Q1 2024 The Greenbrier Companies Inc Earnings Call
Hello and welcome to the Green Briar Company's first Corps of Fiscal 2024 earnings conference call.
Hello, and welcome to the Greenbrier companies first quarter of fiscal 'twenty 'twenty four earnings conference call.
Following today's presentation, we will conduct a question and answer session.
Following today's presentation, we will conduct a question and answer session.
analyst should limit themselves to one question with a follow-up if needed. Until that time, all lines will be
Each analyst should limit themselves to one question with a follow up if needed.
Until that time, all lines will be in a listen only mode.
the request of the Greenfire Companies. This conference call is being recorded for replay purposes.
At the request of the Greenbrier companies. This conference call is being recorded for replay purposes.
At this time, I would like to turn the conference over to Mr. Justin Roberts, Vice President, and Treasurer. Mr. Roberts, you may
At this time I would like to turn the conference over to Mr. Justin Roberts, Vice President and Treasurer. Mr. Roberts you may begin.
Justin Roberts: Thank you, Andrea. Good morning and happy New Year to everyone. Welcome to our call today for fiscal first quarter. Today, I'm joined on the call by Lori Tachorius, Greenbriers CEO and President, Brian Comstock, Executive Vice President and Chief Commercial and Leasing Officer, and Adrian Downs, Senior Vice President and CFO . Following our update on Greenbriers performance in Q1 and an update on our outlook for the remainder of fiscal 24, we will open up the call for questions.
Thank you Andrea good morning, and happy new year to everyone welcome to our call today for our fiscal first quarter today.
Today I'm joined on the call by lorries, Aquarius, Greenbrier as CEO and President, Brian Comstock Executive Vice President and Chief commercial and leasing officer, and Adrian Downes, Senior Vice President and CFO.
Following our update on Greenbrier as performance in Q1, and an update on our outlook for the remainder of fiscal 'twenty. Four we will open up the call for questions. In addition to the press release issued this morning additional financial information and key metrics can be found in a slide presentation posted today on the IR section of our website.
Justin Roberts: In addition to the press release issue this morning, additional financial information and key metrics can be found in the slide presentation posted today on the IR section of our website.
Justin Roberts: Matters discussed on today's conference call includes forward-looking statements within the meeting of the Private Security's litigation reform act of 1995.
Matters discussed on today's conference call includes forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 three.
Justin Roberts: Throughout our discussion today, we will describe some of the important factors that could cause green buyers actual results in 2024 and beyond to differ materially from those expressed in any forward-looking statement made by, for on behalf of green buyers.
Throughout our discussion today, we will describe some of the important factors that could cause Greenbrier is actual results in 2024 and beyond to differ materially from those expressed in any forward looking statement made by or on behalf of Greenbrier.
Speaker Change: And as a reminder, I'd like to invite you to join us for our annual shareholder meeting today at 12 p.m. Pacific 3 p.m. Eastern, a link is available on our website and we'll go live about about 15 minutes before the call with that. I'm going to hand it over to Laurie.
And as a reminder, I'd like to invite you to join US for our annual shareholder meeting today at 12 P. M Pacific three P. M. Eastern a link is available on our website and will go live about a lot about 15 minutes before the call with that I'm going to hand, it over to Laurie.
Laurie: Thank you, Justin, and good morning everyone and Happy New Year. I hope everyone had a great and safe holiday season.
Thank you Justin and good morning, everyone and happy New year, everyone had a great and safe holiday season.
Laurie: And while Monday marked the start of a new calendar year, we're ending the fifth month of our fiscal year.
And while Monday marked the start of the new calendar year rating the fifth of our fiscal year.
Laurie: And with the first quarter in the book, our fiscal 2024 is all to a great start as we continue to execute our strategy.
And with the first quarter in the books, our fiscal 'twenty 'twenty four is off to a great start as we continue to execute our strategy.
Laurie: Our financial performance indicates early progress as we execute green bars multi-year better together strategy, three fundamental priorities.
Our financial performance indicators early progress as we execute Greenberg multiyear better together strategy.
Three fundamental priorities driving our strategy first.
Laurie: First, we'll maintain our manufacturing leadership position across geography.
First we'll maintain our manufacturing leadership position across geographies.
Laurie: The second priority ensures we meet our customers' needs while optimizing our industrial footprint for efficiency and margin enhanced.
The second priority ensures we meet our customers' needs, while optimizing our industrial footprint for efficiency and margin enhancement.
Laurie: Third, and equally important, we're pursuing discipline growth and leasing in services.
Third and equally important were pursuing disciplined growth and be staying in services.
Laurie: We remain committed to enhancing our manufacturing performance while growing recurring revenue and generating tax-efficient cash flows through investment in the lease fleet.
We remain committed to enhancing our manufacturing performance.
Our growing recurring revenue and generating tax efficient cash flows through investment in the lease fleet.
Laurie: The detailed work of facility rationalizations and manufacturing and maintenance services that began in fiscal 2023 continues.
The detailed work of facility rationalizations in manufacturing and maintenance services that began in fiscal 2023 continues.
Laurie: will transform to be simpler and more profitable.
Well transform to be simpler and more profitable.
Laurie: Aggregate gross margins and gross margins in our manufacturing segments specifically this quarter reflect this strategic push.
Aggregate gross margins and gross margins in our manufacturing segment, specifically in this quarter reflect the strategic plan.
Laurie: And while I'm sure everyone on today's call understands this, I think it bears repeating that we do not expect progress on our strategic initiatives to be linear.
And while I'm sure everyone on today's call understands it I think it bears repeating.
We do not expect.
Graph on our strategic initiatives to be linear.
Laurie: In some cases, we're ahead of our internal schedules and others relaying the foundation to excuse the plan.
In some cases, we're ahead of our internal scandals.
And others are laying the foundation to execute the plan.
Laurie: our goals target a multi-year completion window, and there will be ups and downs, but I'm pleased with our performance at this early stage.
Our goals target a multiyear completion window.
And there will be ups and downs, but I'm pleased with our performance at this early stage.
Laurie: Turning to our results, we generated over 800 million in revenue, excuse me, and aggregate gross margins of 15 percent, an increase of 250 base points.
Turning to our results we generated over $800 million in revenue excuse me and aggregate gross margins of 15% an increase of 250 basis points.
Laurie: This aligns with our target to achieve aggregate gross margin in the mid-teens by fiscal 2026.
This aligns with our target to achieve the aggregate gross margin in the mid teens by fiscal 2026.
Laurie: One quarter of mid-team margins is an excellent start, but it would be premature to declare the mission accomplished on our multi-year strategy.
One quarter of mid teen margins is an excellent start but it would be premature to declare the mission accomplished on our multi year strategy.
Laurie: First quarter manufacturing growth margin of 11.1 percent is an increase of 180 basis points compared with the prior quarter.
First quarter manufacturing gross margin of 11, 1% is an increase of 180 basis points compared with the prior quarter.
Laurie: As we previously disclosed, the sale of our Gunderson Marine Operation and our Texas Foundry have resulted in permanent cost savings of approximately $20 million per year.
As we previously disclosed the sale of our Gunderson Marine operation and our Texas foundry have resulted in permanent cost savings of approximately $20 million per year.
Laurie: Our in-sourcing initiatives to bring fabrication in-house for basic primary parts and sub-assemblies, as part of our make versus by strategy, is proceeding on schedule.
