Hello, and welcome to the Greenbrier Companies Third Quarter 2025 Earnings Conference Call. At the request of the Greenbrier Companies, this conference call is being recorded for instant replay purposes. At this time, I would like to turn the conference over to Mr. Justin Roberts, Vice President of Financial Operations, the Americas. Mr. Roberts, you may begin.

Thank you, Ken. Good afternoon, everyone, and welcome to our third quarter 2025 conference call. Today, I am joined by Lorie Tekorius, Greenbrier's CEO and President; Brian Comstock, Executive Vice President and President of the Americas; and Michael Donfris, Senior Vice President and Chief Financial Officer. Following our update on Greenbrier's Q3 performance and our outlook for the remainder of fiscal '25, we will open up the call for questions. Our earnings release supplemental slide presentation can be found on the IR section of our website. Matters discussed on today's conference call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Throughout our discussion today, we will describe some of the important factors that could cause Greenbrier's actual results in 2025 and beyond to differ materially from those expressed in any forward-looking statements made by or on behalf of Greenbrier. Throughout the call today, we will refer to recurring revenue throughout our comments. Recurring revenue is defined as leasing and fleet management revenue, excluding the impact of syndication activity. And with that, I'll hand the call over to Lorie.

Thank you, Justin. Good afternoon, everyone, and thank you for joining us. As we begin today, I'm pleased to report that Greenbrier's operational execution resulted in strong financial performance for our third quarter ended May 31, 2025. Net earnings of $60.1 million or $1.86 per share increased sequentially and year-over-year. Our aggregate gross margin stands at an impressive 18%, marking our seventh consecutive quarter at or above our mid-teens long-term target. We also achieved a return on invested capital, or ROIC, that falls within our long-term target range. I am very proud of our team throughout the organization. Our innovation and excellence extend from the shop floor to our headquarters and across all Greenbrier's global sites. The team's flexibility and responsiveness to uneven market conditions are a competitive advantage for Greenbrier. Two recent examples of our efficiency initiatives are our European footprint rationalization and our North American insourcing project. I'm pleased to share that we delivered our last freight wagon from the Arab Romania facility in late May, ahead of initial expectations. Our aggregate production capacity in Europe remains largely unchanged and may increase as we continue investing in the remaining locations. Once the capacity rationalization activity is completed, we expect to realize savings of at least $10 million annually. In North America, the expansion of our in-sourcing capacity in Mexico nears completion. The full value of the initiative will be realized as production scales through fiscal 2026 and beyond. Additionally, we're continuing to reduce overhead throughout our global manufacturing network. Our leasing and fleet management operation maintains a disciplined approach to growing our lease fleet, ensuring predictable revenue and cash flow. We are nearly halfway to meeting our goal of doubling recurring revenues by fiscal 2028. Greenbrier renewed and extended two bank facilities totaling $850 million in May. Michael will provide more details in his remarks, but I want to highlight that our debt profile now features more nonrecourse borrowings to support our lease fleet growth. Our balance sheet is in very good shape and liquidity is at its highest level since 2023. A healthy liquidity position is a critical enabler of our strategy. It allows us to navigate various market conditions and act opportunistically. Greenbrier has a very long history and has operated through various macro backdrops. As progress continues towards deals with America's most important trade partners, U.S. MCA-compliant products like our new railcars remain free of direct tariffs. Also, the Senate's passage of the budget bill today includes tax policy that we expect will energize the markets for capital goods like railcars. As U.S. tax and trade policy becomes more certain, this will be a welcome tailwind for Greenbrier and our customers. Our experienced and agile team will flex our manufacturing capacity to rapidly respond to changes in demand and maximize our operating efficiency. We are positioned to achieve our strategic plan and expect escalating value creation as the demand for our products and services grows. Looking ahead, we see a strong finish to our fiscal year and are optimistic about market conditions in the medium to long term. Lastly, I'm pleased to note that we repurchased approximately $22 million of shares during the quarter. Along with our consistent dividend, this demonstrates the continued confidence of our Board and leadership in our long-term strategy, affirming our commitment to return value to our shareholders while investing in the business. And with that, I'll turn the call over to Brian Comstock.

