our suppliers to get -- stabilize any of those increases. We've addressed our margins going forward with what we're bidding. So not only is our average selling price going up dramatically based on mix, our margin, as Brian highlighted in his words, is better. The outlook on our margins and what's in our backlog is considerably better, than we've ever had before. And so literally, just last quarter, the line was crossed in terms of the average sale price of motor coach and transit. And so transit buses now reflect a portion of that, that is Zero-Emission. So you're going to see sales increases and you're going to see margin increases, as we go forward. So the guidance that we provided, you don't critique about guidance or about too much guidance and so forth. We're pretty comfortable and confident in our recovery. Make no mistake. We're not out of the woods yet. We still have supply chain issues. We still have off-line WIP waiting spare parts. We still have supply chain that are recovering their businesses. Examples of a seat supplier in the United States that shuttered their business because all of our -- the bus industry was slowed down. They let 500 people go. Now our demand is back up. They've kicked all the people back fast enough. So they've got to recover their business. Things like that will continue to inhibit us. But our forecast basically is to get to $4 billion of revenue by 2025 to get to north of $400 million of adjusted EBITDA, so a 10% return on sales. I would say we started our business with CapEx. We've continued to invest in our business. We continue to invest in new product development, but there are -- we have some plans for CapEx, over the next few years to get back to where we were pre-COVID. And of course, the return on invested capital, a critical metric. We were at 13.7% pre-COVID. It dropped a little bit as soon as we added Alexander Dennis and then, of course, COVID changed everything. And, we think we can get back to 12% by 2025. So our whole commitment is not just the way we want our business. Our product is ESG and our product is sustainability with our customers. And so it's really cool to walk around our plants and have people remember when we launch this better product, better workplace and where we didn't just make this up. We've been growing this literally since 2006 and made this commitment and the impact we can have on the environment cannot be underestimated. Our priorities, so our shareholders have taken a lot of pain. Our credit partners in our syndicate have -- we've gone back 6 times in the last 3 years. We're in the middle of the seventh time. We've had tremendous support from our credit syndicate adjusting the policies and working on the right covenants going forward and so forth. We're confident that we'll meet our target by the end of -- that we published by the end of June. Our story is right now all about debt management and leverage management. We have to continue to work through the pace at which we ramp up our facility in concert with our ability to get parts and to be efficient at doing that. So we're laser-focused on the whole capital structure and, of course, the management of working capital to generate that cash. We are diligent and great conversations with our Board the last couple of days, about where we are spending money and what we're focused on from a project perspective. And obviously, anything we can do around cash flow generation has been top of mind. At the end of the day, we were the market leader. We are the market leader. We're going to be the market leader. So, we're not taking back our position of leading it. If you add up the life, if you will, of all the businesses we've assembled, we have 450 years of bus and coach experience. We've been building electric vehicles. The first trolleys were in Seattle in 1969. So this isn't new to our business. We were the first with hybrids. We were the first with natural gas. We were the first with fuel cells, one of the -- really the leader, if you will, on battery electric. So this whole dynamic of a competitive advantage, we like our competitors have had some major issues. Ours have been probably a little bit more amplified given the size and scale and scope of our customers. But there is no question we're coming back, and we're very well poised from a capital structure perspective, once we get these next activities done, as well as from a backlog perspective, our backlog is $6.7 billion. 45% or 50% of it are firm orders. We're not worried about who we're going to sell a bus to in the next couple of years. Yes, we have to fill some thoughts and so forth. This year, effectively, every one of our slots is sold out. We're already booking now in 2024. We've never had that kind of visibility going forward. So our story is execution. Our Achilles has been supply chain and the ripple effect on our factory, we're poised to be able to pull that off, and get back to the financial success that we've had, not just the market share success. So there's a couple of other slides that you can see. You look at on our website if you'd like to see. I'd be glad to take any questions that anybody has at this point in time.

[indiscernible]?