Our in sourcing initiatives to bring fabrication in house for basic primary parts and sub assemblies as part of our make versus buy strategy is proceeding on schedule.
Laurie: We expect to achieve our total cost savings targets of $15 to $55 million from this initiative in fiscal 2025.
We expect to achieve our total cost savings target of $50 million to $55 million from this initiative in fiscal 2025.
Laurie: Moving across the business, maintenance services continue as positive momentum, even the wheeled volumes were ceasely lower heading into winter.
Moving across the business maintenance services continues its positive momentum, even though wheel volumes were seasonally lower heading into winter.
Laurie: On a solid revenue base, growth margin remains strong at 14.6%
On a solid revenue base gross margin remained strong at 14, 6%.
Laurie: Several initiatives are underway to continue to enhance this unit's efficiency by improving car flow, material planning, and cycle times at all of our facilities.
Several initiatives are underway to continue to enhance this units efficiency by improving car flow material planning and cycle times at all of our facilities.
Laurie: And then as Brian will explain shortly, our expanded leasing strategy is gating traps.
And then as Brian will explain shortly or expand their leasing strategy is gaining traction.
Brian: This is a critical component of our multi-year plan and is expected to result in the doubling of recurring revenues within the next five years.
This is a critical component of our multiyear plan and is expected to result in a doubling of recurring revenues within the next five years.
Brian: The market conditions for railcar leasing remain positive, allowing us to generate compensatory lease originations and renew leases at a higher rate.
Market conditions for our railcar leasing remains positive, allowing us to generate compensatory lease originations and renew leases at higher rates.
Brian: As we continue to grow the leaflet and work towards achieving our recurring revenue target, we remain disciplined and focused on building a high-quality balanced portfolio.
As we continue to grow the lease fleet and work towards achieving our recurring revenue target. We remained disciplined and focused on building a high quality balanced portfolio.
Brian: Our Q1 performance maintains the health of our balance sheet allowing us to invest in our business while continuing to return capital to shareholder.
Our Q1 performance maintains the health of our balance sheet, allowing us to invest in our business, while continuing to return capital to shareholders. This has been our long standing and preferred approach to capital allocation.
Brian: This has been our long standing and preferred approach to capital allocation.
Brian: I'm pleased to report that our board declared a quarterly dividend of 30 cents per share this week, representing Greenberg's 39th consecutive quarterly dividend.
I'm pleased to report that our board declared a quarterly dividend of 30 cents per share this week, representing greenberg 39th consecutive quarterly dividend.
Brian: The broader economy is dynamic and geopolitical strife again commands our attention and concern. For instance, we're closely monitoring conditions at the southern U.S. border.
The broader economy is dynamic and geopolitical like geopolitical strife again commands our attention and concern.
For instance, we're closely monitoring conditions at the southern U S border.
Brian: While the work performed by our skilled manufacturing and logistics colleagues so far has successfully avoided severe impacts to Greenbrier, the current migration response is unsustainable.
While the work performed by our skills manufacturing and logistics colleagues. So far has successfully avoided severe impacts to greenbrier.
Current migration response is unsustainable.
Brian: We have joined many, including railroad leaders, shippers, and even our competitors, to draw government attention to this situation.
We have joined many including railroad leaders shippers and even our competitors to drive government attention to this situation.
Brian: Collectively, we will ensure policy makers hear our concerns and address impediments to commercial activity and trade at our southern border.
Collectively we will ensure policymakers here, our concerns and address impediments to commercial activity and trade and our southern border.
Brian: Meanwhile, the economy in both North America and Europe is showing signs of resilience and our outlook remains positive. We expect North America and Europe to continue to see stable demand across railcar types underpinning both new bills and lease renewals.
Meanwhile, the economy in both North America, and Europe is showing signs of resilience and our outlook remains positive.
We expect North America, and Europe to continue to see stable demand across railcar types underpinning, both new build and lease renewals.
Brian: We have excellent near-term visibility for fiscal 2024 and are focused on maximizing our platform's potential as we successfully pursue our multi-year target.
We have excellent near term visibility for fiscal 2024 and are focused on maximizing our platform's potential as we successfully pursue our multiyear targets for.
Brian: or confidence in the long-term strategy because it focuses on what we can control and does not rely on an optimistic or aspirational demand scenario.
We're confident in the long term strategy because it focuses on what we can control it does not rely on an optimistic our aspirational demand scenario.
Brian: I look forward to sharing our progress on future calls. And now over to you, Brian . Thanks, Lori. During Q1, Greenbar secured new railcar orders of 5,100 units worth nearly $710 million.
Look forward to sharing our progress on future calls.
And now over to you Brian Thanks, Laurie during Q1 reversed secured new railcar orders of 5100 units worth nearly $710 million.
Brian: Of these orders, approximately 20% derived from lease origination.
Of these orders approximately 20% derived from lease originations orders continued to be broad based and diverse across most railcar types, except for intermodal where market conditions have been soft are improving and may provide some upside in future quarters.
Brian: Orders continue to be broad-based and diverse across most real card types, except for intermodal where market conditions have been soft but are improving and may provide some upside in future quarters.
Brian: As of November 30th, Greenbrier's global new railcar backlog was 29,700 units, valued at $3.8 billion. Backlog continues to be strong and stable, providing significant revenue visibility into 2025. As a reminder, backlog excludes programmatic refurbishment and requalification work, which will produce meaningful revenue during the fiscal year.
As of November 30, Greenbrier as global our new railcar backlog was 29700 units valued at $3 8 billion backlog continues to be strong and stable providing significant revenue visibility into 2025.
As a reminder, backlog excludes programmatic refurbishment and re qualification work, which will produce meaningful revenue during the fiscal year.
Brian: Our commercial performance reflects our leading market position, strong lease origination capabilities, and direct sales experience.
Our commercial performance reflects our leading market position strong lease origination capabilities and direct sales experience.
Brian: International orders accounted for 30% of activity in the quarter, reflecting the continuing momentum in Europe and ongoing strength in Brazil. We have been performing well in Europe and our backlog remains healthy thanks to our broad product portfolio.
International orders accounted for 30% of activity in the quarter.
Selecting the continuing momentum in Europe, and ongoing strength in Brazil, we have been performing well in Europe, and our backlog remains healthy thanks to our broad product portfolio.
Brian: Our leasing platform is now fully operational in Europe . And our ability to originate and syndicate leases has been critical to the improved performance of our European manufacturing business.
Our leasing platform is now fully operational in Europe.
Our ability to originate and syndicate leases has been critical to the improved performance of our European manufacturing business.
Brian: We're excited about our opportunity in Europe , where the rail industry enjoys strong secular tailwinds, and we expect Europe to increasingly become a meaningful contributor to our profitability.
We're excited about our opportunity in Europe, where the rail industry enjoys strong secular tailwind and we expect Europe to increasingly become a meaningful contributor to our profitability.
Brian: Likewise, Lori and I recently visited our Green Butter Maxian joint venture in Brazil. While unit volumes in South America will always be lower than North America and Europe , recent stabilization in the rail sector there promises a steady stream of business activity in months to come.
Likewise, Laurie and I recently visited our Greenbrier Maxion joint venture in Brazil.
Unit volumes in South America, we will always be lower than North America, and Europe recent stabilization in the rail sector. There promises a steady stream of business activity in months to come.
Brian: Leasing and management services also performed well in the quarter. We are steadily advancing on our stated goal of doubling recurring revenue from leasing and management services.
