Earnings Call: Q1 2020

May 7, 2020

Thank you for standing by, and welcome to the NFI Group's First Quarter twenty twenty Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. I would now like to hand the conference over to Stephen King. Please go ahead, sir. Thank you, Cheryl. Good morning, everyone, and welcome to NFI Group's first quarter twenty twenty results conference call. This is Stephen King, NFI's Group Director, 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. For your information, this call is being recorded and a replay will be made available shortly. On this morning's call, we will be walking through a financial results presentation that can be found in the Investors section of our website. We will call out the slide number referred to as we walk through the presentation. 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 are advised to review the risk factors found in NFI's press releases and other public filings on SEDAR for more details. During today's call, we will be highlighting certain first quarter twenty twenty results and provide comparisons to the same periods in 2019. In addition to the results presentation, we encourage all participants to review the consolidated financial statements, the associated Management Discussion and Analysis or MD and A and press release that are all posted to our website and on SEDAR. 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 quarterly highlights, Papasu will take us through the financial results and the impact of COVID-nineteen, and finally, Paul will provide 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 to provide highlights for the first quarter. Thanks, Stephen, and good morning, ladies and gentlemen. I'm turning to now Slide three of our results presentation. The first quarter of the year is our seasonally slowest period, and this was our expectation as we started 2020. We did see significant growth in deliveries during Q1 when compared to 2019, primarily driven by the addition of Alexander Dennis, plus higher deliveries at ARVOC, who did not experience any chassis disruption this year as they did last year. Q1 twenty twenty adjusted EBIT was generally in line with our expectations. However, we did start to experience the first impact of COVID-nineteen towards safety of our team. We also worked with suppliers who had been impacted by the same government measures to coordinate timing and adjust incoming inventory shipments and avoid supply chain disruptions. With the facilities idled in April and into May, we decreased the majority of our cash expenses, which are variable and tied to production, and we implemented numerous measures to lower our fixed costs, which include freezes on hiring and salary increases, temporary decreases to leadership compensation ranging from 20% to 50%, a delay in payment of twenty nineteen earned incentive payments, a reduction in the amount and delay of the Board fees and a permanent reduction in force of over 300 people. While new vehicle production was idled, we were able to complete late stage work in process vehicles and deliver them to customers. These measures, along with the increased focus on working capital, have proven to be very effective as we generated over $90,000,000 in cash from the end of the quarter to now. In addition to cash generation, we greatly improved our total liquidity by securing two new credit facilities, including first, a new $250,000,000 unsecured facility or sidecar for general corporate purposes and second, a strategic $50,000,000 facility to support Alexander Dennis' international operations. Our banking partners also provided covenant relief to help us navigate through COVID-nineteen. The combination of the new facilities and the credit covenant relief shows our banking partners have had strong support for our management team, our business and our strategic plan. Tapasio will discuss additional treasury matters later in this call. We continue to believe that the credit capacity on our existing revolving credit facility is sufficient to fund our business, including dividends. But the addition of these new facilities makes us extremely well positioned to work through the impacts of COVID-nineteen as we now have over USD550 million in total sorry, yes, dollars in total liquidity. While there is no doubt the COVID-nineteen pandemic creates near term challenges, we continue to be optimistic about our end markets. This view is driven primarily by record levels of North American bid universe with active bids up 16% from the 2019 and sixty one percent from the 2019. In April and May, even as the pandemic caused major disruption, we've been pleased to see procurements and vehicle awards continue. A recent example was a significant New Flyer win in Miami Dade for 140 Miami Dade County, Florida for 140 units. On Slide four, we outlined the delivery performance by quarter, by product type, all of which increased with the majority of the increase coming from the addition of ADL in both heavy duty transit and motor coach product lines. I'll now ask Papasu to take us through the financial details of the quarter. Thank you, Paul, and good morning, everyone. Turning to Slide five. In the 2020, NFI reported an increase in revenue of 25% to $710,000,000 The increase was driven by the addition of ADL, higher RBOC deliveries and increased aftermarket part sales to public transit customers. Adjusted EBITDA was $56,000,000 a decline of 7% from 2019 at a margin of 7.9%. The decline in adjusted EBITDA margin is mostly due to the