Good day, and welcome to the Wabash National Corporation First Quarter 2024 Earnings Call. I would like to inform all participants that this call is being recorded.

Thank you, and good afternoon, 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 ir.onewabash.com. Please refer to Slide 2 in our earnings deck for the company's safe harbor disclosure addressing forward-looking statements. I'll hand it off now to Brent.

Thanks, Ryan. Good afternoon, everyone, and thanks for joining us today. Beginning with the first quarter of 2024, our revenue and income fell slightly short of our expectations due to slower customer pickups of equipment. I'd like to emphasize that particularly for a year of weaker demand, Q1 tends to be seasonally weaker. Additionally, the size of our products necessitates that we rely on customers to pick up their equipment before we are able to recognize revenue. That said, our production outstripped shipments during the first quarter, so the delta versus our anticipated quarterly revenue and associated income will flow into subsequent quarters during 2024, particularly Q2. As we'll discuss later, our financial outlook for the year remains unchanged. From a strategy perspective, we continue to enhance our network at 78 dealer locations. Through our marketplace joint venture, we launched the initial version of our Wabash Marketplace in the first quarter. Collaborating with leading technology and logistics providers, the platform seeks to deliver customer-centric solutions through an integrated partner ecosystem that sets new industry standards for parts, services, and trailer capacity. The ultimate objective of the Wabash Marketplace is to develop a comprehensive end-to-end digital platform that transforms the experience for dealers, customers, and suppliers. Utilizing advanced technology and connectivity, we aim to streamline the supply chain experience, making it more efficient, connected, and user-friendly. Dealers and customers will benefit from improved access to a wide range of parts and services, with a particular focus on our Trailers as a Service or TAAS capabilities and the expansion of our Wabash Parts distribution network. The marketplace has significant potential for growth as the team focuses on opening up opportunities for additional value-added offerings. Also, our Wabash Parts distribution joint venture is reaching an initial stage of maturity that will facilitate meaningful growth in 2024. Of course, the synergy between our comprehensive First to Final Mile equipment portfolio, Wabash Parts, and the Wabash Marketplace and our Parts and Services segment more broadly affirms our position in this market as we seek to add more value for our customers by supporting equipment through the course of its life cycle. Confidently investing in strategic growth initiatives during a down year in the trailer industry marks a new chapter for Wabash, one that we have not previously had the opportunity to explore. As we gain more clarity on 2024, it's important to emphasize the resilience of our portfolio that has grown over the last decade. We see relative stability in customer demand for our truck bodies and tank trailers, which helps mitigate the anticipated decline in dry van demand this year. In addition to benefiting from strategic customer relationships with best-in-breed participants in trucking, logistics, and retail, our expanded and diversified equipment portfolio not only enhances our stability through market cycles but also provides a stronger foundation for layering on strategic growth. This backdrop positions us well to capitalize on market shifts and continue our innovation and leadership in the transportation, logistics and distribution industries. As we continue to advance our strategic objectives, a vital component is fostering higher levels of employee engagement, which we believe leads to enhanced execution and improved financial performance. At Wabash, we are dedicated to building a culture that embodies our core values and emphasizes respect for individuals. In line with this commitment, we have established a culture council, a multi-year initiative aimed at addressing critical aspects of our organizational environment. These include our work environment, working relationships while being in community, growth in autonomy, flexibility, and consistency and systems and processes. To bring these areas to life, we have formed cross-functional teams tasked with implementing changes that positively affect all employees and creating an environment where everyone can succeed. These teams represent various functions in geographical locations, ensuring a wide range of perspectives and ideas are being represented across the teams. This investment in our people and elevation of our internal standards, not only aligned with our leadership responsibilities and values, but also advance the interest of Wabash, our customers, partners, shareholders, and our communities through the acceleration of our strategic vision and increasing sustainability of value creation. Moving on to market conditions. While our customers continue to experience a challenging freight environment, we have seen important leading indicators like the ISM index rising above 50, indicating expansion returning to the manufacturing sector, while surveys of inventory levels that shippers suggest abating headwinds from destocking that have been working against the freight market over the last couple of years. While these positive indicators have yet to meaningfully translate into improved freight conditions, we are optimistic that improvements may be on the horizon when you pair the strengthening macro backdrop with the amount of capacity that has left the transportation industry since the market downturn began in early 2022. Thinking beyond the current freight cycle, we remain bullish on our core markets benefiting from secular trends like power-only, persistent driver shortages, and the resurgence of near-shoring activity within North America. Shifting focus to our backlog. At the close of the first quarter, we had a total of $1.8 billion in orders, with $1.5 billion of that figure expected to be shipped in the next 12 months. Both figures were lower by roughly $100 million sequentially, but it's important to note that with over $500 million in revenue for the quarter, the relative stability of our backlog implies that we continue to see meaningful volumes of new orders. Moving to our financial outlook. With the benefit of further visibility provided by our sizable backlog, we are reiterating our full year 2024 guidance of $2.3 billion of revenue and a midpoint of $2.25 of EPS. In closing, we are capitalizing on the opportunities presented by the market environment in 2024. With a diverse portfolio of First to Final Mile equipment and a growing Parts and Service business, Wabash is positioned with unprecedented strength paired with minimal leverage at this stage of the freight cycle. I believe our ability to maintain focused execution on our unique organic growth projects underscores the strength of our strategic positioning for the future. We are actively working to deepen relationships with our dealers, suppliers, and customers as well as engaging with interesting new players within the transportation, logistics, and distribution landscape. Simultaneously, we are committed to fostering a culture of continuous improvement within our own employee experience, ensuring that we remain well equipped to act on our strategy. We are confident that this approach will not only enhance our financial performance at all points in the cycle, but also enable Wabash to sustainably grow our level of value creation for all stakeholders. With that, I'll hand it over to Mike for his comments.

