Earnings Call: Q3 2020

Nov 11, 2020

Ladies and gentlemen, thank you for standing by, and welcome to the NFI Group Inc. Third Quarter twenty twenty Financial Results Conference Call. At this time, all participant lines are on mute. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question and answer session. I would now like to turn the call over to your speaker today, Stephen King. Please go ahead. Thank you, Amy. Good morning, everyone, and welcome to NFI Group's third quarter twenty twenty results conference call. This is Stephen King, NFI's Group Director, Treasury, Corporate Development and Investor Relations speaking. Joining me today are Paul Subri, President and Chief Executive Officer and Papasu Soni, Executive Vice President, Finance and Chief Financial Officer. As Amy mentioned, this call is being recorded and a replay will be made available shortly on our website. On this morning's call, we will be walking through a financial results presentation that can be found in the Performance and Reports section of our website. We will call out the slide number referred to as we walk through the deck. In addition to the results presentation, we encourage all participants to review the consolidated financial statements and the associated management discussion and analysis and press release, which are all posted to our website and on SEDAR. Starting with Slide two, I will remind all participants and others that certain information provided on today's call may be forward looking and based on assumptions and anticipated results that are subject to uncertainties. Should any one or more of these uncertainties materialize or should the underlying assumptions prove incorrect, actual results may vary significantly from those expected. You're advised to review the risk factors found in NFI's press releases and other public filings on SEDAR for more details. We also want to remind listeners that NFI's financial statements are presented in U. S. Dollars, the company's functional currency, and all amounts referred to are in U. S. Dollars unless otherwise noted. On today's call, Paul will start with a recap of the quarter and then Papasu will take us through the financial results and our progress on the NFI Forward initiative. Paul will then conclude with some market insights and discuss NFI's outlook. Following that, we'll open the call to analyst questions. I'll now pass it over to Paul. Thanks, Stephen, good morning, ladies and gentlemen. First, I'd like to acknowledge that today is November 11, it's Remembrance Day, a Memorial Day observed in the Commonwealth Member States to remember the members of their armed forces who died in the light of duty. We are grateful to those who have given their lives for their countries. Before I get into the details of the quarter, for first time listeners and those not familiar with NFI Group, I'll quickly provide some background on our business. Starting on Slide three. NFI Group is a leading global independent bus and coast manufacturer with operations in 10 countries and more than 105,000 vehicles in service. Our business is diverse with over four fifty combined years of bus and coach experience of our individual companies. Turning to Slide four. NFI's history of growth and profitability is built on organic growth, product improvement, vertical integration and strategic acquisitions. Over the last decade, our business went through two major phases. First, from 2010 to 2014, we consolidated the North American Transit space through several acquisitions and also began our lean operational journey. From 2015 to 2019, we diversified our business by entering the North American motor coach space, acquired our fiberglass suppliers, entered the low floor cutaway business, and finally, expanded globally by acquiring Alexander Dennis just last year. As you can see from the slide, both our revenue and adjusted EBITDA tripled from 2010 to 2019. On Slide five, we highlight that we are much more than just a vehicle manufacturer. We are now a total mobility solutions provider and a leader in technology development. NFI is the strongest zero emission bus offering in the marketplace today, offering battery electric, fuel cell electric, and electric trolleys. We have the industry's widest range of battery electric fast transit vehicles ranging from single deck to double deck and articulated buses and motor coach variants. In 2018, we identified that infrastructure is one of the main challenges for operators and we launched an infrastructure solutions business to support our customers with their transition to zero emission fleets. We are driving change with the associated advanced driver assistance systems including autonomous technology and we're focused on telematics and connected vehicles allowing agencies and operators to improve their performance. Finally, we're driving the evolution of a zero emission future with the largest zero emission bus or ZEB capacity in North America and The UK. And unlike our competitors, we have the capability to produce diesel, natural gas, hybrid and zero emission buses. This is a key differentiator as it allows us to continue building traditional propulsion products for our customers as they make their transition to zero emission over the next decade or more. On Slide six, the 2020 saw a strong improvement from the lows of the second quarter, but we continue to be dramatically impacted by the COVID pandemic. During the quarter, we're able to reopen all of our manufacturing and parts fabrication facilities with a focus on ensuring the health and safety of our team members, our suppliers and our customers. While our facilities have resumed operations, we've adjusted our production rates to match the current market demands, order deferrals and backlog and expected new vehicle awards. This reduction is essentially especially true within the private operator segments of our business, including North American Motor Coach and The UK business. As COVID-nineteen has created challenges for our markets, we moved quickly to reduce our costs and preserve cash flow. While a significant portion of our costs are variable and linked to production, we focused on reducing firm overhead and admin costs wherever possible. During the past six months, we've eliminated significant costs through staffing reductions. And while we're able to remove certain costs immediately, the size and international scope of our business combined with the multiple production facilities and aftermarket distribution centers requires us to take a thoughtful approach. We wanted to ensure that we did not make cuts that would impact our long term capacity or competitiveness or ability to deliver for customers and win new awards. Capacity will discuss these cost reduction efforts in detail when he walks us through the NFI Forward, our company wide transformation initiative that will ensure we emerge as simpler leader business with fewer business units and a reduced footprint. While our third quarter performance was in line with our expectation, it was impacted by several non onetime nonrecurring items for which we normalized. These include severance and restructuring as well as COVID related charges. With the third quarter complete, we again reiterate our full year adjusted EBITDA guidance of 145,000,000 to $155,000,000 In addition, our liquidity remains strong and we're focused on prudently managing our cash flow and deleveraging our balance sheet. We continue to believe that our cash position and our credit capacity under our existing credit facilities is sufficient to fund operations, meet our financial obligations as they come due, provide the necessary funds for capital expenditures, dividend payments and other operational needs. Based on our anticipated cash flow generation, we do not expect to utilize the incremental sidecar facility that we put in place in April 2020. Recall that this facility was implemented as insurance to ensure we had enough financial resource to weather the COVID storm no matter how deep it got. The fact that we have not needed to use it speaks to the resiliency of our business. We had a covenant waiver in place for total leverage ratio, TLR, which measures total leverage against adjusted EBITDA on a trailing four quarter basis on all our facilities until 09/28/2020, at which point covenant then resumed at more relaxed levels based on a prorated calculation that excluded the 2020 results. The company now expects that the combination of lower trailing adjusted EBITDA in 2020 combined with the company's current debt profile and the ongoing uncertainty created by COVID may impact compliance with the TLR covenant starting in the first quarter of next year. We're in late stage negotiations with our banking partners to obtain further covenant relief and look forward to announcing