addition of ADL's lower margin international business plus sales mix and margin pressure in the New Flyer Transit and MCI private motor coach businesses. Offsetting these items were lower incentive payment accruals. The Manufacturing and Aftermarket segment saw both significant revenue increases And while the manufacturing segment's adjusted EBITDA was down, primarily for the reasons I previously mentioned, aftermarket adjusted EBITDA increased by 17% from the addition of ADL and positive sales mix from public market sales. On Slide six, we show net earnings and adjusted net earnings. During the first quarter, we had a loss per share of $1.8 primarily as a result of a non cash $50,800,000 goodwill impairment for MCI. The impairment reflects the dramatic impact COVID-nineteen has already had and is expected to continue to have on the private coach market in 2020. There was also an increase in the cost of equity capital utilized due to market volatility caused by COVID-nineteen in the calculation to determine the recoverable amount of the MCI cash generating unit. Net earnings were also impacted by higher depreciation and amortization from the addition of ADL, the higher interest expense, including a 22,500,000.0 mark to market loss on interest rate swaps. Adjustments to net earnings for these non cash items created an adjusted net loss per share of $01 Both net earnings and adjusted net earnings include $4,300,000 in intangible amortization related to the acquired assets of ADL. There would not have been a similar expense in Q1 twenty nineteen. A reconciliation of net earnings to adjusted net earnings is provided with additional details in the appendix of the presentation. Turning to Slide seven, first quarter free cash flow was challenged by higher interest and current income tax expenses, Return on invested capital, which is calculated on a trailing twelve month basis, was also down as improvements to LTM adjusted EBITDA from higher deliveries, aftermarket growth, and lower corporate expenses were offset by impacts felt during 2019, including a learning curve on new models and the startup of KMG. Higher invested capital from the acquisition of ADL and WIP plus the financial impacts of non cash accounting adjustments from the ADL transaction. Slide eight provides a detailed look at the impact our dedicated focus on cash flow management in the face of COVID-nineteen has had on liquidity. As you can see, we've improved our position by $445,000,000 since the February through a combination of inventory reduction, strong accounts receivable performance, payables management, expense management and deferrals, plus increased access to credit facilities. Turning to slide nine, subsequent to the end of the quarter, we entered into two new credit facilities and also saw our banking partners waive covenants for the 2020 on both our existing and new facilities. Now I'll provide some insight into the impacts COVID-nineteen has had on NFI. On slide 10, we outlined the high level areas where the pandemic has created challenges. And as Paul mentioned, we idled the majority of our facilities in late March to ensure the health and safety of our team members. We've experienced a timing disruption in North American transit deliveries with some units originally planned for delivery in the second quarter being shifted into other periods of 2020, which creates a ripple effect causing some deliveries to move from 2020 into 2021. Again, the impact of this market is primarily seen as a timing issue rather than market or customer concern. To date, new flyers experienced negligible cancellations. While ARBOC also idled its operations, they too have not had material cancellations. ARBOC continues with a strong low floor cutaway order book for the remainder of 2020 and are in discussions with dealers about ECWA's delivery timing. In The UK, private operators operate transit routes and all have experienced a significant drop in fare box revenues, which has put pressure on timing of orders and deliveries. Again, we have not seen order cancellations of any magnitude, but we continue in discussions on deferrals into 2021. The hardest HET segment is private motor coach, both within MCI in North America and Plaxton in The UK. Nearly 90% of private coaches currently sit idle and this slowdown was led to both cancellations and deferrals of orders. Private aftermarket part sales has also been impacted. Our parts business was able to continue operations throughout the pandemic, albeit with a much stronger focus on sanitization and physical distancing between staff. Aftermarket has been supporting customers with vehicles in service. In April, we launched additional Clean and Protect products to assist operators with safety and cleanliness on buses and coaches to help transit agencies and private operators protect employees and passengers. While there have been challenges from COVID-nineteen, NFI has taken a very measured and proactive response to lower cost, protect cash flow, and ensure stability for our customers. On slide 11, we outline the measures in detail. By focusing on three major areas, we've been able to generate positive cash flow over the past month even while facilities have been idled. From a working capital perspective, we've accelerated receivables and have worked with suppliers on extended terms. We've eliminated discretionary spending and lowered capital spending to critical maintenance projects only. Across the business, our team have made numerous concessions including salary decreases