Q3 2023 Wabash National Corporation Earnings Call
Good day My name is Rob it'll be your conference operator today at this time I would like to welcome everyone to the Wabash third quarter 2023 earnings conference 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. If you'd like to ask a question. During this time.
Simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question again prestige Star one. Thank you Ryan Reed senior director of Investor Relations and corporate development. You May begin your conference. Thank you and good morning, everyone. We appreciate you joining us on this call with me today are Brent <unk>.
D President and Chief Executive Officer, and Mike Pettit, Chief Financial Officer.
Before we get started we would note that this call is being recorded I would 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 Dot one Wabash dotcom.
Please refer to slide two in our earnings deck.
Company's safe Harbor disclosure addressing forward looking statements I'll hand, it off now to Brent.
Thank you Ryan good morning, everyone and thanks for joining us today.
I'm pleased to announce another quarter of strong financial results, which continues to demonstrate successful execution against our strategic vision.
With the industry's broadest portfolio of first to final mile products solutions, and a growing parts and services offerings that complement our transportation equipment group.
We remain dedicated to elevating our value proposition even further.
For our partners.
In addition to securing two pivotal agreements with strategic customers. We are also focused on adding value across our partner ecosystem by executing relational agreements with key suppliers like he drove Ryerson and most recently Rockland boring.
Rockwell is a longstanding supplier blip flooring for trailers and their supply commitment will bolster wabash and strategic positioning as we look to enhance demand planning within our dynamic industry.
Just as we continue in our pursuit of enhanced value creation within our transportation solutions business by redefining relationships with our evolving set of direct customers and key suppliers. We have similar strategic focus on amplifying our parts and services offering by working collaboratively with our best in class dealer network to provide.
Differentiated offerings to make customers more efficient by leveraging our parts distribution capabilities as well as embracing the power of digital transformation.
Im excited to announce a significant expansion of our Wabash parts network and trailers as a service capabilities through our new joint venture with firmly group.
Collaboration strategically aimed to enhancing our ecommerce and partner ecosystem.
<unk> boasts a distinguished track record in scaling industrial Tech and we anticipated. This JV will significantly accelerate our development and growth of an end to end digital platform that provides an industry leading experience to our dealers traditional and nontraditional suppliers of both parts and services and a broad set of customers spanning the transportation.
Logistics and distribution landscape.
<unk> is positioned as a central figure with an increasingly complex ecosystem of industry participants where innovation endeavors to address challenges within transportation and we look forward to using our unique positioning to work closely with firm way to scale transformative projects that will help to enhance efficiency of logistics networks.
I'd also like to take a moment to thank our board of directors, whose active engagement and dosing oversight throughout the process of forming the strategic joint venture has been instrumental has always their collective experience guidance and support has been pivotal in steering us along this path of reinvigorated organic growth.
If this joint venture appears to be a departure from a well worn path for Wabash with respect to encourage you to take a closer look at our most recent journey.
Over the past few years, our company has undergone a profound transformation, we've restructured re segmented rebranded.
<unk> answered that and recapitalize our manufacturing operations.
Reaping changes it yielded substantial financial accomplishments that have come ahead of schedule at.
At our 2022 Investor meeting, we unveiled a new set of long term financial targets, which included in EPS goal of $3 <unk> per share by 2025.
At the time was viewed as an ambitious target.
For those keeping score at home, we've achieved $3.74 of EPS through the first three quarters of 2023 are in the process of setting a new bar for what peak earnings can look like for this company.
And just as importantly, as demand conditions within band soften in 2024, we fully expect to put our best trough performance as the power of our portfolio shines through with truck tanks trailers in parts and services are expected to continue posting strong financial performance.
While I've called this out in the past I would like to reiterate that the record earnings figure. We will achieve in 2023 is being done so on unit volume that resides meaningfully below full factory utilization additions.
Additionally, by the time, we make our way back to the next market peak.
We would expect our parts and service business to be even larger margin accretive piece of the portfolio.
Turning our attention to market conditions and backlog shouldn't activity continued to outpace new orders in the third quarter, which is not surprising given the softening of demand conditions as freight rates bump along with simply problem.
So during the challenging transportation market conditions that our customers have been contending with it.
It's also not surprising to see order activity shifting towards the later stages of the typical seasonality timeframe.
And in Q3, our total backlog stood at $1 9 billion, while our 12 month backlog was $1 4 billion and we do expect to achieve an uptick in order flow through Q4 with order season now underway.
As industry participants have noted.
Additional month that the freight market continues to languish, the stronger and more durable we expect the inevitable recovery to date.
Over the long term, we maintain our belief that our core markets are benefiting from secular trends such as power only persistent driver shortages and resurgence of re shoring activity within North America.
Moving on to our financial outlook with the first three quarters of EPS in 2023, outstripping any full year in the company's history. We again are pleased to raise the midpoint of our full year 2023, EPS guidance to $4 65.
$4 45.
In closing, we are well prepared to execute in 2024.
<unk> actually is as strong as it's ever been at this point in the freight cycle with minimal leverage and the ability to continue our focused execution on our unique organic growth projects outlined on our strategic roadmap.
We expect to navigate a reduction in dry van industry demand next year, but we will do so with recently proven capabilities and the performance of other major facets of the business remain strong in the coming year that will allow us to accelerate as demand rebounds within the band segment during 2025.
We see 2024 as a point in time, we will expand and deepen relationships with our dealers suppliers and customers as well as interesting new players within the transportation logistics and distribution landscape, yes, certain markets may pull back in 2024, but nothing is happening that will derail us from our purpose and our.
Mission, we are executing to the plan that improves our financial performance at all points in the cycle and facilitates opportunities for wall base to continue to grow our level of value creation for all stakeholders.
With that I'll hand, it over to Mike for his comments.
Thanks Brent.
With a review of our quarterly financial results in the third quarter, our consolidated revenue was $633 million.
During the quarter, we shipped approximately 10765, new trailers and 4160 truck bodies.
Given what we see in the market environment for bands, we made the decision to take from targeted downtime at our <unk> facility.
Barrier for new trailer shipments coming in slightly below what we might have expected one quarter ago.
In doing this we have maintained the vast majority of our full time production employees in order to preserve our flexibility to respond to near term demand changes.
