NFI Announces Battery Recall Agreement with XALT

Executive Summary

• NFI Group signed a Master Settlement Agreement with XALT Energy that will recover approximately 75‑80% of its $229 million battery‑recall provision.
• The settlement provides an immediate cash payment expected to boost Q3 2025 pro‑forma liquidity by ~26% (≈$100 M) and additional escrowed funds for 2026 costs.
• Transfer of XALT assets—including battery cells, management software, IP, a Michigan office lease, and 21 engineering/service staff—enhances NFI’s battery supply chain and supports its zero‑emission platform roadmap through 2027.

Key Details

• Cash Recovery: Majority cash payment to be received by Dec 31 2025; will increase total liquidity (pro‑forma) from $386 M by ~26% (~$100 M).
• Escrow Payments: Additional cash held in escrow for certain 2026 costs related to personnel and facility transfers.
• Asset Transfers:
• Inventory of new battery cells from a leading global cell manufacturer (originally purchased by XALT).
• Battery management software and associated intellectual property.
• Lease of Michigan‑based office and engineering lab; storage contract for the assumed battery cells.
• Personnel Transfer: 21 Michigan‑based software, engineering, and service team members hired to support the recall and ongoing bus fleet oversight.
• Recall Cost Outlook:
• Total warranty provision expense recorded in Q3 2025: $229 M (≈700 vehicles).
• Expected cash outflows for battery replacements over 18‑24 months starting Q2 2026: $70‑$90 M in 2026 (35‑45% of total) and the balance in 2027.
• All 2026 cash expenses and part of 2027 outlays to be fully funded by settlement proceeds.
• Financial Reporting Impact: Settlement will be reflected in Q4 2025 results; adjustments expected to improve quarterly net earnings, Adjusted EBITDA, and Adjusted Net Earnings after normalizing for the non‑recurring recovery.
• Strategic Implications: Enables NFI to accelerate introduction of a second battery supplier by 2027 and strengthens support for its existing electric‑bus backlog.

Notable Quotes

“This collaborative settlement is positive for NFI and our customers,” said Paul Soubry, President and CEO. “It delivers immediate cash payments to commence the battery recall… positioning us to accelerate the introduction of a second battery supplier in 2027.”