NFI Group Inc. (OTCPK:NFYEF) Third Quarter 2022 Results Conference Call November 16, 2022 08:30 AMm. ET
Participating companies
Stephen King – Vice President of Strategy and Investor Relations
Paul Soubry – President and Chief Executive Officer
Pipasu Soni – Chief Financial Officer
Conference Call Participants
Kevin Chiang – CIBC Global Markets
Chris Murray – ATB Financial Markets
Daryl Young – TD Values
Mark Neville – Scotiabank, Global Banking and Markets
Alex Hutton – Banco Nacional Financiero
Operator
Have a nice day and thank you for being here. Welcome to NFI Group’s third quarter 2022 convention call. At this time, all participants are in listen-only mode. After the presentation of the speakers, there will be a response session. [Operator Instructions] Please note that today’s convention is recorded.
Now I’d like to give the lecture to your speaker today, Stephen King, vice president of strategy and investor relations. Please continue, sir.
Stephen King
Thank you Norma. Hello everyone and thank you for joining us. With me are Paul Soubry, President and CEO; and Pipasu Soni, Chief Financial Officer.
Today, we will review our quarterly effects for the third quarter of 2022, provide an update on discussions with our banking syndicate and government partners regarding liquidity and covenant relief, and provide feedback on the broader macroeconomic environment and our outlook. Then we will open the call for questions from analysts.
If you have not been able to access the dial-up option for this call, post your query in the webcast chat and we will play it live from there. This call is being recorded lately and will be played shortly. use a provision that can be found in the Investors section of the NFI Group website. We will move the slides through the webcast link as provided this morning and also call the slide number when we go through the game for participants over the phone and on the webcast.
Starting with slide 2, I would like to remind all participants and others that some of the data provided on today’s call is possibly forward-looking and based on expected assumptions and effects that are subject to uncertainty. Should one or more of these uncertainties materialize?Or if the underlying assumptions prove incorrect, the actual effects may also differ materially from those expected.
Please also note that some monetary measures used in today’s call do not have a standardized meaning prescribed by International Financial Reporting Standards and therefore may not be comparable with measures submitted through other issuers. We recommend that you review the threat points discovered in the NFIs. press releases and other public presentations on SEDAR for more details.
We would also like to remind auditors that NFI’s monetary statements are presented in U. S. dollars, the company’s reporting currency, and all amounts discussed are in U. S. dollars, unless otherwise stated.
On slide 3, we’ve included the key terms and definitions referenced in this presentation. It should be noted that zero-emission buses or ZEBs consist of electric, hydrogen-fueled mobile and battery-electric coaches and trolleybuses. Equivalent assemblies or EU assemblies are a term we use for production spaces and delivery statistics. Most of our cars constitute an equivalent unit, while a 60-foot articulated transit bus occupies two production spaces and is therefore equivalent to two equivalent sets.
On slide 4, for those of you who are new to NFI’s history, we are a leading independent global provider of sustainable bus and coach solutions. in the UK, and we are the world leader in double-decker transit buses. We operate under our commitment to sustainability to offer a better product, a better workplace, a greater global. Other main points about our environmental and social governance systems can be consulted. on our online page in our annual ESG report.
Slide five shows the breadth of NFI’s responses, which come with the cars themselves, charging infrastructure, telematics, aftermarket portions and services, education and workforce development, and lastly, financial responses where needed. We supply highly customised buses and a set of mobility responses tailored to meet the ecological needs of our customers.
Now I’ll pass it on to Paul.
Paul Soubri
Thank you Stéphane and good morning everyone. If my voice sounds a little hoarse this morning, I will try to speak slowly and clearly. As if my luck couldn’t get worse, despite the 4 vaccines, I tested positive for COVID last week and so far. So I paint from a distance.
Now, on slide 6, we’ll review to summarize the quarter. As we explained in our October 24 update, supply chain disruptions and poor supplier performance have been challenging for our business since mid-2021. But recent supplier delivery and disconnections in critical parts have exacerbated an already complicated situation.
Let me be transparent from the outset. In general, NFI does not have a call for the problem. We are running out of essential parts to successfully build and deliver the contract buses. Remodify our plans to expand production rates in the fourth quarter to meet contract orders.
It also led to further expansion in our on-the-line work-in-progress inventory, ending the third quarter with more than 400 buses built, but without some critical components. Now we’re focusing on delivering as many of those cars offline as possible before the end. of the year.
The challenging macro sourcing environment is unique to NFI, as primarily electrical subcomponents, which come with microprocessors, electrical connectors, wiring artists, and other elements, remain limited globally, affecting us and all automakers. Bus production is also facing those disruptions at the source and is also experiencing an incomplete backlog of ongoing work and has also had few weeks of coming online.
While we expect those demanding situations to continue into 2023, there are signs of improvement that we’ll talk about later in this call. NFI continues to lead the evolution towards zero-emission mobility in buses and coaches. In the third quarter of 2022, 13% of our total deliveries were zero-emission buses, representing 21% of our order book, and NFI electric buses and coaches have now driven more than 85 million electric kilometres in service.
In addition, our infrastructure response team has now installed more than 330 EV chargers, a base of more than 55 megawatts and we plan to install at least 120 more chargers in 2023. In our aftermarket, revenue remained solid year-over-year. However, Adjusted EBITDA decreased due to unanticipated freight surcharges and some higher input portion costs.
We’ve passed most of those higher prices through our transactional pricing programs. But we haven’t done it in some fixed-price contracts and programs. While 2022 has been challenging, our long-term outlook remains very strong thanks to significant increases in our call of metrics and rates of good fortune.
Our North American universe of active public offerings increased 14% year-over-year to 10,170. We introduced the highest number of offers ever recorded in the third quarter of 2022, with over 7000 EUs in that quarter alone. The good fortune of those offerings will generate further expansion in our long-term order book and long-term contracts won over several years.
Unprecedented government investment continues to drive this activity and we look forward to this main call for our products to continue through 2023 and beyond. It should be noted that our EBAs are a critical component of the government’s investment systems as a component of its net objectives 0, and now account for 48% of our total public tendering universe.
NFI’s overall order book declined slightly compared to the second quarter of 2022, due to the timing of new awards and the expiration of superior features with a number of older diesel features due in the quarter as agencies intensified their plans to achieve zero emissions. Reflecting the individual schedule of all approval processes and board meetings for each transit agency, we ended the third quarter with another 1,360 pending bid award uses, meaning NFI was decided as the preferred supplier, but the final contract documentation was not finalized. Once the documents are obtained and signed contract, those sets will be identified as rewards and added to our order book.
We also continued to advance our NFI Forward and NFI Forward 2. 0 projects with a combined adjusted EBITDA of $18 million and lost cash flow savings learned in the quarter. In the third quarter of 2022, we closed the legacy distribution facility [technical difficulty] in Delaware, Ohio, and incorporated it into our existing NFI portion distribution footprint. We are also on track to close MCI’s final touch facility for public coaches in Pembina, North Dakota, which we announced earlier this year in the early part of 2023.
