Hello, and welcome to Wabash Second Quarter 2022 Earnings Call. At this time, I would like to turn the call over to Ryan Reed for opening remarks and introductions.

Thank you, and good morning, everyone. We appreciate you joining us on this call. With me today are Brent Yeagy, President and Chief Executive Officer; and Mike Pettit, Chief Financial Officer. Before we get started, please note that this call is being recorded. I'd also like to point out that our earnings release, the slide presentation supplementing today's call and any non-GAAP reconciliations are available at our investor site at onewabash.com. Please refer to Slide 2 on our earnings deck for the company's safe harbor disclosure addressing forward-looking statements. I'll now hand it off to Brent, so he can get us started with his highlights.

Thanks, Ryan. Good morning, everyone, and thanks for joining us today. We have a strong quarter and outlook to discuss, but I'd like to start by recapping the investor meeting we held on May 19 to reiterate our strategy, growth goals, and financial targets. We've made meaningful changes to our organization, which began with reimagining our purpose, vision, and mission as we seek to change how the world reaches you. Narrowing our focus to the transportation, logistics, and distribution industries provided us with the charter to change our organization to be more customer-centric and make changes from R&D to product development to how we interface with the customer. Re-segmenting our external reporting structure and rebranding our company are external manifestations of several years of purposeful change and internal growth inside our company. I believe our organization is now ideally designed to execute on our base business while leveraging growth initiatives across cold chain, e-commerce, logistics disruption, and parts and services. By 2025, we anticipate revenue of $3 billion, an operating EBITDA margin of 11%, and earnings per share of $3.50. We look forward to updating you on the progress we make on the strategic initiatives that move us closer to these financial targets and our purpose of changing how the world reaches you. One exciting update I'd like to spend some time on today relates to our parts and service initiatives. Earlier this month, we announced our trailers as a service with FreightVana to support the power-only offering. We've previously spoken about how trailer pools and power-only offerings are eliminating waste from the transportation ecosystem, not only by using trailers to optimize drivers' time but also to allow trailer drop and hook operations to permeate much deeper into the fragmented ends of the carrier space. Our partners at FreightVana are efficiently connecting shippers with carriers utilizing drop trailers, and they expect to meaningfully scale this offering as their business continues to grow. Our trailers as a service program provides partners like FreightVana with access to trailers that's critical in growing their business while connecting them with a robust maintenance and repair network underpinned by our recently announced Wabash Parts distribution joint venture. We're excited about the opportunity to continue scaling this program in the marketplace. The financials from our trailers as a service initiative will run through our parts and service segment and will be additive to our ambitions of increasing the amount of our business that comes via a recurring revenue model. Moving on to our second quarter financial performance. Our team generated revenue that exceeded our initial expectations and EPS within the range of our prior outlook. Between increased volumes and improved pricing, revenue increased over 40% from the same quarter last year to an all-time record of 643 million. Profitability also continued to sequentially strengthen as we began shipping 2022 backlog, which recovers cost increases experienced during 2021. As pleased as we are with the second quarter, we still see opportunities to do even better in the second half of the year and beyond. Moving to market conditions. We spent time with investors during visits and roadshows during the quarter, and we appreciate the prevailing concerns about the macro environment. Our management team watches a variety of macro leading indicators, which I think would most fairly be described as mixed right now. Credit has tightened, although not constrained. Consumer sentiment has weakened, although the labor market and retail sales remain very strong. Supply shortages persist in the industrial sector, although industrial production and durable goods demand remains strong. All this is to say that we appreciate the warning signs in the broader environment. That said, the reality that we have at the present is that we have seen no cancellations within our order backlog, and we are experiencing strong 2023 quote/demand and very productive 2023 demand discussions with our strategic customers, which has allowed us to open our 2023 order book. Just to tie a couple of things together here, I believe that there are a few different factors combining to create a less cyclical environment for our business under any sort of impending economic stress. First, as we have covered in the discussion of power-only and the expanding use of larger trucks, trailers are being used in new and interesting ways to create efficiencies in the transportation, logistics, and distribution industries. The creation of these trailer pools results in immediate tailwinds to demand and ongoing increases to the rate of replacement. Additionally, we're coming off of two solid years of constraints across the transportation equipment complex, which is fresh in the minds of equipment users. As we have seen and are still experiencing dialing back trailer purchases during times of economic uncertainty is a recipe to ensure that you're boxed out of participating in the prosperous times that typically follow short bouts of uncertainty. Even if overall consumer spending does pull back, the long-term trend on e-commerce is well established and has shown the ability to maintain and even continue expanding through economic uncertainty. The structural changes to logistics models required by continued growth in e-commerce will continue to utilize more transportation equipment as passenger vehicle miles are replaced by commercial vehicle miles. And finally, let me reiterate that we showed in 2020 Wabash's capability of managing through significant cyclicality, and we have only improved that capability over the past two years. We will continue to closely monitor the economy, and I think it's important for the investment community to more fully understand the unique and secular demand environment we see before us by looking beyond the traditional measures and headlines and more of what Wabash is creating in terms of strategic portfolio management and moves to capture the benefits of a changing logistics landscape. As a reminder, the trailer industry has a strong seasonal pattern of ordering activity in which OEM backlogs filled during the second half of the calendar year, then burn off in the first two calendar quarters. The second quarter typically sees the most pronounced weakness, with industry backlogs contracting by about 15% on average over multiple decades. As such, the fact that our backlog remains flat at $2.3 billion from Q1 to Q2 is a purposeful outcome we're very pleased with. Our backlog ending Q2 also represented a 71% increase versus the same period last year. Given our in-line Q2 results and the visibility provided by our strong backlog, we are comfortable maintaining our 2022 EPS outlook of $1.90. In closing, we're excited to have the opportunity to fully articulate our strategy, growth initiatives, and updated financial targets at our May Investor Meeting. Paying full respect to the prevailing macro uncertainty, our conversations with customers regarding both 2023 as well as long-term agreements remain very positive. We continue to work on increasing recurring revenue through our parts and service business, with trailers as a service being another tangible example of how we can engage with the marketplace differently to capture more of the value that our products create for the transportation, logistics, and distribution ecosystem. More immediately, I'm pleased with our execution so far in 2022 and look forward to updating you on our early thoughts for 2023 as those figures come into sharper focus over the next one to two quarters.