Leasing and management services also performed well in the quarter.
We are steadily advancing on our stated goal of doubling recurring revenue from leasing and management services.
Brian: Recurring revenue is growing from various sources, including new rail cars added to our lease fleet and lease renewals at more favorable terms.
Recurring revenue is growing from various sources, including new railcars added to our lease fleet and lease renewals at more favorable terms.
Brian: We grew our lease fleet from about 700 units or 5.2% during the quarter as we fulfill our commitment towards disciplined fleet investment of up to 300 million per year on a net basis.
We grew our lease fleet from about 700 units or five 2% during the quarter as we fulfill our commitment towards disciplined fleet investment of up to 300 million per year on a net basis.
Brian: As we make this investment during the next few years to expand recurring revenue, we are focused on railcar types that keep our fleet profile balanced and reduce concentration risk.
As we make this investment during the next few years to expand recurring revenue. We were focused on railcar types that keep our fleet profile balanced and reduce concentration risk I want to emphasize that we will only invest in the right assets with the right lease terms and Counterparties we take this.
Brian: I want to emphasize that we will only invest in the right assets with the right lease terms and counterparts.
Brian: We take this capital deployment very seriously. We will not chase an arbitrary fleet size or value if the underlying assets do not meet our required internal rates of return.
<unk> deployment very seriously, we will not chase, an arbitrary fleet size or value the underlying assets do not meet our required internal rates of return.
Brian: Our discerning approach to fleet composition resulted in a AA credit rating for our most recent ABS offering completed in November . We understand these are the highest ratings ever received in the railcar ABS space.
Our discerning approach to fleet composition resulted in a double AA credit rating or most recent ABS offering completed in November.
We understand these are the highest ratings ever received and the railcar ABS space.
Brian: We issued an aggregate principal amount of $178.5 million in notes with a blended interest rate of 6.5% and a two and a half year call fee.
We issued an aggregate principal amount of $178 5 million in notes with a blended interest rate of six 5% and a two and a half year call feature.
Brian: The call feature gives us forward flexibility to respond to lower interest rate environments.
Call feature gives us forward flexibility to respond to lower interest rate environment.
Brian: Our average interest rate of 4.4% on our non-recourse leasing debt is significantly lower than current market interest rates.
Our average interest rate of four 4% on our non recourse leasing debt is significantly lower than current market interest rates.
Brian: We continue to evaluate our financing strategies as we grow our lease fleet to achieve the goal of more than doubling recurring revenue in the next five years.
We continue to evaluate our financing strategies as we grow our lease fleet to achieve the goal of more than doubling recurring revenue in the next five years at.
Brian: At the end of Q1, our fleet leverage was 80%. We leveraged railcar assets at an appraised fair market value, which results in borrowing ratios that are higher on a net book value base.
At the end of Q1, our fleet leverage was 80% we leverage railcar assets at an appraised fair market value, which results in barring ratios that are higher on a net book value basis.
Brian: Our lease renewal rates continue to grow at double digits, and we successfully extended lease terms while maintaining a consistently high fleet utilization of 98% in Q1.
Our lease renewal rates continue to grow at double digits, and we successfully extended lease terms, while maintaining a consistently high fleet utilization of 98% in Q1.
Brian: The leasing market remains robust, characterized by a shortage of the in-demand railcar types and high fleet utilization among lessors.
The leasing market remains robust characterized by a shortage of the end demand railcar types and high fleet utilization among lessors.
Brian: Moving in sequence with higher interest rates, our lease rates remain compensatory, resulting in elevated rates for both new originations and renewals.
Moving in sequence with higher interest rates, our lease rates remain compensatory, resulting in elevated rates for both new originations and renewals.
Brian: We have strategically staggered lease durations to lessen the impact of cyclicality and create opportunities for favorable renewals.
We have strategically staggered lease durations to lessen the impact of cyclicality and create opportunities for favorable renewals.
Brian: In Q1, we syndicated a total of 1,300 railcars in transactions with a variety of investors.
In Q1, we syndicated a total of 1300 railcars and transactions with a variety of investors generating strong liquidity and margins the syndication market remains liquid and strong appetite for the asset or asset class as we are confident in our team and our offering both in northern.
Brian: generating strong liquidity and margins. The syndication market remains liquid and a strong appetite for the asset class as we are confident in our team and our offering both in North America and Europe .
Erica and Europe.
Brian: Fundamentally, the backdrop for the North American rail car market remains solid. We expect rail car deliveries to be around industry replacement levels for the next few years with retirements, keeping pace, the supply of available rail cars is still near trough levels, which has led to strong lease rate growth, renewals, and term length. We are confident we have the right strategy in place to execute our plan in this environment, success.
Fundamentally the backdrop for the North American railcar market remains solid we expect railcar deliveries to be around industry replacement levels for the next few years with retirements keeping pace.
Supply of available railcars is still near trough levels, which has led to strong lease rate growth renewals and term length. We are confident we have the right strategy in place to execute our plan in this environment successfully.
Brian: Now, I'll hand the call over to Adrian who will speak to the financial highlights for the quarter. Thank you, Brian . Good morning, everyone, and Happy New Year to you all.
Now I'll hand, the call over to Adrian who will speak to the financial highlights for the quarter. Thank you, Brian Good morning, everyone and happy new year to you all.
Adrian: Before moving into the highlights of the quarter, I would like to remind everyone that quarterly financial information is available in the press release and supplemental slides on our website.
Moving on to the highlights of the quarter I would like to remind everyone that quarterly financial information is available in the press release and supplemental slides on our website.
Adrian: As highlighted by Lori and Brian , Greenbrier's Q1 performance was strong across all operating segments.
As highlighted by Lori and Brian Greenbrier is Q1 performance was strong across all operating segments. The quarter was marked by improved profitability due to the sequential increase in aggregate gross margin percent and operating margin.
Adrian: the quarter was marked by improved profitability due to the sequential increase in aggregate gross margin percent and operating margin.
Speaker Change: After covering some of the highlights from the quarter I will also affirm our fiscal year 2024 revenue and deliveries guidance and provide an update to our gross margin and capital expenditure guidance.
And some of the highlights from the quarter I'll also affirm our fiscal year 'twenty 'twenty four revenue and deliveries guidance and provide an update to our gross margin and capital expenditure guidance.
Speaker Change: Notable highlights for the first quarter include broad-based new rail car orders of 5,100 units valued at nearly $710 million, with an average selling price of approximately $139,000 per unit.
Notable highlights for the first quarter includes broad based new railcar orders of 5100 units valued at nearly $710 million with an average selling price of approximately 139000 per unit.
Speaker Change: This does not include a few thousand orders in the quarter related to programmatic railcar refurbishments, requalifications or recertification.
This does not include a few thousand orders in the quarter related to programmatic railcar Refurbishments re qualifications are re certifications.
Speaker Change: Deliveries of 5,700 units include 500 units from our unconsolidated joint venture in Brazil.
Deliveries of 5007 hundred units include 500 units from our unconsolidated joint venture in Brazil.
Speaker Change: Consolidated revenue in the first quarter was $809 million, representing a new first quarter record going back to Q1 of 2016.
Consolidated revenue in the first quarter was 809 million, representing a new first quarter records going back to Q1 of 2016.
Speaker Change: aggregate gross margins increased by 250 basis points to 15% and have consistently increased over the past five quarters.
Aggregate gross margins increased by 250 basis points to 15% and have consistently increased over the past five quarters.