Gross margin was 19, 4% of sales during the quarter, while operating margin came in at 12, 3%. These figures remained strong due to a combination of favorable factors, including material cost and mix benefits as truck bodies tank trailers and parts and services remain bright spots in our portfolio.
In the third quarter, we achieved strong operating EBITDA of $93 million or 14, 8% of sales.
Finally for the quarter net income attributable to common stockholders was $55 $3 million or $1 16 per diluted share.
From a segment perspective transportation solutions generated revenue of $583 million and operating income of $89 million.
Parts and services generated revenue of $56 million and operating income of $12 4 million.
Our parts and service segment grew again in excess of 20% during the quarter and our partnership with firmly group increases our confidence in the future revenue potential for this business.
Looking forward to next year, we expect parts and services to continue growing at a 20% clip.
Year to date operating cash flow of $205 million.
Reflecting our strong financial performance.
Even in the context of significant growth investment via capital expenditure of $30 million.
The company generated $28 million of free cash flow during the quarter.
Concerning our balance sheet, our liquidity, which comprises both cash and available borrowings was $447 million as of September 30.
We finished Q3 with a net debt leverage ratio of zero eight times.
This is our lowest leverage ratio in 2017.
And I'd also like to note that while the ashes debt rating was upgraded during the third quarter by S&P.
Given the current interest rate environment, we are very pleased with our debt structure, which is simple.
<unk> of one issuance of $400 million in principal value and also chief in today's environment with a rate of four 5%.
These notes mature in late 2028, and we currently see no reason for debt repayment to be part of our capital allocation priorities.
On the topic of capital allocation during the third quarter, we invested $29 million in capital projects and $1 million in revenue generating assets for our trailers as a service platform.
We utilized $18 million to repurchase shares and pay quarterly dividends of $3 8 million.
Our capital allocation focus continuing to prioritize capital expenditure above and beyond our annual capex maintenance spend of 20% 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 of bolt on M&A.
Moving onto our outlook for 2023, our financial outlook now contemplates revenue of approximately $2 6 billion.
And we are increasing our outlook for EPS by <unk> 20 per share at the midpoint to $4 65 per share with a range of $4 60.
To $4 75 per share. This compares to a previous EPS outlook midpoint of $4 45 per share.
We continue to expect $150 million of free cash flow during 2023 in a year, where we have meaningfully recapitalize the manufacturing of our flagship driving in product line as well as providing additional capacity for future growth. We have also invested in important growth initiatives, such as cold chain and recurring revenue.
And our financial outlook, we expect fourth quarter earnings per share in the range of 86 per share to <unk> 96 per share.
While we're still in the process of gathering all of the necessary inputs to provide precise 2024 guidance I'd like to share some insight that I hope are helpful. In thinking about the outlook for next year.
First as Brent mentioned, the cadence of orders season for vans. This year is much more similar to the calendar innovation of many pre COVID-19 years. We're fortunate in 2000 22021 and 2022 at demand conditions were exceedingly strong, whereas the full order season forward in those years 2023 resemble something more usual from a historical perspective.
Our negotiations with customers have been productive and we expect to actively quote order for 2024 during the fourth quarter.
While we've seen so far aligns with industry forecasters and that demand seems poised for a modest pull back to a level that most would consider mid cycle territory.
Now that commentary specific to advance with.
With regard to our other businesses, we expect to see continued strength within areas by truck bodies tank trailers and parts and services together. These segments are poised to contribute significantly with the potential to generate around $200 million of gross profit in 2024 to be clear that figure excludes the contribution from dry vans and allowance.
Our consolidated gross profit performance in years, like 2020, and 2021, reflecting the robust potential within truck bodies tank trailers in parts and services.
In conclusion, I am thrilled that check off a meaningful long term financial target more than two years ahead of schedule. I'm also pleased to be able to raise our full year guidance again this year, but even more excited about what our 2023 financial performance signals for years to come we have a very strong and capable team that has generated a record 2023 performed.
And we believe we're still in the early innings of realizing the full capability of our remade company.
Perhaps surprisingly I'm also enthusiastic about our prospects for 2024 for over three years, we've been exploring the potential of our first to final mile. One Wabash plan designed to transform the company cyclicality as we look ahead to 2024, we're poised to showcase the continued progress we've achieved and stabilizing wild acid historical earnings volatility.
<unk>.
While that's occupies a prominent position as an industry leader in transportation equipment and is positioned at the epicenter of an increasingly complex ecosystem of participants within transportation logistics and distribution.
We are actively collaborating with firm way to bring value to this ecosystem by crafting a digital marketplace capable of uniting these diverse stakeholders to address industry challenges. We firmly believe that this initiative will define the next chapter in our journey to change how the world <unk> is an exciting time and we're eager to continue shaping the future of the industry alongside our.
Our partners and stakeholders.
I'll now turn the call back to the operator, and we'll open it up for questions.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
And your first question comes from the line of Justin Long from Stephens. Your line is open.
Thanks, and good morning.
Alright.
Awesome.
So maybe to start I was wondering if you could help us understand the positive impact you saw from material margin in the third quarter and then as we move into <unk>.
<unk> fourth quarter and early next year, how you see that progressing.
Yes, we did see some.
Positive sourcing related material cost.
As impacted in Q3 about non commodity related debt.
Some of that will continue into Q4, some will not and that was a partial driver to our beat versus our original guide.
So I would expect a little bit of a step down in.
Q4, and a mature margin, which is embedded in our guidance but.
Not a ton. So we would have we would expect to maintain some of that the sourcing benefit that the gap, you'll see a little bit of a step down from the margin perspective.
Okay and would you expect that to normalize in <unk>.
First and second quarter next year.
At what point will we get to a kind of a more normalized manufacturing margin level.
Q4 will be a I would say a much closer to what we would expect to see in 2024 from.
Margin perspective, but we obviously still have a lot of work to do from a backlog fill perspective before we can get any official guidance. So we didn't give guidance for 2024, yet so I can't I can't say that will be the exact margin profile, but Q4 will be closer to what we would expect to see on a run rate level.
Okay understood.
Following up on what you just said you gave some helpful puts and takes for 2024 and totally under a fair I appreciate that the macro environment makes forecasting challenging but how are you thinking about the range of potential outcomes for the business in 2024.
