Good day, and thank you for standing by. Welcome to the NFI 2021 second quarter financial results call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session you would need to press star one on your telephone keypad. If you require any further assistance, please press star zero. I would now like to hand the conference over to your first speaker today, Mr. Stephen King. Please go ahead.
Thank you, Henry. Good morning, everyone. Welcome to NFI Group second quarter 2021 results conference call. This is Stephen King speaking. Joining me today are Paul Soubry, President and Chief Executive Officer, and Pipasu Soni, 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 results presentation that can be found in the investor section of our website. While we will be moving the slides via the webcast link, we will also call out the slide number as we go through the deck for participants on the phone. Starting with slide two, I would like to 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. We also want to remind listeners that NFI's financial statements are presented in US dollars, the company's functional currency, and all amounts referred to are in US dollars unless otherwise noted. On slide three, we have included some key terms and definitions referred to in this presentation. Of note, zero emission buses or ZEBs consist of battery electric, hydrogen fuel cell electric, and trolley electric buses. Equivalent units or EUs is a term we use for both production levels and delivery statistics.
The majority of our vehicles represent one equivalent unit, while an articulated 60-foot transit bus takes two production slots and therefore is equal to two equivalent units or two EUs. On slide four, for those of you new to the NFI story, we are a leading independent global provider of bus and motor coach solutions. Our purpose and mission is simple. We exist to move people. In other words, our products move precious cargo. We are focused on designing, building, and delivering exceptional mobility solutions. On this slide, we've also included our stakeholder matrix that drives our strategic decisions and core operating principles that govern our behavior. I'll now pass it over to Paul to recap the call.
Thanks, Stephen, and good morning, everyone. I'm now turning to slide five. In 2021 Q2, we experienced numerous positives as we executed on our strategic priorities of A, winning the evolution to the zero-emission mobility, B, lowering our cost structure, C, strengthening our balance sheet, and D, supporting our customers as markets recover and as they transition their fleets. While there has been significant progress related to vaccine roll-outs and easing of government restrictions, COVID-19 is not yet over. The pandemic continues to impact our people and has created notable supply chain challenges, which in turn is disrupting our production schedule. It's not an excuse we're hiding behind. It's our reality now. We have, and we will manage through it. We anticipate supply chain challenges to be transitory, and like most other manufacturers, we are navigating daily disruptions and working closely with our supplier partners.
On the positive side, we have seen exciting growth in active procurements with bids up almost 50% from 2021 Q1. Our North American public sales team is the busiest that it's ever been. In addition to the growth in procurements, we've also seen broad signs of market recovery and unprecedented levels of government support with multi-billion-dollar planned in public transit investments to come. Although we view funding as the key driver for procurements, it is also worth noting that transit ridership is more than 80% up from early 2020 levels in some of the U.S. communities. We continue to lead the evolution to zero emission, and ZEBs are now 16% of our total backlog. We've been awarded large ZEB awards in the United States, England, Scotland, and Ireland, and we recently announced entry into the Australian market via a strategic partnership.
In addition, we delivered our best performance ever on the U.S. Federal Transit Administration's Low or No Emission Grant Program. In 2021 to date, we've launched seven new zero-emission products, and we remain on track for approximately 20%-25% of our annual deliveries this year to be zero emission. Our company-wide transformation initiative launched last year, NFI Forward, is on schedule and continues to meet its targets. NFI Forward is designed to make us a simpler, leaner company with fewer business units and a reduced footprint to drive margin improvement as top-line revenue grows. In May, we released our third annual environmental, social, and governance report for 2020. The report focused on the three main components of NFI's sustainability pledge, a better product, a better workplace, and a better world.
The ESG report also introduced NFI's four-pillar approach, including vehicles, infrastructure, smart connected technology, and workforce development, directly supporting the evolution of zero-emission technology, the need for equitable access for mobility, and people development that will drive a more sustainable future. Once again, we are reaffirming our full year 2021 guidance for revenue of approximately $2.8 billion-$2.9 billion. Adjusted EBITDA of approximately $220 million-$240 million. Additional insights will be provided on today's call. I'll now turn it over to our CFO, Pipasu Soni, to review NFI's second quarter financial results.
Thanks, Paul. Turning to slide six, you will see that our backlog decreased slightly due to deliveries in the quarter, expiry of older options that date back to 2016, and timing of new orders. Our backlog remains at a robust 8,168 EUs, with 16% being ZEBs. Our year-over-year deliveries were up in all product lines, primarily due to the idling of facilities in Q2 2020. Turning to slide seven, total revenues increased by 75% year-over-year, largely driven by idling of production facilities in 2020 and from record quarterly aftermarket revenues. Aftermarket performance was driven by Asia-Pacific volumes and significant volume increases in North America, the U.K., and Europe. The continued improvement in Asia-Pacific transit markets is a good sign for broader market recovery, given those markets were impacted earliest by the pandemic.
Adjusted EBITDA was up by $76.1 million from the combined benefits of higher deliveries, NFI Forward savings, and the receipt of $18 million in government support, largely provided to assist with retention of skilled personnel. Going forward, we expect volume recovery and margin improvement will replace the impact of wage subsidies received. Free cash flow was up by $58.5 million, a 136% increase over 2020 Q2. A significant factor contributing to this increase was NFI Forward savings of approximately $13 million and additional free cash flow savings of approximately $1 million. Liquidity at the end of the quarter was $389 million, an increase of $70 million from the previous quarter, primarily driven by working capital improvements. During the quarter, we repaid $46 million of debt for a year-to-date repayment of $161 million.
In addition to repaying debt and funding strategic investments, we remain focused on returning capital to shareholders through dividends. A key priority for 2021 is a focus on working capital. We saw the benefits of this approach as we lowered working capital days by six from the previous quarter, generating a CAD 62 million inflow. These improvements have come from better supplier payments, increased usage of purchasing programs, and improved collection processes. Going forward, we anticipate continued improvements to working capital metrics, although supply chain challenges, product mix, and seasonality may cause some quarterly variance. Turning to slide eight, I'll explain some of the dynamics we're seeing with NFI tax exposure. Our North American tax structure includes minimum tax components that are more fixed in nature, plus variable components based on profitability and the impact of non-recurring discrete or one-time items, for which we normalize.