Thanks, Brent. I'd like to start off by providing you some additional color on our second quarter financial results. Consolidated second quarter revenue was $643 million with new trailer and truck body shipments of approximately 13,670 and 3,970 units, respectively. Shipments improved across the board in the second quarter. As Brent mentioned, this helped us achieve record quarterly revenue during the second quarter. Gross margin was 12.1% of sales during the quarter, while operating margin came in at 5.6%. Operating EBITDA for the second quarter was $50 million, or 7.8% of sales. This is another quarter of margin improvement as we began fully shipping our 2022 backlog. We expect margins to continue improving during the back half of the year as some of the cost inherent are ramping to achieve record revenue stabilize going forward. Finally, for the quarter, net income attributable to common stockholders was $22.6 million or $0.46 per diluted share. From a segment perspective, Transportation Solutions generated revenue of $596 million and operating income of $48 million. Parts and services generated revenue of $50 million and operating income of $8.1 million. I would like to call out that adjusting for businesses included in last year's results that are no longer part of our portfolio. Revenue growth in our parts and service segment was approximately 25% as initiatives such as the distribution joint venture Wabash partners continue to progress. Year-to-date, operating cash flow was $83 million. We achieved a meaningful release of working capital during the second quarter, driven by a reduction in accounts receivable, while payables were higher. Our second quarter operating cash result, combined with CapEx, equates to over $100 million of free cash flow generated during the second quarter. Our target for 2022 capital spending remains between $80 million and $90 million, as we remain on track with our strategic capacity expansion and the conversion of our Lafayette-based South plant from reefer capacity to dry van capacity. Even with our increased growth CapEx budget, we expect to generate over $75 million of free cash flow in 2022. With regard to our balance sheet, our liquidity, or cash plus available borrowings as of June 30 was $298 million with $138 million of cash and cash equivalents, and approximately $160 million of availability on our revolving credit facility. With regard to capital allocation during the second quarter, we invested $12 million in capital projects, utilized $5 million to repurchase shares, and paid our quarterly dividend of $4 million. Our capital allocation focus continues to prioritize organic growth via capital spending while also maintaining our dividend and evaluating opportunities for share repurchase alongside bolt-on M&A opportunities. Moving on to our outlook for 2022. Through the first half of the year, we have executed our expected revenue and margin improvement, and we remain on track for financial performance to continue to step up into the second half. Given that our second quarter performance was in line with our expectations, we are pleased to maintain our guidance for 2022. We expect revenue of $2.5 billion and EPS of $1.90 per share. Full-year 2022 operating margins are expected to be approximately 6% at the midpoint, and we continue to believe that progress towards our 11% EBITDA margin goal will be evident relatively early in our journey to reach our 2025 financial targets. Relatedly, one item I'd like to call out is that we modified our long-term incentive plan to add an ROIC component in this year's proxy disclosure. We have taken meaningful steps to shape our portfolio to fit our strategy over the last few years. Our organization is aligned on generating higher returns as we execute our strategic initiatives. Turning back to our 2022 guidance. We continue to assume that present supply chain conditions persist through the remainder of 2022. I'd also like to point out that the volumes and run rates implied by our 2022 outlook set up the company nicely for continued record performance in 2023. Turning to the third quarter, we expect revenue in the range of $620 million to $660 million and EPS of $0.55 to $0.60 for the quarter. In conclusion, I believe we showed excellent progress in the second quarter. As Brent mentioned at the outset, we were pleased to have the opportunity to tell our strategic story at our May investor meeting, and having spoken with multiple investors during the second quarter, I was excited by the more strategic nature of our conversation following an update on our growth initiatives and financial targets. I believe we are at an interesting juncture in the company's history, a time highlighted by the combination of ample near-term opportunities and the right long-term strategies and initiatives, all against a backdrop of share valuations that discount Wabash as a bygone era. Being fully mindful of potential near-term economic uncertainty, I believe that the last few years have highlighted a couple of things. First, our ability to rapidly respond to changing market conditions and produce meaningfully positive free cash flow during a time of economic volatility. Second, the substantial demand for transportation equipment that can be created by short periods of uncertainty, resulting in the ballooning pent-up demand, which is still working its way through the system since 2020. We are strong believers in our 2022 and longer-term outlook, and we look forward to sharing more with you as we continue making progress on our strategy. With that, I'll now turn the call back to the operator, and we'll open it up for questions.

