Q3 2021 Wabash National Corp Earnings Call
Good day and thank you for standing by welcome to allow best National Corporation third quarter. It's my final one earnings call. At this time all participants are in a listen only mode. After the Speakers' remarks, there'll be a question and answer session. So I ask the questions. During the session you will need to press Star then the number one on your telephone.
Any further assistance please press star zero.
I'd now like to hand, the call over to your speakers today, Mr. Ryan Reed. Please go ahead. Thank.
Thank you good morning, everyone. Thanks for joining us on this call.
With me today are Brent Yankee, President and Chief Executive Officer, and Mike Pettit, Chief Financial Officer.
A couple of items before we get started first 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 Dot Wabash National Dot com.
Please refer to slide two of our earnings deck for the Companys Safe Harbor disclosure addressing forward looking statements.
I'll now hand, it off to Bret.
Thank you Ryan good morning, everyone and thank you for joining US today, we have a number of exciting updates to share with you.
Upon becoming CEO our team began this journey at repositioning Wabash as an innovation leader of engineered solutions, but the transportation logistics and distribution markets with a unifying purpose of changing how the world reaches you.
We have made deliberate organizational structural changes over the last few years, there further enable and accelerate the deployment of our strategy first.
First we built a portfolio of first to final mile equipment, which positions us to have the most complete set of solutions for our customers as they respond to changing logistics environment.
Primarily driven by the growth of E Commerce.
We implemented the Wabash management system.
<unk> based in enterprise focus process development effort that drives breakthrough and scalable business capabilities.
Lastly, we introduced the one wall Bash approach to focus all aspects of our business, our processes and our people to create and deliver value to our customers.
These significant advances to our company structure and culture had been made with the goal of enhancing collaboration innovation and customer centricity across the enterprise.
We now go to market as one wall Dash, which provides our customers with an improved experience as they continue to increase purchasing from across our product and service portfolio.
Our innovation product development and manufacturing capabilities from across all businesses are overseen by one centralized team, which enables our talent to focus on solving the most pressing needs for our customers focusing on deployment of resources, while driving highest levels of innovation within our markets.
This structure enables the Wabash management system. The foundation of how we do things to drive connected thinking problem solving and alignment. So that we can create breakthroughs at an increasingly rapid pace.
These changes have not only enabled a better customer experience, but also allowed wabash to be more productive as evidenced by our $20 million of structural cost efficiencies achieved during 2020. This enhanced platform for growth physicians Wabash to seize the opportunities created by an increasingly disruptive logistics landscape.
The Wabash management system has also enabled the company to focus on the growing opportunities within the transportation logistics and distribution markets.
Our team has worked hard to align our portfolio of businesses with the new strategy and as a result, we have divested three noncore businesses Gar site deal and extract these decisions all follow the principles of our system such as the sharing resources are focused on deployment of the strategy powerful redeployment of capital and focus is.
Critical to our success.
The outstanding efforts of our extended leadership team and all of our employees to accept and drive change has receipt strategically repositioned Wabash to execute the next phase of our growth strategy.
Cold chain the growth in e-commerce, and parts and services offered numerous secular growth opportunities within the transportation logistics and distribution markets and we intend to leverage our people our technologies and our existing and growing capabilities in order to foster profitable growth in these attractive markets.
Our cold chain initiative, Leverages, new technologies to add value within the rapidly growing refrigerated transportation and logistics space.
The E Commerce space has been experiencing dynamic growth in our product portfolio is expanding to better serve that market from first to final mile.
And our parts and service platform initiative is one where we are excited to build upon existing revenue streams target growth of higher margin more recurrent sales as we deliver to our customers' changing needs.
We will deliver on this growth from a market leadership position, while continuing to innovate and deliver industry, leading customer service the opportunities for profitable growth over the next decade has never been as significant in the Companys history and wall bashes positioned to seize this moment.
This moment has special Tran.
Transportation logistics and distribution markets are going through a momentous transition as they adapt to a compilation of forces.
We see a different future reality than our competition in the context of social technological and logistics changes and we've chosen to go down a substantially different path to reshape the industry and pull that future forward for our customers.
It is time to be bold and send a message to all of our stakeholders that we choose to take the next step forward in our maturity as a company as a solutions provider and as part of a greater contributor to the sustainability and social awakening of the world.