And maybe you could speak to how you're managing resources based on that range I heard you say.
At one point you took some targeted downtime at one of your facilities in the third quarter, but just curious if you could comment on the range for 2024 do you have any thoughts there and how you manage resources to that range, yeah, absolutely I'll start and then I'll let.
Brian maybe you take the resource part of the other question, but we.
We clearly believe that we're going to see some.
Nice order inflow in Q4.
Which is not uncommon that we in some of the prepared remarks, we mentioned that if you go to the pre Covid days seen as the majority of the backlog fill going into year end and Q4 was was not a not an abnormal thing we're getting back to that.
Calendar renovation of order fill and we feel we feel pretty good about what we what we can deliver in Q4 and going into 'twenty.
2024, and also Thats, a very much a dry van specific comment.
As I mentioned, we have a lot of other revenue streams that we feel are filling and we'll provide a lot of support in 2024.
Those are the parts and tank trailer truck value, we've talked about it so.
It's a wide range, which is why we didn't give give a formal guidance, but we would expect to see.
<unk>.
A reduction of that happens from the trail of orders that you are seeing from <unk>, we would expect.
Rob: Good day. My name is Rob, and it will be your conference operator today. At this time, I'd like to welcome everyone to the Wabash Third Quarter 2023 Ernie's conference call.
We would not see that big of a drop in revenue for sure based on some of the support we have in our other value streams and we'll have a lot more color and context around what we'll see from drive ends at the year end call.
Rob: All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press B star one. Thank you.
So Justin when you think about it from just a youre, primarily talking about hourly head count shift structure and so on.
Yes, I think the way that we see it is that you're going to go.
Ryan Reed: Ryan Reed, Senior Director of Investor Relations and Corporate Development, you may begin your conference. Thank you and good morning, everyone. We appreciate you joining us on this call. With me today, our 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-gap recommendations, are available at ir.1wabash.com. Please refer to our slide two in our earnings deck with the company's safe harbor disclosure addressing forward-looking statements.
Q3, Q4 of 2023 to bridge the entire story.
We specifically are managing this current period of time to position our overall head count to support how we see the first half of 2024, playing out and making sure that we're in a great position to.
React to an increase in demand as we go into the tail end of 'twenty four and absolutely into 2025, so what does that actually mean.
That means is specifically for our dry than.
Operation.
We believe we can stay solidly on two shift operation throughout the year with the ability of using over time to flex with.
Brent Yeagy: I'll hand it off now to Brent. Thank you, Ryan.
We'll just say opportunistic.
Brent Yeagy: Good morning, everyone, and thanks for joining us today. I'm pleased to announce another quarter of strong financial results, which continues to demonstrate successful execution against our strategic vision. With the industry broad as portfolio, first the final model product solutions, and the growing parts and services offering that complement our transportation equipment group, we remain dedicated to elevating our value proposition even further for our partners. In addition to securing two pivotal agreements with strategic customers, we have also focused on adding value across our partner ecosystem by executing relational agreements with key suppliers like Hydro, Ryerson, and most recently Rockland Boring.
Changes in demand in the early part of the year.
Give us a nice solid baseline that we can grow and prepare for 2025% in the second half of the year. We think the market has the potential to be able to do that.
Sitting in with the clarity issues, we have today.
To Mike's point on the rest of the business, specifically tanks truck bodies and parts were actually in a position where we are maintaining if not growing headcount in those aspects of the business in 2024 to meet the known market drivers and demand we have on the table today.
So we are still what I would say net net in a.
Brent Yeagy: Rockland is a long-standing supplier of lip-blowering for trailers, and their supply commitment will bolster law-abashed strategic positioning as we look to enhance demand planning within our dynamic industry. Just as we continue in our pursuit of enhanced value creation within our transportation solutions business by redefining relationships with our evolving sub-direct customers and key suppliers, we have so much strategic focus on amplifying our parts and services offering by working collaboratively with our best and class dealer network to provide differentiated offerings to make customers more efficient by leveraging our parts distribution capabilities as well as embracing the power of digital transformation.
Great position in terms of how do we think about having an active and.
And robust resource management's outlook going into 2024.
Okay very helpful. Thanks for the time.
Thanks, Justin.
Your next question comes from the line of Mike <unk> from D. A Davidson your line is open.
Hello, and thanks for taking my question.
Can we start off there was one topic you didn't mentioned for 24 and that was the reefer business I know that's been a bit of a transition at the moment can you update us on the transition to Minnesota for that business in.
Brent Yeagy: I'm excited to announce the significant expansion of our wall-bashed parts network and trailers as a service capabilities through a new joint venture with Fernway Group. The collaboration is strategically aimed to enhancing our e-commerce and partner ecosystem. Fernway boasts a distinguished track record in scaling industrial tech, and we anticipate that this JV will significantly accelerate our development and growth of an end-to-end digital platform that provides an industry-leading experience to our dealers, traditional and non-traditional suppliers of both parts and services, and a broad set of customers spanning the transportation logistics and distribution landscape.
The cadence of how that might ramp up next year or in 2025.
Yes, so when we think about our cold chain product lineup.
We want to make sure we talk about it in the total wind up not just on reefer vans.
Going to be in a nice place in 2024, where we think we can actually be additive and in the total amount of cold chain revenue and overall product output in 2024.
That's a combination.
A relative amount of maintaining if not slightly growing on our ego next reefer van.
Brent Yeagy: Wall-bashed positions as a central figure with an increasingly complex ecosystem of industry participants were innovation endeavors to address challenges within transportation, and we look forward to using our unique positioning to work closely with Fernway to scale transformative projects that will help to enhance efficiency of the logistics network.
But also pulling through additional parts and service revenue.
And we are now seeing an opportunity with eco next medium duty truck bodies.
We've been able to establish a foothold in 2023, and that's an area of potential expansion for us in 2024.
Brent Yeagy: I'd also like to take a moment to thank our Board of Directors for the active engagement and those that oversight throughout the process of forming the strategic joint venture has been instrumental. As always, their collective experience, guidance and support has been pivotal in steering us along this path of reinvigorated organic growth.
Got it.
And then just taking that taking a step back on 2024.
It sounds like Youre already calling the trough.
And I guess I'd like to know your confidence level.
