RAIL - NASDAQ

Welcome to FreightCar America's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. An audio replay of the conference call will be available on the company's website within a few hours after the call. I would now like to turn the call over to Chris O'Dea with River on Investor Relations. .

Thank you, and welcome. Joining me today are Nick Randall, President and Chief Executive Officer; Mike Riordan, Chief Financial Officer; and Matt Tonn, Chief Commercial Officer. . I'd like to remind everyone that statements made during this conference call relating to the company's expected future performance, future business prospects or future events or plans may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Participants are directed to FreightCar America's Form 10-K for a description of certain business risks, some of which may be outside of the control of the company that may cause actual results to materially differ from those expressed in the forward-looking statements. We expressly disclaim any duty to provide updates to our forward-looking statements, whether as a result of new information, future events or otherwise. During today's call, there will also be a discussion of some items that do not conform to U.S. generally accepted accounting principles or GAAP. Reconciliations of these non-GAAP measures to the most commonly directly comparable GAAP measures are included in the earnings release issued yesterday afternoon. Our earnings release for the fourth quarter and full year 2025 is posted on the company's website at freightcaramerica.com along with our 8-K, which was filed at market close yesterday. With that, I will now turn it over to Nick for opening remarks.

Thank you, Chris. Good morning, everyone, and thank you all for joining us today. I'll start with a brief review of our full year performance and then share how we're thinking about the business moving into 2026. 2025 was a challenging year for the North American rail market with industry new build rates at some of the lowest levels we've seen in more than a decade. While we continue to view this as a temporarily muted with underlying fundamentals remaining strong. We have positioned ourselves well to maintain resiliency in any market cycle. Against that backdrop, our focus for the year was on disciplined execution, profitability and positioning the company for long-term success. We did just that, and I'm proud of how the team executed. We delivered significant margin expansion, generated $31.4 million in free cash flow, gain delivering market share across the markets we serve, advanced our tank car readiness and lastly, expanded our aftermarket platform through the acquisition of Cardium railcar components, accomplishments that effectively strengthened our financial position and expanded our industry presence. For the year, both revenue and deliveries within our expected range, while our profitability improved meaningfully. Gross margin expanded over 260 basis points. And on a per car basis, adjusted EBITDA rose approximately approaching 10% growth year-over-year, reflecting our diversified mix, improved operating leverage and cost discipline across the platform. We also generated over $31 million of adjusted free cash flow, up approximately 45% year-over-year reflecting our ability to translate earnings expansions into cash. I want to pause on that put because it's important in what was a down year for the industry we not only maintained, but enhanced profitability and cash generation. That speaks to the progress we've made over the past several years, building a leaner, more flexible manufacturing footprint. In particular, our continued growth in conversion and retrofit programs reflects our focus on controlling the factors within our influence to drive profitable growth. These programs require meaningful engineering expertise, manufacturing flexibility and disciplined operational execution, capabilities we've intentionally strengthened across our platform. By structuring our operations to support this level of complexity, we are able to deliver consistent margin performance and attractive returns even when new build volumes remain below long-term replacement levels. Throughout 2025, in addition to our customized solution in conversions, retrofits and other specialized railcar programs, we gained share in new car deliveries across the markets we serve, further demonstrating how our commercial strategy continues to resonate with customers as our flexible manufacturing presence enables us to gain ground on multiple fronts. In addition, from an operational standpoint, our ability to drive performance improvements through programs like TruTrack which focuses on driving consistency and quality, throughput and cost execution along with our broader operational initiatives is working effectively to improve margins and production discipline. We continue to refine plant flow and production sequencing within our Castanos facility driving improved throughput, better cost absorption and greater margin consistency across our manufacturing lines. Importantly, these are structural improvements that make us fundamentally a more efficient and dynamic company that can flex our manufacturing capabilities to support our customers in any market condition. Next, we continue to execute on our strategic road map, advancing our vision FreightCar America as a scaled, integrated rail platform. During the fourth quarter, we completed the acquisition of Carly Railcar Components, a leading distributor of railcar components. This transaction expands our aftermarket capabilities further diversifies our revenue mix and broadens our reach across key regional footprints. Importantly, Carly represents our first acquisition in the aftermarket space and serves a foundational step in building a more robust recurring revenue platform. The acquisition reflects our disciplined approach to capital allocation, prioritizing opportunities that are adjacent to our core manufacturing business enhance our value proposition with our customers and generate attractive returns relative to internal growth investments. With a strong balance sheet and cash generation, we are increasingly well positioned to build on this momentum. We will continue to evaluate strategic, value-accretive opportunities, particularly within the aftermarket and that are aligned with our core rail markets, deepen customer relationships and enhance long-term returns on invested capital. Additionally, we remain focused on progressing tank car redness for this year's retrofit programs and as we have discussed previously, that earliness remains on schedule, and we are prepared to start shipments for our retrofit order in the back half of this year. While the larger opportunity lies in new builds, we view our fulfillment of this retrofit contract as a key step in achieving our longer-term goals. Looking ahead, we ended the year with a backlog of 1,926 railcars by the $137.5 million. reflecting a diversified mix of conversion programs and new car rail builds, providing meaningful visibility into our 2026 production. Our near-term focus is on converting that backlog into profitable deliveries while maintaining the same discipline that define our performance in 2025. As we move into 2026, our priorities remain clear: deliver consistent margin performance, generate strong free cash flow, continue expanding our aftermarket and tank capabilities and deploy capital in a disciplined manner that enhances long-term returns. The operational progress we have made positions us well to execute against those priorities while maintaining flexibility in a dynamic market environment. We remain mindful of ongoing uncertainty in the railcar newbuild market as industry deliveries continue to run below long-term replacement levels. However, history has shown that prolonged underinvestment ultimately leads to a normalization of demand as fleets age and replacement needs reascertain shelves. As I stated earlier, fleet fundamentals and end markets remain strong. And it's a matter of time before this course corrects. As that normalization occurs, FreightCar America is well positioned with a flexible operating model ample capacity and a broader portfolio of offerings and the financial strength to capitalize on emerging opportunities. In summary, 2025 was a year of progress despite a difficult market environment. We improved margins, generated strong cash flow, strengthen the balance sheet and advance our diversification strategy. positioning the company to grow both organically and inorganically as industry conditions evolve. With a disciplined commercial strategy, a lean and flexible operating model and an efficient manufacturing footprint we are well positioned to adapt to changing conditions and deliver sustainable, profitable growth over the long term. With that, I'll turn it over to Matt to discuss the industry dynamics.