the details of that very soon. Slide seven shows our deliveries in the quarter and the backlog at the quarter end. During the quarter, our backlog declined slightly due primarily to deliveries outpacing new awards as some awards continue to be delayed due to the pandemic. Our ability to deliver profitable results highlights the importance of our backlog and the visibility that it affords us. We anticipate that we will see increased order activity in the 2021 as previously delayed orders are released, which will help rebuild our backlog. Our backlog is heavily weighted towards public transit agencies where government agencies make longer term multiyear orders. Deliveries were down slightly within transit, but down 32% in motor coach, reflecting the immediate impact that COVID-nineteen had on our private operators. Medium duty and low floor cutaway deliveries were up significantly as demand remains high. I'll now ask Papasu to take us through the detailed financial results. Over to you, Papasu. Thank you, Paul, and good morning, everyone. Turning to Slide eight. Our third quarter performance saw a significant improvement from the 2020, but it did see some decline on a year over year basis due to the COVID-nineteen pandemic. Manufacturing operations resumed during the period, but at lower production levels and private markets continued to be challenged by the pandemic, leading to revenues declining by 8.5% when compared to Q3 twenty nineteen. Adjusted EBITDA also saw a decline year over year. We lowered variable overhead costs to match with production, but experienced unfavorable fixed overhead and SG and A absorption. We are strategically removing fixed costs from the business to right size our operations. Free cash flow was down by $10,200,000 as we saw lower adjusted EBITDA and higher interest expense, somewhat offset by reduced cash capital expenditures and cash taxes. Turning to Slide nine, I'll outline our net earnings and the adjustments that we've made to reflect the impact of one time non recurring items. During the quarter, we had a net loss of $24,900,000 or $0.40 per share. While some of this loss was due to the same items that impacted adjusted EBITDA, the main drivers on a tax adjusted basis were $16,800,000 in COVID-nineteen related costs and $17,500,000 in severance and restructuring costs. After adjusting for these items, plus mark to market gains and unrealized foreign exchange gains, our adjusted net earnings was $5,700,000 or $09 per share. We provided a detailed reconciliation of adjusted net earnings in the appendix of this presentation on Slides twenty and twenty one. Now turning to Slide 10. In July 2020, we launched NFI Forward, an initiative that will transform NFI Group into an integrated operating company. As Paul mentioned at the beginning of our call, we've completed several acquisitions that, to date, have run as independent businesses. We see significant opportunities for financial improvement through business combinations and through the rollout of common platforms and systems across the NFI Group. That's the power of the NFI Forward initiative. With the efficiency gains we get from integrating the businesses, we generate significant returns for our shareholder base, while continuing to offer world class mobility solutions. The anticipated cost savings will show up in three areas of our financials: lower direct material costs, lower manufacturing overhead and lower SG and A expenses. In aggregate, NFI Forward is expected to deliver an 8% to 10% reduction to both manufacturing overhead and SG and A based on 2019 run rates. We anticipate generating $18,000,000 of savings in 2020, driven by a combination of lower material costs and the benefit of restructuring initiatives. In 2021, we'll add another $29,000,000 in savings for a total run rate of $47,000,000 as the New Flyer and MCI business units run as one combined business. We consolidate the NFI Parts and ADI North America Parts operations and we realized full run rate savings from actions carried out in 2020. In 2022, we expect to be able to consolidate plants within our North American network, which combined with further administrative reductions will generate an additional $13,000,000 in savings. And finally, in 2023, we'll achieve another $7,000,000 to bring total expected annualized savings to 67,000,000 These cost reductions will generate significant volume leverage. When markets recover, we'll grow revenues on a lower fixed cost base with drop through to adjusted EBITDA. We also expect an additional $10,000,000 in cash flow savings over the period of 2020 to 2023, driven by a decrease in cash leases as we reduce our total facility footprint and the benefits of a central treasury team to lower interest and banking cost. In addition to these items, we continue to explore other cash generation options, including a significant focus on working capital. One of these working capital improvement projects was our recent sale of MCI's pre owned Coach pool for approximately $19,000,000 cash. As the pandemic had caused significant challenges in the North American private motor coach market by immediately and dramatically decreasing demand for pre owned motor coaches and putting pressure on market values, the divestiture of the asset pool was prudent and directly aligned with the strategy of NFI Forward. It will also help to ensure that NFI is well positioned when the coach market recovers from the pandemic. We will continue to disclose the impacts of NFI Forward within our financial results as we achieve them. In addition, we'll also discuss the NFI Forward program in detail at our January twenty twenty Investor Day that Stephen will discuss later this morning. I'll now turn the call over to Paul to discuss our outlook. Thanks, Lipa. Circling back to my earlier comments on 2021 being a transition year, I'll comment now on how COVID-nineteen has impacted our end markets. Starting on Slide 11, our discussions with transit operators suggest long term demand for transit vehicles is intact. I'll point out that our active bid universe, which is bids in process and bids already submitted, are up 2027% year over year. The five year total bid universe continues to fluctuate and currently reflects a reduction in expected motor coach public demand. An overall positive sign is that we're only a few transit RFPs have been canceled to date, even with the ongoing pandemic. Another development with respect to orders is the fact that the orders are smaller in total size and with fewer options. This trend predates COVID-nineteen and it's something we've been developing as agencies make the transition to ZEBs. As an essential service, government support is critical to public transit no matter the political affiliation. There is a desire to fund public transit in all of our major markets. The U. S. Government has been especially strong supportive of transit through the pandemic through a variety of stimulus packages. On Slide 12, we'll provide an overview of some of this support. In addition to government support, the recent U. S. Elections highlighted that there's an overwhelming public support for public transit where 13 out of 15 transit related ballot measures were passed. These results add to the 32 public transit measures already passed by voters in 2020, a 92% win rate for the year. The measures represent more than $38,000,000,000 in new funding for U. S. Public transit. Longer term, the potential successor to the FAST Act was unveiled in June 2020 through the investing in a new vision for the environment and surface transportation in America, also known as the INVEST in America Act. This $494,000,000,000 act aims at providing sufficient funds for improvements to U. S. Infrastructure, including transit. The draft specifically focused on reducing The U. S. Carbon footprint and assisting with the conversion to electrified mass transit vehicles. This includes $1,700,000,000 in proposed funding for zero emission buses, a fivefold increase from the FAST Act. The Invest in America Act is a five year proposal, which provides transit agencies with longer term visibility as they execute on their capital plans. The act is not yet approved, but is a significant positive step in the right direction. In addition, we're pleased to see that the FAST Act extended for one more year to provide transit agencies with more confidence while The U. S. Works through the impact of the elections and a new administration. The stated priorities of U. S. President-elect Joe Biden on investment environmentally friendly public transit is very encouraging. The movement to battery or fuel cell electric buses continues to be a trend across NFI's various markets, and there is potential that the recovery from COVID-nineteen may accelerate this transition. A recent