NFI Group Inc

TSX:NFI

Earnings Call Transcript 2020-Q2

[Operator]

Thank you for standing by, and welcome to the NFI Group's Second Quarter 2020 Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Stephen King. Thank you, please go ahead.

[Stephen King]

Thank you, Chris. Good morning everyone and welcome to our conference call. This is Stephen King, NFI Group Director, Treasury Corporate Development and Investor Relations speaking. Joining me today are Paul Soubry, President and Chief Executive Officer; and Pipasu Soni, Executive Vice President, Finance and Chief Financial Officer. For your information, this call is being recorded and a replay will be made available shortly. On this morning's call, we'll be walking through the financial results presentation that can be found in the Investors section of our website under Events and Presentations.We will call out the slide number referred to as we walk through the presentation. Starting with Slide 2, I will remind all participants and others that certain information provided on today's call may be forward-looking and based on assumptions and anticipated results that are subject to uncertainties. Should one or more of these uncertainties materialize or should the underlying assumptions prove incorrect, actual results may vary significantly from those expected. You're advised to review the risk factors found in NFI's press releases and other public filings on SEDAR for more details.During today's call, we will be discussing second quarter 2020 results with a specific focus on the COVID-19 pandemics impact on operations and results. In addition to the results presentation, we encourage all participants to review the consolidated financial statements and the associated management discussion and analysis and press release that are all posted to our website and on SEDAR. 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 today's call, Paul will start with a recap of the quarter, Pipasu will take us through the financial results with specific focus on the impact of COVID-19 and we'll then discuss our transformation initiative, the launch of NFI Forward. Finally, Paul will provide some market insights and discuss NFI's outlook.Following that, we'll open the call to analyst questions. I'll now pass it over to Paul.

[Paul Soubry, President, CEO & Non]

Thank you, Stephen, and good morning ladies and gentlemen. The second quarter of 2020 is a period that none of us will likely ever forget. The COVID-19 pandemic dramatically impacted everyone around the world and this is an especially true within the bus and motor coach industry.On Slide 3 of our deck, we recap the quarter. As you'll hear throughout today's call, our second quarter 2020 financial results saw a significant decline from 2019, as a direct result of COVID impact on our customers and on our operations. This included a greater than 50% drop in revenue and a decrease in margins as we maintained our fixed cost base on a lower revenue base. We also incurred one-time COVID-19 related costs of $12.1 million. We started the second quarter by executing on a plan to work cooperatively with our suppliers and our team in response to the initial insights into the possible impacts of the pandemic. But as governments implemented more dramatic and definitive restrictions on travel, border closures and self-isolation mandates, our top priority focused on the health and safety of our people, and of our customers and their customers.We began idling nearly all of our facilities in late March and they remained idle until late May and June. We essentially lost two months of full production. We also implemented a company-wide return-to-work protocol to be ready to educate and ensure the safety of our team when they did return, and we invested significantly in additional plans in office cleaning, sanitization and protection processes and the implementation of 100% masks or face-covering policy across the company.Just to provide a little context, from April to now, we've engaged employees and leadership and our customers who have come on-site of 12,444 hours of specific COVID-19 education and training. With the facilities idled and the pandemic continuing to spread, we moved across quickly to address our costs and preserve cash flow where possible. While a significant portion of our costs are variable and linked to the production, we focused on reducing fixed overheads and admin cost where we could.We were able to remove approximately $10 million in costs from personnel reductions at MCI, Carfair and NFI Parts. We also moved quickly to strengthen our balance sheet by obtaining covenant relief on our senior credit facilities and entered a new sidecar or insurance credit facility to help ensure sufficient financial resources to weather the COVID-19 pandemic. While we were able to remove certain cost immediately, the size and international scope of our business combined with multiple products and facilities, service centers and aftermarket distribution centers required a thoughtful approach. We wanted to ensure short-term decisions would not impact our longer-term health, capacity, capability, or our delivery, ability to deliver for customers and to be able to win new awards.The focus on removing the right costs were now accelerating NFI Forward, a company-wide transformative initiative to make us a simpler, leaner business with fewer business units and a reduced footprint. NFI Forward was originally developed as part of our strategic plan presented to NFI Board in early March, which is pre-COVID. Later in this call, Pipasu will discuss NFI Forward in more detail, including the projected financial savings, where they will be recorded in our financial statements and the anticipated investment required to make this happen.As we've now restarted our facilities and focused on managing recovery from COVID-19 impact, we do so with the improved visibility on orders, deliveries and sales for the remainder of 2020. We are reintroducing adjusted EBITDA guidance with an expectation that we will deliver between 145 and $155 million adjusted EBITDA for fiscal 2020, which would represent a $113 million to $123 million of adjusted EBITDA during the second half of this year, a strong improvement from the significant lows we experienced during the second quarter.Now turning to Slide 4, I'll comment briefly on the impact COVID-19 has had on our end markets. I won't go through each slide in detail, but we will highlight a few key points. First, within the manufacturing segment of our business, North American markets have seen mixed results. In public transit, which includes public buses and motor coaches, we see limited cancellations. But there have been deferrals of new vehicle builds and some delays in option conversions, and new orders being awarded.Private operators, especially motor coach operators who primarily served tourism, travel, executive shuttle and linehaul operations, have been significantly impacted by the pandemic and currently over 90% of their fleets have been idled.We expect these markets to remain challenged for some time, as the recovery restarts and recovers. The low-floor cutaway and medium-duty shuttle market has actually remained healthy. While production was disrupted for two months, we continue to see strong demand in that space with the interest in ARBOC's low-floor cutaway buses and medium-duty Equess bus. The electrification of Equess previously announced with the support of the New Flyer product development team is going very well and is ready for testing later this year.In the UK, where private operators provide public transit routes, the majority of our customers have delayed their planned 2020 buying activity, as they've seen massive drop in [ Fair Box ] revenues. When 2020 started, the UK was expected to be a very busy market for ADL, following several years of under-investment. The need for vehicle replacement in the UK has not gone away, but COVID-19 has definitely deferred orders. The speed of UK market recovery in new orders will likely be contingent on government support and ridership improvement, which has actually started to happen. Within our aftermarket segment, both NFI Parts and ADL Parts remained open through the quarter and with a focus on servicing and supporting our customers that we're operating. The same decline in activity that we've seen in private coach has also impacted the private aftermarket business.NFI quickly pivoted to launch a line of clean and protect products, including barriers, filters, UV lights and other air sanitization treatment methods, that has been very well received focusing on the safety of both bus operators and their riders. And later in this call in the outlook section, I'll walk you through the expectations of market recovery from COVID-19.Turning to Slide 5, it shows our deliveries in the quarter and the backlog at quarter end. Deliveries in Q2 were down across all product lines and the idling of production facilities and other associated impacts of COVID-19 saw deliveries dropped to 630 EUs, the largest decline being in the private motorcoach segments of MCI and ADL.NFI's backlog continues to be a positive strength and one that we are leveraging as we work through COVID-19. Backlog shows some decline, but that was expected as we had a record fourth quarter 2019 deliveries and there has been a delay in new orders of the first half of 2020. Our backlog remains heavily weighted towards transit operators and public coach in North America, where government agencies largely have multi-year contracts.I'll now ask Pipasu to walk you through the detailed financial results starting on Slide 6.