We will now take our first question from Justin Long with Stephens.

Maybe to start with the question on trailer deliveries. There was a pretty decent step up here in the second quarter relative to the first quarter. So I was wondering if you could talk about your expectations for deliveries in the back half of the year and what's getting back into the guidance? And then maybe how capacity ramp as we get into early next year with the additional capacity you're bringing on?

Thank you for the question, Justin. In our implied guidance of $2.5 billion for the year, we anticipate that Q3 and Q4 delivery expectations will remain relatively flat compared to the Q2 figures. It's important to note that we saw a significant increase from Q1 to Q2, with an 18% sequential growth, which is the largest rise we've experienced during the post-COVID period. This indicates that we are now at a level where we can confidently deliver similar results in the second half of the year. Looking ahead to 2023, we expect our capacity transition from refrigerated to dry units at the Lafayette plant to come online, which will add approximately 10,000 units while reducing four to five refrigerated units. When you combine these factors, it paints a positive picture for potentially strong earnings per share in 2023 based on our current run rate and available capacity.

Yes. I would add just a little bit more color. Far from guidance, let me stress far from guidance. But if you think about relatively flat shipping levels coming off of Q2 for the remainder of the year, capacity continuing to shore up given the capacity that we have, which will somewhat ramp all year from a production standpoint, we should be sitting at a decent finished goods level at the end of the year. And you can imagine that the jumping-off point in the first quarter will be improved from the first quarter of 2022, but it's still generally a lower shipping quarter of the year. So that has to be factored in. And then you can think about Q2 having a decent finished good, a good production rate in the first quarter, jumping off the fourth quarter, and then starting to see the impact of the surge, you get a feel for what will be happening from a flow-through in the first half and then that all flows through in the third and fourth quarter of 2023.

And Brent, I wanted to circle back to some comments you made earlier in the call around trailer pools, obviously, seeing a lot of momentum and discussion on that topic. Is there any way you could ballpark the percentage of your trailer deliveries this year that you feel like are coming from this secular theme? And any thoughts on where that percentage could go as we move into 2023 and beyond?

