Q2 2024 The Greenbrier Co Inc Earnings Call

Operator: Hello and welcome to the Greenbrier Company's second quarter of fiscal 2024 earnings conference call. Following today's presentation, we will conduct a question and answer session. 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.

Hello, and welcome to the Greenbrier companies second quarter of fiscal 'twenty 'twenty four earnings conference call.

Following today's presentation, we will conduct a question and answer session.

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.

Operator: At the request of the Greenbrier Companies, this conference call is being recorded for instant 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 begin.

At the request of the Greenbrier companies. This conference call is being recorded for instant 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 begin.

Justin M. Roberts: Thank you, Gary. Good morning everyone and welcome to our second quarter of fiscal 24 conference call. Today I'm joined by Lorie Tekorius, Greenbrier's CEO and President, Brian Comstock, Executive Vice President and President of the Americas, and Adrian

Justin M. Roberts: Thank you Gary.

Justin M. Roberts: Morning, everyone and welcome to our second quarter of fiscal 'twenty Four conference call today, I'm joined by Lori to Glorious Greenbrier as CEO and President, Brian Comstock Executive Vice President.

And president of the Americas and Asia.

Operator: Pardon me, this is the conference operator. We're speaking privately. Can I get your name, please? Hello, could you unmute your phone, please? This is the conference operator. I pulled you out of the main call. We are speaking privately. Can I get your name, please?

None: <unk> me. This is the conference operator, we're speaking privately can I get your name please.

None: Hello could you mute your phone please.

None: This is the conference operator, I put you out of the main call. We are speaking privately can I get your name. Please.

You are now rejoining the main conference and conference call include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Operator: You are now rejoining the main conference.

Operator: This conference call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Throughout our discussion today, we will describe some of the important factors that could cause Greenbrier's actual results in 2024 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier. You will also notice that today we will refer to the words recurring revenue throughout our presentation and comments today. Recurring revenue is defined as leasing and management services revenue that excludes the impact of syndication activity.

None: The router discussion today, we will describe some of the important factors that could cause greenbrier as actual results and 2024 and beyond to differ materially from those expressed in any forward looking statement made by or on behalf of Greenbrier.

None: You'll also notice that today, we will refer to you the words recurring revenue throughout our presentation and comments today.

<unk> revenue was defined as leasing and management services revenue that excludes the impact of syndication activity and with that I will turn it over to Laurie.

Lorie L. Tekorius: And with that, I will turn it over to Lorie.

Lorie L. Tekorius: Thank you, Justin. And good morning, everyone.

Laurie: Thank you Justin and good morning, everyone.

Lorie L. Tekorius: Greenbrier once again delivered strong performance as we move through our fiscal year. We're seeing operating efficiencies continue to improve, and we're progressing on our organization-wide initiative. We have good momentum as we head into the second half of our year and beyond.

Laurie: <unk> once again delivered strong performance as we move through our fiscal year. We're.

Laurie: We're seeing operating efficiencies continue to improve.

Laurie: <unk> on our organization wide initiatives.

Laurie: We have good momentum as we head into the second half of our year and beyond.

Lorie L. Tekorius: We remain confident in Greenbrier's multi-year Better Together strategy and the three fundamental priorities underlined. As a reminder, FIRST is maintaining its manufacturing leadership position across our geography. Second, is meeting our customers' needs while optimizing our industrial footprint for efficiency and margin enhancement. And third, is the pursuit of sustained disciplined growth in leasing and services. Through Better Together, we're committed to enhancing our manufacturing performance while growing recurring revenue and cash flow by investing in the lease fleet. Turning to our results, we generated over $860 million in revenue and earnings per share of $1.03. A consolidated gross margin of 14% represents our second consecutive quarter of mid-teens margins.

Laurie: We remain confident and Greenberg multiyear better together strategy and the three fundamental priorities underlying yes.

Laurie: As a reminder, first is maintaining our manufacturing leadership position across our geographies.

Laurie: Second is meeting our customers needs, while optimizing our industrial footprint for efficiency and margin enhancement.

Laurie: And third is the pursuit of sustained disciplined growth in leasing and services.

Laurie: Through better together, we're committed to enhancing our manufacturing performance, while growing recurring revenue and cash flow by investing in the lease fleet.

Laurie: Turning to our results, we generated over $860 million in revenue and earnings per share of $1 right.

Laurie: Our consolidated gross margin of 14% represents our second consecutive quarter of mid teens margins.

Lorie L. Tekorius: It reflects solid operating performance in manufacturing and leasing and management services, partially offset by lower wheelset volumes in maintenance services due to a milder winter. Last quarter, we said that one quarter of mid-teens margin was a great start toward our long-term strategic goal. However, it is still not a trend.

It reflects solid operating performance in manufacturing and leasing and management services, partially offset by lower wheel set volumes and maintenance services due to a milder winter.

Laurie: Last quarter, we said that one quarter at a mid teens margin with a great start towards our long term strategic goal. It is still not a trend.

Lorie L. Tekorius: We're continuing to work on facility rationalizations in manufacturing and maintenance services that commenced in fiscal 2023, advancing our make versus buy strategy, and remaining focused on enhancing margins. We also continue our long track record of product innovation while incorporating sustainability into our design. As you might recall, in 2021, we introduced our high-strength steel gondola. In Q2, we successfully launched our ultra-high strength gondola. The gondolas use an innovative formula for high-strength, lighter-weight steel. Reducing each gondola's unloaded weight by up to 15,000 pounds.

We're continuing to work on facility rationalization and manufacturing and maintenance services. They commenced in fiscal 2020 three.

Advancing our make versus buy strategy and remain focused on enhancing margin.

Laurie: We also continue our long track record product innovation, while incorporating sustainability into our jobs.

Laurie: As you might recall in 2020, one we introduced our high strength steel gondola.

Laurie: In Q2, we successfully launched our ultra high strength bundle.

Laurie: Gondolas used an innovative pardon me left for high strength lightweight steel.

Using each candlewood unloaded way by up to 15000 pounds.

Lorie L. Tekorius: We also successfully constructed and tested a new 89-foot slab-tilt flat car built for heavy industrial applications, as well as a new high-strength boxcar door. Our focus on innovation, manufacturing excellence, and sustainability is earning Greenbrier favorable notices. Recently, CN recognized us for our efforts and commitment to sustainability as part of its ECHO Connections Partnership Program. This is the first year CN included suppliers in its recognition program, and Greenbrier was one of only seven supply chain partners to receive the award.

Laurie: We also successfully constructed and tested a new 89 foot slab chilled black car builds for heavy industrial applications as well as a new high strength box to box car door.

Laurie: Our focus on innovation manufacturing excellence and sustainability is earning Greenbrier favorable notices.

Laurie: Recently being recognized us for our efforts and commitment to sustainability as part of an echo connections partnership program.

Laurie: This is the first year see it included supplier switch recognition program and Greenbrier was one of only seven supply chain partners to receive the award.