[Pipasu H. Soni, Chief Financial Officer]

Thank you, Paul and good morning everyone. Turning to Slide 6, as Paul mentioned, every one of our financial metrics were impacted by the pandemic. The year-over-year impacts in Q2 2020 are a result of our focus on employee safety, and remaining idle for two out of the three months of the quarter. This led to a decline in sales that resulted in a year-over-year drop in adjusted EBITDA from a positive $81 million to a negative $24 million. This also dropped our free cash flow from positive $41 million to negative $43 million. With only one month of operations, we not only lost sales margin but also had unfavorable fixed cost overhead absorption, as we expensed overheads.As Paul mentioned, when the pandemic first started to impact markets, we focused on liquidity and balance sheet strength, greatly improved both through a combination of cash management, as well as increasing our access to credit facilities, ending the quarter with over $430 million in total liquidity.Based on our current financial position plus anticipated future cash flow generation, we continue to believe that we can maintain our current dividend policy and do not expect to use that incremental sidecar credit facility. On Slide 7, we show that during the second quarter, we had a loss per share of $1.8. This loss came from the combination of lower volumes and lower margins, plus the impact of one-time COVID-19 related cost, including a $10.4 million lower cost of market or net realizable value adjustments on pre-owned coaches held within MCI and ADL.After we adjust for these items, plus restructuring cost and some smaller one-time items, our adjusted net loss is $0.97 per share. Turning to Slide 8, I'd like to walk you through the NFI Forward initiative. This is an initiative that will transform NFI Group, one of the world's leading independent global bus manufacturers, into an integrated operating company. As you know, we've had a number of acquisitions that to-date have largely run as independent businesses. All of these businesses have been one of the leading players in the markets they serve. During my first six months, I've come to realize that our market position is a result of heavy lift by the leadership team to position NFI Group for the future.For example, we offer our customers the industry's widest choice in propulsion, zero-emission battery or fuel cell electric, electric trolley, hybrid electric, natural gas or clean diesel. We fully package and integrate batteries with an integrated battery management system and we have optimized weight vehicle performance at range. We also feel that we are the best telematics systems with Connect 360 that offers over-the-air software updates. We're the only OEM in North America who is truly going to put level 4 autonomous buses in service on a BRT route. We've already made the facility and personnel investments, such that most of our legacy plans have the capability of building electric buses or fuel cells. The majority of our field technicians have now been trained on ZEB technology, so we have the largest North America mobile field service network. Most major cities where we sell our electric buses are on trial or in service.Our infrastructure solutions team has built credibility and business volume at a very fast rate. These are just some of the few advantages the NFI Group has today. As Paul and the leadership team and I think of the possibilities they enhance our competitiveness, at increased shareholder return, we're focusing on areas that have it mid-fully optimized. These focus around fully leveraging our scale, optimizing our cost, at further cross-sharing our technology and expertise. That's the power of the NFI Forward initiative.We have world-class offerings and with the efficiency gains possible integrating the business, which would be at 8% to 10% reduction in overheads at SG&A, we could generate significant returns through volume leverage for our shareholders, and get to a consistent double-digit EBITDA margin.We originally raised this topic during our Q4 results call and at our Annual General Meeting, as it was a critical piece of our pre-COVID-19 strategic plan. We are now accelerating these initiatives to drive NFI Forward, while navigating through the fallout of COVID-19. NFI Forward will deliver a simpler organizational structure which we outlined on Slide 9. We will continue to have two segments, manufacturing and aftermarket, with two business units below those segments, North America and International. We are excited to have Ian Smart, Former President of MCI, and previous EVP of NFI Parts to lead our business transformation teams to design, implement, and execute all NFI Forward projects.Prior to joining NFI, Ian managed the standard Aero business transformation team as part of the significant and successful privatization of Kelly Air Force Base, a major US logistics center located in San Antonio. To achieve these goals of NFI Forward, we have launched multiple sub-projects that include a back office administrative function of HR, legal finance and accounting, with a shared services model to efficiently support our business units, creating a combined MCI and New Flyer business unit focused on servicing public, bus and coach customers and private coach operators. For 3A, what North American aftermarket business that combines NFI Parts which services New Flyer NABI, Orion, ARBOC buses and MCI motor coaches with ADL's Parts business.For 3B, following the combination, we will rationalize the number of Parts' distribution centers to lower lease at overhead cost and capture freight savings. For four, we're creating a global integrated supply chain that further leverages our scale and buying power. And then number five, in the UK we have accelerated and extended a program to review ADL's overheaded SG&A costs by evaluating, optimizing and decreasing facility footprint. And then number six, finally, NFI Forward will launch a dedicated team to assess our overall North American footprint to find opportunities to reduce both fabrication at production facilities.Turning to Slide 10, we outlined the financial impact of NFI Forward. The program is a combination of numerous initiatives that will drive $65 million to annual EBITDA savings, plus an additional $10 million in annualized free cash flow savings.Over 2021 and 2022, we'll see the improvement start to take shape and achieve full-year run rate in fiscal 2023. The savings will flow through the following categories on our income statement, $20 million in adjusted EBITDA in business unit SG&A, with savings driven by organizational changes at efficiencies at the business unit level. These primarily come from the combination of MCI New flyer and the creation of one consolidated North American aftermarket business. $5 million of adjusted EBITDA savings in centralized functional transformation activities included in SG&A.These include fully deployed our shared service model. $20 million in adjusted EBITDA in manufacturing overhead reduction for facility at parts distribution center closures. This is a component of our cost of sales, and then $20 million in adjusted EBITDA in production material cost savings, as we integrate our Strategic Sourcing initiatives to leverage our global scale and size.In aggregate, NFI Forward is expected to deliver a 8% to 10% reduction to both manufacturing overhead at SG&A, based on our 2019 run rates. The other $10 million in cash flow savings is driven by a decrease in cash leases, as we reduce our total facility footprint and benefits of our central treasury team to lower interest and making cost.In addition to these items, we continue to explore other cash generation options including a significant focus on working capital. We want to increase working capital efficiency in turn, including improvements to our days payables outstanding and inventory turns. In order to generate the significant cost savings, we estimate that NFI will incur one-time restructuring and facility closing costs ranging from $15 million to $20 million during fiscal 2020 to fiscal 2022. The majority of these costs will be incurred in 2021.We will continue to provide regular updates on NFI Forward and its progress through our quarterly MD&A and other presentations. I'll now turn the call over to Paul to discuss our outlook.

