NFI Group (TSE:NFI) executives highlighted a “record quarter” and a “record year” during the company’s fourth-quarter 2025 earnings call, pointing to higher manufacturing profitability, a $13 billion backlog, and progress on deleveraging. Management also discussed the financial and operational impacts of a battery recall settlement reached in December, and provided 2026 guidance while flagging headwinds tied to U.K. demand and the evolving tariff environment.
Record Q4 and full-year 2025 performance
Chief Financial Officer Brian Dewsnup said the fourth quarter was the largest in company history for both revenue and adjusted EBITDA. NFI reported a 22.5% year-over-year increase in Q4 revenue and an almost 79% increase in adjusted EBITDA. Adjusted net earnings in Q4 were $59.6 million, up 45.7% from Q4 2024.
Battery recall settlement and 2025 normalization adjustments
Management detailed the December settlement related to a previously announced battery recall. Dewsnup noted that in Q3 2025 NFI recorded a $229.9 million provision related to the recall, primarily for expected recall-campaign costs, plus a smaller portion for “potential additional warranty and support costs” tied to other non-recall electric buses in service from the same battery manufacturer.
The final settlement agreement reached in December included multiple elements, according to the company, including:
- An immediate cash payment received in December
- An inventory of battery cells from a “leading global provider,” which NFI said it plans to use with a new battery manufacturer starting in late 2027
- The hiring of certain engineering and service employees to support the recall and oversee other electric buses
- The assumption of software and intellectual property, plus facilities for office/engineering labs and battery-cell storage
- A cash payment in escrow to support transferred employees and facilities
On a net basis, Dewsnup said NFI recorded a $63.9 million loss tied to the settlement and described the approach as conservative, given uncertainty around whether certain warranty claims may materialize. He added that the company is focused on managing recall-campaign costs to lower cash outflows. Because of the non-recurring nature of the event, NFI said it “normalized” adjusted EBITDA and adjusted net earnings to account for recall and settlement impacts.
Dewsnup also walked through notable non-recurring items affecting 2025 results, including $25.9 million related to a June 2025 refinancing, $137 million of costs at Alexander Dennis tied to impairment and restructuring, a $19 million seat supply adjustment for labor inefficiencies and unproductive overhead, and the net impact of the battery recall and settlement of $39.6 million. Adjusted net earnings for 2025 were $85.4 million, up $88.8 million from 2024.
Deliveries, pricing, and margins
On deliveries, NFI said transit bus volumes declined, driven primarily by lower U.K. deliveries. Transit bus deliveries were down 6% in Q4 and down 7% for the year, partially offset by higher North American deliveries. Despite lower deliveries, the average selling price (ASP) of a heavy-duty transit bus increased 33% year-over-year, which management attributed to converting “stronger backlog to results.”
Motor coach deliveries rose 48% in the quarter versus 2024, driven by “customer demand, acceptance, and seasonal timing,” while ASP increased 3% year-over-year. The low-floor cutaway and medium-duty segment posted a record full-year delivery total of 761 units, up 22% year-over-year, with Q4 deliveries up 12%. ASPs in that segment rose 15%.
Aftermarket gross margin percentage improved versus Q3 and versus 2024, reflecting sales mix benefits and updated pricing for the impact of tariffs. In manufacturing, gross margin rose to 14.8%, an increase of 780 basis points from Q4 2024 and 460 basis points from the prior quarter, after adjusting for battery recall impacts. Dewsnup said the improvement was driven by backlog conversion and geographic mix. He also said manufacturing adjusted EBITDA increased by $59 million, or 167%, in Q4 and rose by nearly $150 million for the full year.
Free cash flow in 2025 was positive at $67.8 million, up $86 million year-over-year, driven by operating performance and lower cash interest costs. Dewsnup said working capital changes had a significant positive impact during 2025, largely due to the battery recall provision, partially offset by higher inventory received in the settlement and higher accounts receivable tied to a busy December delivery period.
2026 guidance, backlog visibility, and key risks
President and CEO John Sapp, who said he has been in the role for just over two months, outlined four strategic pillars for 2026: operational excellence, market leadership, profitable growth, and long-term value creation. He emphasized supply chain performance and cost management as priorities, alongside converting backlog into deliveries and expanding aftermarket penetration through targeted components and increased use of e-commerce platforms.
For 2026, NFI guided to revenue of $3.9 billion to $4.2 billion, adjusted EBITDA of $370 million to $410 million, and cash capital expenditures of $50 million to $60 million. Sapp said the company expects to likely reach its target leverage range in 2027 and described deleveraging as a key capital allocation priority.
Management highlighted backlog metrics and demand indicators supporting its outlook. NFI said its backlog is now over $13 billion and includes more than 15,300 equivalent units (EUs), with 41% firm orders and 59% options. The company said it has filled its 2026 North American public market production slots and is “now selling well into 2027.” The option conversion ratio reached 83.4% in 2025, up from 76.3% in 2024.
On the demand environment, NFI said it ended the quarter with active bids of 7,120 EUs, including about 4,100 EUs in submitted bids, up 12.6% year-over-year. The company cited a five-year expected public bid universe of roughly 25,000 EUs, up 14.7% year-over-year, which management said reflects a longer-term replacement cycle as fleets retire older buses.
However, executives also outlined headwinds. Sapp said the U.K. order book is a “high priority” because overall demand in the region is “behind our expectations,” even as the company has been encouraged by the rollout of new EV products. He said NFI is continuing discussions with government partners on the importance of domestic manufacturing, noting support in Scotland but seeking broader focus to improve domestic production and procurement outcomes.
Tariffs were another focus. Management said guidance includes “current known impacts of tariffs as of March 11, 2026,” but does not assume material future changes that could affect demand, pricing, or costs. Executives said the largest tariff impacts were tied to Section 232 truck and bus tariffs and steel and derivative tariffs. NFI said tariffs are generally treated as pass-through costs via contractual terms and pricing actions, though discussions with customers are required and full cost recovery is not guaranteed. Management added that tariffs are currently expected to weigh more on private motor coach demand than on public market demand, given U.S.-based manufacturing for public market products.
During Q&A, management also addressed supply chain topics. Sapp said seating supply constraints have improved “remarkably,” though he expects some lingering impact into Q2 with full resolution anticipated in early Q2. Executives said they were monitoring geopolitical events in the Middle East but did not see broad supply chain exposure. On receivables, management attributed the Q4 increase to a heavier December delivery profile and higher ASPs, and said collections had started to normalize in Q1.
Looking ahead, the company reiterated that the revenue and EBITDA outlook is increasingly a “volume story,” with continued—but less central—benefits expected from pricing, as higher production and backlog conversion drive results.
About NFI Group (TSE:NFI)
Leveraging 450 years of combined experience, NFI is leading the electrification of mass mobility around the world. With zero-emission buses and coaches, infrastructure, and technology, NFI meets today’s urban demands for scalable smart mobility solutions. Together, NFI is enabling more livable cities through connected, clean, and sustainable transportation. With over 9,000 team members in ten countries, NFI is a leading global bus manufacturer of mass mobility solutions under the brands New Flyer® (heavy-duty transit buses), MCI® (motorcoaches), Alexander Dennis Limited (single- and double-deck buses), ARBOC® (low-floor cutaway and medium-duty buses), and NFI Parts¿.
