Thank you for standing by. My name is Jeanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wabash Third Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Operator Instructions. I would now like to turn the conference over to Ryan Reed. You may begin.

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; Pat Keslin, Chief Financial Officer; and Mike Pettit, Chief Growth 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 all 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 thank you for joining us. Let's start out by level setting that our adjusted third quarter financial results are largely in line with our prior expectations. Before we get into the details on the quarter, I'd like to provide some strategic updates and address how we see the path of our growth continuing to unfold. To set the stage, I want to step back and reflect on the last few years of our journey to change the growth and performance trajectory of Wabash, highlighting how we've reached our current position and where we see the company headed. When I assumed the role of CEO, our strategy of becoming a more diversified industrial was no longer serving us well. While the fundamental rationale behind it was to address dry van cyclicality, it has become clear that some of the most promising mega trends were happening within our core markets of transportation, logistics, and distribution. We need to refocus closer to home. Expanding our equipment portfolio to complement our core dry van product line created greater value and an opportunity for deeper relationships with our customers, but we haven't fully capitalized on that potential. The pandemic provided an opportunity to quickly restructure both our organization and the go-to-market strategy, shifting from a product-centric model to a more customer-centric one, where we could expand the definition of how value could be created. By streamlining access to multiple equipment types through a single commercial point contract, we created significant value for our customers. This shift has brought us closer to our customers, enabling us to jointly plan for the future and foster innovation. It also gave us further insight into what their deeper problems and business needs were beyond the products we make and the solutions we provide at the time. We are now able to position our total portfolio of transportation solutions as a more resilient set of revenue streams. The value of deeper customer relationships gives us reason to engage more strategically with our supply chain to enhance the manner in which business can be conducted, allowing for more resilient responsiveness and a willingness to collectively serve the customer. Suppliers recognize Wabash's efforts to improve the industry status quo and are aligning with us, combining strengths to provide even greater benefits to our customers, particularly within the next industry up cycle. Our reimagined manufacturing capacity will also be a key asset in this regard. Our increased resiliency and improved responsiveness will allow us to outperform compared to previous cyclic upturns. One major area of strategic focus has been our parts and service initiative. For years, this opportunity was overlooked in our previous drive for diversification. We now recognize that growing this higher margin, recurring revenue business is a core element to balancing the simple nature of demand for transportation equipment. We're excited about the potential in parts and services, not just as a revenue driver, but as a critical support mechanism to maximize the life cycle of our equipment. We continue to drive the core aspects of this growth journey and are increasingly excited about unmet needs we are uncovering through our enhanced customer relationships. Our partnerships with HTI and Fernweh Group are instrumental in this growth. The Wabash Parts joint venture with HTI rapidly established extensive distribution capabilities, providing our dealer network and fleet customers with efficient access to a broad portfolio of aftermarket parts. Meanwhile, our link joint venture with the Fernweh Group is enhancing our digital capabilities, providing us the capability of engaging our customers differently and addressing solutions to problems in innovative ways. The ability to revolutionize how our dealers, suppliers, and customers experience the Wabash brand through the solutions we provide and the manner in which we provide within the vast transportation and logistics landscape. We have positioned the company well for this next chapter where continued investment and development of capabilities will increase the scale of profitable growth for the company. To further refine our focus, we made some key organizational changes. Mike Pettit, formerly CFO, has been both a thought leader and internal catalyst for our parts and service growth, recognizing that we needed to free him from his day-to-day CFO responsibilities to fully focus on the mission to accelerate the scale of our achievements. Mike will now serve as Chief Growth Officer, overseeing parts and services, digital enablement, and engineering. Collectively, these areas of the business will be leveraged in a manner to bring our purpose of changing how the world reaches you to life at scale. Let me turn the call over to Mike for his first update as Chief Growth Officer. It's all yours, Mike.