[Paul Soubry, President, CEO & Non]

Thanks, Pipasu. Circling back to my earlier discussion on markets, as we talked through our outlook for 2020 and beyond, I think it's best to discuss some of the key market drivers.Turning now to Slide 11, ridership has been a topic of significant focus over the past few months with numerous transit agencies and operators reporting significant declines.On Slide 11, we show the impact of COVID-19 has had on ridership in our markets and in some major US cities. Transit is an essential service and one that is utilized significantly by frontline responders, especially through the pandemic. As agencies continue to run buses, even though ridership is dropped by nearly 80%, it put significant pressure on operating budgets. Recall with public transit agencies that operating budgets are separate from capital budgets and funded by state, local taxes and fair box revenues.The good news is that as COVID-19 restrictions are now being lifted, ridership is starting to show trending returns, as you can see on the slide. While it's still at 50% of pre-COVID levels, this improvement aligns with our belief that transit will recover and will be a critical driver for economic recovery over the long-term. Transit is the most efficient and environmentally friendly way to move millions of people every day around the world. As businesses and offices and economies reopen, we expect riders will return, and it has started. An essential service government support is critical to public transit.On Slide 12, we highlight this approach and the support that we're experiencing. No matter what political affiliation, there is a desire to fund public transits in all of our major markets. The US government has been especially strong supporters of transit through the pandemic, providing over $40 billion in funds through the CARES and the HEROES Act to support agencies as they deal with the challenges of lower ridership. In a sign of longer-term support, the potential successor to the current FAST Act which was unveiled in June 2020, wasn't built in June 2020 through the investing in a new vision for the environment and service transportation in America, also known as the Invest in America Act. This new $494 billion act aims at providing significant funds for improvements in US infrastructure including public transit.The Act specifically focuses on reducing the US's carbon footprint and assisting with conversion to electrified or zero-emission mass transit. This includes $1.7 billion in proposed funding for zero-emission buses, which is a five-fold increase from the FAST Act. Invest in America Act is proposed as a five-year act which provides transit agencies with a longer-term visibility to execute on their capital and fleet replacement plans.Now, the act has not yet been approved and we're hesitant to say that it will become law in 2020 with the pending election, but it is a significant step forward in the right direction. In Canada, the government recently launched the Safe Restart Agreement, which includes funding to transit agencies for 50% of the COVID-related operating costs, up to total of $2 billion. Prior to the pandemic, the government also announced $28.7 billion platform in support for transit projects and their election platform included the procurement of 5,000 electric transit vehicles and school buses.Before COVID-19, the UK government had announced a GBP5.1 billion fund for the procurement of buses to revitalize the UK's bus fleet outside of London, with a significant focus on zero-emission buses. A release of these funds would have a significant impact and drive the recovery of the UK market. While all of these signs point to positive operating environment long term, the speed at which funds are released will dictate the recovery of capital purchases.Government funding is not a guarantee, but based on our experience, following the financial crisis of 2008 and 2009, stimulus funds can accelerate capital vehicle purchases very quickly, that would benefit NFI as the market leader in every one of our businesses.Now turning to Slide 13, we showcased that our North American public bid universe remains at record levels. The delay of orders or option conversion during the COVID-19 pandemic has contributed to the public bid universe being at record levels. Active bids where a new RFP has been released, plus RFPs that are already in the bid stage, are up 34% from the first quarter of 2020 and they are up 77% from the same time last year.Another positive sign is that only a few public customer RFPs have been cancelled to date, even with the ongoing pandemic. Finally, another development is that orders that are happening have been smaller in total size and with fewer options. This is not a new trend, but something we've seen developing as agencies make the transition to zero-emission buses, a topic we've discussed on previous calls. Orders continue to increase through the use of state schedules, it's something that we've talked about and focused on, that allows our customers more flexibility and increased speed to purchase new buses. So the backlog charge is not the only way to buy buses. The movement to battery electric or fuel cell bus, we refer to them as ZEB, zero-emission buses, continues to be a key trend in the market and there is potential that the recovery from COVID may accelerate this transition.Turning to Slide 14, we highlight that NFI is the leader in North America and the UK for zero-emission buses, and would benefit from an increased transition to the ZEBs. Right now, ZEBs make up 9.7% of our backlog, up 4% at the same time last year, and it makes up 26% of our total bid universe. New Flyer could manufacture ZEBs at all of our facilities. ADL has deliver the most ZEBs in the UK, and MCI is now selling its innovative battery electric coach and the electric Equess is nearly ready for testing.Overall, the bid universe supports our view that demand for buses over the long term will remain strong. But as mentioned, the market recovery will depend on the speed of government support, COVID-19 case rates, travel restrictions and economic reopening. I'd maintain we're in a great position to come out of the crisis in very, very strong position.Now turning to Slide 15. We show our historical deliveries at each of our major markets, the Canadian and US transit bus market, the Canadian and US motor coach market and the combined UK bus and coach market. In North America, coach deliveries were dramatically lower during the first half of 2020. This is especially pronounced during the second quarter with the entire market only delivered 59 units, compared to 502 units in 2019 in the same quarter. Private coach markets are expected to remain under pressure in 2020 and into 2021 and, based on previous economic cycles, we expect that market will recover, but it may take a few years. To help offset these initiatives expected lower deliveries, we're advancing NFI Forward initiative, that Pipasu discussed, to reduce our cost base and improve our competitiveness. Combining MCI and New Flyer into one business will only enhance our business.In the UK, 2020 looks to be a period of increasing activities, as operators executed on fleet renewal plans following several years of lower volumes. COVID-19 disrupted those plans immediately and many of our customers shifted orders originally planned for 2020 to 2021. We're working closely with those customers to plan for 2020 and beyond as vehicles need replacement. The recovery in the UK market will take time and, as said before, will depend on the speed of which government support is released.We'll now report on the slide, Asia Pacific was our first market to recovered from COVID-19 and continuous to be active with growth potential in New Zealand, Singapore and Hong Kong. Hong Kong is currently in a typically lower period, following increased activity in 2017 and 2018. But ADL remains to be the clear market leader in Hong Kong.Within the aftermarket segment, we continue to expect demand for heavy-duty transit bus, as operators in North America and international markets continue to recover their fleets and complete regular fleet maintenance and invest in additional products to clean and protect their vehicles. The large speed of Actavis, essential service transit vehicles, provides us with visibility and generally recurring revenue streams. The private component of the aftermarket business, which is largely NCI and ADL coaches, will no question be negatively impacted by the operators who have idled their vehicles. The private component business of those parts represents about 30% of the segment's revenues.We expect those part sales recover over time, as businesses reopen and leisure and business travel resumes. While COVID-19 impacted our results during the first half of 2020, we are now on the road to recovery and we do so with improved visibility.As I mentioned earlier on this call, we're reintroducing 2020 adjusted EBITDA guidance with the expectation that we can deliver between 145 and $155 million of fiscal 2020 which represents $113 million to $123 million of adjusted EBITDA during the second half of this year. This recovery in performance from Q2 is driven by our contractually obligated vehicle sales and expectations for private vehicle deliveries and aftermarket sales. COVID-19 will continue to impact our third and fourth quarter deliveries and results and we expect both periods will be down when compared to the same periods in the prior year.But the impact will not be as nearly significant as the one we saw in the second quarter. The fourth quarter is historically our busiest period driven by deliveries to private market customers at MCI and ADL. But based on our expectations for weaker activity in those markets, we anticipate that the fourth quarter will be slightly down from 2019 levels. Overall, while the third and fourth quarters will show improvement, we expect a larger recovery to start in 2021 and grow into 2022.In transit, the return to pre-COVID production levels likely won't happen until later in 2020 as we manage orders, option conversion and production scheduling. The speed of this recovery may accelerate, but we depend on the release of new orders, government funding and how we quick -- how quickly the economic recovery with tourism, travel and transportation takes place. Private market recovery in North America will directly relate to vaccines and treatment resulting in an increase in the general public confidence in traveling and riding on motor coaches.As I wrap up, I'll remind our listeners that NFI is the market leader in buses and coaches. Our customers around the world have relied on our vehicles for decades. We've supplied and supported and installed fleet of over a 105,000 vehicles and we've been growing our presence in new markets.In 2020, we made significant entry into Ireland and next year, we'll see our first major ADL deliveries of vehicles in Berlin. We are well positioned to benefit from fleet investment plans, the transition to zero emission buses and aftermarket sales, and we will continue to invest in new products and technology to ensure we remain in our leadership position although we do expect lower CapEx of about $25 million in 2020.Finally, I'm honored to recognize our nearly 9,000 NFI team members that have supported the company and our customers through this ugly pandemic and the most recent civil unrest activities. We continue to work hard and transparently on our diversity initiatives with great partners and active employee engagement.In fact, we just completed a company-wide employee pulse check survey at the end of July with an amazing 50% of our team members, many still at home and many working remote responding. The final question of the survey had an 88% response rate when asked; overall, I feel NFI is a great organization to work for. Now that's having confidence from your team.There is no doubt that COVID impacted our 2020 business and our first half results. But long-term buses and coaches will recover and we will play a critical role as buses are the spinal cord of cities around the world. There will be bumps in the road as we recover to our normal run rates, but market recovery combined with structural changes made by NFI Forward will only make us more competitive and more cost-efficient as the market leader.With that, I'll now turn it over to Stephen to finish up our call.