Thanks, Brent. Beginning with a review of our quarterly financial results. In the first quarter, our consolidated revenue was $515 million. During the quarter, we shipped approximately 8,500 new trailers and 3,690 truck bodies. As Brent mentioned, we saw some delays in customer pickups of equipment during the first quarter, and we do anticipate the opportunity to recognize revenue on these finished goods in subsequent quarters, including the second quarter. Gross margin was 14.8% of sales during the quarter, while operating margin came in at 5.7%. In the first quarter, we generated operating EBITDA of $46 million or 8.8% of sales. Finally, for the quarter, net income attributable to common stockholders was $18.2 million or $0.39 per diluted share. From a segment perspective, Transportation Solutions generated revenue of $470 million and operating income was $44 million. Parts and Services generated revenue of $49 million and operating income of $10.5 million. Year-to-date, operating cash was an outflow of $17 million, reflecting what is typically a back-ended quarter of shipments in Q1. Concerning our balance sheet, our liquidity, which comprises both cash and available borrowings of $389 million as of March 31. We finished Q1 with a net debt leverage ratio of 0.9x. On capital allocation, during the first quarter, we invested $19 million in capital projects, utilized $16 million to repurchase shares, and paid quarterly dividends of $4.2 million. Our capital allocation focus continues to prioritize capital expenditures above and beyond our annual maintenance CapEx spend of $20 million to $25 million in order to support our organic growth initiatives. We are committed to maintaining our dividend, and then we anticipate continuing to evaluate opportunities for share repurchase alongside bolt-on M&A. Moving on to our outlook for 2024. We are reiterating guidance of a revenue range of $2.2 billion to $2.4 billion with a midpoint of $2.3 billion; and an EPS range of $2 to $2.50 per share with a midpoint of $2.25. We believe this outlook is well supported by a stable backlog and new order flow that continued at original pace during the first quarter. We continue to see truck body, tank trailers, and Parts and Services as stabilizing forces within our portfolio in 2024 as market conditions remain stronger in those businesses relative to dry vans. In particular, we anticipate year-on-year growth in Parts and Services to accelerate as we move through 2024. Thinking specifically about our second quarter, our expectation is for revenue to come in between $550 million and $600 million and for EPS to be between $0.50 and $0.55 per share. Moving on to capital deployment expectations for 2024. We anticipate traditional capital investments to be between $75 million and $85 million in 2024 as a result of planned expenditures to support our strategic growth initiatives. We also expect to invest in CapEx that will be immediately revenue-generating through our Trailers as a Service program. We anticipate investment in that program will be back half loaded, and we will give more specific guidance as the figure comes into focus but we would expect at least 1,000 units in 2024. In conclusion, I'm excited about 2024 as we take the opportunity to demonstrate what we believe is an improved through-the-cycle financial profile for the company. Additionally, Wabash currently enjoys the most significant potential for strategic growth in the company's history by pursuing our Parts and Service adjacencies and we're eager to demonstrate our capacity to grow the top line of this business to allow us to become a more meaningful contributor to our portfolio as a whole. As an industry leader in transportation equipment positioned at the epicenter of an increasingly complex ecosystem of participants within the transportation, logistics, and distribution industries, we have a unique opportunity to unite diverse stakeholders to address industry challenges via our Wabash Marketplace digital platform as well as the Wabash Parts distribution business. And we look forward to updating you on the progress of this initiative. We firmly believe that this area of strategic growth will define the next chapter in our journey to change how the world reaches you. I'll now turn the call back to the operator, and we'll open it up for questions.

