Good day, everyone, and welcome to the Trinity Industries Third Quarter Ended September 30, 2025 Results Conference Call. Please also note today's event is being recorded. Before we get started, let me remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 and includes statements as to estimates, expectations, intentions, and predictions of future financial performance. Statements that are not historical facts are forward-looking. Participants are directed to Trinity's Form 10-K and other SEC filings for the description of certain business issues and risks, a change in any of which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. At this time, I would like to turn the conference call over to Leigh Mann, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone. We appreciate you joining us for the company's third quarter 2025 financial results conference call. Our prepared remarks will include comments from Jean Savage, Trinity's Chief Executive Officer and President; and Eric Marchetto, the company's Chief Financial Officer. We will hold a Q&A session following the prepared remarks from our leaders. During the call today, we will reference certain non-GAAP financial metrics. The reconciliations of the non-GAAP metrics to comparable GAAP measures are provided in the appendix of the quarterly investor slides, which are accessible on our Investor Relations website. These slides are under the Events and Presentations portion of the website, along with the third quarter earnings conference call event link. A replay of today's call will be available after 10:30 a.m. Eastern Time through midnight on November 6, 2025. Replay information is available under the Events and Presentations page on our Investor Relations website. It is now my pleasure to turn the call over to Jean.

Thank you, Leigh, and good morning, everyone. As we approach year-end, I want to recognize our team's dedication. Our third quarter results demonstrate Trinity's agility and strong business model. Trinity is raising and tightening full year EPS guidance to $1.55 to $1.70, reflecting our confidence in the business model and execution capabilities. Our leasing business continues to benefit from strong market dynamics, higher lease rates, and favorable pricing on external repairs. We're also seeing continued opportunities in the secondary market, further reinforcing our position as an industry leader. On the manufacturing side, our team delivered impressive results, achieving a solid operating profit margin of 7.1% with a favorable mix of specialty railcars and improving operational efficiencies despite a lower delivery environment. I am proud of what we have accomplished together and confident that our continued focus and teamwork will drive future success. Before discussing our quarterly results in more detail, I would like to provide a brief market overview. Strong renewal success and steady lease fleet utilization across the industry indicate customers continue to size their fleets anticipating future demand. While persistent market uncertainty has delayed customers' decisions to invest in new railcars, customers are still holding on to existing railcars. Overall, the North American railcar fleet remains in balance and is contracting as scrapping is outpacing new railcar deliveries. I will now highlight segment performance for the quarter, beginning with the Railcar Leasing and Services segment, which includes leasing, maintenance, and digital and logistics services. Leasing and Services segment revenue grew year-over-year, driven by higher fleet pricing and strong utilization of 96.8%, which continues to represent a balanced and well-utilized fleet. Renewal rates were 25.1% above expiring rates in the quarter with an 82% renewal success rate. The future lease rate differential was 8.7% in the quarter, driven by higher expiring rates and some lease rate moderation on certain railcar types. Despite this moderation, we remain optimistic about the leasing market. Furthermore, the secondary market remains very active, and we have capitalized on good opportunities to optimize and monetize our fleet. We added over $100 million of railcars into our fleet from the secondary market and sold $80 million of railcars in the quarter. We find value in utilizing the secondary market as both a buyer and a seller and remain pleased with the performance and yield on our fleet. We expect secondary market activity to accelerate in the fourth quarter, and we plan to end the year within our guidance range for our overall net lease fleet investment. Trinity's maintenance business continues to benefit from industry-leading turn times, which allows us to lower the cost per maintenance event for our lease fleet. Turning to the Rail Products segment, which includes our manufacturing and parts businesses, market conditions remain challenged. Industry railcar orders remained depressed in the third quarter. By proactively adjusting production, together with a favorable mix of railcars, we improved efficiency and achieved a 7.1% operating margin in the rail products despite lower deliveries of 1,680 railcars. 46% of our deliveries in the quarter went into our lease fleet, and we expect the full year number to be between 30% and 35%. In the quarter, we received orders for 350 railcars. This order number reflects the broader market conditions. Industry orders in the quarter were 3,071, well below expectations in the replacement cycle. While industry orders remain below expectations, our conversations with customers indicate potential for future growth. With these conversations and the replacement demand, we have not changed our longer-term outlook for the industry. Our backlog stands at $1.8 billion with approximately 21% expected to deliver by year-end. We currently hold about 50% of the industry backlog. In conclusion, I am pleased with our performance in the quarter. We are delivering results consistent with our expectations and reflective of market conditions. The Trinity integrated platform of railcar leasing enabled by manufacturing and services makes it easier for our customers to use rail. We have a multitude of levers to deliver steady profitability and cash flow through a cycle. Whether it's repriced leased cars, selling leased railcars in the secondary market, investing in the fleet, building new railcars, or supporting elevated railcar repair and compliance needs. Trinity is designed to deliver value to shareholders and customers alike. As we head into the last few months of 2025 and into 2026, our fleet is well positioned to generate significant and consistent cash flows, and our manufacturing footprint is rightsized and ready to efficiently meet railcar demand when it fully returns. I'll now turn the call over to Eric to talk through financial results as well as our updated guidance for 2025.