Speaker Change: The margin enhancement can be attributed to a broad-based improvement across all segments including improved operating efficiencies, market conditions, and syndication activity.
The margin enhancement can be attributed to a broad based improvement across all segments, including improved operating efficiencies market conditions and syndication activity.
Speaker Change: Selling an administrative expense of approximately $56 million declined sequentially, primarily due to lower employee-related costs.
Selling and administrative expense of approximately $56 million declined sequentially, primarily due to lower employee related costs.
Speaker Change: Quarterly tax rate of 24% was lower than the fourth quarter and benefited from net favourable adjustments related to our foreign subsidiaries.
Quarterly tax rate of 24% was lower than the fourth quarter and benefited from net favorable adjustments related to our foreign subsidiaries.
Speaker Change: Net earnings attributable to Greenbrier of $31 million generated diluted EPS of $0.96 per share, and finally adjusted EBITDA for the quarter was $93 million or 11.5% of revenue.
Net earnings attributable to Greenbrier of $31 million generated diluted EPS of <unk> 96 per share.
And finally, adjusted EBITDA for the quarter was $93 million or 11, 5% of revenue.
Speaker Change: Greenbrier's Q1 liquidity remained solid at $663 million, consisting of cash of $307 million and available borrowings of $356 million, which we believe to be an ample level as we conduct our day-to-day operations.
Okay.
Greenbrier is Q1 liquidity remained solid at $663 million, consisting of cash of $307 million and available borrowings to $356 million, which we believe to be an ample level as we conduct our day to day operations.
Speaker Change: Although our cash flow from operations reflected cash usage of approximately $45 million, our cash balance increased by nearly $20 million in the quarter. The increase was primarily attributed to proceeds from the issuance of debt net of repayment.
Although our cash flow from operations reflected cash usage of approximately $45 million, our cash balance increased by nearly 20 million in the quarter. The increase was primarily attributed to proceeds from the issuance of dash net of repayments.
Speaker Change: Greenbar's balance sheet continues to be strong, and we will remain prudent with how we manage our capital structure and balance sheet.
Greenbrier is balance sheet continues to be strong and we will remain prudent with how we manage our capital structure and balance sheet.
Speaker Change: To make it easier to discern between recourse and non-recourse desk, we are now providing a breakout between the two in the footnotes section of our 10Q under notes payable and revolving notes.
To make it easier to discern between recourse and nonrecourse debt. We are now providing a breakout is between the two in the footnote section of our 10-Q under notes payable and revolving notes.
Speaker Change: In February , we will retire the remaining portion of our Senior Convertible Note issued in 2017 of approximately $48 million. This is expected to be retired
In February we will retire the remaining portion of our senior convertible note issued in 2017 of approximately $48 million.
This is expected to be retired using cash.
Speaker Change: As Brian mentioned in his commentary, we successfully issued our second ABS offering with a double AA credit rating.
As Brian mentioned in his commentary, we successfully issued our second ABS offering with a double AA credit rating.
Speaker Change: As a reminder, Leasing Dash is non-recourse to Greenbrier and we expect this to fuel the growth of our lease fleet over the next few years.
As a reminder, leasing dash is nonrecourse to Greenbrier and we expect this to fuel the growth of our lease fleet over the next few years.
Speaker Change: We are focused on reducing and retiring our recourse debt as cash flows improve.
We are focused on reducing and retiring our recourse staff as cash flows improve.
Speaker Change: Highlighted in Lori's commentary, Greenbrier's Board of Directors declared a dividend of 30 cents per share. Based on yesterday's closing price, our annual dividend yield is approximately 2.7%.
Highlighted in Lori's commentary Greenbrier Board of directors declared a dividend of <unk> 30 per share.
Based on yesterday's closing price our annual dividend yield represents.
It's approximately two 7%.
Speaker Change: Additionally, we repurchased nearly 38,000 shares for just over $1 million and a quarter, leaving $45 million remaining of authorization under the current share repurchase program, which extends through January of 2025.
Additionally, we repurchased nearly 38000 shares for just over 1 million in the quarter, leaving 45 million remaining about summarization under the current share repurchase program, which extends through January of 2025.
Speaker Change: Including activity from the first quarter, Green Bargains returned over $500 million of capital to shareholders through dividends and share repurchases, something our board and management team remain committed to.
Including activity from the first quarter Greenbrier has returned over $500 million of capital to shareholders through dividends and share repurchases something our board and management team remain committed to.
Speaker Change: We believe this is a great way to create long-term shareholder value and will continue to periodically evaluate increases to our quarterly dividend and will opportunistically repurchase shares.
We believe this is a great way to create long term shareholder value and we will continue to periodically evaluate increases to our quarterly dividend and will opportunistically repurchase shares.
Speaker Change: Turning to our guidance and business outlook, and based on current trends and production schedules, we are affirming Greenbrier's fiscal 2024 revenue and delivery guidance, but updating our gross margin and capital expenditure guidance.
Turning to our guidance and business outlook and based on current trends and production schedules. We are affirming greenbrier as fiscal 2020 for revenue and delivery guidance, but updating our gross margin and capital expenditure guidance.
Speaker Change: Our guidance includes deliveries of 22,500 to 25,000 units, which includes approximately 1,000 units from Green Baramaxian in Brazil.
Our guidance includes deliveries of 22500 to 25000 units, which includes approximately 1000 units from Greenbrier Maxion in Brazil.
Speaker Change: revenues between $3.4 and $3.7 billion.
Revenues between three four and $3 7 billion.
Speaker Change: Selling and administrative expense is expected to be approximately $220 million to $230 million. Capital expenditures
Selling and administrative expense is expected to be approximately $220 million to $230 million.
Capital expenditures has been updated.
Speaker Change: Gross investment of approximately $350 million in leasing and management services includes fiscal 2024 capital expenditures and transfers of rail cars into the lease fleet, which were produced and held on the balance sheet in 2023.
Gross investment of approximately 350 million in leasing and management services includes fiscal 2020 for capital expenditures and transfers of railcars into the lease fleet, which were produced and held on the balance sheet in 2023.
Speaker Change: Proceeds of equipment sales are expected to be approximately $85 million.
Proceeds of equipment sales are expected to be approximately $85 million.
Speaker Change: And capital expenditures in our manufacturing segment are expected to be around 165 million, which is primarily for our insourcing initiatives, followed by 15 million in the maintenance services segment.
And capital expenditures in our manufacturing segment are expected to be around $165 million, which is primarily for our in sourcing initiatives, followed by $15 million and the maintenance services segment.
Speaker Change: We are raising our aggregate gross margin percent outlook and now expect full year consolidated gross margin percent to increase to the low to mid-teens.
We are raising our aggregate gross margin percent outlook.
And now expect full year consolidated gross margin percent to increase to the low to mid teens.
Speaker Change: I'm very pleased with the performance of our first quarter results. Our outlook for fiscal 2024 is positive with earnings expected to grow. And now we will open it up for questions.
I'm very pleased with the performance of our first quarter results.
Our outlook for fiscal 2024 is positive with earnings expected to grow and now we will open it up for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: To ask a question, you may press star, then 1 on your touchtone phone.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. Please limit yourself to one question and one follow-up.
If you are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two please.
Please limit yourself to one question and one follow up.
At this time, we will pause momentarily to assemble our roster.
Speaker Change: And our first question will come from Justin Long of Stevens. Please go ahead. Thanks. Bye. Bye.