Yes. There are different ways to classify trailer pools, and that's one aspect we've noticed while speaking with various players. On one end, you have traditional truckload companies transitioning into digital brokerage, and on the other end, there are truly innovative digital brokers focused solely on power-only models, such as FreightVana. In terms of the full spectrum, if we look at J.B. Hunt and others, approximately 10% to 15% of our trailer shipments can be categorized as utilizing some form of trailer pool application, with J.B. Hunt being the largest participant. Additionally, there are smaller emerging players like FreightVana that are expected to gain traction in the second half of the year, and we anticipate further growth as we move into 2023.

And last one for me. It sounds like the order book for 2023 was recently opened. So I was curious if you had any initial indications on pricing that you could share?

Yes. What I would say is that we say it this way: we've been successful in 2022, passing along an appropriate level of inflationary cost increases with margin into the backlog so far. And we've done that in a very good way. What I would say is that we still have additional inflation that we need to factor into our pricing. We've done that in part and parcel with opening up 2023 backlog. We wouldn't have opened it up if we didn't feel we would be successful in executing that. And I would say that you can take from the backlog increase that we've done, we've met our expectations and our ability to pass along pricing at an acceptable level.

Next, we have Mike Shlisky with D.A. Davidson.

Maybe I can start off with a follow-up on the last question. You continue to suggest that you've got a nice balance to the margin trend in 2023, given your long-term outlook and still kind of halfway on the margin front. And you kind of give decent pricing there. Are there any other areas or factors we should be looking for in 2023 as to why margins should be on a step up over 2022? Is it just the new capacity or other things you've got going on that we should be hearing from you?

First, I mean, obviously, with the addition of surge, the ability to absorb overhead throughout not only 2023 but in the second half of 2022 is a margin tailwind as we continue to ramp the business. Two, as we reach the end of 2022, we'll be at the tail end of the additional manpower that we generally have to add throughout the business. And those two things will be done with the efficiency curve for the most part as we enter the second quarter of 2023, and we'll be able to start pulling back from some of the overtime that we use right now to buffer that. The last one, I would say, that really comes into play in the second and third quarter of '23 is that the workforce that we'll be moving to surge is an already multiyear experienced trailer building workforce. So we should have a much better opportunity to convert those trailers on that new production line at a much higher level of initial ramp efficiency than what we would see under a more traditional shift add or line set up with new people. So those are the most fundamental reasons. We should see margin tailwind going into '23. And then there's a whole host of initiatives inside the business, but we'll buffer that accordingly.

We expect to see improved chassis flow in 2023, which should enhance our truck body product line as a positive initiative for us next year. Additionally, our guidance indicates a significant increase in the second half of 2023 compared to the first half, where we anticipate a lot of substantial work will take place towards the end of the year.

I also wanted to ask about the supply chain. There's an unanswered question, but can you hear me okay? I'm sorry.

Yes. We hear you.

Yes. We're good.

I was wondering if you can tell us about what initiatives you're competing with on supply chain? Clearly, your business is doing quite well, got great backlog, probably several to come. Other areas in the economy are not doing so well. Do you think if other areas in the economy have a little bit of weakness here that might be a benefit to your supply chain and the ability to get some even better margins?

That's a great question. I think the overall trailer and freight-related industries will experience strong demand as we move into 2023, which will help us significantly. However, other parts of the economy are likely to face some kind of ongoing recession. If we observe an increase in labor availability in the market, it will greatly benefit the overall extended supply chain, particularly for our industry. The primary challenge for domestic suppliers has been the labor issue, so any easing of labor tensions will enhance the efficiency of the supply chain. Compared to our competition, we are performing well in managing our supply chain. While we are not completely free from challenges, we are doing better than others. This improvement will reduce the disturbances we face, which will translate into better labor conditions and overall efficiency.

If I can add one more point, Mike, I appreciate your comments about how the valuation of the stock seems to reflect a past era. I'd be curious, as you look towards your 2025 projections, do you feel more confident now than when you initially made those announcements? Are there any expected declines in your forecast between now and then, or does the current cycle and customer perspectives suggest that will not be the case in 2025?

Yes. That's obviously difficult to predict, Mike. But what I would say is anything we're seeing now, we wouldn't expect a big enough pull back that it would put the 2025 targets in jeopardy. So based on how we've run the facilities, the South plant capacity exchange from reefer to dry, and our general One Wabash initiative, we believe will allow us to be resilient if there is an economic pullback in 2023 or 2024 and still be able to maintain the 2025 targets. So that the 2025 targets are based on kind of mid-cycle level volumes, but we feel pretty good that we can maintain and be able to achieve them.