[Stephen King]

Thanks, Paul. I'll turn to Slide 16 to summarize today's call. We made the decision to idle our facilities to protect employees, customers and manage supply chains. It was the right thing to do and positioned us well for recovery even though it challenged Q2 results. The worse appears to be behind us. While COVID-19's fall out continues to create some market uncertainty, we are focused not only on recovering production safely, but also optimizing our business and delivering shareholder returns.NFI Forward [indiscernible] accelerated our plans to remove cost from the business and transition to a more efficient operating company. Q3 and Q4 will be recoveries in Q2 in 2020; we expect they will both be down from the same periods in 2019. With the greater visibility, we've reintroduced fiscal 2020 adjusted EBITDA guidance with a range of $145 million to $155 million which would represent adjusted EBITDA of $113 million to $123 million for the second half of 2020.Our total liquidity remains strong and more than $430 million. Based on our current financial position and anticipated cash flow generation, we expect to maintain our current dividend rate and do not expect the need to utilize the incremental sidecar credit facility.As Paul just said, NFI is the market leader for buses and coaches in all of our major markets, including Canada, the United States and the United Kingdom. Transit remains an essential service with strong government support and private operators play a critical role in helping get tourism travel markets moving again. As orders and activity resume, customers who relied on us will return and NFI will be there to service them with a competitive [ integrated ].We'll now open the call for questions. Chris, please provide instructions to our callers.

[Operator]

[Operator Instructions] Our first question is from Cameron Doerksen with National Bank.

[Cameron Doerksen, Analyst]

So just a question on, I guess it's sort of related to your guidance, but I'm just wondering whether that kind of assumes at ADL, it seems to me that maybe some of the back half of the year deliveries at ADL may be dependent on some government stimulus. So maybe just talk about what your expectations are there at ADL. And what does the guidance assume?

[Paul Soubry, President, CEO & Non]

Thanks, Cam. Yeah, we -- look, we spend a lot of time thinking about how to transmit -- how to communicate to their analysts, our shareholders about the outlook for the back half of the year. As for private operators, the reality of their capital allocations, the ridership, the fare box revenue that comes off them and so forth is obviously continuing to be up in the air. We've been fairly conservative in our approach of the UK, at the back half of the year. Quite honestly, even if the government stepped up tomorrow with a big initiative, as you know, it doesn't turn the factories back on overnight at the previous levels because there is non-recurring engineering efforts, there is supply efforts, there is production planning and so forth. So, yes, there is some builds in the back half of the year for ADL but not a significant amount.