That 24 will in fact, SBA a single year downturn Assembly. Your trough is there anything about 25, we should be taking note about the regulations or just where do you think.
Brent Yeagy: If this joint venture appears to be at departure from a well-worn path to Wabash, I would respectfully encourage you to take a closer look at our most recent journey. Over the past few years our company has learned on the profound transformation. We've re-structured, re-segmented, re-branded, re-financed, or dead, and recapitized our manufacturing operations. These sweeping changes have yielded substantial financial accomplishments that have come ahead of schedule. At our 2022 investor meeting, we unveiled a new set of long-term financial targets, which included an EPS goal of $3.50 per share by 2025, which at the time was viewed as an ambitious target.
Richard Henry currently that makes you feel like it will just be a single year.
Yes, I think when you look.
First off Mike you know as well as I do we.
We saw have yet to unfold what will happen in the world around us both globally and domestically so I can't speculate on what might happen.
But what I will say is that if we can keep too.
One worst case, two fed rate changes I think we're in a decent place.
For us to anticipate that overall freight has the ability and recovering to a degree that allows the strongest players in the industry to move forward with our growth.
Brent Yeagy: For those keeping score at home, we have achieved $3.74 cents of EPS through the first three-quarters of 2023 are in the process of setting a new bar for what peak earnings can look like for this company. And just as importantly, as the main conditions within Vance often in 2024, we fully expect to put in our best trough performance as the power of our portfolio shines through with truck buys, bank trailers, and parts and services, all expected to continue posting strong financial performance.
We will call it aspirations and strategic direction in 2025, those beta customers, we tend to do business with based on the backlog.
The portfolio, we create we were in.
Conversations with those customers to understand how they view 2025, that's more importance on how we view its more about how they view they view it as a 2025.
I would say differently the tail end of 2024.
Brent Yeagy: While I've called this out in the past, I'd like to reiterate that the record-earnings figure we will achieve in 2023 is being done so on unit volume that resides meaningfully below a full-factor utilization. Additionally, by the time we make our way back to the next market peak, we expect our parts and service business to be at a larger margin-a-create piece of the portfolio. Turning our attention to market conditions and backlogs should an activity continue to outpace new orders in the third quarter, which is not surprising giving the softening of demand conditions as freight rates bump along the simply bottom.
We should start to be able to give them the confidence to lead into 2025 as they look to gain market share while everyone else is somewhat still reeling from the trough that we're in right now.
That's why I walnut issues, so pointed in preparing itself to be ready.
At the.
Earliest notice to respond to that demand signal when it comes we think that will actually come a little bit ahead of what the overall market will be signaling based off the customers that we do business with.
Outstanding.
Brent Yeagy: Considering the challenging transportation market conditions that our customers have been contending with, it's also not surprising to see order activity shifting toward the later stages of the typical seasonality timeframe. Ending Q3, our total backlogs stood at 1.9 billion, while our 12-month backlog was 1.4 billion, and we do expect to achieve an uptake in order flow of 3Q4 with order season now underway. As industry participants have noted, every digital month that the freight market continues to languish, the stronger and more durable will expect the inevitable recovery to be. Over the long term, we maintain our belief that our core markets are benefiting from secular trends, such as power only, persistent driver shortages, and resurgence of reassuring activity within North America.
Can I just squeeze one last one in here can you update us on the.
On the impact of the UAW strike on on orders or your business I guess on the truck body side has it been chassis supply issues.
Exacerbated over the last couple of weeks on the trailer side are you getting the sense that some of the fleets are holding off on ordering.
So they are not sure if they are in excess capacity. If there is no auto parts or components in auto themselves being shipped around the country.
Yeah.
I'll take the last part of the question first.
I don't really believe yet we are seeing a significant impact in any type of 2024 order behavior.
<unk> of what's going on with the current state of the UAW strike.
I'm not going to quote them, all but I think there is a series of metrics out there at least that I've been exposed to let's say that we haven't really even seen true.
Brent Yeagy: Moving on to our financial outlook, with the first three quarters of EPS in 2023, outstripping meaningful year in the company's history, we again are pleased to raise the point of our 40-year 2023 EPS guidance to $4.65 from $4.45. In closing, we are well prepared to execute in 2024. While Bash is as strong as it's ever been at this point in the freight cycle, with minimal leverage and the ability to continue our focused execution on our unique organic growth projects outlined on our strategic growth.
Really material impacts of the UAW strike in terms of real freight impact.
We also know that it's not what I'd call full stride, yet it's more of an iterative process that they are going through.
So I don't think it's material yet in any decision, making and I don't think it would be.
Until we get into <unk>.
The end of the first quarter or the last that long and even then it might be somewhat limited to the carriers, which really does impact got it.
Brent Yeagy: We expect a navigator reduction in drive-in industry demand next year, but we will do so with recently proving capabilities in the performance of other major facets of the business for many strong in the coming year that will allow us to accelerate as demand rebounds within the van segments during 2025. We see 2024 as a point in time where we will expand in deep in relationships with our dealers, suppliers and customers, as well as interesting new players within the transportation logistics and distribution landscape.
It's not a high item on that front from a risk management standpoint for Wabash and the demand profile.
When we think about it from a truck body standpoint, we've had a limited impact.
We will see what I would call limited.
Incremental increments not the right word sporadic impact in 2023.
That we're able to maneuver around that is the <unk>.
Nuisance, but I wouldn't call it a headache.
If this were to get into 2024. So this is again a first quarter.
Brent Yeagy: Yes, certain markets may pull back in 2024, but nothing is happening that will derail us from our purpose and our strategic mission. We are executing to the plan that improves our financial performance of all points in the cycle, and facilitates opportunities for Wabash to continue to grow our level of value creation for all stakeholders.
<unk> moved full.
We'll see a larger amount of impact.
But we had we got enough lead time.
Good or bad in terms of the way they have done this with the incremental nature of how they're rolling this out not taking them all to their needs right at the moment, we have plenty of time to adjust and how we demand plan to fill the first half of the year to move away from the chassis pool.
Mike Pettit: With that, I hand it over to Mike for his comments. Thanks, Brent. Beginning with our review of our quarterly financial results, in the third quarter, our consolidated revenue was $633 million. During the quarter, we shift to approximately 10,765 new trailers and 4,160 truck bodies.