The decision to drop national from our name while on the surface may seem insignificant is in fact, a powerful change and some <unk> for the significant strategic changes that they've made as one wall batch and we'll continue to make on our growth journey.
We are redefining and re imagining our unity with customers dealers suppliers employees and shareholders.
While <unk> has become a more dynamic place to work where reshaped to grow beyond our traditional markets and we have a visionary mindset and the capacity to prosper in a changing world.
Today, we are announcing our name change and in the near future. We will outline our plan to adapt our brand strategy to reflect our vision of the future.
In addition to changing our identity, we are changing our segment reporting structure to align with how we operate the business and how we go to market.
Given we now have one face to the customer for our first the bottom our portfolio of equipment.
We will now have two reportable segments.
First these segment transportation solutions comprises of vans platforms tank trailers and truck bodies and accounts for about 90% of our year to date sales.
We continue to provide disclosure of new trailer shipment volumes and we have added disclosure on unit shipment volumes for truck bodies provide visibility to what we anticipate will be a strong growth trajectory for that business going forward.
The second new segment is parts and services a higher margin more repeatable business that is poised to benefit from a changing logistics landscape, new and emerging customer needs and the rise of the digital marketplace.
While we currently generate a small portion of our company's total revenue from parts and service businesses. We appreciate the cyclicality dampening effects and the margin uplift that parts and services can create for Oems as such we have shifted significant talent to lead our parts and service team and they are focused on executing aggressive plans that now underpinned.
Our growth initiatives in this space aftermarket parts repair and maintenance services and updating as well as equipment services, all present compelling opportunities for revenue growth and margin expansion.
We expect parts and services the benefit from our planned capital allocation activities to drive both organic and inorganic growth enabled by a significant free cash flow generation by our transportation solutions segment.
The mature strategic appointment process is one of our many new capabilities installed under the Wabash management system. This will be an area of extreme focus and will benefit from our enhanced ability to create scalable and profitable growth in both OEM and aftermarket parts focused service and update offerings as well as other service offerings.
Our new segmentation structure reflects our enhanced focus on new growth opportunities as well as lines, how we discuss the business with how we operate the business.
This will create enhanced transparency and a more simplified discussion of how and where value is created at <unk> for our employees, our customers and our shareholders.
I will now discuss our plans and shifting capacity from traditional refrigerated bands to dry vans and the scale growth of our composite refrigerated products, which includes molded structural composite technology.
I am pleased to report that our progress remains on track for additional drive and production to begin in early 2023.
As we discussed these capacity changes with the investment community over the last quarter.
I'd like to revisit a few points that I believe are helpful. In explaining our rationale for these changes and the forthcoming benefits.
Going to market as one wall batch allows the portfolio selling approach that leverages, the unrivaled breadth of our products.
Capability to meet this new customer demand more more fully for our flagship dry van product is tremendously important in supporting our portfolio selling approach.
Additionally, our enhanced dry van capacity will allow us to more adequately supply product to our Wabash exclusive and industry leading dealer network.
This added capacity is also necessary to supply logistics market that continues to drive changes in the way trailers are utilized drop and hook is a strategy carriers used to maximize driver's time on the road.
Driver shortages are a persistent problem, but have become more severe since 2020 with little clarity on how or when this situation will materially improve.
Overall, our customers incremental economics of adding a trailer to attract her has meaningfully increased and represent a compelling value proposition in the marketplace. Additionally, incremental demand for dry van trailers is being generated by customers that did not consume trailers five to 10 years ago.
Private fleets and freight brokers.
Our building trailer pools to ensure consistent access to capacity and more effectively leverage power only capacity.
Given our efforts to grow drive and production. We have also planned several steps ahead to ensure stability of component supply.
As one example, our management team has spent time with our supply partners at Heathrow, a global leader in aluminum extrusion.
Which have historically been in high demand during times of elevated trailer industry build rates.
The hydro team appreciates the vision that Wabash is working to bring to life and <unk> agreed to be a key supplier for Wabash over the life of a 10 year supply agreement.
Which is a meaningful development increasing supply certainty for both our existing and new dry van capacity.
When considering the differentiation facilitated by our industry, leading lightweight panel technology. We believe this capacity expansion creates incredible long term opportunity for Wabash.
We also remain on track with our plan to scale, our innovated molded structural composite technology within refrigerated van <unk> truck bodies, and other transportation logistics and distribution related products.