development that supports the continued expectation of increased demand for ZBs was the Canadian government's 10/01/2020 announcement of $1,500,000,000 in financing through the Canadian Infrastructure Bank to support the adoption of zero emission buses and charging infrastructure. The financing is expected to be delivered over a twenty four to thirty six month period. NFI is the leader in North America and The UK for zero emission buses and would benefit from increased transition to ZEBs. We currently have ZEB vehicles on trial in major cities in North America and The U. K. And New Zealand. ZEB orders are growing and now make up 8% of our total backlog, up 4% at the same time last year and makes up 26% of our active bid universe. New Flyer can manufacture ZEBs at all of our facilities. ADL has delivered most ZEBs in The UK and MCI is now selling its innovative battery electric coach and Aarbox electric Equis shuttle bus is currently in testing. On Slide 13, you can see how our private customer markets have been dramatically impacted by the COVID pandemic. As motor coach offers depend heavily on tourism, travel, conventions, sports and employee transportation, they've been challenged by the negative impacts and immediate impacts of the pandemic. In North America, coaches deliveries through the 2020 are down 57% and over 80% of coach industry employees have been furloughed. We expect the private motor coach market will recover as travel restrictions are lifted and vaccines are rolled out, but this will take time. And we expect the market will continue to be challenged well through 2021. Recent positive vaccine developments and announcement are encouraging and we view them as positive towards private and public market recoveries. In The U. K. Transit market, where private operators operate public routes, the 2020 deliveries were down 65%, reflecting the impact of lockdowns and travel restrictions across The U. K. As ADL reported by adjusting production sorry ADL adjusted production at Scottish facilities, rationalizing chassis production at the Guildford location and removing fixed costs through a reduction in administrative positions. We are working closely with customers to plan for 2021 and beyond as many, many bus vehicles need replacement. We do expect that there will be overall improvement in fiscal twenty twenty for ADL's delivery activity as ADL delivers more vehicles to customers in Germany and Ireland and also sees growth in its Asia Pacific markets. The positive contribution from various markets speaks to the strength of ADL's market diversity. Within our aftermarket segment, we continue to expect demand for heavy duty transit parts as operators in North America international markets complete regular maintenance and invest in additional products to complete clean and protect their vehicles. The large fleet of active essential service transit vehicles provides us with visibility and generally recurrent revenue stream. The private component of the aftermarket business, which is primarily MCI and ADL coaches will continue to be negatively impacted by the operators idling their vehicles. The private component of the parts business represents about 30% of that segment's revenue, and we expect those parts sales will recover over time as businesses reopen and leisure and business travel resumes. Turning to our financial outlook on Slide 14. As I mentioned earlier on the call, we reconfirmed our adjusted EBITDA guidance with an expectation we'll deliver between 145 and $155,000,000 for fiscal twenty twenty, which would represent a $52,300,000 or $62,300,000 of adjusted EBITDA during the 2020. We also reconfirm our expectations that our property plant equipment expenditures will be approximately $25,000,000 for fiscal twenty twenty. Looking forward, based on our current market conditions and expected future demand, we anticipate that 2021 financial results will seek significant improvement over fiscal twenty twenty, but we also see 2021 as a transition period with the impacts of COVID pandemic continue to create challenge for end markets. Management has certain visibility on components and its expected 2021 results driven by our firm backlog, expected option conversions and anticipated new awards. But delays in public awards, decreased private sector demand and uncertainty surrounding the timing and magnitude of government stimulus creates some year for full year 2021 results. There is no doubt that COVID-nineteen has impacted our 2021, but long term, buses and coaches will recover and we will plan a critical role and will play a critical role as the spinal cord of cities around the world. There will be bumps in the road as we recover to normal run rates, but market recovery combined with structural changes made by our NFI Forward initiative will make us a more competitive and more cost efficient market leader. I'll now turn it back to Stephen to summarize today's discussion, to review the NFI investment thesis and introduce our plans for twenty twenty one Investor Day. Following that, we'll open the call up to analyst questions. Stephen? Thanks, Paul. Sticking to Slide 14, I'll recap this morning's call. NFI's Q3 twenty twenty performance demonstrates NFI's resiliency, strong backlog position and ability to respond to the ongoing economic realities of the COVID-nineteen pandemic. During the quarter, our facility successfully resumed production with strong health and safety processes in place to protect employees. We have strong liquidity and currently have no concerns with our cash flow generation or cash flow position. We anticipate that we'll need covenant relief in 2021 mostly due to lower trailing adjusted EBITDA and we are in detailed negotiations with our banking partners. Overall markets remain challenged, but we continue to see strong active bids with potential for awards in 2021. Current backlog in 2020 deferrals provide a base for 2021 volumes, but we do expect lower than pre COVID-nineteen levels with 2021 being a transition year primarily in private markets. NFI is the leader in ZEBs in North America and The UK. Adoption is increasing and stimulus funding would support acceleration and get more ZEBs into the market. The private motor coach market is expected to take a number of years to recover, but we are seeing some positive signs in sports and vaccines and active travel will drive increased activity. NFI Forward is a primary focus across the group. The various initiatives that are underway will position NFI for recovery, drive volume leverages and improve our margins. Slide 15 provides key points on what we believe makes NFI an attractive investment. I won't go into detail on these items, but we'll highlight that we are entirely focused on bus and coach with a strong public customer base and recurring revenue part stream. We have the largest CEB capacity in North America and The UK, proven track record in delivering electric vehicles and will lead the markets transition to a zero emission future. NFI Forward initiatives will create meaningful volume leverage. When markets recover and we deliver revenue growth, we'll do so with a lower fixed cost base. And finally, we invest in our business and return capital to shareholders through dividends and share repurchases. Finishing on Slide 16, I'm excited to announce our Virtual Investor Day is happening on Monday, 01/11/2021. This year's event will be especially exciting as we unveil our plans to drive the future of mobility, including updates on the evolution to zero emission fleets, growth of our infrastructure solutions business, how we plan to leverage telematics and connected vehicles to create stronger relationships with customers and the numerous advanced driver assistance projects we are investing in to make vehicles safer for operators, customers and communities. The Investor Day will also provide details on the various NFI Forward projects, insight to environmental social governance efforts or ESG at NFI and provide a forward looking outlook. We hope you can all join us for this exciting event. Details on how and the RSVP can be found on our website. More information including the agenda for the event will be released in December. We'll now open the line for questions. Amy, please provide instructions to our callers. Thank you. At this time, we will be conducting our question and answer session. Your first question comes from the line of Mark Neville with Scotiabank. Mark, your line is open. Hey, good morning guys. First, nice to see the sequential improvements, so good there. Maybe just on the outlook, Paul, I appreciate all the detail. I guess from a high level, if I'm thinking about Q4 and then into 2021, again, know you haven't provided guidance for 2021 yet, but if I'm thinking about the Q4 run rate, you sort of adjusted your