[Cameron Doerksen, Analyst]

Okay, that's helpful. And second one for me, just any commentary around the actual bus deliveries over the next couple of quarters. What should we expect in Q3 and Q4 as sort of the production re-ramps to a more normal rate by the end of the year?

[Paul Soubry, President, CEO & Non]

Yeah. So when you say bus, Cam, do you specifically mean like the New Flyer North American business or do you mean across the fleet?

[Cameron Doerksen, Analyst]

Across the fleet, I would say, how do you transit motor coaches cutaway, what are your expectations there for use?

[Paul Soubry, President, CEO & Non]

Yes, it's a good question. So clearly, the markets are disrupted as we've tried to articulate the facts and so forth. Just some color on each of the businesses. Chris's focused for the back half of the year was now rescheduling anything that was delayed, deferred, rescheduled and so forth. So the vast majority of Chris's work is far more execution oriented than worrying about where the work is going to come from. And this -- most -- a good significant portion of that work is under contract. So it's a -- it was a timing delay and now an execution story. Volumes will be down from previous year by somewhere in the neighborhood of, let's call it 20% or 30%. The motor coach business, we've effectively eliminated very -- almost entirely the entire private motor coach expectation of buys in the back half of the year. As you know, about 40% of that business is public transit operators, New Jersey or Houston or Connecticut, those kinds of people that use motor coaches as public shuttle type vehicles into the cities. That business is largely contractual, but we've really downgraded any expectations of private motor coach recovery in the back half of the year. In the ARBOC world, we're actually back up at pre-COVID levels on our cut away business and we're slightly behind on the ARBOC business which probably acts a little bit more like a public transit type environment. Alexander Dennis in North America is operating basically at the levels they were pre-COVID in terms of the number of units coming out. In the UK it's dramatically down and in Hong Kong, Singapore, New Zealand where we're delivering, it's kind of back up to pre-COVID levels. So in general, I'm going to say roughly our production levels are in the 60% or 70% levels for the back half of the year across the overall fleet.

[Operator]

Our next question is from Chris Murray with ATB Capital Markets.

[Christopher Allan Murray]

Maybe I don't know, Pipasu, if you want to take this one. So I guess the one thing that we always worry about as we go through these transitions, I mean we have some good ideas around what your CapEx expectations are and your debt expectations are, but really, it's going to be working capital. And so can you help us understand how working capital started to evolve through the quarter and your expectations as you start ramping on how you're going to have to lean on working capital, and if you're seeing any issues around payment terms or anything like that and how your suppliers are responding to some of these challenges as well?

[Pipasu H. Soni, Chief Financial Officer]

Yeah. Thanks, Chris. Good question. So at a very high level, what I would tell you is, when we think about our business units and what I've seen so far, again being fairly new in the businesses, we've got pockets of excellence in our businesses. So for example, when we think about our AR or AP and some of the work that New Flyer has done and we look at some of the cash generation we've got from that it's been really good. Now at the same time, one of the things that I'll kind of mention is what we're doing now isn't what we've already done. In May, we went ahead and integrated AP as a centralized function, so we can start leveraging things. So what we're seeing out of that right now is -- what we're starting to see is there are some term differences, we're trying to get to a point where we get suppliers and understand what suppliers are shared across the business units, etcetera. So I think what we're doing right now is with that AP consolidation, we are going to see some cash flow generation and that will be something that I'll talk a little bit more on the next call especially, and maybe our Investor Day, if we decide to do an Investor Day, this year where we talk about from a turns perspective where we can get to. So we're starting to see some of that. From AR, we -- so typically, just so you know, we're trying to get to a point where we have typically 60 for -- in AP side, we're trying to get to a typical 60 day term play, me and David White, who is the EVP of our supply chain -- of our supply group. So we're working that. And then the other areas that we're starting to look at and me and Paul are starting to push out a little bit more is the inventory side, for example, with our parts business as well as our ADL. So some of that happens to be timing on our ADL and our MCI business. But otherwise we're good. So let -- Paul, anything else you want to --

[Paul Soubry, President, CEO & Non]

No, just -- Chris, specifically, the story went like this. As soon as COVID hit, we were focused on preserving working capital and so we work with our supplier community about delaying some payment terms and so on and so forth. As we had clarity moving through May and June that we were going to start up our facilities, we got back current with all of those suppliers. They played ball with us, we played ball with them and knock on wood, we've had no business disruption from any supplier nonperformance or bankruptcies. Now the world changes over time, but we've been really pleased with how David and the supply teams have managed those suppliers and transparently worked with them as we started back up. As you've seen in our written materials, we basically generated about $100 million of working capital with AR and a little bit creativity on AP management. As we restarted the facility, we reinvested that $100 million to get all of those suppliers current as well as to lay in the inventory to start production again at those levels. I think the biggest issue, as Pipasu said now, is the centralization, optimization of some of those processes, a lot more focus from across the business, as well as a way deeper review and look at the utilization and inventories inside the businesses.

[Pipasu H. Soni, Chief Financial Officer]

Yeah, I think just to add quickly, historically, our business would run kind of 15%, 16% working capital as a percentage of last 12 months revenue and through 2018, 2019 some hiccups with KMG and then the addition of ADL and some accounting adjustments and then now COVID-19, that number has grown to kind of sometimes in the low 20s.

[Stephen King]

I think as Pipasu mentioned and Paul mentioned, there is definitely the plan to get back to more to that kind of historic 15%, 16% run rate. And then I think as Pipasu mentioned a lot of more focus now with him on board on the turns and how we manage that process with our working cap.

[Christopher Allan Murray]

Okay. So I guess what I'm trying to think is as you restart the system through Q3, Q4, you would anticipate even though you're going to be at a lower level, maybe of activity, is it fair to think that you should be working capital neutral for the rest of the year or which is the offsets between what you've already done and some of the gains you may get in other parts, like in AP, is that fair to think?