We believe we have a unique technology and operational capability that has the ability to disrupt the broad cold chain product market as well as change operating models for carriers and shippers. These composite technologies facilitate improved operating efficiency for our customers changes the model of asset usage of life. While also supporting our customer base that has increased.
Increasingly focused on sustainability and reducing their carbon footprint.
We now have over 25 million miles log to date and we're excited to scale. This opportunity as we move into full commercialization of this product technology.
Finally, we believe long term investors will be rewarded in the near term by our dry van capacity project has are converted traditional refrigerated van facility will produce 10000 units post conversion, which is twice as many dry vans as compared to the reversal previously manufacturer.
Notably dry vans carry a higher margin compared with our conventional refrigerated product. All told we expect to realize 15 to 20 <unk> of annual EPS accretion in 2023 and beyond as a result of this near term capacity move.
This capacity project will also enable us to further create shareholder value as we fully commercialize our breakthrough all composite refrigerated technology over the next several years.
Moving to market conditions demand for freight remains robust and supply continues to be constrained by a multitude of factors.
Long business investment and consumer spending paired with persistently low inventory levels continue to propagate robust levels of freight activity. We see the overall freight environment remaining positive through 2022, and well into 2023, coupled with structural changes as previously discussed in terms of e-commerce related logistics disruption the entry of new.
Customers and the emergence of large trailer pools, we see demand remaining robust for an extended period of time.
Possibly the strongest periods of demand we've seen in history.
As a reminder, the trailer industry has a strong seasonal pattern of ordering activity and which OEM backlogs built during the second half of the calendar year.
The strength within our customers' businesses from first to final mile has been well reflected in our backlog, which increased by $600 million sequentially Q3 to a total of $1 9 billion.
This represents an 87% increase versus the same period last year $1 9 billion in backlog also establishes a new record for our order book, which is testament to our new commercial structure and market strength as well as changing dynamics of how the market utilizes trailers.
The strength in our backlog creates the visibility necessary to offer an initial EPS outlook for 2022.
$1 70, assuming no improvement and supply chain conditions.
In closing, we're excited to announce our identity change and the realignment of our external reporting with our operating structure, our growth initiatives and our strategy going forward our portfolio of transportation solutions positions us to leverage unmatched product breadth as a competitive advantage shored up by unified commercial structure.
<unk> and go to market strategy.
We expect our increased dry van capacity to be a linchpin to many new and expanded customer relationships and our shift to all composite refrigerated technology to drive growth well into the future.
Driving focus and our parts and service business enhances visibility to our higher margin more repeatable business that features ample potential for growth.
These reporting changes are the culmination of modifications to our organization to facilitate our refresh strategy and we are eager to share our progress with you as the new reporting structure enables more effective communication.
We believe the story that started with a change in vision and a deep desire by so many it Walt I used to be different to be better.
Ultimately we are living our purpose with action to change how the world reaches you.
With that I'll hand, it over to Mike for his comments.
Thanks, Brett.
To start by offering some brief thoughts on the announcements french's discussed.
Following our strategic organizational and capacity update today's company branding and segmentation refreshes are the culmination of work that has been going on behind the scenes for the last three years.
Our decision to narrow our strategic focus to transportation logistics and distribution market. It comes at a time, a dramatic and exciting changes within the industry and we are tremendously excited with how the fibers have physician.
To leverage our commercial organization and innovation and product development capabilities to lead our markets forward.
Turning to a review of our third quarter financial results consolidated third quarter revenue was $483 million with new trailer and truck body shipments of approximately 12455 units and 3708 units respectively.
Gross margin was 10, 6% of sales during the quarter, while operating margin came in at three 8%.
Operating EBITDA for the third quarter was $33 million or six 8% of sales.
Finally for the quarter net income was $11 million or 22 per diluted share.
From a segment perspective transportation solutions generated revenue of $443 million and operating income of 26 million.
Parts and service generated revenue of $42 million in operating income of $4 $1 million.
Year to date operating cash flow was negative $74 million.
Shipments that were skewed very late in the quarter caused our receivables to increase significantly from Q2.
We have also increased inventory in certain areas of our business to help buffer supply chain interruptions.
We would expect Q4 to have a significant amount of free cash generation.
