M&A Announcement

May 28, 2019

Good morning. My name is Matthew, and I'll be your conference operator today. At this time, I'd like to welcome everyone to NFI Group Announce Acquisition of OXYAN Pandemic Limited Investor Analysis. Thank you. Stephen King, you may begin your conference. Thank you, Matthew. This is Stephen King, NFI's Group Director of Corporate Development and Investor Relations speaking. Joining me on this call today are Paul Subri, NFI's President and Chief Executive Officer and Glenn Asham, NFI's Executive Vice President and Chief Financial Officer. Good morning from Lutterworth, Scotland located almost equidistant between Edinburgh and Glasgow in Central Scotland. We're very excited today to discuss our press release that crossed the wire a few hours ago announcing NFI Group's acquisition of Alexander Dennis Limited, one of the world's leading independent bus and coach manufacturers and the world leader in double deck buses. Today, Paul will discuss the strategic vision and rationale for the acquisition, Glen will summarize the financial details and then we'll open it up for your questions. For your information, this call is being recorded and a replay will be made available shortly after the call. Details can be found on our website. As a reminder to all participants and others regarding this call, certain information provided today 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 the company's press releases and other public filings on SEDAR for more details. In addition, we encourage call participants to read our press release and the associated investor presentation on this transaction, both of which can be found on the NFI Group website under Investor Relations. I'll now hand the call over to Paul to discuss the acquisition. Thank you, Stephen, good morning, everyone. We're excited to announce the acquisition of Alexander Dennis by the NFI Group. Along with New Flyer, Motor Coach Industries, Aarbox Specialty Vehicles, NFI Parts and Carfare, This transformative acquisition enables NFI to become truly a global independent must manufacturer with pro form a combined revenue of approximately US3.3 billion dollars operations in 10 countries with more than 50 facilities, nearly 8,900 team members supporting over 100,000 buses and coaches in service every day. ADL is a remarkable company with a legacy of bus design and manufacturing that spans more than a century, tracing its UK roots back to 1895. Today ADL has vehicles in service in Scotland, England, Ireland, Hong Kong, Singapore, Malaysia, New Zealand, Poland, Switzerland, Mexico, Canada and The United States. ADL is the market leader in The UK and in Hong Kong and the world's largest producer of double deck transit buses. The company also offers single and double deck motor coaches sold under the Plaxton brand and primarily operating in The UK. ADL is recognized for its high quality innovative products and commitment to aftermarket service and support. The company has over 2,500 team members supporting 31,000 vehicles in daily service from their facilities in Scotland, England, Canada and United States and with third party assembly partners in China, Malaysia and The UK. Now ADL is a company we know very well. We had a long standing relationship with their team and worked together on a joint venture from 2013 to 2017 to sell a North American variant of their highly successful Enviro 200 bus, something we call the MIDI. It was through this joint venture that we experienced firsthand the strong alignment between our two companies, especially when it comes to quality, customer experience, reliability and dedication to its people. I've said numerous times on investor calls that we wouldn't rush into just any acquisition. We were looking to find the best fit financially, strategically and culturally for NFI and with ADL we found all three. Quite simply, we were looking for a company that could be the growth platform for NFI internationally. From a strategic point of view and with ADL now part of our family, NFI has leadership positions in four major markets as well as a significant market share in a variety of other regions. ADL has a proven track record of entering and succeeding in new markets having grown their own business from just two countries in 2004 to 12 countries in 2018. NFI did not have a double deck product in our portfolio and ADL is the world's largest double deck manufacturer. When we add ADL single deck and plaques and motor coaches along with NFI's strong technical capabilities, it provides us one of the strongest and most diverse bus and coach portfolios in the world. This is especially true in North America where NFI will have a complete bus lineup with the widest range of vehicles, propulsion system choices and unrivaled aftermarket support. Following successful sales in Poland and Switzerland, ADL also recently won a major contract in Berlin for the supply of double deck buses up to four thirty units making its first entry into the German market. And last month ADL was awarded a 50 unit double deck order in Singapore and also looks to build on its 2017 contract for 90 double deckers in Mexico City, establishing a model for future potential growth in Latin America. One of the things we really liked about ADL is their flexible operating model, which has allowed them to successfully develop new products, enter new markets and establish local sourcing and assembly partnerships. So while there are things that ADL can learn from NFI, there's no question we see a of opportunities for NFI to