Thank you, Nick, and good morning, everyone. I'll provide some perspective on the industry environment and how we position the business commercially throughout 2025. As Nick mentioned, 2025 was a challenging year for the North American railcar market with new build activity running well below historical replacement levels. Customers remain cautious prioritizing capital discipline and fleet optimization over a large-scale expansion. However, underlying fleet fundamentals remain intact with aging equipment and deferred replacement building across multiple car types. . For the full year, we increased our delivery market share by nearly 300 basis points even as total industry deliveries declined to approximately 31,000 railcars from 42,000 in the prior year, reflecting the strength of our commercial strategy, disciplined operational execution and ability to align closely with customer needs. Industry orders also moderated with North American new railcar holders totaling approximately 20,000 units compared to roughly 25,000 in the prior year. Within this environment, we secured approximately 3,250 total orders, including roughly 2,500 new railcar orders, allowing us to maintain new car order share despite lower overall volumes. At the same time, the balance of our orders came from conversions, retrofits and other specialized programs underscoring that our commercial approach extends beyond traditional new builds. These customized projects require engineering expertise, detailed planning and manufacturing flexibility, capabilities that meaningfully differentiate us in the market. By intentionally structuring our operations to support this complexity, we are able to both compete effectively in new car production and support demand with higher value specialized programs. This balanced strategy expands our addressable opportunities and supports profitable growth even when broader industry volumes remain below historical levels. As we move into 2026, backlog visibility provides a stable foundation entering the year. As Nick stated, we exited 2025 with a backlog of 1,926 railcars valued at $137.5 million, representing a diversified mix of conversion work and new car builds. Although backlog levels reflect the broader moderation in industry new car order activity, the composition remains balanced with a meaningful portion tied to specialized and conversion programs. In summary, our commercial strategy is working effectively to maintain order share despite industry headwinds, and we are maintaining the flexibility needed to support customers today appropriately while preparing for a normalization in demand. As a reminder, long-term replacement requirements across the North American fleet continue to suggest annual industry demand in the range of approximately 35,000 to 40,000 rail cars, supported by aging equipment and mandated retirement thresholds. While timing remains uncertain, these structural drivers remain intact. With that, I'll turn the call over to Mike to walk through the financial results in more detail. Mike?