Our current target for 2021 capital spending is approximately $50 million, which is higher than normal as we catch up on projects that were deferred during COVID-19 and prepare for our strategic capacity expansion and the conversion of our Lafayette based out plant from reefer capacity to drive that capacity.
With regard to our balance sheet, our liquidity or cash plus available borrowings as of September 30th was $269 million with $49 million of cash and cash equivalents and approximately $220 million of availability on our revolving credit facility.
In late September and early October we upsized, our revolving credit facility by $50 million to $225 million and closed the issuance of $400 million in senior notes respectively.
After repaying our previous senior notes and term loan our improved debt structure will result in $3 million of annual interest expense savings and more importantly, create a reasonably priced patient debt structure that allows us to invest in our business and enhances our opportunity to create value with a lower cost of capital.
With regard to capital allocation during the third quarter, we utilized $14 million to repurchase shares paid a quarterly dividend of $4 million and invested $9 million in capital projects.
Our capital allocation focus continues to prioritize reinvestment in the business through growth Capex, while also maintaining our dividend and evaluate opportunities for share repurchase alongside bolt on M&A opportunities.
Thinking about the next three to five years.
I expect our capital allocation to continue to support our internal opportunities for organic growth.
Exciting opportunities to generate rates of return well in excess of our cost of capital as we progress with initiatives in our transportation solutions and <unk> services segment.
Our dividend also remains an important element of returning capital to shareholders.
Given that we expect our future free cash flow profile to remain robust we will continue to have the opportunity to repurchase shares when we consider them to be undervalued.
While we will continue to evaluate smaller acquisition opportunities that would easily fold into our existing operations I believe any large deals will be a lesser priority compared to the internal opportunities we have in front of us.
Moving onto our outlook for 2021, we do expect Q4 to represent peak paying for SMA margin perspective.
In the quarter, while the price cost most heavily works against US as we produced for orders that were booked in late 2020, after which material costs have run substantially.
We expect revenue in the range of $490 million to $520 million and EPS of 10% to 15 for the quarter.
As Brent mentioned, a record backlog allows us to offer an initial outlook for 2022 of $1 70 per share I'd like to be clear about the assumptions behind our 2022 outlook.
Pricing recovery from commodity headwinds experienced in 2021 have been effective and we expect average selling prices for trailers to increase in the range of 5000 to $6000 year over year. This would represent a 60% tailwind in the bridge from our anticipated 62 cents of EPS in 2021 to our guide of $1 70.
<unk> in 2022.
I'd like to emphasize a modification to our pricing contract for 2022, where we have implemented pass through commodity prices with many trailer customers we.
We have targeted a certain margin and have agreed to pass through commodity costs. We feel this provides more certainty around our forward financial expectations and we hope to continue with this framework in future years.
So assuming over 90 from improved bill rates, which are based on the ramp and factory floor associate count.
We've been able to achieve to date.
We expect to gain totaled 10 sets from the combination of reduced year over year share count as well as lower interest expense.
Fixed overhead and SG&A will partially offset the significant gains as a result of the impact from the current inflationary environment.
We are assuming no improvement in supply chain and our guidance.
Clearly, we hope that as time goes on the supply chain situation improves, but we're not building that level of optimism into our outlook. However, it is clear that provide upside opportunity should the presence supply chain improve.
Operating margins are expected to be approximately 6% at the midpoint and we are well on our way to achieving our 8% operating margin target by 2023.
We are excited about our opportunity to meaningfully expand the company's profitability and earnings per share year over year and about the strong underpinnings of the demand for our products driven by both strong demand conditions and structural changes in the market.
In conclusion the announcements we've made today are the culmination of work that has been going on behind the scenes for the last three years.
Our strategic focus is well set to leverage the company's strengths as our organizational structure improvements proactively position us to drive innovation at a time when the market most needs. It. Additionally.
Additionally, while our new segment structure provides visibility to our important parts and service business I'd like to reinforce that our parts and services team is working on initiatives meant to holistically benefit Wabash, which.
Which means we're thoroughly falling through the lifetime value of our equipment for customers.
Enhancing wabash has value to our industry, leading dealer network.
And effectively leveraging our carefully curated supplier partnerships.
We are building something exciting.
And the white space around our traditional first to final mile portfolio of transportation solutions.