As discussed at our previous financial results call, for 2021 Q1, on an annual basis, we expect our minimum fixed tax expense will be CAD 18 million-CAD 22 million, while our variable taxes will be based on a range of 21%-23% of adjusted pre-tax earnings. During the second quarter, we also saw a tax benefit from currency fluctuations, which lowered our total adjusted ETR. We may continue to see these impacts during the remainder of the year. As foreign exchange rates are very difficult to forecast, we will report the fluctuations and actual results, but we will not provide a forecasting methodology for this component of the tax expense. I will also note that during the quarter, we had a CAD 6.1 million tax expense related to the impact of U.K. legislative tax changes that we normalize for our adjusted ETR.
On slide nine, you'll note that net earnings and adjusted net earnings improved significantly from the same periods in 2020. Both metrics were positively impacted by revenue growth, savings from NFI Forward, support from government wage subsidy, and foreign exchange gains. The derivative financial instruments noted on the year-to-date reconciliation of adjusted EPS relates to pre-tax gains on our interest rate swaps. Turning to slide 10, the NFI Forward initiative remains at or above targets. Included here are a list of projects that we've completed in the first year of the program and the projects that we are currently working on to generate further savings. Since inception, NFI Forward has generated $41.5 million in adjusted EBITDA savings and an additional $2.5 million in free cash flow savings.
Note that the additional free cash flow benefits are on top of the expected cash flow that will be generated from the adjusted EBITDA savings in our normal operating activities. We remain on target with our original plans and anticipate that we'll reach a run rate of at least $67 million in annual adjusted EBITDA savings by 2023, plus an additional $10 million in annual free cash flow savings. These cost reductions will generate significant leverage. As markets recover, we'll grow revenues on a lower fixed cost base with expected drop through to adjusted EBITDA. On Slide 11, we reaffirm our guidance for revenue, adjusted EBITDA, and cash capital expenditures. I wanted to add a comment on seasonality. We anticipate that revenue and adjusted EBITDA for the third quarter will be down from the same period in 2020 and similar in profile to Q2 2021.
This is mostly driven by the impact of supply chain challenges and impacts on production schedule due to timing of customer orders. Fourth quarter revenue and adjusted EBITDA are expected to be higher than the comparative period in 2020. A reminder for listeners that in 2021, Q3 will be a 13-week period, while Q4 will be a 14-week period, for a total fiscal year of 53 weeks. I would like to now turn things back over to Paul to discuss the factors driving our longer-term outlook.
Thanks, Pipasu. Now on slide 12. On this slide, we summarize the unprecedented government support for public transit in Canada, the U.S., the U.K., and New Zealand. A significant amount of this funding is focused on zero-emission buses and infrastructure solutions, where NFI has leadership positions. These announcements are very encouraging, but they are complex, and they're still going through the approval, negotiation, and employment phase. As such, we do not yet have all the details on when these proposals and funds will actually materialize into financial results in buying and delivering of buses. Turning to slide 13. What we attempted to do here was present our view of the timing of market recovery as it relates to public and private transit and motor coach markets, essentially a phasing of the recovery from the pandemic.
As mentioned, the North American public bid activity is increasing, and we anticipate that this trend will continue for the foreseeable future, driven by unprecedented levels of government support. We expect to start seeing an uptick in project awards in the latter part of 2021 and into 2022, and we expect production to significantly increase in the H2 of 2022. North American private coach markets are anticipated to reach 50% of their pre-COVID levels in 2022. Recovery here will be driven by travel and leisure, sports teams, universities, employee shuttles, and colleges. We've already started to see a shift in optimism from private coach motor coach operators. This market will take longest to recovery from the pandemic. In Europe, the U.K., and Scotland, government support and customer demand is driving strong ZEB adoption and overall order activity.
We expect to see these markets continue to improve throughout this year into 2022 and beyond. Asia Pacific is currently experiencing higher aftermarket volumes, with new vehicle order activity expected to pick up again as the market enters its next purchasing cycle in 2023. Overall, our view is that the markets will recover in 2022, but it's likely 2023 before we see a return to pre-pandemic demand, production, and delivery levels. On slide 14, we provide the latest update on the North American public customer bid universe. As mentioned earlier, active bids where we have submitted or are in the process of submitting a proposal, meaning they've had the most significant near-term impact on our operations, increased by 48% from 2021 Q1. The forecasted five-year North American industry procurements, developed through detailed discussions with transit agencies and from their published fleet replacement plans, is down slightly from the first quarter.
This is primarily driven by the shift to increased active bids, with agencies revisiting their capital plans as they now gain a better understanding of the new government funding programs available to them. At the end of 2021 Q2, 38% of the total bid universe were zero-emission buses, up 28% from the end of Q1, highlighting the ongoing evolution to zero-emission transit. We continue to see increased usage of purchasing schedules, which include state and national contracts and cooperative agency purchasing agreements. Since 2018, NFI has received more than 600 vehicle awards from these schedules, which highlights their growing importance within North American transit agencies as an effective and efficient bus procurement tool. I want to remind everyone that these schedules are not recorded in NFI's backlog, as they do not have a defined quantity associated with them allocated to NFI or any other OEM at point of award.
Once a customer purchases a vehicle using one of these agreements, the purchase is recorded immediately as a firm order. Turning to slide 15, it shows our targets through 2025. We're well-positioned for the near and long term with expectations for growth with $3.9 billion-$4.1 billion in revenue and $400 million-$400 million in adjusted EBITDA in 2025. Our performance will be driven by our sole focus on buses and motor coaches, where we have deep customer relationships and the ability to deliver highly customized vehicles. In addition, we'll continue to grow in new markets through ADL and ARBOC. We have a proven track record in delivering zero-emission buses. We will lead the market's transition to zero-emission future. We expect that 35%-40% of the 2025 production will be higher priced and higher margin zero-emission buses, more than tripling our 2020 levels.
We have the largest zero-emission bus capacity in North America and the U.K., with growing presence in Europe and Asia Pacific. NFI Forward will create volume leverage as we deliver higher revenue on a lower and more flexible fixed cost base. This is evidenced by our 2025 targets, including an expected revenue CAGR of more than 8%, but an adjusted EBITDA CAGR of more than 16%. We have one of the largest aftermarket bus and coach parts business in the world, supporting over 105,000 of our own vehicles in service and others and delivering a recurrent revenue parts stream. We're pleased with our performance. We're confident in our business recovery and our market outlook. I'll now turn it back to Stephen to summarize today's discussion. Following that, we'll open the call up for analyst questions. Thank you.
