FreightCar America, Inc. 17th Annual Midwest IDEAS Conference

Thank you, John. Thank you very much. Well, good afternoon, everybody. My name is Nick Randall. Mike Reardon is just in the front here for any questions that come up. Just going to orientate myself to make sure I can proceed. We have our normal forward-looking disclosure statements. Please be aware of those. A bit about us. We are a rail manufacturing company. We are 125 years old. We are a pure play manufacturer, and I will get back into that in a bit later as to opposed to a leasing company. We are focused purely on manufacturing. We began life as a coal car company way back as a part of U.S. Steel. For the first 110 years or so, we focused on coal cars. Then we grew our product portfolio organically in the early part of the century.

In 2018, we manufactured our last railcars in the United States, and we moved our manufacturing to Mexico. In 2019, we started manufacturing in Mexico and been sort of growing the business from a railcar manufacturing business the last four or five years. More recently, we have expanded through M&A into the aftermarket business. That is the parts, components, and distribution of components, and we will talk about that as well. That is really where we have been for the last 125 years. A couple of highlights. Our revenue has grown 25% over the last five years. Adjusted EBITDA has grown by over 1,000 BPS. Market cap recently hit just under $320 million. Our share price growth has been over 4.4x with free cash flows of $89 million and growth margin growth as well.

I am going to talk through how we have done that and what we do to go forward from that through the next couple of pages. We have a diverse product portfolio. You can see various pictures of them on there. What is important to see on this is our product portfolio grew organically as opposed to through acquisition. One of the important features of that is there is a lot of shared engineering in our platforms, in our systems. Some of our products, such as the hoppers and the covered hoppers, share a significant portion of the same components, the same bill of materials, and the same designs, so that from a manufacturing perspective, you can interchange them and substitute them effortlessly which drives cost out of the business and increases our productivity.

From a product mapping to the customer perspective, if you look at the typical market for the railroads across North America, we break into three groups: the leasing community, that is the red portion; the Class 1 railroads or the large railroads, the blue section; and then private owners or private ecosystems in the gray section. The leasing group is pretty much where we drive our pure play manufacturing because we are not a leasing company. That resonates well with that group that we are not a competitor, we are a supplier, and we can interact with their end users with a more intimacy and design and configure our products to the end user's requirements specifically, which is a pretty good key advantage for us. Railroads, they typically buy larger fleets. We work very well with railroads and customized products specifically for the railroads.

They get a unique product that suits their unit length, the conditions their railroads run in, and their service maintenance intervals. Private shippers and private owners, these are short lines or closed ecosystems such as mines and aggregate areas where we are able to do mixed alloys to enhance the corrosion resistance to match the product and materials type to the product or commodity being moved. For all those reasons, we are able to diversify our product and maximize our product portfolio to match the customer's pain points. We look at the main types. Open-top hoppers, we are number 1 in the market position. Market leader on open-top hoppers. A principal driver of that is our gating mechanisms and the multi-alloy, multi-material corrosion resistance that we offer in those places. That really helps drive that market position.

With a number 1 market position, we have a number 1 gross margin that goes with it as well. It is a nice commanding position to be. Gondolas, we probably get about a third of the market on gondolas. One of our primary products we do build is a gondola, is what a coal car pretty much evolved into. We have got a lot of experience and expertise in those. Covered hoppers, we have really sort of entered the covered hopper market with a lot of energy over the last 2 or 3 years, going from sort of a niche product for us to really sort of dominating that space and growing in that space.

We have just recently got a lot of growth in that covered hopper market, and we are able to offer a unique set of designs, such as a shorter footprint or a highly configured product to meet exactly what the end users require. Flatcars are really interesting for us. I will separate flatcars into two types, Intermodal and non-Intermodal. Non-Intermodal are usually highly engineered, configured flatcars unique for that customer needs, and we have our on-site and inside engineering team who do a great job of configure it to end users. Boxcars, we have Boxcars in our portfolio. Unless we absolutely have to, we will usually let other people build Boxcars. They are more of a commodity product for us, and sort of you can see that represented by the blue bar. Tank cars, we will be entering the tank car market in the future. We have a couple of designs approved.

You've got the designs approved for general purpose tank cars, and we will be configuring and getting our plant certified over the coming years. Expect 2028 to 2029 to be that launch window of tank cars into the marketplace. Our current product portfolio covers approximately 70% of the market. Normally in the market, we consider the market in the industry to be about 40,000 units a year placed. We can see there is some cyclicality on that. Right now in 2026, we expect orders placed to be around 25,000 to 26,000, in a trough of that average market with an uptick back to 40,000 over 2026 and 2027. Sorry, 2027 and 2028, with 2028 being when we expect to see 40,000 units placed again.

Well-positioned, growing in the sectors covered hoppers and flatcars, and pretty much number one already in open-top hoppers, where we command a nice premium. We also look at the fundamentals driving the railcar market. These are the commodities and the things that are being shipped by railcar, which would drive the demand or appetite for replacement railcars. When we look at the first half of 2026, it's the first time since 2019, or it was the highest since 2019, the first half of the year being at just over 5.68 million carloads, which is a signal that the railroad and railcars are clearly in use at sustainable rates. Then we look at the categories or the commodities. Grain, and grain is moved by covered hoppers, covered hoppers being the largest segment, is up 12% year-on-year.

The amount of grain being shipped by railcars this year is up 12%. Petroleum products and petroleum derivatives are up by 7.4%. Intermodal is up just short of 7% at 6.7%. Grain mill products is up at 5.2%. Carloads excluding coal, everything else, up 4.5%, then chemicals at 2.1%. Of these 20 commodities that are tracked, 16 of them grew year-over-year, and most of them the highest quarter since 2021. Some good underlying fundamentals about the health of what's being moved on the railroads. That will help drive new car demand as we look forward over 2027 and 2028. In addition to new railcars, we've really started to push on our aftermarket business. Our aftermarket segment, we've done parts for quite some time. That was typically historically providing parts for our coal car fleet, unique aluminum parts.

We really spent some periods of time growing that business and now augmenting that business with bolt-on acquisitions. We recently bought a company called Carly Railcar and then Southern Parts & Equipment in the last nine months. The aftermarket is a rail-adjacent opportunity for us, but it has a different cyclicality or a different flow than our whole goods do. There's a couple of things that drive the attractiveness on there. As railcars age and railcars need serviceable maintenance, that's consistent regardless of the commodity uses. There's just stricter regulatory standards, which require components and elements to be replaced and repaired. Then we have OEM supply challenges.

As an OEM of a railcar, we have good relationship with those component manufacturers and part manufacturers, and we are able to bundle and combine deliveries so the end user gets one delivery as opposed to multiple deliveries, and that consolidation converts to a price premium for us and a service enhancement for the end user. The aftermarket process is pretty attractive for us, and we have been actively adding that organically and inorganically to grow our business. A couple of different positions we have for total growth. We have a flexible manufacturing campus. Our campus in Castaños, we have four operating lines. Typically, each line can run about 1,500 railcars a year, so four would give us a capacity of 6,000.

We have a fifth manufacturing line that is not turned on, but it is under roof, so we could turn that on in less than 90 days if customer demand justified it. More recently, we took a big operation improvement in Q2 where we have demonstrated continuous productivity improvements over the last two years, and we had surplus headcount. We are able to build more than one product type down the same line. Historically, that would be more than one product line, but on different periods. More recently, we can do more than one product line simultaneously. We could really build a covered hopper, followed by a mill gondola, followed by a covered hopper, followed by an AGON in the same line, in the same shift, in the same people. That gives us a huge amount of agility in the rail space.