And our first question will come from Justin long of Stephens. Please go ahead.
Thanks, and good morning.
Justin Long: So maybe to start with the question on manufacturing gross margin, it was encouraging to see the sequential improvement, but I was wondering if you could share any thoughts about where we go from here sequentially over the remainder of the year, and you addressed Eagle Pass for a moment earlier, but any thoughts on the potential impact we could see from the activity across the border here in the fiscal second quarter?
So maybe to start with the question on manufacturing gross margin. It was encouraging to see the sequential improvement, but I was wondering if you could share any thoughts about where we go from here sequentially over the remainder of the year and you address Eagle pass for a moment earlier, but any thoughts.
On the potential impact we could see from the activity across the border here in the fiscal second quarter.
Okay.
Speaker Change: Thank you for those questions, Justin, we don't give, you know, quarter by quarter.
Thank you for those questions, Justin we don't give quarter by quarter.
Speaker Change: margin guidance. As I said in the prepared remarks, I'm very pleased with the results that we had in our first quarter and I know that the team is working to continue to build on those results.
Margin guidance.
As I said in the prepared remarks, I'm very pleased with the results that we had in our first quarter and I know that the team is working to continue to build on those results have been in this business for too long to ever be able to predict that it will always be linear we have puts and starts and in certain.
Speaker Change: I've been in this business for too long to ever be able to predict that it will always be linear. We have puts and starts, and certainly our fiscal second quarter, which incorporates the holidays, takes a couple of weeks out of our...
Our fiscal second quarter, which incorporates the holidays and it takes a couple of weeks out of our typical production activities. So that can be a little bit of a difficult here a little bit of a challenge, but like I said the team is working very hard to.
Speaker Change: typical production activities. So that can be a little bit of a difficulty or a little bit of a challenge. But like I said, the team is working very hard to build on the achievements in the first quarter. Talking about the border.
To build on the achievements in the first quarter.
Talking about the border.
Speaker Change: While we have been successful in not having a material impact to our deliveries, I would say that it's absolutely because of the men and women that we have working in our manufacturing and logistics operations who are
While we have been successful in not having a material impact to our deliveries I would say that is absolutely because of the men and women that we have working in our manufacturing and logistics operations who are.
Speaker Change: in constant conversations with the railroads that are picking things up, thinking about alternatives, making certain that we get our products.
In constant conversations with the railroads that are picking things up thinking about alternatives, making certain that we get our products.
Speaker Change: positioned appropriately and it's not just the outbound side of our produced rail cars, it's the inventory coming in. So, you know, I'm, I am really pleased.
<unk> positioned appropriately and it's not just the outbound side of our produced.
Railcars, it's the inventory coming in so.
I'm.
I am really pleased to see how.
Speaker Change: others in our industry as well as broader beyond the rail freight industry are really putting the pressure on our elected officials to figure out a way to deal with this crisis at the border as opposed to just shutting it down without any notice and and not really giving good feedback as to when it might open or how it you know what it's going to take if there were to be a prolonged shutdown it certainly does take time to get everything moving again whether it's
Others in our industry as well as broader beyond the rail freight industry are really putting the pressure on our elected officials to figure out a way to deal with this crisis at the border as opposed to just shutting it down without any notice and not really giving good feedback as to when it might open or how it you know what it is.
I'd say, if there were to be a prolonged shutdown. It certainly does take time to get everything moving again, whether it's.
Speaker Change: out of the United States and into Mexico or vice versa. So, you know, it just it's going to depend on any future shutdowns, how long they are as to what that impact might be.
Out of the United States and into Mexico, or vice versa. So it just it's going to depend on any future shutdowns how long they are as to what that impact might be.
Speaker Change: But I'm going to take again this opportunity to publicly thank the men and women that are working in our procurement and our logistics areas for the hard work that they're doing to keep our products flowing.
But I'm gonna take again this opportunity to publicly thank the men and women that are working in our procurement and our and our logistics areas for the hard work that they're doing to take him to keep our products flowing.
Yeah.
Speaker Change: Okay, great. And maybe to follow up on the margin question, Adrian, you said you're now expecting consolidated gross margin to be in the low to mid teens for the full year. The first quarter was
Okay, great and maybe to follow up on the margin question. Adrian you said, you're now expecting consolidated gross margin to be in the low to mid teens for the full year, the first quarter with 15% right right at the midpoint of mid teens, so that kind of implies that we're going to be flat.
Adrian: 15% right at the midpoint of mid-teens, so that kind of implies that we're going to be flat to down sequentially from here, but when I listen to the commentary, it sounds like you're positive that there's the opportunity for some self-help margin improvement going forward, so is there a
Down sequentially from here, but when I listened to the commentary.
It sounds like you're positive that there's the opportunity for some self help margin improvement going forward. So is there a headwind that we should be mindful of that could offset some of that whether it's mix or something else.
Adrian: A headwind that we should be mindful of that could offset some of that, whether it's mixed or something else.
Yeah.
Speaker Change: I think we do have some mix. Sorry, this is Justin. I'll jump in briefly. I think we do have a little bit of mix in Q2. But ultimately, we are seeing a positive trend on margin to the rest of the year. That's why we did increase our full year guidance. And we do have very good visibility. And a lot of this is a year of execution and blocking and tackling. So I think part of this is, you know,
I think we do have some mix sorry. This is Justin I'll jump and briefly I think we do have a little bit of mix in Q2, but ultimately we are seeing a positive trend on margin through the rest of the year. That's why we did increase our kind of full year guidance and we do have very good visibility and a lot of this is this is a year.
<unk> execution and blocking and tackling so.
I think part of this is you know we.
Speaker Change: bullish on our performance, bullish on our margins, but also I guess I would say if we came out and said we're going to be at 20% margins for the rest of the year, you guys might not necessarily buy that. So we're trying to find a path that makes sense without necessarily creating too much of a, leading with our chin effectively. Balanced expectations as opposed to being overly aggressive or overly conservative.
We are.
Bullish on our performance bullish on our margins and but also I guess I would say if we came out and said we're going to be at 20% margins for the rest of the year you guys might not necessarily by that so we're trying to find a path that makes sense without necessarily creating too much of a.
Leading with our churn effectively balanced expectations as opposed to being overly aggressive or overly conservative it's a much better way to say it.
Speaker Change: your words. Got it. Thanks so much for the time. Congrats on the quarter.
Got it thanks, so much for the time congrats on the quarter.
Thank you.
Speaker Change: The next question comes from Matt Elcott of TD Cowan. Please go ahead.
The next question comes from Matt Alcott of T. D. Cowen. Please go ahead.
Speaker Change: Good morning, thank you. Given the strong performance in the first quarter, do you guys still see the cadence as being 45% in the first half, 55% in the second?
Good morning. Thank you given the strong performance in the first quarter do you guys still see the cadence as being 45% in the first half 55 in the second.
Speaker Change: Yeah, I think that it's very close to 50-50, but I think 45-55 is still a good split.
Yeah, I think that that is it's very close to 50 50, but I think 45 55 is still a good split.
Speaker Change: Okay, good, good to know. And then, Lori, maybe if you can give us some more insight on the orders in the quarter, or Brian , the types of cards, the types of customers, lessors versus shippers, and did it include any large multi-year contracts by lessors? And also, the inquiry and order activity post-quarter end.