Lorie L. Tekorius: While accolades are always nice to receive, most importantly, our emphasis on innovating and enhancing our manufacturing expertise supports our leadership position across the markets we serve. This performance continued in Q2, with Greenbrier receiving a nice balance of orders across our geography. Market conditions for Railcar Leasing remain positive, and our expanded leasing strategy is gaining traction in both North America and Europe. This is a critical element of our multi-year plan and is expected to result in the doubling of recurring revenues within the next five years. Importantly, our balance sheet remains very healthy, allowing us to invest in our business while continuing to return capital to shareholders. This has been our longstanding and preferred approach to capital allocation. I'm pleased to report our board declared a quarterly dividend of 30 cents per share this week, representing our 40th consecutive quarterly dividend. In the meantime, the economy in North America has been resilient. The probability of a soft landing is increasing, and the Fed has signaled it will likely make three interest rate cuts by the end of 2024. Of course, this year is also a U.S. presidential election year, not to mention national elections in the EU and Mexico.

Laurie: Well accolades are always nice to receive most importantly, our emphasis on innovating and elevating our manufacturing expertise support our leadership position across the markets we serve.

Laurie: This performance continued in Q2 with Greenbrier, receiving a nice balance of orders across our geographies.

Laurie: Market conditions for railcar leases remain positive.

Laurie: Our expanded leasing strategy is gaining traction in both North America and Europe. This is a critical element of our multiyear plan and is expected to result in the doubling of recurring revenues within the next five years.

Laurie: Importantly, our balance sheet remains very healthy, allowing us to invest in our business, while continuing to return capital to shareholders. This.

Laurie: This has been our long standing and preferred approach to capital allocation.

Laurie: Pleased to report our board declared a quarterly dividend of 30 cents per share this week, representing our 14th consecutive quarterly dividend.

Laurie: Yeah.

Laurie: In the meantime, the economy in North America has been resilient.

Laurie: The probability of a soft landing is increasing.

Laurie: And the fed has signaled it will likely make three interest rate cuts by the end of 2024.

Laurie: Of course this year is also a U S presidential election year not to mention national elections in the EU and Mexico.

Laurie: Our current disciplined approach in our core North American railcar market has attracted new capital to asset based investing in railcars, which is encouraging.

Lorie L. Tekorius: Our current disciplined approach in our core North American railcar market has attracted new capital to asset-based investing in railcars, which is encouraging. In Europe, while the economy is still lagging behind the U.S., the growth projections have been trimmed once again by the European Central Bank, but we're building momentum. Stable demand across railcar types in both North America and Europe underpin new builds and lease renewals. The southern border remains a focus as we address developments that could impact deliveries from our suppliers or to our customers in real time.

Laurie: In Europe, while the economy is still lagging the U S. The growth projections had been trends once again by the European Central Bank, but we're building momentum.

Laurie: Stable demand across railcar types in both North America, and Europe, underpinned Newfield and lease renewals.

Laurie: The southern border remains a focus as we address developments that could impact deliveries from our suppliers or to our customers in real time.

Lorie L. Tekorius: Border crossing issues impacted us at various times during the quarter, but the work performed by our skilled manufacturing and logistics colleagues has successfully avoided severe impacts on Greenbrier. Sustained high performance across our business is in view. Our commercial team, with its powerful lease origination capabilities, continues to outperform, giving us excellent near-term and longer-term visibility into manufacturing and steadily building our stream of lease revenue. We're confident in the long-term strategy and multi-year targets and look forward to sharing our progress on future calls. Now before I conclude my remarks, I'd like to acknowledge the contributions of Adrian Downes, who has been at Greenbrier since 2013. As we announced earlier this year, Adrian will be stepping down from his role as CFO. Adrian's service to Greenbrier during challenging times, including the pandemic, has been essential.

Laurie: Border crossing issues impacted us at various times during the quarter, but the work performed by our skilled manufacturing and logistics colleagues has successfully avoided severe impacts on greenbrier.

Sustained high performance across our business is in view our.

Laurie: Our commercial team with its powerful lease origination capabilities continues to outperform giving us excellent near term and longer term visibility into manufacturing and steadily building our stream of lease revenues for.

Laurie: We're confident in our long term strategy and multiyear targets and look forward to sharing our progress on future calls.

None: Now before I conclude my remarks, I'd like to acknowledge the contributions of Adrian Downes, who has been a greenbrier since 2013.

None: As we announced earlier this year Adrian will be stepping down from his role as CFO Adrian service degree Burger in challenging times, including the epidemic pandemic has been essential.

Lorie L. Tekorius: During his time here, Greenbrier strengthened its balance sheet and expanded its global operations platform, integrating accounting and finance functions as we grew. We're incredibly grateful for his contributions to Greenbrier over the years and wish him all the best in his future endeavors. Thank you, Adrian. And with that, I'll turn the call over to Brian Comstock, who will discuss our activities for the quarter in greater detail and review market conditions.

None: During his time here Greenbrier strengthened its balance sheet and expanded its global operations platform integrating accounting and finance functions as we grow.

None: We're incredibly grateful for his contributions to greenbrier over the years and wish him all the best in his future endeavors. Thank you Adrian.

And with that let me turn the call over to Brian Comstock, who will discuss our activities for the quarter in greater detail and review market conditions. Thanks, Laurie and good morning, everyone. During Q2, Greenbrier secured new railcar orders of 5900 units were nearly 690.

Brian J. Comstock: Thanks, Lorie, and good morning, everyone. During Q2, Greenbrier secured new rail park orders of 5,900 units worth nearly $690 million. Demand continues to be broad-based and diverse across most railcar types. As of February 29th, Greenbrier's global new railcar backlog was 29,200 units valued at an estimated $3.6 billion. The backlog continues to be stable, providing significant revenue visibility well into 2025. Our commercial performance reflects our leading market position, strong lease origination capabilities, and direct sales experience. International orders accounted for about 40% of the activity in the quarter, reflecting the continuing momentum in Europe and Brazil.

Demand continues to be broad based and diverse across most railcar types.

February 29, Greenberg global New railcar backlog was 29200 units valued at an estimated $3 $6 billion.

Brian J. Comstock: Backlog continues to be stable, providing significant revenue visibility well into 2025 or.

Brian J. Comstock: Our commercial performance reflects our leading market position.

Brian J. Comstock: Strong lease origination capabilities and direct sales experience <unk>.

Brian J. Comstock: International orders accounted for about 40% of the activity in the quarter, reflecting the continuing momentum in Europe and Brazil.

Brian J. Comstock: We have been performing well despite a challenging backdrop in Europe, and our backlog remains very healthy thanks to a broad portfolio of MECs. In Europe, volumes through our leasing distribution channel continue to grow. Our ability to originate and syndicate leases is critical to the long-term performance of our European manufacturing business. We remain excited about our opportunity in Europe, where the rail industry enjoys compelling secular tailwinds. We delivered 5,600 railcars to customers in Q2, roughly the same as last quarter. We increased the midpoint of our delivery and revenue guidance, indicating that deliveries will be weighted to the second half of the year. Second quarter gross margins of 10.8 percent declined slightly from Q1, but they still improved by 380 basis points compared to the second quarter of last year.

Brian J. Comstock: We have been performing well, despite a challenging backdrop in Europe, and our backlog remains very healthy thanks to our broad portfolio.