Thanks, Brent. Before diving in, I'd like to mention that while I genuinely enjoyed my time as CFO, I'm excited about my new position and the focus it provides to drive growth consistently throughout the organization. On the topic of growth, one of the ways Wabash is leading within the transportation, logistics, and distribution industries is by leveraging our ecosystem to navigate shifts and seize emerging opportunities. As a market leader in transportation equipment, Wabash sits at a unique crossroads, collaborating with suppliers, dealers, carriers, shippers, and technology providers. These partnerships allow us to tackle complex challenges that no single entity could solve alone. While we're still early in this process, in October, we hosted our second gathering of key ecosystem partners at our Ignite Conference, bringing together over 300 attendees. This gathering really demonstrates our commitment to transforming what was once viewed as a basic supply chain into a collaborative ecosystem capable of solving broader challenges together. There are already a couple of proof points I'd like to highlight. First, we recently signed a 10-year strategic supply agreement with Steel Dynamics, a leading North American steel producer. This agreement strengthens our supply chain, ensuring priority access to critical components like steel coils and cross members during periods of high demand. This will help us meet customer needs, even during times when other manufacturers may face constraints. This agreement with Steel Dynamics adds to similar lines with Hydro, Ryerson, and Rockland Flooring, positioning Wabash as a leader in supply reliability and operational excellence. Secondly, our Trailers as a Service partnership with Kodiak, a leader in autonomous truck technology, is another significant step forward. Our TaaS program provides Kodiak with a flexible solution, offering access to a fleet of reliable trailers via subscription that includes maintenance, repair, and managed care support. This allows Kodiak to focus on developing autonomous technology, while Wabash handles logistics and trailer utilization, uptime management, and maintenance through our managed care services. This brings together a unique technology partner and Wabash dealer service capabilities, supplemented by a growing managed care network with Wabash acting as a connective tissue to create value for all parties. Our team is excited by these partnerships, and we are just getting started. We have been laying the foundation for growth in 2024 that we believe will prove to be transformative for Wabash over the next couple of years as we look forward to continuing to create these opportunities by leveraging our position in the transportation, logistics, and distribution ecosystem. With that, I'll hand the call back over to Brent.

Thanks, Mike. Many of you on this call know Mike and his passion for Wabash and the strategic direction we are following. We are lucky to have a leader like him to drive our strategic growth forward, and we look forward to seeing him succeed in this new role. I'm equally excited for Pat Keslin to take the duties as CFO and work directly with Mike and me to achieve our strategic goals. After spending 15 years at Honeywell in various finance roles, Pat joined Wabash and has progressed through several leadership positions, most recently as VP of Finance. I have worked directly with Pat since he joined Wabash in 2017, and I know that he has what we need as we move into this next chapter of the company. Moving on to our third quarter, you'll see a significant divergence between our GAAP and non-GAAP financial results due to the impact of a September 2024 jury verdict. As we've previously shared, a St. Louis jury found Wabash liable for $12 million in compensatory damages and $450 million in punitive damages in connection with a 2019 motor vehicle accident. This incident involved a passenger vehicle traveling at a high speed with an unobstructed view that struck the back of a nearly stopped 2004 Wabash trailer. While we booked a non-cash charge during the quarter related to this product, we believe the damages are abnormally high and the verdict is not supported by the facts or the law. Among other things, and despite precedent to the contrary, the jury was prevented from hearing critical evidence in the case, including the driver's blood alcohol level being over the legal limit at the time of the accident and neither the driver nor the passenger was wearing a seatbelt, which was also kept from the jury. There will be post-judgment proceedings before the court enters a final judgment for the purpose of appeal, but in the meantime, we are working closely with our external legal counsel, accounting, and insurance firms, and we will be evaluating all available legal options. We will continue to share updates as appropriate. Wabash continues to stand firmly behind the quality and safety of our products; this will not stop us from continuing to challenge ourselves to create new and innovative products and do what we can to contribute to safety on the road. Turning to our backlog and financial outlook. Total bookings at the end of the third quarter totaled just over $1 billion. This compares to about $1.3 billion at the end of Q2. As we had expected, the dry van large deal season is pushing to the latter stages of normal seasonality in 2024, and we anticipate the flow of new orders to increase in Q4 and into early Q1 of 2025. With the dry van picture for 2025 yet to be fully developed, we feel it's prudent to adjust capacity in our vans facility in order to ensure we are optimizing our current labor structure for now and for what we expect to be a medium-term improvement. In the areas such as truck bodies, we are thoughtfully increasing incrementally to prepare for a positive 2025. Our parts and service revenue streams continue to add capability, and we will have both a broader and deeper set of offerings as we enter into the new year and continue our march to higher levels of growth in this key area of the business. For now, the rebalancing of our Q4 dry van demand and capacity necessitates that we lower our full-year revenue outlook to roughly $1.95 billion and EPS to approximately $1.25. While it's too early to quantify expectations for 2025, I do believe our 2025 EPS performance can exceed that of 2024. We look forward to providing more detail on our Q4 call. Finally, I'd like to touch on capital allocation priorities as we move forward, reiterating that the significant legal charge in the third quarter was non-cash. We remain well-positioned to invest in the company's strategic growth initiatives with a focus on funding parts and service growth. We believe our current dividend is competitive with our peer set, and we expect to continue evaluating potential returns we can generate via share repurchases compared to M&A. In closing, we believe by adjusting our operations to align with the current market reality, we're optimizing our future earnings power. We have made significant changes throughout the company to increase Wabash's customer value creation, and we believe the company is well-positioned to grow our parts and services revenue streams, which will complement the transportation solutions side of our portfolio to further enhance our value proposition to customers and our financial performance for shareholders. Our ecosystem approach to grow value is showing early signs of success and the company's new organizational structure is designed to accelerate and create focus on how we build our collective future. With that, I'll hand it over to Pat for his comments.