Thank you, Jean, and good morning, everyone. I will begin by discussing our third quarter financial statements, starting with the income statement. Total revenues in the third quarter were $454 million, down both sequentially and year-over-year due to lower external deliveries in the Rail Products Group. However, despite lower deliveries, earnings per share in the quarter of $0.38 are up sequentially due to the favorable margin performance in the Rail Products Group. As previously noted, we are seeing the benefits of the decisions we made earlier this year to rightsize our organization. We are expecting full-year SG&A savings of approximately 20% as compared to 2024 and we will end the year at a lower run rate as we move into 2026. Moving to the cash flow statement. Year-to-date cash flow from continuing operations was $187 million. Our net fleet investment year-to-date is $387 million, above our full-year guidance of $250 million to $350 million, implying a negative fleet investment in the fourth quarter as timing of railcar sales are heavily weighted in the fourth quarter. Year-to-date gains on lease portfolio sales are $35 million, and we anticipate full year gains of $70 million to $80 million. Year-to-date, we have returned $134 million of capital to our shareholders through a combination of dividends and share buybacks. We continue to be opportunistic in our return of capital and continuously evaluate our capital allocation options to generate favorable shareholder returns. Moving to the balance sheet. Our cash balance is $66 million and total liquidity is $571 million. Our asset balance includes $162 million of finished goods inventory, the majority of which we expect to deliver in the fourth quarter and convert to cash. Our loan-to-value ratio of 68.5% remains within our target range of 60% to 70%. Earlier this week, we completed the financing of our TRL 2025 notes and used the proceeds to repay borrowings under our warehouse, redeem the outstanding debt of TRL 2010 notes, and for general corporate purposes. We are pleased to have strong investor demand for these notes and benefited from lower benchmarks and tightening spreads. And now moving on to our expectations for the fourth quarter and the full year 2025. We maintain our outlook of full year industry deliveries of 28,000 to 33,000 railcars, reflecting the muted current railcar environment. We expect the industry to scrap about 40,000 railcars this year, which means we expect contraction in the North American fleet this year. As previously mentioned, we are maintaining our net fleet investment guidance of $250 million to $350 million for the full year, implying a negative net fleet investment in the fourth quarter. We expect substantial railcar sales in the fourth quarter, more than offsetting additions to the fleet from origination and secondary market purchases. However, we still expect overall fleet growth for the year, meeting our 1-year target and keeping us on track for our 3-year target of $750 million to $1 billion of net fleet investment between 2024 and 2026. We continue to prioritize investment in our fleet as this provides sustainable long-term returns. And finally, we are raising and tightening our full year EPS guidance from a range of $1.40 to $1.60 to a range of $1.55 to $1.70. We are on track to our forecast for deliveries and expect Rail Products segment margin performance of 5% to 6% for the full year. Additionally, our leasing margin before gains is on track with prior expectations. Therefore, with conviction in our margin performance as well as expected higher gains on railcar sales in the fourth quarter, we are raising our full year EPS guidance. In closing, I want to emphasize that we are growing our lease fleet while capitalizing on strong secondary market conditions. Additionally, we have reduced costs, which allows us to operate more efficiently and profitably and improve our returns. In short, our platform provides flexibility and resilience, which are demonstrated in today's results and commentary. We look forward to sharing our full year results with you in February, and we'll provide our expectations for 2026 at that time.