production. I know Q4 is typically seasonally stronger, but I think part of that's coach, so maybe that doesn't come back. So I'm thinking about 2021. If I sort of take Q4 as my run rate per quarter, add on some of the NFI forward benefits, am I sort of getting in ballpark of sort of what you're thinking for next year? Again, maybe there's stimulus and maybe there's a vaccine that's sort of the wildcard, but is that at least right now a reasonable way to think about next year? Well, thanks, Mark. Good questions and lots in that. And of course, we went a little bit longer to try and tell the story of all the moving pieces. Q4 historically had quite a component for our business that had a transactional motor coach sales. And of course, all of us remember the changes in The U. S. Tax structure that then allowed for significant opportunities of accelerated depreciation. We had a massive sale of coaches, private motor coaches in the fourth quarter. That we don't anticipate this year. So what we've got for fourth quarter basically is all of our slots are filled. We're running effectively at slightly lower production rates. Now Q4 effectively is, maybe I'll ask Papasu to talk about how it relates into the 2021 forecast. We see a full year increase, quite substantially from the current 01/1945 to the 01/1955. Obviously, change in U. S. Administration has an impact how fast that kind of discussion around stimulus or any kind of additional support for The U. S. Public transit. In Canada, we now see this discussion with the Canadian government, the Canadian infrastructure bank, which is now rattling through the discussion with various transit operators. We also have on the cost side, as we described, lots of takeouts. So, Pastor, how would you articulate or provide insight into Mark's comment about run rate relative to Q4 and 2021? Yes. I guess the way I'm kind of seeing it right now, Mark, is as I kind of think about Q1, obviously, there's going to be a little bit of a mix component that we're going to have kind of going into Q1. When we think about the run rate, obviously, if we compare it to 2020, most likely will be slightly less than what we're seeing in Q1 twenty twenty. And we'll obviously provide more detail at the Investor Day, but to kind of give a little bit more detail on that on the move to electrics that we're experiencing as well. Okay. That's helpful. Maybe I appreciate that. If I can just ask about the covenant relief, I would assume it's a much easier conversation to have today than it was four or five months ago. And again, it sort of it doesn't sound to me that there's sort of any maybe material sort of givebacks or I guess what I'm thinking was a dividend to get this negotiated, but I don't know and again, maybe it's hard to comment, but just curious to hear your thoughts on that. Yes. For me, I would say, as we kind of think about the covenants, I mean, one of the things that you've already realized that Paul had mentioned it as well as Stephen, but when you look at the back half of 2020 versus the back half of 2019, if you're starting to just do the math, we're roughly, I think, 180 when we were in the back half of 2019. We're roughly 120 ish when we're in the back half of 2020. So as we think about it we started thinking about our covenants, we feel pretty good in terms of getting through 2020. And we feel fairly tight, maybe in Q1 twenty twenty one. So we said, hey, at this stage, let's just go ahead and get the relief. The banks are very supportive of it. We've got great results from our banking partners. And then I think to Stephen's point and to Paul's point, no liquidity concerns whatsoever. We should be close to 200 plus liquidity without the sidecar by the time we exit this year. And we're just making sure that we meet our leverage covenants kind of going forward, but just have some relief just in case. So it should be kind of a mute point is the way I kind of think about it. But again, Stephen, you're running treasury first. Anything else that you're seeing that I may be missing? No, I think you covered all the key points. Papasu, I would just reiterate as we mentioned, as we do our cash flow forecasting, dividends is an important part of the story. And obviously, we made the cut earlier this year, but being able to continue the dividends at the current levels is important to us. And so that's something we've factored into our cash flow forecasting, as Papasu mentioned, around where we think our liquidity levels will be. So confident in the cash position and confident we'll get this amendment done with our banking partners. Okay. That's helpful. Sorry, I said last question. Papasso, did you say you anticipate exiting the year with $200,000,000 of liquidity? And is that sort of apples to apples of the $414,000,000 now? Yes. So I'm basically taking out just so you know, I'm taking out the sidecar facility whenever I get that number. Okay. All right. Thanks guys. I'll pass the line. Thanks. Your next question comes from the line of Chris Murray with ATB Capital Markets. Chris, your line is open. Yes. Thanks guys. Good morning. So maybe to follow-up on Mark's question, just to maybe make it a little clearer. You'd previously thought about or talked about being about just a hair over $1,000,000,000 levered by the end of Q4. Is that maybe a better way to think about it? Yes. I think that's still the plan in from a net debt perspective, Chris. Obviously, working capital is a little bit higher this year because of some of the private market ADL and MCI private market coaches and private market vehicles. So I think, yes, that's kind of the right number to think about for net debt. Okay. So that kind of implies you're going to have to you'll have earnings, as you said, of about 50,000,000 in EBITDA plus I'm going guess some working capital recovery in Q4. Is that the way to put it all together to get there? Yes, that's the right way to think about it. So yes, kind of I think we said $5,262,000,000 dollars of adjusted EBITDA in the fourth quarter based on our guidance, some working cap improvement. There's always some at the end of the year. And then but we won't get as much as we would have seen in 2019 just because of that, like Paul mentioned, coach is usually our busiest period in the fourth quarter, but some working cap improvement. And so yes, if you put all that together, and that's why I think, as Papasu mentioned, it's more of a 2021 issue on the covenants as we're looking at trailing EBITDA has dropped significantly from 2019 to 2020. Chris, it's Paul. Just another point of color. You'll read in our materials and we talked about today, we liquidated our pre owned Coach pool. We really didn't feel that that pool was going to turn. There's significant costs in exercising those coaches, managing them, updating them in our facilities and so forth. What we usually see this time of year is obviously, as I mentioned, the burn down of our new coach inventory. And of course, I think we talked about it last quarter, we have now stopped inducting new motor coaches. We did that a couple of months ago. But we still have new coach motor coach inventory on hand, both at ADL and MCI. And so the trick for us, obviously, as we move into 2021 is we've got to burn down that new coach inventory over time. By relieving ourselves of the pre owned coach pool, we've solely focused now on transactions associated with getting rid of new coaches. That should help the net debt level as we move through 2021. Okay, great. And actually that was another one of my questions. So at this point, you have no more used Coach on in inventory. Is that the right way to think about it? That's exactly right. Okay. Good. And then I guess my next question, because it's maybe the least clear part of how this thing evolves. Can you talk a little bit about The U. K. Market, your thoughts around stimulus and whatever this bill would be? And how soon or what kind of impact are you guys thinking about as we go into 2021 in terms of maybe rebuilding some of the order books for ADL in The U. K. Market? It's a really good question, Chris. And you'll remember when we acquired ADL, we were quite bullish on ADL for 2020 and 2021 because The U. K. Market had gone through kind of four or five years of a slowdown on replacement factors. And so we saw a bunch of pent up demand as we started the year. Most of the ADL customers in The U. K. Were talking and we were deeply negotiating quite a significant ramp up to the business. Just prior to COVID, I think it was in early February, the UK government and Prime Minister announced a $5,100,000,000 plan to support and assist private operators with a conversion to clean and green vehicles in addition to other things like some bike paths and some other initiatives throughout The UK. So obviously, COVID