And it's a valid, transparent, sincere question, and we deal with that all day long. When we -- you'll remember that chart I had up here that our supply chain was getting better. We had put in a credit agreement, in May or something of 2022. We felt we had runway through the rest of the year and into 2023. As our supply chain started to get worse, it became crystal clear that we weren't going to make our year-end covenants. And so the sports analogy, we went to our credit syndicate and through the flag early saying, it's September now, we're not going to make our year-end credit agreement. So we made a deal with our syndicate to effectively provide us a 6-month runway to relook at the capital structure of our business, and that's what we've been doing for the last 5 months. The extension from the credit agreement goes to the end of June. We are deep, deep, deep, day after day after day working with our credit syndicate. They have been tremendously supportive to do a couple of things. We look at how that agreement works, a much longer tenure for us to allow us to have runway and covenants that are appropriate for the next couple of years, that are more recovery oriented rather than light switch change. And then, we continue to look at all other puzzle options of cash generation that can reduce the debt and the risk associated with that. So stay tuned. All that stuff is actually coming to an end. We literally have an agreement with the banks to get our current agreement done by the end of June, and we are very comfortable based on where we are with what that will do. As far as people looking at our converts and saying, what's the value and I'll trade them, and I'll sell them and so forth, of course, that is a market that's going to trade on itself. Anybody looks at our business on the surface would say, boy, are these guys dropped off the face of the earth and have really done. I go back to -- it's not like I got to create a product or we have to create a product we don't have. It's not like I have a market where you're going to make stuff, put it on the shelf and then worry them, we must sell it to. We have massive amounts of customers and contracts. Number three, we got hammered on margins over the last year with supply chain and hyperinflation, plus foreign exchange variance killed us at a window of time, where all of our firm price contracts didn't allow for repricing. We've addressed that both with the way we're pricing and the contracts going forward with extremely strong margins. We still have, as I said, supply chain challenges that we're micromanaging and we are not going to ramp up our volume to the point, where we can't have confidence to be able to get buses out. Our projection is by the end of this -- well, we'll start to deliver and unwind some of the WIP at the end of the second quarter. By the end of the year, a vast majority of our excess WIP, somewhere in the neighborhood of 300 buses will be out of our system. I hope that addresses the issues that I'd love to be able to tell you more about what we're working on. It's not finished. And so, we'll release that shortly, when we're in a position to tell you exactly how that's going to work our capital structure going forward.

[indiscernible] discussions with the various governments getting additional financing?

That is all part of the activity that we've been working on. I should you'll be completely transparent. The governments are helpful in terms of the access to cash, but it is not free. And there are also trimmings and conditions and things that go with that stuff. So in tremendous respect and appreciation, both Manitoba and EDC stepped up at the end of last year to help us fill a void associated with cash flow. Yes, we have continued to have conversations with our governments that's not really a big portion of our strategy going forward, our expectation, if you will, of the capital structure going forward. Well, there's a time and a place for everything. They were there when we -- Chair, Brian Tobin and I were Premier Manitoba, 6 or 7 Federal Ministers. The most efficient way was to get EDC, who was inside our current credit syndicate, to provide both an accounts payable type facility as well as surety backstop, and that has turned out to be tremendously helpful. I mean, you were in this dire financial straits. At the same time, we're bidding like crazy. We got bid bonds, performance bonds and all those things. EDC has really helped us fill that kind of surety confidence and backstop especially our ability to bid.

Microphones for any future questions.

Any other questions? Okay. Well, thank you for coming. Again, Brian, the first time in a couple of years. Thank you, Mr. Tobin for everything you've done for us. Wendy, look forward for our team to continue to work with you. Jannet, welcome and the rest of the Board, appreciate you sticking around and your support, as we go forward to our adviser friends and shareholders in the room. Thanks for your support. It's a pretty exciting time for us. It's painful right now. It continues to be. But boy, when we look up, there's lots of opportunity and runway for us. So watch this space. Thank you for coming today. Enjoy the rest of your day.