Thanks, Lorie, and good afternoon, everyone. In Q3, we delivered 5,600 new railcars and our Q3 manufacturing gross margin of 13.6% remained steady from Q2. I am proud of the focus and performance of the manufacturing team. This quarter, I visited two of our facilities in Central Mexico. The energy, collaboration, and the innovation occurring at these key operations is highly encouraging. Across our network, our focus remains on reducing costs and controlling what we can. Leasing and Fleet Management had another quarter of good performance. Recurring revenue reached nearly $165 million over the last four quarters, representing nearly 50% growth from our starting point of $113 million a little over two years ago. Fleet utilization also remained high at 98%. Greenbrier's lease fleet grew modestly from the prior quarter. This reflects opportunistic additions to the fleet as well as the thoughtful nature of our approach. Our intent remains to invest up to $300 million annually on a net basis with railcar fleet additions that meet our strict return parameters and concentration criteria. Net fleet investments are expected to come in lower this year, resulting from a shift in customer activity and product mix. We are building a balanced railcar portfolio in a disciplined manner. This requires us to be shrewd and patient. The quality of our fleet, its utilization rate, railcar lease renewal volume, and meaningful progress towards our recurring revenue target demonstrate the value of that approach. Lease renewal trends remain strong. We entered fiscal 2025 with about 10% of our leases up for renewal and have successfully renewed most units. We are confident that we will successfully renew or remarket all units as railcar availability in the North American railcar fleet is expected to remain tight due to supply-side shrinkage from fewer builds and increased scrapping levels. We generated strong liquidity and margins through syndication of 1,700 units in the quarter. The timing of syndication activity remains driven by customer delivery requirements and production scheduling. Turning to the new railcar market, Greenbrier secured orders of 3,900 units worth more than $500 million in the quarter. While inquiries have been slow to translate meaningfully, order activity has gradually improved, and our sales pipeline is strong. Customers are seeking clarity on U.S. trade policy and waiting for commodity prices and other key economic indicators to reach a level of equilibrium. Our global new railcar backlog remains healthy at nearly 19,000 units, providing industry-leading visibility in our new railcar markets. This allows us to manage production lines and volumes effectively and supports a reliable revenue outlook. We expect aggregate gross margin percentage to remain solidly in our mid-teens long-term target range as we leverage the operating efficiencies gained over the last two years. The North American fleet average age for a railcar exceeds 20 years, the highest level in a decade and a key driver for steady growth in the railcar maintenance market. Programmatic railcar restoration activity not included in our backlog and our deliveries continues to perform well. In Europe, railcars are being ordered for projects driven by underlying necessity, but activity will be muted until the economy's trajectory improves. There are pockets of activity such as railcars needed for infrastructure investment in Germany, and we remain confident in the medium- and long-term prospects for European economic recovery. As the European economy grows, the freight rail industry will be needed to support expansion. In Brazil, demand is modestly increasing as customers complete infrastructure investments and shift to purchasing railcars. Brazil may stand to benefit from U.S. tariff activity as trading routes are reordered. If that occurs, we expect subsequent benefits to the freight rail sector. As you know, we've been here before and though we've faced even more challenging times, our deeply experienced management team knows how to operate through all kinds of economic conditions and industry cycles. We will effectively navigate short-term market volatility and deliver strong performances. We are successfully executing our strategic plan, and have either exceeded or are on track to meet each target in that plan. That is a testament to the work and dedication of our colleagues at Greenbrier. I could not be prouder of the entire team. With that, I'll hand the call over to Michael.

Thank you, Brian. I'm pleased with our financial performance in the third quarter of 2025 as we continue to execute our strategic plan. I'm proud of the team's effort to continue enhancing operational efficiency, which has delivered favorable gross margin and bottom line results. Greenbrier remains in a strong financial position. Revenue of $843 million improved by 11% sequentially, and we remain on track to achieve our revenue guidance for the year. Aggregate gross margin remained robust at 18% as we continued to see favorable railcar delivery mix, improved operating efficiency, increased syndication activity, and the benefit of higher recurring revenue. This represents the seventh consecutive quarter meeting or exceeding our mid-teens gross margin target. Operating income of $93 million or 11% of revenue benefited from strong performance, including gains on sale related to lease fleet optimization. Foreign exchange was favorable related to the strengthening foreign currency. Our tax rate of 23% in the quarter was better than expected, primarily due to the strengthening Mexican peso. Diluted EPS was $1.86, and EBITDA for the quarter was $129 million or 15% of revenue. For the 12 months ending May 31, 2025, our return on invested capital, ROIC, was 12.9% and continues to be within our 2026 target of 10% to 14%. Moving on to our balance sheet. Greenbrier Q3 liquidity was nearly $770 million, consisting of almost $300 million in cash and more than $470 million in available borrowing capacity. I'm pleased to highlight that on May 21, we renewed our $600 million domestic revolving credit facility and a $250 million term loan. This extends maturities into 2030 with no significant maturities until 2027. I'd like to express my appreciation for the team's effort and commitment in getting these deals done. We generated nearly $140 million in operating cash flow for the quarter, driven by strong operating performance and working capital efficiencies. We expect liquidity to remain robust, reflecting positive operating results, ongoing working capital efficiency improvements, and increased borrowing capacity. Now, switching to capital allocation. We remain disciplined and committed to returning capital to our shareholders through a combination of dividends and stock buybacks. Greenbrier's Board of Directors declared a dividend of $0.32 per share. This is our 45th consecutive quarterly dividend, and it's a direct reflection of the confidence we have in our business. Additionally, during the quarter, we repurchased nearly $22 million in shares, leaving $78 million remaining in our share repurchase authorization. We will continue to utilize this capacity opportunistically and within the framework of a broader capital allocation strategy. Finally, we are updating our guidance for the remainder of fiscal 2025. We are raising aggregate gross margin percent by 75 basis points at the midpoint to a range of 17.7% to 18.3% from our prior guidance. We are also raising our operating margin percent to a range of 10.6% to 11%, which is 35 basis points higher at the midpoint from our prior guidance. In addition, we are affirming our delivery and revenue guidance. We expect investments in manufacturing to be around $145 million and gross investment in leasing and fleet management of $270 million and proceeds from equipment and sales of around $75 million. This updated guidance reflects better visibility into the mix and disposition of our production plan for the fourth quarter. In conclusion, our third quarter results reflect strong execution, improved efficiency, and disciplined capital deployment, all while delivering returns to our shareholders. We're well positioned heading into the final months of the fiscal year, and I remain confident in our team's ability to deliver on our strategic priorities. And now we'll open it up for questions.