changes everything. All of those operators were still operating but slowed down the number of buses on the road, the frequency of operation and so forth. So we go through a period from kind of March or April to now where those operators are unsure of the pace recovery of ridership and therefore fare box and therefore income. The UK government obviously in parallel to the COVID dynamic is working through the Brexit dynamics. The dialogue with the government and with the operators is actually in the last, I'm going to say a month to forty five days, has actually heated up quite positively about something in the next month or two that could be really unique to rebuild the schedule for ADL for 2021. So as we sit here today, I've got nothing other than dialogue, discussion, interest, activity to tell you about further volume for Alexander Dennis in The UK. We talked a little bit about rationalizing our capacity. And so we basically had three production facilities and we've now rationalized that down to two. And so we also believe that as that market recovers and as we move into 2021, we start to see some of those orders come through. We've also got a reduced cost base, which will only enhance the profitability of Alexander Dennis going forward. So I wish I could point to a specific bill or a specific announcement. We know that that stuff is actually coming and very positive of late. And as soon as we get any positive or any firm indications, we'll obviously announce that. The good news about ADL is that they've been able to secure some work now, as you know, in Germany, we delivered the pilots. We're now planning for the first tranche to be built in The UK starting in 2021. And a very significant order was secured for Ireland. So a lot of positive stuff about ADL in the last couple of months, and we expect a significant recovery in its performance as we head into 2021. Okay. Thanks, guys. That's all my questions. Thanks, Chris. Your next question comes from the line of Kevin Chiang with CIBC. Kevin, your line is open. Hi. Good morning, everybody. Thanks taking my questions here. Yes, let me just first off, I can get a sense of how your customers are feeling. I recognize there's a lot of government and bipartisan government support for public transportation, but you saw a bit of a dip in the universe quarter over quarter. You saw a little bit of a tick up in cancellations. So just wondering, are you seeing a little bit of fatigue in your customer base, just given how long it seems to be or how long it's taken to get a second stimulus bill? And is that what it's going to take to get some of these orders flowing through in 2021? Would we need to see a definitive fiscal bill passed in The U. S. For transit agencies to kind of put in the orders you expect next year? Well, yeah, look. It's a good comment, and a good question. All of us are fatigued with with the COVID dynamic in every sense of the word. Every day we come to the work and find out how many people have tested positive or the people around them that have tested positive and then they've got to go get tested and so on and so forth. Our customers continue there was a bit of a recovery in ridership and then we saw the wave two and then a slowdown and so forth. I will tell you our conversations with the public transit agencies of late are actually starting to be a lot more encouraging and a lot more positive. These guys are resilient. I mean, they've gone through funding cycles, they've gone through extensions of bills, they've gone through all that other stuff, and yet they're warriors and operate all day long every day to support the public transit needs in every city. I would suggest there's a couple of positive things. Most of the operators, a good portion them have now gone through it, let's call it a trial phase on zero emission, whether it's battery electric or of late more and more trying hydrogen fuel cells and realizing range performance, how they're going to deal with the charging infrastructure strategies and so forth. So the pain we had last year of we don't know what this means for operation. I think a lot of them have got enough experience now to have a view of what they want to do. The second issue is they were waiting for a second round of stimulus. That hasn't happened. Even in the last couple of days, we're seeing more and more announcements about we may see something in late November or December, which I think our operators are seeing as positive. But there's a generally a positive sentiment around President-elect Biden and his views around public transit and the need to fundamentally invest in kind of lean green infrastructure associated with it. So I would say clearly, these guys have gone through hell and they've been frustrated, but they are warriors and they've really responded in the last little while in conversations with us. I'll just give you a stat, for example. Kevin, you've been to our Vehicle Innovation Center in Anniston, Alabama. We took that now online. And over the last two or three weeks, we've had four virtual sessions. We're getting between eighty five and one hundred customers each time on those virtual calls. And so the engagement and interest is really, really strong, some of which we'll obviously want to try and share with you and others at the Investor Day in January 2021. On the private side, there's still movements and activity for the private shuttle type operators, but those small or even medium sized privately owned motor coach operators that are relying on sports or leisure or travel and so forth are still depressed. And we expect that as I talked in our notes here that to go through 2021 and potentially even a little bit longer. So we're not planning on a massive recovery for that portion of the business. That's very helpful. If I could maybe just a couple of modeling questions. One, you held your guidance for the year, again, I guess, highlighting the sequential recovery in your business. Just wondering, when you look at the offsets from the government support programs, I guess first, what would you anticipate in terms of Q4? And is this flowing kind of in line with what you would expect when you reintroduced your guidance in 2020? Or is it coming a little bit higher than you anticipated or maybe below what you had anticipated just given your pace of recovery? Well, I think if you'll remember, we started the year with $320,000,000 to $350,000,000 guidance for 2021. Obviously, immediately when COVID hit us in March, we had no idea how long or how deep. We went from March to August with no guidance out there trying to understand what to do. Our whole focus was on shutting our facilities or idling them, but also the safety of our employees. When we started back up really in earnest in late July and August, we set our guidance based on what we had for known slots. We knew that there wasn't going to be very many private sales and it was really about known and sold slots this year. The reason we still have a reiterated guidance that is a $10,000,000 range, if you will, for 2020 is the reality of the COVID impact on our business every day about absenteeism challenges, delivery challenges with customers, inspector dynamics and all that other stuff. Look, we're really confident. We don't have to worry about selling anything in the fourth quarter of this year. It's about executing and delivering, and we're managing extremely well, notwithstanding all those daily bumps and bruises. But as we head and move into 2021 and we're filling up our slots through the first half of the year, we're relatively confident. And all these positives that we're starting to see around government interest, around potential U. K. Stimulus, the Canadian government and so forth, we think bodes well for the back half of next year. But that's really where our focus is right now is selling the slots for the back half of next year. Yes. I think, Kevin, just to add to your question, just at a very high level, when we think about The U. K. Furlough program, we're thinking somewhere in the $1,000,000 range. Getting that in Q4 twenty twenty and then for the SUE stuff, we obviously got that built in. But we're kind of working that because there is a little bit of uncertainty if we'll get that last. Okay. So you you you you've been building this into your your your your outlook. And maybe just last one for me. I'm sure you've you've all seen just how how how cheap the capital is, I guess, for a lot of new mobility companies that are looking to enter into the electric vehicle space, especially the commercial vehicle space. Just how are you seeing the competitive environment? I know a lot of these players don't have actual buses or vehicles yet, but a fear that as you get through this recovery, you're going to see more competition or more pricing