[Stephen King]

I think like based on what I am seeing, we should see -- we should be working capital positive, I think, like it should be a release because I think we'll get some of that inventory. Like we've made a big investment now, in inventory to restart the machine, so at the end of the quarter, we made $100 million kind of investment in working cap to get us back up, start the facilities again. As Pipasu mentioned now through the rest of the year, while volumes may be lower, we're going to be releasing those things that we built up, releasing things that are in inventory, collecting on receivables. So I think as we go through Q3 and Q4, we should have more of a release of working cap and we shouldn't have -- I mean, in some of the previous years, as you know, we've been building up our commercial, I guess our private coaches throughout the year. So kind of in Q3, we tend to build more private coaches for Q4 deliveries because we expect less -- lower volume in that segment of the business, we won't have that inventory buildup in the third quarter like we would have seen in some previous years.

[Pipasu H. Soni, Chief Financial Officer]

Yeah, I think I'll just add to that. I think what we're seeing, Chris, is some of the ADL for example, if we take ADL for example, we are looking at deliveries and some of the inventory coming down as we get into Q3, etcetera. So there has been some delays in terms of the orders. So we should be getting a positive gain in working capital as we move forward.

[Christopher Allan Murray]

Okay, so it is fair to think that where you think earnings are heading on your EBITDA number, or working capital being slightly positive then that should also -- when we think about total leverage -- and I know you guys don't have a covenant until you have to hit Q4 reporting. But that's sort of the past, if I will, on how you think that you're okay on covenant by the time you get to year end. Is that the right way to think about it?

[Paul Soubry, President, CEO & Non]

Absolutely.

[Stephen King]

Yeah, absolutely.

[Paul Soubry, President, CEO & Non]

That's a little bit more stingy on the CapEx spend, Chris.

[Christopher Allan Murray]

I'm sorry, I didn't hear that.

[Paul Soubry, President, CEO & Non]

I just said, it's absolutely as you described it, but as you know, when it was reported, we're going to be more stingy in our CapEx than we have in previous levels and we continue to expect to pay -- continue our dividend policy and fair dividend at current rates.

[Stephen King]

And just to add, just on the leverage calc, just so it's clear in our materials, but Q2 results are excluded from the calculation. And it's done on a pro-rated basis when it does resume for Q4, so Q2 is continuously excluded. So I think that definitely helps a lot because obviously, Q2 was the worst period with a negative EBITDA. And then from there, so as we get through Q4 and then Q1, Q2 and Q3 next year, Q2 is consistently excluded from the calc.

[Pipasu H. Soni, Chief Financial Officer]

Yeah, and Chris and this is Pipasu and again, you know, Stephen leads our treasury function. But one of the things that I would add to that is we monitor cash flow on a weekly basis by the business units. We're looking at it on a daily basis basically, but at the end of the day what we are seeing is we're seeing a couple of things that should kind of give us a positive. Number one is we see us being within covenants, all the way through this year, we don't see any kind of issues there at this stage, we are seeing some positives that will kind of help us throughout the year. There'll be some tax items that will probably look at that's going to also help us as well. Some inventory reductions and some other things, so we feel pretty good about this year, no covenant issues that we see at this stage.

[Christopher Allan Murray]

Okay. No, sure. And then just maybe a quick question on the NFI Forward plan and how you think that goes together. When you're talking about integrating, I guess, for lack of better term, the North American Bus market integrating transit and MCI, does that really envision building common line product or you still think you're going to need separate factors? I'm just trying to understand exactly what that means, or if it's just leadership type things and you need different facilities and lines.

[Paul Soubry, President, CEO & Non]

Good question, Chris. Job one is to integrate the businesses and optimize the overhead of the two businesses. I mean 60% of NCI's work which was private is gone and so we -- as you know we cannot reasonably afford the infrastructure of the whole thing and so the immediate decision that we made a couple of weeks ago, was to rationalize the executive teams. Now we're in the process of harmonizing and looking at the order design. The second project in part of that is to harmonize and optimize the IT systems, as you know, and as we've talked about, we've been working at putting [ Oracle and MCI ]; now we will complete and finish that. And the final element is a North American plant review between New Flyer, MCI, ADL, ARBOC all of our car fair and KMG facilities. We've got a quite a fast physical footprint and so we will be looking at optimizing and reducing those facilities, whether we actually see transit bus on the same line as a motor coach as the same line, as a double deck, is yet to be determined. It's probably unlikely, but no questions of footprint opportunity, and in overhead opportunity.

[Christopher Allan Murray]

Okay. And then I guess my last question, just in terms of public coach business, are there any larger bids that are out there or anything that you think that you might see that could offset some of the private market. Like what you see in the private markets essentially, to your point, is going to be pretty challenged maybe for the next couple of years. Is there any thought around some stimulus? And one of the things that always happens when we get into these things is there any worry about some of the other competitors in the market getting irrational and are you seeing anybody throwing around dumb numbers just to fill a factor?

[Paul Soubry, President, CEO & Non]

Yes. So the MCI or the motor coach type operator in North America. There are, let's call it seven or eight of them. The biggest one is Jersey or New York as I mentioned before, Connecticut, Houston. There's others that use motor coaches. There is nothing and there is no opportunity that we know that will replace our commercial business which therein lies the opportunity to harmonize our entire machine around supporting public customers whether it's a coach or a transit bus sort of a double-deck and so forth. Of course, COVID changes everybody's plans at this point in time. There is no RFPs on the street that we know of that would replace that by a significant level of volume. So the reality is, optimize our machine, reduce our cost base, deliver to the contracts we have. As you know just recently, we received the year five of the New Jersey order which had its annual order plus and so that's a very strong recurring revenue stream that runs all the way through 2021 and into 2022 and so we'll just keep working that one. As RFPs hit the street, we obviously will compete. At this point in the motor coach space on public, we haven't seen crazy irrational. There really aren't any large RFPs on the street today.

[Operator]

Our next question is from Kevin Chiang with CIBC.

[Kevin Chiang]

I'm just wondering, when you talk to the transit agencies, just given the pressures they're seeing, do you see any change in the buying habits in terms of the types of buses they want in their portfolio based on the ridership outlook and even how they think about customization as maybe a way -- or reduce the customization as a way to reduce the purchase price? Do you see any of that changing or do you think the way they bought buses a year ago that just returns the way it was?

