Q1 2025 Wabash National Corp Earnings Call
Okay.
Ian: Thank you for standing by my name is Ian and I will be your conference operator today.
Operator: Thank you for standing by.
Ian: My name is Ian, and I will be your conference operator today.
Ian: At this time, I would like to welcome everyone to the Wabash First Quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise.
Speaker Change: This time I would like to welcome everyone to the Wabash first quarter 'twenty 25 earnings call.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Ian: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad to enter the question queue. Once again, that is star followed by the number one. If you would like to withdraw your question, again, press star one. Thank you.
Speaker Change: After the Speakers' remarks, there will be a question and answer session.
Speaker Change: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad to enter the question queue. Once again that is star followed by the number one if you'd like to withdraw your question again press Star one thank you.
Ryan Reed: I would like to hand the call over to Ryan Reed, Vice President, Investor Relations. You may begin your comments. Thank you and good morning everyone. We appreciate you joining us on this call. With me today are Brent Yeagy, President and Chief Executive Officer, Pat Keslin, Chief Financial Officer, and Mike Pettit, Chief Growth Officer. Before we get started, please note this call is being recorded. I'd also like to point out that our earnings release, the slide presentation supplementing today's call, and any non-GAF reconciliations are available at ir.1wabash.com. Please refer to slide 2 in our earnings deck for the company's safe harbor disclosure addressing forward-looking statements.
Speaker Change: I would like to hand, the call over to Ryan Reed Vice President Investor Relations you May begin your conference.
Ryan Reed: Thank you and good morning, everyone. We appreciate you joining us on this call with me today are Brent <unk>, President and Chief Executive Officer and.
Speaker Change: Cephalin, Chief Financial Officer, and Mike Pettit, Chief growth Officer.
Ryan Reed: Before we get started please note this call is being recorded.
Ryan Reed: Also like to point out that our earnings release, the slide presentation supplementing today's call.
Ryan Reed: non-GAAP reconciliations are available at IR Dot one Wabash dot com.
Ryan Reed: Please refer to slide two in our earnings deck for the company's safe Harbor disclosure addressing forward looking statements I'll hand, it off not the breadth.
Brent Yeagy: I'll hand it off now to Brent. Thank you, Ryan. Let me start by level setting where we are in terms of the business environment. Compared to what we expected at the beginning of the year, there's no question that conditions have softened. We're seeing it across the board. Our customers are sharing that their own customers are delaying decision making, which is creating a cascading effect that slows activity across our business. As a result, third-party industry forecasts for 2025 have been steadily revised downward over the past several months, and we've seen recent confirmation during this earnings cycle, with many carriers reducing their CapEx estimates for the year.
Speaker Change: Thank you Ryan.
Speaker Change: Let me start by level setting, where we are in terms of the business environment compared to what we expected at the beginning of the year. There's no question that conditions have softened.
Speaker Change: Seeing it across the board customers are sharing that their own customers are delaying decision, making which is creating a cascading effect. This was activity across our business.
Speaker Change: As a result third party industry forecast for 2025 had been steadily revised downward over the past several months and we've seen recent confirmation during this earnings cycle with many carriers, reducing their capex estimates for the year.
Speaker Change: This isn't isolated to any one product or market, it's a broader macro driven slowdown and while the situations certainly presents a fresh set of challenges.
Brent Yeagy: This isn't isolated to any one product or market. It's a broader macro driven slowdown.
Brent Yeagy: And while the situation certainly presents a fresh set of challenge, In some ways, it's reinforcing the strategic importance of how we organized Wabash over the last few years. One of the key benefits of our work structure is that it allows us to be agile. While we're running our downturn playbook on transportation solutions to take costs out where necessary to align with near-term demand conditions, we're continuing to execute without distraction on growth opportunities within the parts and services side of the business, which achieve positive year-on-year revenue growth during the first quarter. We expect our sustained efforts to grow parts and services and strategically integrate these offerings across our equipment solutions portfolio to play a key role in helping us achieve greater balance over cyclicality as we move forward.
Speaker Change: Some ways, it's reinforcing the strategic importance of how we're organized Wabash over last few years.
Speaker Change: One of the key benefits of our org structure is that it allows us to be agile.
Speaker Change: Well, we're running our downturn playbook on transportation solutions to take costs out where necessary to align with near term demand conditions, we're continuing to execute without distraction on growth opportunities within the parts and services side of the business, which achieved positive year on year revenue growth during the first quarter.
Speaker Change: We expect our sustained efforts to grow parts and services and strategically integrate these offerings across our equipment solutions.
Speaker Change: Portfolio to play a key role in helping us achieve greater balance over cyclicality as we move forward.
Speaker Change: As I mentioned during a difficult quarter for equipment demand, we were able to grow revenue in our parts and service business I'd like to call out a couple of highlights from the quarter.