pressure? Or are your customers saying anything that suggests anything worrisome on the competitive front as you look up the next few years? Well, look, we've had people come and go in our space over the years. And as you know, the dynamics in North America are in the public transit space and even the private motor coach are dramatically different in our world than somebody showing up with electric truck or electric car. Getting through Altoona, getting through the customization of the vehicle to meet those customers, in some cases having to meet shaker table tests and all these other things is not simple. And, you know, I'll just point to one of our competitors that, you know, is only an EV provider. They've been around for fourteen years, and they have sub 600 vehicles on the road. And so this is why we're so focused on making sure investors realize and understand this is not an off the shelf product. It is highly custom and highly engineered and highly unique for each operators. There are incredibly challenging and difficult testing environment that we have to get through with our customers. And then there's the whole dynamic of the charging infrastructure and the pace at which and the experience at which the operator needs and the OEM needs to provide to put those vehicles in service. And so I go back to I'm very comfortable of our competitive position given what we offer today, our evolution to the zero emission, given the fact that we're the leader both in electric and trolley, but also in the fuel cells that we can migrate as those customers want to migrate at the pace. But we're still taking orders today for conventional diesel vehicles, hybrid vehicles, natural gas vehicles. It is not a light switch. And so anybody showing up tomorrow that says, I can sell a vehicle to you, to Mr. Customer in a public environment, really hasn't got a lot of traction. Your point around competitive intensity is, I would suggest no different today than it's been in the past. There's the desire to want to fill slots in the short term, the desire like us and our competitors to want to build up backlog. Some of our investors look at us and say, Oh my God, you're burning down your backlog. We look at it as, Thank God, we built up a backlog and thank God we have the flexibility to manage with our customers today on option conversions and state schedules, as we've talked about, which has been a massive part of the ordering in the last little while, to be able to support that customer. We are seeing some spot buys now that maybe we didn't see in the past. In the last six months, can think of a handful of operators that said, hey, look, I found a unique way of getting some funds. I want a batch of buses. Can you deliver quickly? And the fact that we can build any kind of vehicle in any one of our facilities, whether it's diesel, natural gas, hybrid gas, electric or fuel cell allows us to be able to respond in a responsible pricing manner, having to tank price. There are some situations where there's very aggressive pricing, no question. But I wouldn't say that's the predominant part of our market today. That's great color, Paul. Thank you very much. And that's it for me. Thanks, Kevin. Your next question comes from the line of Cameron Driksen with National Bank Financial. Cameron, your line is open. Thank you. Good morning. I guess one questions of or one of the theses that we hear out here on the sort of effects of the pandemic is that more people will move away from the cities. There'll be, therefore, less need for public transit. I mean, don't necessarily agree with that thesis. But I'm just wondering if you're hearing from any of your transit customers that they're perhaps in their long term planning are making an accounting for that potentiality. I mean, is there any change in what transit agencies are planning as far as replacement of buses or new buses that would lead you to be worried about, I guess, a smaller market five years down the road? Well, there's a it's a really good question, Cam. And I think you're right, it is very topical and we see it all day long in the news about more lock downs and more work from homes and so forth. I can honestly say that we haven't heard it as a major theme from a group or many of our customers around public transit is no longer needed or it's needed at a fraction of what it was. I think there's also tremendous political pressure in every city in North America, let's call it, or even The UK or Hong Kong to want to push not less, but more public transit for two reasons. A, the congestion continues to be massive in major cities and trying to get, you know, it's romantic to say to get more people in their cars or more people in an Uber, but that's it's a congestion dynamic. The second part of that is now that public transit truly has green and zero emission elements to it, we're hearing almost the opposite to what you just highlighted in terms of more politicians and more cities are wanting to find a way to get more people back into public transit that is both congestion positive, but also environmentally friendly. And I think we're going to see more and more of that, especially with the green agenda of the next administration that talks about the environmental footprint and impact. The same thing with Canada for that matter in a massive way. I've had the benefit of talking to many federal ministers who are really trying to marry a public transit agenda with a green agenda. And the fact that we now can deliver vehicles that look and smell and feel and Wi Fi and operation and comfort and noise way different than a 10 old vehicle in addition to that zero emission dynamic has lots of attraction for politicians. There is no question certain businesses are going to say we were successful at some people working at home, and we may see a slight drop off in some of those people that used to drop to work. But essential service providers still need to get work. You can't manufacture stuff from home and on and on and on. So we're not seeing a massive trend against the use of public transit nor are we hearing it from our customers. Okay. That's very helpful. And just a follow-up. I mean, you mentioned the discussion you've had with in Canada. Are you able to maybe describe in a little more detail how this infrastructure funding for green buses in Canada is going to work and when we might actually see that translate into some orders for you? Well, we're obviously learning as it was rolled out. I had the opportunity of speaking to Minister McKenna and others, the people at the Canadian Infrastructure Bank. The premise and the theory and the strategy of the CIB is it kind of goes as follows, just to make it as simple. They want to go to public transit agencies in Canada and say you operate a conventional fleet that costs you X, Y or Z. You have future savings if you move to zero emission in terms of maintenance costs, fuel costs and so forth and maybe even sparing ratios. The Canadian Pressure Bank wants to be able to help operators finance the upfront purchase of electric or zero emission vehicles, electric or fuel cell, and then help them with the charging infrastructure and therefore pay for the upfront money with the future savings and act as a facilitator. Now CIB hasn't been in the bus support game before, but they bring a lot of public private partnership and a lot of project management experience. And so look, it's fresh and it's new. There's lots of interest and discussion. We're kind of a tale of two cities in Canada. You've got the bigger cities that have tried electric vehicles that understand what it means, that are starting to get their vision clear on how and when and why and where they're going to charge them as opposed to some of the smaller cities that haven't yet done that. I don't expect a massive number of orders, but I do expect to start to see some announcements associated with that as we move into 2021. And Paul, I'd just add, I guess, that Canada, obviously, a great market for us on ZEBs, Vancouver, Toronto, Montreal. A lot of the big cities have new flyer buses in service. And so obviously, hopefully, this Canada Infrastructure Bank gets the loan out, but I think it leaves us really well positioned, like you said, for longer term. Okay. That's very helpful. Thanks very much. Thanks, Ken. Your next question comes from the line of Naaman Sadi with Laurentian Bank. Naaman, your line is open. Hey, good morning, everyone, and thanks for taking my questions. So just going back to the covenant relief part, is that relief just for the first quarter? Or are you anticipating for Q2 next year and Q3 as well? Well, thanks, Noma. Thanks for calling in and appreciate you picking up coverage recently. Think of the covenant relief as not the need for actual credit dollars or cash flow