Thanks, Brent, and good afternoon, everyone. I'm excited to be here and honored to step into the role of CFO. Mike has been an excellent mentor and I look forward to building on his accomplishments as we continue transforming Wabash into a visionary leader in connected solutions for the transportation, logistics, and distribution industries. I'm eager to work with all our stakeholders. Beginning with a review of our quarterly financial results, in the third quarter, our consolidated revenue was $464 million. During the quarter, we shipped approximately 7,585 new trailers and 3,630 truck bodies. Gross margin was 12.1% of sales during the quarter, while adjusted operating margin came in at 3.7%. In the third quarter, we generated adjusted EBITDA of $34 million or 7.4% of sales. Finally, for the quarter, adjusted net income attributable to common stockholders was $8.6 million or $0.19 per diluted share. Adjusted EPS generation for the quarter was slightly short of our prior quarterly outlook range. However, I'd like to mention that we incurred higher-than-expected legal expense of $1.4 million or $0.02 of EPS in connection with the St. Louis legal verdict. We did not include these costs in the non-GAAP adjustments made for Q3 as they may be recurring as we move forward to find an acceptable resolution to the matter. Moving on to our reporting segments. Transportation Solutions generated revenue of $416 million and operating income of $29 million. Parts and services generated revenue of $52 million and operating income of $8.3 million. Year-to-date operating cash generation was $36 million with sequential working capital trends in Q3 being incrementally helpful to operating cash. Regarding our balance sheet, our liquidity, which comprises both cash and available borrowings, was $405 million as of September 30th. We finished Q3 with a net debt leverage ratio of 1.5x. On capital allocation, during the third quarter, we directed $15 million to traditional CapEx, invested $1.4 million in revenue-generating assets via our Trailers as a Service initiatives, utilized $18.4 million to repurchase shares, and paid quarterly dividends of $3.5 million. Our capital allocation focus continues to prioritize capital expenditure above and beyond our annual maintenance CapEx spend of $20 million to $25 million to support our organic growth initiatives. As Brent mentioned, we are committed to maintaining our dividend and we will continue to evaluate opportunities for share repurchases alongside bolt-on M&A. Moving on to our guidance for 2024, we are reducing our revenue outlook to approximately $1.95 billion and EPS to roughly $1.25. From the previous midpoint, this represents a reduction of $150 million in revenue and $0.30 of EPS. The most significant changes from our prior outlook come from reduced revenue stemming from level loading of line rates as well as some step-up in G&A related to increased legal expenses as our team works to address the aforementioned jury verdict. Our updated guidance implies fourth quarter revenue of $425 million to $450 million and modestly positive Q4 EPS. Moving on to capital deployment expectations for 2024, we anticipate traditional capital investments to be between $70 million and $80 million in 2024, as a result of planned expenditures to support our strategic growth initiatives. We also expect to continue with a modest level of investment in CapEx that will be immediately revenue-generating through our Trailers as a Service program. While we expect to have a more complete picture of 2025 by our Q4 call, we continue to believe that we have the opportunity to generate stronger adjusted financial performance in 2025 relative to 2024 as the dry van market troughs and we achieve improving performance from our truck body, tank trailer, and parts and services businesses. We believe 2025 adjusted EPS can eclipse that of 2024. I'll now turn the call back to the operator, and we'll open it up for questions.