learn from ADL. In North America, NFI has taken aggressive approach to zero emission buses offering 35, forty and sixty foot versions of the Excelsior Charge and MCI is now testing battery electric J model motor coaches. ADL is the leader today in double deck electric bus deliveries in The UK and actively developing double deck electric buses for North America that deliver later this year and into next. Now Glenn will get into more detail on the financial metrics, but I'll note that the transaction is attractive from a financial perspective from the get go. It's immediately accretive to earnings per share and free cash flow per share before potential synergies It will allow us to delever quickly back to the targeted total leverage range our total target leverage range of two to 2.5 over the next eighteen months. There's no doubt we can expect to capture synergies over time, but they were not materially relied on to make the financial case compelling. The combined business will explore opportunities in North America to optimize our go to market approach, share best practices in sourcing and supply chain and part fabrication along with manufacturing sales and service. ADL's success can be attributed to the strength of its people. And I'm pleased to advise that ADL's management team led by CEO, Colin Robertson and CFO, Michael Stewart are staying with the company post transaction. I've known Colin for nearly ten years now and I've had great admiration and respect for him. His leadership and the company they've built Colin is a Scot and worked for many years in The United States, last being Executive Vice President of Terex Corporation before returning to Scotland in 2007 to champion ADL's growth. Colin will continue as CEO of ADL, offering it as a business unit within NFI, but he'll also assume a dual role of President of NFI International to lead our efforts charting a global strategy for further NFI growth and diversification. And not only are Colin and Michael staying on with the business, they along with the other two primary shareholders of ADL have elected to roll approximately 10% of their transaction consideration into NFI shares, ensuring strong ongoing alignment with NFI's existing shareholders. Now before I pass the mic over, I want to recognize Stephen King, who was the ADL Acquisition Project Manager and so many others from across NFI for their superb and efficient due diligence effort. Also a special thanks to the ADL team for answering what felt like I'm sure a never ending list of questions and inquiries. NFI Group CFO, Glenn Asham, will now walk you through the financial highlights of the transaction and then I'll return to wrap up with a few thoughts before we open it to our traditional Q and A session. Over to you, Glenn. Thanks, Paul. As noted in our press release, NFI acquired Alexander Dennis for a total transaction value of £320,000,000 which is equivalent to approximately $4.00 $5,000,000 This transaction value represents an implied purchase multiple of 7.3 times ADL's fiscal year twenty eighteen EBITDA. I want to point out that ADL's financial results are currently prepared on a U. K. GAAP basis and all the numbers referenced herein reflect U. K. GAAP preparation. There are differences in the treatment of certain financial results between NFI's reporting under IFRS and U. K. GAAP that will require reconciliation and adjustment. As part of the transaction, we will work with ADL's CFO, Michael Stewart, and his team to complete a business acquisition report, which will provide ADL's 2018 results on an IFRS basis. In addition, our second quarter twenty nineteen results will also include ADL's post acquisition results on an IFRS basis. At this point, we have not completed all the necessary reconciliations, so I will discuss only the current UK GAAP presentation. In 2018, ADL had annual consolidated revenue of £631,000,000 or approximately $843,000,000 from the delivery of 2,533 vehicles. This revenue split with was split with £559,000,000 coming from manufacturing and £71,000,000 from aftermarket parts and service. Geographically, 49% of ADL's revenue was generated from The United Kingdom, 27 from Asia Pacific region, 12% from North America, 11% from aftermarket parts and service and 1% from their developing markets. Given the strength of NFI's balance sheet, we are able to finance this transaction almost entirely with debt. NFI drew on our existing syndicated credit facility, developed a new $300,000,000 credit facility, which was co led by BMO Capital Markets and HSBC Bank Canada and issued from treasury 1,470,000.00 common shares of NFI in lieu of cash. At the close of the transaction, NFI drew an aggregate of approximately US420 million on its credit facilities, resulting in a pro form a total debt to pro form a adjusted EBITDA as of NFI's last fiscal year on December 3038 of approximately 2.9 times, which is well below our credit facility covenant of 4.25 times debt to adjusted EBITDA for the first year after an acquisition and is then reduces back down to 3.75 times. As Paul mentioned, the transaction is immediately accretive before potential synergies to earnings per share and free cash flow per share. And similar to our MCI transaction in 2015, we expect combined financial results will enable us to delever quickly and return to our target of two times to 2.5 times total debt to EBITDA within the next eighteen months. ADL has a track record of growth, having delivered a compound annual revenue growth rate of 10.5% from 2010 to 2018, as the company significantly