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FreightCar America, Inc. (RAIL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $118.6M versus $147.4M in Q2 2024 and $96.3M in Q1 2025; adjusted EPS of $0.11 beat Wall Street consensus of $0.055*, and revenue modestly exceeded consensus of ~$114.9M* .
  • Gross margin expanded to 15.0% (+250 bps YoY); adjusted EBITDA was $10.0M (8.4% margin), supported by favorable mix and productivity gains .
  • Orders and backlog strengthened: 1,226 units booked ($106.9M), backlog rose to 3,624 units ($316.9M), up ~300 units QoQ; management reaffirmed FY 2025 guidance for deliveries (4,500–4,900), revenue ($530–$595M), and adjusted EBITDA ($43–$49M) .
  • Non-GAAP items were significant: GAAP diluted EPS $0.34 reflected a $51.9M non-cash tax valuation allowance release partly offset by a $47.6M non-cash warrant liability adjustment; fifth consecutive quarter of positive operating cash flow ($8.5M) and adjusted FCF ($7.9M) underscore cash-generation durability .
  • Near-term catalysts: stronger 2H deliveries cadence, continued margin discipline, tank car retrofit investment (capex raised to $9–$10M for 2025) and industry tariff clarity; management tone confident on replacement cycle and share gains .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and profitability: “Gross margins for the quarter expanded to 15% on 939 deliveries… Adjusted free cash flow of $7.9M” .
  • Commercial momentum: “We secured 1,226 new orders… valued at $107M… backlog to 3,624 units, up ~300 units from the prior quarter” .
  • Cash generation and balance sheet: “Our fifth consecutive quarter of positive operating cash flow… closed the quarter with $61.4M cash and no borrowings under our revolver” .

What Went Wrong

  • Lower volume YoY: Revenue and deliveries declined vs Q2 2024 (118.6M on 939 units vs 147.4M on 1,159 units), reflecting timing of shipments and market softness in new railcars .
  • Higher SG&A: SG&A rose to $10.1M vs $8.5M in Q2 2024; ex-SBC, SG&A/revenue increased ~260 bps due to timing of professional services .
  • Large non-cash volatility: $47.6M warrant liability adjustment offset by a $51.9M valuation allowance release; GAAP optics noisy despite steady adjusted performance .

Financial Results

MetricQ2 2024Q1 2025Q2 2025 Estimate*Q2 2025 Actual
Revenue ($USD Millions)$147.416 $96.290 $114.894*$118.623
Diluted EPS ($USD)$0.11 $1.52 N/A$0.34
Adjusted EPS ($USD)$0.11 $0.05 $0.055*$0.11
Gross Margin %12.5% 14.9% N/A15.0%
Adjusted EBITDA ($USD Millions)$12.1 $7.307 N/A$10.018
Adjusted EBITDA Margin %8.2% N/AN/A8.4%
Deliveries (units)1,159 710 N/A939
  • Values with asterisk are Wall Street consensus from S&P Global.

KPIs

KPIQ1 2025Q2 2025
Orders (units)1,250 1,226
Orders ($USD Millions)~$141 $106.9
Backlog (units)3,337 3,624
Backlog ($USD Millions)~$318 $316.9
Operating Cash Flow ($USD Millions)$12.794 (Q1) $8.528 (Q2)
Adjusted Free Cash Flow ($USD Millions)$12.464 (Q1) $7.920 (Q2)
Cash & Equivalents ($USD Millions)$54.084 (end Q1) $61.353 (end Q2)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Railcar Deliveries (units)FY 20254,500–4,900 4,500–4,900 Maintained
Revenue ($USD Millions)FY 2025$530–$595 $530–$595 Maintained
Adjusted EBITDA ($USD Millions)FY 2025$43–$49 $43–$49 Maintained
Capital Expenditures ($USD Millions)FY 2025$5–$6 (incl. ~$1 for tank retrofit) $9–$10 (growth capex for tank retrofit/new tanks) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Operational efficiency/productivityGross margin improvement on mix/productivity; running 4 lines at capacity 15% gross margin; productivity gains, agile model highlighted Improving margins; sustained focus
Tariffs/macroTariff uncertainty noted; USMCA alignment; replacement cycle resilient Softer new railcar demand due to tariff policy uncertainties; replacement cycle intact Near-term headwind; long-term intact
Orders/backlog cadenceRobust pipeline; 1,250 orders; backlog $318M; stronger 2H deliveries expected 1,226 orders; backlog +300 units QoQ; Q3/Q4 deliveries to step-up Momentum sustained; 2H ramp
Tank car retrofit/new tank carsMultiyear retrofit agreement; prep capex in 1H25 Capex raised; retrofit starts mid-2026; ~$6M EBITDA over 2026–27 Strategic expansion; margin accretive
Product mix (VersaFlood/open/covered hoppers)Mix drove 2024/early 2025 margins; boxcars low-margin exited Mix supportive; rebuilds/conversions important Mix supporting margins; aftermarket strength
Capital allocation/leverageTarget net leverage 1–2.5x; cash generation TTM net leverage ~1.2x; funding growth capex Balance sheet strengthening

