This article first appeared on GuruFocus .
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Revenue:Increased 18.6% year-over-year to approximately $1.03 billion in Q2 2026.
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Net Earnings:Reported net earnings of $17.4 million, compared to a net loss of $160.8 million in the prior year quarter.
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Adjusted EBITDA:Increased 47% to $104 million in Q2 2026.
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Manufacturing Gross Margin:Increased to $98.2 million, or 11.5% of revenue, up from $75.2 million (10.6%) in Q2 2025.
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Aftermarket Gross Margin:Increased to $55.3 million, or 31.4% of revenue, up from 26.4% in the prior year.
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Overall Gross Margin:Total gross margins of $153.5 million, up 32% year-over-year, representing 14.9% of revenue (a 150 basis point improvement).
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Manufacturing Adjusted EBITDA:$70.7 million in Q2 2026; on an LTM basis, reached a record $276 million.
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Aftermarket Adjusted EBITDA:Increased 38.6% to $42.3 million; on an LTM basis, up 4% to $136 million.
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Operating Cash Flow:Net cash generated by operating activities was $159.1 million, compared to cash used of $69.6 million in Q2 2025.
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Free Cash Flow:Positive at $20.7 million, compared to $15.7 million last year.
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Deliveries:Total deliveries of 1,232 equivalent units (EUs), a 14.5% year-over-year increase. Transit bus deliveries up 22% to 911 EUs; motor coach deliveries up 7.6% to 142 EUs; medium-duty and low-floor cutaway deliveries down 9.1% to 179 EUs.
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Liquidity:Ended Q2 2026 at $520 million, up approximately $193 million year-over-year.
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Leverage:Total leverage reduced to 2.81 times.
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Return on Invested Capital:13.6% at the end of Q2 2026, a 130 basis point improvement from Q1 2026.
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Backlog:Total backlog of 14,483 EUs with a value of approximately $12.5 billion.
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2026 Guidance:Increased revenue guidance to $4.0 billion to $4.2 billion and adjusted EBITDA to $385 million to $415 million. Cash CapEx guidance increased to $55 million to $65 million.
Release Date: August 07, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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NFI Group Inc ( NFYEF ) delivered a strong Q2 with revenue up 18.6% to $1.03 billion and adjusted EBITDA up 47% to $104 million, reflecting improved operational execution and higher production rates.
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The company achieved positive net earnings of $17.4 million in Q2, a significant turnaround from a net loss of $160.8 million in the prior year, highlighting successful cost and margin improvements.
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Aftermarket business posted a record quarter with gross margin expanding to 31.4% from 26.4%, driven by strong demand, including FIFA World Cup activity, and effective pricing and tariff management.
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Liquidity improved to $520 million, and total leverage was reduced to 2.8 times, with the company on track to achieve its target leverage range of 1.5-2.5 times by 2027.
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The company raised its 2026 guidance, now expecting revenue of $4.0-$4.2 billion and adjusted EBITDA of $385-$415 million, reflecting confidence in continued growth and margin expansion.
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Backlog remains robust at $12.5 billion, providing multiyear visibility and supporting future production and earnings growth, with strong demand indicators in North America and the UK.
Negative Points
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The company faces ongoing tariff exposure, including the proposed Section 338 tariffs, which could impact costs and pricing, though management considers it manageable.
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Q3 is expected to be a seasonally slower period with a modest sequential decline in deliveries and revenue due to summer shutdowns and slower customer acceptance, potentially impacting near-term results.
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Aftermarket performance may face tougher comparisons in the second half as FIFA World Cup-related demand is expected to normalize, potentially reducing high-margin revenue.
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The company continues to deal with the financial impact of the battery recall campaign, with cash outflows of $7.2 million in Q2 and ongoing replacement activities.
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Alexander Dennis (UK) operations are undergoing restructuring due to a challenging competitive environment, with benefits expected to take time to fully materialize.
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Working capital investments are expected in Q3 to build inventory for the seasonally strong Q4, which could temporarily pressure cash flow and leverage.
Q & A Highlights
Q: Can you unpack the guidance increase and discuss the quality of manufacturing margins, as well as clarify if the record aftermarket margin is a one-time event or sustainable going forward? A: John Sapp (President and CEO) stated that Q2 performance exceeded expectations, driven by strong operational execution, clearing through legacy seating issues, and faster-than-anticipated WIP reduction. He noted the aftermarket benefited from FIFA World Cup activity, which may create a tougher comparison in the second half as agencies bought ahead. Regarding manufacturing margins, he highlighted continued improvement from a healthier backlog, reduced inflationary pressures, and better overhead absorption from higher volumes, though cautioned on second-half mix effects.