Brian J. Comstock: <unk>.

Brian J. Comstock: In Europe volume through our leasing distribution channel continued to grow our ability to originate and syndicate leases is critical to the long term performance of our European manufacturing business. We remain excited about our opportunity in Europe, where the rail industry enjoys compelling secular tailwind.

Brian J. Comstock: We delivered 5600 railcars to customers in Q2, roughly the same as last quarter.

Brian J. Comstock: We increased the midpoint of our delivery and revenue guidance, indicating that deliveries will be weighted to the second half of the year.

Second quarter gross margins of 10, 8% declined slightly from Q1, but still improved by 380 basis points compared to the second quarter of last year.

Brian J. Comstock: While we are working on numerous activities to optimize manufacturing efficiency, several efficiency gains we have made over the last 12 months are being sustained. Expansion of in-house fabrication for basic primary parts and subassemblies as part of our make versus buy strategy remains on track, with the full benefit from insourcing expected to be realized by the middle of fiscal 2025. Leasing and management services also performed well in the quarter. We are steadily progressing to our stated goal of doubling recurring revenue from leasing and management services. Recurring revenue is growing from various sources, including new railcars added to our lease fleet and lease renewals at more favorable terms. We grew our lease lead by about 500 units, or 3.5%, during the quarter. As a reminder, we have committed to invest up to $300 million per year on a net basis over the next several years to expand our recurring revenue, as long as we do so in a manner that meets our financial criteria.

Brian J. Comstock: While we are working on numerous activities to optimize manufacturing efficiency.

Brian J. Comstock: All of the efficiency gains we have made over the last 12 months are being sustained.

Brian J. Comstock: Spansion of in house fabrication for basic primary parts and sub assemblies as part of our make versus buy strategy remains on track with the full benefit from in sourcing expected to be realized by the middle of fiscal 2025.

Leasing and management services also performed well in the quarter. We are steadily progressing to our stated goal of doubling recurring revenue from leasing and management services.

Brian J. Comstock: Recurring revenue as Brian from various sources, including.

Brian J. Comstock: New railcars added to our lease fleet and lease renewals at more favorable terms, we grew our lease fleet by about 500 units or three 5% during the quarter.

Brian J. Comstock: As a reminder, we have committed to invest up to $300 million per year on a net basis over the next several years to expand our recurring revenue.

Brian J. Comstock: As long as we do so in a manner that meets our financial criteria I want to reemphasize that we will only invest in the right assets with the right lease terms and Counterparties and we are focused on railcar types that keep our leading portfolio balance.

Brian J. Comstock: I want to re-emphasize that we will only invest in the right assets with the right lease terms and counterparties, and we are focused on railcar types that keep our fleet portfolio balanced. We regularly evaluate our financing strategies and are taking a prudent approach to financing growth in our lease. Our average interest rate of 4.5% on our non-recourse leasing debt is significantly lower than current market interest rates. At the end of Q2, our fleet leverage was 77%, in line with our targeted fleet leverage framework. We leveraged ROCCART assets at an appraised fair market value, which results in borrowing ratios that are higher on a net book value basis.

We regularly evaluate our financing strategies and are taking a prudent approach to financing growth of our lease fleet. Our average interest rate of four 5% on our non recourse leasing debt is significantly lower than current market interest rates at the end of Q2, our fleet leverage was 77%.

Brian J. Comstock: In line with our targeted leverage framework, we leverage railcar assets at an appraised fair market value, which results in borrowing ratios that are higher on a net book value basis.

Brian J. Comstock: Our lease renewal rates continue to grow at double digits, and we have successfully renewed lease terms, while maintaining a consistently high fleet utilization of nearly 99% in Q2.

Brian J. Comstock: Our lease renewal rates continue to grow at double digits, and we have successfully renewed lease terms while maintaining a consistently high fleet utilization of nearly 99% in Q2. The leasing market remains healthy, characterized by a scarcity of in-demand row car types and high fleet utilization among lessors. Moving in sequence with higher interest rates, our lease rates remain compensatory, resulting in elevated rates for both new originations and renewals. We have strategically staggered lease durations to lessen the impact of cyclicality and create opportunities for favorable renewals. We have already renewed more than half of our expiring leases this year at more favorable rates. Our team is working on the remaining lease renewals, and we are confident we will finish the year successfully.

Brian J. Comstock: The leasing market remains healthy characterized by a scarcity of end demand railcar types and high fleet utilization among lessors.

Brian J. Comstock: Moving in sequence with higher interest rates, our lease rates remained compensatory, resulting in elevated rates for both new originations and renewals.

Brian J. Comstock: We have strategically staggered lease durations to lessen the impact of cyclicality and create opportunities for favorable renewals, we have already renewed more than half of our expiring leases this year at more favorable rates.

Our team is working on the remaining lease renewals and we are confident we will finish the year successful.

Brian J. Comstock: Fundamentally the backdrop on North American railcar market remains solid with demand approaching replacement levels.

Brian J. Comstock: Overall traffic is projected to remain steady there is potential for intermodal growth due to the current challenges at the Suez and Panama canals.

Brian J. Comstock: Fundamentally, the backdrop of the North American railcar market remains solid, with demand approaching replacement levels. While overall traffic is projected to remain steady, there is potential for intermodal growth due to the current challenges at the Suez and Panama Canals. These disruptions will likely redirect traffic to West Coast ports, which benefits rail transport demand. Additionally, nearshoring trends support long-term growth in traffic across the southern border. The supply of available railcars is still near trough levels, which has led to robust lease rate growth, renewals, and term length. We are confident we have the right strategy in place to successfully execute our plan in this environment. In Q2, we syndicated 1,400 railcars with multiple investors, generating strong liquidity and margin. The syndication market remains liquid, with a solid appetite for the asset class.

Brian J. Comstock: These disruptions will likely redirect traffic to the west coast ports, which benefits rail transport demand. Additionally.

Brian J. Comstock: Additionally, near shoring trends support long term growth and traffic across the southern border the supply of available railcars and still near trough levels, which has led to robust lease rate growth renewals and term length.

Brian J. Comstock: We are confident we have the right strategy in place to successfully execute our plan in this environment.

Brian J. Comstock: In Q2, we syndicated 1400 railcars with multiple investors generating strong liquidity and margins the syndication market remains liquid with a solid appetite for the asset class.

Brian J. Comstock: El sector has proven to perform well over economic cycles, and we are continuing to see increased syndication interest from new investors motivate.

Brian J. Comstock: To diversify.

Brian J. Comstock: Yes.

Brian J. Comstock: Finally maintenance services performance was impacted by lower mill says and component volumes, resulting from an unusually mild winter we have several initiatives underway to improve this unit's efficiency by improving carpool material planning and cycle time in all facilities.

Brian J. Comstock: The rail sector has proven to perform well over economic cycles, and we are continuing to see increased syndication interest from new investors motivating the rail sector to diversify. Finally, maintenance services performance was impacted by lower wheel sets and component volumes resulting from an unusually mild winter. We have several initiatives underway to improve this unit's efficiency by improving car flow, material planning, and cycle time at all facilities. The backdrop for maintenance services remains constructive over the interim to longer term, driven in part by the last two peak tanker build cycles that will require repairs and requalification over the next several years. Now I'll hand the call over to Adrian, who will speak about our financial highlights for the quarter. Thank you, Brian.