And your first question comes from Mike Shlisky of D.A. Davidson.

Yes. So I guess I wanted to ask first about some of the pickup and logistical issues that might have changed things from the first quarter to the second quarter or elsewhere during the year. I'm curious, was this an industry-wide phenomenon? Was it just an issue with Wabash? I'm curious to see if this is something that we should be thinking of as everyone is facing, or is it just a strictly Wabash issue?

Yes, Mike. I mean as we said in the release and on the actual, call it, narrative we put out there. I mean this is a normal type of situation that our industry feels across the board at any time that we are in, not only the first quarter of the year, but when compounded by being in a down year, relative to dry vans. This is a normal and customary type of issue to have. So everyone is feeling it throughout the overall industry at this point. And in general, this is to be expected in terms of weak pickups as people are working to understand what needs to be put in service at this time of the year. So while we were a little short in what those expectations are, the phenomenon itself is a normal and customary industry fact.

Okay. Okay. I also want to ask about Trailer as a Service. Mike, you outlined a couple of details there. I understand that maybe you don't want to get into actual numbers and guidance per se. I mean you did mention at least 1,000 units. But just how do we start to model that out? Do we model that as 1,000 units of sales, 1,000 units per inventory with rental attached to it or leasing revenue attachment? I'm not sure like what to put in my current model and what's incurring guidance as far as that business is concerned.

From a P&L perspective, it will be recognized as a lease-type expense. You won't see full revenue recognition like you would with a shipped unit, as it will operate under a leasing model. You'll observe monthly revenue along with the corresponding expense. In terms of cash flow, it will be categorized as a revenue-generating asset in our cash flow statement, distinct from our regular plant, property, and equipment. As those units become operational, they will be reflected in that section of our cash flow statement.

Okay. Maybe one last question for me. Brent, what are your thoughts on what needs to improve in the market for orders to rise from current levels? We've seen a few significant bankruptcies in the last year, mainly involving older units that likely didn't return to the used market. I'm interested to know if the exit of capacity from the market today might enhance the high demand for trailers and loads, and whether some of those units leaving may be much newer, potentially affecting the demand for new equipment over the next couple of quarters.