Thanks, Matt, and good morning, everyone. I'd like to begin with an overview of our full year 2025 financials and then share a few fourth quarter highlights. I'm pleased to say that 2025 marked another year of strong profitability despite the challenging demand environment, underscoring the strength of our operational execution, favorable manufacturing cost structure and an enhanced product mix. While our results were solid, industry-wide volume pressure continued to weigh on top line performance reinforcing the importance of our ability to pivot and provide conversion rebody and retrofit programs for customers as well as focus on margin discipline and cash generation. . For the full year, we achieved revenues of $501 million on 4,125 units represented [Audio Gap] for the full year was $44.8 million, representing a $1.8 million increase or a 4.2% improvement from 2024 and effectively demonstrating our successful efforts to enhance profitability. Lease expenses previously classified with an interest expense will be recorded in cost of goods sold as a result of an accounting classification change for our Castanos lease. This change would have reduced our adjusted EBITDA by approximately $3.5 million in 2025 if it had occurred at the beginning of the year. The change has no impact on cash flow, operating income, net income or earnings per share. Adjusted net income for the full year was $18.1 million or $0.50 per diluted share, accounting primarily for the impact of certain noncash items, including a noncash tax benefit of approximately $51.9 million we recorded in the second quarter due to the release of a valuation allowance on our deferred tax assets. This more than offset the $32.2 million noncash adjustment related to warrant liability, which fluctuates each quarter in line with changes in our share price, which as a reminder, solely reflects accounting for the warrant holders investment and does not impact our fully diluted share count. As we have mentioned in prior calls, we remain focused on enhancing cash generation. In 2025, we delivered $34.8 million in operating cash flow and free cash flow of $31.4 million, a 44.8% increase over the prior year. This strong cash generation further supports our balance sheet as we ended the year with $64.3 million in cash and provides us with the optionality to capitalize on future opportunities as they emerge. Turning to fourth quarter highlights. Consolidated revenues for the fourth quarter of 2025 totaled $125.6 million with deliveries 1,172 railcars and compared to $137.7 million on deliveries of 1,019 railcars in the fourth quarter of 2024. The year-over-year change was driven by delivering converted railcars in the fourth quarter of 2025 that carry a lower average selling price, while the comparable 2024 period contain only newly manufactured railcar deliveries. Gross profit in the fourth quarter of 2025 was $16.8 million with a gross margin of 13.4% compared to gross profit of $21 million and gross margin of 15.3% in the fourth quarter of last year. This year-over-year change primarily reflects mix impacts, partially offset by continued productivity improvements and cost discipline. SG&A for the fourth quarter of 2025 totaled $9 million compared to $9.4 million in the fourth quarter of 2024. Excluding stock-based compensation, SG&A as a percentage of revenue increased approximately 50 basis points, driven by the heavier mix of conversion programs versus new car builds in the fourth quarter of 2025 compared to the prior year. In the fourth quarter of 2025, we achieved adjusted EBITDA of $10.4 million compared to $13.9 million in the fourth quarter of 2024, reflecting mix impacts across the comparable periods. For the fourth quarter of 2025, we reported a net loss of $16.6 million or $0.52 per share. This result includes $19.9 million of noncash adjustments related to share appreciation accounting, partially offset by a $2.1 million noncash acquisition-related gain. Excluding certain items, adjusted net income for the quarter was $4.9 million or $0.16 per diluted share compared to adjusted net income of $8 million or $0.21 per diluted share in the fourth quarter of last year. In 2025, capital expenditures totaled $3.4 million reflecting disciplined investment that is consistent with our maintenance cycle. Supported by strong cash generation, we ended the year with $64.3 million of cash and cash equivalents and low net debt operating at the low end of our targeted leverage range of approximately 1 to 2.5x. Looking ahead, we expect capital spending to be $7 million to $10 million in 2026. This is comprised of maintenance level spending of approximately $4 million to $5 million as well as spending to complete our previously announced investment to vertically integrate aspects of tank car manufacturing, reinforcing our measured approach to capital allocation. Importantly, with 4 production lines in place and the flexibility to activate a fifth line relatively quickly, we have embedded capacity within our existing footprint to flex as market conditions improve without requiring significant incremental capital investment. This allows us to focus on disciplined capital deployment towards initiatives that enhance long-term value. The acquisition of Carly railcar components is a strong example of our approach and represents an important step in scaling our aftermarket platform, which generates attractive returns for our shareholders. We also continue to advance our tank car retrofit capabilities in a measured manner positioning the business to participate in adjacent opportunities as demand develops. As we look ahead, we'll evaluate additional complementary opportunities that expand our platform and strengthen our revenue profile to further enhance the stability of our cash flows support more consistent performance across market cycles and drive long-term value for our customers and shareholders. With that, I'd like to turn the call back over to Nick to share our outlook for 2026.