Thank you. The floor is now open for questions. Operator Instructions. And your first question comes from the line of Jeff Kauffman with Vertical Research. Please go ahead.

Thank you very much. And congratulations in a tough environment. I want to take a bigger picture, kind of. We know the market's slowing down right now because of the pressure on industry P&L that's out there. We know that trailers are getting a little harder in trucks just because fleets are nervous about the decisions, and they're holding on to the truck purchasing commitments for the year. As you talk to your customers about 2025, a lot of the truckload earnings calls I've heard companies are saying, hey, we may spend less in '25 than we are in '24. What have your customers told you so far about their '25 intentions versus the '24 intentions? And research just reduced their forecast for '25 below '24? What parts of your customer base are seeing the greatest pressure versus what parts of your customer base are actually holding in pretty well despite the environment?

Thank you, Jeff. It's a complex question with a nuanced answer. In the past, it was easier to provide specific answers based on customer segments. Currently, customer behavior varies across different segments. For instance, in the LTL sector, while some companies are maintaining their volume levels from 2024, others are hesitant and prefer to wait and see how the market evolves. Additionally, some are discussing the possibility of adding more units throughout the year if the market conditions justify it. The landscape in LTL is diverse, and the truckload sector reflects similar trends. Small and medium-sized companies are still in the same situation they were in during the first and second quarters of 2025, which contributes to the revised projections from ACT and FTR. Some larger firms are maintaining their volume due to a more structured replacement cycle, as they want to keep pace with previous years. Others are either waiting or holding off to gain better clarity on their purchasing decisions, which is causing delays in the cycle. Right now, decision-making is highly individualized among customers and not a generalized reflection of the overall market situation.

Thank you for that answer. To approach it from the company's perspective, the forecast for this year is approximately 235,000 units, depending on who you ask. Looking at the production forecasts quarterly, there may be a significant drop to an annualized rate of around 180,000 units during the winter months, followed by a potential increase to about 230 or 240 in the summer months. How do you handle such volatility? Additionally, given the changes in the pricing model from a couple of years ago, should we consider that operating margins will respond to volume differently than in the past?

That's a multipart answer. Let me start with the first part, and then I'll let others contribute. Yes, I believe the ACT FTR estimates for 2025 are definitely aligned with the current environment. To elaborate a bit more than you asked, from a pricing perspective, the prices we encountered to finish our dry van backlog for 2024 reflect how we will begin 2025. We consider that a clear data point for us and probably for the market as well. Regarding our adaptability, we've been in this industry for over 20 years. In terms of dynamic conditions, this isn't as challenging as what we've faced in the past. We are well-equipped to manage this, and we currently handle it better than ever. However, with the capacity reductions mentioned in our revised guidance, those are the adjustments we are making now to optimize and enhance our net margin profile over the next six months, while also ensuring we maintain some level of adaptability to seize any opportunities in the market. That's my perspective on the qualitative aspects, and I'll turn to Pat to see if he has any additional insights.

Yes. Brent hit it with the pricing where we expect the levels that we're at right now to flow into 2025. To answer your question specifically about operating margins relative to what we've seen in the past. So in a past trough time, we would expect to see an improvement there given what we've been able to do with pricing. So hopefully, that answers your question, Jeff.

Yes. And what I would add is that you really have to integrate in the improved position of where we sit with our truck body business. You have to add in the additional parts and service on top of what is a better starting position at this point in the trough from a dry van perspective compared to any time we've had in our history.