Big III supplied call line of businesses there is enough other out there specifically during the first half of the year that we are able to maneuver accordingly, so while it may operationally change how we do demand management.
Mike Pettit: Given what we see in the market environment for bands, we made a decision to take some target downtime that our main trailer facility. To figure out if our new trailer shipment is coming in fairly below, what we might have expected one quarter to go. In doing this, we have maintained the vast majority of our full-time production employees in order to preserve our flexibility to respond to near-term demand changes. Close margin was 19.4% of sales during the quarter, while operating margin came in at 12.3%.
At this point I would not see a material impact on the actual outflow of Wabash and I think just to add Brad mentioned in there, but just to double click on it we do have a pretty significant percentage of our truck body build as medium duty and not dependent on the Detroit today. So there's a lot of our mix it isn't impacted at all.
Oh, great perfect guys I appreciate the color I'll pass it along thank you.
Thanks, Mike.
Mike Pettit: These figures remain strong due to a combination of favorable factors, including material cost and mixed benefits. As truck bodies, tank trailers and parts and services remain bright spots in our portfolio. In the third quarter, we achieved strong operating EBITDA of $93 million, or 14.8% of sales. Finally, for the quarter, net income attributable to common stockholders was $55.3 million, or $1.16 for the Lootish year. From a segment perspective, transportation solutions generated revenue of $583 million and operating income of $89 million.
Your next question comes from the line of Jeff Kauffman from vertical Research partners. Your line is open.
Hey, guys congratulations.
Perfect.
Thank you for the view.
So.
I hear your message.
Which is good.
But in 'twenty four.
Youre seeing the numbers already we're going to use that rasp, but to make our business stronger we're going to have a better bottom.
You talked about the big announcement today in parts and service as well and that'll be it.
Bigger piece of the pie.
Mike Pettit: Parts and services generated revenue of $56 million and operating income of $12.4 million. Our parts and service segment grew again in excess of 20% during the quarter, and our partnership with Firmly Group increases our confidence in the future revenue potential for this business. Looking forward to next year, we expect parts and services to continue growing at this 20% clip. Year-to-day operating cash flow is $205 million, reflecting our strong financial performance. Even in the context, we get to get growth investment via capital expenditure of $30 million.
So so two questions here.
Number one you have ceded a little share over the last year, because you took the factory down to do the transition.
For the dry van Reefer up to Minnesota.
So you are on track to do about 45000 trailers this year give or take give or take.
So based on what you're saying is it possible that even if the total trailer industry is down 15% or so next year I don't know what the real number is going to be.
Mike Pettit: The company generated $28 million to free cash flow during the quarter. Concern our balance sheet, our liquidity, which comprises both cash and available borrowings, was $447 million as of September 30th. We finished Q3 with a net debt leverage ratio of 0.8 times. This is our lowest leverage ratio since 2017. I'd also like to note that while Bash's debt rating was upgraded during the third quarter by S&P, and the current interest rate environment, we are very pleased with our debt structure, which is simple, consisting of one issuance of $400 million in principal values and also cheap in today's environment with a rate of 4.5%.
That you could potentially still be making about 45000 trailers as you ramp up reefer and you ramp up this new capacity and dry.
Given some of your market opportunity or am I thinking about that wrong.
Well, Jeff as always you ask various student questions.
What I would tell you is that.
Correct one thing now.
Okay.
B E.
Ramping up of our dry van manufacturing and the transition of Reefers really has had no real impact on what I would call a literal market share as we think about 'twenty two 'twenty three what I would call. It any gross material way that affects 24 at all alright, I know there is some math in between but it really doesn't.
Mike Pettit: These notes mature in late 2028, and we currently see no reason for debt repayment to be part of our capital allocation priorities. On the topic of capital allocation, during the third quarter, we invested $29 million in capital projects and $1 million revenue-generating assets for trailers of a service platform. We utilize $18 million to repurchase shares and pay poorly dividends of $3.8 million. Our capital allocation focus continues to prioritize capital expenditure above and beyond our annual CAPEX maintenance spend of $20 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 sharing purchase alongside a bulk on M&A.
When we think about market share in 2023. This is much more about a deliberate management decision to drive pricing to maintain pricing in the second half of the year based off of that level of demand in security that was that's been caused by the overall freight conditions, we felt it.
The organization is the premium supplier into the market that maintaining pricing was paramount as we move into the order season for 2024.
It also just happens to match the level of capacity smoothing that we needed to do to prepare for 24, and so there'd be no reason to chase pricing in order to run up against a hard stop.
Mike Pettit: Moving on to our outlook for 2023, our financial outlook now contemplates revenue of approximately $2.6 billion, and we are increasing our outlook for EPS by $20 per share at the midpoint to $4.65 per share with a range of $4.60 to $4.70 per share. This compares to a previous EPS outlook midpoint of $4.45 per share. We continue to expect $150 million of free cash flow during 2023 in a year where we have meaningfully recapitized the manufacturing of a flagship drive-in product line as well as providing additional capacity for future growth. We have also invested an important growth initiative such as coal chain and returning revenue. In our financial outlook, we expect fourth quarter earnings per share in the range of $0.86 per share and $0.96 per share.
And then in inefficiency hit going into 2024 that would not be the smartest business moves on the planet.
So when we think about market share in 2024, I think you are absolutely in the ballpark of the market share is.
Inherently available for us as we adjust our pricing to still be premium in the market still be at a much higher level than what we've seen over past cycles will.
It will be in a nice place that we can maintain plus or minus probably in that range that youre alluding to with the capacity that will have on the ground starting 2024.
Great. Thank you and then just following up on that.
Mike Pettit: While we are still in the process of gathering all the necessary inputs to provide precise 2024 guidance, I would like to share some insights that I hope are helpful in thinking about the outlook for next year. First, as Brent mentioned, the cadence of order season for vans this year is much more similar to the counterization of many pre-COVID years. We are fortunate in 2020, 2021, and 2022, that demand conditions were exceedingly strong so that the full order season forward in those years.
And I want to follow Mike question on.
As 2000 and for just a single backward year and of course, none of us know.
But I'm thinking about this big EPA mandated out there for the fleets in 2007, which means you probably get a tractor pre buy.
Some kind in 2006 it may even started in 'twenty five and we all know that unfortunately in that situation, even if truck P&L is better.