Brent Yeagy: As I mentioned during a difficult quarter for equipment demand, we were able to grow revenue in our parts and service business.
Brent Yeagy: I'd like to call out a couple of highlights from the quarter. First off, I'd like to congratulate our UpFit team for their efforts to lead a doubling in year-over-year UpFit volumes in Q1. Another exciting development within Parts and Services during the first quarter is the continued expansion of our Trailers as a Service initiative. Mike will give more color on these topics in a few minutes, but these are both accomplishments that give us a sense of Parts and Services' ability to contribute enhanced stability within our overall portfolio as we continue to scale our offer.
Speaker Change: First off I'd like to congratulate our update team for their efforts to lead a doubling year over year a bit volumes in Q1.
Speaker Change: Another exciting development within parts and services during the first quarter is the continued expansion of our trailers as a service initiatives, Mike will give more color on these topics in a few minutes with either both accomplishments to give us a sense of parts and services ability to contribute to enhanced stability within our overall portfolio as we continue to scale our offerings.
Speaker Change: During the first quarter, our team I appreciated the opportunity to connect with customers at a couple of important industry events PMC and workshop week, both provided valuable opportunities to reinforce <unk> position as a technology aboard leader.
Brent Yeagy: During the first quarter, our team appreciated the opportunity to connect with customers at a couple of important industry events.
Brent Yeagy: TMC, and WorkTruck. both provided valuable opportunities to reinforce Wabash's position as a technology forward leader. At TMC, we connected with industry professionals to show off our capabilities and innovation. We showcased our new, more efficient dry van manufacturing capacity, which increases line rates while driving enhanced consistency and build quality. We also use the event to highlight our 40-year history of innovation and partnership. At MTEA's Work Truck Week, we showcase our AccuTherm refrigerated truck body with EcoNex technology. These units deliver 25% better thermal efficiency compared to conventional refrigerated products, which translates directly to lower fuel costs and reduced maintenance.
Speaker Change: At AMC, we connected with industry professionals to show off our capabilities and innovation.
Speaker Change: We showcased our new more efficient dry van manufacturing capacity, which increases line rates, while driving enhanced consistency and build quality.
Speaker Change: We also use the event to highlight our 40 year history of innovation and partnership.
Speaker Change: At <unk> work truck week, we showcase our accu refrigerated truck body with Eco next technology.
Speaker Change: Units delivered 25% better thermal efficiency compared to conventional refrigerated products, which translates directly to lower fuel costs and reduced maintenance.
Brent Yeagy: We also promoted a ready to mount program, which provides our Wabash competitive advantage within the truck buy space by allowing customers to get pre-configured fleet equipment faster than ever before.
Speaker Change: We also promoted up ready to Mount program, which provides our Wabash competitive advantage within the truck body space by allowing customers to get pre configured fleet equipment faster than ever before.
Brent Yeagy: At the end of the day, the time we invest in building and strengthening relationships during down years like this will pay dividends as the demand environment recovers. even in the face of a transportation market characterized by near-term unprecedented uncertainty. We find that customers at these recent events remain remarkably upbeat and resilient. Their optimism about the future provided an interesting contrast to the current softness and equipment.
Speaker Change: At the end of the day the time, we invest in building and strengthening relationships during down years like this will pay dividends as the demand environment recovers.
Speaker Change: Even in the face of a transportation market characterized by near term unprecedented uncertainty we find that customers at these recent events.
Speaker Change: Remarkably upbeat resilient.
Speaker Change: Their optimism about the future provided an interesting contrast to the current softness in equipment demand and that contrasts or as a reminder, that sentiment often leads to fundamentals.
Brent Yeagy: And that contrast serves as a reminder that sentiment often leads to fundamentals.
Speaker Change: Let me pivot to tariffs now.
Brent Yeagy: Let me pivot to tariffs now. This has been obviously a frequent market topic with everyone from suppliers to customers to investors alike. So allow me to unpack how we think about these both in the short term and the longer term implications. Our exposure is very limited from a manufacturing perspective. Outside of one small tank trailer facility in Mexico, our manufacturing footprint is distributed entirely throughout the United States. Additionally, about 95% of our materials are sourced domestically. That proximity not only shields us from potential volatility and trade barriers, but also allows us to manufacture with speed and reliability.
Speaker Change: This has been obviously, a franklin market topic with everyone from suppliers to customers to investors alike. So allow me to unpack how we think about these both in the short term and the longer term implications.
Speaker Change: Our exposure is very limited from a manufacturing perspective.
Speaker Change: Side of one small tank trailer facility in Mexico, our manufacturing footprint and distributed entirely throughout the United States. Additionally, about 95% of our materials are sourced domestically that proximity not only shields us from potential volatility and trade barriers, but also allows us to manufacturer with speed and reliability.