The backdrop for maintenance services remains constructive over.

Brian J. Comstock: In terms of longer term driven in part by the last two peak tanker adult cycles that will require repairs and re qualification over the next several years now.

Brian J. Comstock: Now I'll hand, the call over to Adrian who will speak to our financial highlights for the quarter.

Adrian: Thank you, Brian and good morning, everyone.

Before moving into the highlights of the quarter I'd like to remind everyone that quarterly financial information is available in the press release and supplemental slides on our website.

Adrian: Remember, our Q2 performance was robust and our manufacturing and leasing segments as highlighted by Lori and Brian in their remarks.

Adrian: After covering some of the highlights from the quarter I will provide an update to our fiscal 2020 for guidance.

Adrian J. Downes: Thank you, Brian, and good morning, everyone. Before moving into the highlights of the quarter, I'd like to remind everyone that quarterly financial information is available in the press release and supplementary slides on our website. Greenbrier's Q2 performance was robust in our manufacturing and leasing segments, as highlighted by Lorie and Brian in their remarks. After covering some of the highlights from the quarter, I'll provide an update on our fiscal 2024 guidance. Notable highlights for the second quarter include diverse new rail car orders of 5,900 units valued at nearly $690 million, the second highest in the past two years. Deliveries of 5,600 units include 300 units from our own consolidated joint venture in Brazil.

Adrian: Notable highlights for the second quarter include diverse new railcar orders of 5900 units valued at nearly $690 million the second highest over the past two years delay.

Adrian: Deliveries of 5006 hundred units include 300 units from our own consolidated joint venture in Brazil.

Adrian: Consolidated revenue of $863 million grew sequentially due to a change in product mix, increasing manufacturing volumes and growth in our leasing and management services segment.

Adrian: Aggregate gross margin percent was 14, 2%, resulting primarily from product mix growth in the lease fleet at higher lease rates.

Selling and administrative expense of approximately $64 million increased sequentially, primarily due to higher employee related costs.

Adrian: Earnings from unconsolidated affiliates of $4 million more than doubled from the first quarter, primarily due to higher earnings from our Brazilian joint venture, which are expected to moderate.

Adrian J. Downes: Consolidated revenue of $863 million grew sequentially due to a change in product mix, increasing manufacturing volumes, and growth in our leasing and management services segment. Aggregate gross margin percent was 14.2%, resulting primarily from product mix, growth in the lease fleet, and higher lease rates. Selling and administrative expense of approximately $64 million increased sequentially, primarily due to higher employee-related costs.

Adrian: Net earnings attributable to Greenbrier of $33 million generated diluted EPS of $1 <unk> per share.

Adrian: And finally, EBITDA for the quarter was $95 million or 11% of revenue.

Adrian: As we look to liquidity Greenbrier generated positive operating cash flow of over $99 million in the quarter, resulting from strong earnings and a positive net change to working capital.

Adrian: Additionally, Greenbrier as Q2 liquidity remained solid at $581 million, consisting of $252 million of cash and available borrowings of $329 million.

Adrian: Other notable financing items in the quarter include the retirement of the remaining $48 million of our 2017 senior convertible notes with cash.

Adrian J. Downes: Earnings from unconsolidated affiliates of $4 million more than doubled from the first quarter, primarily due to higher earnings from our Brazilian joint venture, which are expected to moderate. Net earnings attributable to Greenbrier of $33 million generate a diluted EPS of $1.03 per share. And finally, EBITDA for the quarter was $95 million, or 11% of revenue. As we look to liquidity, Greenbrier generated positive operating cash flow of over $99 million in the quarter, resulting from strong earnings and a positive net change to working capital. Additionally, Greenbrier's Q2 liquidity remains solid at $581 million, consisting of $252 million of cash and available borrowings of $329 million. Other notable financing items in the quarter include the retirement of the remaining $48 million of our 2017 senior convertible notes with cash. As mentioned in our first quarter remarks, we are providing a breakout between recourse and non-recourse tasks in the footnotes section of our 10Q under notes payable and revolving notes. Greenbrier's desk composition is now composed of more non-recourse desks than recourse.

Adrian: As mentioned in our first quarter remarks, we're providing a breakout between recourse and nonrecourse dash in the footnotes section of our 10-Q under notes payable Andrews revolving nodes.

Adrian: Greenbrier is that compensation is now composed of more nonrecourse desk then recourse this.

Adrian: This emphasizes our commitment towards reducing them retiring our recourse dash as cash flows improve and underscores our prudent with how we manage our about our capital structure and balance sheet.

Adrian: As already mentioned Greenberg's board of directors declared a quarterly dividend of <unk> 30 per share.

Adrian: Based on yesterday's closing price our annual dividend represents a yield of approximately two 3%.

Including activity from the second quarter, Greenbrier has returned nearly $510 million of capital to shareholders through dividends and share repurchases since reinstating our dividend program back in 2014, and these are actions that our board and management team remain committed to we believe this is a great way to create long term shareholder.

Adrian: The value and we will periodically evaluate increases to our quarterly dividend and look to repurchase shares opportunistically.

Adrian: Finally, shifting focus to our guidance and business outlook.

Adrian: Just on current trends and production schedules, we are raising the bottom end of our 2020 for revenue and delivery guidance updating our capital expenditure forecast and reaffirming our gross margin outlook.

Adrian: We are raising the bottom end of our deliveries to 23500, which includes approximately 1400 units from Greenbrier Maxion in Brazil.

Adrian J. Downes: This emphasizes our commitment to reducing and retiring our recourse debt as cash flows improve and underscores our prudence in how we manage our capital structure and balance sheet. As Lorie mentioned, Greenbrier's board of directors declared a quarterly dividend of $0.30 per share. Based on yesterday's closing price, our annual dividend represents a yield of approximately 2.3%.

Adrian: We are increasing the lower end of revenues to $3 5 billion.

Adrian: Selling and administrative expense is expected to be approximately $230 million to $235 million.

Adrian: Capital expenditures have also been updated forecasted expenditures in our manufacturing segment are expected to be around $140 million, which includes spend related to insourcing activities, followed by 15 million in our maintenance services segment.

Adrian J. Downes: Including activity from the second quarter, Greenbrier has returned nearly $510 million of capital to shareholders through dividends and share repurchases since reinstating our dividend program back in 2014, and these are actions that our board and management team remain committed to. We believe this is a great way to create long-term shareholder value, and we will periodically evaluate increases to our quarterly dividend and look to repurchase shares opportunistically. Finally, shifting focus to our guidance and business outlook, based on current trends and production schedules, we are raising the bottom end of our 2024 revenue and delivery guidance, updating our capital expenditure forecast, and reaffirming our gross margin outlook. We are raising the bottom end of our deliveries to 23,500 units, which includes approximately 1,400 units from Greenbrier Maxion in Brazil.