Yes, Mike, I think the necessary changes are already underway. It's been clear in our industry that confusion and mixed signals often indicate that the market is starting to make the improvements needed for an upswing. We're observing gross manufacturing activity beginning to shift in several ways. Capacity is being removed from the market, and imports are continuing to improve. The essential developments are indeed taking place. Now, while they do not have an immediate impact on freight and the spot market, that will change gradually over the next six months as anticipated from our current perspective. Everything aligns with the market forecasts provided by ACT and FTR, and there are no deviations from the underlying forces driving those forecasts. This is precisely how things should unfold as we prepare for the estimates for 2025. The process is already underway; no new developments are required. One area of concern is the Fed's approach to interest rates. The forces in play are already in play. It's already factoring in where the Fed is at right now. So if the Fed waits until let's just say, Q4, to have an interest rate reduction, that is not going to probably materially affect the forces that will drive the upswing into 2025. So I think the play is set; it's been called. It's happening; it just needs to work itself out over time.

Your next question comes from the line of Justin Long of Stephens.

So I guess getting back to the delayed pickup of trailers, is there any way to quantify what that headwind was in the first quarter versus your expectation to just help us think through the catch-up we could see in the second quarter? And then as you just take a step back and look at trailer shipments over the balance of the year, is there any color you can provide on the quarterly cadence that is reflected in the guidance?

Yes. I would say that generally, the disconnect we saw between our guidance and Q1 results was largely that delay in pickups that we had. And then you see some of that stepping into Q2, obviously, with a little higher revenue and EPS guidance in Q2 versus Q1. We would expect the back half to continue to see moderate increases in revenue and EPS, but not significant. So obviously, you can do the calendarization with our full year guidance. But we will see that a pretty good step-up from Q1 to Q2, which really does encompass that slight pickup miss that we had and then a little further firming in Q3 and Q4 to set up for what Brent just mentioned, what we think will be a much stronger 2025.

Yes. To provide some additional details, most of the gap in pickups occurred in January and early to mid-February. We then observed a significant improvement in pickups as we approached the end of the first quarter, and that trend has continued into the second quarter. This issue has generally been resolved. The timing of the gap in January and February was primarily due to fleets attempting to understand the operating environment for the first half of the year and figuring out where to relocate trailers. When they pick them up, they put them into service in areas that generate revenue, so they wait to determine where that will be. Once they have clarity, they take action, and we saw that happen, which then leads to a smoother operation.

Okay. Got it. That's helpful. And I guess along similar lines, I was wondering if you could talk about the cadence of operating margins that you're expecting over the balance of the year. If I look at the first quarter, you were a touch below 6%. The guidance for the full year is around 7%. So that implies we need to be above that level to kind of average up. So just wanted to get some more color on the cadence you're expecting and what will drive that improvement sequentially through the year?

Yes, I think it's largely going to follow the volume I described earlier because that's what's holding it down below 7%. We held our full year at 7% and finished Q1 at 5.7% and less largely a fixed overhead contribution margin impact of a little lower revenue number in Q1 that we expect will naturally grow as we move into Q2 and the second half of the year. The other thing that we talked about in our remarks is we expect Parts and Services to continue to perform well this year and grow in the second half of the year. That will also be a tailwind to our margin performance as we get into the second half as Parts and Service delivers an outsized margin component of our business compared to the OE side.

Got it. And I think the last one for me along those lines, two other areas you've talked about historically as being areas of resiliency in addition to Parts and Service are the tank trailer business and the truck body business. So I'm curious if you could talk a little bit more about what's getting baked into the 2024 guidance for those two segments, are you expecting growth in those areas?

Yes, we expect year-over-year growth in truck bodies. In Q1, truck body shipments were a bit weaker than anticipated, similar to our observations on the trailer side. However, we are looking forward to significant sequential improvements in the truck body business. We anticipate an increase in shipments year-over-year in that sector. While all of our original equipment products are influenced by the broader transportation and logistics industries, and exhibit some cyclicality, the truck body business is less cyclical than the dry van business. We actually expect to see some growth in truck bodies this year. We won't see growth in tanks year-over-year this year, but we anticipate a smaller decline in tanks compared to what we observed in dry vans. As we've discussed in previous calls, tanks, truck bodies, and Parts and Services together form a solid foundation of stable earnings, which are more reliable than those from our traditional dry van business at Wabash. We are looking forward to showcasing this stability throughout the year. Although they all operate in an industry with cycles, these segments tend to be less volatile than the dry van market.