Brent Yeagy: That said, we're not completely immune from secondary impacts. Tariffs on raw materials like steel and aluminum can create pricing pressure, even from domestic suppliers. And more impactfully, uncertainty tends to inhibit our customers ability to deploy capital for equipment. In our recent experience, companies aren't posturing to make speculative bets in this environment. There's an increased willingness to preserve cash until we have greater clarity.
Speaker Change: That said, we're not completely immune from secondary impacts tariffs on raw materials like steel and aluminum can create pricing pressure, even from domestic suppliers and more impactful eight uncertainty tends to inhibit our customer's ability to deploy capital for equipment.
Speaker Change: And our recent experience companies arent posturing to make speculative bets in this environment. There is an increased willingness to preserve cash until we have greater clarity.
Brent Yeagy: Still, we see a bright spot. It seems clear that the current administration has a goal of revitalization of the U.S. manufacturing sector. That would be a significant structural tailwind for us because manufacturing carries an outsized impact on freight activity. More domestic production means a multiplier on freight moves, more trailers, and more demand for exactly the kinds of solutions Wabash offers. Because we've been consistent in calling out the long-term benefits of nearshoring on our business, it's important to draw a comparison between nearshoring and revitalization of American manufacturing that has recently become a part of the discussion.
Speaker Change: Still we see a bright spot it seems clear that the current administration has a goal of revitalization of the U S manufacturing sector.
Speaker Change: That would be a significant structural tailwind for us because manufacturing carries an outsized impact on freight activity.
Speaker Change: More domestic production means a multiplier on freight moves more trailers and more demand for exactly the kinds of solutions while batch offers.
Speaker Change: <unk> been consistent in calling out the long term benefits of near shoring on our business. It is important to draw a comparison between near shoring and revitalization of American manufacturing that has recently become a part of the discussion on the surface. They may appear to be somewhat concepts, but the implications different meaningful ways.
Brent Yeagy: On the surface, they may appear to be similar concepts, but the implications differ in meaningful ways. Nearshoring suggests a growing role for Mexico in a broader North American manufacturing strategy. What we're hearing from the current administration, however, indicates a major emphasis on rebuilding domestic U.S. manufacturing capacity. That distinction matters. A U.S.-focused manufacturing resurgence changes logistics patterns. Supply Chain Dynamics and Brake Flows in a way that more directly impacts our customers and ultimately demand for trailers and equipment solutions.
Speaker Change: Near shoring suggests a growing role for Mexico in the broader North American manufacturing strategy.
Speaker Change: What we're hearing from the current administration, however indicates a major emphasis on rebuilding domestic U S manufacturing capacity that distinction matters.
Speaker Change: A U S focused manufacturing resurgence changes logistics patterns supply chain dynamics and freight flows in a way that more directly impacts our customers and ultimately demand for trailers and equipment solutions.
Speaker Change: Now continue with initiatives from the current administration on a regulatory front. The EPA recently announced a review of our 2027 phase III emission standards for heavy trucks. This initiative is part of a broader reassessment of regulations generally viewed as burdensome. While these changes targeted a reduction in Cotwo shins.
Brent Yeagy: Now, continue with initiatives from the current administration. On the regulatory front, the EPA recently announced a review of their 2027 phase three emission standards for heavy trucks. This initiative is part of a broader reassessment of regulations generally viewed as burdensome. While these changes targeted a reduction in CO2 emissions, they did so at the expense of a significant increase in truck cost, which has led to a short-term prioritization of truck refreshment relative to trailer. I believe it's a consensus view that assuming the implementation of these standards, some diversion of CapEx is set to act as a headwind for trailer demand in 2025 and 2026.
Speaker Change: Did so at the expense of a significant increase in truck cost, which has led to a short term prioritization of truck refreshment relative to trailers I believe it's a consensus view that assuming the implementation of these standards. Some diversion of Capex is set to act as a headwind for trailer demand in 'twenty, five and 26, while no decisions regarding <unk>.
Brent Yeagy: While no decisions regarding the review has been announced, we'll continue to monitor the situation as removal of these regulations would be a near-term positive for trailer demand.
Speaker Change: Our review has been announced will continue to monitor the situation as a removal of these regulations will be a near term positive for trailer demand.
Speaker Change: I also want to briefly touch on the ongoing legal matters stemming from the 2019 motor vehicle accident.
Brent Yeagy: I also want to briefly touch on the ongoing legal matter stemming from the 2019 Motor Vehicle Accident. As many of you know, a jury in St. Louis originally returned a verdict of $462 million in damages against Wabash. But in March, the trial court amended the judgment down to $119.5 million. We stand firmly behind the safety and integrity of our products and remain confident in our ultimate legal position as such. We filed notice of appeal and obtained the necessary appeal bond in April as we continue to pursue all available legal options to achieve a more reasonable outcome.