Thanks, Paul. Turning now to slide 16 for a quick recap. We had a solid second quarter performance in a very challenging environment. Although the market is on the path to recovery, there are ongoing challenges from the pandemic, primarily related to the supply chain. We continue to see unprecedented government support for transit, which will help drive order activity and growth. North American public transit bid activity is at pre-COVID-19 levels. We expect to see production volumes back to normal in the back half of 2022. We continue to innovate and disrupt ourselves and the market. We've had numerous new product launches this quarter. We also announced entry into new EV markets in Australia and Ireland. We reaffirm our full year 2021 guidance despite a challenging global environment.
We are focused on achieving our ESG goals through initiatives aimed at reducing our internal footprint while creating equitable access to mobility and workforce development. We are leading this evolution to a zero-emission future with strong 2025 targets that would see us drive top-line growth and even better margin performance. We'll now open the line for analyst questions. Henry, please provide instructions to our callers.
Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Your first question comes from Nauman Satti of Laurentian Bank. Your line's now open.
Hi, good morning, everyone. My first question is regarding the manufacturing segment. If I read this correctly, there's a little bit of pressure on the margin side. I'm just wondering, is that has to do with the product mix, or is there supply chain pressures? If you could just provide some color on that front.
Okay. Let me just make sure I understand. One of the things that you're asking is from a manufacturing segment side of things, you're seeing some margin pressure, and from that perspective, you're asking about what's kind of causing that margin pressure?
That is correct. Yeah.
Okay. Let me just kind of start out, and then maybe we can go from there. I think one of the things that we're starting to see more of is, from my perspective, is we're starting to see a couple of things. Number one is we're starting to see more EVs, and with that EV mix dynamic, what's happening is we're getting a little bit more top-line revenue. When we talk about margin percentage pressure, we are getting a little bit less on the margin percentage side. That's the way I'm kind of.
Nauman, just to be clear, though, as we get more zero-emission vehicles, the EBITDA margin for zero-emission buses is actually, at this point, better than we're seeing for conventional propulsion. The problem is the sale price of the EV is materially higher, therefore, by simple math, the margin percent is slightly deteriorated. We're not viewing that as a fundamental dynamic yet in terms of our competitiveness on zero emission. In fact, we're in a really good position there. Just the simple more top line or the higher sales price has quite a significant impact on a margin percent calc.
Nauman, just one quick thing, too. There was some mix for sure in the second quarter. We sold more motor coaches and more vehicles in U.K. and Asia than North American transit. Some of that, yeah, is related to just market dynamics and market recovery and a little bit of the issue, too, from the supply chain on some of the idling of facilities and days and stuff like that. There was a little bit of mix issue as well in the quarter.
Okay, perfect. That's great color. Just a second one, it's more about, maybe Paul can answer that. There's a good slide on NFI view on market recovery. I'm just wondering, there's a solid bid universe there. What is really has to happen in the North American market for that to sort of translate into backlog? Is that the infrastructure build or is there something that needs to happen where it actually gets translated, or this is just like a normal cycle where it will take a few quarters to translate into backlog?
Well, it's a really good question. As we spend every day watching the news and living in Washington and watching what's going on in terms of the infrastructure build, the replacement for the FAST Act and all those other things. There's kind of a micro and a macro dynamic. First of all, the transit agencies that through kind of 2018, 2019 and 2020 that were trying pilot projects on zero-emission buses are starting to get their heads around the way they want to go, the charging strategy, the size of the fleet, the pace of adoption, smaller vehicles versus 30 or 45-footers versus Artics, and even now double decks and so forth. There's a micro dynamic of them getting confident in the way they want to proceed on a zero emission and having learned a little bit around the requirements for infrastructure.
At the macro level, there is no question that the Biden administration's strategy and policies and plans around dealing with congestion in cities, dealing with the zero emission dynamic, and funding the infrastructure has a really massive impact on future demand, but stability of demand. There's a lot of people that are spending an inordinate amount of time right now trying to understand the timing of that. The thing that often we try to get across to investors and analysts and stakeholders is even with an announcement today, for example, on the U.S. government, the Canadian government, it can be 18- 24 months before that really solidly trends into actual build and delivery activity. The good news is you've got the general market recovery and economic recovery.
You've got confidence from an operator in kind of starting to get their heads around the way they want to move to zero emission, the type of vehicles, the route structures. Then you have the macro tailwinds of some pretty serious funding like we have never seen before. This is why I think between my comments and Stephen comments this morning, we kind of continue to see a little bit of noise through 2021, a little bit more solid order and backlog development through 2022, and then what we think will be the recovery, what was the previous replacement factors, if not a little bit higher in 2023 and beyond.
This is very helpful, and maybe the last one before I head back into the line. You've entered the Australian market with a partnership. I'm just wondering if you could provide some color on the economics of such partnerships. You did one in New Zealand and Ireland, if some big picture on that.
Yeah. Great point. Australia, a little bit of history. When we were just New Flyer and Alexander Dennis was on its own, and Marcopolo, before they had made an investment in New Flyer, there was a company that came for sale in Australia, the market leader. All three of us bid on acquiring that business. Marcopolo was the successful player. Alexander Dennis then bought another player in Australia, a smaller business, and it really wasn't a success. They backed out of that market. What they did learn was how the market operates, the provincial dynamics or state dynamics in Australia, the local buy requirements, and so forth.
What this allows us to do is, this partnership with Nexport allows us to actually build body kits, and work with that local partner to do final assembly of our buses on a BYD chassis in Australia for the Australian market. It's not a new market to us in terms of understanding the market dynamics, but it's a re-entry into a market with a proven kind of strategy. The same thing we do, for example, in New Zealand, work with a local build partner to build it for the local market. It's not a home run, but it's another really solid, we think, interesting market for us to try and diversify from our current cost base and diversify and grow our revenue base.
Okay. Well, thanks for the color. That's it for me. Thank you. Thanks.
Thank you. Thanks, Nauman.
Next question comes from Kevin Chiang of CIBC. Your line's now open.
Thanks for taking my question. Paul and team, you talked about the bidding activity being elevated here, funding environment's good. I'd be interested to hear if you see any changes in how transit agencies are looking at, I guess, replacing their fleet or building back their fleet post-pandemic. Are you seeing considerations around how many people they want to put in a bus, how they're looking at capacity utilization and the type of buses they may want to order moving forward, maybe how you view that potential demand profile versus maybe what a transit agency would've typically ordered pre-pandemic?