Mike Pettit: 2023 resembles something more usual from the historical perspective. Our negotiations with customers have been productive and we expect to actively close orders for 2024 during the fourth quarter. What we've seen so far aligns with industry forecasters in that demand seems poised for a modest pullback to a level that most would consider mid-cycle territory. Now, that commentary specific to vans, with regard to our other businesses, we expect to see continued strength within areas like truck bodies, tank trailers, and parts to services.
You may get a crowding out of capital or trailers.
Maybe maybe not right, who knows but I'm just thinking about the shape of industry demand for the next few years.
24, we're going to get a respite.
25, we'd probably still see a little bit of a respite in the early part of the year then it starts to get better.
Mike Pettit: Together, these segments are poised to contribute significantly with the potential to generate around $200 million of gross profit in 2024. To be clear, that figure excludes the contribution from drive-ans and it alone surpasses our consolidated gross profit performance in years like 2020 and 2021, reflecting the robust potential within truck bodies, tank trailers, and parts to services.
But then we start running into this this tractor buying requirement that a lot of customers are going to have how do you think the shape.
Okay.
<unk> works over the next couple of years I know, it's anybody's guess, but I'm just curious your point of view.
Yes, I think I think it said more complicated.
Complicated question then what is the one generic shape of how the market will play out based on the factors that you've.
Thrown out there.
The potential for some level of pre buy out there based on the facts on the ground.
Mike Pettit: In conclusion, I'm thrilled to check off a meaningful long-term financial target, more than two years ahead of schedule. I'm also pleased to be able to raise our full-year guidance again this year, but even more excited about what our 2023 financial performance signals for years to come. We have a very strong and capable team that has generated our record 2023 performance, and we believe we're still in the early hint of realizing the full capability Company. Perhaps surprisingly, I'm also enthusiastic about prospects for 2024.
Marginally, yes does it affect every fleet in the same way no. It does not those customers, we say it differently those carriers and users of tractors and trailers. So you have to make discrete choices about how much capital. They can deploy may very well fall into the category of what Wi Fi.
Huawei, specifically doesn't market or sell to those customers that are in our capital position to have to actually make that level of.
Brent Yeagy: For over three years, we've been exploring the potential of our first to final mile, one Wabash Plan. Designed to transform the company's cyclicality. As we look ahead to 2024, we're pulling to showcase the continued progress we've achieved in stabilizing Wabash's historical earnings volatility. Wabash occupies a prominent position as an industry leader in transportation equipment and is positioned at the center of an increasingly complex ecosystem of participants within transportation, logistics, and distribution.
We will call a specific choice we tend to sell to those customers that will have ample capital to be able to maintain a more balanced asset base and reminding reminding everyone that we never.
The 300000, plus trailers, all said and done we're not bought from 2020, all the way through to 2023, and we call it into that somewhat but it's still going to be out there fleets are not going to be those that are well capitalized well managed.
Brent Yeagy: They're actively collaborating with Formlay to bring value to this ecosystem by crafting a digital marketplace capable of uniting these diverse stakeholders to address industry challenges. We firmly believe that it's this initiative will define the next chapter in our journey to change how the world reaches you. It's an exciting time and we're going to continue shaping the future of the industry, alongside our partners and stakeholders.
With a keen eye on operational costs are not going to want to get further behind on their trailers, even with it was a pre buy hanging out there.
So when we tend to cater to those customers.
We're going to be I think somewhat buffered from any effect and so when you think about the curve I think that curve will be different based off of different segmented parts of the overall buying community.
Rob: I'll now turn the call back to the operator and we'll open it up for questions. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad.
Thank you for that one last question if I can this one for Mike.
Justin Long: And your first question comes from a line of Justin Long from Stevens. Your line is open. Thanks and good morning. So maybe to start, I was wondering if you could help us understand the positive impact you saw from material margin in the third quarter. And then as we move into fourth quarter and early next year, how you see that progressing. Yeah, we did see some positive sourcing related material cost impact in Q3.
Mike You mentioned that capital spending this year is going to be about $70 million to $80 million higher than what would be maintenance capex because some of these growth opportunities, which I think is great.
Right that you have that growth.
Project out there so given your current slate of growth projects, how should we be thinking about the right amount of capex and as I look out to 'twenty, four and 'twenty five and just some of the projects that you have.
That you are spending on right now.
Yes.
It's difficult to say exactly what 24 will be because as you know we're doing a lot right now and kind of depending on some of the year end spend that can change it to 24 number somewhat but I would expect to see 24 to be down 10% to 20% from what we saw in 'twenty through 'twenty three will be the highest the high point of Capex for the for the foreseeable future, but we will.
Justin Long: I'll call it non-commodity related that some of that will continue into Q4, some will not. And that was a partial driver to our fleet versus our original guide. So I would expect a little bit of a step down into Q4 and I'm a trail margin, which is embedded in our guidance, but not not a ton. So we would expect to maintain some of that sourcing benefit that we got. But you will feel a little bit of a step down from the trail margin perspective.
We will have we have growth project highly accretive growth projects that we will have in $2024 25 that will exceed what you may have seen historically from Wabash, but it won't be to the 23 levels.
Justin Long: Okay, and would you expect that to normalize in the first and second quarter next year, at what point will we get to kind of a more normalized manufacturing margin level? Yeah, Q4 will be a much closer to what we'd expect to see in 2024 from a margin perspective. But we obviously still have a lot of work to do from a backlog fill perspective before it can give any official guidance. So we didn't give guidance for 2024 yet.
Oh, yes growth is a good thing I am just curious how to think about the next two to three years of modeling since you do have these growth projects to spend back.
That's helpful. Thank you.
Congratulations guys. Thanks for your time, Thank you Jeff.
And there are no further questions at this time I will now turn the call back over to Ryan for some closing remarks.
Thanks, Rob and thanks, everyone for joining US today, we'll look forward to following up during the quarter have a great day.
This concludes today's conference call. Thank you for your participation you may now disconnect.
Justin Long: So I can't say that will be the exact margin profile, but Q4 will be closer to what we'd expect to see in a run-reliable. Okay, understood. And maybe following it upon what you just said, you gave some helpful puts and takes for 2024 and totally under are appreciated. The macro environment makes forecasting challenging, but how are you thinking about the range of potential outcomes for the business in 2024? And maybe you could speak to how you're managing resources based on that range.