Thanks, Mike. For the full year 2026, we are forecasting revenues between $500 million and $550 million, up 4.8% year-over-year at the midpoint of the range. This expectation is based on an expected deliveries between 4,000 to 4,500 railcars, an increase of approximately 3% to the midpoint range. We expect adjusted EBITDA guidance between $41 million and $50 million for the full year, representing a year-over-year increase of 10.4% at the midpoint versus our lease adjusted EBITDA for fiscal year 2025. We expect a stronger second half year cadence that will scale up to our guided numbers. With that, I'd now like to open up the line for Q&A.

[Operator Instructions] Our first question comes from the line of Mark Reichman with Noble Capital Markets.

So the revenue guidance is $525 million at the midpoint. Now the aftermarket business did about $27.1 million for the full year 2025, you made the Carly acquisition, which I'm assuming will contribute $13 million to $15 million. So to kind of divide those 2 groups, is $40 million to $41 million an appropriate revenue estimate for the aftermarket business in your view?

Mark, this is Mike. Yes, I'd say that's a good view of what we would be expecting for 2026. .

And then secondly, the interest expense was about $17.6 million for the full year. And so with this change with the lease, that's about $3.5 million. So would you expect that interest expense to decline to kind of maybe $14 million to $15 million? And how are you thinking about maybe paying down debt or reviewing the balance sheet capitalization?

Mark, this is Mike again. Yes, I think you're thinking about that right. There will be the portion of interest expense that will now be in COGS, which would get you to about $13.5 million I would expect that interest expense to go down a bit as we do have debt repayments we'll be making here in Q1 as part of our term loan, and we'll see that keep getting a little lower and generating more free cash flow as we pay down debt and continue to work on our capital structure.

So it actually could be lower than, say, $14 million or $15 million for the full year 2026. It sounds like.

Correct.

Okay. And then just lastly, on the free cash flow, where you back out the purchase of property, plant and equipment, is that $4 million to $5 million of maintenance capital, is that equivalent to purchase of plant, property and equipment. .

Yes. Yes, that would be right there. .

Our next question comes from the line of Iva Prcela with North Coast Research. .

On the line to asking question for Aaron Reed. And then my first question is you talked about the margins extending during the quarter. What extent of that was driven by mix? So was it just a higher proportion of higher-margin cars? Or was it more operational improvements or pricing?

Iva, this is Nick. There was -- obviously, both those will influence it. Productivity is where we get the larger of the 2 enhancements in Q4. Obviously, mix can vary quarter-to-quarter. Productivity is the 1 we really sort of drive to focus because that repeats a word going as we drive and make those productivity improvements in. But what we observed in Q4 was more primarily driven by productivity and operational improvements. .

All right. Perfect. And then also in the guidance you provided, are can car retrofit volumes included within that? Or should we think about those as incremental to the delivery outlook for '26?

So they are in there. We're pretty committed before that, that's a multiyear program. So it's not the full program is in 2026. It was a portion of the program. is in 2026, and it rolls in through 2027 as well. But it's in line with what we've said in prior calls and the prior amounts, but it's -- yes, towards the back end of 2026, that program kicks in. .

Our next question comes from the line of Brendan McCarthy with Sidoti.

Great appreciate you taking my questions here. Just wanted to start off on your industry outlook. I think you mentioned 31,000 deliveries in 2025. I have you about a 13.3% market share. And then for 2026, what's your outlook on industry deliveries and your corresponding market share?

And, Matt, Tonn here. When we look at the overall industry, we do believe that we'll see deliveries in the $25,000 to $30,000 range. order activity will probably follow suit to what we saw in 2025. So we are expecting some moderation of order activity with increases in activity as we get into the second half of the year. .

Understood. I appreciate that. And that might -- I think according to my rough math that might put your market share closer to 15%, 16%. Is that accurate? And what would drive that uptick there from 2025?

Yes. So your numbers are accurate for how we track it. I would say this about the overall market. Our differentiation and our approach to the market is 1 of collaboration with customers where they find value in what we bring with engineering expertise capabilities not only on the new car front, but also on the conversion retrofit front. We see opportunities for growth in both of those areas in the marketplace. .

Understood. I appreciate that detail. And then breaking down the 2026 guidance a little bit, what assumptions would really cause deliveries to come in at the low end of 4,000 in 2026? And then on the other side, what would cause deliveries to come in at the high end, around 4,500.