Let me start off at kind of a simple statement, Kevin, and then give you a little bit of color. I don't think we're seeing anything different in how they think about the future of operating their fleet and the mix profile of the size of the vehicles. All of them have strategies for on-route service, their various route structures, their pace or cadence of buses every X per hour, and so forth. They all have their own current facility strategy. Some of them are fairly advanced on adapting their facilities for either larger vehicles or to adopt the charging strategies and so forth. When COVID started, we saw, clearly in some cities, the bus go to Sunday or holiday service, so the frequency changed dramatically. The route structures really didn't change.
As we saw them starting to come back, in some cases, we saw as many buses on the road, but limiting the number of people on the bus. Again, every city, every area was different depending on how many people were riding, how many first responders or how many essential workers had to get onto those vehicles. As they now start to get back into load factors starting to increase, ridership going up, the strategy is more around the evolution of the propulsion and their choice of either depot charging only or on-route charging, so less batteries, but charging more frequency. In some cases, really starting to seriously look at fuel cell electric vehicles that give them a range benefit.
I'm not so sure it's changing the quantum or the type of bus that they want to buy, other than the real focus on the propulsion system. What is changing, though, is the pace now of maybe their fleet renewal. Let's say since 2018 to now, not only the first part of 2018, 2019, even to 2020 was around what kind of zero-emission do I want? What's my strategy? From then on, here has now been kind of survival and adaptation. They're starting to get their heads around what they really think they want.
When you sit back and think if you and I were running a transit agency in the average city in the U.S., the comfort today that the federal government is dead serious about, A, public transit, B, about transit in every city available to allow congestion reduction, and C, a commitment to environmental responsibility and therefore zero emission, it's actually really encouraging. If we sat here with Chris and his team and went through the actual bids on the street, we've never had as many active bid opportunities than we have today. In many cases, the quantum of buses per bid is less because they're getting into that recovery phase, but the number of discrete opportunities is at record levels.
That's helpful. Maybe if I look at, and I appreciate, I think it's slide 13 here on your views on the market recovery. I found that to be very helpful. Maybe if I looked at it, your performance in the H1 of 2021, a transition year. You delivered just under 2,000 new buses. That's actually not too far from the total you would deliver in the first half of a, I guess, a pre-pandemic year, obviously with much higher earnings attached to that. I'd be interested to see how you think about the recovery in earnings with the recovery in volumes. Do you think by 2023, you're kind of back to pre-pandemic levels on your way to kind of that $400-plus million of EBITDA by 2025?
I'd be interested, I think as volumes recover, what are some of the marks we should be thinking about in terms of EBITDA as well?
It's a really good question. In fact, I'll take you to slide 15, Kevin, if you don't mind, just to give you a kind of our look at it. Previously, we have given this slide. This case, we actually went back and showed you 2019. 2019, we only had half of Alexander Dennis in our business. Basically, when you look from 2019- 2020, then you look at the start of the trajectory of recovery, we've basically lost two and a half to three years of our lives, if you will, in terms of getting back to pre-pandemic EBITDA performance. Some of it will have a mixed dynamic, some of it will have the full year benefit of ADL coming in, and some of it will have the reduction in our cost, and therefore, the improvement in our performance.
We kind of think, without giving the details of individual periods past 2021, we think that take our 2019 numbers and kind of insert them somewhere in 2023 and so forth, and you'll see us with a very strong trajectory of returning back to what we predict to be $400 million- $450 million by 2025. A reminder of what we talked about last quarter. We didn't just make up a number based on units. We went back to the volume of each of our markets pre-pandemic. We took cost out of our business. We added the conversion to zero-emission. We added a little bit of growth based on some of the strategies that Alexander Dennis had, and that got us to the $400 million- $450 million. We've kind of looked at that as a prudent, responsible, reasonable, conservative approach to where we can get to.
The tailwinds that we're seeing are really positive in terms of funding. It's not tomorrow. It doesn't allow for a bus to be bought tomorrow. The other dynamic that, all you got to do is read the paper today or click on the internet, there is not a supplier in the world or a manufacturer that doesn't have supply chain challenges. In addition to managing customer demand and build slots, schedules, and all this stuff, the supply chain dynamics are really causing our inability to really try and speed up. We're in a pretty good place today. We're relatively stable. We've got continued to change our master production schedule darn near every week. That's really why we articulated this year as a transition year. Nobody should expect our business to bounce back. We've given guidance for 2021.
As we get closer or past the new year, we'll give 2022 guidance. We think it's about a two and a half year downgrade, if you will, relative to where we were in 2019, but we're well on our path back.
Now, the one thing, and again, Paul, just to make sure, Kevin, I'm understanding you, I think you were looking at 2019, and you were not factoring a full year of ADL, correct?
Yeah, exactly. Even taking the 2020 pre-pandemic guidance that you had issued, I guess, in early 2020. Yeah, I guess the earnings framework is roughly the same.
Yeah.
Yeah. I think sorry, Kevin, pro forma 2019, we would've did about 6,100 units for a full year of ADL.
That's helpful. Maybe just last one for me here. I know you do operate in a pretty stringent local content requirement environment, but there's obviously a lot of headlines about the Biden administration's push to move the overall Buy America percentage to 75%, I believe it is, and I know you already operate in a 70% world, but are you hearing anything of an increase in your local content requirements in the U.S., and is there anything you think you'd have to do to hit that if that is coming down the pipeline?
Just a point of clarification, Kevin. There are two different things. Buy America is the provisions inside the FTA for the purchase of rolling stock. That's the world we live in, and it went from 60%- 65%- 70%, as you just summarized. Buy American is for construction contracts in the United States. That has nothing to do with the purchase of buses. We have heard nothing in any of our investigations or lobbying efforts to increase in our world past the 70%. That's the first issue. The second issue is the local procurement requirements. There is some lobbying by various organizations in the United States to try and get local content dynamics, and we have seen none of that yet make its way into, again, the purchasing of rolling stock.
We have in the past set up local completion centers or local service centers in, pick one, Ontario, California, or in Washington or a fabrication facility in New York to try and assist with local content. At this point, we don't expect to have to change our footprint to accommodate any of that as far as we can tell.
That's it for me. Thank you for taking my questions.
Thanks, Kevin. Kev.
Your next question comes from Cameron Doerksen of National Bank Financial. Your line is now open.
Thanks very much. Good morning.
Hey, Cam.
Just a question on supply chain. I think we're all familiar with what's going on the chip shortage and things like that. I guess maybe two questions here. One is, what gives you some confidence that we're going to start to see some normalization in that by the end of the year? I also wonder if you could talk a little bit about cost inflation. Anything specifically there that you're seeing that's affecting you on the cost side?