We have a more diverse set of revenue streams than we ever had during a trough performance.

All right. Well, thank you very much. And I want to congratulate you for hiring an Indiana Hoosier as your CFO.

It just shows you we're capable of anything.

Good afternoon, and I appreciate you addressing my question. I want to follow up on your previous answer. With flat or slightly declining volumes next year in the trailer segment, will the production mix shift? Now that your new facility is fully operational, will there be a change between the new products and the older ones? Additionally, could there be benefits to your margins due to the insights gained from having the facility open for a year and optimizing your processes? Is there any positive outlook for 2025?

This question is quite complex in relation to the market. Firstly, I want to emphasize that Wabash is positioned well regarding the demand we expect to generate in 2025, even if the industry remains flat from 2024 to 2025. We plan to take advantage of this situation, believing that our pricing will support us. The mix of what we produce, or the overall volume, can restrict how effectively we utilize our resources in this environment. Therefore, while we may not realize the full benefits of our new capital investment, we anticipate a positive impact from having it operational. It should be fully functioning at maximum volume throughout 2025, contributing positively for the entire year. We are also actively working to exceed the demand we encounter, specifically adapting that demand to align with where we can efficiently build it.

Okay. Okay. Makes sense. One asks about the parts and service business. I was a little surprised you didn't see substantial growth in that business, given the efforts that you've made. You rolled out the new portal, I think, over the last few months. I guess I would like to just kind of feel for whether your efforts are bearing fruit and if all we're seeing is just the effect of just a sluggish market broadly, but your efforts, you feel confident that you'll see some growth there over the next few quarters?

Yes. On the scripted aspect of the call, we've alluded to the fact that we are very confident that the foundational elements that we have put in place, plus what has come online in the last few months and will be coming online in the next month after that, put us in a great position relative to '24 going into '25. The relative demand, or not really demand, but I would say more sluggish performance, still grew when we think about where we were. It's a tough market out there at this moment, and we're not immune to that. The parts and services are not immune from cyclic demand characteristics of a market like this. But they are absolutely more resilient than most of our revenue streams. And I think that's showing in our numbers. So that's proving out, and having stability in the market will provide a tailwind in 2025 compared to 2024. When customers are trying to figure out one quarter to the next, is it going to get better or worse, that makes for delayed buying decisions and complete buying decisions and might not be optimal. Just stability, regardless of the level, will help our parts and service business.

Yes, I think it's important to remember, too, Mike, there's a lot of different revenue streams that roll up in our parts and services and a lot of what you alluded to we're seeing some nice growth and progress in, but we do sell some into the OE space from component parts for Wabash. You can actually see that in our press release, where you see some weakness in some of those parts. As Brent mentioned, the initiative itself is much more resilient than the base business. You can see that we are providing the stability that we thought it would. But it still does operate within the overall freight landscape this year.

Yes, so I guess, I'd even be more specific to the retail side of our parts and service. I'm pretty happy with what we directly provide in terms of components that are directly consumed, which are directly related to OEM demand. They're in the same place that the rest of our business is in.

Okay. Got it. Maybe my last question. I also appreciate your commentary that there's a good chance for growth in earnings next year, even if there's no tremendous growth in the dry van business. But you've also mentioned there have been some reductions to the dry van forecast and who knows, there could be more to come. I'm just curious, can you give us a ballpark for what is the maximum amount that maybe the broader trailer market can be down or Wabash to still have a flat to up year in earnings for 2025?

I'm not sure; I believe that would extend beyond our capacity to provide that kind of guidance right now. I would be reluctant to do that at this moment. There is certainly potential for that to happen, but I do not have a clear answer as there are numerous factors to consider in responding to that question.

I would say that we would expect to see growth in parts and services, we expect to see growth in truck body. And so that would offset some softness in dry van specific unit count.

Okay. That's totally fair. Appreciate the answers. I'll pass it on.

Thanks, Michael.

That concludes our Q&A session. I will now turn the conference back over to Ryan Reed for closing remarks.

Thank you very much, and thanks everyone for joining us today. We look forward to following up on the third quarter. Have a great day.

That concludes today's call. Thank you for joining. You may now disconnect.