As noted in our October 24 update and third quarter results released last night, based on our fourth quarter monetary expectations, we anticipate that we will not be able to meet the secure credit facility clauses that will apply at the end of the fourth quarter. However, we are in detailed discussions with our banking union, with Export Development Canada or EDC, a member of our existing union, and the government of Manitoba to compare financing structures to offload the mandatory relief as we embark on the coming years of recovery with further delay and strong bidding activity. Based on the possible responses being discussed with the government and banking partners, I anticipate that NFI will be able to offload the required commitment relief.
On slide 7, we show our third quarter 2022 deliveries and our overall order book, which now has orders through 2027. At the back of the slide, you can see that the quarter’s deliveries were below, they were above in the heavy transit area in the third quarter of 2021 was also [indistinguishable] due to supply chain disruption.
All deliveries of our product lines have particularly declined since the beginning of the year, reflecting the ongoing challenge of the home environment. I should point out that those are all portions, although some criticisms: it is all the portions that we need, but some critical parts of the same electronic electrical formula are still the ultimate problem.
On slide 8, we provide an update on two macroeconomic effects on our business, inflation and exchange rate or FX. For inflation, in the form of company orders and features in our general order book. Generally, our company’s orders are manufactured and delivered within 12 to 18 months of receiving the award. When we make our initial offer, we will get express costs for more than 50% of our suppliers’ vehicle components, as they are specified solely by the customer.
For many other unspecified components, we use in-house sources, adding Carfair for fiberglass production or KMG for steel production, electrical kit meeting and plastic thermoforming. We have incorporated an inflation adjustment in all our contacts to reflect the time between attribution in production. As inflation rose in 2022, we experienced significant supplier surcharges, which pushed us to pay for it or [indistinguishable] getting actual portions and prices to exceed suppliers’ contract estimates from dubious companies, most of which were bid before 2022.
The ability to rejuvenate or rearrange other parts of the structure is very limited. And for the affected contracts, we introduced a crusade with consumers asking for value increases, charging surcharges and pre-invoices from contracts. We’ve noticed the fortunes of those new projects with over $42 million in advance invoices earned as of October 2, 2022, and they’ve also earned some value changes through clients.
We continue complex discussions about similar systems and expect further benefits in the fourth quarter of 2022 and 2023. But keep in mind that the client’s investment mechanisms are different when it comes to the actual contract, as are the language of the actual contract and its local, political and budgetary dynamics. Make an abundant commitment for many consumers and time to finish.
Some consumers even responded by providing a long-term volume of buses and a divergence of options. But unfortunately, this does not help our 2022 results. In 2022, we updated our quoting and quoting methods to reflect higher input prices and higher inflation changes. due to vehicle and spare parts contracts. And because of those actions, we expect inflation to have an effect primarily on margins in 2022, with some postponement to 2023.
Inflation-related margin stress is expected to ease in the current part of 2023, as most of our old contracts affected by the onset of immediate and hyperinflationary inflation will have been completed. As a reminder, inflation in option orders is another situation. For most of our option conversions, when a consumer executes a long-term option, there is a revaluation opportunity that takes into account a manufacturer value index or government PPI clause or, in some cases, other types of inflation instruments. a PPI adjustment clause adds a cumulative value at the time the option is executed, which projects margins – margins of protection against long-term inflationary stresses.
NFI’s total order book is ultimately divided into approximately 49% enterprise orders and 51% options. Most current company contracts reflect our discounted prices affected by inflation and our prices.
With respect to currency movements, our currencies or FX power in general, the costs of NFI contracts in local currencies, for example, contracts in Canadian dollars are denominated in Canadian dollars. UK contracts are denominated in British pounds, pounds sterling, etc. while coins and parts come from other jurisdictions with other currencies. We have implemented a macro-hedging strategy to identify the point of the organization to deal with potential currency exposures.
But given the immediate rise of the US dollar in 2022, we expect a negative effect on the exchange rate in some contracts tendered last year or before this year that were built with maturity in 2022 or 2023. This is basically a service as of a higher level than general. New Flyer’s share of contracts with Canadian consumers by 2023 is expected to offset this negative effect on the advantages of obtaining lower payroll costs for our Canadian workers and lower interest rates for our Canadians. Convertible Debentures.
In the last quarter of this year, we provided a summary of our workflow roadmap to address a rapid microprocessor shortage impacting the delivery of critical modules to Florida’s new MCI in 2022. This diversion program was fortunate as we obtained microchips in 3 grades lower from our chain of origin and finished the buses on the production lines employing flexible units. We have now delivered almost all the effective buses that were missing in this fast module, which shows the luck and creativity of our team.
Unfortunately, today we encounter similar upheavals with other critical parts, such as wiring harnesses, electrical adversaries, and target panels. missing components, adding the temporary closure of new line entries at all New Flyer plants for several weeks to allow our suppliers more time to deliver upstream portions to our facility.
And just like our module bypass plan we announced earlier this year, and if our painters paint diligently, diligently and creatively executing a construction and maintenance technique was mandatory to accommodate missing parts. We created old-fashioned groups in each of our plans to end the buses, with portions missing when they arrived. Since the chain of origin for some critical portions is not yet reliable, we will continue to run operations at lower new line access rates to minimize paint backlog at other stations and therefore excess offline inventory.
A reminder, for every hour, we miss the installation of parts of the production line in the mobile panels of the factory and the structure of the bus. It takes 3 to five person-hours to process frames offline and other stations, making it expensive and incredibly disruptive to production.
Slide 10 is a table of the overall suitability of the supply chain. Despite the tireless efforts of our sourcing team, unforeseen disruptions to our production lines have critical parts that have lasted longer than expected. Once again, we saw this disruption increase rapidly, early in the fourth quarter of 2022, with some suppliers reporting less than a week indicating that they may no longer meet promised delivery deadlines to our plant.
Overall portion availability has improved. If you enter our factory, you will see 98% or 99% of all available portions and at the station. But some critical portions remain a challenge. And it gets even worse, especially when they have giant cascading effects. For example, a wiring harness has giant cascading effects downstream of production.
We expect those portion delays to continue in the first part of 23. And as a result, we once lagged behind in expanding production rates by 22 and now plan to start expanding line rates in the first part of 2023. Given the wide variation in the types of propulsion of the buses and the exclusive specifications for visitors, this is an undeniable process. And we are taking steps to increase capacity prudently, enabling proper skills education and ensuring the suitability of the chain of origin.
Our goal is for it to return to pre-pandemic execution rates until the expiration of the 23rd and the beginning of the 24th. Let me remind you that it is not a demand dynamic, it is above all a supply dynamic. Now I’ll turn the field around to Pipasu to summarize the monetary results for the quarter.
Pipasú Soni
Thanks Paul. Turning to slide 11, we highlight some of our key monetary measures. As discussed above, this quarter was challenging due to the unpredictable and unreliable nature of certain elements of the origin chain. Portions available at the appropriate construction or production station. But the single 1% is wreaking havoc on the efficiency of our structure, bus completions and financial performance.