or liquidity. It's more around covenant calculations. And as Papasu and Stephen both alluded to, we're doing a little bit of preventative medicine here to make sure that we don't run into any of those challenges as we move through 2021 and 2022. The term of the next agreement, Stephen, that you're working with the banks has kind of window associated with it? Yes. So I think we're looking at longer term relief. I think obviously when we did this the first time in April, the world was a different place and nobody really knew what the impacts of COVID-nineteen were going to look like the longer term. So this time we're going with the view of let's extend it a bit longer. So kind of through 2021, we'd have this relief and then the covenants would come back, but it kind of stepped down levels to get us back to our path. As we mentioned, I mean, trajectory is we still want to get to our target leverage of two to 2.5 times. But that's going to take time now as we recover 2021 being a bit of a transition year and then 2022, 2023 getting back to pre COVID levels. So I think 2021, it's not just the first quarter, I would say. We're looking at more kind of full year 2021 to have heightened covenant levels and some relief because of the trailing 2020 numbers. And then 2022 getting back to kind of a more normal profile. Okay. That's great color. Thanks for that. And just on the NFI forward plan, I understand if I heard it correctly that you've consolidated some facilities in ADL from three to two. Are there more factory consolidations that are in plan? And if you could provide some color on there? So, so far, here's what's happened. And you'll remember when we announced NFI Forward, we had kind of business unit rationalization. So that was New Flyer and MCI coming together. That's effectively complete. We're now continuing to work on the combined org as well as the one system approach that we'll obviously give a lot more color in January on. From a facility perspective or sorry, the other combination of businesses was the North American parts business of ADI and NFI parts, And that is well in process and that will be completed by the end of this year. From a facility perspective, we've already got The UK dynamic from three production centers, if you will, to two. We've already rationalized some of the fiberglass manufacturing sites. Just this past year, we eliminated one of the sites in Winnipeg, and we're in the process of combining two left two of the facilities left in Winnipeg down into one. That will be completed by early twenty twenty one. And then we're in the process of looking at all of our other facilities in North America. We've got a project team that's deep into the study of that. We've effectively provided some color in our calculation in our go forward plan of how much money we think we can take out of the overhead. But there are no definitive decisions made yet on which facilities and at what pace. Other dynamic is we did shut down two service centers on the MCI side as the private market slowed down and effectively stalled. So Ian Smart and Chris Stauder were able to rationalize the Los Alamitos service center in California, and we are also able to eliminate a service center in Winter Garden, Florida. Those are now complete. Okay. That's very helpful. And maybe just last one from my end. The motor coach segment, I mean, are you seeing any pricing pressures on the public side of this business? And just maybe how much customization goes into motor coaches? Because I'm assuming there's going to be a big inventory in the market or overall the market should be getting very competitive. So a couple of things happened. First of all, the reflection or the dynamics in motor coach are kind of three different types. First of all, when we sell a motor coach to a public operator like New Jersey Transit or New York, those vehicles are highly customized, different than a transit bus. They're usually obviously multiyear contracts with large orders, but they're highly customized. When it comes to private operators, there's kind of two ends of the spectrum. The larger operators have their own unique specs, not just paint and delivery and inside, but some level of customization. So that's kind of one end of that spectrum. And in many cases, some of those are a little bit larger quantity and volume. The other end of the spectrum is mostly configured orders, not customized. So think of it this way, we offer a customer a vehicle that has this level of trim or this level of interior or this type of engine and those kinds of things. And we build most of those buses, what we call fast tracks or effectively generic vehicles that we build, put in inventory and then do any final little customization for a customer. So your question about the demand, basically as soon as COVID really hit and there was lockdowns and all kinds of restrictions, you had this massive dynamic of actually no orders. It's not as if pricing was crazy, there weren't any orders. And that's why we effectively stopped the induction of new commercial vehicles and ceased those. And that's why we also liquidated the pre owned coach pool because we don't know how deep and how long that pandemic is going to happen. Your next question comes from the line of Jonathan Lamers with BMO Capital Markets. Jonathan, your line is open. Good morning. I'll bother you with a modeling question. Do you have the production rates with you for North American transit and public sector motor coach lines for Q3 and Q4? Sorry, you want to know the induction rate or the delivery rate? The production rate at the plants. Before on recent calls, we talked about, I think, I believe an 85% of run rate exit rate at the end of Q2 going into Q3. Yes. I'm not exactly sure I understand. We started the year with something like, let's say, on the North American MCI front of about 20 units a week and about two thirds of that are private customers and one third of that is public customers. As we got into the third quarter, we stopped inducting commercial vehicles with the private and we ended up continuing to operate on the public demand. So our current build rate on motor coaches is somewhere around seven or eight vehicles a week. Okay? On the new flyer side, we started the year at a production rate of somewhere around 55 vehicles a week, and we are now operating at somewhere around 45 or so plus or minus. And of course, as you know, when you come through our facilities, that's also dependent on whether they're 40 foot or 60 foot, which are two halves, which have a different impact on labor efficiency. But roughly 55 down to 45, and that's the sustained rate we're working at right now. Does that help? That's very helpful. I'm just trying to determine what's going on with the unit deliveries. They were way above my forecast for Q3, and they look like they're on track to be below for Q4. I mean, you've explained the transactional Coach side for Q4 well. Would you have with you how many units were delivered from Q2 inventory this year versus last year? I'm not sure we have that kind of level of detail. Maybe we can try and help you work through some of that stuff offline. Think of it this way, the year has been not normal because we could build a bus, induct it, build it, but depending on the customer acceptance and inspection, getting across the border or getting to our facilities or in some cases delegating self inspection to us and then we deliver to the customer and they inspect on-site has had quite a dramatic impact on the month to month, week to week actual delivery. So the cadence of inputs and outputs is quite out of whack this year. Okay. Thanks. Maybe I know you've had a lot of thoughts offline, Jonathan, we can help you with maybe a little bit more color as you try and think about evaluating and projecting the business. The good news for fourth quarter is we don't have to worry about selling a slot. We have to focus on just the constant execution. And then the other dynamic around as we're now in second waves and we've got different levels of lockdowns, inspection and then customer acceptance dynamic at the end of the year may be a little bit different than what we have experienced in the past. Yes. Think, Paul, I'd just echo that comment. Happy to chat. Otherwise, Jonathan offline. But I think, as you mentioned, 2020 is such a different year. You know, you've had the addition of ADL plus COVID selling out of inventory, trying to finish whip during q two even while facilities were finished, that it makes it more difficult to do that. You know, what what we used to be able to do kind of pre ADL, pre MCI, the business you could really just do that inventory kind of flow through. So it's definitely much more complicated in 2020 with the different production levels and different production