NFI Group (TSE:NFI) raised the low end of its 2026 earnings guidance after reporting higher third-quarter revenue and adjusted earnings, as more consistent bus deliveries helped the manufacturer improve margins and reduce its reliance on a busy fourth quarter.
Revenue rose 14.5% from a year earlier to approximately $1 billion, while adjusted EBITDA increased 34.3% to $108.7 million. Adjusted net earnings were $35.4 million, or $0.30 per share. Net earnings were approximately break-even, reflecting in part a non-cash impairment on battery cells.
President and CEO John Sapp said improved production and deliveries during the first three quarters helped NFI spread its workload more evenly across the year. In 2025, supply disruptions delayed deliveries and led to a significant fourth-quarter catch-up.
“It was unhealthy for us to be dependent on a strong Q4 at the end of the year,” Sapp said. Better supplier performance and on-time parts availability have helped reduce rework, overtime and unfinished buses, he said.
Manufacturing and aftermarket margins improve
NFI delivered 1,113 equivalent units in the quarter, essentially flat from a year earlier. Transit deliveries totaled 773 equivalent units, while motor coach deliveries rose 50% to 270. Medium-duty and low-floor cutaway deliveries fell by 84 units, reflecting the timing of fleet replacements and record low-floor cutaway deliveries in 2025.
Manufacturing revenue rose 15.8% to $837 million, and gross margin improved to 12.1%. CFO Brian Dewsnup attributed the nearly 200-basis-point gain to conversion of the North American transit backlog and higher motor coach deliveries.
Aftermarket revenue increased 8.7% to $171 million, with gross margin rising 220 basis points to 28.7%. Dewsnup cited sales growth, favorable product mix, pricing and tariff management. Aftermarket adjusted EBITDA rose 23.9% to $35 million.
Zero-emission vehicles accounted for 196 equivalent units, or 17.6% of deliveries. Sapp said some transit agencies are emphasizing diesel, compressed natural gas and hybrid vehicles in the near and medium term. Despite the lower proportion of zero-emission deliveries, the company improved its overall adjusted EBITDA margin by 160 basis points, he said.
Guidance and demand outlook
NFI raised the bottom of its full-year adjusted EBITDA guidance to $395 million, while maintaining the upper end at $415 million. The company kept its revenue forecast at $4 billion to $4.2 billion, although Sapp said fourth-quarter sales mix could put revenue closer to the lower end. Cash capital expenditure guidance remained $55 million to $65 million.
Sapp said he expects the fourth quarter to be among NFI’s strongest and anticipates continued growth in North American transit and motor coaches in 2027. The company plans to provide 2027 guidance early next year.
NFI received 1,214 equivalent units of new orders in the quarter and converted another 968 option units into firm orders. Firm orders represented 7,164 equivalent units, or 50% of total backlog, up from approximately 37% a year earlier, Sapp said.
In the United States, a temporary extension of the Infrastructure Investment and Jobs Act runs through Dec. 11, 2026, while Congress works on the next surface transportation bill. Sapp said NFI had not seen a broad-based pause in customer activity during the extension. Stephen King, vice president of strategy and investor relations, said another extension was the most likely near-term scenario.
Battery recall and balance sheet
NFI replaced batteries on 122 buses during the quarter and another 39 in October, bringing total completions to 161. That represents about 23% of the 700 buses expected to be completed by the end of fiscal 2027.
The company recorded a $33.8 million non-cash impairment on battery cells received under a 2025 settlement and expects to sell the cells over the next 12 to 18 months. Dewsnup said proceeds have not been disclosed and are intended to partially offset recall-related cash outflows. King said the cells would probably be sold in several tranches rather than in one bulk transaction.
Free cash flow rose to $41.2 million from $14.8 million a year earlier. Liquidity increased to $661 million following a Canadian bond issuance, and total leverage stood at 2.79 times, above NFI’s target range of 1.5 to 2.5 times.
Dewsnup said bond proceeds were used to repay the first-lien facility and that NFI expects to redraw funds in January 2027 to address a convertible debenture maturity. Once leverage is within the target range, the company will consider capital returns alongside business investment and cash needs, he said.
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¿.