Adrian: Gross investment of approximately $350 million and leasing and management services is unchanged and includes trying to your capital expenditures as well as transfers of railcars into the lease lease there were a manufactured and subsequently held on the balance sheet in 2023.

Proceeds of equipment sales have been adjusted to approximately $75 million.

Adrian: And aggregate gross margin percent for the full year is expected to be in the low to mid teens.

Overall I am pleased with our performance in the second quarter and throughout the first half of the year, which is put greenbrier on solid footing for a strong finish to the year as we head into the second half. We are supported by a robust backlog ample liquidity and a strong balance sheet. We are confident of our outlook for fiscal 'twenty 'twenty four is positive.

Adrian: With earnings expected to grow.

And now as this will be my final earnings call at Greenbrier I would like to take this opportunity to say. Thank you I am privileged to have spent 11 years at Greenbrier, what does the chief financial officer, and prior to that as Chief Accounting Officer.

Adrian J. Downes: We are increasing the lower end of revenues to $3.5 billion. Selling and administrative expense is expected to be approximately $230 to $235 million. Capital expenditures have also been updated. Forecasted expenditures in our manufacturing segment are expected to be around $140 million, which includes expenditure related to insourcing activities, followed by $15 million in our maintenance services segment. Gross investment of approximately 350 million in leasing and management services is unchanged and includes current year capital expenditures, as well as transfers of rail cars into the lease fleet that were manufactured and subsequently held on the balance sheet in 2023. Proceeds of equipment sales have been adjusted to approximately $75 million.

None: As already mentioned a lot has been accomplished over this time period and Greenbrier has a great leadership team reinforced by a strong balance sheet and improving results I would like to thank our board of directors shareholders and Lori for the opportunities and support during this time. This has been a great place to work and although I will be leaving this role I will still be involved.

As a strategic advisor to help with the transition process and other projects.

None: Thank you and with that we will open up for questions.

None: We will now begin the question and answer session.

None: To ask a question you May press Star then one on your telephone keypad.

None: If you were using a speakerphone please pick up your handset before pressing the keys.

None: To withdraw your question. Please press Star then two.

None: At this time, we will pause momentarily to assemble our roster.

None: Our first question today comes from Justin long with Stephens. Please go ahead.

Adrian J. Downes: And aggregate gross margin percent for the full year is expected to be in the low to mid teens. Overall, I am pleased with the performance in the second quarter and throughout the first half of the year, which has put Greenbrier on solid footing for a strong finish to the year. As we head into the second half, we are supported by a robust backlog, ample liquidity, and a strong balance sheet. We are confident our outlook for fiscal 2024 is positive, with earnings expected to grow. And now, as this will be my final earnings call at Greenbrier, I would like to take this opportunity to say thank you. I am privileged to have spent 11 years at Greenbrier, both as the Chief Financial Officer and, prior to that, as the Chief Accounting Officer.

Justin Trennon Long: Thanks, Good morning, Adrian Congrats.

Thank you very much.

Justin Trennon Long: So maybe to start with a question on the gross margin outlook, you reiterated that outlook for the full year, the low to mid teens, but through the first couple of quarters. We're tracking at the high end of that range in the guidance also implies that production levels in the <unk>.

Justin Trennon Long: Second half will be higher than the first half and I would think that would create some positive operating leverage. So is there anything that you would kind of point to that could drive a sequential moderation of margins or do you feel like the higher end of that gross margin outlook is.

Justin Trennon Long: Most reasonable as we sit here today.

None: So I'll give a couple of brief comments, we're excited about the progress we've made for the first half of this year. We're excited about what we see and the second half of the year.

Adrian J. Downes: As Lorie mentioned, a lot has been accomplished over this time period, and Greenbrier has a great leadership team, reinforced by a strong balance sheet and improving results. I would like to thank our board of directors, shareholders, and Lorie for the opportunities and support during this time. This has been a great place to work, and although I will be leaving this role, I will still be involved as a strategic advisor to help with the transition process and other projects. Thank you, and with that, we will open up for questions.

None: So you know I think that we're going to continue the steady progress.

We're mindful that we have to put one foot in front of the other everyday to move forward and that's what we're doing and I think the last.

Six months or two quarters are showing and others, but that's what we're capable of and I expect us to continue on a modest trajectory.

None: Okay got it and maybe for my second question I wanted to ask about orders and see if you could provide any additional color on how orders progressed through the quarter month to month I know there can be some seasonality around year end and then anything you can share.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question today comes from Justin Long with Stevens. Please go ahead.

None: On the third quarter, thus far and what you've seen in an order and inquiry levels are relative to <unk>.

None: Yeah, Thanks, Justin it's Brian.

Brian J. Comstock: It's a good question because as you know coming out of the holidays typically it's a little bit slower and the cadence is pretty much in line with your expectations. We came out of the holidays people are now.

Justin Trennon Long: Thanks. Good morning. And Adrian, congrats. Thank you very much.

Justin Trennon Long: So maybe I'd start with a question on the gross margin outlook, you reiterated that outlook for the full year, the low to mid teens, but through the first couple of quarters, we're tracking at the high end of that range. And the guidance also implies that production levels in the second half will be higher than in the first half. And I would think that would create some positive operating leverage. So is there anything that you could kind of point to that could drive a sequential moderation of margins? Or do you feel like the higher end of that gross margin outlook is most reasonable as we sit here today?

Brian J. Comstock: Back.

Brian J. Comstock: Doing their jobs and what we saw through the quarter is a progression of increased orders, particularly in North America as the quarter progressed I would say that this quarter is off to a very strong start as well. So pipeline is still it's still solid visibility is still robust and the car types are quite diverse.

Brian J. Comstock: Okay.

None: Okay, great. That's good to hear I appreciate it.

None: Yeah.

The next question is from Matt Alcott with T. D. Cohen. Please go ahead.

Matthew Youssef Elkott: Thank you good morning, staying on the order question, Brian It's nice to see a solid number for the quarter and that the activity is still strong.

Unknown Executive: So I'll give a couple of brief comments. We're excited about the progress we've made in the first half of this year. We're excited about what we see in the second half of the year. So, you know, I think that we're going to continue our steady progress. We're mindful that we have to put one foot in front of the other every day to move forward. And that's what we're doing. And I think the last Transcription by CastingWords is best.

In the third quarter, the ASP decline.

Matthew Youssef Elkott: Decent amount I think 16% Q2 versus one Q is that a function of the international portion being higher this quarter than last quarter or is there anything else in there.

None: It's a little bit a Matt yeah, it's a little bit of everything at the end of the day, it's it's mix as usual.

Unknown Executive: Okay, got it. And maybe for my second question, I wanted to ask about orders and see if you could provide any additional color on how orders progressed through the quarter month to month. I know there can be some seasonality around year end, and then anything you can share on the third quarter thus far and what you've seen in order and inquiry levels relative to 2Q.

None: But also the mix of international orders has.

None: It has some headwinds to the average ASP as well.

None: However from a pricing perspective, what I can give you is that nothing has really changed in the industry is still very disciplined.