Our first question comes from Andrzej Tomczyk from Goldman Sachs.

Could you provide more details about the current railcar delivery and order environment? Specifically, how many quarters of book-to-bill above 1 do you anticipate before feeling confident in a sustained increase in railcar demand? Do you expect to see that by 2026?

Andre, thanks for the question. When you look at our backlog, remember, we've got a multiyear order out there that's got about 50% of the industry backlog sitting there. So for us, when you're looking at order entry, it may mean something a little bit different because you have to take that into consideration. When you look at our projection for this year for industry deliveries, it's 28,000 to 33,000, which is below replacement level demand right now. And we're looking to see something similar in 2026 right now. And so I think on the book-to-bill, I can't tell you when it's going to be above 1 again. We're still having strong inquiries. We're having really good discussions with customers. It's just taking them longer in this uncertain environment to make the decision to take it from an inquiry to an order.

Understood. And maybe just on that guidance for the 28,000 to 33,000 industry deliveries, how much of that delivery gap versus replacement level demand of around 35,000 to 40,000 would you say is driven by customers already having what they need relative to their expectations for freight demand versus customers just delaying orders that they know they need to make, but are maybe more just holding off now due to policy uncertainty around tariffs and trade.

We are experiencing a delay in placing orders. We anticipate that about 40,000 cars will be scrapped this year, which will lead to a reduction in the North American fleet again. Eventually, orders will need to be placed. We think the current situation is primarily a delay, and we expect to see an increase in orders later once there is more certainty regarding car orders.

Got it. Once the delayed demand comes back, do you think that could lead to a situation where deliveries exceed replacement level demand? In that case, does it seem like it would take several years to reach the next peak from the current levels, which you might consider closer to a trough?

Well, earlier, I mentioned that we expect 2026 to be similar to this year for the industry. It's important to consider that orders can be unpredictable. We have a multiyear order that accounts for 50% of the industry's backlog. Therefore, the future orders will depend on various scenarios. So, we anticipate 2026 to be akin to 2025. After that, we'll provide guidance as we gain more clarity.

Understood. And I guess just as far as potential for Class 1 rail consolidation, if networks move to be predominantly single line in nature in the future with less interchanging, does that effectively speed up the network and enhance rail industry asset utilization? And if so, how do you expect rails to balance the potential need for fewer cars due to better utilization versus the potential for a longer-term need for more cars if the networks sort of speed up to the degree that rails can sort of extract share gains from trucks?

Yes, Andrzej, this is Eric. That's a good question and one that the industry is considering. A transcontinental railroad should indeed increase fluidity and speed with fewer interchange points. The main question is whether this will lead to growth in modal share. We believe that the opportunities for modal share growth could counterbalance any effects of moving freight more rapidly, potentially resulting in growth for both carload and fleet sizes in the industry. It's been challenging to demonstrate this in previous mergers. The discussions ahead will need to focus on substantiating this, but it is hopeful as it supports the rationale for the merger.

I appreciate that. And maybe just switching to leasing. I noticed that the FLRD dropped to, I think, about 9% from 18% last quarter. It seemed fairly sharp. I'm just curious on what caused that and if you sort of expect FLRD to trend similarly to here?

So let me start out with saying that we're really happy with the leasing results in the quarter. Renewal rates were 25.1% above the expiring rates. We had an 82% renewal success rate and fleet utilization remained very strong at 96.8%. We continue to see runway for lease revenue growth, both from repricing the fleet and ongoing fleet investment. When you look at the FLRD for Q3, it was the 17th consecutive quarter of positive FLRD. When you look at the step down, it was driven by higher expiring rates and some moderation in market rates for certain railcar types. And as you've seen in the past, this metric can be lumpy quarter-to-quarter. With 50% of the industry backlog, we have good visibility in what's going on there, and we believe the leasing environment remains favorable, and our portfolio is well positioned to continue the performance that we've had.