So I'll start with that one, and then Matt can probably fill some additional details in this. So if I know you recall this time last year, -- we talked about uncertainty in the outlook for the year would favor us given our agility and our ability to convert orders reasonably quickly and be able to bring things as a pipeline and all the value proposition we have. And that's what transverue. So we gained market share last year despite a prevailing backdrop of sort of reduction across the industry. And I expect this to be similar this year is where customers are facing any level of uncertainty. We're able to offer some certainty on the timing and the agility and the response time to build. And as Matt says, not just new builds, but on conversions and rebodies as well, where that may be a better alternative for a customer rather than an outright new car. So I think that's what -- the main drivers are going to be. This time last year, there was a lot of uncertainty around tariffs. We answered those questions on were fully USMCA compliant, a lot of our end users have now got on questions that they didn't have last year regarding to tariffs and inputs and outputs across the freight network. And then we've got some uncertainty more recently on oil prices, et cetera, generally oil prices, if they're sustained higher for a bit longer, typically favor rail. So there's a number of macro economics, which I think will definitely favor the back half of this year with railcar demand, and we expect to see that just on seasonal timing such as harvests and various product deliveries which need for rail. And then if oil prices stay high, you would expect to see more things move to rail due to pure economics of the freight efficiency. And the underlying process of the rail industry, the metrics are pretty decent for their industry. The velocity is pretty good. The utilization is pretty good. So it's a reasonably healthy industry propping that up. which would imply that this is more pent-up demand as opposed to demand that's being deferred indefinitely. So a lot of those things really sort of go into our thought process of how we look at that forecast. And the forecast is, as you mentioned, the unit volume is it doesn't take into account whether it's a rebody or it's a new car, it's still a unit. So I think that's where we've got some confidence in the amount of units we can ship the deliberation will be, whether it's a new or retrofit car, and that can be obviously dictated by a number of different macroeconomics, but Matt anything I missed on that.

One other comment. Majority of what we talk about in the industry right now is replacement demand. It's certainly the cycle that we're in. However, we play in multiple market segments where there is new business demand that derives the needs for new railcars. And oftentimes, that new business is tied to infrastructure build-out. -- and permitting. And at times, those can be accelerated or delayed. So when we look at that gap of 4,000 to 4,500 a lot of -- a lot of that gap is tied to the timing in which those infrastructure improvements are completed and the demand for the cars are known and permitting. But we're in a really good position with those particular segments. It's just a matter of time when those fall into '26 and then the latter part of the year or maybe put it early '27. .

Understood. And I really appreciate the color there. And as it relates to your capabilities in rebuilds and retrofits, what are you seeing as far as demand goes? It seems like order flow picked up there in 2025 from 2024 -- are you seeing relatively higher demand there on that front, just maybe considering some of the economics around the new build market. .

Yes, we do because it does offer customers significant price savings and value of the rail asset. A lot of it is tied to the existing railcar underutilized assets that are what we call the donor cars that are used in the conversion process. But we do believe that the demand for conversions is long-standing, and we continue to operate in the marketplace to develop those opportunities as those ores come in. .

Got it. Got it. And last question for me, just on the backlog, just entering 2026, where the current backlog level is as well as considering your outlook for deliveries of 4,250 at the midpoint. It seems like the backlog covers a smaller portion of that compared to recent years. What can investors -- what can we take away from there as we look into 2026?

There's a couple of things. One is we've done a lot of work on leaning out our operations, and that translates into the productivity improvements you saw in Q4 as a financial productivity improvements in Q4. What that allows us to do is be a lot more agile in our manufacturing footprint and take opportunity to retool or rebuild lines to be more optimized in a quieter period and then have them be able to scale up capacity without significant infrastructure during busier periods. So we're able to respond to those market dynamics in a way that doesn't require major infrastructure changes, which I think is a benefit to us. That's what we referred to last year and our ability to sort of capture that. We do believe that the back half of this year will be the busier half of shipments. A couple of reasons for that is similar to last year is we may build items in Q2, and then we ship prebuilt and built items in Q3 and Q4. So you just see those delivery dynamics going through that way. And then you often see period with our customers the way they preapprove their large capital expenditures, their order placement may be drift towards the end of Q4 into Q1 and sort of this time of year. late Q1 into Q2 as those CapEx approvals coming through. And we populate those into our pipeline. So we've deliberately constructed and build our infrastructure to take that sort of uncertainty from the marketplace, then to turn it into a strength that we can respond with agility and to the customers' needs and be able to run multiple capacity levels concurrently on different lines. So when 1 product is in demand, we can ramp up that productivity on that line and then wind down on a different line if demand isn't there in that period of time. So a lot of that work that translates to productivity is being able to accommodate those sort of customer cycles that come through and been able to still offer that guidance on shortened lead times and shortened prep times from customers.