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Justin Long: I heard you say at one point that you took some targeted downtime at one of your facilities in the third quarter, but I'm just curious if you could comment on the range for 2024. If you have any thoughts there and how you manage resources to that. Orange. Yeah, absolutely. I'll start and I'll let Brent maybe take the resource part of the other question, but we clearly believe that we're going to see some nice order in flow in Q4, which is not uncommon.
Okay.
Okay.
Justin Long: We in some of the prepared remarks, we mentioned that, you know, if you go to the pre-COVID days, seeing the majority of their backlog fill going into your end in Q4 was not a not an unnormal thing. And we're getting back to the calendarization of order fill. We feel pretty good about what we can deliver in Q4 and going into 2024. And also, that's very much a driving and specific comment. As I mentioned, we have a lot of other revenue streams that we feel are failing.
Justin Long: We'll provide a lot of support in 2024. And those are the parts and take trail and truck by we talked about. So, you know, it's a wide range, which is why we didn't give formal guidance, but we would expect to see a reduction that happens from the trail order that you're seeing from ACTSGR. We would expect, we would not see that big of a drop in revenue for sure, based on some of the support we have in our other value streams.
Justin Long: And we'll have a lot more color and context around what we'll see from drive ends at the year and goal. Right? Yeah. So Justin, when you think about it from just a, you're primarily talking about hourly head down, shift structure, and so on. I think the way that we see it is that we got to look at Q3 and Q4 of 2023 to bridge the entire story. We specifically are managing this current period of time to position our overall head count to support how we see the first half of 2024 playing out.
Justin Long: And making sure that we're in a great position to react to an increase in demand as we go into the tail end of 24 and absolutely in the 2025. So what does that actually mean? What that means is specifically for our drive end operation, we believe we can stay solidly on two shift operation throughout the year with the ability of using overtime to flex with, you know, we'll just say opportunistic changes in demand in the early part of the year and give us a nice solid baseline that we can grow and prepare for 2025 in the second half of the year.
Justin Long: We think the market has the potential to be able to do that, even sitting in with the clarity issues we have today. The Mike's point on the rest of the business specifically tanks, truck bodies, and parts were actually in a position where we are maintaining if not growing head down in those aspects of the business in 2024 to meet the known market drivers and demand we have on the table today. So, you know, we are still what I would say net net in a great position in terms of how do we think about having an active and robust resource management outlook going into 2024. Okay, very helpful. Thanks for the time. Thanks, Justin.
Mike Schliskey: Your next question comes from a line of Mike Schliskey from DA Davidson. Your line is open. Kevin. Hello, and thanks for taking my question. Can we start off? There's one topic I didn't mention for 24 and that was the reefer business. I know that's in a big transition at the moment. You updated us on the transition to Minnesota for that business and the kids of how that might ramp up next year and or 2025.
Mike Schliskey: Yeah, so when we think about our coal chain product lineup, we want to make sure we talk about it in the total lineup, not just on reefer vans. We're going to be in a nice place in 2024 where we think we can actually be additive in the total amount of coal chain revenue and overall product output in 2024. That's a combination of a relative amount of maintaining it, not slightly growing on our eco-next reefer van but also pulling through additional parts and service revenue and we are now seeing an opportunity with eco-next medium-duty truck bodies that we've been able to establish a foothold in in 2023. That's an area of potential expansion for us in 2024. Got it.
Mike Schliskey: And then just taking a step back on 2024, it sounds like you're already calling that a trough and I guess I'd like to know your confidence that 24 will in fact just be a single year downturn, a single year trough. It's raining about 25 which we think about the calculations or just where you think Richard Hay currently that makes you feel like it'll just be a single year. Yeah, I think when you look, I mean, first off, my keynote as well as I do, we saw yet to unfold what will happen in the world around us both globally and domestically so I can't speculate on what might happen but what I will say is that if we can keep to one worst case, two federate changes, I think we're in a decent place for us to anticipate that overall freight has the ability of recovering to a degree that allows the strongest players in the industry to move forward with their growth.
Mike Schliskey: We'll call it aspirations and strategic direction in 2025. Those happen to be the customers we tend to do business with based on the backlog to like customer portfolio we've created. We're in conversations with those customers to understand how they view 2025. That's more important. That's not how we view it. It's more about how they view it. They view it as a 2025, I would say differently. The tail end of 2024 should start to deal with give them the confidence to lean into 2025 as they look to gain market share while everyone else is somewhat still reeling from the trough that we're in right now.
Mike Schliskey: That's why Wallbash is so pointed in preparing itself to be ready as the color earlier noticed to respond to that demand signal when it comes. We think that will actually come a little bit ahead of what the overall market will be signaling based off the customers that we of the U.A.W, strike on orders of your business.
Mike Schliskey: I guess on the truck by side has there been chassis supply issues. They've been exacerbated over the last couple of weeks. And on the trailer side, you know, are you getting the sense that some of the speeds are holding off on ordering because they're not sure if they're able to access capacity, if there's no auto part to opponents and auto themselves being shipped around the country. Yeah, I think the last part of the question first.
Mike Schliskey: I don't really believe yet. We are seeing a significant impact in any type of 2024 order behavior based off of what's going on with the current state of the U.A.W, strike. I'm not going to quote them all, but I think there's a series of metrics out there, at least that I've been exposed to, and say that we haven't really even seen any truly material impacts of the U.A.W, strike in terms of real freight impact.
Mike Schliskey: We also know that it's not a what I call full-hole strike yet. It's more an innovative process that they're going through. So I don't think it's material yet in any decision making, and I don't think it would be until we get into something into the first quarter for it to last that long. I need them then. It might be somewhat limited to the carriers, which really does impact. It's not a high item on that front from a risk management standpoint for all batches of demand profile.
Mike Schliskey: When we think about it from a truck body standpoint, we've had limited impact, and we probably will see what I was called limited incremental, even though it's not the right word sporadic impact in 2023, that we're able to maneuver around. It's a nuisance, but I wouldn't call it a headache. If this were to get into 2024, so this is again a first quarter protracted, more full, we'll see a larger amount of impact, but we've got enough wheat time.