We are a traditional manufacturer of buses designed with a lot of tradition. Therefore, any challenge in supplier functionality as opposed to compromises leads to production inefficiencies, lower-than-expected deliveries, and higher curtain costs. We saw this in the third quarter and, combined with a lack of government wage subsidies in 2022, to the $14 million we earned in the third quarter of 2021, resulted in year-over-year declines.
Most of our monetary difficulties are in our bus and trainer business in North America, where most of our contracts are with government agencies. As Paul mentioned, the dynamics of the contracting procedure do not allow us to seamlessly transfer supplier surcharges or freight and inflation to government customers. Instead, we engage in negotiations for value changes and/or advance invoices to offset more temporary inflationary impacts.
We have actively sought out those systems and have had some success, some contracts are still under negotiation. In summary, for the third quarter of 2022, sales were up 5% year-over-year, but adjusted EBITDA decreased to $47 million. EBITDA in the aftermarket segment offset by negative adjusted EBITDA in the production segment.
Negative EPS and adjusted EPS of $0. 56 consistent with the consistent percentage and $0. 63 consistent with the consistent percentage, respectively. Our liquidity at the end of the third quarter was solid at $471 million, adding our minimum liquidity needs of $250 million. This is an improvement of more than $150 million over the past year, but a minimum of more than $150 million sequentially, primarily due to a buildup of long-term debt, which has been used to fund inventory expansion and other current capital balances similar to supply chain disruptions. As our cars are delivered, they are moved from stock to accounts receivable, and it takes some time to convert them into cash, as each visitor has unique payment terms.
We expect to see an improvement in liquidity in the fourth quarter, reaching more than $500 million, thanks to the decrease in the overall whip combined with the advantages of visitor prepayments. Due to the money conversion program, some of the advantages of vehicle details and deliveries won’t be visual until the first quarter of 2023.
On slide 12, we reconcile the net source of income with the adjusted net source of income or adjusted net loss. During the quarter, the net loss impacted through the same parts that impacted adjusted EBITDA, offsetting some of those negative parts with gains at the fair market price of our interest rate swaps.
Lately we have two swaps, one for 540 million at 2. 27% and for $200 million at 0. 4%. This significantly limits our exposure to increases in floating interest rates. As rates rose, we made gains forged during the era we normalized. The chart at the back of the slide shows normalizations made since early 2022.
Regarding slide 13, we summarize our revised forecast for 2022 that was updated on October 24, 2022. Based on year-to-date results, our guidance suggests that the fourth quarter of 2022 will generate adjusted EBITDA of minus $6 million and plus $14 million depending on the delivery of final-touch functionality and final bus deliveries to our customers.
Now I’ll turn to Paul to give you an idea of our perspectives.
Paul Soubri
Thank you, Pipasu. Now on slide 14. As stated, our universe of public offerings continues to grow. We have over 10,107 games in active deals, which will result in new orders and rewards in the coming months. In the longer term, see more than 20,000 years of potential opportunities in our universe of 5- to 5-year offerings. In total, our bidding universe is at record levels of more than 30,000 sets, 48% of which are zero-emission buses.
And a reminder that electric buses have zero-emission buses with a consistent and consistent margin with dollars, sorry, consistent with revenue and dollar margins consistent with the unit. I should note that the fiscal year has now won more than 1,000 vehicle awards from purchase calendars since early 2018, with its increasing use appearing through U. S. transit agencies. It is a U. S. procurement option up to the classic North American exclusive public bidding procedure. These purchasing systems are recorded in the order book because they have assigned amounts explained to NFI or any other OEM.
Once a visitor agrees to purchase a bus with one of those deals, the value is a record, immediately recorded as company orders in our order book. On another positive note, we continue to see positive symptoms of increasing bus ridership after reporting. that the number of passengers on U. S. public transportation is not a major contributor to the U. S. The U. S. Department of Health and Security in September 2022 has now surpassed 70% of pre-pandemic levels, as general resumes and offices reopen. This will increase our visitors’ rate chart revenue, decrease congestion in your city, and decrease emissions in your local communities.
While passenger numbers are very high, the main driving force of trans public procurement in Canada and the U. S. is a major driver. UU. es federal, provincial and municipal funding, which is helping operators execute their fleet replacement plans, which have now been boosted through environmental emissions relief targets. financing.
With respect to investment on slide 15, we summarize our functionality in the U. S. FTA subsidy systems. UU. de 2022 for low-emission buses and bus facilities. I should point out that there was an error in our previous announcement about those 2022 NAFTA subsidy systems, and The main points of reconciliation are provided with our MD
New Flyer has been named direct spouse with nearly $200 million in grants with 15 agencies. This is a significant improvement over our 2021 performance, we are the designated spouse with $40 million, where we were the designated spouse with $40 million in grants with nine agencies. Although New Flyer has been the designated spouse with new pricing, it will be added to our order eBook until the contract documentation is finalized and an official purchase order is received. Long-term opportunities for backlog growth.
In addition to the nominated awards, there are 800[ph] in the FTA’s low-no grant program, where this has been provided to transit agencies that have not yet officially named or liked a zero-emissions partner, resulting in long-term zero emissions bidding activities for NFI.
On slide 16, we highlighted some global victories from our third quarter, adding a value of 50 double-decker sets for ADL from Greater Manchester Transportation in the UK, an order for 40 ARBOC low-floor coupes from Las Vegas, and 27. 60 two-foot articulated electric buses for Madison, Wisconsin. Even better news, after the quarter, we also announced that ADL had won the largest single bus order in the UK since 2019 for two hundred low-emission double-decker buses.
On slide 17, we highlight the increase in the average selling value of our North American order book. The graph shows that the average values of transit buses and heavy coaches have increased significantly, reflecting the effect of updated values, more ZEB orders, and highly [indistinguishable] bus options. These average values will be our long-term revenues and margins.
On slide 18, our book-to-bill continued to grow with the third quarter MTL at 130%, positioning us well for the future. We saw a drop in LTM option conversion, which we expected as there were a number of features for some ICE-powered buses that some consumers don’t want to convert as I now plan to upgrade their fleet with more zero-emission buses.
For clarity, with FTA-funded programs, consumers can refine or modify specifications with bus brands after contract award. But they are allowed to make cardinal adjustments as a type of propulsion, and when one option, an internal combustion engine option, expires, they have to go back to zero-emission buses.
On slide 19, we have not abandoned our long-term goals and are confident that NFI will overcome demanding situations and continue to lead the evolution towards zero-emission buses. Revenue EBITDA between $3. 9 billion and $4. 1 billion. These expectations do not require major adjustments in our business.
As we achieved adjusted EBITDA of $332 million in 2019, on a pro forma basis taking into account the partial acquisition of Alexander Dennis and prior to any savings from NFI Forward’s initiatives. These targets are in higher sales and expected margins of zero-emission buses, recovery and production rates have overcome existing supply chain challenges, increased penetration and expansion in overseas markets and volume leverage as we produce more cars at a lower cost, as a result of the NFI Forward and NFI Forward 2. 0 initiatives.