Q: With the new financing in place and leverage near target, how should we think about the next steps for deleveraging, capital allocation, and addressing the convertible debentures and high-yield notes? A: Brian Dewsnup (CFO) confirmed the company is well-positioned to repay the January 2027 convertible debentures using the first lien facility. He stated the primary focus remains deleveraging to the 1.5x-2.5x target range, with expected working capital fluctuations in Q3. He noted options for the US high-yield notes will be evaluated when the call period opens next summer, depending on market conditions.
Q: How should we frame the high and low ends of the updated 2026 guidance, and what are the biggest risk factors and opportunities in the second half? A: John Sapp (CEO) explained the raised low end reflects derisking through improved supplier management and operational execution, though supply chain risks remain. The high end benefits from strong operational performance and process improvements. He highlighted private motor coach order timing as a key variable, with the lower end reflecting potential softness there, while the upper end assumes continued strong execution and volume growth.
Q: The implied second-half EBITDA margin is lower than the first half. Is this due to structural or seasonal reasons, or conservatism? A: John Sapp (CEO) attributed the expected margin step-down to mix effects, including a higher proportion of lower-margin private coach and Alexander Dennis units in Q4, as well as the aftermarket's typically higher margins being less prominent. He also noted Q4 2025 had an unusually high delivery base due to prior supply disruptions, creating a tougher comparison.
Q: What is your view on the Build America 250 Act, and how are transit agency customers responding to the funding uncertainty? A: John Sapp (CEO) expressed optimism about the bill's bipartisan support and progress, though noted it will take time to finalize. He stated there is no broad-based pause in customer activity, citing aging fleets (40% over expected life) as a key driver for recapitalization. The company has strong backlog coverage into 2028, providing time for funding resolution.
Q: Have the restructuring actions at Alexander Dennis (ADL) improved margins, and how are you positioning for potential UK government policy changes? A: John Sapp (CEO) confirmed the cost restructuring is underway and benefits will continue to materialize through the year. The plan was built on current competitive dynamics, but the business is positioned to scale up if UK policy shifts toward domestic manufacturing through franchising models. He emphasized the focus on delivering expected profit levels within the existing competitive environment.
Q: Is there more opportunity to reduce WIP and inventory structurally, or are you at the required levels? A: Brian Dewsnup (CFO) stated there is opportunity to work down inventory balances, which have grown significantly, while balancing the need to support transactional private motor coach sales. John Sapp (CEO) added that improved supplier performance should reduce the need for safety stock, providing a further tailwind to inventory reduction and cash generation.
Q: Is the increase in adjusted EBITDA guidance driven primarily by volume, or are there specific margin improvements from manufacturing efficiencies? A: John Sapp (CEO) confirmed volumes are a significant driver, but also highlighted continued profitability improvements in the backlog, including better ZEB margins. Brian Dewsnup (CFO) added that operational stability has improved labor efficiency per equivalent unit, contributing to the margin gains.
Q: With the aging US fleet, are customers considering retiring units without replacement, or is replacement expected one-for-one? A: John Sapp (CEO) stated agencies are focused on recapitalization rather than reducing fleet size. Brian Dewsnup (CFO) reinforced this view, citing active bids above 6,000 units and a five-year outlook above 26,000 units, noting that extending vehicle life increases operating and parts costs, driving the need for replacement.
Q: How are 2027 slots booked, and does an extension of funding typically lead to a flurry of order activity? A: John Sapp (CEO) confirmed the company is very well booked for 2027 and into 2028 on the North American side. He noted that agency behavior around funding extensions is case-by-case, but the strong firm backlog (43%) provides confidence and time for resolution. He expects a bridge or extension given bipartisan support.
Q: Is the aftermarket strength from FIFA a pull-forward, or could recovering ridership sustain higher parts demand? A: John Sapp (CEO) acknowledged FIFA created unusual demand from certain agencies, but emphasized the core aftermarket business has shown good growth across all agencies. He noted that aging fleets and potential procurement delays would support continued aftermarket parts sales, positioning the company well for sustained demand.
Q: EBITDA per unit declined slightly in Q2 versus Q1. Is this mix-related, and how should it trend? A: Brian Dewsnup (CFO) explained the decline was due to delivering units from WIP with higher associated overheads and labor costs. He expects this to normalize as offline WIP is cleared. John Sapp (CEO) advised looking at LTM figures to smooth quarterly dynamics, noting continued improvement in EBITDA per EU from 2025 to 2026.
Q: Is the mix of new orders trending more toward diesel and away from ZEBs? A: John Sapp (CEO) confirmed a slight decrease in ZEB percentages, with some timing push-outs due to agency infrastructure readiness and policy uncertainty. He maintained high long-term confidence in the ZEB transition, noting the shift is not a
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