Yes, I would add just a little bit more. We looked at a range of scenarios over the next couple of years. And I'd say as long as we are able to maintain a healthy clip of purposeful capital deployment, which we've laid out in '23 and '24, then we'll set the stage for '25 from a business enablement standpoint. Couple that with the continuation of moving the portfolio to the appropriate strategic spot and then the internal work we do with digitization and the work with parts and service. There's nothing that says that even if there is a lull, even a moderate lull in between, that we aren't in a position to execute on the 2025 targets.

Your next question comes from Felix Boeschen with Raymond James.

I was hoping to start, Brent, I think in the beginning, you talked about starting to take 2023 orders. And you also said you're having more strategic longer-term discussions with customers around capacity. I was curious if you could elaborate maybe on the latter comments. Were you implying about maybe locking in some capacity for multiyear periods? I'm just kind of trying to think through those dynamics.

Yes. I won't go into all the details, as that's somewhat proprietary, but our approach is tiered and strategically focused. We're not simply opening the order book and letting quotes come in like others do. Instead, we're prioritizing core strategic business through indirect channels, ensuring a dealer-first mentality. Next year, we're engaging with a select group of customers we believe are well positioned for the next five years. These discussions are designed to be multiyear, multifaceted, and extend beyond just trailer access to include advanced R&D and parts and service integration related to our value proposition. This next tier will contribute to our backlog. Afterwards, we will target another group of strategic customers to fully round out our backlog for 2023, which is very specific to how we're creating that backlog.

And then I was hoping to follow up on sort of the new product development standpoint. We haven't talked a ton about it this call, but I'm curious if you could comment on the EcoNex van as you see it right now? And then secondly, last year, you had talked about a walk-in cargo van. I'm curious if you could update us on the status there.

Sure. First, we're rebranding is the Accutherm refrigerated van with EcoNex technology. We continue to have better-than-expected results in the validation of that product with our customers with over 50 million miles on the road, well above 50 million at this point. We are moving forward with capacity additions, the next phase that will be in 2023-2024. I would say, at this moment, demand far exceeds what our initial capacity add will be as we look to maintain a level of scarcity and controlled launch, right, as we scale this up, one, to maintain premium pricing, two, to make sure that the physical manufacturing process meets a premium product expectation. And then as we move through that, we'll look at what the next phase of capacity addition will be. So we have a multiyear strategy lined out as to how we will do that. This is a slow, fast, and slow is purposeful in what we're trying to do. But we are balancing the extended and higher-than-expected desire for the product with moving in a prudent and planned way.

And any color on the cargo van?

Yes. The cargo van, we have a prototype in hand that we visually reviewed just the other day. It has made its way to one or two significant customers in this phase that we think are highly interested to broaden their portfolio available product to meet their growth needs. So we are very pleased with where we sit at this moment. And that is something that we firmly believe that we'll have prototypes, and we'll call it extended small volume prototype production in 2023 to meet initial market validation needs with possibly the chance of beginning to scale up in the second half of 2023 and 2024.

Yes. We expect that the second quarter did not show much improvement. However, we are starting to see some early signs that the second half could perform better than the first half, and we believe that the volumes for 2023 will be significantly better. It's still too early to indicate a major improvement on the ground, but we are confident that we will be able to fulfill the orders. Our backlog for that product line is substantial, and we will manage to deliver in the second half of the year while also increasing profitability. The business is definitely getting better, though we need a bit more volume to significantly enhance the margin. Once we achieve a steady flow of chassis, we anticipate a notable improvement in profitability by 2023.

Felix, just to follow up on the previous question. One of the items that we didn't talk about was our light-duty refrigerated product that we have with a significant grocer, Kroger, to be specific. That also continues to go well, and we'll be looking to broaden that into additional points of revenue in the future, both within Kroger and then modifications to the product design to allow it to be applicable to other users, that continues to go well. And then our traditional truck body-like product that use EcoNex technology, we are also adding capacity there because we've had better-than-expected customer reviews, which will help us grow within our cold chain area. As we get more and more users starting to understand the role efficiency within that space, very much like our van customers would see.

There are no further questions at this time. Mr. Reed, I'll turn the call back over to you.

Thanks, Angela, and thanks, everyone, for joining us today. We look forward to following up during the quarter. Have a great day.

This concludes today's call. You may now disconnect.