grew its international operations, while remaining strong in core markets in The United Kingdom and Hong Kong. We expect the strength of our existing business combined with ADL's platform for growth will enable NFI to maintain its dividend policy, generate free cash flow and earnings growth. I'll now pass it back to Paul. Thanks, Glenn. As I highlighted before, the acquisition of ADL was strategic, financially compelling and helps NFI further diversify our business. The acquisition supports our commitments in North American market as ADL's business expands our product offering in Canada and The United States. We're extremely proud of our leading market shares of our core businesses in heavy duty transit, motor coach, low floor cutaway and parts. It's the strength of those businesses that have enabled us to invest in our company, including new products, new facilities and our people, plus complete acquisitions and continuously return cash to shareholders through dividends in the last year through share buybacks using an NCIB. ADL and Edifier both companies that focus on innovation, technology and being at the leading edge in bus and motor coach manufacturing. By combining ADL's knowledge of engineering, supplier partnerships, new product development, aftermarket support and sales expertise with NFI's electric vehicle know how, operational excellence, fabrication, infrastructure support, insourcing and systems management, we will be the leading global independent bus manufacturer with what we feel are the best vehicles in the market. Now some may ask why NFI would acquire a company outside North America, especially in The UK, given current political and economic issues such as Brexit. It's important to have context on Brexit as it relates to ADL, which we considered carefully during our diligence process including discussions with experts on the topic. While there are risks with Brexit, ADL is somewhat insulated. It does not have a large export market from The UK to the European Union, does not have vehicles crossing borders multiple times, can flex its supply chain as necessary and currently has limited sales or purchases in euros. In fact, the majority of transactions are in British pounds. Generally, vehicles for The UK market are made in The UK, vehicles for North America are made in North America and ADL vehicles for Asia are made in Asia. This manufacturing strategy is a testament to ADL's flexible operating model that I discussed earlier. So while Brexit was something we're monitoring closely, ADL's management team works globally today and has a lot of experience with tariffs and trade issues. Most importantly, we're taking a long term view of this acquisition as we see it being a critical component of NFI's growth for many years to come. The addition of ADL is the right decision for our shareholders, our employees and our customers at this time. It expands our business beyond North America enhancing our product portfolio. It creates the strongest customer offering in North America and gives us a platform for growth. It is this logical next step in our vision of enabling the future of mobility with innovative solutions. As we say about all the new NFI companies, ADL is a great example of a company that can be proud of its history and excited about its future. With that, I'll turn it over to Matthew to give instructions to our callers for questions. Our first question comes from the line of Mark Neville at Scotiabank. Your line is open. Hey, good morning, guys. Hi, Mark. First off, I guess, on the transaction. Maybe just on the question, sorry. I appreciate this is obviously much more of an international sort of expansion story. Just curious on the synergies. Again, I also appreciate not a lot of geographical overlap, but just thinking potential, looking at sort of the margin, it looks like Alexander Dennis is about a 6.5% EBITDA margin, my math is right. You guys are closer to 12%. There's probably some structural differences. But just how you're thinking about the opportunity there on the margins in the next couple of years? Yes. So look, it is a very different globally, it's a very different business than it is domestically. And of course, the way New Flyer and NFI have grown through acquisition, the synergy we've been able to get off of integration of businesses, part fabrication, facility reorientation and lean and so forth, aftermarket parts component have helped us improve that margin over the years. The opportunities for synergies in the next couple of years really are around North America. We're both running operating facilities. New Flyer is far more vertically integrated than ADL is. So there potentially is some fabrication opportunities. There's some potentially sourcing coordination that we have. But I also really think there's an opportunity for sales synergy in terms of the coordinated effort of selling. ADL has done an amazing job in the last seven or eight years of putting 1,000 buses on the road in North America and has had to build a service infrastructure and a parts infrastructure. We have that. And so the opportunity to work and coordinate to help support ADL and their selling efforts in North America and give us potentially a volume lift as well. On a broader scale, what ADL does really well is a flexible model and using partners, assembly partners and so forth. And I think as we think about growing together internationally, there's some things that we really can learn from ADL. We have put some synergies very small in our model, but we've also tried