Yes. The ability to see the overall resiliency can be evident in a set of markets that we have today where it's much more secular in nature where different courses are affecting different subsegments differently. We're not experiencing a 2009 event. We're not experiencing a macro type of negative set of forces that affect all different groups simultaneously. This is segment-based forces which really allows us to leverage the resiliency of the portfolio.

Your next question comes from the line of Jeff Kauffman of Vertical Research Partners.

Congratulations, everybody.

Thank you, Jeff.

A couple of modeling questions. I want to get back to the units that were not picked up on time. I mean this happens every now and then. It just is what it is. Let's just say, for argument's sake, that number was 500 in the first quarter. I don't know what the number is, and you guys haven't thrown one out. But would we normally see something like 2/3 of it in the following quarter and then 1/3 of it maybe in the third quarter. How does this typically work when we have this happen? It doesn't all happen in Q2 necessarily, right?

No, Jeff. You've been doing this long enough to know how it works. And I would say that is a generally good approximation for how the world works.

All right. And then ASP was pretty strong, a little stronger than I was looking for, both in truck bodies and in trailers, which is great. But I would assume with raw material costs coming down, ASP levels off a little bit. Could you give us an idea of what trailer ASP might look like without the mix issue of tanks being a little bit stronger and give us a feel for what was driving the higher truck body ASP?

Sure. I'll begin with trailers. As you consider our business, we have a significant backlog. The average selling price that reflects in our revenue for the quarter comes in at various times over the past year. Therefore, you might notice some reduction in average selling price as we progress through 2024. I anticipate that while volume will increase, the average selling price will decrease as we move through the year. For truck bodies, there may be some variations in that segment. Overall, it indicates a generally stable to strong demand environment, which should allow for pricing stability. Consequently, I don't foresee significant pricing changes in truck bodies throughout the year. However, for trailers, expect a decline as we enter Q2 and the latter half of the year.

And this general commentary, Jeff, is that pricing across all the segments, except maybe platform trailers, has generally been more resilient than we anticipated for the market we are in. A significant factor contributing to this is the actual value of the product becoming more apparent, along with the changes we've made to our portfolio and the channel movements, which are beginning to positively influence pricing. This mitigates the impact of the competitive pricing environment we might have expected in the past. We are simply managing it more effectively.

Okay. Great. And as you mentioned, Brent, I've seen these things a bunch of times, but sometimes you forget. And then lastly, very impressive margins in Parts and Service. The gross margins pretty strong, but the operating margin flow-through was a lot better than I expected, which is fantastic. Is 21%, which I don't remember seeing on an operating margin basis, is this a new level that we've reached because of what's changed in Parts and Service? And is this more sustainable? Or was there something that helped that number a little bit in 1Q?

Yes. I wouldn't expect anything over 20%. We've been indicating high teens to around 20%. I would stick with that. We had a very strong margin performance in that revenue stream in Q1. While it is higher compared to the rest of the portfolio, I wouldn't want to project anything above 20% moving forward. Although that might be possible in a few years, I still believe we should aim for high teens up to 20% in the business.

Okay. For my final question, could you clarify how Trailers as a Service will be accounted for? I'm not completely clear on what you mentioned about the lease expense and the revenue, and I'm unsure where that will appear.

From a revenue perspective, you will see how many months the unit has been in service, which will be reflected as lease revenue. The capital expense will appear as a revenue-generating asset in our cash flow statement.

So Jeff, that will come to Parts and Services...

Parts and Service, I'm sorry.

Okay. That was my question. Yes. Parts and Service.

Congratulations, challenging environment, solid results. Best of luck.

Thank you.

Thanks, Jeff.

There are no further questions at this time. So I'd like to hand back to Ryan.

Thanks, Kevin. Thanks, everybody, for joining us today. We'll look forward to following up during the quarter. Have a great day.

That does conclude our conference for today. Thank you for participating. You may now all disconnect.