for all management employees, hiring and wage increases, and deferred board fee payments that have been lowered by 35%. Finally, we made the difficult decision to lower our dividend in response to the uncertain economic conditions caused by COVID-nineteen. While these measures were difficult and impact all of our stakeholders, we were appropriate given the unprecedented nature of COVID-nineteen and the economic uncertainty it has created. I'll now turn the call over to Paul. Thanks, Patasse. So I'm now on Slide 12 of our deck. Our total backlog position ended the quarter at 10,579 equivalent units with a total value of 5,100,000,000.0 And as you see from the graph, has held flat since Q4 twenty eighteen and continues to provide us with visibility and confidence not only as we navigate through COVID-nineteen in 2020, but as we look to future periods. Turning to Slide 13. There's no doubt that 2020 will be a challenging period for our operations and our financial results, but we are well positioned to execute on our restart plan with our production facilities reopening already and continuing on through early June on a very calculated phased and staggered approach. Our internal supply businesses started operations this past week as both Carfare and KMG resumed operations to support our business startup. It was important that these groups reopen as they supply to varying degrees the vehicle production lines at New Flyer, MCI, AARBOC, ADL North America as well as our New Flyer parts business. Next week, our main production facilities will begin a staggered site by site process of resuming operations with the expectation that all facilities in both North America and U. K. Will resume normal operations by early June. There is a risk to this operational plan due to the unknown surrounding COVID-nineteen, but we are taking every precaution to ensure a clean and safe working environment for our people. Last week, we launched a very detailed return to work protocol for all employees, which includes extensive social and physical distancing policies, continuous cleaning and sanitization measures, additional personal protective equipment requirements, and significant other guidance to govern how we will work while we're at work. This program will be supported through training and orientation for all team leads and every team member to ensure understanding and compliance. As we resume operations, we continue to utilize or investigate government programs, which may assist us with reimbursement for costs incurred. We're currently availing of these programs in The UK and exploring opportunities in Canada and with the U. S. Government, will also play a critical role for many of our customers who've lost billions of revenue and incurred significant operating costs during this pandemic. So given the ongoing uncertain nature of COVID-nineteen, it is important to provide guidance for 2020 at this time. But we can offer some insights to our investors about potential scenarios. First, our financial results for 2019, all driven by the disruption of this pandemic. We expect the third and the fourth quarters will be impacted by the pandemic, but not to the same degree as the second quarter. Our capital expenditures will be significantly lower in 2020 than we had planned, and our original guidance of a range of 45,000,000 to $50,000,000 we'd be down to a range around 30,000,000 to $40,000,000 Dividends continue to be important part of the NFI story, and we believe that our cash flow generation efforts, combined with our existing liquidity, provides us with the funds required to finance our operations through the pandemic and continue to return capital to shareholders. Obviously, as this proceeds, we will provide further updates on our 2020 guidance when the situation stabilizes. Now shifting to our long term outlook. As we move through COVID-nineteen, we do so from a position of strength. We have now strong liquidity, a business that is primarily driven by variable costs linked to production and a solid aftermarket business provides a base of recurring revenue. We focused on lowering our fixed cost base and have a track record of removing costs through operational and structural initiatives. We see numerous opportunities to drive margin enhancements now and in the future as we transition NFI from a holding company type structure to more of an operating model. The majority of our global end markets remain positive. NFI's vehicles are largely used for public transit, which remains the spinal cord of cities around the world and the primary daily method for transportation of millions of users. As numerous jurisdictions recovered for COVID-nineteen pandemic and execute on strategies to improve accessibility, renew fleets and migrate to more zero emission buses, we expect to be a beneficiary. Our view is supported by continued strong growth in our North American bid universe, which remains at record levels, plus announcements from governments in Canada, The U. S. And U. K. Regarding dedicated multiyear funding programs to support transit operations and vehicle procurements. While the outlook for overall end market demand is positive, we do expect that the private motor coach business, which represents approximately 12% of our consolidated revenue and an even lower percentage of our net earnings, will continue to be negatively impacted by the COVID-nineteen pandemic in the near term. This near term impact is reflected in the impairment we reported in Q1 twenty twenty. Longer term, we do see Motor