FreightCar America closed first-quarter 2022 with “significantly improved results” in spite of “persistent inflationary and supply chain challenges,” President and CEO Jim Meyer said during a May 10 earnings report that also announced his 2023 retirement.
The FreightCar America Board of Directors “has initiated a search process for the new CEO, for which Meyer is actively involved,” the company said. Meyer will step down after the appointment of his successor “to ensure a smooth transition,” and will remain a Board member following that transition, according to the railcar builder.
First-Quarter 2022 Results
For the three months ended March 31, 2022, FreightCar America revenue came in at $93.2 million on deliveries of 783 railcars, representing a 188% jump from first-quarter 2021’s $32.4 million on deliveries of 309 railcars, and a 24% increase from fourth-quarter 2021’s $75.0 million on deliveries of 604 railcars.
Quarter-end backlog totaled 2,395 railcars with an aggregate value of about $250 million. FreightCar America said its 2022 delivery outlook has been revised from between 2,600 and 2,900 railcars to between 2,800 and 3,000 railcars, “an increase of approximately 68% vs. 2021 at the mid-point of the range.”
Gross profit for first-quarter 2022 was $10.1 million with gross margin of 10.8%, “positive for the sixth consecutive quarter,” the company reported. Manufacturing operating income came in at $8.5 million, “positive for the fourth consecutive quarter.”
FreightCar America reported a first-quarter 2022 net loss of ($25.8) million, or ($1.11) per share, which was “primarily driven by a $20.7 million non-cash charge related to the change in fair market value of warrant liability and $4.2 million of stock compensation.” This compares with first-quarter 2021’s net loss of ($39.1) million, or ($1.96) per share; and with four-quarter 2021’s net income of $1.2 million, or $0.06 per share.
First-quarter 2022 adjusted EBITDA was $3.3 million. This compares with the prior-year period’s adjusted EBITDA loss of ($1.8) million, and with fourth-quarter 2021’s adjusted EBITDA of $1.2 million.
FreightCar America’s performance is expected “to only get better as industry conditions improve and we continue to scale the company,” Meyer said. “Our efforts to take FreightCar America to the next stage of growth, with equal focus on cost discipline and manufacturing excellence, are starting to pay off.”
“We remain on track to achieve our strategic priorities for 2022, which include positive adjusted EBITDA, [and] the completion of the fabrication shop and the expansion of the wheel and axle shop by mid-year,” added Mike Riordan, who was promoted to Chief Financial Officer in March. “The construction of additional production lines, which will double our annual railcar capacity to between 4,000 and 6,000, is expected to be completed by early 2023. Finally, we expect to deliver annual revenue between $320 million and $340 million, an increase of approximately 63% year-over-year at the mid-point of the range.”
“RAIL’s 1Q22 results beat our revenue and gross margin estimates,” said Cowen and Company Transportation Equipment Analyst Matt Elkott. “.While EPS was a miss, that was primarily due to non-core-operations items that fluctuate based on a number of external factors, including the stock price. Increased deliveries of railcars, solid pricing, and improving production efficiency have allowed the company to continue the gross margin momentum.
“1Q22 revenue was $93.2 million, up 188% year-over-year, exceeding our estimate of $75.6 million and consensus estimate of $71.3 million. Adjusted EBITDA was $3.3 million, beating our estimate of $1.8 million and consensus estimate of $2.8 million. It’s worth noting that the company has reported its adjusted EBITDA factoring in underlying adjustments related to warrant liabilities, state grant amortization and consulting costs— our model’s forecast takes a traditional approach of using total operating income/loss and depreciation and amortization for adjusted EBITDA. Gross Margin exceeded our estimates of 9.1% by reporting 10.8% for 1Q22, the first double-digit margin since 1Q 2016.
“RAIL reported an EPS of $(1.11) for 1Q 2022. Excluding a non-recurring cost tied to warranty liabilities, we’ve adjusted this EPS to $(0.22) in our model, compared to our estimate of $(0.08). We also note that, excluding a negative impact from a $4.2 million stock based compensation from SG&A, EPS would have been closer to $(0.04).
“In an ongoing effort to provide more guidance, the company provided revenue projections for the first time and is currently targeting revenue to be between $320 million and $340 million for FY 2022, compared with our estimate of $326.1 million and consensus estimate of $300.8 million. The 2022 delivery outlook was raised from 2,600 and 2,900 railcars to 2,800 and 3,000 railcars due to continuing demand and increase in production capacity. Management projected capacity to double to 4,000 to 6,000 units per year with a fourth production facility to be completed by 1Q 2023. Management also seemed to believe the 2H22 production growth should continue into next year. This is not inconsistent with what we have baked into our model, with an estimate of 3,512 new railcar shipments in 2023, a 69% increase year-over-year.”
Also, for more on Meyer’s efforts to turn around the historic, 120-plus-year-old company by consolidating manufacturing in Mexico and positioning it to meet the needs of the market, read the May 2021 Railway Age Q&A.