[Paul Soubry, President, CEO & Non]

I think it's probably too early Kevin, to be able to honestly provide any insight for that. If you and I were running a transit agency, we went from normal operations to serious issues in the very, very short term, reduced service, cleanliness issues, fogging and sanitize buses every single day damn near every couple of hours and so on and so forth. So as they kind of start to see recovery of ridership in some cases, we're seeing more buses on the routes because they're having to socially distance the people on the buses and other cases we've seen reduced routes and so forth. We haven't yet seen any real change to fleet replacement plans strategies and of course, these guys live in a world, which is multi-multi-year planning and because of their funding sources, some comes from local and a lot from the Fed, they're trying to align all that stuff. I can honestly say that the RFPs we've continued to see in the last three months haven't changed the spec of the vehicles, haven't changed the desire to consider more zero-emission type vehicles. The great news is that we've already invested. We've done a really good job on the battery-electric, the work that Chris and team have done on the fuel cell electric puts us in pole position. We've got a very significant fuel cell electric delivery scheduled in the back half of this year moving into next year and the customization of seating configuration on that we haven't seen that. Remember that a city is a very, let's call it a political animal and it has to manage its local communities and special interest groups' needs and so forth. That obviously will bump up against available funding as they try and replace their fleets. We all remember that 100% of the operating costs and maintenance costs are on a city and so they are motivated to find a way to work, plan for and budget for capital replacement, but I can't say, Kevin, that I've seen anything there or Chris' team has seen anything different in the short term. As you know also we've worked at what we call referenced buses on strategies that have customers do move to a more optimized bus and ask us for performance specs, not necessarily detailed design specs that we can respond very quickly. We've already gone there of what we think would be the best price value and performance on all of our platforms. So we are ready for that if that happens.

[Kevin Chiang]

That's helpful color. I apologize if you went through some of these details, I jumped on the call late. In terms of your NFI Forward, the $65 million of EBITDA savings and the $10 million of additional cash sittings on top of that, it looks like you'll get a full run rate in 2023, but how should I think of that progressing over the next few years here? Is it highly back-end loaded or do you kind of get a third, a third, a third, until you get the full amount in 2023? Any color there would be helpful.

[Pipasu H. Soni, Chief Financial Officer]

I'd like to -- so a couple of things. Number one is we are developing some of those initiatives. So let me kind of give you what I know today, as kind of Paul mentioned. What we've done today is for the organizational structure, especially for the combination of the two businesses with MCI and New Flyer some of those cost have already been taken out. So when I think about the cost side of things, we have taken some of the cost. The areas that are going to be really the long pole in the tent is really going to be the factory consolidation. So we've got two portions of this, Kevin, just so you know. So number one, is the New Flyer and the MCI teams are starting to look at, hey, what are we going to think about it from their factories. Then number two is, we've already got a developed to plan. I should say, we've got an initial plan in terms of our distribution centers with our parts groups. So those are the things that are probably going to last until 2023 but during the next earnings presentation, once we get these plans developed, let's try to give you more of a guidance which gives you more detail on what we would expect in 2020, 2021 and 2022 to kind of bake that out for you.

[Kevin Chiang]

Okay, that's helpful. Last one for me and I know what the answer is going to be, but if I think of the $120 million of EBITDA you're referring for the back half of the year and annualized that, you have an annual run rate of $240 million. What's the missing in that if I say past 2020 into 2021? It sounds like you have some tailwinds from NFI Forward. The ramp-up of production will be a tailwind. You have the New Jersey contract. You have the Berlin contract I think kicks in next year. How should I think of the puts and takes of 2021 in terms of things that might be additive or maybe a negative to that $240 million number?

[Paul Soubry, President, CEO & Non]

We definitely won't have a crazy adverse negative quarter like we had this year in the second quarter and of course, the pace of recovery for us is going depend on the available funding. We continue to look, monitor and be actively involved in government support type activities as we outlined in Canada, U.S. and U.K. There is a certain level of our order book that is actually under contract. We haven't seen cancellations of government contracts. I think there is only one that we had that was I think a 15 unit option order that was canceled, but that's it from a public perspective. There is definitely movement in timing of builds and timing of deliveries and acceptance, and so that's what we're managing through. The other part of it obviously is the big swing thing. The two biggest swings will be the pace at which private motor coach in North America recovers. Quite honestly, I don't see that of any significance in 2021. It's largely we think going to move out of 2022. Stimulus is far more oriented obviously to government public transit agencies than it will be to any of the commercial type operators. Then the other biggest change over here is going to be a pace at which the U.K. fleet starts to recover and buying starts to recover. But so just a pure run rate is probably not a fair comparison; but at this point in time, it's a reasonable comparison, given what we don't know.

[Pipasu H. Soni, Chief Financial Officer]

I think just to add to that Paul, is and again, it's exactly what Paul said, but the $240 million or the $120 million in that back half is still impacted by COVID and we're just trying to figure out from a government standpoint when does that change.

[Operator]

Our next question is from Jonathan Lamers with BMO Capital Markets.

[Jonathan Lamers, Analyst]

Paul, just a follow-up on your comment about that large fuel cell order. How many units was that for?

[Paul Soubry, President, CEO & Non]

It's not an order, Jonathan, it's a number of operators, but we're seeing in the neighborhood right now of next year something like 50 fuel cell buses under contract for New Flyer which is quite significant. There really isn't any other mainstream player in North America in the ZEB transit bus space that has that capability, and as you know from walking through our facilities and conversations, the strategy of an all-electric bus that is either battery-electric charged at depo or charged on route is we're starting to see more get interest in Fuel Cells that act as range extenders. Rough context in terms of range, a rough 40-foot battery-electric bus with the appropriate amenities and whatever can get plus or minus 250 miles range. Where we've seen that same bus with the fuel cell, of course, the economics are different, but they get up to 350 miles which then gets in the range of what a diesel bus operates. As the environmental dynamic in the United States has the strategy of zero-emission in fuel cell and so forth, it takes on, Chris has done a fantastic job. We will build probably 400 or so all-electric vehicles next year, of which 50 will be those fuel cells. That's pretty significant from where we were a couple of years ago. But it's not one operator, Jonathan. It's multiple.

[Jonathan Lamers, Analyst]

Okay. Thanks, Paul. I think you mentioned historically New Flyer delivered something like 30 fuel cell buses to-date. Does that sound about right or would you like to get back to me on that?

[Paul Soubry, President, CEO & Non]

Yes, it's probably a little bit more than that, but we can send you note after. Remember the original fuel cells work was done in 2008 and 2009 to get ready for the Vancouver and the BC Olympics. There was 20 vehicles in which the difference between then and now is those fuel cells were the actual propulsion engine of the vehicle and so cost amount of fuel required reliability, economics, maintenance and so forth made them unpractical. So that's when Chris's team pivoted to working far closer on battery buses that used fuel cell as range extenders and it's gone very, very well. Historically, there's probably been about 47 total or 45, 47 total fuel cells delivered by us to date.