All told narrowing our strategy to focus on transportation logistics and distribution restructuring our organization around these customers and going to market as one love ash to most effectively leverage the breadth of our portfolio of solutions has built a new identity for our company.
This new identity is underlying by the modification of our company's name.
Our ticker will remain WMC for Wabash will stand for changing how the world reaches you.
I'll now turn the call back to the operator, and we'll open it up for questions.
Thank you as a reminder to ask a question you will need the breadth pardon the number one on your telephone keypad again, Doug Let me start and then the number one on your telephone keypad. Please Dan Barber compile the Q&A roster.
Your first question comes from the line of Justin Long from Stephens. Your line is open.
Thanks, and good morning.
Good morning, Brian Good morning, So I wanted to start with the question around trailer delivery expectations going forward I didn't.
Seeing anything and I could have missed it on trailer delivery expectations for the fourth quarter and then as we think about next year. In this bridge that you just walked through Mike, It's a pretty significant tailwind from increased volume despite that.
Clear capacity constraints that we're seeing in the market. Today. So can you just kind of help us think through what level of trailer deliveries is needed to achieve the 2022 guidance and just your comfort and visibility and seeing that ramp.
Yeah sure. So if we didn't give specific unit guidance for Q4, we did give a revenue range, which is slightly a slight uptick from.
Q3.
If you look at going in the run rates, what what's important to know is we have clearly been able to.
Man, our installed capacity to be able to come out of the gate in Q1 of 2022 and hit.
The guidance that we laid out and where we are running faster today than we were earlier in the year. So if you just can you just allocate out and normalize where we were first half step it up into second half and then take it into Q1 of 2022, you'll see we've done some of the hard work already.
But there is obviously in our implied.
The guidance, we gave for 2022 were nowhere near some of the run rates. We would have seen in 2018 in 2019 from a unit count perspective, and that's the upside that still exist in the supply chain.
So we are basically baking in we have visibility obviously on the demand side with our backlog of $1 9 billion, we have the demand and backlog surety to hit the rates.
Maintaining some conservatism around the supply chain, but I think the other point is that we do have the installed manpower to do what we need to do to hit those run rates in 2022.
Yes, I think another point of optimism as we go into the fourth quarter and we are thinking about the first quarter of 2022 is that we've been very successful over the last 45 to 60 days with Onboarding New associates, we really saw that change in the middle of September and the other good pieces, we're hearing the somewhat.
Similar output.
Our supply base as well that has capacity.
And resilience that will come into the supply base really in the first quarter.
2022, and that gives us a much better feeling in the stability of the supply base going forward, which gives us a very nice jumping off point with the labor that we've been able to bring in.
At a minimum maintain but more than likely able to incrementally do better from a general production standpoint going into the first of the year.
Okay. That's helpful and maybe another way to ask it is when you look at that Act research forecast for industry trailer production in 2022, I think there.
Just under 20% next year.
<unk> that you would at least expect to be kind of in line with that level of growth maybe a bit above.
I think Thats a fair assessment.
Okay.
And then Mike maybe just following up on the EPS guidance for 2022, so for the fourth quarter, we're going to be at 10% to 15 cents of EPS you kind of run the math on where we're headed next year and it's a pretty significant step up. So I was wondering if you could help us think through that.
The cadence of earnings you're expecting next year, even if it's just kind of high level first half versus second half as we think about how things should ramp over the course of next year.
Absolutely so.
You would expect Q1 to be the lowest quarter of the year from an EPS generation perspective, but that's normal for Wabash National If you look back over the last.
Seven to eight years pre pandemic it was.
Very normal for Q1 based on how equipment picked up from our customers that Q1 would be the lowest.
So you would see you also see a little bit of overhang from Q4 units that pushed into Q1 from the supply disruptions that will work through in the first part of the quarter and then Youll see Q2 it'll be.
Should be off to the races at that point with a repriced back.
Backlog from the 2022 order season, a fully staff manufacturing facilities, and we would hope to see at that point, even more stability from this from the supply chain. So.
Q2, I think is what youre going to see a meaningful step up from Q1, and I would say Q2, Q3, and Q4 should all could all be relatively similar in terms of EPS generation after a big step up in Q1.
Okay. That's really helpful and last one from me when you just look at what the guidance implies for the step up in SG&A next year, it's around $40 million can you kind of help us unpack the key drivers to that increase and does that include any kind of temporary operating expense.