Finally, on slide 20, excuse me, I would like to recap our investment thesis. While in recent years, especially since March 2020, when the pandemic began, we have faced an incredible challenge in revising our forecasts and recovery expectations, we remain focused on the long-term: long-term and delivery for our stakeholders. We are very focused on retaining core skill and competencies in our business.
We have gone through an ongoing global pandemic, sudden and significant hyperinflation, an unimaginable and unreliable source of many suppliers who have held a demand for gold for NFI for more than 20 years, and recent, immediate and significant maximum currency movements. We continue to navigate through the Demanding Situations and Related Inefficiencies Source Chain, however, we will overcome those initial issues and can start in 2023.
As we explore features with our credit union, EDC and government partners, for whom we have announced several detailed and interesting meetings, we anticipate securing relief from restrictive agreements. As I said before, 2023 will be an era of recovery and transition. For NFI. Me I realize perfectly that you have heard this many times from me, but we do not have an order eBook or a market call for problem.
We will increase our production rates until the suitability of the supply chain justifies it. We are positive on the basis of record costs: recovered. We entered into supplier commitments and agreements on response times, tight stock and a manual strategy that, whether at NFI or at our suppliers, reduces commodity costs and now reduces shipping delays.
We will also benefit from a strong order book position that has given us adequate visibility into deliveries in our 2023 plan. We have necessarily sold out all of our production spaces by 2023 in North American transit, and we are way ahead of what we would do. at the moment for our other markets. There will undoubtedly be effects on the supply chain, especially in the early part of next year. But some declining contract margins will trickle down to the new year’s costs, and the new year will put pressure on production margins. , there will be an improvement in 2023. But we expect those effects to still be particularly below our pre-pandemic levels.
NFI remains the marketplaceplace leader in buses and coaches in North America, with the marketplaceplace leader in public transit in the UK, the double-decker marketplaceplace leader in Hong Kong and a world leader in the distribution of buses and coaches by pieces. we expand our business worldwide and continue to expand leading products on Marketplaceplace that will help our consumers transition to zero-emission shipping. In our marketplaceplace, it’s not a question of if, but when.
I need to sincerely thank our employees, customers, banking partners and shareholders for their support as we continue to weather those headwinds. There is no doubt that we are not alone. It was not simple and required difficult decisions that impacted our team members and their families, as well as our shareholders and other partners. I am confident that we will overcome those problems and get back on track to fulfil the wishes of our stakeholders.
As I have said throughout, we are proud of our history and excited about our future. Although if I am completely honest, I would like to talk about the last few years. We will see a 23-24 recovery driving expansion as we return to our 2025 targets.
With that, I will now forward the call to Stephen King to provide the commands for the Q&A portion of this call.
Stephen King
Thanks Paul. Now we’ll open the line for analyst inquiries. Participants who are listening to the webcast link can send their query to the chat service control about it and we will read it aloud and answer it. And for analysts who are on call, Norma will now open the line and give commands to callers.
Q&A session
Operator
Thank you. [Operator Instructions] And the first comes from CIBC’s Kevin Chiang. Your line is open.
Kevin Chiang
Hi, thank you for taking my question. Paul, I hope you start to feel better soon. Maybe just because of the comments you made about liquidity and easing restrictive agreements. It sounds like you’re competing with the banking syndicate. But he also discussed with EDC, one of his banking partners, and the Manitoba government to perhaps find an additional solution to liquidity. I was wondering if I could elaborate on what it is. It seems that he can do anything with the accumulation there. And does this have to happen first before the banking syndicate considers offering relief from the commitment, or can it happen simultaneously?Are they two separate negotiations, I guess?
Paul Soubri
No thanks, Kevin. Excellent question. So, I just based on what we talked about in our script. And let’s go back to this graph on the dynamics of the chain of origin, where we reset our agreements and put the revised credit agreement in position at the end. of July, we began to see the improvement and suitability of the origin chain and therefore we kept expecting two things: we would burn the WIP we built and the one that is offline; and second, we would be able to increase our production capacity. Again, we have contrary requests for this kind of thing. It’s not like we’re a construction to put things on a shelf.
As we moved into September and October, it became crystal clear that those two things weren’t going to happen. Do not put the wiring harnesses on the bus in steps 2, 3, 4 or 5 of the construction process, the cascading effect of all the other elements you have connected is surely suicidal.
So, putting more equipment on the shop floor just to create offline WIPs that require more people offline was a bit crazy. As a result, we set off the chimney alarm early with the union to say we don’t believe the end of the quarter. But honestly, there’s no way we can catch up and therefore we have to deliver on some of those commitments that we’ve made.
So, the verbal exchange is surely parallel. First, we move on to our credit union, which has had discussions about those realities and dynamics. We have now provided you with updated forecasts for the quarter and for the five years. Annual plan that is expected to be still in place.
At the same time, we went to the local province to see if there were artistic systems in position that only with some other kind of debt or liquidity for us to handle that, obviously, all in terms of advertising. And then we went to the federal government and said, look, we’re not alone, yet our business, our industry, has been disproportionately affected without the ability to heal in the short term.
And so, working with a lot of federal decomponents, and specifically EDC, which lately is part of our union, we’re exploring every conceivable feature for liquidity, but also flexibility of commitments, because it’s unimaginable to say how temporarily things can break down again. We firmly believe that, based on our order book, we can recover a wonderful grade in 2023. But to get back to pre-pandemic levels, as I said, we’re going to have to get to 24 and beyond.
So, we don’t want a track for a quarter, we want some flexibility for probably a year to make sure we can navigate as the origin chain recovers. But the reaction has been fantastic. The popularity of the critical nature of our business and what it does to meet in particular government targets for 0 emissions and environmental impact, the reaction has been fantastic. All this is happening in parallel. I wish I had more main points to give you today’s call. But we put everyone on deck and everything we can ask for to check to find solutions. So stay close and attentive to what they look like.
Kevin Chiang
No, I thank you. I appreciate the sensitivity of today’s conversations. When I looked at slide 10, it highlights the challenges of your supply chain. When you look at this increase from 24 high-threat vendors to 39, I’d be interested to know if there are 15 more high-threat vendors. Threat vendors? Are they new vendors? Or those vendors that were before, when I was 50 or those kinds of high-threat vendors in the past who, despite everything, have noticed moderation now, have become kind of a high-threat or just something. – What’s the trend? And then, I guess, do you see those disconnects?Do you see that even your secondary provider is offline?I know you’ve been looking for select vendors here, however, are they also going offline and is that now exacerbating this threat control process?
Paul Soubri
For the most part, it’s the same cast of characters and they started in 2020, early 21. We have a handful of consumers just because they want [indistinguishable] personalization; Sorry, a handful of providers are struggling. And it’s partly their ability to obtain labor, partly their ability to acquire individual portions or factors or microprocesses, etc.