Just on the order gestation period can be a long period. What we talk about is booked orders. So obviously, we have visibility prior to it being booked -- and I think Matt mentioned before, there's some projects were maybe permitting or maybe something which is just a trigger point that's going to convert to an order. So we can have a sense of visibility and security around order placement, it's just prebook, but we only communicate actually booked orders, which is where we were able to give a confidence on our guidance, which may, may not have the fully booked commitment behind it, but we have the work and the process and the pipeline that supports it, both internally and with our customer discussions, if that makes sense. That makes sense.

Our next question is a follow-up from Mark Reichman with Noble Capital Markets.

First, I just wanted to ask about the industry. I mean -- it seems like the orders of kind of the deliveries -- orders and deliveries have kind of lagged by choice. I mean, you had the tariff uncertainty, there's economic uncertainty. But the opus that we get to past replacement cycle. And so I was just wondering, it's not like the industry is out there all using new equipment or don't need the equipment. Is there a metric that you look at? I mean, can you look at like retirements versus deliveries to try to get an indication of when you might expect orders to accelerate in terms of -- and is that 40,000, -- do we think that that's a good number? Or are there some structural dynamics that were there either because of different types of cars are doing more with less, that might suggest either a lower or higher number?

Yes, Mark, you look at the mandated age of a railcar for retirement is 50 years. So you can back that up with some certainty on the build in the late '70s and into the early '80s to understand what's going to fall out. Some of those cars have already fallen out, but many of them are still operational. And depending on which forecast you look at, somewhere between 150,000 and 200,000 railcars are going to fall out in retirement over the course of the next 4 years. So with some certainty, we can look at that metric to understand what cars, what car types are going to require replacements in that time frame. And there are some differences when we look at capacities, you have higher-capacity cars today. both in cubic capacity and in gross railroad. But overall, it's a pretty good indicator of what we see that will fall out. And of course, we monitor the new car opportunities based on market segments and growth in various markets where the new rail demand is required.

And you're pretty well positioned across the cycle because you have a pretty healthy conversion business, and you can do rebodies and you've got the parts business. Now -- when I look at just margins, so in the manufacturing Segment, margins were about 12.2%, 13.5% for the year. So we're kind of assuming 13.5% in 2026. The aftermarket business was 33.6% in the fourth quarter, just under 35% for the full year. I mean, do you think those -- do you see any items kind of affecting your margins in 2026 relative to 2025?

Mark, this is Mike. I think for a manufacturing segment, I think that's a good basis to go on into 2026 based on the pipeline and mix we see. I think it will be pretty similar. On the aftermarket, I think as we integrate our acquisition and move down the line, we should see some accretive generation there and some enhanced margin, but that will probably be a little more towards the back half of '26 going into '27 as we continue to scale that business. .

Okay. And then just lastly, if you could just remind me, I think the orders for fourth quarter were like 348. Just how long does it take for these orders to convert into deliveries?

You're correct on the order volume. It can take anywhere from a year down to days. It sort of depends on the customer the need, the planning of that particular customer. I will tell you, though, that as Nick mentioned, our ability to pivot and meet customer needs based upon the flexibility, operational excellence of the plant allows us to be able to meet customers' needs very quickly and in short lead times. .

I am not showing any further questions at this time. I would like to turn the call back over to Nick Randall for any further remarks.

Thank you. 2025 was a year of disciplined execution and resilience despite one of the weakest North American new build markets in more than a decade. We expanded margins, gained share in markets we serve and delivered strong cash generation. Gross margin improved meaningfully, up 260 bps and adjusted EBITDA increased, reflecting mix improvements, operating leverage and cost discipline. We continue to generate strong free cash flow of $31 million, up 45% year-over-year and ending the year with over $64 million of cash and low net leverage. We are making strategic progress to strengthen our platform through the completed acquisition to bolster our aftermarket business and remain on track in advancing our [indiscernible] retrofit readiness program. Looking ahead, we are positioned for continued success in 2026 with a strong year-end backlog, strong free cash flow generation and a balance sheet to drive durable growth. With that, thank you.