to expect as we start to operate these businesses together that there's some of those synergies that will come to fruition. And at this point, we're not really giving any guidance or magnitude on those synergies. But clearly, there's an opportunity to improve margins. Do you have a rough split between manufacturing and aftermarket, the margin, the margin percentage for each business? Well, the ADL business you could probably use the New Flyer proxy as a good comparison of the return margins of spare parts. Now And in the case of ADL, they do a little bit more service than the New Flyer side, but it's probably more comparable to MCI. But I would say that the same ratio off the top in terms of returns of aftermarket to manufacturing is about the same. Okay. Maybe just on the growth rate that you cited, maybe just curious how much of that was acquired versus organic? And then just again, you mentioned some recent successes, some new geographies, but sort of on a go forward basis where sort of more the growth attention or what target markets are sort of top of mind currently? So ADL's growth has been 100% organic. The business as I said in the discussion was an assembly or a combination of kind of three iconic U. K. Builders, Alexander's, Dennis and Plaxton. And Plaxton came back into the ADL fold in 02/2007. But since then all of the growth is organic. And what Colin and the team have done is seek out markets, optimize or customize a product for those markets and then figure out the most cost effective way to build and support those vehicles. And so you have to think of the business as largely originally a U. K. Company that went then went to Hong Kong, that went to New Zealand, that won some mark in Singapore, then decided to go West and made its way into North America, won some business in Mexico and now has started to kind of look strategically in Europe where those where opportunities make sense. That's all been business development organic work on behalf of ADL, which is part of what they do extremely well. And most of ours has been some organic but largely acquisition. So the combination of skills I think bodes really well for our company. As far as go forward, Hong Kong is a very, very cyclical market and it's just come off of a high. And that's why the growth in places like Singapore and New Zealand are very much top of mind for the team. In that case, in those cases largely the chassis are assembled in Malaysia, the buses are built in China and shipped to those markets in a fairly cost effective methodology. In North America, as you see from our materials, they've been able to grow by first partnering with us and another company to build their buses historically and now ADL has facilities in Toronto, in Vaughan, but also in near Elkhart in Indiana. So when you start to think about the growth from there, it's really to support the North American growth of customers. The next obvious market is a place like Latin America where there could be some opportunities for growth and potentially even in cooperation with one of our shareholders Marco Polo. So again, when we did the diligence on the ADL plan, the things that we were doing, they were doing very well from an international growth perspective. Okay. Thanks. I'll turn it over to someone else to get back in queue. Congrats again. Thanks, Mark. Next question comes from the line of Kevin Chiang with CIBC. Your line is open. Hi, this is Seth Rubin on the line for Kevin Chiang. Thanks for taking my questions. So just to start, maybe if you can talk to the seasonality of the business and how we can think about that? Sure. So the seasonality in the business is much like we experienced in the MCI part of our business, primarily because their customer base is running through private operators. So we see strong sales traditionally in the back end of the year, specifically in The UK and in the Hong Kong markets. And then obviously the lighter part of the year is in the first half of the year. Okay, great. Thanks. And then just my next question, just if we can get a sense of the effective tax rate post acquisition. So the corporate tax rate in Britain is significantly lower than what we see in North America. So it's 17% in The UK for their tax. Obviously, this business operates in multiple jurisdictions, so its effective rate was slightly higher than that 17%, call it 20%, low 20%, which obviously is still well below NFI's effective tax rate. So we'd expect that as we combine the businesses and together all the numbers, our corporate tax rate should see a positive impact. Thanks. And then just my last question and then I'll pass the line. If we can get a sense of the pro form a CapEx on the combined company? Yes. So we need to do a little work there and there's some accounting differences there. But if you look at what we would call just our pure CapEx is probably running in the neighborhood of 8,000,009 million dollars per annum. Pounds. Pounds. Yes. So convert that into U. S. Dollars to make it comparable to New Flyer. Thanks for taking my questions. Thank you. Our next question comes from the line of Cameron Doerksen with National Bank. Your line is open. Yeah, thanks. Congratulations on the deal. Guess just want to come back to the margins. I mean, as mentioned, they are lower for the ADL business. I mean, I guess, I just want so I'm clear, the fact that ADL does a lot of manufacturing partners or with third party manufacturing and has third party chassis suppliers. Is that the main reason why we should expect lower margins than the