As we move into 2021, those who are high-risk, high-impact have increased, as well as those in the middle class. As you can see, at one point we literally had 110, Q1 of 2022 of our most sensitive 700. general suppliers we had our eyes on, 50 of which can literally close our product lines. And then what happened when we got at the time and the third quarter of this year, we started to see high-risk rates?move to the intermediate category. They were: improving their delivery functionality, improving their time control, etc.
But suddenly, it’s not new suppliers joining this party. These are the same suppliers that have provided a secure point of inputs, whether electrical connectors in a wiring harness, the wiring of microprocessors themselves that pass modules to control. So, it’s not like it’s a new organization of things. And the ability to exchange the source, which is very difficult, which is to go back to what I said before, the explanation of why we succeeded and recovered the challenge of the VMM module is that we go down two, 3 or 4 degrees in the chain of origin and help our supplier to locate several microprocessors, because it improves their health, Then you can allow us to get those processes or parts.
So, listen, it’s: I think it’s about the broader dynamic around the global source of some of those key components. And because of the bespoke nature, the customized nature, the ability of our suppliers to rotate the source is also compromised. Historically, we have never worked under the first point or moment of our chain of origin. And now we are actively doing it. And going back to the VMM module, for example, what David White and his team have done now is pressure our supplier to have 2 years of chips available or their inputs to give us the modules. Chain of origin forward, that not only do we want to have an intermediate inventory, but we can, but our suppliers want to do the same.
It sounds pretty perverse, however, we’re a little excited about the option of a global recession dynamic where some of the global requirements or some of those microprocessors, the electrical connectors are a little turned off, which will lose some capacity, or alleviate some of the considerations we have.
Kevin Chiang
Which makes sense. Yes. Come on, Steve.
Stephen King
Just interfere very quickly, I just need help to explain a little bit as well, that this is definitely an industry factor that we see in this kind of disconnect and supplier demand situations across the industry. So we heard from our suppliers, from our consumers that our competition also had to temporarily avoid the production of new vehicles, which led to a backlog of jobs in process. So it’s definitely that kind of, I guess, a backlog in demanding supplier situations. An effect on the entire bus production industry. So, not only is it just NFI, we also see it, as I said, in all of our biggest competition.
Kevin Chiang
No, it’s a great extra color out there. Maybe just the last one for me. When you look at your order book, option [indistinguishable], call on part of your option, what percentage of the features would be natural diesel?So, the ones he believes will possibly not be exercised. Like those transit agencies switching to a low- or zero-emission type of vehicle?
Paul Soubri
Stephen, you have that data. Stéphane, are you there?
Stephen King
I just came out mute, sorry. So yes, I think in the features that are still Z, or sorry, classic ICE, there are still quite a few, but most of them, we’ve noticed that some expire. , have not changed in the third trimester. And so, we’ve noticed a lot of those circulating this quarter. We’ll see again, I think before the end of this year, and as we get closer to 2023. As we move beyond that, more and more of the long-term features we started building become more and more ZEB all the time. In fact, there are and still are no CNG hybrids, diesel buses on this list of features.
Now, not all consumers will decide not to convert those features. So, some consumers [indistinguishable] from their hybrids or some diesel cars still, but as we transition to 0 emissions, we will definitely see more consumers focus on fulfilling new orders. To account for new orders for battery electric fuel cells they will most likely update some of the features that are running.
Kevin Chiang
Right.
Stephen King
So now, as you’ll see, we have orders until 2027 and a lot of them are hybrid or electric orders. And as Paul mentioned, 48% of our public order book is now 0 issues. So I think what we can see is that the conversion will probably stay at that kind of 60% rate, maybe a little bit of decline some quarters and maybe a little decrease sometimes in LTM. But let’s see, I think that functions that do not convert, are replaced along executing functions that will probably be more than 0 emissions.
Kevin Chiang
Correct. Only the type of replacement cycle available. It’s useful. I’ll leave it there. Thank you very much, and Paul feels better.
Operator
Just a moment for our nextArray Our next one comes from Chris Murray of ATB Financial. Your line is now open.
Chris Murray
Yes, thank you, friends. Hello.
Paul Soubri
Hi Chris.
Chris Murray
Maybe we’ll go back to some of the discussions with maybe the challenges, EDC and creditsss installation or the creditss union. I guess from here he communicated a little bit about the fact that he has a challenge with calculating agreements, not really a liquidity challenge. So I’m looking to understand a couple of things. And would it be to decrease the reduction of liquidity in the main line of credit?Is that how we deserve to think about it? And then, secondly, he’s put a little language around the dividend and it would probably have to disappear the quarter. But only if you need to communicate about the dividend or any other incentive, possibly you would have to give to get the distribution of those warrants or other shares, that would also be useful.
Paul Soubri
Thanks Chris. All smart questions. Limited a bit in the ability to give you more colors, some things. In the fourth quarter, we plan our liquidity a little bit as we burn and deliver; burn is a dirty word as we end up and deliver some of this WIP offline and coins come in there is a bit of a challenge as each visitor has other payment terms. So if we deliver this week, depending on when it happens or when it’s accepted, we’ll ask for the accounts payable cycle for a client’s paintings and so on.
So, although we do not expect a lack of liquidity in the fourth quarter, what returns to the consultation is not in the short-term dynamics of liquidity. As we restart our operations in the next, over the next 12, 18 months, we’re most likely going to want more money to be able to give us higher costs, more expensive buses and manage the construction that we have related to that.
So until it’s done and resolved, we’re exploring every imaginable option, whether it’s how the existing union is formed. As you know, today we have a capacity of 1250 million with a minimum liquidity of 250 million. And we’re looking at things, but still, just like other examples of debt, whether it’s a government or a type of organization, or examples of a kind of subordinated debt. So we’re going to — we’re working on all of this to verify and localize a solution that makes sense for us as a company to work flexibly for our banking syndicate to make sure they continue to help us through this.
And then though, we understand that they’ve been ridiculously active for the last 2. 5 years as we control our path through COVID and the chain of origin, we’re getting there, they’re doing everything they can to manage their threat profile. And we’ve had super government officials that we’ve talked to, whether at the provincial or federal point about the importance of our company, not only as an employer of other people in North America and around the world, but also quite frankly, as one of the key enablers of the zero-emissions program.
So all those things are in place. The [indistinguishable] form of debt, the final liquidity figure, the total package of commitments that we think makes sense to manage this era of uncertainty. I don’t need to be frivolous about it. But I’m going back to the bidding and auction universes at the macro level, the auction universe or what other people say they’re going to buy, it’s an absolute record, our order ebook is very healthy, we have a lot of things. Pending the batter’s box is just waiting for the paperwork.
Therefore, it is not a call for the problem. It’s about making sure that we have the flexibility and that our credit partners have the security and the threat assessment, the threat, the appetite to help us manage that. Not to be silly or to be simple, it’s very complicated, but we are committed and we are confident that we will get this next point of flexibility to help us get through this.
Chris Murray
And any comments around you about the dividend or. . . ?