Brian J. Comstock: Yeah, thanks Justin. It's a good question because, as you know, coming out of the holidays, it's a little bit slower, and the cadence is pretty much in line with your expectations. We came out of the holidays, people are now, you know, back doing their jobs, and what we saw through the quarter was a progression of increased orders, particularly in North America, as the quarter progressed. I would say that this quarter is off to a very strong start as well. So the pipeline is still solid, visibility is still robust, and the car types are quite diverse.

And we're seeing we're still seeing good pricing in the market.

Okay. That's good to hear and then staying on kind of.

None: The mix question, but going to production the benefit of product mix and manufacturing for revenue.

None: Is that going to turn into a headwind going forward and thus the lack of.

None: What one would expect a higher margin than youre guiding.

Unknown Executive: Okay, great. That's good to hear. I appreciate it.

So I think Matt we don't expect to see a material shift in our mix.

Operator: The next question is from Matt Elkott with T.D. Cowan. Please go ahead.

Matthew Youssef Elkott: Thank you. Good morning.

Matt: At this point, what we would say is is we are the reason we increased the bottom end of our range as we see more upside.

Matthew Youssef Elkott: Staying on the order question, Brian, it's nice to see a solid number for the quarter and that the activity is strong in the third quarter. The ASP declined by a decent amount, I think 16% in Q2 versus 1Q. Is that a function of the international portion being higher this quarter than last quarter, or is there something else in there?

Matt: Over the back half of this year and.

Matt: Part of this is just probably being aware that we are living in a very fluid time of fluid economy, and while we do have very good visibility in manufacturing.

Matt:

Matt: I was just trying to make sure that we are.

Matt: Have a little bit of of caution in our remarks at times and in our outlook. One thing. We continue to learn is that there is this is a very fluid world very fluid economy in what we see is very very great outlook strong orders strong backlog great momentum in manufacturing.

Brian J. Comstock: It's a little bit of everything. At the end of the day, it's mix as usual, but also the mix of international orders has some headwinds to the average ASP as well. However, from a pricing perspective, what I can give you is that nothing has really changed in the industry. It's still very disciplined, and we're still seeing good pricing in the market. Okay.

Matt: And in production.

Matt: But.

Matt: I guess, we're just trying to make sure that we are.

Matt: Not going to get too far out over our skis and over promise but.

But at this point.

Unknown Executive: Okay, that's good to hear. And then, you know, staying on kind of the mix question, but going to production, the benefit of product mix in manufacturing for revenue, is that going to turn into a headwind going forward, and thus the lack of what one would expect, you know, higher margins than you're guiding?

Matt: I'm looking at Loria, Brian right now is we're almost or effectively a month into our Q3, and we don't see any significant changes from our trajectory and Matt.

Matt: Now, while we love, having a big backlog solid gives us ability to plan our production lines and be very efficient at the same time, we are investing particularly in Mexico with our in sourcing project that we will continue to add to efficiencies in our cost of which will enhance.

Unknown Executive: So, I think, Matt, we don't expect to see a material shift in our mix at this point. What we would say is that we are – the reason we increased the bottom end of our range is that we see more upside over the back half of this year, and part of this is probably being aware that we are living in a very fluid time, a fluid economy, and while we do have very It's just trying to make sure that we have a little bit of caution in our remarks at times and in our outlook. One thing we continue to learn is that this is a very fluid world, a very fluid economy, and what we see is a very, very great outlook, strong orders, strong backlog, great momentum in manufacturing and production, but I guess we're just trying to make sure that we are not going to get too far out of our skis and overpromise. But at this point, and I'm looking at Lorie and Brian right now, we're almost, or effectively, a month into our Q3, and we don't see any significant changes from our

Matt: Our margins.

None: Okay got it and Lorie and Justin you guys are good at and Brian alluded to intermodal, possibly starting to recover you know later this calendar year those are lower ESP cars, but can you talk about the margin effect or would they be margin dilutive or are they margin neutral.

None: Even though they're lower ESP.

None: I would say, they're either margin neutral or are there margin benefit depends on but so you're right at the top line, but we would expect to maintain the margin and actually I think now that I'm quickly thinking through math in my head a lower sales price with good margin dollars should be a benefit to margin percentage.

None: Got it great.

None: Much.

Your next question is from Harrison Bauer with Susquehanna Financial Group. Please go ahead.

Robert Stephen Barger: Hi, This is heresy non for Baskin majors. Thanks for taking my questions today, Laurie as Brian both mentioned the milder winter affecting the maintenance business, but now that's been revenue dropping for three quarters sequentially and then profits have dropped the lost to them.

Matthew Youssef Elkott: And Matt, while we love having a big backlog, SOLID gives us the ability to plan our production lines and be very efficient. At the same time, we are investing, particularly in Mexico, with our insourcing project that will continue to add to efficiencies in our costs, which will enhance our margins.

Robert Stephen Barger: Could this be a broad cyclical adjustment or may be customers specific customers pulling back the use of their network and then when would you expect stabilization and maybe what some of your trajectory for the maintenance business going forward.

Unknown Executive: Okay, got it. And Lorie and Justin, you guys and Brian alluded to Intermodal possibly starting to recover, you know, late this calendar year. Those are lower ASP cars, but can you talk about the margin effect? Would they be margin dilutive, or are they margin neutral even though they're lower ASP?

Robert Stephen Barger: Okay. Harrison this is Justin good good to hear from you today I I would say that actually this business has always had some seasonality and cyclicality. So that you see a run up in our fiscal Q2 in the winter and then a further step up in our fiscal Q3 in the spring.

Unknown Executive: I would say they're either margin neutral, or their margin benefit depends on, but so you're right at the top line, but we would expect to maintain the margin. And actually, I think now that I'm quickly thinking through math in my head, a lower sales price with good margin dollars should be a benefit to margin percent.

Robert Stephen Barger: Because of our the winter the winter does drive volumes in the wheel business and then there's a spring restocking and then Q4 and our fiscal Q1 definitely have some I would say more normalization. So we see this as a broader this isn't it.

Matthew Youssef Elkott: Thank you very much.

Robert Stephen Barger: Change in the business. This is more of just a.

Operator: The next question is from Harrison Bower with Susquehanna Financial Group. Please go ahead.

Robert Stephen Barger: The normal seasonality, we see in the wintertime does it didnt manifest this year. So it's not a big cyclical shift in the business. It's more of just know things did not manifest as they historically do and we are moving into our Q3 and an undertaking various remedial actions to kind of make sure that our volumes are going up.

Harrison Bower: Hi, this is Harrison on behalf of Bascom Majors. Thanks for taking my questions today.

Justin M. Roberts: Lorie and Brian both mentioned the milder winter affecting the maintenance business. But now, revenue has been dropping for three quarters sequentially, and then profits have dropped the last two. Could this be a broad cyclical adjustment or maybe customers, specific customers, pulling back the use of their networks? And then when would you expect stabilization, and maybe what's some of your trajectory for the maintenance business going forward?

Robert Stephen Barger: Manifest as expected and that were.

I'd say managing their cost structure and overhead as as proactively as possible I don't know if there's anything else you'd like to add Brian on that no. I think you I think you hit it perfectly just isn't the seasonality typically is over two two and a half quarters.