Associated with adding capacity before you actually see that revenue play out in 2023.
Yes.
Theres a lot that goes into that when we talk about.
The step up in SG&A obviously.
We are going to have to add some.
SG&A for our ramp facilities that we've got both little falls for MFC endless surge, but a big part of that actually is just some of the normalization.
Inflation you see throughout the business.
From low levels in 'twenty 2020 in 2021.
Some areas.
Incentive comp and other areas of the business that are returned to more normal levels in 2022.
Okay. That's helpful. I appreciate the time.
Thank you thanks Joseph.
Thank you next up we have Jo Walton from BMO. Your line is open Sir.
Hey, guys Don.
Joe.
I wonder.
If you if you could talk a little bit about any signs I know well everyone's disrupt it out there and I wondered if there is any sign that you guys are seeing about gaining share.
In the market and some of your new targeted areas.
Yeah, what I would say is that.
Or do you want to start so when we think about the various trailer segments that we have and we'll start there.
We have a you can see by our backlog.
We've been very successful of leaning into the beginning of the order season.
And that.
Illustrates the amount of demand we had.
For our product really since the beginning of the year.
What I can tell you is that we are specifically targeting customers for.
For the purposes of building out our portfolio.
We're also targeting customers that understand the value proposition of our product and that's maybe a more important way of thinking about.
How we go forward and building out our portfolio now we're also setting up to your to your explicit point of market share.
Purposely building and expanding.
Sure slightly in 2022.
But will be more interesting is how we talk about the mix of what who that what that customer portfolio is as we come out of the first quarter and.
We're excited about talking about what that is and it goes hand in hand, with having a very robust.
And pragmatic view of the pricing that we're getting as we go into 2022 I think that's probably the most important thing to take away from it now if I want to expand out of trailers I think about MSC reefers.
While it may not be necessarily a market share gain today I want to talk about where we're at with that this year, we'll build somewhere between $220 and 250.
Based on the limited amount of capacity that we had in pre commercialization phase of launch as we move into 2022, we're looking at scaling that up to approximately 1000 units.
Only factoring in foam availability as a mitigating factor, which will look to resolve and we're approximately already at.
At 50% booked as we sit here today for that product, we're already doubled the amount of MSC.
Booked orders today and still are processing and have no has.
Zero concern of filling out that backlog.
Approximately 1000 for 2022, that's almost a 400% improvement from where we are.
We are investing in our product.
Our I'm, sorry, our platform business to increase specifically aluminum related trailers.
And that business is effectively booked for the year at full capacity based off of labor availability today.
And our truck body business is just beginning to open up and I think what we would see there is relatively the same same market share.
Just a expanding market so that would be the color I would give right now.
Okay, that's beautiful.
Can you give us a sense, Mike I don't know how to measure are you gaining your fair. So you do have your fair share in parts and service or maybe the better way to ask it is where do you think this business could be in five years or 10 years whatever.
Longer term timeframe, you want to put on it.
No.
The reality of it Joe is that we at wall batch national have really underserve, the parts and service segment of our business for the last 20 plus years.
We see this as a tremendous growth opportunity something that could easily double.
In terms of revenue and probably with some level of margin.
Improvement.
As we greatest grow scale.
The environment is clamoring for.
We'll call it some business innovation and the way parts and services are delivered today with the changing logistics marketplace. So we really feel if we approach it.
A more innovative manner and more modern manner.
Sky's the limit on where we can go with us as Mike talked about we also see it as a destination for deployed capital to be very specific and aggressive in the way that we grow that so between organic and inorganic opportunities.
Today say.
I have no concern and doubling it and we'll see where we go from there.
Okay. That's great and then the last one for me is can you just talk a little bit about acquisitions.
Good.
In your view do you think we would be a little more technology focused or more capacity focused more spreading out.
The product line, just a little bit of color in that direction and then I'm done. Thank you.
So when I think about capital allocation in terms of acquisitions technology is absolutely.
An area of.
Capital deployment that would be useful assuming that it fits into our innovative innovation pathway as we target our portfolio of customers.
Second I think there are opportunities from a capital deployment standpoint to shore up our supply chain, whether that's a level of vertical integration or expanding our ability to buffer.
Concerns over the next several years, let's just say for the next half decade, I think that's an opportunity and we absolutely are going to look at capital deployment for the purposes of capability enhancement for our parts and service business to round out a very extensive.