Speaker Change: As many of you know a jewelry in St. Louis originally return a verdict of $462 million in damages against Wabash, but March the trial board amended the judgment down to $119 $5 million, we stand firmly behind the safety and integrity of our products and remain confident in our ultimate legal position as such.
Speaker Change: We filed notice of appeal and obtained the necessary appeal bond in April as we continue to pursue all available legal options to achieve a more reasonable outcome.
Speaker Change: Turning back to market conditions, and our outlook in terms of demand we've seen a notable shift in customer behavior recently that coincides with the step up and uncertainty created by tariffs.
Brent Yeagy: Turning back to market conditions and our outlook in terms of demand, we've seen a notable shift in customer behavior recently that coincides with the step up in uncertainty created by tariffs. Although there's a lot of noise in the environment right now, I think it's fair to say that the signal is clear.
Speaker Change: Although there is a lot of noise in the environment right now I think it's fair to say that the signal is clear the trailer industry has already experienced eight consecutive quarters of contraction in orders. Our total backlog ending Q1 was approximately $1 2 billion.
Brent Yeagy: The trailer industry has already experienced eight consecutive quarters of contraction and orders. Our total backlog ending Q1 was approximately $1.2 billion, and while this showed a slight sequential step-up, like most data through March, we believe there is a level of retrenchment happening now, given the uncertainty being generated by tariffs. Forecast for trailer volumes this year indicates shipments will undercut basic replacement demand, resulting in the aging of fleets across the industry. The last time we saw this dynamic play out was in 2020, when pent-up demand built and was later unleashed as the freight market recovered. There are similarities between the two time periods where an external shock causes capex retrenchment that results in a building of pent-up demand.
Speaker Change: And while this showed a slight sequential step up like most data through March. We believe there is a level of retrenchment happening now given the uncertainty being generated by tariffs.
Speaker Change: Forecast for trailer volumes. This year in the case shipments will undercut basic replacement demand, resulting in the aging of fleets across the industry.
Speaker Change: Last time, we saw this dynamic play out was in 2020, when pent up demand built and was later unleashed as the freight market recovered there are similarities between the two time periods, where an external shock causes capex retrenchment that results in a building of pent up demand.
Speaker Change: For now we've undertaken a reassessment of 2025 and now expect the midpoint of $1 $8 billion in revenue and negative 60 of adjusted EPS.
Brent Yeagy: For now, we've undertaken a reassessment of 2025 and now expect the midpoints of $1.8 billion in revenue. and negative 60 cents of adjusted EPS.
Mike: I'll now turn the call over to Mike for additional comments.
Michael Pettit: And I'll turn the call over to Mike for additional comments. Thanks, Brent. I'd like to take a moment to expand on how we're continuing to move Wabash toward being a more durable, resilient and higher margin Central to that work is our strategic initiative to grow our parts and services revenue, generating greater recurring revenue to reduce the company's exposure to cyclicality. Our parts and services offerings sit at the intersection of seamlessly serving our customers, our first-to-final mile portfolio, and connected services that deliver lifecycle solutions. During the quarter, we were able to demonstrate tangible progress in all these areas through organic and strategic growth, coupled with some nice technological acceleration.
Mike: Thanks, Brent I'd like to take a moment to expand on how we're continuing to move wabash toward being a more durable resilient and higher margin business central to that work is our strategic initiative to grow our parts and services revenue generating greater recurring revenue to reduce the company's exposure to cyclicality, our personal services offerings sit at the intersection.
Section of seamlessly serving our customers our first to final mile portfolio and connected services that deliver lifecycle solutions during the quarter, we were able to demonstrate tangible progress in all of these areas through organic and strategic growth coupled with a nice technological accelerators I'd like to personally thank Dave Hill, and as parts and services team.
Michael Pettit: I'd like to personally thank Dave Hill and his Parts and Services team for their Q1 sequential and year-over-year growth in the face of a very challenging industry and macroeconomic backdrop. One area where we've seen outside growth is in our upfit values. In the first quarter, we doubled the volume of units moving through this business, which includes shelving systems, lift gates, partitions, roof racks, thermal solutions, and most recently, ready-to-mount trucking. These offerings allow customers to tailor their equipment to their specific operational needs and are growing competency in this space is allowing customers to increasingly see Wabash, not just as an equipment provider, but as a solutions partner.
Mike: For the Q1 sequential and year over year growth in the face of a very challenging industry and macroeconomic backdrop.
Mike: One area, where we've seen outside growth is in our update value stream in the first quarter, we doubled the volume of units moving through this business, which includes shelving systems lift gates partitions roof racks thermal solutions and most recently ready to Mount truck bodies. These offerings allow customers to tailor their equipment to their specific opera.