Our first question comes from Bascome Majors with Susquehanna.

You've been more precise and quantitative with guidance, and we appreciate that. There are some pretty meaningful moving parts sort of below the operating income line. I was hoping we could walk through just with one quarter left in the fiscal year and talk through some of what you might expect at least directionally on the interest FX line, the unconsolidated affiliates, and non-controlling interest as we try to kind of bridge down to EPS after three very strong quarters.

Yes. Great to hear from you on this Tuesday afternoon. Broadly, from an interest expense line item, we would expect pure interest expense to be probably in the 22% to 25% range, maybe towards the upper end of that range in the quarter. The thing that causes headwinds is FX, which, as you've seen throughout the year, can be very large positives or very large negatives. In the most recent quarter, we had a pretty big benefit from that. I think about $5 million pre-tax, which after the volatility on a nine-month basis gets us to about $1 million of upside. It's been a journey, a wild ride a little bit from that perspective. But we don't expect or project a lot of volatility in the peso or euro. I think if we did that, you wouldn't be talking to us necessarily right now; we might be on a beach somewhere. So that's our best visibility from a guidance perspective for Q4. With regards to our kind of below-the-line item areas, I think we would say that we're probably tracking in line with what we've seen, largely this year for unconsolidated affiliates and probably in line with what you saw in the first quarter for non-controlling interest. It's kind of our best bag based on production schedules and timing of syndication activity right now.

And I would say maybe earnings from unconsolidated affiliates are looking at the overall average for the nine months, yes.

Yes. Yes. All right. So maybe zooming back, I mean, you've been facing more challenged order levels for some time now. Although I think the commentary on North America was maybe modestly optimistic, I felt like the way to characterize that. Just with what we're seeing as we close out this year, do you think that production rate is when you're comfortable with deeper into next year? And regardless of the answer to that, when do you get to the point where you need to make decisions on kind of reducing production rates if orders don't improve? Or is what we're seeing right now reflecting those decisions already.

Lorie, do you want to go first on the...

Yes, you follow up, Brian. I would just say, Bascome, it's nice to hear your voice. We have been adjusting production rates and production lines. I would say probably this entire fiscal year, we've been adjusting towards what is the market demand, working with our customers to make certain that we are feathering that appropriately to maintain the visibility that a strong backlog gives us. So 19,000 cars of backlog gives us really nice visibility. We're able to weave in, as Brian will talk about, more current orders on top of the existing backlog.

Yes. I think that—it's Brian, Bascome. That's right, Lorie. If you look at production rates, we have taken adjusted production rates down. Some of that started to come into focus here in late Q3, as well as Q4. But as we look out into the future, combined with the backlog, the sales pipeline and inquiry levels are definitely up. We've talked to a lot of the big shippers in the space. There is a tremendous amount of attrition that is going on kind of universally throughout the North American fleet, particularly the boxcar fleet. I think they're losing somewhere between 6,000 to 8,000 cars a year, and those aren't being replaced. The pent-up demand towards the back half of the year, we think, is going to be fairly robust. It's just—not if, it's just the timing of when. So we're continuing to monitor the production lines and our backlog as we balance future demand that we see coming back versus what we're dealing with today.

So high level, it sounds like there's some optimism that the second half of fiscal '26 can show some recovery as orders improve into maybe a more certain environment. Is that fair?