Okay. Good to know and then Lori maybe if you can give us some more insight on the orders in the quarter or Brian are the types of cars there types of customers lessors versus shippers and did it include any large multiyear contracts by lessors and.
Also the inquiry and order activity post quarter end.
Speaker Change: Yeah, no, thanks, Ben. It's Brian . The order book continues to be extremely diverse. There's a number of covered hopper cars, metal cars, black cars, gondolas, auto, it's really very broad based. There are no multi year orders in our really in our backlog to speak of. And so it truly is, you know,
Yeah, no. Thanks, Brian.
Their order book continues to be extremely diverse.
There is a number of covered hopper cars are metal.
Cars flat cars gondolas auto.
It's really very broad based there are no multiyear orders in our.
Really in our backlog to.
To speak of and so it truly is.
Speaker Change: shippers that have slots that we are going to deliver to as far as the leasing Origination mix. It's about
Shippers that have slots that we are going to deliver to as far as the less leasing origination mix, it's about 20%.
Speaker Change: And how was post quarter earnings activity or order activity? Very good. Yeah. Stronger than normal. Usually you have quite a bit of a quiet cycle during the holidays and quite frankly we're off to a pretty good start in Q2 as well.
And how was how was post quarter earnings activity or order activity very good yes stronger than normal usually you have a quite a bit of a quiet cycle during the holidays and quite frankly, we're off to a pretty good start in Q2 as well.
Speaker Change: No, that's good to hear. And then the ASD of the orders went up pretty nicely, I think 12% or so, if you compare this quarter to the last quarter. Can you talk about that?
Oh, that's good to hear and then the a S. D of the orders went up pretty nicely I think 12% or so if you compare this quarter to the last quarter can you talk about that.
Speaker Change: Love that mix, you know, honestly, that's really what drives it. Okay.
A lot of that mix.
You know honestly, that's really what drives it.
Okay.
Great. Thank you very much really appreciate it.
Thanks, Matt Thanks, Matt.
Speaker Change: The next question comes from Ken Hoxter of Bank of America. Please go ahead.
The next question comes from Ken Huckster of Bank of America. Please go ahead.
Speaker Change: Hi, this is Nathan Dylian for 10 congrats on the quarter. I guess I'd like to just maybe start a little bit on Adrian's comment about that continued strength in the syndication market and how the team is seeing that opportunity trend here into the second quarter and also maybe what you're assuming in terms of syndication activity for the rest of the year when you're talking about low-to-mid-teens market
Hi, This is nathan dialing in for Ken.
That's on the quarter.
Yes, I'd like to just maybe start a little bit on Adrian comment about that continued strength in the <unk>.
Syndication market and and how it how the team is seeing that opportunity trend.
Here into the second quarter and also maybe what youre assuming in terms of syndication.
Syndication activity for the rest of the year when when you're talking about low to mid teens margin target.
Speaker Change: I was going to say, so I think thinking about the syndication market, it continues to be strong. We continue to take leases, originate leases. We continue to have liquidity in the market and work with our syndication partners. We see a relatively stable cadence throughout this year, kind of quarter to quarter to quarter, and are just pleased that we're continuing to deepen the relationships with these partners that we've worked with over the last several years.
I was going to say, so I think our thinking about the syndication market. It continues to be strong. We continue to take leases originated leases. We continue to have liquidity in the market and work with our syndication partner partners we.
We see a relatively stable cadence throughout this this year kind of quarter to quarter to quarter and ours.
Just pleased that we're continuing to deepen the relationships with these.
These partners that we've worked with over the last several years.
And what was your second question Nathan.
Speaker Change: Oh, yeah, just what you're assuming in terms of, I think you just answered that, what you're assuming regarding syndication in that low dimitines margin target, and would I be right in assuming that?
Oh, yes.
Yes, just what you're assuming in terms of I think you just answered out what youre, assuming regarding syndication in that low to mid teens margin target and.
Would I be right in assuming that's going to be an equal cadence over the year.
Well, what I would say right now is we do see it being relatively stable.
Speaker Change: throughout the rest of the year, things change. And that's the biggest thing is we will continue to make decisions that benefit the business and ultimately our customers and shareholders. And sometimes that may mean things move around a little bit, but you're getting our latest, greatest snapshot.
Throughout the rest of the year. It's you know things change and that's the biggest thing is as we will continue to make decisions that benefit the business and ultimately our customers and shareholders and.
Sometimes that May mean things move around a little bit that you're getting our latest greatest snapshot.
Speaker Change: Got it. Thanks, Justin. And maybe just a quick follow-up on the cash return side of the equation. I understand that the team has some pretty ambitious targets regarding lowering leverage, as well as a capital plan. Maybe just could you kind of remind us again on what the cash priorities would be when you're thinking about investing to release fleets, leverage target, and shareholder return?
Got it thanks, Jeff and maybe just a quick follow up on the cash return side of the equation.
I understand that the team has some pretty ambitious targets regarding lowering leverage as well as a capital plan and maybe just could you.
Kind of remind us again on what the cash priorities would be when when youre thinking about investing fairly fleets leverage target and shareholder returns.
Speaker Change: Yeah, so we're going to start with the basics of we are investing in our manufacturing business and maintenance business with the insourcing initiatives and other activity and maintenance. We are continuing to invest in Europe as well. And then you have our leasing business, which is a large number from an optics perspective. But again, bear in mind that we do lever it, and so it's a much smaller equity piece. And then you think about
Yeah. So we're going to start with the basics of we are investing in our manufacturing business and maintenance business with the in sourcing initiatives and other other activity and maintenance.
We are continuing to invest in Europe as well and then you have our leasing business, which is a.
A large number from a optics perspective, but again bear in mind that we do lever it and so it's a much smaller equity piece and then you think about.
Speaker Change: Safeguarding our dividend. We do look at periodic increases to that. We did increase it last July . So
Safeguarding our dividend, we do look at periodic increases to that we did increase it last July so it.
Speaker Change: Um, it is not on or off the table explicitly, but we do look at that pretty.
It is not on or off the table explicitly but we do look at that pretty.
Speaker Change: consistently. And then I would say that we do look at share repurchases opportunistically, given the ongoing volatility in our share price and kind of what we see going forward. I think growth in the business is not necessarily off the table. It's just that we are
Consistently and then I would say that we do look at share repurchases opportunistically given the ongoing.
Ongoing volatility in our share price and kind of what we see going forward.
I think yes.
Growth in the business is not a is not necessarily off the table. It's just that we are focusing on making the most of the current platform. We have before we kind of move back into some type of an expansion mode and I don't know if I would say the one thing that I'd emphasize at least on the investments that we're making particularly in manufacturing here in North America as those are journey.
Speaker Change: Focusing on making the most of the current platform we have before we kind of move back into some type of an expansion mode and I don't know if
Speaker Change: Well, I would say the one thing that I'd emphasize, at least on the investments that we're making, particularly in manufacturing here in North America, is those are generating, we expect a return of $50 to $55 million on an annual savings. So I think that's a pretty darn nice return.
<unk>, we expect a return of $50 million to $55 million on an intangible thing right. Yes, yeah. So I think that's a pretty darn nice return.
Speaker Change: And then we're also focused on reducing our recourse dash. Thank you. That's perfect, yes. Great.
And then we're also focused on reducing our recourse dash. Thank you that's perfect yes.
Great. Thank you so much.
Thanks Nathan.