Justin M. Roberts: Hey Harrison, this is Justin. It's good to hear from you today. I would say that actually, this business has always had some seasonality and cyclicality so that you see a run-up in our fiscal Q2 in the winter and then a further step up in our fiscal Q3 in the spring because the winter does drive volumes in the wheel business, and then there's a spring restocking, and then Q4 and our fiscal Q1 definitely have some, I would say, more normalization. So we see this as a broader, this isn't a change in the business, this is more of just the normal seasonality we see in the wintertime didn't manifest this year. So it's not a big cyclical shift in the business; it's more of just, nope, things did not manifest as they historically do, and we are moving into our Q3 and undertaking various remedial actions to kind of make sure that our volumes are going to manifest as expected and that we're, I'd say, managing the cost structure and overhead as proactively as possible. I don't know if there's anything else you'd like to add, Brian, to that.

Robert Stephen Barger: We're already seeing that moderate as we move into this next quarter and we're not projecting any major.

Brian J. Comstock: Shortfalls are moving forward in that business.

None: Thank you for that and for my second now that the North American manufacturing production rate and margin profile can be stabilizing with solid order recovery sequentially can you share some updated thoughts on what your ultimate margin range, you would expect to generate.

None: In our manufacturing with a mid cycle backdrop, and then from where we sit today. If orders are stable would you expect the higher or lower margin, maybe just directionally for fiscal 2025. Thank you.

None: Great question, Harrison I would say that if I look out into 2025, and we have stability in the kind of visibility that we have right now I would expect to be at the upper end of the range that we provided I know that the men and women that are working.

None: Specifically within our manufacturing organization as well as our commercial organization, we're always finding ways to improve.

None: Improve the throughput so that we can drop more of the revenue through some margin and to the bottom line.

Brian J. Comstock: No, I think you hit it perfectly, Justin, the seasonality typically is over two, two and a half quarters. We're already seeing that moderate as we move into this next quarter, and we're not projecting any major, you know, shortfalls moving forward in that business.

The next question isn't it.

None: Excuse me go ahead.

None: The next question is from Ken extra with Bank of America. Please go ahead.

None: Great.

Ken: Good luck Adrian and congrats on the team on building the backlog, but maybe if I can you.

Harrison Bower: Thank you for that. And for my second question, now that the North American manufacturing production rate and margin profile seem to be stabilizing with solid order recovery sequentially, can you share some updated thoughts on what your ultimate margin range you'd expect to generate in a manufacturing environment with a mid cycle backdrop? And then, from where we sit today, if orders are stable, would you expect a higher or lower margin, maybe just directionally, for fiscal 2025? Thank you.

Ken: You unpack that margin you're your multiple margin outlook, a little bit better I guess near term I know you just gave a long term 25, but given your low to mid teens outlook are you still expecting manufacturing margins to stay at double digits here for for the second half and then do.

Ken: Do you expect to see maintenance margins are I didn't quite get the answer there are you expecting them to return to double digits or maybe you can give you your thoughts on that.

And thank you can I hope I didn't misspeak, but we are not expecting low to mid teen margins, we're expecting mid teens margins would be an expectation that we will continue marching through this fiscal year on a solid trajectory and on a consolidated basis and on a consolidated basis yeah. Thank you Justin.

Lorie L. Tekorius: Great question, Harrison. I would say that, you know, if I looked out into 2025, and we had stability and the kind of visibility that we have right now, I would expect to be at the upper end of the range that we've provided. I know that the men and women that are working specifically within our manufacturing organization, as well as our commercial organization, are always finding ways to improve the throughput so that we can drop more of the revenue through to the margin.

Ken:

Ken: From a the manufacturer that'd be I'm, sorry is that maintenance services to business perspective, we do and as Brian said, we're taking a number of actions to think about how we're running that business. How we're thinking about how we schedule equipment into those shops too strained efficiencies as part of the re org.

Operator: The next question is... Excuse me, go ahead. The next question is from Ken Hoexter with Bank of America. Please go ahead.

Ken: <unk> of some of our activities and combining some of our operating resources around engineering.

Kenneth Scott Hoexter: Great

Lorie L. Tekorius: Great. Good luck to Adrian and congrats to the team on building the backlog. But maybe if I could, Lorie, unpack that margin, your multiple margin outlook a little bit better. I guess near-term, I know you just gave a long-term 25, but given your low to mid-teens outlook, are you still expecting manufacturing margins to stay at double digits here for the second half? And then do you expect to see maintenance margins? I didn't quite get the answer there. Are you expecting them to return to double digits? Or maybe you can give your thoughts on that?

Ken: Yeah.

Quality and things like that so that we can take the strengths that we have in our manufacturing operations and share those more broadly with our rail services group and by first it takes some of the strength of what we've been able to do in those repair shops and share those with our manufacturing facilities. So I would say, we do expect in the third quarter.

Ken: <unk> me.

Ken: Conservatives margin.

And we expect to continue on the overall path for consolidated March it's temporary and if I can just draw a firm line under your manufacturing question, Ken We do not anticipate manufacturing margins going backwards much less dropping back into the single digits. At this point on a on a gross margin basis just to be very clear about that thank you Joseph.

Lorie L. Tekorius: And thank you, Ken. I hope I didn't mispronounce, but we are not expecting low to mid-teen margins. We're expecting mid-teen margins with the expectation that we will continue marching through this fiscal year on a solid trajectory. And on a consolidated basis And on a consolidated basis? Yes. From the maintenance services business perspective, as Brian said, we are taking a number of actions to think about how we're running that business, how we think about how we schedule equipment into those shops to increase efficiencies as part of the reorganization of some of our activities and combining some of our operating resources around engineering, Quality, and things like that, so that we can take the strengths that we have in our manufacturing operations and share those more broadly with our rail services group So, I would say we do expect the Consolidated services margins and expect to continue on the overall path for consolidated margins to improve in the third quarter.

None: Very helpful.

And then Lori if I can revisit.

None: It was maybe Matt's first question on the ASP decline.

None: I guess, if I just look at the backlog total revenue per per ASP per car right and in terms of your total backlog at it fell as he mentioned is that I just want to revisit is that just a mix issue in terms of what you're selling versus <unk>.

None: Anything going on the interest I, just want to clarify that that one answer there.

None: So it's I'm, sorry, you were asking Laurie, but I have a hard time not talking.

None: In Asia.

[laughter] mix and then there is there is some as you as you're well aware, we do have the ability to escalate and D escalated Ron book costs on our backlog and so as there is some moderation on our input costs, primarily steel steel surcharge and whatnot.

None: That pricing comes down a little bit to the piece to really reiterate is that on a core pricing basis, the pricing that drives profitability and on lease rates that is being disciplined that is stable to up kind of across the various car types.

None: Alright Thats helpful. Oh go ahead sorry.

None: I said well said Justin.

Kenneth Scott Hoexter: And if I could just draw a firm line under your manufacturing question, Ken, we do not anticipate manufacturing margins going backwards, much less dropping back into the single digits at this point on a gross margin basis. Just to be very clear about that.