Coach returning to previous cash flow performance, and this view is supported by previous economic cycles. But given current market conditions, we've taken measures to remove costs from this segment of our business. We made the difficult decision to complete permanent layoffs and decreased production levels by 62%, which are expected to save MCI in excess of $10,000,000 per annum to date. We have continued to explore options with the Coach business and the team and other NFI businesses to adjust our overhead and will act accordingly. Before turning the call back to Stephen and opening the call for analyst questions, I really want to take this opportunity to thank our team members who've been extremely supportive and committed, both those who have been idled and disrupted and those who work in essential or core services through this COVID-nineteen pandemic and implemented a variety of protocols for us to get back to work. Everyone across our business units has played a role in developing and executing our safety programs. I also want to thank the dedicated frontline members of our transit agencies, public and private operators who continue to work every day, putting their health and safety at risk to ensure essential workers are able to get to work and communities and families can stay connected. We will do everything we can to support transit agencies and operators to make buses safer for drivers and riders during this pandemic and following on. With that, I'll hand it back to Stephen. Thanks, Paul. I'll now turn to Slide 13 to summarize today's call. The first quarter was in line with our seasonally slower expectations, although COVID-nineteen did begin to impact operations and customer orders late in the quarter. COVID-nineteen is a new reality and has created a new normal for not only NFI, but our customers and suppliers around the world. We have responded appropriately and are continuing to focus on ways to remove costs from our business, while also offering additional products focused on health and safety. Our operations are resuming and we'll continue to do so into early June. We are a much stronger position than we were just over a month ago. Now armed with improved liquidity and increased flexibility and financial capacity from the generation of $90,000,000 of cash and over $300,000,000 in additional credit capacity. As Paul mentioned, 2020 will be challenged and results will reflect the impact of COVID-nineteen, but we remain very well positioned to be a beneficiary as demand for transit vehicles remains high, we have a strong backlog and a solid aftermarket revenue base. We'll now open the line for questions. Cheryl, can you please provide instructions to our callers? Thank you. Our first question comes from Kevin Chiang from CIBC. Please go ahead. Your line is open. Thanks for taking my question here and hope everyone's safe out there. Maybe I'll start with NCI. I appreciate the color you've given in terms of the near term adjustments you've made. I think you said production, you've reduced that 62% and it's about $10,000,000 of, I guess, cash cost savings. But to the extent that leisure travel takes multiple years to get back, what's the long term how do you reposition this business for the longer term if, let's say, two thirds of its typical demand takes a much longer time to recover? Thanks, Kevin, for your question and it's a good one. Let's just dissect MCI a little bit. And I mean, you know the business well, roughly 50% to 60% is private operators, 40% to 50% depending on the year is our public operators. The public is contractual. There's no change at this point in time, at least for 2020, that we've seen in any way, shape or form that reduces the public demand. The private demand, as you know, has sub segments. And so no question, the tourism type operator is idled at this point in time. You still have demand from employee shuttles. You have demand that we think will recover to some extent in the limousine or private charter type environment, the city type charter. We think that over time throughout this year as people get back and comfortable of getting on an airplane or whatever that you're still going to see people moving and coming back, albeit maybe less people on board, more social distancing with all these protect and care type products that we're putting in place, UV lights in the air conditioning systems, cleanliness, sanitizing products, barriers in between drivers and passengers, barriers between passengers. At the end of the day, once the world starts to move again, you're still going to have to move those people in some efficient way. And so we know and we go back to heaven forbid nineeleven, you go back to the financial crisis and you look twenty, thirty years back when there have been economic shocks and then recoveries. Albeit this one is different, it's not just economic, it's a health dynamic. But when we look at NCI and we did a forecast, we've taken a pretty aggressive look at the downside on the private market or at least the segments that we think will be impacted in the short term. And at the end of the day, fast forward x months or months, I should say, or years, a smarter, safer, more cognizant social distancing communities and so forth, we're still going to see people moving. And you cannot find any community in North America that doesn't have a big reliance on coaches as part of their transit or as part of their moving of people. It's dire in the short term, no question. And Ian's team has done a fantastic job