levels at different sites and for different markets. Okay. And just circling back to Paul's comments about the new public funding measures that were approved on the ballots recently representing, I believe, set up to $38,000,000,000 I know it's hard to generalize the wide range of different measures out there, but were those generally for operating budgets or capital budgets? And how positive do you see that being for the active bid universe? I'm going say, Jonathan, it's probably too early to tell. What we see obviously is the headlines from not only our customers and what the details that were on the ballot agendas, but also the summaries from the trades associations. A couple of pieces of commentary. A lot of these are effectively taxes that are then applied for multi years or in perpetuity around a fuel tax or a sales tax or a gas tax or some kind of a dynamic in each of those locations. Most of them are kind of a percent levy, and they're not specifically defined whether they're capital or operating costs. Our perspective is net net, anything that benefits a public transit agency from the cash flow in their business ultimately allows them to rejuvenate their fleets or to think about op cost versus capital costs. The other thing that I'll point out as we looked at that list, a, what was on the ballot and whatever 90 something percent of them that passed, and b, is that they're actually quite well diverse across America. I mean, they range from Seattle to Portland to Denver to California to the East Coast. And so, when we talk to our trade associations, again, all of our operators are going through hell. But net net, there seems to be a really positive sentiment from the American public around the desire to want to push public transit and green public transit. I'm not sure I can give you any color yet on how that translates into an actual bid universe for 2021. Obviously, as we get into our Investor Day, we'll do some more research and try and tell that story to give a little bit more color of Quantum or whether it's capital or operating costs. Net net, I think it's very positive. Paul, maybe I'll just mention one thing because we did mention it earlier. It's as recently yesterday, Senate appropriations for 2021. So there's discussion and obviously the FAST Act was extended for a year, but getting funding was only extended till December, but the Act extension was until September 2021. Now there's a strong appetite to pass a bill that would fund the FAST Act for until next year. So that's another positive step in addition to all the approvals coming out of the election and the President elect's view on funding for public transit. It looks like there's an appetite for to fund and pass the bill before December 11 that would fund the FAST Act for another year. Well, fact, Stephen, the Transportation and Housing Appropriations bill that you described in the Senate yesterday is not only extending it until September, but it's a plus up over current funding of $570,000,000 So a very, very strong indication. And of course, this is the Senate, right? So it's not necessarily aligned with the next administration, very positive for us. Maybe one follow-up question on that commentary. I appreciate all that. Based on the existing level of FAST Act funding, would you see industry volumes returning to 6,000 units per year eventually once the customers are stabilized? Speculation on my part, Jonathan, but yes, I If you just take the 85,000 transit buses in North America today in operation, you look at the average age of that fleet, which is somewhere around eight years plus or minus, given the slowdown in buys this year, it will only move up a little bit. Given the desire and the interest in funding and the funding associated with zero emission, our view is that, yes, that 6,000 is definitely attainable. It won't be in 2021 is my view, but we're going to start to see recovery. At this point in time, we do not have a really good forecast of actual deliveries for 2020, but my guess is it's going be a couple thousand down from that 6,000 level once all the dust settles. But I do think we're going back to that level. Makes perfect sense. Okay. Thanks for your comments. Thanks, Jonathan. Our final question comes from the line of Daryl Young with TD Securities. Daryl, your line is open. Good morning, guys. Just one quick one for me with respect to electric buses and some of the pilot programs that have been going on across The U. S. Obviously, a lot of distraction this year. But just curious if there's been any major takeaways because I think some of them have now been in operation for a year plus in terms of timing of orders and major takeaways on competitors or anything like that? Well, timing of orders as we highlighted and you can see in the notes in our materials, Daryl, around the percentage of our active as well as the percentage of the total bid universe that is zero emission. Clearly, it's almost a factor of two of what we saw last year. So the interest and attention is definitely there. A couple of takeaways from a technical or a spec or a scoping dynamic. First, and if you go back a couple of years in our perspective, we and most of the industry thought that we would have batteries, a small battery quantity on a bus and we'd have charging throughout the infrastructure. In the last year and a half, that clearly has shifted to more operators wanting to have less en route charging as a concept and more depot charging, so they have much more flexibility in operation. The other challenge, the other learning, the other deployment dynamic is how important the charging infrastructure strategy and partnership relates to the bus sale. We can point to a number of situations where we sold a bus, the operator took responsibility for the charging, deployment hasn't gone all that well, communication dynamics, electronics and so forth. And so this only reinforces what Chris' team is doing is getting closer and closer to the customer of offering vehicles and charging solutions as a bundled offering. In addition, it provides the operator with a single, let's call it belly button or a single person to work with to make sure it's optimum. The third thing I'll point to is that we've gone in and out of the fuel cell dynamic. You may remember back in 2010, we did a bunch of fuel cells for the Vancouver Olympics. The fuel cell was the propulsion mover. It was big, was expensive, maintenance was complex and so forth. We then kind of pivoted, well, it's got to be a battery electric world. I would say in the last year or two or three, and again, Chris' guys will tell us a story at the January Investor Day. But the concept now is a fuel cell being a range extender. So it's a battery electric bus. You've got a much smaller fuel cell, some onboard hydrogen that allows you to keep topping up the batteries, which then allows the operator way more flexibility on range. And so that now the days of saying it's electric bus and only electric bus solution is clearly past us. Fuel cell has its place for many operators depending on their geography, their temperature, their topography and so on and so forth. And so what you'll see at our Investor Day is discussion around, A, one size doesn't fit all, but B, every customer will have a different dynamic based on their political environment, their funding environment, their technical aptitude, their history with fuel cells, battery electric hybrids or whatever. And I think that the trick for us and the success that we've had is that we can actually offer all of those variants to our customer depending on their unique need. And we've got lots of case studies where we'll have a political environment come and say, well, what's the range of your bus? And we'll say, well, it depends on so many factors that in many cases, the onboard energy uses a disproportionate amount of energy for HVAC or heating or cooling or whatever. And this goes back in terms of that deep working with an operator in terms of a solution unique to their operation, which also then means somebody showing up with a vehicle and just trying to sell the vehicle is really at a disadvantage as opposed to that integrated solution. Got you. Okay, great. Thanks guys. I'll leave it there given time. Thanks, Daryl. Thanks, Daryl. This concludes our question and answer session. I will now turn the call back over to Stephen King for closing remarks. All right. Thanks, Amy, and thanks, everyone, for joining us this morning. We look forward to speaking with you all again at our January Investor Day. And so I'll just remind everyone that will be Monday, 01/11/2021, and information will be available on our website, We'll send out the agenda for that session in December. Thank you. Have a great day. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.