[Pipasu H. Soni, Chief Financial Officer]

I think what was a very telling stat I think in our materials is the improvement in the backlog for ZEBs, not just fuel cell, but obviously fuel cell is part of that, going from 4% to 9.7% is a pretty big jump. Also that transition to ZEBs is happening and it's great for us because we're the leaders in that market in North America and the U.K. and as we've mentioned in this call multiple times, battery-electric or fuel cell, we can manufacture those in our facilities. It's interesting to see that the forecast that people have been talking about on ZEBs, they are starting to come to fruition with actual orders and vehicles hitting the road in the fuel cell or battery-electric propulsion.

[Jonathan Lamers, Analyst]

Absolutely. On the backlog, I was encouraged to see the firm orders for Q2. Were actually up year-over-year. Is it fair to say that firm orders are trending down over July and August given all the challenges the customers are facing?

[Paul Soubry, President, CEO & Non]

Yes, no question because quite honestly, Jonathan, there were very, very few awards in the quarter. So we're building up from orders, we delivered a bunch of the vehicles that were in our excess, but there really weren't any orders of any significance in the quarter.

[Jonathan Lamers, Analyst]

Paul, the customers have requested additional emergency funding from the federal government. How do you see this shaping out for the first half of 2021 as it pertains to New Flyer? Could you break it into two scenarios like one where the transit agencies do get the emergency funding and one where they don't get the emergency funding? At what point would you start to get concerned about filling your assembly slots?

[Paul Soubry, President, CEO & Non]

I think that's a great question and it's, in fact, the dilemma that we're dealing with every day. So if we sat at Chris's sales and ops meeting every Monday morning with his team and we went through what we have under contract, what options we expect to be delivered or to be converted, what new RFPs have hit the street or we expect to hit the street, the first deal, let's call it the next kind of six or nine, 12 months, a good portion of the early half of that is effectively already under contract, but what we've done is effectively trying to manage the production rates so we don't go up in volume and then have a drop-off or we go too slow and have inability to ramp that back up. So it's a blessing and a curse. The complexity as we have three production systems, a split built between Winnipeg and Minnesota, a full build Minnesota and a full build in Alabama. We're trying to manage not having a full set of information today as we move through that. If the government does our current build production plan for next year doesn't effectively, currently contemplate any significant stimulus or any real stimulus. If that happens, we've demonstrated in the past that we can over a relatively short period of time ramp up volume and production. The fact that Chris has multiple production centers allows them to do that. But we're governing our pace right now to handle that level of uncertainty. I'm confident in the understanding that Chris's team has of all competitions all available or expected competitions, we are very thoughtful and respectful of those transit agencies that are juggling day-to-day operations. With the long-term reality, is that they're going to have to figure out how to continue to move people through cities and whether a vaccine is six months away or a year away to us, we see this as a transition window. The new normal will still have a very significant portion of bus transportation in every major city around the world, and I continue to point to like think about New York, 5,900 transit buses, think about London, England. Those cities are unable to operate without transit buses being a core part of the movement of those cities. So it's a transition story. We're going to be very cautious at the pace at which we manage short term so that we don't inhibit our ability to be successful in the long term.

[Jonathan Lamers, Analyst]

Okay, thanks. You mentioned your alternative plan for the first half. Could you give us an update as to what line rates you expect over Q3, Q4 and the first half relative to pre-COVID run rate?

[Paul Soubry, President, CEO & Non]

So we obviously idled for two months of the quarter. We started back up. I think the team did a fantastic job of let's call it phasing and staging and by that I mean we didn't open up all our factories at one on one day so that we could allow our internal fabrication and external suppliers to start back up at a jog rather than a run. Then what Chris did, is he started those facilities at lower production rates just to make sure that people still worried about coming back to work or people that had childcare or elderly people care issues or kids in schools and so forth. So we're now operating effectively at, let's call it 90% of the rates or 85% of the rates that we were, the run rates pre-COVID and we're going to continue to hover in that area and bury over blocks of three or six months as we head into 2021. Obviously, we're talking every day about any customer that has pushed out a production window of when they now want to receive those vehicles because it's one thing for us to build them, but they have to inspect them, then they have to accept and then they have to put them in service. It's probably premature to give you any real forward guidance on run rates heading into 2021. But having said that, a good portion of Chris's work as we know is multi-year contracts and so it's all about option conversion, production rate management and winning our share or better of the RFPs that hit the street.

[Jonathan Lamers, Analyst]

Okay, thanks. A quick one for Pipasu. Does the H2 EBITDA guidance include expected receipt of any further wage subsidies?

[Pipasu H. Soni, Chief Financial Officer]

It does not.

[Jonathan Lamers, Analyst]

So if you do receive some -- I guess you had to record those but then break it out for us?

[Pipasu H. Soni, Chief Financial Officer]

Jonathan, one of the things, and again, I know we included some here, but if we just step back for just a second, one of the reasons that we decided to use the government grants into our adjusted EBITDA, and we did talk to our auditors about this as well and we had a lot of internal discussions here, but one of the reasons is when we decided to take the grants, what we were doing is we incurred them because we basically didn't take those costs out. So we said, hey, you know what we're going to incur those costs so we can have our employees get wages and then we would offset that with obviously the grants. Now, if we think about moving into the second half of the year, if that does happen, then if there was a one for one, the reason we did not furlough is because for the grant, then we would include them, but that's a subject depends on as we kind of get into that second half. But right now we're not expecting to include those in the numbers that we provided.

[Jonathan Lamers, Analyst]

Okay. I believe in the notes to the financial statements, you broke out the amount that's been recorded and receivables that you expect to collect this cash in the second half. Is that a good proxy to use for the -- it looks like a pretty small cash benefit you're expecting for Q3?

[Paul Soubry, President, CEO & Non]

Yes.

[Operator]

I'm showing no further questions at this time.

[Paul Soubry, President, CEO & Non]

Okay. Well, thanks, Chris and everyone, for joining us this morning on the call. We'll wrap it up with that. If at any time you have any further questions please reach out to me at any time. My contact information is all on our website. Thank you and have a great day.

[Operator]

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.