to dial the tap back on production for the private motor coaches. But we still have that public business. MCI is still a viable business, but it's going to be impacted, to some extent. And that's why when you do the math, when you rerun the forecast, there's obviously a goodwill impairment in the short term. That's great color. And maybe just a second and last one for me. I'd be interested to know, in your conversations with the transit agencies, do you think there'll be a change in how how they look at their fleet composition? I mean, I I think we've all read headlines around ridership being down and and I guess various, forecasts around what that recovery looks like. So do you think maybe absolute transit demand is lower, but but but maybe people want smaller buses because they end up dedensifying the bus? Does does electrification is is that still an important goal for a lot of transit agencies today? I'd be interested to know what your end markets are saying in terms of how they think of fleet composition post COVID-nineteen. Well, not all the transit agencies have people all back to work in a full complement and so forth. And we saw ranging from, let's call it, 50% to 80% drop in ridership universally across North America and even into The U. K. And Hong Kong and so forth. The Hong Kong market is back up and running quite efficiently. And so we're seeing demand over there stabilize and actually be fairly healthy. The U. K. Is on lockdown and continues to be on lockdown. Here's what we're hearing from customers. A, they haven't changed their fleet replacement plans. We know that there was a slowdown as we saw in 2018 and 2019 around trying to figure out how electric vehicles or fuel cells might make it into their fleets. The fleet replacement plans are critical to their ability to access federal funding and to have a real strategy about, you know, replacement of twelve year buses in The US and 500,000 miles and all those kinds of dynamics. What we're hearing from, though, is that you look at the movement of people across any city that gets to some level of normality. There are not enough cars. There is not enough Ubers and Lyfts out there to be able to move all these people. And quite frankly, the cost of those things are prohibitive for the average person that uses public transit to get to work or to to move, to go visit people, to go shopping, and so forth. What we have heard in some cities anecdotally, and I can't translate it into demand, is we may see more buses on the road because they don't want to fill them to the same level that they had before. And as you know, the average bus has 50 or 60 seats depending on the configuration and other 40 or so people, 30 or 40 that can be in standing capacity. We actually may see coming out of COVID more fleet as well as route strategizing around more capacity to be able to move people and still allow some level of social distancing. We haven't seen a change in any of the RFPs that we've seen of late in terms of size or scope of the bus, if you will, from that perspective, nor any differential in the propulsion system strategies. Good news for us, if we see any of that stuff, we chose years ago to have both single deck articulated buses, double deck, which is really helpful in terms of social distancing. You got way more seated people across two levels that can spread out as well as now the addition of Arbach that has cutaways but also shuttle buses. And so I think we're very well positioned, Kevin, if we do see any of those shifts. Quite honestly, it's probably too early to be able to predict. I'll point to one last thing, and we talked about it in our materials. It's amazing to see our active bid universe has not gone down. It's actually gone up quite materially as well as the total bid universe. And the total bid universe, all that is, is us collecting the fleet replacement plans of our customers and what they expect to buy in the next five years. And it's just a proxy for intent, but it's actually quite healthy. And so, you know, that gives us quite a bit of hope and confidence that we'll navigate the short term and then we'll be able to get back on what looked to be for us a very solid 2020, and maybe that gets pushed out to 2021. But, we're pretty comfortable on that side of our business about the recovery. And Paul, maybe I'll just add quickly too on the aftermarket side. Obviously, we're seeing an increase in demand for things like driver barriers, vehicle cleaning systems. And so our team is really focusing on the aftermarket piece of the business, increasing our product offering within that segment to help transit agencies increase obviously the cleaning, sanitization and health and safety of the vehicles as they operate. Are my two. Thank you very much. Thanks, Kevin. Thank you. And our next question comes from Cameron Doerksen from National Bank Finance. Please go ahead. Your line is open. Thanks. Good morning. Just to you a couple of questions on what's going on in The UK. I mean, most of the transit there is served by private operators who obviously are facing some financial difficulties, but still offering a public service with transit. I'm just wondering what you're seeing from those customers as far as their procurement? And also, I guess, in addition to that, is there any update on the, I guess, the pre COVID announcement that The UK made about making a significant investment in buses. Do you think that that's still something that's going to go ahead? It's a really good topical issue, Cam. We