Speaker Change: Next question comes from Alison Polonak of Wells Fargo. Please go ahead. Hi, good morning. Want to get your thoughts on the latest storage data? I know one month doesn't make a trend, but we did start to see some cars moving back into storage a little bit more than seasonality. Are those just specific car types that you were less worried about or you're not seeing the orders or just any how you're thinking about that number?
The next question comes from Allison <unk> of Wells Fargo. Please go ahead, hi, good morning.
Wanted to get your thoughts on the latest storage data I know one month doesn't make a trend, but we did start to see some cars moving back into storage a little bit more than seasonality or there was a specific car types that you were less worried about it you're not seeing any orders or just any how you're thinking about that that number.
Speaker Change: Yeah, Allison, this is Brian . A lot of that is seasonal. When you start to look at some of the trends. And also keep in mind that as the plastic pellet car fleet expands, a lot of those cars are storage vessels that are used for the product. And as that grows,
Yeah. Allison this is Brian a lot of that is seasonal when you start to look at some of the trends.
And also keep in mind that as the plastic pellet car fleet expands a lot of those cars are storage vessels that are used for the product.
And as that grows.
Speaker Change: The ARCI continues to count those historic vessels if they're beyond 30 days, so a lot of that number is a little bit skewed by that as well.
The RCI continues to count those as storage vessels up there beyond 30 days. So a lot of that number is a little bit skewed by that as well, but it's really seasonality and and the influx of pellet cars is driving that number artificially up a little bit below.
Speaker Change: But it's really seasonality and the influx of pellet cars is driving that number artificially up a little bit.
Speaker Change: That's helpful. Thank you. And then, can you maybe talk about the absolute lease trends? I know the lease rate trends, the renewal rates are certainly high, but are you seeing some stability there? Is the absolute lease rate still going up in specific car types? Just any color over on that.
That's helpful. Thank you and then can you maybe talk about the absolute lease trends I know, there's like free trends. The renewal rates are certainly high but as you know are you seeing some stability. There is that the lease rate you're absolutely right still going up in specific car type just any colorado around that.
Speaker Change: Yeah, we're still seeing lease rates continuing to go up fairly sizably. A lot of our lease renewals, keep in mind some of those leases were done a couple of years ago and so they're catching up to today's rates, but we're still seeing, you know, deep into the 20-25% increases on cars across the board.
Yeah, we're still seeing lease rates continuing to go up fairly soon.
<unk> a lot of our lease renewals now keep in mind. Some of those leases were done a couple of years ago and so they're catching up to today's rates are we still seeing you know deep into the 20% to 25% increases on cars across the board.
Speaker Change: As far as if you were to look at point to point, maybe the last few months, we're continuing to see increases even on some of those as well.
As far as if you were to look at.
Point to point, maybe the last few months, we're continuing to see increases even on some of those as well so the trajectory is still there.
Speaker Change: if the trajectory is still, lease rates are still appreciating.
Lease rates are still appreciating.
Great. Thank you.
Okay.
Speaker Change: next question comes from basketball majors of Susquejana, please go ahead.
The next question comes from Pascal majors of Susquehanna. Please go ahead.
Basco: To follow up on the leasing question, can you talk a little bit more about the secondary market, how you feel about valuation, and any comments on the depths and types of buyers that you're seeing, whether or not you participate?
To follow up on the leasing question can you talk a little bit more about the secondary market. How you feel about valuation and then any comments on the depths and types of buyers that you're seeing.
Whether or not you're participating in the deals. Thank you.
Basco: So we are participating on a very selective basis in the secondary market.
So we are participating.
On a very selective basis in the secondary market.
Basco: We believe that a lot of the portfolios are overvalued, continue to be overvalued, so we're very selective in which transactions that we engage in. And we continue to see a lot of transactions in the marketplace. So there's still a lot of trading going on, but we're being very, very selective.
We believe that a lot of the portfolios are overvalued continued to be overvalued. So we're very selective in which transactions that we.
That we engage in.
And we continue to see a lot of transactions in the marketplace. So there's still a lot of trading going on but.
Yeah, we are.
Very very selected Baskin in that arena and I have to say one of the nice things about this being such a broad based demand market right. Now is with the deals that we're originating that we can build we've got that diversity that we don't.
Basco: in that arena. And I would say one of the nice things about this being such a broad-based demand market right now is with the deals that were originating that we can build, we've got that diversity that we don't.
Basco: you know, we're going to pay attention to what's going on in the secondary market, but it's going to be the right pricing for us to participate.
Yeah, well, we're going to pay attention to what's going on in the secondary market, but it's got to be the right the right pricing for us to participate.
Uh huh.
Speaker Change: Can you talk a little bit about the CapEx reduction in maintenance and whether that's deferral or change in some of the views on investment there?
Can you talk a little bit about the capex reduction in maintenance, and whether that's deferral or or or change in some of the abuse or an investment there.
Speaker Change: I think it's just timing, the timing of actual.
I think it's just timing and the timing of actual.
Speaker Change: And some of it is reviewing where do we need to make the investments and other is just the timing of when is, you know, sometimes when we go into the beginning of a fiscal year, we are bright eyed and bushy tailed and we think we can get.
And some of it is revealing where do we need to make the investments and other is just the timing of when as you know.
Sometimes when we go into the beginning of our fiscal year, we are a bright eyed bushy tailed and we think we can get.
Speaker Change: 101 things done in 20 minutes, but then sometimes reality sets in a little bit.
101 things done in 20 minutes, but then sometimes realities that sound a little bit.
Speaker Change: And lastly, you have one of the remaining piece on one of your convertibles is due pretty soon here. Can you talk about your intent on the balance sheet? Will you use convertibles in the future? Should we expect you to shift more and more to a secured funding model, given the success you've had there? Thank you.
And lastly, you have one of the remaining piece on one of your convertibles is due pretty soon here can you talk about your intent on the balance sheet.
Will you use convertibles in the future or should we expect you to shift more and more to a secured funding model given the success you've had there. Thank you.
Speaker Change: I would say as for for leasing, we will continue to look at our options as
I would say as for leasing we will continue to look at our options as I.
Speaker Change: as they present themselves and as we need funding sources to continue to grow the portfolio. In terms of our recourse debt, our focus right now is repaying. Again, whenever we would look to refinance, we would look at our options. I would say for me personally, the convertible market has been a good one for us over the years. We do have this stub coming up shortly that we're expecting to repay in cash.
As they present themselves and as as we need funding sources to continue to grow the portfolio in terms of our our recourse debt you know our focus right. Now is is repaying again whenever we would look to refinance we would look at our options I would say for me personally.
Yeah.
The convertible market has been a good one for us over the years, we do have this stub coming up shortly that we're expecting to repay in cash.
Speaker Change: So I don't know.
So I don't know if that gives you enough color.
Speaker Change: Do you feel like you need more recourse funding to take care of your capital and buyback needs, or do you think that's something we just pay down and wait to have a more opportunistic need for capital there?
I mean do you feel like you need more recourse funding to take care of your capital and buyback needs or do you think that's something we just pay down and wait to see more opportunistic need for capital there.
Speaker Change: I think it will wait. I mean, I think we're going to pay down this convert. And, you know, the focus is on reducing some of the recourse debt. The non recourse will adjust depending on our investments in the lease fleet. And then if there's an opportunity that comes up that needs to be a specific transaction or something, we'll deal with that one across that. Yeah, I mean, we've got a very nice ladder of maturities, you know, if you go through our various standing debt facilities.