Mike: Racial needs and our growing competency in this space is allowing customers to increasingly see Wabash not just as an equipment provider, but as a solutions partner.
Michael Pettit: As demand for up-to-date solutions grows, Wabash is building a national network that delivers faster turnaround times and brings deep industry expertise to customers. With the support of our National Dealer Network, our momentum is being driven by an expanding footprint of parts and services locations, underscored by a new Chicagoland up-pit location opening in Q2 of this year, and an Atlanta location opening in the second half of 2025. We recognize that potential for meaningful value creation sits at the intersection of where we can wrap services around our industry-leading equipment portfolio, as we demonstrated in Q1, Upfit Services is a good example.
Mike: Demand for <unk> solutions grows Wabash is building a national network that delivers faster turnaround times and brings deep industry expertise to customers what's.
Mike: With the support of our National dealer network, our momentum is being driven by an expanding footprint of parts and services locations underscored by new Chicago land location opening in Q2 of this year and in Atlanta location opening in the second half of 2025.
Mike: We recognize that potential for meaningful value creation system.
Mike: The intersection of where we can wrap services around our industry, leading equipment portfolio as we demonstrated in Q1 update services is a good example of this a.
Michael Pettit: and leveraging our integration skills to coordinate between our equipment, multiple suppliers and value added components and the end customer.
Mike: Leveraging our integration skills to coordinate with great our equipment multiple suppliers and value added components and the end customer or update service as a microcosm of our broader parts and services goals.
Michael Pettit: Our upfit service is a microcosm of our broader parts and services goal.
Michael Pettit: Turning now to Trailers-as-a-Service. We're excited to have added customers to our offering in Q1. Shippers, carriers, and brokers are seeing the value of using our TAS solution to access capacity on demand across the US. They're not just gaining trailer units, but a comprehensive bundle that includes maintenance, repair, telematics, and national uptime support. It's both a capital light and capital efficient way for them to expand their network while maintaining flexibility. We have over 1000 trailers deployed into our fleet and are increasing our operational capabilities by the We're not just expanding our capabilities organically.
Mike: Turning now to trailers as a service we're excited to have added customers to our offering in Q1 shippers carriers and brokers are seeing the value of using our tap solution to access capacity on demand across the U S.
Mike: They are not just gaining trailer units, but a comprehensive bundle that includes maintenance repair telematics and national uptime support it's both a capital light and capital efficient way for them to expand their network, while maintaining flexibility.
Mike: We have over 1000 trailers deployed into our fleet and are increasing our operational capabilities by the day.
Mike: And we're not just expanding our capabilities organically with our acquisition of trailer Hawk, we're working to embed cargo security technology directly into our <unk> platform and ultimately across our product portfolio.
Michael Pettit: With our acquisition of Trailerhawk, we're working to embed cargo security technology directly into our task platform and ultimately across our product portfolio. This allows customers to monitor freight conditions in real time, manage trailer access digitally, and validate the entire custody chain from origin to delivery. These aren't just bells and whistles, they're mission-critical tools in today's supply chain where cargo theft is a significant and growing problem that needs to be addressed.
Mike: This allows customers to monitor for a conditions in real time manage trailer access digitally and validate the entire custody chain from origin to delivery.
These aren't just bells and vessels that are mission critical tools in today's supply chain, where cargoes that is a significant and growing problem that needs to be addressed.
Michael Pettit: We're also fortunate to have Brett Suma, TrailerHawk's founder, join us as part of the acquisition. Having spent years in numerous logistics roles, including as the founder of Loadsmith, a freight brokerage that was an early task customer, his experience, as well as that of his team, and insight will be instrumental as we scale this office.
Mike: We're also fortunate that Brett Simba trailer Hawks founder join US as part of the acquisition having spent years in numerous logistics roles, including as a founder of load Smith, a freight brokerage that wasn't early task customer experience as well as that of his team and insight will be instrumental as we scale this offering.
Mike: We're also advancing our capabilities through a partnership with up labs, a pioneering corporate venture studio or collaborate to build two high impact startups that will simultaneously create value within Wabash is operations.
Michael Pettit: We're also advancing our capabilities through a partnership with Uplabs, a pioneering corporate venture studio. We're collaborating to build two high impact startups that will simultaneously create value within Wabash's operations. The first is an AI-powered equipment configuration tool that simplifies how customers choose equipment specifications and powerfully enables Wabash to execute faster and more efficiently. Instead of a slow, manual process, users will be able to generate real-time proposals that clearly layout trade-offs in cost, time, and performance. Wabash keeps the customer at the center of how we structure our organization, and we expect this tool to enhance our customers' experience and continue to elevate Wabash's ease of doing business.