have daily calls with our group leadership team, including Colin Robertson over The UK that's been very, very close to the Scottish government as well as the U. K. Government. And your point is a good one. Before we headed into COVID and before the British Prime Minister got to COVID himself, there were some real strong initiatives, a commitment of $5,000,000,000 to look to fleet rejuvenation and more focus on zero emission buses in The U. K. Of course, COVID threw everybody in a bit of a tailspin. The discussion about private operators who are publicly traded for the most part is absolutely real. Their valuations are down, their stock prices are down, their cash flows are down. Some of them have issued equity, some of them got some more debt and credit capacity. And so they're obviously like us navigating through this pandemic both from a profitability perspective, but also cash flow. I can say with a high degree of confidence, we have not really seen any material cancellations of orders in The UK. What we have seen is lots of dialogue about rescheduling, pushing out. So in our minds, it's not a demand issue going away, it's more around timing and recovery. And because those are private operators that bid on operating public routes or public service, Again, just when The U. K. Economy, and albeit maybe slower or different in terms of getting those people around those cities and around those communities has to happen to some level. And Colin reported actually yesterday the dialogue we just had with Kevin about some discussion with some of their operators about increasing the fleet use to try and spread more people out on those buses and those coaches. So probably early to say. We haven't heard any specific initiatives of how that pre COVID commitment converts into tangible actions in the short term, but there's an awful lot of dialogue around trying to help support those operators. It's not like they're public agencies like you see in North America where they can continue to operate at losses and then kind of navigate. These are private businesses that are absolutely finding a way to do it economically going forward and profitably in some way, shape or form. Okay. No, that's helpful. And maybe the second question for me just from an operational standpoint. I mean, obviously, as you restart production here, you've got maybe some social distancing efforts in the plant. Assuming that some of these things stay with us for a while, I'm just wondering what that means from an operational efficiency point of view. I mean, you able still to build the same number of buses in your plants by also accommodating social distancing rules? I'm just wondering what that does from an efficiency point of view. Yeah. It's really topical as well, really important to us. Let's go back a little bit in terms of demand. In the public world, we have not really seen cancellations. We've seen a little bit of schedule changing and deferrals. So that world we are relooking every day literally reissuing a new production schedule to plan our people, but also to plan the supply chain that supports it. We have put teams in place and we kept a number of people on through the shutdown or through the idling period to relook at the manufacturing processes. And of course, site is slightly differently. Processes that Stephen and I are putting wheels on a bus, is there a way of doing that with tooling rather than the two of us sitting two feet apart? We've gone after that stuff. We've put up some people barriers or plastic barriers or cardboard barriers where that makes sense. We've tried to reengineer some processes so that people can spread out. We've tried it when it went into idling and we are staggering the start up of our facilities so that we don't overburden our supply chain plus the fact that any lessons learned in one factory about spreading things out, distancing, cleansing of common tools, mask utilization and on and on and on can be spread across our facilities. We started, as I mentioned earlier, we started bringing some people back across the business the week of the twenty seventh or whatever it was. We started up some people this week and then we get back to legitimate production rates starting next week. Knock on wood, we've learned a lot. We've deployed it across the business very quickly and so far we haven't seen any issues. We have been very aggressive with a cross company task force that meets every single day to compare cameras as people come on-site to check temperatures, to ensure mask utilization or deployment in the facilities, cleansing and on and on. So I'm never say never, but I'm feeling really confident that we're prepared and we're going to jog before we run and get back up to those production levels, which is why we gave that color around don't expect our production levels to get back from zero to 100% immediately. It will take time. Okay. Thank you. Thanks, Dan. Thank you. Our next question comes from Jonathan Lamers from BMO Capital Markets. Please go ahead. Your line is open. Thank you. Good morning. Paul, following up on that last discussion, would you happen to have handy where the line rates will be for the New Flyer Transit plants as production reopens? And maybe an estimate for how long it might take to get back to full run rates? So at the risk of just not trying to screw your question, John, but a little bit of color. We chose we looked at all of our facilities, as I mentioned in the Transit case and New Flyer case. As you know, we burnt off most of the excess