Yes. That's been exactly, Bascome. We're already seeing some positive signs broadly, but we continue to have—as Brian said, very strong order inquiry activity, and then it's just translating that into firm activity. At the end of the day, we do see just—frankly, just as the fleet is aging, cars will need to be ordered.

Our next question comes from Ken Hoexter with Bank of America.

Great. Happy for the July week. I want to kind of follow up on that a little bit, right? So the 18,900, it's the lowest backlog you've had since the second quarter of 2014. I just want to understand, I mean, I guess on the locomotive side from a locomotive manufacturer, we keep hearing that same theme, right, Justin, that the locomotives are getting older and older each year, and they're able to kind of refurb them and extend the life. Lorie, what—I guess, what's the confidence in terms of getting those orders given the backlog is now at such a historic low point? And maybe dig into a little bit of the mix of deliveries versus lease cars, but let's talk about that in a second. Let me just dig on the backlog first.

Sure, Ken, and thanks for making me feel old. It feels like we've certainly had this level. This is a very robust level of backlog. I didn't appreciate that it would be considered low, and I think I'm just thinking back to my early days at Greenbrier. I have tremendous confidence in our commercial team and the products that we bring to the market. As Brian said, we've had the opportunity to talk to a lot of customers here for the North American market, and then I was over in Europe a month or so ago. We're hearing the same thing from these customers. They desire railcars; they just need a little bit of clarity around tariffs and trade policy to make that commitment because they don't already have expansions or other activities underway. We do think that there's going to be, as soon as—maybe as soon as the big beautiful bill gets completed or just a little bit of time with settled down trade talks, that demand is going to convert into orders.

Yes. Maybe I'll tack on to that as well because there are a few things in the legislation that we think are going to be a potential catalyst. You've got 45Z, which is the renewable fuels bill that looks like it's going to get through and be very beneficial to the ethanol and soybean crush side of the world; that's going to create some demand as well as kind of the bonus depreciation or expensing. We think that similar to the effects it had last time, it's going to have some positive impact on backlog. But setting that aside, the other part of the backlog that I think is new that people don't really appreciate because we don't really talk about it that much is that there are several thousand cars that are not counted in that backlog that are part of programmatic railcar restoration activity; this is something we started a couple of years ago. It's a big part of our production, and it's very meaningful. So you think about our production rates of just say 20,000 cars a year of new cars that may not include and does not include maybe as many as 3,000 cars a year that are going through these restoration programs.

And the other thing I was going to add on is what's nice about the last few years is it's really been diverse demand. We haven't seen a particular car type that's driving whether it was in the past sand cars or crude cars or ethanol cars; this has been broad-based demand. So it's allowed us to maintain multiple varieties of lines running.

I guess on the refurb, because I mean that's a big driver for, let's say, the locomotive side. Is there — is that a scaling business because that would explain why the fleet can keep getting older or maybe we don't need 6,000 to 8,000 box cars a year if we can kind of refurb some of them? Is that something that numerically, is that something you're going to break out in terms of what that contributes on the manufacturing side? Or is that higher margin and that's why margins are going up?

I'll leave that part of the question to Joseph, and maybe give a little bit more clarification on the difference between locomotive refurb and what we're doing. A lot of these cars that we're talking about that are falling off the cliff are aging out. There isn't any level of refurbishment or rehabilitation that's going to bring those cars back. Those are truly going to exit the fleet, and they do need to be replaced. Now on boxcars, think about it: if there's 7,000 a year going out, the replacement is probably about 5,000 because of cubic capacity increases. On the railcar restoration, these are things like re-jacketing of pressure cars, refurbishment of GP cars. These are cars that are 10, 15 years old that are committed to the requalification life, and they do have very high margins.

Okay. So let me get back to the other part of my first question, which was the mix of deliveries, right? So 5,600, and you've been growing the lease business nicely, but it went up, what, 200 cars on the owned fleet. You sold off 1,700 out of your lease fleet and 3,900 was new production. So if you aim to keep the leased fleet and CapEx is down, do we see that production, I guess, decelerate or not necessarily?

Well, I think part of that is we're becoming a little more active in the used car market as well. I mean, I think we can say that there's definitely been quieter demand, and there's been a little more direct sale activity versus leased activity over the last few months. As we are committed to growing the leasing business and we're also committed to continue to originate good deals, put those in our cars, but also to balance out with our syndication partners; the best way we can kind of dance between these raindrops effectively is to be a little more active in the used car market. So that's where we see an opportunity to grow the fleet and maybe a little more aggressively in the year ahead.

Perfect. Great job on the ongoing savings. Lorie, that was great to hear on the European that as you keep closing these facilities, the ongoing savings. So I appreciate the insights.

This concludes our question-and-answer session. I would like to turn the conference back over to Justin Roberts for any closing remarks.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.