Paul Soubri
Well, dividend, dividend, we’re going to be betting on this same conversation, okay?There are calculations in our credit agreement that have proof of dividends, etc. It’s a problem. The factor of the moment is that depending on the solution, whether it is a government aid program for advertising fees, etc. , there would possibly be restrictions related to that. The union is obviously interested in knowing where the available cash goes. Therefore, there is still no definitive resolution on how it works or where it falls. You know we have the idea that dividends are a vital component of our business, we need to keep them at the right level. Given the profile of our consumers in our industry, the fact that it’s not a big corporate expansion or an expanding industry, it’s actually a replacement industry. And, in fact, hunting in some cases, more like utilities than any other type of business. That falls within the total discussion of credit unions, liquidity, agreements, etc. And that will be a component of the solution, [indistinguishable] where it all ends.
chris murray
Okay, useful. My next question, looking at slides 16 and 17 for a second, I guess the first thing is related to your comment, so first of all, a pretty very large accumulation in the average sales value in the order book. But also to make the observation that the dollars are consistent with the EU contribution, I guess we would have an idea that it was EBITDA through the type of EU figure. It also goes higher. Historically, you’ve been quite cautious about how you’ve had to think of EBITDA as a constant number. Is there anything becoming the dynamic here?Or is it just some other update on inflation and margin normalization?Or any color around that would be a useful thing.
Paul Soubri
Yeah, that’s also a literally smart query, Chris, because there’s no doubt that if you compare our 2019 or 2022 margins today, okay, the big hit has been the charge for portions that we can’t pass, frankly, hard work and power . Just a silly example, not a silly example, one time example, every single % of hard working power in our plant is worth about $2 million in EBITDA, just on the New Flyer side of our business. And so the inability to build the buses successfully not only has the burden of higher material, but also tremendous hard work power, which really kills our margins. Therefore, there is no doubt that there is a standardization of margins. The other, frankly, and we say it, since we have noticed the arrival of 0 emissions to our portfolio, a 0 emissions bus has a greater margin, whether it is battery electric, electric trolley or fuel cell electric. And so an increase consistent with the percentage of that in our business will have an effect on the overall EBITDA or the combined margin according to the EU.
Chris Murray
Well, that’s helpful. And then on slide 16, you talked a little bit. . .
Stephen King
Chris, sorry, just to intervene, shortly, I think, also in the EV aspect, like a few years ago, in addition to pilot programs, smaller orders, smaller projects that consumers were doing, they were for pilots. And now we’re starting to move to those bigger orders, to bigger economies of scale, to bigger consumer engagements in the electric vehicle. So I think that’s also partly helping the profit and margin profile in some of those electric visitor programs.
Chris Murray
It’s useful. Only if I can, one last time, on slide 16 and thinking about the UK margin, the UK market for a second. Many adjustments are being made in the UK at government level. But I think on a positive note, you saw, I think you called it the biggest commission for Alexander Dennis since 2019. We’re kind of, call it a pent-up request for some time for the British government to make a final resolution where they need to spend and not just make those resolutions to start circulating the funds. Do we start to enter or do you start to see symptoms that those commands are materializing now?And if so, how do we think about the foreign organization’s order expansion in ’23.
Paul Soubri
So when Boris Johnson was prime minister, he foresaw a huge investment in zero-emission buses. And, of course, as we know, it is a personal operator that offers an offer to provide a public service through the offer of public transport. This money announced at the time was intended to help operators offset the charge between a diesel bus and a zero-emission bus, i. e. before COVID. So COVID comes into play and your passenger numbers go into the tank, UK operators rely heavily on the fare box. So the number of passengers began to arrive back. In fact, it’s probably a little more wonderful in the UK than in North America. Operators have not rejuvenated their fleets. They tried 0 broadcasts and we were very lucky with the Alexander BYD association in the UK. But that doesn’t mean they’ve done the fleet renewal in its entirety at this point.
The fact that we’ve had a number of government adjustments over the last 2 or 3 years, which came out of the initial dynamics of Brexit, which has put a lot of things on hold, and the fact that there hasn’t been the same point of government investment from the UK government that it planned. I think those new diesel bus orders show that we’re starting to see consumers obviously saying we want to get to 0 emissions, but without help, we want to rejuvenate our fleets. And they have chosen to do it with diesel buses today, basically with diesel buses. Now we are still taking orders for zero-emission buses. We are still penetrating across the UK and doing so with, within the Alexander Dennis BYD partnership.
We announced last year in this story that we had also reviewed this BYD partnership where, at the end of 23, 24, we will offer our own Alexander Dennis zero-emission offering in the area of double-decker and smaller buses. I think all those things are positive for us. Scotland has stepped up with fairly extensive funding or low-emission financing. The UK has lagged behind. And I think we’re going to continue to see a delay until we see the global economy, the British economy in particular, stabilise a little bit and, frankly, the government is emerging from below.
Chris Murray
It’s useful. Thank you.
Paul Soubri
Thank you Chris
Operator
Just a moment for our nextArray And the next one comes from Daryl Young of TD Securities. Your line is now open.
Young Daryl
Hello, hello everyone. The first query for me is about EV and only the immediate expansion in demand and expected long-term orders. My query is: Is the particular EV supply chain physically powerful enough for you to deliver this kind of volume?Are you starting to see bottlenecks simply due to the lack of volume of key parts that will move to electric cars in the long run?
Paul Soubri
That’s a wonderful question. I think what our procurement team has been looking to do, and unfortunately learned the hard way through COVID, is that we can’t just order a component and expect that component to show up without us understanding the subchain of origin and the [indistinguishable] that comes into play or where the input load comes from, input components, etc. And moving on to what’s going on on the production line right now, 98%, 99% of the portions are there. The structure of the bus is not the big challenge.
These are critical factors that have cascading effects on a giant component of the market that are EV-type or similar to electronics. But, for example, we are missing many brake pads or brake pedals, sorry, for coaches, it has nothing to do with 0 emissions. We have had difficulties in the last month with seat suppliers. It had nothing to do with 0 emissions. We believe that the elements that come from Siemens or BAE that our zero-emission buses or hybrids are remote in some critical parts where there have been problems in the supply chain.
We’re now much smarter in how we source and what we expect from our suppliers given the nightmare we’ve been through over the last year and a half, and now we’re looking to incorporate the expectations of having a subcomponent. available buffer stocks, etc. , etc. Never say we’re through this thing. And it’s actually hard to answer some of those questions about when you pass the dynamics of the source chain, we’re going to have them.
At this point, I think our team is not worried about the end of the 23rd and 24th. As we are today, where we put some of the key parts, again, in the comments we made on the script. Each bus is another in many conditions and therefore managing this customized nature of the origin chain presents its unique challenges. We are deeper and smarter about where and how we buy products and what suppliers expect. Therefore, it will be a risk. We are making any and all efforts to manage it.