I think it will wait I mean, I think we're going to pay down this convert and you know the focus is on reducing some of the recourse debt. The nonrecourse will adjust depending on our investments in the lease fleet and then if there's an opportunity that comes out that needs to be.
Vic transaction, that's something we'll deal with that when you cross that yeah. I mean, we've got a very nice our ladder of maturities you know if you go through our various outstanding debt facilities.
Thank you for the time.
Thanks, Bob and thanks to ask them.
Speaker Change: The next question comes from Steve Barger of KeyBank Capital Markets. Please go ahead.
Yeah.
The next question comes from Steve Barger of Keybanc capital markets. Please go ahead.
Thanks, Good morning.
Steve Barger: I know you wanted to avoid the quarterly margin walk, but the press release did mention improved operating efficiency as the manufacturing gross margin driver. What efficiencies specifically were the swing factor? And I'm trying to just get to, was the increase driven more by mix or one-offs or some more durable factors? I would say no one-offs.
I know you want to avoid the court yeah. Good morning.
I know you wanted to avoid the quarterly margin walk, but the press release did mentioned improved operating efficiency as the manufacturing gross margin driver.
What efficiencies, specifically, where the swing factor.
And I'm trying to just get to was the increase driven more by mix or one offs or some more durable factors.
Oh, I would say no one offs.
This was a this is a combination of.
Good mix. This is a combination of continuing the momentum that we saw the primarily the last six months of last fiscal year and also a part of that is as you know we did.
Steve Barger: This is a combination of continuing the momentum that we saw primarily the last six months of last.
Steve Barger: Fiscal year and also part of that is is, you know, we did.
Steve Barger: rationalize some of our capacity in North America. And so we're seeing some of that flow through. And then we are starting to see some of the benefits of the En sourcing initiative in Mexico as well. So it's a combination of factors that falls under operating efficiencies, but we do not expect really any of these to go away necessarily.
<unk> rationalized some of our capacity in North America, and so we're seeing some of that flow through and then we are starting to see some of the benefits of the in sourcing initiative and are in Mexico as well. So it's a combination of factors that falls under operating efficiencies, but we.
We do not expect really any of these to go away necessarily.
Speaker Change: Understood. And when you say the rationalization, that's the $15 to $20 million that you're getting from the marine and the foundry sale?
Understood and when you say the rationalization, that's the $15 million to $20 million that youre getting from the marine and in the foundry sale.
Speaker Change: I think we, uh, Lori, Lori spoke to, uh, but we kind of landed on about 19 to 20 million of, of realized savings is what we expect going forward.
Correct.
Got it thank a.
Laurie Lorie spoke to are we kind of landed on about $19 million to $20 million of of realized savings is what we expect going forward.
Speaker Change: got it. And I know backlog excludes the rebuild and refurbishment activity, but how much revenue do you have a line of site to there? Is that tens of millions or hundreds of millions? Can you frame that?
Got it.
And I know backlog excludes the rebuild and refurbishment activity, but but how much revenue do you have a line of sight to there is that tens of millions or hundreds of millions can you frame that.
Speaker Change: Yes, Brian , Steve. It's tens of millions. We've in Q1, there were several thousand cars that we acquired. The ASP on those are probably about half of what a new car would be just from a high level perspective, but the margin percentages are much stronger. Yeah, so that's
Yes, Brian Steve It's it's tens of millions we've we've in Q1 there were several thousand cars that we acquired the E. S. P. On those are probably about half of what a new car would be just from a high level perspective, but the margin percentages are much stronger.
Yeah, So that's part of that mix benefit.
Correct.
Speaker Change: And then, and Brian , really great to hear you talk about this.
And then and Brian.
Really great to hear you talk about the disciplined approach to leasing deals as I think about the six 5% a b S. Four for the leasing business, what hurdle rate or weighted average cost of capital are you using in your assumption to vet deals and make decisions.
Speaker Change: As I think about the 6.5% ABS for the leasing business.
Speaker Change: What hurdle rate or weighted average cost of capital are you using in your assumption to vet deals and make?
Speaker Change: So, we're using a kind of a cost of capital that is probably around kind of 9 to 10% for these activities. And so it's 1 of those where as our.
So we're using a a kind of a cost of capital that is probably around kind of 9% to 10% for.
For these activities and so it's one of those where as our.
Speaker Change: cost of debt has been increasing over the last, you know, as everybody's cost of debt has been increasing, we are seeing a compensatory increase in our lease rates to make sure that we're having this flow through appropriately and that we are generating the returns that we expected to when we first took this trip two years ago to...
Cost of debt has been increasing over the last is everybody's cost of debt has been increasing we are seeing a compensatory increase in our lease rates to make sure that we're having this flow through appropriately and that we are generating the returns that we expected to when we first took this trip.
Two years ago to two to three years ago.
Yes.
Speaker Change: Okay, and one quick one final one.
Okay.
One quick one final one.
Speaker Change: Which of your business units have the most open capacity? And I'm just trying to think about where we could see better asset utilization or operating leverage across the portfolio.
Which of your business units have the most open capacity and I'm just trying to think about where we could see better asset utilization or operating leverage across the portfolio.
Speaker Change: I would say probably, ironically, Brazil has the most open space in our fiscal year at this point, and that's, you know, hundreds of units, not thousands. Well, it's it's right. Hundreds. Otherwise, we do have a little bit of open space in July and August and.
I would say probably a ironically, Brazil has the most open space in our fiscal year at this point.
And that's you know hundreds of units not thousands well, it's it's right hundreds otherwise.
Otherwise, we do have a little bit of open space in July and August and then at that point I really see this as a year of execution and we're in a very good shape to be able to control.
Speaker Change: Then at that point, I really see this as a year of execution and we're in a very good shape to be able to control our own.
While our own destiny, and I would say the other thing that we're doing I believe a very nice job on his room being disciplined so not only are we being disciplined in how we think about the investments we're making in the lease fleet on our balance sheet, but we're also being disciplined in our production rates and really thinking through.
Speaker Change: And I would say the other thing that we're doing, I believe, a very nice job on is room.
Speaker Change: being disciplined. So not only are we being disciplined in how we think about the investments we're making in the lease fleet on our balance sheet, but we're also being disciplined in our production rates and really thinking through how the.
Speaker Change: ramping up or having to slow down impacts manufacturing efficiency and to the extent that, you know, our broad product portfolio, our strong commercial activities can keep that activity balanced, we're very happy to just continue having that balance move throughout the organization.
How the ramping up or having to slow down impacts manufacturing efficiency and to the extent that our broad product portfolio. Our strong commercial activities can't keep that activity balanced we're very happy to just continue having that balance moved throughout the organization.
Very good thanks.
Thank you Keith.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.
This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
Speaker Change: Happy New Year again, everyone. Thank you for participating in our call today. As Justin mentioned at the top of the call, we do have our annual shareholder meeting at noon Pacific, 3 p.m. Eastern time today. So please join in. And if you are a shareholder and you haven't voted, please vote. We look forward to talking to you in the coming months.
Happy New year again, everyone. Thank you for participating in our call today as Justin mentioned at the top of the call. We do have our annual shareholder meeting at noon Pacific three P. M. Eastern time today and so please join in and if you are a shareholder and you haven't voted.
Please vote.
We look forward to talking to you in the coming months.
Hi, everyone.
Speaker Change: conference is now concluded. Thank you for attending today's presentation and you may now disconnect.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Okay.
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