Got it. And then maybe just lastly for me on the leasing. If you could just bring us up to speed on how much of the book has been resigned at the higher COVID rates and maybe how much is left to reprice from here?

Yes. So Andrzej, this is Eric. We have started to see some of our renewals from this environment, which has also affected the FLRD. When you examine how much we've adjusted our pricing, about 65% of the fleet has been repriced back to double digits. We continue to see around 15% of that reprice happening this year, so there is still some ongoing adjustment. Looking at current rates compared to when they first reached double digits, there are still opportunities available. As Jean mentioned, we are quite optimistic about the renewal outlook and our expectations for revenue growth in leasing.

Our next question comes from Bascome Majors from Susquehanna.

I'd love to start where Andrzej left off there. Jean, I think you said that renewal rates were 25% this quarter. I just want to do maybe a more detailed job of kind of reconciling that with the FLRD going down to 8%, 9% here. I imagine it has a lot to do with the denominator and the forward-looking nature of that. But just I think walking through that and with a bit more granularity would help us set better expectations for what leasing could do next year.

Yes, Bascome, I'll take that one. You're correct. What Jean was referring to involves comparing the current quarter's new contracted rates with the expiring rates. We successfully renewed at an 82% rate, which is up 25%. This indicates that customers are willing to pay more to keep their railcars, which reflects our sentiment. Regarding the FLRD, there are various metrics for lease rates. Our FLRD considers current rates for 25 different car types in the quarter and compares them to the expiring rates for those same car types over the next four quarters. So, in your comparison, the numerator is the same for both the 8% and 25% calculations, but the denominator differs. The 25% comes from the contracts we secured in the quarter, while the 8% pertains to the contracts expiring in the next four quarters, maintaining the same mix. The FLRD may show some volatility since we don't control for mix; it reflects our actual expirations rather than being an index of our fleet. This serves as an indication of future lease pricing based on those expirations. However, from a market perspective, the expiring rate is up 25%. Does that clarify the difference?

It helps a lot. So if we square ultimately, that's telling us that your expiring rates are going to be about 15% higher next year.

Yes, exactly. It's a combination of some overlap and the fact that they are simply higher.

All right. So this is a combination of potentially engaging in some short-term leases at the lower end of the market and simply moving past the weaker phase of the cycle.

Yes. The lapping would indicate that if you did a three-year lease three years ago, then you are starting to see the effects of that. While it is a relevant factor, I don't want to emphasize it too much. It's just one aspect of the situation.

No, understood. And the other piece you mentioned was a little quarter-over-quarter moderation in car types. Can you give us a little more fidelity in where things are stable to increasing and where things are a little bit softer sequentially?

Generally speaking, tank car rates remain robust overall. We've observed some softness in certain agricultural sectors, which is somewhat expected given the current trade situation in agriculture. However, this impact is minimal and not indicative of significant changes. When we analyze our various car types, we notice many are trending upward, while some are experiencing a downward trend. In terms of the mix and with the FLRD, there has been a slight downward trend in some car types. Yes. The lapping suggests that if you entered a three-year lease three years ago, you are now starting to lap it. This is one aspect of the situation, but I don't want to focus too heavily on it. It's just one part of the overall picture.

Sure. I'll start with that. The Rail Products segment had a strong quarter, driven in part by a favorable mix of specialty cars and disciplined operational execution. Earlier this year, we intentionally aligned our production with expected volumes, which involved some workforce reductions or realignment. This strategy helped us maintain our margins despite lower deliveries. In our prepared remarks, we mentioned that we expect to end the year in the 5% to 6% range, and we anticipate the fourth quarter will also be within that range, primarily due to the mix of cars we will produce. Overall, the performance is promising, and with our ongoing efficiency and automation programs, we expect to see continued improvement. We are not providing guidance for 2026 yet, so I'll stop there and let Eric discuss the gains.