The other part, I suppose, is, let’s say the other party is investigating where we can get other source resources. So traditionally we had a battery supplier at the end of this year and next year we have a momentary battery source for zero-emission buses. Today, we offer two other hybrid systems, [indistinguishable] and BAE. So we check where we can do things at the source to load only the competitive tension on the chain of origin, but also the ability to make sure that we can solve our customers’ disorders in another way, if we find disorders in the chain of origin.
Stephen King
Yes, Daryl, just to intervene. Yes, we reportedly saw an announcement from us last week on ADL that they have put a new battery supplier online in addition to the legacy BYD appointments they are working with. Then also, as Paul alluded to, suppliers of choice that we also bring to North America. It is vital to permanently expand the base of the source in the battery space.
Young Daryl
It is ok! So, the query at the moment is only about the accumulation in the average value of the bus in the order book. I think we’ve increased more than 30% compared to the 2020, 2021 era when a lot of that investment would have been announced. So, I guess my query is, and I think the values are likely to pass a level as the electric vehicle mix continues to evolve. So, my query is, how much money do we have, the amount of investment that has been announced to date?Do we literally want more investment?
Paul Soubri
I would say that, of course, we manage, monitor and track the dollars and sets, which you refer to, and if the sets charge more, you can buy less. Therefore, we monitor and monitor each customer’s fleet, fleet age and fleet composition. We take your fleet replacement plans and publish them and then put them into effect, which gives us our request. There’s a situation where I could say, well, we don’t want six or seven, 6500 sets a year in North American transit, we want 7000 or 8000 to catch up with fleet replacement strategies. What we’ve tried to do is Mark’s mood. oversized expectations, or the total duration of market expectations with all this dynamic that buses will charge more.
The other truth is that not only can you buy a more expensive bus, but most operators still want to invest in charging infrastructure. on. So, the good news is that there is a lot of cash, in Canada and the U. S. In particular, the U. S. government is incentivizing operators to move forward on this zero-emissions schedule. , 5, 7, 10 electric buses, and now we’re starting to see 30, 40, 50 to 100. So, our vision of recovery from the pandemic, but the fleet transition is also very healthy and given this overall investment number. Will they potentially have more investment in the future?Absolutely.
Young Daryl
It is ok. And one last one on [technical difficulty].
Stephen King
Sorry Daryl.
Paul Soubri
To find.
Stephen King
I hate doing that again. I was just passing through to say yes, I mean, I think what we also noticed is that Paul alluded to Canada, now a federal program, a multi-billion dollar program focused on the genuine transition to 0 emissions. And then the U. S. , $100 billion plus [indistinguishable] infrastructure investments, is concentrated in transit investments. And like the channel, for example, it went from $180 million to $1. 2 billion year over year. task of investing much more money to concentrate on the top load of the vehicles. But as Paul said, as we move beyond 25, 26, well, there needs to be more funding, probably to reflect the top charge load of — those vehicles. But it seems that the government has definitely stepped up and invested a lot of extra cash to encourage zero-emission shopping and buses.
Young Daryl
Fine thank you. And then, just secondary market margins and some of those constant contracts, hopefully there are a few more quarters that haven’t developed yet, or are some of those constant-price contracts about to expire?
Paul Soubri
Go ahead, Pipasu.
Pipasú Soni
Sorry, I think we were silenced. Can you repeat this about secondary market margins?
Young Daryl
Are you just curious to know if the six contracts that reduce the quarter’s margin, if they will span several quarters or if they are about to run out?
Pipasú Soni
I would say that at this point we are about to launch into those. So I don’t think they will pass any extras from our point of view.
Pipasú Soni
Yes, I think, Daryl, the way of thinking yes, like our business, I think in the aftermarket and Paul, kindly if I’m. . . If I say something wrong, I think third parties are probably transactional. So someone orders In part, we provide them with 0. 33 contract, and contract contracts are definitely shorter-term. When I think yes to address the point, most of that will have an effect on flow and may be worthwhile and make sure the changes are very well implemented. We also seek to update our list of values in those contracts to reflect inflation where possible.
Paul Soubri
And I think another thing we upload is.
Operator
Thank you. Our next one for a moment. Our next one comes from Scotiabank’s Mark Neville lineage. Your line is now open.
Marc Neville
Hi, hello, guys. Can you hear me? I only have one with the [indistinguishable] line of a wider audience.
Operator
Yes, we can hear you.
Paul Soubri
Yes, we can hear you. In passing.
Marc Neville
It is ok. Yes, great, thank you. Perfect. Listen, I appreciate that discussions are delicate and complex. But I’m curious if you think there’s a situation or a street to do this, do it or get relief or an additional investment that wouldn’t be diluent. , or some kind of dilution, or maximum dilutions?
Paul Soubri
Well, obviously, that’s our goal, Mark, is to look for a way to live with liquidity that we can manage with a little more patient debt design that has a little bit of runway to push us back on our volumes and therefore become a company business that generates EBITDA and money to pay off debt and, therefore, get out of debt. It’s not that we’re not looking, but our ultimate preference is to check and do whatever dilutes our existing shareholders. We have done it twice in the last 2 years. So, that’s obviously our goal. And it’s a complicated negotiation, which is part of why we’ve engaged other levels of government to see if there are other tactics to work with the union to, again, manage their expectation of threat, but also not obstruct or obstruct opportunity. for the long term of our company.
Marc Neville
Droit. Entendu. Je sought to ask that question. So, alone, Paul, did you talk about being complete until 2023?I mean, pretty much what line rate or how do we deserve us to think about production rates next year, and the fact that they sell you at [indistinguishable] type of line rate that is?
Paul Soubri
Therefore, we will continue with our 23 orientation discussions once we have our annual operating plan and our long-term plan, solidified through the banking discussion we are conducting, as well as board approval. The current speed of operation of our activities in all our facilities, all our product lines are muted for the pre-COVID period. I think I said in today’s script that we believe we can go back to pre-COVID levels until late 2023 and early 2024.
For example, New Flyer operates its business today somewhere in the early 30s in terms of new line entries every week. Before COVID, we were north of 50. So that’s a kind of our desire. The [indistinguishable] you’ve been here, not just setting up the factory, you want professional hard work and portion availability. And if you don’t have both at the same time, you have excessive inefficiencies in your charging base.
Therefore, we don’t need too many actions or too many people sitting doing anything, or we don’t need other people who don’t have the apparatus to do this kind of thing. Therefore, acceleration is delicate. And so we’ve said that when we do this here, to go from, call it 35 buses a week to 37, and 2 weeks later to 39 to 3 weeks later, it’s a slow increase rather than a slow change. It’s just that convenience in terms of efficiency, quality, but we need to get back to levels close to pre-COVID levels until the late 23rd and early 24th from an execution rate perspective.
Marc Neville
It is ok. It’s super useful. And only the last query about idling. Curiosity, is it over and still ongoing and expanded as a primary focus, just as an update?