Mike: The first is an AI powered equipment configuration tool that simplifies how customers choose equipment specifications and powerfully enables wabash to execute faster and more efficiently.
Mike: Instead of a slow manual process users will be able to generate real type proposals that clearly layout tradeoffs in cost time and performance.
Speaker Change: <unk> keeps the customer at the center of how we structure our organization and we expect this tool to enhance our customers' experience and continue to elevate Wabash is ease of doing business.
Speaker Change: The second venture is focused on parts intelligence. This tool uses predictive analytics to optimize inventory levels through the channel ensuring the right part is in the right place at the right time, it helps reduce downtime improve customer satisfaction and eliminate excess capital tied up in part stock. This enables.
Michael Pettit: The second venture is focused on parts intelligence. This tool uses predictive analytics to optimize inventory levels through the channel, ensuring the right part is in the right place at the right time. It helps reduce downtime, improve customer satisfaction, and eliminate excess capital tied up in parts stock. This enables breakthrough ability to meet customer demand across our aftermarket, our supply chain, and our distribution operations. Together, these two initiatives represent a big step forward in how we serve our customers and enable our dealers and service partner network.
Speaker Change: Breakthrough ability to meet customer demand across our aftermarket our supply chain and our distribution operations.
Speaker Change: Together these two initiatives represent a big step forward in how we serve our customers and enable our dealers and service partner network.
Speaker Change: 2025 of the year, we will show the full breadth of capabilities and growth potential within parts and services. So whether it's through internal initiatives partnerships or acquisitions. Our focus is clear we're building parts of the services capabilities that deliver for our customers regardless of what's happening in the broader economy.
Michael Pettit: 2025 is the year we will show the full breadth of capabilities and growth potential within parts and services. So, whether it's through internal initiatives, partnerships, or acquisitions, our focus is clear. We're building parts and services capabilities that deliver for our customers, regardless of what's happening in the broader economy. Surrounding our industry-leading equipment with a growing set of capabilities and offerings is a model that brings value, scale, and enhances the power of our portfolio.
Speaker Change: Surrounding our industry, leading equipment with a growing set of capabilities and offerings as a model that brings value scale and enhances the power of our portfolio and we're just getting started.
Michael Pettit: And we're just getting started.
Patrick Keslin: With that, I'll hand it over to Pat for his comment. Thanks, Mike. Beginning with the review of our quarterly financial results, in the first quarter, our consolidated revenue was $381 million. During the quarter, we shipped approximately 6,290 new trailers and 3,000 truck bodies. First quarter shipments were below our prior expectations and resulted in a revenue shortfall of about $55 million, while the weaker than anticipated volumes resulted in less fixed cost absorption, leading to lower than expected gross margins of 5% and adjusted operating margins of negative 7.2% during the quarter. In the first quarter, adjusted EBITDA was negative $9 million or negative 2.4% of sales.
Pat: With that I'll hand, it over to Pat for his comments.
Pat: Thanks, Mike beginning with a review of our quarterly financial results in the first quarter. Our consolidated revenue was $381 million during the quarter, we shipped approximately 6290, new trailers and 3000 truck bodies.
Pat: First quarter shipments were below our prior expectations and resulted in a revenue shortfall of about $55 million, while the weaker than anticipated volumes resulted in less fixed cost absorption leading to lower than expected gross margins of 5% and adjusted operating margins of negative seven 2%.
Pat: During the quarter and the first quarter adjusted EBITDA was negative $9 million or a negative two 4% of sales finally for the quarter. Adjusted net income attributable to common stockholders was negative $24 8 million.
Patrick Keslin: Finally, for the quarter, adjusted net income attributable to common stockholders was negative 24.8 million or negative 58 cents per diluted share. Moving on to our reporting segments, transportation solutions generated revenue of $347 million and operating loss of negative $10 million. Overall, demand did not fill in as expected in some of our equipment businesses that experienced quick turnarounds from order to shipment, leaving us overexposed to labor costs in those areas during the quarter. We have taken action to right-size direct labor and production support costs going forward.
Pat: Our negative <unk> 58 per diluted share.
Pat: Moving on to our reporting segments transportation solutions generated revenue of $347 million and an operating loss of negative $10 million overall.
Pat: Overall demand did not fill in as expected and some of our equipment businesses that experienced quick turnarounds from order to shipment, leaving us overexposed to labor costs in those areas. During the quarter, we have taken action to right size direct labor and production support costs going forward.
Patrick Keslin: Parts and Services generated revenue of $52 million and operating income of $6.9 million. While parts and services is certainly less cyclical, it's also not immune from freight market conditions. So we view the year-over-year revenue growth in this segment as a particularly positive sign. year-to-date operating cash flow was flat, with sequential working capital trends in Q1 being incrementally helpful to operating cash, driven primarily by widening out of accounts payable during the quarter. Additionally, the increase in inventory experienced during the first quarter was due to a gap between equipment production and shipments during the quarter. Regarding our balance sheet, our liquidity, which comprises both cash and available borrowings, was $310 million as of March 31.