Great questions. Just put in context for all of our listeners, the product that we build is not a standard vehicle. Sure, there are certain parts that are the same on every vehicle, but every single one of them is customized, and we're buying quantum of parts to put on a vehicle based on a certain batch quantity of each customer. We're in daily communication with every single individual supplier based on each of those batches. We don't buy microprocessors or chips directly. We buy parts that have them embedded in, and so yes, we've had situations where we'll get force majeure letters or we'll get customer supplier notifications of delays and all these other things.
Our quantum of what we buy is nowhere near what automotive guys would buy and so forth. In terms of confidence for the rest of the year, we're working based on our suppliers' ability to supply to us. In that daily dialogue around, "Do you have 15 of those or 50 of these that we have on order? Are we going to get them?" This is part of the daily gymnastics that we go through of adjusting master production schedules to meet production output. In many cases, we'll make judgment calls about delaying the line entry of a certain order based on concerns about supply chain, and we'll make game time decisions about no line entry weeks to clean up WIP or to adjust production schedules, which is why you aren't seeing us dramatically recover volumes in 2021.
In terms of commodity price increases, most of what we're building today was priced and cost a year ago or a year and a half ago. Yes, there are some commodities that we buy, steel, for example. I think it's $15,000 a bus is raw steel. We see shorter-term cost increases. Almost all of our contracts, or the vast majority of them, at least on the New Flyer side, have purchase price index elements to those contracts so that go forward builds, we're able to adjust the price based on the cost inflation. There's some risk in those numbers. There's also some opportunity in the numbers where we can kind of beat the inflation number.
Given the size of our quantities, our batches, individual builds, our escalation of cost is managed at the micro level, contract by contract, to try and understand the impact on our business. We think there's no question there's inflation on pretty well everything that we're buying. We think we can manage, for the most part, that inflation inside our sale price adjustments as we go forward. Of course, everything we're bidding today reflects the current cost and the current price from our supplier in those proposals. It's not like it's a massive issue for us, but it is, no question, something we spend an inordinate amount of time trying to manage so that we can maintain our margins.
Okay. No, that's very helpful. I guess second question from me is just on the aftermarket. You've had a few quarters in a row here where your revenue's been very strong, margin's strong. You sort of mentioned some retrofit activity in Asia and other things. I'm just wondering the sort of the sustainability of the current revenue run rate and margin run rate in the aftermarket. Is this kind of a new baseline for you?
It's a really good question, Cam. I'm not trying to be elusive on this one, it's kind of hard to tell. In Asia, there is no question, we have a big contract in Hong Kong and some others where there's a retrofit that's almost like what we would see historically in North America, where we'd have a refurb type program. It's a quantity of vehicles where we're managing with the customer a complete retrofit. I'm not sure that side of the Asia market is sustainable, it's been a really good contributor through this period of COVID. In North America, private motor coach and public transit, I think what we're starting to see is as any of those operators have idled their fleets through COVID, as they're starting to get back moving, there's kind of catch-up mode to some extent in terms of getting their vehicles ready.
Some of it replacement parts, some of it's, let's call it tune-up parts or whatever, to get the vehicles back into daily operating service. Whether it's sustainable or not, it's tied a little bit to the pace at which they recover or replace their fleets, which as we just said, isn't an overnight issue. It's a two or three-year trend. As far as we can tell for the next couple of quarters, we've got fairly positive outlook on the aftermarket volume and margin in North America, and in the U.K. for that matter, as the vehicles get back on the road.
Okay. No, that makes sense. Appreciate the time.
Thanks, Cam.
Next question comes from Chris Murray of ATB Capital Markets. Your line is now open.
Yeah, thanks guys. Good morning.
Hey, Chris.
Just not to beat this one to death, but just thinking about the supply chain issues, and I guess a couple pieces of this, and maybe even looking out into the rest of the year. I guess I'm trying to understand what kind of risk we should be thinking about you guys actually hitting your guidance numbers, and the type of confidence you have about making the deliveries you've got. We've had some issues before where getting to Q4 and stuff has to push out of the year just for some timing issues. The second piece of this is really how much of this is about external supply versus internal issues, say with the Kentucky Manufacturing Group?
Any sort of color you can give us on your confidence level of that these are actually going to be transitory and we shouldn't be too worried about you guys hitting your numbers?
Really good questions, Chris. Let's take them in reverse. KMG, we dropped the ball in late 2018 and into 2019, which caused us a bunch of problems. We told everybody about us rethinking how to manage the facility. We changed the leadership team. We added a bunch of resources to get caught up. KMG has been profitable now, even with reduced volume, for about a year and a half. KMG is not our problem anymore. They've been a really solid internal supplier, and quite honestly, as you've seen from our NFI Forward documentation, we continue to in-source more strategic parts into that building or that facility. We're not worried about KMG. The external supply is real, and it's every day, and it changes every day, and every product and every individual order has different implications.
We're doing our best to manage that. Again, as I said a minute ago, if you sat every week in Chris Stoddart's production team meeting, they're making calls about the current cadence of what's on the line, but also the pace at which they'll deploy or line enter new product based on their gut feel of how good the supply chain's going to be. There is also some areas where a customer has told us to hold slots for them. They haven't been able to get all the paperwork and the contract in place. We're adjusting what we're line entering based on customer demand dynamics as well. Our external confidence in our supply chain, David White and his team will tell you it's absolute hell today, but it's not that we're not managing our way through it.
There are no question problems, and in some cases, we're spending crazy amounts of money to air freight a part in to meet the production line, and that's part of some of the cost pressure. We're building things online, and we'll make a conscious decision not to install a widget in cell two, but we'll do it in cell four, which has retrofit dynamics or inefficiency dynamics or expedite dynamics and so forth.
Now would you say, Paul, from a guidance perspective, and I think what we would say right now, just based on some of the discussions we have in our monthly meetings, is we have confidence in the $220-$240 today.
Well, this is what the other-
Yeah, exactly. It's a very dynamic situation.
Chris, the fourth quarter is no question our strongest quarter expected this year. We don't have this year the real dynamic where we traditionally sell a whole bunch of MCI motor coaches in December for U.S. customers to accept vehicles to take advantage of accelerated tax. It's largely a transit bus delivery dynamic as well as an Alexander Dennis dynamic. We just reaffirmed our confidence of the 220- 240, knowing that fourth quarter's going to be our strongest quarter of the year. At this point, we're feeling we can continue to deliver. The other dynamic, which is a little bit odd in this situation, if we under-deliver on certain volumes, we get an opportunity to potentially get a little bit more wage subsidy that helps us retain some of these skills. It's a bit of a circular discussion.