work in process last year. We still had some that bled over to So this we took advantage of keeping the lines stocked, but actually getting rid of some of that excess work in process capacity. So we are going to start up the facilities that are the healthiest, if you will, of inventory on hand, available people unless any work in process post line. So basically, we're going to start up with the Anniston, Alabama facility first and then we're going to move to the Winnipeg Crookston completion scenario second and then we're going to move to the St. Cloud facility. So Chris has got a very, very exciting and if you will, staggered plan to get that up and running. In parallel or in addition, our internal capability of KMG and Carfare have started up at quite a lower capacity to fulfill those. I would suggest that we're probably through phasing through Q2 is down, Q3 will get back to somewhere in the two thirds of our capacity and by the end of the year, we should be back up to the run rates we were at previously in the fourth quarter. That's great. Thank you. One question on your commentary about the trajectory of public transit demand. There's quite a few news articles indicating that state and municipal budgets are under pressure. Is it I understand that you're not seeing material cancellations yet, that you're more seeing deferrals to 2021. But is it fair to say that there would be another round of federal funding required to support these transit agencies to avoid a scenario where the deferrals become cancellations? Well, it's a great question, Jonathan. I wish I had a crystal ball and of course every city, municipality, state, province is in a different situation. But let's talk a little bit about the dynamics inside a transit agency. First and foremost, the operating with 50% or 80% less people on your buses has a massive impact on the fare box, which on average is about 30% to 35% of the revenue of a transit agency. So that part of it has been decimated for the vast majority of transit agencies. The U. S. CARES Act, which was a $25,000,000,000 investment really was intended primarily in The United States to help pay the operating costs of what were very, very inefficient transit agencies to keep that essential service operating. The CARES Act did not specify whether those transit agencies could use the money for operating cost or for capital. And so we've actually seen some operators refer to the continued purchasing of their buses using some of that CARES Act money. The second issue is that they also separate and we call it colors of money or buckets of money. But the operating budgets that I think you referred to have been dramatically under pressure in a lot of different places. We have as you know, in The U. S, they use the FTA funding for the capital portion of fleet renewal. And so the bigger issue then is, does those municipalities have the ability to come up with their 20% match? We did see, as you know, in the last financial global crisis, we did see unique stimulus money to help transit agencies buy capital assets. We have heard lots of dialogue about that in conjunction with the renewal of the FAST Act that expires at the end of this year. And so I wish I knew more to be definitive. But to us, it's telling that these people aren't canceling their RFPs, they aren't stopping looking at buying, they're continuing. The number of RFPs that we have in a work in process on our table right now, specifically in the New Flyer case, is quite staggering. And so, you know, sure, there's gonna have to be government initiatives. I I think there's two things at play here. One is creating jobs in the whole manufacturing and supply chain. Two is fleet upgrading to ensure that public transit continues to be an essential service. And three is the whole environmental dynamic. If they if the government is gonna spend money to to try and economically push the economy, there's a huge story about doing it with green or zero emission buses from an environmental perspective, which, you know, and not not to be silly, but ticks a lot of boxes in terms of the the essential desire or the desire outcomes from from government funding. Canada is is different. Know, we don't have the same kind of federal funding. No question, every Canadian transit agency is struggling to continue to operate effectively. The federal government, to their credit, has been talking very aggressively about some unique approaches and programs to help them both from an operating perspective, but also from a capital perspective. I hope by the time we talk next, Jonathan, in August, we'll have started to see the game back on and a little bit more clarity about that. I just go back to if the number of bids on my table stopped or everybody started canceling RFPs or canceling orders that we have in place, that would be a really concerning signal. We have not seen that. Thank you. And I have one question for Papasu. And I'm not sure if you have this in front of you, but following all the reductions in fixed costs that management has implemented, do you have an estimate for where the cash burn rate would have been for April and sort of the fixed expenses we should be looking to as the plants ramp back up? I think no, thanks, Jonathan, again for that question. The way that I'll answer this and then obviously Paul add some more clarity but from our perspective as we start looking at our cash flow on a regular basis one of the things that we've projected so far is we look like we can stay within our original twelve