Management Commentary

  • “We increased utilization across our four production lines, delivered improved productivity, and benefited from a richer product mix… particularly in rebuilds and conversions” — Nick Randall, CEO .
  • “Adjusted net income… $3.8M or $0.11 per share… non-cash tax benefit of ~$52M due to release of valuation allowance… partially offset by a $47.6M non-cash adjustment to warrant liability” — Mike Riordan, CFO .
  • “Order intake… back-to-back quarters with a book-to-bill of 1.3… conversions and rebuilds provide value and optionality” — Matt Tonn, CCO .
  • “Capex in 2025 now $9–$10M… growth capital for tank car retrofit program and future production of new tank cars” — Mike Riordan, CFO .

Q&A Highlights

  • Deliveries cadence: Q2 step-up from Q1 but not dramatic due to changeovers; Q3/Q4 significantly higher to meet guidance .
  • Margin sustainability: Management expects Q3/Q4 gross margins similar to Q1/Q2; mix and productivity drive margin profile .
  • Tank car retrofit economics: ~$6M of EBITDA over 2026–2027; program begins mid-2026 with potential for additional orders .
  • Aftermarket vs manufacturing: Aftermarket sales growth continues; production was higher than deliveries with shipments slated for 2H; demand dictates sales more than capacity constraints .
  • Coal-related demand: Increased inquiries for extending life of coal assets (repairs/parts), with conversions more likely than new builds near term .

Estimates Context

  • Q2 2025 adjusted EPS of $0.11 versus consensus $0.055* — a clear beat; GAAP diluted EPS $0.34 reflects non-cash adjustments .
  • Q2 2025 revenue of $118.6M versus consensus ~$114.9M* — modest beat; limited coverage (EPS estimates: 2; revenue: 3)* .
  • Target price consensus $15.00*; consensus recommendation unavailable*.

Values marked with an asterisk are retrieved from S&P Global.

Key Takeaways for Investors

  • Margin and cash engine intact: 15.0% gross margin, 8.4% adjusted EBITDA margin, 5th consecutive positive operating cash flow — supports near-term resilience even as volumes fluctuate .
  • Mix and flexibility are strategic advantages: Rebuilds/conversions and agile manufacturing offset softer new-car demand amid tariff uncertainty; book-to-bill ~1.3 for consecutive quarters .
  • 2H delivery ramp is the near-term driver: Expect stronger Q3/Q4 shipments to meet reaffirmed FY guidance; monitor execution vs backlog conversion .
  • Tank car program is a medium-term margin lever: 2025 capex up to $9–$10M to vertically integrate; ~$6M EBITDA contribution over 2026–2027, with retrofit starting mid-2026 .
  • Non-cash GAAP volatility persists: Warrant liability remeasurement and valuation allowance release skew GAAP EPS; focus on adjusted metrics and cash generation for underlying performance .
  • Estimates likely to revise upward on margins/cash: Given beats on revenue and adjusted EPS and reaffirmed guidance, Street models may push margins higher and recognize 2H cadence*.
  • Watch macro/tariff clarity and coal-related activity: Near-term order timing sensitivity remains; potential coal-related aftermarket/conversion work provides incremental support .

Appendix: Additional Data from Primary Sources

  • Q2 2025 headline metrics: Revenue $118.6M; gross profit $17.8M; gross margin 15.0%; adjusted EBITDA $10.0M; GAAP diluted EPS $0.34; adjusted EPS $0.11; operating cash flow $8.5M; adjusted FCF $7.9M .
  • Non-GAAP drivers: $51.9M tax valuation allowance release; $47.6M non-cash warrant liability adjustment .
  • Orders/backlog: 1,226 units ($106.9M) ordered; backlog 3,624 units ($316.9M), up ~300 units QoQ .
  • FY 2025 guidance reaffirmed: Deliveries 4,500–4,900; revenue $530–$595M; adjusted EBITDA $43–$49M .
  • Prior quarter snapshot (Q1 2025): Revenue $96.3M; gross margin 14.9%; adjusted EBITDA $7.3M; adjusted EPS $0.05; orders 1,250 units ($141M); backlog 3,337 units ($318M); operating cash flow $12.8M; adjusted FCF $12.5M .
  • Q4 2024 reference: Revenue $137.7M; deliveries 1,019; gross margin 15.3%; adjusted EBITDA $13.9M .