As of today, we stand behind our $220-$240 for this year.
Okay. No, that's helpful. Then, I think maybe just even to follow on a little bit on Cam's question about the aftermarket. Look, guys, margins, that's the first time I've seen a percentage margin with a two in front of it in a few years. Part of that was also about the integration of all the different platforms. I'm just trying to understand, kind of like, yeah, you've got some timing things in there. How much of that is, call it the NFI Forward plan or just kind of cleaning up and integrating on a common platform that you think is in that margin that might be longer term structural?
Well, there's no question. As I said to Cam, there's definitely some campaign stuff, and if it's not in Hong Kong, Brian Dewsnup or Chris will find a customer in North America that's working on a retrofit campaign of, I don't know, driver barriers or upgrading certain things in the vehicles. Your point on NFI Forward, it wasn't just about manufacturing facility rationalization or optimization. We made a conscious decision to reduce the number of stocking locations, and I think it's gone from 22- 9 or 10 in North America. In addition, we took Alexander Dennis' North American parts business and ARBOC part business and put into NFI Parts. What Brian Dewsnup's been able to do is to kind of reduce and strengthen the quality of his distribution machine and put more parts through that.
The recovery of the markets has definitely helped the drop through, Chris, overhead as a percentage of sales is a couple of points down than what it was a few years ago, which reflects exactly that. Let's get really efficient at distributing aftermarket parts. We've been talking about this for a long time, more than any of other competitors, what Brian Dewsnup's team has done at NFI Parts is trying to actually change or expand the way we sell parts. There's no question we get a phone call, "Yeah, windshield wipers.
Sure, we'll sell them to you today. The ability to put programs in place with customers, min-max levels at consigned inventories, vendor managed inventory programs, or even now we're flirting with some of these parts per mile type contracts on scheduled maintenance parts, are really starting to help the performance of the business because it's now about planning parts delivery as opposed to guessing and quoting and hoping we're winning. I think some of that stuff is, no question, sustainable in that business. The movement to zero emission on parts is going to have a long-term effect because you'll have less parts being replaced. That isn't today. That's years to come, and we're planning for that as we speak.
Okay. That's my questions for today. Thanks, guys.
Thanks, Chris.
Your next question comes from Maggie MacDougall of Stifel. Your line is now open.
Morning.
Hi, Maggie.
Morning.
Following up on the conversation around outlook guidance, et cetera, but leaving most of the commentary as is, I am just curious how we should be thinking about work in progress and inventory cadence for the balance of the year. You have got some initiatives to reduce some working capital days, and you have also got, I guess I would call it a bit of an unpredictable or a lumpy supply chain. So, should we be thinking about the potential for increased work in progress for Q3 falling in Q4 as you enter into that strong quarter, or is it just kind of following historical patterns?
Yeah. Maybe I'll just start out, and then I'm sure Paul and Stephen can jump in. Maybe I'll just talk a little bit about cash flow and then jump into the working capital as well. At a very high level, if we start thinking about Maggie, if we start thinking about what we expect to spend on capital this year, we're kind of still looking at that $50 million range, the guidance that we provided. There's two things here from the inventory side that I'll kind of mention here. Number one is, our goal at the end of the day is to get back to the normal working capital days, which should be in the low 50s over time. I think we're kind of in that 60 range right now, so we're kind of dealing with some of that.
There is a couple of things here. Inventory levels for us, we do expect those to be heightened on the private coach and some of the supply chain issues from our perspective. I guess some of these supply chain issues will kind of give us a little bit of a raise, but we're still trying to get into that sub 60, obviously, before the year-end is up. We kind of think about that from a 13-point working capital average, which, as you know, that's the internal metric we use, which is a very difficult metric to achieve from a target perspective.
Maggie, we've made really good progress on reducing some of the working capital. When we started the year, as everybody knows, we were worried about the finished goods sitting in our motor coach pool. The private sales team in North America, as well as the Alexander Dennis sales team in the U.K., have been able to actually really move some of those finished private motor coaches. That's been a positive contributor. It's not like we warehouse spare parts to build buses. We build by parts to put onto a specific bus. It's not really around the parts issue, it's more around the pace and cadence of delivery of product through the factory. Given some of the supply chain dynamics, we have seen definitely noise at our ability to finish and deliver a vehicle.
We kind of think we're in the worst of it right now, and as we head through the end of this year and into the first quarter and H1 of next year, that we'll see even better performance on our working capital side.
Yeah, the only thing I think I'd add there is probably on the back half of this year, probably a bit of a working capital investment. I don't know if it's something in the $20 million-$30 million for the back half of 2021, because of all the factors the guys talked about, if it's inventory levels, more sales of zero emission buses, some of the supply chain challenges. Overall for the year, I think it's a positive working capital benefit, but a little bit of an investment in the back half of 2021.
Great, thanks. Just in terms of how we should monitor the situation, given we don't have the level of detail that you guys have, should we be thinking about the clearing up of the chip shortage and the chassis shortage as being kind of major markers for an indicator around your supply chain issues abating? Is it a bit too nuanced to be able to look at a couple of larger parts markets and determine how things are going?
Well, it's a great question, and I wish we had the fidelity to understand how the chip shortages affect the sub-suppliers and then our suppliers and then us, and so we're not really deep inside that world. We know when we phone a supplier whether they can deliver to schedule and to the quantity that we need. There is no question that that global dynamic has, as it gets healthier, there's no question it will help us. The second issue is the whole freight and logistics dynamics, the whole Suez Canal dynamic, the pushing back of the global movement of freight and so forth. Parts, not that we buy a lot offshore, but parts being stuck in containers and different things has had an issue on our business. As that kind of clears itself as a macro indicator, there's no question that will only help our individual business.
I don't know if that helps you. The chassis shortage is directly a result in two issues. One, in North America, ARBOC buys chassis, and in some cases, the chassis are basically given to us by our dealer, who then we build a body on it and sell it back to them. In that, it's directly a chip supply issue to the Ford and the GM and so forth that supply those chassis. The other dynamic is Alexander Dennis in the U.K. bodies BYD chassis. The ability for BYD to build a chassis, batteries, frame structure, microprocessors where they're required, and then ship that from China to the U.K. or from Europe to U.K. are some of the challenges associated with that supply.