legacy NFI business? Well, it's a really good question, Cam. And we did a lot of discussion around diligence here. They're very different markets. But yes, in some of those markets, they use a third party assembler. So that's one element. Two, the level of part fabrication inside NFL inside ADL is different than New Flyer, but it's a distributed business. So us making parts in North America and shipping to multiple Canada U. S. Facilities is one thing, but ADL making parts here and shipping around the world doesn't make a lot of sense. The third and probably the biggest issue is price. ADL is competing in markets where you're dealing with a lot more competition than we have in North America. And so a lot of those competitive dynamics come into play ultimately. The contracts in most cases internationally are different than in North America. They're not multiyear contracts. They're either spot buys or annual buys. And so we shouldn't expect or an investor shouldn't expect to go from a six or 7% return on sales rate to a 12% like we are anytime fast. This is going to be an evolution of a business, but also a growth opportunity with lots of potential for synergies that we've talked about earlier. But it's not going to happen overnight. Okay. No, that's helpful. And on the sort of implied selling price, if I just kind of run the numbers and maybe this isn't the best way to do this, but it does seem a lot lower than we would see at MCI or at New Flyer. Is there an explanation for that as well? Yes. You mean the average selling price per unit? Right. I mean beyond the price competitiveness, is there something else in there that we should be thinking about? So very much like New Flyer and to some extent NFI, ADL highly customizes the vehicles. And of course, when we think about an average selling price, as you know Cam, we've always kind of thought about that as kind of being not that big of a deal. We don't spend a lot of time thinking because one customer may take tremendous amount of electric or electronic type options or cameras or counters and so forth that have a massive impact on the average price of the unit. They are in some cases the situations where ADL is putting a body on somebody else's chassis. And so in some cases they're selling the body but not the full bus. And so those averages make it difficult to kind of compare to the NFI Group averages today. Okay. That's what I thought. And just maybe finally So some color on that too. Ken, just some color. As we finish our business acquisition report and we convert ADL from U. K. GAAP to IFRS and as we think about how we communicate now this broader NFI to the shareholders, we're really going to try and think about how you can interpret the performance and profitability of the elements, but also the total business. That's something that you'll start to see play out once we finally get ADL onto the IFRS standards. Okay. No, that makes sense. And maybe just finally, maybe margins is the best way to look at the business. Maybe can you just discuss kind of what the return on capital is on the business relative to where NFI Group is and the opportunities you see to improve that? Again, as I said, we haven't done all our combination work in terms of converting to IFRS. And obviously, the capital structure is a lot different today than it was last night. So we'll be reporting that impact as we go forward and put it all together. Okay. But I guess my question was more, I mean, yes, the margins at ADL may be lower than NFI groups are today, but maybe because there's the way that some of the assembly is done with third parties, etcetera, that maybe the return on capital is maybe a better way to look at the For ADL sure, this is a much lighter CapEx business than NFI or the new flyer or MCI business, where we have our own fabrication ability. So yes, you're entirely correct from that standpoint on a return basis, even though the margin would not be as high, it would not be and it's not necessarily dilutive to return on capital. Got it. No, that's great. Thanks very much. Thanks, Ken. Our next question comes from the line of Jonathan Lamers with BMO. Your line is open. Good morning. Paul, you alluded to this in a few areas, but could you just describe the growth opportunities for ADL going forward and where the challenges are? You mentioned the Hong Kong market appeared to be just past peak and that the business was looking to expand in Europe. Could you just elaborate a little bit on those comments? So The U. K. Market is obviously half the business. And ADL has done a magnificent job of adding to its product line, evolving into the hybrids and then now electric vehicles and so forth. It continues to have a very strong share. But there is opportunity for growth and share and profitability in The U. K. That the team is focused on. Hong Kong is a market that has a very large fleet that buys in batches and has just come off the peak. Having said that, what ADL chose to do and has done is diversify just outside of Hong Kong, just Hong Kong. So opportunities in New Zealand, opportunities I said the contract award in Singapore, the business historically has done some work in Australia, there may be other opportunities there. So clearly, they know how to build buses for that region. They've done they've customized them. They've done a good job with variable assembly partners and optimized supply chain. North America was a way of the business starting to really grow. And I think there's more opportunity. The business sells in the order of 200 or so