Paul Soubri
Yes. So we started 2. 5 weeks ago. We extend and adjust the schedules of each of the factories founded in its exclusive structure. I was wrong. But I think after this weekend we’re back to line inputs like before idle. Unfortunately, while you’re down, this means other people get laid off temporarily, which isn’t fun for other people, especially this time of year. We have several teams, old teams, volunteers in some cases who are willing to work those [indistinguishable] weeks of access to help us burn off or end the ongoing excess work. The portions that [indistinguishable] and offline are the buses. So we’re done with the maximum of them. Supply targets to get caught up in a briefing the other day where the vast majority of the servings we were expecting came through, there are still a few issues that the guys are trying to speed up. And he also helped us, I don’t know exactly to what extent yet, but he helped us deliver some of the offline buses and marked offline hours. So we’re going to see that happen over the next two weeks as we either start delivering more cars or finish and deliver more cars. And so this total build had two goals, not to introduce more sets that would create more popular offline WIPs, and #2 to help us eliminate excess WIP.
Stephen King
Sorry, [indistinguishable] just to intervene, you’re right. Yes, about next week we’re going to absolutely go back to the previously reduced operating rates, but everyone will be back to plans [ph] next week.
Marc Neville
It is ok. Stéphane, thank you for your time. Okay and Paul feels better.
Paul Soubri
thanks.
Operator
One moment for our nextArray AND the next comes from Alex Hutton of National Bank. Your line is now open.
Alex Huton
Hello everyone, Alex Hutton for Cam Doerksen today. I found out that ADL recently won this award of two hundred electric, over two hundred in the UK, which is wonderful to see. But I also saw that some of their competitors in the UK market have a smart order. Smart fortune too. We wonder what Alexander Dennis’ position is in the UK market and how the competitive environment has changed. I just hope to have some color in that.
Paul Soubri
That’s a very smart question. Therefore, there are 3 main domestic competitors in the UK. There’s Alexander Dennis, who is by far the market leader. Number two is Wrightbus. Number 3 is Switch Mobility, which in the past was called Optare. We also have buses soldwhich are manufactured in China, for example, through [indistinguishable] and some others. Wrightbus, the number two player, went through a bank reshuffle or any word in the UK a few years ago, has recovered a bit, but it has nothing to do with the volume it had before this registration process.
Our market share continued to hold at over 60% of anything [indistinguishable] in the UK. And far beyond that when it comes to zero-emission buses. Wrightbus now offers electric buses and mobile fuel buses and has won some orders. Optare or Switch have not gained popularity. And we’re seeing the same kind of penetration from Chinese players.
I already said in one of the questions that we are very excited about what Alexander’s Dennis is doing. The option to be able to deliver diesel buses, so to speak, or hybrids on your own platform today, the ability to offer buses on the Alexander Dennis Rack on a BYD electric platform and soon the Alexander Dennis platform with our own battery and electronic battery control package, which has garnered great reception from several operators.
Quite happy with market positioning, competitive performance, etc. Although we bought the company 6 or 8 months before COVID, the entire market was particularly affected. I don’t see our competitive positioning deteriorating from start to finish.
Alex Huton
Yes, fantastic. Thank you very much for the color.
Paul Soubri
thanks.
Operator
Thank you. Wait a minute. And I have a follow-up of Kevin Chiang with CIBC. Your line is now open.
Kevin Chiang
Thank you. Just a follow-up consultation from me. Paul, you discussed a kind of ebb and flow with your paintings now that your production goes up and down. I wonder if it exacerbates the labor shortage issues you face or turnover. I know the paintings were one, it was a factor for you, the pandemic. Not sure how this is happening today and whether supply chain issues exacerbate it?
Paul Soubri
Well, there’s no question that hard work is our challenge and everyone’s number two challenge, in our global and Stephen talked about that [indistinguishable] to our competition that shut down for weeks, our competition is out of line with those [indistinguishable] pending portions and so on, which then affects your ability to manage your services like we did. We have, let’s face it, surplus hard work today on our services because we have to build buses online and manage and all the internet offline. So there is no free, however, there is capacity available, what is the offline internet so that we can grow with existing workforce levels?
Going back to pre-COVID levels, there’s no doubt that we’re shifting to wanting to rent more as we move past the 23rd and 2024, which is returning to our kind of attitude of perhaps a broader recession in some markets that only work could allow. Forcing availability because, without a doubt, it is difficult to hire other people in any of our markets today. And we’ve all been under pressure on wage rates and benefits and that sort of thing.
No, there is no doubt that our number one challenge over the last year and part of it has been the availability of spare parts. The turnover of some plants has been slightly higher than others, however, that’s what can be said based on the average industry turnover. . In many cases, we have adjusted corporate wages, some as a result of union negotiations, others that we have done it ourselves just to be competitive in individual markets.
The next chapter, once we have more and more confidence in the chain of origin, is to use that capability to build buses correctly the first time and then selectively rent them where we want them. Some key skills continue to be a challenge in all markets, such as traders, welders, electricians, etc. And we’ve also stepped up our work with local institutions, some of them, a lot of our own learning systems or education systems on many of those key core competencies knowing that in the future, buses may not be less complex or maybe have more [technical difficulty].
Kevin Chiang
Perfect. It makes a lot of sense. Thanks a lot. That’s it for me.
Operator
Merci. Et at the moment, I am raising any other questions. I would like to return to the conference to Mr. Stephen King.
Stephen King
It is ok. Thanks Norma. We have a webcast of Simon Chu [ph]. And that simply said, have you noticed that consumers are more hesitant to place orders from the company in its contract with NFI after announcing the need for a relief in commitment?
Paul Soubri
[Indistinguishable] in answer to a big question, the answer is no. In each of our situations, especially in public situations, we have offer bonuses or functionality bonuses in position that help the consumer perceive and be sure that we are or can deliver the product they ordered from us. We, the vast majority of the time, our proposals involve built-in monetary statements. We have full disclosure to our consumers of our demanding situations, etc. During the more than 2. 5 years, we have controlled the dynamics of short-term pacts and have been very transparent with our consumers. To date, we have not noticed any negative impact.
Stephen King
Hi, Paul, [indistinguishable] and I think you covered it all. But again, as I mentioned earlier, this is an industry problem. Therefore, we did not see any public consumers cancel. And I think everyone realizes that our competition also has the same problems. So, if you cancel an order or if you went with another supplier, it will be the same delay in delivery and dispute. And I would say the good news for us, as industry leaders, is that we have this track record of functionality, this track record of delivering the highest quality cars and the most productive functionality for our consumers.
But again, yes, definitely an industry factor in the sourcing challenge, which I think our consumers really realize and appreciate. And as Paul alluded to, we’ve actually noticed that our order e-book grows and our rewards arrive. And as we said, the highest deals ever recorded in the third quarter. Therefore, the call is very, very high.
And with that, I think we’ve answered all the questions. We will conclude this call. Norma, I know you’re going to close, but I just need to tell everyone that there will be a recording on our online page, as well as the filing and a copy of the transcript of that call will also be on our online page. Pleasure. And soon we will communicate with everyone. Thank you and have a smart day.
Operator
That concludes the convening of today’s convention. Thank you for your participation. You can now log out. Everyone is having a glorious day.