There's no question we hope that and expect to see that start to clear up throughout the rest of the year and into next year, which then it goes back to the market demand increasing on our business and the reliability and stability of our own supply chain. Which is why we continue to say 2021 is a kind of a transition for us. Had we not had the supply chain dynamics, we'd be probably in a different place in terms of being far more sure or confident of the ramp-up of our business. As I said before, we still have issues where the pandemic had a massive impact on a transit agency.
The ability to plan their fleet replacement, the ability to make sure that they have funding, the uncertainty and yet positive news of the federal government funding are all tailwinds that will help us. If you walked into the middle of a transit agency today, there are still lots of pressures and dynamics around deployment, recovery of their fleets, strategy around deployment of zero emission charging things and so forth. A little bit of helter skelter to some extent.
Thanks a lot. I really appreciate your responses. Just one final thing from me. I noticed that your infrastructure solutions division is starting to sort of pick up some steam. Recognize it's pretty small, but I'm really curious how that offering plays into your conversations around the ZEV transition as you discuss planning with these transit agencies around replacement of fleet, et cetera. If you've noticed any patterns standing out whereby that has actually given you a bit of an advantage versus maybe some of your competitors in that market.
I think it's an important observation because the first number of deployments a couple of years ago, we were very frustrated trying to build a bus, delivering the bus to a customer, and then the infrastructure side of it or the charging side of it not being ready or appropriate or easily to operate. We got into that business, maybe half good luck and half the foresight of trying to think about how to provide more of a solution than just a vehicle. It has grown year-over-year and continues to grow. We're currently, I think in one of our slides, we had a stat in there about 44 individual initiatives that we're bidding on, where we're selling a vehicle and trying to tag the infrastructure side of it with it.
I think Chris often will give me a stat that says for every 10 buses or 10 bus contracts, maybe six times or so, we'll actually sell the infrastructure associated with it. That's an important part of our business, not only from a customer sat and a customer confidence in deployment perspective, but also it's now, to some extent, a profit opportunity for us. The growth of the business is something where we're spending a lot more time on. All you got to do is check the news or go on the Internet, and everybody's talking about mobility as a service or charging as a service and where's the energy going to come from, and whether they'll bundle the buses with and so forth.
That's an area we're spending a lot of time on trying to understand where we migrate from just a vehicle provider to a solution provider, and how deep do we get into that. It's been a really good business. I have to tell you as well, putting the chargers in and then providing the customer support on terms of troubleshooting their fleet, but also the chargers, has allowed us to learn an awful lot about how to make more reliable, more robust buses going forward. It's going to be an area that we're going to continue to focus. Every one of our competitors talks about it, but I think we've got a real leg up where we've actually had many situations of deployment and lots of lessons learned, whether it's depot-level charging or en route charging.
Thanks again. Have a great morning, guys.
Thanks, Maggie.
Thanks, Maggie.
Next question comes from Mark Neville of Scotiabank. Your line is now open.
Hey, good morning, guys.
Mark.
Morning. Maybe just to follow up on supply chain issues. I guess, considering the follow-up on Maggie MacDougall's question, just thinking about the cadence of recovery, you had mentioned, again, maybe you're ordering in much smaller batches than some of the auto OEs. In your opinion, is that a good or a bad thing? I'm just trying to think, do you sort of lead or lag the recovery we might see in auto? Again, just trying to figure out how to handicap the cadence of the recovery.
Yeah, it's a really good question that I wish I had the answer for you. Some days we think, "Hey, we only need 50 of these widgets, surely they can find a way to get 50 and get us our parts." We hear about fields of 150,000 F-150 somewhere waiting for a certain number of parts or components to build the bus or to build the truck or finish the truck and deliver it. I'm not sure we really know the answer to that. In many situations, as you know, Mark, we don't get to choose our supplier. Many of them are spec'd by our customers, we're kind of at the will, if you will, of our supplier's ability to source that stuff.
I think in net the smaller quantities that we need are probably allowing us to be a little bit more flexible in getting things here or there. The chip shortage is one of it. We can't underestimate there are also a number of suppliers. We had one supplier, and I think it was, I can't remember, doors or windows or some darn thing, where they had a COVID breakout. The place was shut down for two weeks. Wait a minute. We're waiting for windows or doors to build a bus. What are we going to do? That stuff is still real, and who knows if we'll have a real fourth wave of COVID. In some of the parts of the U.S., for example, we've seen suppliers have real challenges to get us the parts, and it has nothing to do with microprocessors or chips.
It's a really uncertain time right now, both the combination of COVID and the supply chain dynamics and the chip supply. I think net our smaller batch quantities gives us that ability to be a little bit more nimble. Quite honestly, Chris is really trying to be prudent about what he puts online based on what he knows is scheduled or is coming in in the confidence of the supply chain. You'll remember in 2019, our WIP ballooned because KMG couldn't deliver parts, and we kept hoping and managing and trying to get those parts, and we built up disproportionate WIP. Chris is not doing that right now. We're adjusting the input based on what we have known or have high confidence in the supply chain.
I'd rather take a little bit short-term pain or short-term muted revenue to make sure that we don't balloon our WIP or we don't spend disproportionate cost trying to resolve those problems until that whole thing kind of works its way over the next year or two.
Okay.
I think one of the things, Paul, and you'd probably add real quick, just Mark, is we are taking a lot of, trying to help with the supply chain issues and kind of balancing that out. There's a lot of inventory coming out in that latter half of the year, especially on the MCI side of things. I think we'll probably see a little bit of balancing out of that with that and with ADL. To kind of help us there.
Sure. When I'm thinking about the 2021 guide, how much of that, I guess, at this point would be pre-sold and where the real risk is, again, maybe you come at the low end or don't hit the number for the year, but it's really just an issue where it gets pushed into 2022. If that's the case, are there any penalties for late deliveries with the transit authorities or the other customers? Are they working with you through these supply chain issues as well?
95% of what we need to build in the back half of the year is effectively contracted work. There's a few slots we still have that we've either got to secure it for this year or push it out into next year. We have had, and we manage individual contract signings and timings and so forth. Our issue for the back half of the year is more around the timing of what we put online and the confidence in the supply chain as opposed to lost work to somebody else. If Chris delays the deployment of a certain product online in 2021, it's because he doesn't have confidence that he'd get the paperwork in time from the customer or that he can get the supply chain to do it efficiently. It's not really lost work this far into the year.