fifty facility. So we're managing to that. Obviously if some other disruptions or anything does happen then obviously we may have to use the sidecar facility. But so far we feel pretty comfortable that we're going be able to manage within our $1,250,000,000 facility. Yes. Thanks, Fatima. Jonathan, just a few other notes. I'll get the numbers wrong, but directionally 65% or 70% of our people have gone on to government support programs or EI or those kind of things are using up vacation. And so that's been helpful to reduce our expenses as well as our cash burn. We did make some decisions on people. We did cut leadership salaries. We did cut Board fees and a whole bunch of other stuff. We did, from a cash perspective, defer and work with our suppliers on payment accounts payable deferrals. We did defer and work with our lessors on rents and all those kind of things. And so we've been very careful and very thoughtful of trying to stay, as Bethesda said, to live within what we originally thought from a cash burn perspective. The liquidity is quite significant now at over $550,000,000 We have generated an awful lot of cash through the pandemic as we start back up. But as we start back up, the ability to hold back payables or to be able to do other stuff starts to wean. And so you'll see us starting to use cash through the second quarter to get our facilities back up and running. But I'm very pleased with the work the teams have done around costs and around expenses to be able to stay inside that existing line. I really don't want to get into exact dollars about spend and savings and those kind of things, if you don't mind. That's great. Thanks for your answers. Thanks, gentlemen. Thank you. Our next question comes from Daryl Young from TD Securities. Please go ahead. Your line is open. Good morning, Hey, Daryl. Just one question for me around the North American transit space and the backlog. Just looking at what the margins could look like in the backlog currently and then maybe a little bit of color on any competitive situation in terms of the new RFPs and what pricing is looking like on those orders? Well, the backlog, as we've reported in the past, is the average backlog and the range of pricing that's in there, great margins and some tough margins, is not materially different at all from what we saw as we ended 2019. You remember that we reported 2019 margins under pressure for a couple of reasons. A is the challenges we had at KMG, which put us in a loss position, which then resulted in the businesses not being able to efficiently build product and over time and reprocessing and all these other things that go with expediting freight and those kind of things. So we as we started the year, we expected to try and see some really good solid margin recovery. As we got through the March, halfway through March, as you can imagine, every one of us is checking the news, every one of us is try to keep six feet away from each other, everybody's wondering whether we're going to shut facilities down and so forth. A number of people whose children didn't have daycare or schools and all of those dynamics caused absenteeism to go up. And so that's one of the biggest issues as we ramp back up through Q2, Q3 is getting efficiency of operations. But I wouldn't say from a pricing perspective other than every once in a while we think what we would call a stupid price or stupid bid. We haven't seen that in the last little while of any real material nature. We've always said that we're too early in the game to know whether the normal margin of an electric bus as you start to get larger volumes is better or worse than a conventional, whether it's natural gas or a diesel and those kind of things. Again, the volume is just not big enough. But I feel pretty good about the pricing that we've got, the margins that we've got. What the biggest areas are going to take an impact is not the public stuff in the short term is going to be the private market, where a lot of those operators are going to be not only operating costs challenged, but they're going to be capital challenged. And so to sell a private bus, the dynamic or coach, the dynamic around trade ins and pricing versus competitors and stock on our shelves versus custom builds and so forth, that's where we expect to see the price pressure. Okay, got it. And then just one point clarification on the 30% of the backlog being related to electric buses. Was that the active bids or the backlog that's emissions zero emissions? I think that's the total backlog. That's the bid universe. Yes, total bid universe, yes. Bid universe, The yes, was 30 backlog, I think, is around 4.5%. Got you. Okay, great. Thanks, guys. Thank you. Thank you. And that concludes the questions in the queue at this time. I'll turn the call back over to management for closing remarks. Thanks, Cheryl. Thanks everyone for your questions and for participating with us on today's call. Before we terminate, I just want to remind listeners that NFI will be hosting our Annual General Meeting later this afternoon at two p. M. Eastern. In order to ensure the health and safety of participants obviously in the face of COVID-nineteen, we will be hosting a virtual meeting. You can find details on how to join on our website within management circular because it will be a webcast virtual meeting. We'll now terminate the call. Thank you everyone. Have a great day and stay safe. Thank you very much ladies and gentlemen for joining us today. This concludes our call. You may now disconnect.