Yes, regarding the secondary market gains, you're correct. We have updated our guidance from $50 million to $60 million to a new range of $70 million to $80 million. This increase is higher than our previous expectations. The secondary market is performing exceptionally well, and we anticipate a continuation of our RV program in the fourth quarter. We have some planned sales with one of our RV partners that boosts our confidence. We've put assets into the secondary market and were encouraged by the favorable pricing and expectations. The secondary market has become the primary avenue for other operating lessors to expand their fleets due to a slowdown in the new car market. Additionally, a recent transaction involving Brookfield, GATX, and Wells Fargo has generated heightened interest in this sector. We are witnessing solid activity and intend to capitalize on it. Therefore, we have raised our guidance and feel optimistic about that figure. There is also potential for further growth, whether this year or into the next. We are eager about the opportunities ahead.

If you would indulge me, I just have two more questions. Eric, you recently entered the market with an ABS deal, which I believe was your first this year, but please correct me if I’m mistaken. Could you discuss the credit investor interest in railcar assets? Specifically, what feedback have you received regarding not just the key terms like rate and term, but also any other factors that may influence flexibility and value for you as an owner who prefers to maintain a flexible fleet while financing it with consistent term debt?

Thank you for the question. There's a lot to discuss. This year marked our first access to the ABS market, although we engaged with the bank market for rail secured financing earlier in the second quarter. It's been over a year since we tapped into the ABS market, and I was pleased to see strong demand. The volume of rail paper in the market has been limited lately, and we haven't seen a Trinity name until now. Our TRL issuance generally receives a very positive response, which was encouraging. It’s gratifying to see investor interest in our securities. We enjoy a lot of flexibility with asset trading in the ABS market, which continues to be favorable. Additionally, we had some issuance from green investors under a green framework, which is promising even in the current climate as sustainable railcar leasing attracts more allocations. Overall, we were happy with how things turned out. We benefited from favorable benchmark conditions, allowing us to tighten our spreads. This dual success is a testament to the market's support over the past 25 years and its promise for the future.

And just maybe tying up some of the other questions together. I know you're not going to give guidance for next year nor should you at this point. But high level, from what we've heard today, it seems like from a manufacturing perspective, things feel kind of steady at a soft level. I just want to make sure that I'm not missing any sort of inflection in one direction or the other heading into next year. From a leasing perspective, things still pretty good, although just taking the FLRD at face value, it feels like we might get less sort of renewal income growth from leasing next year than this year. And from a secondary market perspective, things feel pretty gangbusters and that's not changing. I mean are there any other things you'd kind of point us to on the puts and takes, high-level directionally as we think about what Trinity can do next year versus this year?

Well, I'm going to go to the fourth quarter and talk a little bit there. So in the Rail Products segment, we're going to deliver about 21% of the backlog, plus we had some near-term deliveries on top of that, that will occur. So you should expect a little bit of a step-up there because we're expecting to end in our normal market share for deliveries. And I've already said similar industry deliveries for next year, not expecting much change on the market share. So that's probably all I'm going to give you on that part of it. When you look at leasing, again, we still see opportunities. We'll have cars we'll buy in the secondary market. We'll have new build cars that we'll put in there to grow, plus there's still room in a lot of car types to get higher rates. There's just some that are moderating more on that. And so I think all of that is good. Secondary market is, we indicated really strong. We're going to be opportunistic throughout this year. And I would expect it not to change a lot, but we're not giving guidance for next year yet.

And I would add, Bascome, I think your framing was fair and accurate. And Jean's color is, I think, helpful. And then I would just add to that, that's in a backdrop where we had a very flat industrial economy. Industrial production is still flat. So we're pretty positive in a flat industrial production environment. And I think as you look ahead, I think that's going to improve at some point. I can't say when yet because of that uncertainty overhang. But I think the next move is positive. And so that's where we see the operating leverage in this business potential that could really be helpful.

Well, thank you. As you can tell, we remain confident in our strategy and our ability to deliver value as the market conditions evolve. Also want to thank you for your continued support.

With that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.