None: Great I appreciate your time and thoughts thanks, guys.

None: The next question is from Steve Barger with Keybanc capital markets. Please go ahead.

Robert Stephen Barger: Hey, Thanks, good morning.

Robert Stephen Barger: Looking at Slide 12, with the fleet Levered to 77% of book value do you expect incremental debt from here to primarily just sponge additions to the lease fleet at that ratio plus or minus.

Justin M. Roberts: Thank you, Justin.

Kenneth Scott Hoexter: Very helpful. And then, Lorie, if I can revisit, I think it was maybe Matt's first question on the ASP decline. You know, I guess if I just look at the backlog, total revenue per ASP per car, right, in terms of your total backlog, it fell, as you mentioned. Is that, I just want to revisit, is that just a mix issue in terms of what you're selling versus anything going on in the industry? I just want to clarify that one answer there.

Robert Stephen Barger: Yes.

Robert Stephen Barger: And it is lease fleet leveraged the primary metric that you're focused on going forward or is there a net debt to EBITDA target for the company.

Robert Stephen Barger: I'm just trying to think how you're changing your mindset to think about the balance sheet.

Well, so I would say that as we think about our lease fleet and the leverage associated with that as Brian had talked about we're very disciplined about what we're putting on our balance sheet and then we want to leverage it appropriately.

Justin M. Roberts: So it's, it's, sorry, you were asking Lori, but I have a hard time not talking.

Robert Stephen Barger: Locking in interest rate thinking about the term thinking about the conditions I think the team.

Unknown Executive: [inaudible]

Justin M. Roberts: Mixed, and then there is some, as you know, we do have the ability to escalate and de-escalate raw input costs on our backlog. And so as there is some moderation on our input costs, primarily steel steel surcharge, and whatnot, that pricing comes down a little bit, too. The piece to really reiterate is that on a core pricing basis, the pricing that drives profitability and on lease rates, That is being disciplined, that is

And it doesn't really.

Robert Stephen Barger: And being in the market at the right time, and having the right sort of flexibility and the types of debt that we put on our balance sheet.

Robert Stephen Barger: Bill.

Take into consideration the market as to what's going on at that point in time as to whats the right debt I think with the cash flow that will be generating from the leasing business as well as the margins in our other businesses, we would expect to be paying down some of our corporate recourse debt overtime.

Kenneth Scott Hoexter: Alright, that's helpful. Oh, go ahead, sir.

Lorie L. Tekorius: I said, well said, Justin.

Kenneth Scott Hoexter: Great, I appreciate your time and thoughts. Thanks guys.

Operator: ...

Operator: The next question is from Stephen Barger with KeyBank Capital Markets. Please go ahead.

Robert Stephen Barger: Okay.

Robert Stephen Barger: A couple more leasing questions.

Robert Stephen Barger: Slide 10, I think says average term is four two years what is that for recent renewals.

Robert Stephen Barger: Hey Dyches, good morning. Looking at slide 12, with the fleet levered to 77% of book value, do you expect incremental debt from here to primarily just fund additions to the lease fleet at that ratio, plus or minus?

None: It's actually I'm glad you know so well.

None: Most of the renewals are coming in.

Substantially longer we're seeing five to seven years on average that's what's bringing up.

Unknown Executive: Yes.

Unknown Executive: And is loose fleet leverage the primary metric that you're focused on going forward, or is there a net debt-to-EBITDA target for the company? I'm just trying to figure out how you're changing your mindset to think about the balance sheet.

None: As you look quarter over quarter, you'll notice that it brings it up but it takes a lot of renewals to move it incrementally.

None: Beyond the $4 two years, so but most of the renewals are kind of coming in at a five to seven year range.

Lorie L. Tekorius: Well, so I would say that as we think about our lease fleet and the leverage associated with that, as Brian has talked about, we're very disciplined about what we're putting on our balance sheet, and then we want to leverage it appropriately, locking in interest rates, thinking about the term, thinking about the conditions. I think the team has done a really good job of being in the market at the right time and having the right sort of flexibility in the types of Take into consideration the market as to what's going on at that point in time as to what's the right debt. I think with the cash flow that we'll be generating from the leasing business as well as the margins in our other businesses, we would expect to be paying down some of our corporate recourse debt over time.

Got it thanks, and I know the lease fleet is still relatively small but growing it is obviously a focused initiative for you do you anticipate putting out a lease renewal index similar to the L. P I or the S. L I D.

None: We were just talking about that the other day and trying to figure out what acronym we would come up with a yes.

None: Leading that but we don't have anything to unveil today.

None: Okay, great. Thank you.

None: Hey, Steve This is Justin real quick to answer the question I know you usually ask is we do expect the back half of the year to be stronger from a operating cash flow perspective, and then that will also generate some.

Justin: Free cash flow that we can deploy into delevering and other aspects of our business.

Robert Stephen Barger: Okay.

I appreciate you anticipating that for me.

Unknown Executive: A couple more leasing questions. Slide 10, I think, says the average term is 4.2 years. What is that for recent renewals?

Robert Stephen Barger: Well, that's good to hear I look forward to seeing that positive free cash flow. Thanks.

Unknown Executive: You know, so most of the renewals...

None: Definitely things Dave.

Brian J. Comstock: You know, substantially longer. We're seeing five to seven years on average. That's what's driving up the numbers. As you look quarter over quarter, you'll notice that it brings it up, but it takes a lot of renewals to move it incrementally, you know, beyond the 4.2 years. So, but most of the renewals are kind of

None: This concludes our question and answer session I would like to turn the conference back over to Lori to Korea's for any closing remarks.

Lorie L. Tekorius: Thank you Sir I appreciate everyone's time and attention I know, Jeff and I'll be speaking with some of you later today.

Lorie L. Tekorius: Thank you and we look forward to sharing progress in the future.

Robert Stephen Barger: Got it, thanks. And I know the lease fleet is still relatively small, but growing it is obviously a focus initiative for you. Do you anticipate putting out a lease renewal index similar to the LPI or the FLRD?

None: Thanks, everyone.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

None: Okay.

None: [music].

Lorie L. Tekorius: We were just talking about that the other day and trying to figure out what acronym we would come up with. Yes, we are creating that, but we don't have anything to unveil today.

Robert Stephen Barger: Okay, great. Thank you.

Justin M. Roberts: Hey, Steve, this is Justin real quick. To answer the question I know you usually ask, we do expect the back half of the year to be stronger from a operating cash flow perspective. And then that will also generate some free cash flow that we can deploy into de-levering and other aspects of our business.

Robert Stephen Barger: I appreciate you anticipating that for me. Well, and that's good to hear. I look forward to seeing that positive free cash flow.

Unknown Executive: Thanks, Dave.

Operator: All of us

Lorie L. Tekorius: This concludes our question and answer session. I would like to turn the conference back over to Lorie Tekorius for any closing remarks.

Lorie L. Tekorius: Thank you, sir. I appreciate everyone's time and attention. I know Justin will be speaking with some of you later today. Thank you, and we look forward to sharing progress in the future.

Operator: Thanks, everyone. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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