units a year in North America. And I think there's an opportunity with a combined sales effort and the complementary nature of kind of the New Flyer and ADL single decks, but also the New Flyer articulated bus and the double deck because while they to some extent, move large volumes of people, they're also very different in the operating profile. The ADL can carry that many more people in a certain footprint, but it also takes longer to get people on and off the bus, which makes it perfect for commuter type or shuttle type operations as opposed to drop off, pickup drop off on a main street in New York City, where an Arctic does much better. So I think there's growth and clearly in the business plan of ADL, there's more growth in North America. Latin America was a strategy that ADL started with Mexico a number of years ago and targeted Mexico City, high volume people, lots of traffic and was successful with initial order of 90 buses. And so now the strategy is what else can ADL do in Mexico specifically, but also other countries inside Latin America, which then goes back to what I said on the call is Marco Polo is an investor. Marco Polo knows those markets. Marco Polo doesn't have a double deck city bus. And so there could be a coordinated opportunity of how to position that product in those markets. The other thing that ADL has started to really focus on in the last couple of years is their aftermarket. They've launched online parts buying. They've done expanded their parts distribution footprint today largely U. K. Based. There's more service opportunities and so forth. And I think that's a part of the business that clearly they'd like to grow and maybe there's some great lessons learned compared to between NFI and ADL on the parts side. And the other one, I guess, Paul, you mentioned earlier the Berlin. Oh, yes. Sorry about Historically, ADL did not do a lot in Mainland Europe. And of course, the competitive dynamics with some of the major, major truck OEMs that have bus businesses. They strategically sought out a Switzerland customer. They strategically got a Poland customer to understand how Western Europe and Eastern Europe buy and the types of operations. And a couple of years ago, we're successful in demoing and then winning the contract in Berlin. And Berlin can be a massive contract. It's got a couple of different phases where there's some demo buses, there's the initial order and then there's options. And I think the quality of the product comes out of ADL, the performance and support that they're putting in region allows for some really unique opportunities inside Europe for that double deck product. Thanks. And just a follow-up on that, would the manufacturing for Europe be done in The UK? Well, at this point, that decision has not been made. There's ADL has done two things. In some cases, they've made their own buses in UK for UK. In some they've made in UK and shipped them to different locations. As I said in PacRim, use third party assemblers. In The United States, they've now insourced that. The strategy for Germany has not yet been solidified of whether ADL physically will build them or use a partner. Okay. And recognizing the customers across this business are largely private sector, does this come with any backlog? As I said before and as you can read in our notes, in North America there is backlog because in some cases they're multi year contracts. In most other regions of the world, they're either spot buys or annual buys. And so you won't see a multi year backlog like you saw in NFI. It's a lot closer to the way we think of MCI. Yes. So they have long term relationships with all these clients. It's just there'll be annual buys instead of like what Paul said what you see in North America. Was Alexander Dennis carrying inventory? Or are there lead times on the orders? Alexander Dennis in the Plaxton business, so their motor coach business that is largely UK oriented does make what we call fast tracks or stock buses, not a lot, but there are some in inventory that for individual and short term buys. On the transit side, there isn't they don't build buses. It's exactly like New Flyer where they're built to contract. The other thing that Plaxton has, which is the same thing as MCI is that there's a very small return pool, you will, or pre owned coach type pool that is again largely, if not exclusively, U. K. Based, but it's not material. I think there's a $5,000,000 roughly value of those units or £5,000,000, sorry. Okay. So I apologize if I missed this. But as you look across the business, do you have growth expectations for 2019 for Alexander Dennis overall? Yes. Are you able to share those with us on this call? Well, as you know, Jonathan, we don't provide we haven't provided guidance for the core business and we're not going to provide guidance from an ADL perspective. Okay. So you do provide guidance for NFI Group overall in terms of unit deliveries. So Jonathan, I think as Paul mentioned earlier yes, as Paul mentioned earlier, we're kind of revisiting internally the reporting and the disclosure that we're going to provide. Just like Paul said to make it clear to everybody the profitability and what's the best KPIs to use. And so as part of that as we get into Q2 results and for the business acquisition report that's when we'll you'll start to see that information start to flow out. So no change to the North American guidance that we previously provided, but nothing yet to add on ADL at this stage. Okay. And just to be clear, do we know what portion of the sales overall are sourced from third party manufacturers versus sourced from in house bus builds? If you look at the investor deck on Slide 49% of the business is sold in The UK. The vast majority of that is in house. There is a partner in The UK that does some assembly. 