Pat: Parts and services generated revenue of 52 million and operating income of $6 9 million.
Pat: While parts and services is certainly less cyclical. It's also not immune from freight market conditions. So we view the year over year revenue growth in this segment as a particularly positive sign.
Pat: Year to date operating cash flow was flat was sequential working capital trends in Q1 being incrementally helpful to operating cash driven primarily by a widening out of accounts payable during the quarter.
Pat: Additionally, the increase in inventory experienced during the first quarter was due to a gap between equipment production and shipments during the quarter.
Pat: Regarding our balance sheet, our liquidity, which comprises both cash and available borrowings was $310 million as of March 31.
Patrick Keslin: We finished Q1 with a net debt leverage ratio of 3.2 times.
Pat: We finished Q1 with a net debt leverage ratio of three two times.
Patrick Keslin: On capital allocation during the first quarter, we directed $9 million to traditional CapEx, invested $20.1 million in revenue-generating assets to support our Trailers as a Service initiative, utilized $13.7 million to repurchase shares, and returned $3.9 million to shareholders via our quarterly dividend. Our capital allocation priorities continue to focus on capital expenditure above and beyond our annual maintenance cap expense of $20 to $25 million in order to support our organic growth initiative. We are committed to maintaining our dividend, and we will continue to evaluate opportunities for share repurchase alongside of bolt-on M&A.
Pat: On capital allocation during the first quarter, we directed 9 million to traditional Capex invested $20 1 million in revenue generating assets to support our trailers as a service initiative.
Pat: Utilized $13 7 million to repurchase shares and returned $3 $9 million to shareholders via our quarterly dividend.
Pat: Our capital allocation priorities continue to focus on our capital expenditure above and beyond our annual maintenance capex spend of $20 million to $25 million in order to support our organic growth initiatives. We are committed to maintaining our dividend and we will continue to evaluate opportunities for.
Pat: Share repurchase alongside of bolt on M&A.
Patrick Keslin: I'll provide a bit more on our capital allocation outlook, more specific to 2025, in a few minutes.
Pat: I'll provide a bit more on our capital allocation outlook more specific to 2025 in a few minutes.
Patrick Keslin: Moving on to our guidance for 2025, we are reducing our revenue outlook to approximately $1.8 billion and EPS to a range of negative 85 cents to negative 35. From previous midpoints, this represents a reduction of roughly $200 million in revenue. and $1.55 of EPS.
Pat: Moving on to our guidance for 2025, we are reducing our revenue outlook to approximately $1 8 billion and EPS to a range of negative 85 to negative <unk> 35.
Pat: From previous mid point this represents a reduction of roughly $200 million in revenue.
Speaker Change: And $1 55 of EPS as Brent mentioned the level of tariff related uncertainty in the business environment has been a constraint on our customers' capital expenditure plans in the short term and we are updating our guidance to fully read through the impact of this heightened uncertainty on our financial outlook.
Patrick Keslin: As Brent mentioned, the level of tariff-related uncertainty in the business environment has been a constraint on our customer's capital expenditure plans in the short term. And we're updating our guidance to fully read through the impact of this heightened uncertainty on our financial outlook. But more plainly, we have not seen the level of order flow we had previously anticipated and given prevailing uncertainty combined with the importance of seasonal timing to annual order flows, we believe it's prudent to adjust our outlook accordingly. The most significant changes from our prior outlook come from a reduction in volumes within transportation solutions flowing through to a decrease in gross profit equivalent to $1.70 in EPS versus our prior guidance.
Speaker Change: But more plainly we have not seen the level of order flow, we had previously anticipated and given prevailing uncertainty combined with the importance of seasonal timing to annual order flows. We believe it's prudent to adjust our outlook accordingly.
Speaker Change: The most significant changes from our prior outlook come from a reduction in volumes within transportation solutions flowing through to a decrease in gross profit equivalent to $1 70 in EPS versus our prior guidance. This is partially offset by cost containment actions taken within.
Patrick Keslin: This is partially offset by cost containment actions taken within SG&A that recoup approximately 15 cents of EPS. As I mentioned, the weakness in demand flow through during the first quarter resulted in a higher cost structure, an issue that has been addressed. We believe that the organization is now better situated to manage through the remainder of 2025, and we do not anticipate the weakness seen in first quarter financial performance. to reoccur without significant macro degradation.
Speaker Change: SG&A that recoup approximately 15 cents of EPS.