What I want to say worldly portfolio.
Service capabilities.
Business capabilities and in some cases, I'd say capacity, but it's much more about organic capability that we want to bolt on.
I think theres a lot of opportunities.
As Brent mentioned in parts and services due for corporate development that may not be pure M&A that is capital light with partnerships and other ventures that could really help us.
Round out that initiative, and we'll be talking more about that over the coming quarters about that.
Great. Thank you.
Okay. Thanks, Joe.
Thank you. Your next question comes from the line of Jeff Kauffman from vertical research. Your line is open.
Thank you very much this sounds exciting.
Could I ask just a couple of detail mitts.
With the new reporting structure.
I know, we're blending everything together, but can you break out kind of where your.
Volumes were between say.
Dry reefer and tank in the quarter.
We've never broken out.
Dry and reefer tanks tank <unk>.
P. J I would say that the mix the mix in the mix between tank and <unk>.
Classics ETP volume.
Similar to Q3 as it was in Q2.
Alright traditional.
Traditional mix of volume really.
From a historical standpoint for years.
Okay, and then you said when you breakout the 10000.
New capacity for dry that's almost double what you were doing before im assuming the application is about 5000 forever.
Four to five out of Iraq.
And then you mentioned that you'll be around a thousand MSC units next year.
So when fully built out and we're going forward in 'twenty three 'twenty four as MSC going to be around that $4 to 5000 level that reefer was before is there kind of a ramp build or where do we see that MSC business size wise long term.
So when you think about.
Let me be very specific when we talk about MSC as a technology and don't want to break it into his product applications.
The minimum expectation is that we are equal to our conventional historical production. So in that four to 5000 range. We obviously have sites to be greater than that.
Based off of our commercialization efforts and how those truly pan out.
That will be directionally around 1002 thousand 22.
Four to 5000 is a reasonable target at this time. In addition, we are planning to build at least at 900 to 1000 MFC related truck bodies, which I would cast as primarily market share slash.
New business creation and the way that we're applying it I think some things that we'll be giving to the street in the next several weeks with detail as some output with some very interesting work that we've been doing with multiple players in the area of refrigerated.
Refrigerate refrigerated delivery and how we're partnering with them to give them some very unique solutions with MSC. So when we think about MSC in total well.
Maybe four to 5000 refrigerated vans, we may be well over that we will be well over that in terms of MSC utilization as we lean into the marketplace Jeff.
That was really helpful. Just one last follow up if I can thank you.
So.
Whats youre going to do with the parts business sounds exciting.
I was just kind of wondering how do we affect the growth of parts. When you largely gotten out of the dealership business. How do we how do we double parts over time, how do we distribute kind of help me understand how that business grows.
Well first off while Wabash National historically, and you obviously you have been covering Wabash for a long time, what youre referencing is our.
Our Wabash owned service dealerships that we had as part of the <unk> acquisition of assets back in 1999, while we have a transition does what we did for the most part is transitioning those into independent dealer.
Entities.
Those still remain Wabash national independent dealer relationships and as a result, we have created the most expensive.
Deepest and most talented group of dealers in the industry. We plan on leveraging that in a very purposeful way that really hasnt been harnessed in the past 20 years for Wabash National.
We're going to do that with enhanced distribution that will be both.
Say partnership like in the way that we look at that.
We're going to go further.
And the way that we are digitally enabled that beyond what the offerings are to the street today.
And we're going to couple that with bringing together not only truck body parts, but also van and tank parts to have again, a first to final mile total portfolio solution in the way that we do it no one else can do that Jeff. So we think we can create the premier overtime.
Premier portal for.
For the distribution of parts.
Cross those companies that value going to a one stop shop.
So your point is that.
Even though it's not a wide one network your ability to use a distributor network to get out there is still very much intact.
Absolutely and we think we can do it in a very capital efficient way as a result.
Okay, great. Thank you very much.
Thanks, Jeff.
Thank you presenters there are no further questions at this time I will turn the call over back to Mr. Ryan Reed for any closing remarks, Sir.
Thanks, Greg and thanks, everyone for joining US today, we'll look forward to following up during the quarter have a great day.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you all for joining you may now disconnect.
Okay.
[music].
Okay.
Okay.
[music].