Mike Schliskey: It's like good or bad because of the way they've done this with the incremental nature of how they're rolling this out, not taking them all to their needs right at the moment. We have plenty of time to adjust in how we demand plan to fill the first half of the year, to move away from the Chaffee pool, big three supply line of businesses. There's enough other out there, specifically during the first half of the year that we're able to maneuver accordingly.
Mike Schliskey: So while it may operationally change how we do the man management, at this point, I would not see it being a material impact on the actual output of long ash. Yeah, I think just to add, but I mentioned there, but just a double click on it. We do have a pretty significant percentage of our truck body build is medium duty, and that's dependent on the Detroit three, so there's a lot of our mix that isn't infected at all. Oh great, perfect. Guys, I appreciate the color. I'll pass it along. Thank you.
Jeff Kaufman: Thanks, Molly. Your next question comes from a line of Jeff Kaufman from Vertical Research Partners. Your line is open. Hey guys, congratulations. Thank you for the view. So I hear your message, which is respite in 24, you know, you're seeing the numbers already. We're going to use that respite to make our business stronger, you know, we're going to have a better bomb. You talked about the big announcement today in parts and services, well, and that'll be a bigger piece of the pie.
Jeff Kaufman: So two questions here. Number one, you've seated a little share over the last year because you took the factory down to do the transition for the drive and you will refer up to Minnesota. So you're on track to do about 45,000 trailers. It's your give or take. So based on what you're saying, is it possible that even if the total trailer industry is down 15% or so next year, I don't know what the real number is going to be.
Jeff Kaufman: That you could potentially still be making about 45,000 trailers as you ramp up, refer and you ramp up this new capacity and dry given some of your market opportunity or am I thinking about that wrong. Well, Jeff, as always, you asked various questions. What I would tell you is I'm going to correct one thing now. Okay. The ramping up of our drive and manufacturing and the transition of reapers really has had no real impact on what I would call a literal market share as we think about 22 to 23.
Jeff Kaufman: What I would call an any gross material way that affects 24 at all. Right. I know there's a map in between that it really doesn't. When we think about market share in 2023, this is much more about a deliberate management decision to drive pricing to maintain pricing in the second half of the year based off of the level of demand and security that's been caused by the overall freight conditions. We felt as an organization as the premium supplier into the market that maintaining pricing was paramount as we move into the order season for 2024.
Jeff Kaufman: It also just happened to match the level of capacity smoothing that we needed to prepare for 24 and so there'd be no reason to chase pricing in order to run up against a hard stop. And then an inefficiency hit going into 2024 that would not be the smartest business moves on the planet. So when we think about market share in 2024, I think you're absolutely in the ballpark of the market shares is inherently available for us as we adjust our pricing to still be premium in the market.
Jeff Kaufman: But still be at a much higher level than what we've seen over past cycles will be in a nice place that we can maintain plus or minus probably in that range that you're alluding to with the capacity that we have on the ground starting 2024.
Jeff Kaufman: Okay, thank you. And then just following up on that. And I want to follow Mike's question on, you know, is 24 just a single backward year and of course none of us know. But I'm thinking about this big EPA mandate out there for the fleets in 27, which means you probably get a tractor pre-buy of some kind in 26. It may even start in 25 and we all know that unfortunately in that situation, even if truck P&L is better, you may get a crowding out of capital for trailers.
Jeff Kaufman: Maybe, maybe not right who knows, but I'm just thinking about the shape of industry demand for the next few years. You know, 24 we're going to get arrested, but 25. We probably still see a little bit of a respite in the early part of the year, then it starts to get better. But then we start running into this this tractor buying requirement that a lot of customers are going to have. How do you think the shape of failures works over the next couple of years.
Jeff Kaufman: I know it's anybody's guess, but I'm just curious your point of view. Yeah, I think I think it's a more complicated question than what is the one generic shape of how the market will play out based on the factors that you've run out there is the potential for some level pre buy out there based on the facts on the ground marginally. Yes, those that affect every fleet in the same way. No, it does not.
Jeff Kaufman: Those customers, we say definitely those carriers and users of trackers and trailers who have to make discrete choices about how much capital they can deploy. They may very well have to fall into the category of what do I buy? Wabash specifically doesn't market or sell to those customers that are in a capital position that have to actually make that level of will cause specific choice. We tend to sell to those customers that will have ample capital to be able to maintain a more balanced asset base and remind reminding everyone that we never not the 300,000 plus trailers all said and then we're not bought from 2020 all the way through to 2023.
Jeff Kaufman: Now, we've called into that somewhat, but it's still going to be out there which are not going to be those that are well capitalized well managed with the keen eye on operational costs are not going to want to get further behind on their trailers, even with what they pre buy hanging out there. So when we tend to cater to those customers, we're going to be, I think, somewhat offered from any effect. And so when I think about the curve, I think that curve will be different based off of different segmented parts of the overall wine community.
Jeff Kaufman: Thank you for that. One last question if I can this one from Mike. You know, Mike, you you mentioned that capital spending this year is going to be about 70 or 80 million higher than what would be maintenance catbacks because some of these growth opportunities, which I think is great. You know, it's great that you have that growth project out there. So given your current slate of growth projects, how should we be thinking about the right amount of catbacks as I look out to 24 and 25 and just some of the projects that you have that you're spending on right now.
Jeff Kaufman: Yeah, it's difficult to say exactly what 24 will be because as you know, we're doing a lot right now and kind of depending on some of the year and spend that can change the 24 number somewhat, but I would expect to see 24 to be down 10 to 20% from what we saw on 23 23 will be the high the high point of catbacks for the foreseeable future. But we will we will have we have growth projects highly clear growth projects that we will have in 20 24 and 25 that will exceed what you may have seen historically from wild ash, but it won't be to the 20.
Jeff Kaufman: 33 levels. Well, yeah, growth is a good thing. I'm just curious how to think about the next two to three years of modeling since you do have these growth projects to spend. Thank you. We'll congratulate you guys. Thanks for your time. Thank you.
Rob: And there are no further questions at this time.
Ryan Reed: I will now turn the call back over to Ryan Reed for some closing remarks. Thanks Rob and thanks everyone for joining us today. We look forward to following up there in the quarter.
Rob: Have a great day.
Rob: This concludes today's conference call. Thank you for your participation.
Rob: We now disconnect.