27% of the revenues are Asia Pacific, which are almost exclusively third party assembly. 12% is North America, which is almost exclusively built in North America. And then the developing markets is relatively small at this point in time. Okay. Thanks for your comments. Our next question comes from Daryl Young, TD Securities. Just wondering in terms of the transferability of your battery powered buses that technology and the relationship that's existing with BYD, maybe just how you guys see that evolving over time? It's a really good question, Daryl. So in The UK, the strategy that ADL took a couple of years ago and that's been very successful is BYD supplies a chassis that's a fully electric actually drivable chassis that ADL then puts a body on in both single and double deck configurations. And so that has gone very well. The reliability, the performance and so forth in The U. K. Has gone very satisfied from a customer perspective. It's a relatively small portion of the business, but growing. What ADL did in North America is they decided to take their own chassis, which is an ADL design, which is the vast majority of their business around the world and adapt that design to do exactly like New Flyer did, which is put the batteries in the appropriate locations and source those as components as opposed to a full on chassis provided by somebody else. And so there are lots of opportunities we think that with ADL's chassis knowledge, a global reach outside of The UK where NFI can play a role. And so that's one of our initial projects is to look at that. We're really pleased with the performance of the New Flyer Chargebus' range, reliability, performance that we're seeing in a number of cities we have in North America. That's clearly an opportunity that we're excited about. As you can imagine, batteries, electric motors are global supply. And so the fact that ADL playing around the world would not by things like Buy America opens up a whole new world of how to not only provide the best product, but to do it at the right cost point. So pretty exciting opportunity for us. The BYD relationship in The UK was important and BYD has sanctioned, if you will, or provided change of control consent on relationship. And so we'll partner with them in one place and we'll make compete with them in others, just like we do with other companies like Volvo, for example. Okay, excellent. And then in terms of the free cash flow profile, it looks like there's a slightly lower free cash conversion rate for ADL than New Flyer. Is that a reflection of the growth that you've seen 2017 over 2018 and working capital? Or maybe you could just provide a little context there? Yes. So obviously, is some working capital involved in this business, on its export business. The company has done a lot to minimize that working capital and you'll see they probably get a little bit more upfront cash from the customers than we see in our business today. So there is some of that. Again, we complete all the accounting reconciliations, get us into an IFRS basis, we truly won't have a clear picture of that. I mean, we do know that the cash flow the company is generating is going to be accretive even after our additional financing costs. So it's going to add to our business. Okay. And then in terms of the ability to repay over the next eighteen months, a lot of that would that be coming predominantly from the New Flyer free cash flows or? It will come from a combination of the two companies, right? I mean, just like MCI, we didn't think cash is cash at the end of the day, right? So as long as our business is growing and we're generating cash and maintaining our debt at within our targeted range, think we're comfortable. You'll see some ups and downs in every part of the business from time to time. So to focus on any one part of the business, in our minds, is probably not the best way to look at it from a balance sheet standpoint. Obviously from an earnings standpoint you've to focus and we'll put attention where the attention needs to be placed on as the business performs. Okay, great. And then one final question. Do you guys provide in The UK a breakdown of who the key customers? I know there's a list of customers, but kind of what percentage of revenue they would represent? That top list of say nine customers is probably north of 60 or 70% of the business. In The UK, of course, they're buying as big national operators and some of them international operators that will buy on a macro scale or a bulk, if you will, and then assign them to different locations across The U. K. But this group of customers is absolutely the prime operators in The United Kingdom. Okay, perfect. That's all the questions from me and congrats on the deal guys. Thank you. Thanks, John. There are no further questions at this time. I'll turn the call back over to you. Okay. Thanks everyone for the call and for the questions and for joining us today. As you can tell, we're really excited about this transaction and about the future of NFI and now being a global bus manufacturer. Please review the materials posted on our website. You have any follow-up questions, don't hesitate to reach out to me at any time. Thanks and have a great day. This concludes today's conference call and you may now disconnect.