I think from your point also, I think penalty wise, that's immaterial.
Yeah, every contract has some element of liquidated damages. In many cases, the vast majority of the cases, we're able to manage that with a customer by promptly advising and working on delivery windows and schedules, and in some cases, a few concessions here or there. We do have LDs, liquidated damages, at times, but it's not a material number in any way, shape, or form.
Great. If I could ask just one more question, I guess longer term. Paul, you mentioned that as you transition at the ZEVs, the aftermarket opportunity maybe becomes smaller. As your infrastructure solution business grows and your installed fleet of charging and all that grows, does that become a potential offset or is that an aftermarket opportunity down the road as well? Thanks for the time, guys.
That's a super insight, and I think that comes directly from what we talked at our investor day part of this year. There's revenue streams that we're starting to get or starting to look at that we never had historically. In the NFI Parts business, not just the transactional sales, but all the things Brian Dewsnup and team have done in terms of vendor managed inventories and now potentially parts per mile contracts and those kind of things are going to give us revenue streams that will displace some of that transactional parts nature. The infrastructure solutions, again, is a revenue stream we never had before that now allows us, not only the sourcing of it, potentially to do some servicing or monitoring or managing of it.
In fact, most of Chris Stoddart's field service team today are actually not just helping with the deployment of the infrastructure, but actually troubleshooting and servicing on behalf of the customer. Our trick is going to be to figure out how to convert that from a customer support dynamic into a go-forward revenue stream. That's exactly what we're trying to do, which is why when people say to us, "Your parts business is going to go," and we say, "Well, to some extent, that's true over time." There's less moving parts in a zero emission vehicle. I will caution to say the vast majority of the propulsion parts today, we don't sell. Allison Transmission has their own distribution network. Cummins has their own distribution network. We don't sell a lot of that stuff. We sell some. We're going to lose a little bit there.
We're going to lose a little bit of brake revenue, for example, because the really efficient use of a zero-emission vehicle, you don't use the brakes as much. There are other revenue streams that we've got today and that we're pursuing that we think can supplant that for the longer term outlook.
Thanks, Paul Soubry, guys.
Thanks, Mark.
Next question comes from Jonathan Lamers of BMO Capital Markets.
Good morning.
Hey, Jonathan.
I noticed the finished goods inventory on the balance sheet was down at the end of Q2 from Q1. Has there been any change in the private coaches inventory? How confident are you that the private markets will start improving toward that 50% of pre-COVID levels by Q4?
Great observation, Jonathan. You'll remember at the beginning of the year, one of our biggest concerns as we finished through last year is we idled the production line of both the private motor coach in North America and the private motor coach in the U.K. through the Plaxton brand. Our concern was we would have too many finished goods of new buses or new coaches and used coaches. The sale of the entire pool of the used coaches has proved to be extremely important and very strategic because today we're starting to see a little uptake in the purchasing in the U.S. of motor coaches, I'll admit earlier than we thought they would be.
Chris and team has done a really good job of burning down some of that excess finished goods, as has the team in the U.K., to the point where we're actually now really trying to put on the calendar when we'll restart our production lines for commercial coaches in North America. We're looking at the end of the year as probably the point where we'll be able to do that. At any one point in time, we'll probably have ±50 new private motor coaches on the shelf, and it'll depend on the timing of the year when we sell them. Chris is actually projecting now to have that. He's got that down quite materially from what we had originally. By the end of the year, we may be down to as little as 25 new motor coaches on the shelf.
That's exactly what's burning down the finished goods inventory.
Thanks. There's been quite a few questions on the revenue guidance. I'd just like to follow up to make sure I'm not missing anything. If Q3 is lower than last year, to achieve the low end of the range, my math suggests Q4 revenue would have to be well above 2019 Q4, even after adjusting for the 14th week that we'll have this year. Does that make sense if J-Coach production is still down?
Well, we're still selling finished goods, so that will contribute even though the production is down. There's a volume dynamic and there's a mix dynamic. As you know, every time we sell a zero emission vehicle, whether it's battery or fuel cell electric, it has one and a half times the revenue of a conventional vehicle.
I think, Jonathan, the only thing I'd add there, when we're talking about being down year-over-year, we're mostly looking at the EBITDA margin. On the revenue side, it may be up year-over-year on the top line.
Yeah. I think we're going to be getting a lot more ADL as well. I think there's some dynamics there that we've got to push, especially for the end of the year, which obviously is a little bit of that dynamic with the supply chain and right now we feel confident we'll get it, but obviously we're monitoring that daily.
Okay, last question from me. I thought the latest news from the U.S. federal government over the weekend was fairly encouraging with respect to the long-term outlook for funding. At least based on what's on paper today, the $100 billion plus that's listed in slide 12 of your presentation, do you believe that that would provide for transit volumes to recover to the 6,000 unit range, and for the higher prices of zero emission buses?
Yeah, I think we totally think so. I think one of the best things about the government funding that's coming through is it's multi-year funding. Similar to the FAST Act five-year funding program, which gives a lot of confidence to the transit agencies about their outlook of what's coming and what they can procure and that the funding's going to be available. I think from what we saw in both the Bipartisan Infrastructure Act and in the INVEST in America Act, the one that's in the House and then the one that's in the Senate, they're both over five times more funding for zero emission buses and additional funding for more loan or grants and additional funding for more infrastructure.
Across the board, there's definitely been a lot more focus from government on the higher cost of a zero emission bus versus a traditional propulsion bus. That's in the U.S., U.K., and Canada too, where we've seen some major announcements from the Canada Infrastructure Bank, CAD 400 million in Ottawa, CAD 450 million in Brampton. Again, all reflecting that they fully expect they are going to have to pay more for a zero emission bus versus a traditional propulsion bus. I think our view is, yeah, definitely that the funding as proposed would support getting the market back to those pre-pandemic levels.
Thanks for your comments.
Thanks, Jonathan.
As a reminder, to ask a question, you will need to press star one on your telephone keypad.
Okay. Henry, are there any other questions?
No further questions on the phone. Please continue, sir.
Okay. Well, I think we'll wrap it up. Thanks everyone for joining us today. Thanks to Pipasu and Paul as well, and thanks to all the analysts for your questions. Just wanted to let our listeners know that we are launching a new website with a new investor section, should be done within the next couple of weeks in August. Thank everyone for your time today. All the information discussed today can be found on the investor section of our website. We will now terminate the call. Have a great day.
This concludes today's conference call. Thank you for participating. You may now disconnect.