Speaker Change: As I mentioned the weakness in demand flow through during the first quarter resulted in a higher cost structure issue that has been addressed we believe that the organization is now better situated to manage through the remainder of 2025, and we do not anticipate the weakness seen in first quarter financial.
Speaker Change: <unk> to reoccur without significant macro degradation.
Patrick Keslin: Our updated guidance implies second quarter revenue of $420 million to $460 million and EPS of minus 25 cents to minus 35 cents. This guidance implies modestly positive EPS during the second half of the year, as we anticipate volumes to stabilize at lower levels paired with a right size cost structure.
Speaker Change: Our updated guidance implies second quarter revenue of $420 million to $460 million and EPS of minus <unk> 25 to minus 35.
Speaker Change: This guidance implies modestly positive EPS during the second half of the year as we anticipate volumes to stabilize at lower levels paired with a right sized cost structure.
Patrick Keslin: Moving on to capital deployment expectations for 2025, we continue to anticipate traditional capital investment to be between 50 and 60 million. That said, given the heightened uncertainty in 2025, our capital expenditure plans are flexible. While it would not be our preference, we do have room to bring down capital outlays if the outlook dictates. The same goes for the rest of our capital allocation priorities. I would say that generally, we do have quite a bit of flexibility with regard to how we allocate capital in 2025, depending on how market conditions evolve.
Speaker Change: Moving on to capital deployment expectations for 2025, we continue to anticipate traditional capital investment to be between 50 and $60 million that said given the heightened uncertainty in 2025, our capital expenditure plans are flexible while it would not be our preference we do.
Speaker Change: Have room to bring down capital outlays, if the outlook dictates.
Speaker Change: The same goes for the rest of our capital allocation priorities.
Speaker Change: I would say that generally we do have quite a bit of flexibility with regard to how we allocate capital in 2025, depending on how market conditions evolve.
Speaker Change: While 2025 is shaping up to be a more difficult year than any one assumed during our last earnings call. We have been through cycle troughs before and we're taking the necessary actions to reduce cost and we structure our liquidity position to be able to withstand these experiences. We've also seen what <unk>.
Patrick Keslin: While 2025 is shaping up to be a more difficult year than anyone assumed during our last earnings call, we've been through cycle troughs before, and we're taking the necessary actions to reduce costs, and we structure our liquidity position to be able to withstand these experiences. We've also seen what follows cycle trough, which is typically an upcycle that exceeds expectations, and we will be ready to capitalize on this once tariff uncertainty eventually clears way for freight markets to improve, and more importantly, businesses to regain the necessary level of clarity to increase capital investment.
Speaker Change: Close cycle trough, which is typically an up cycle that exceeds expectations and we will be ready to capitalize on this once tariff uncertainty eventually clears way for freight markets to improve and more importantly businesses to regain the necessary level of clarity to increase capital.
Speaker Change: Investments.
Ian: I'll now turn the call back to the operator, and we'll open it up for questions. Thank. This time I would like to remind everybody that in order to ask a question, please press star followed by the number one on your telephone keypad to enter the question queue. Once again, that is star followed by the number one.
Speaker Change: I'll now turn the call back to the operator, and we'll open it up for questions.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: At this time I would like to remind everybody that in order to ask a question. Please press star followed by the number one on your telephone keypad to enter the question queue. Once again that is star followed by the number one.
Michael Shlisky: Our first question comes from the line of Mike Shlisky with DA Davidson, your line is open. Good afternoon and thanks for taking my questions here. So, so you're updated for your outlook. seems to imply Director Mel Martens is about 75%. And when I look back to previous downturns prior to the pandemic, you know, things were kind of similar back then. I mean, you, there's now an EPS loss coming up here in, here in 2025. And I had thought you had made quite a few strides.
Speaker Change: Our first question comes from the line of Mike <unk> with D. A Davidson your line is opened.
Mike: Good afternoon, and thanks for taking my questions here.
Speaker Change: Hey, Bob.
Speaker Change: Yeah.
Speaker Change: So so your updated full year outlook.
Speaker Change: Two implied decremental margins of about 75%.
Speaker Change: And when I look back to previous downturns prior to the pandemic.
Speaker Change: So kind of similar.
Speaker Change: There's now an EPS loss coming up here in 2020, I thought you had made quite a few strides.
Patrick Keslin: Since those last down cycles to avoid such a big decline in the EPS, I'm kind of just curious if you had any problems or issues with purchasing steel, pricing of steel, or anything else that's kind of throwing off the margin profile very temporarily here other than trailer volume. Yeah, so we'll have to reconcile those technical margins with you. Mike, we don't quite have that that big of a drop. But as it pertains to your specific question, all of the all of the pricing pressure around commodities, is built into our full year guide, as well as the price that we're going to see in our backlog right now from the end sale.
Speaker Change: Since those last down cycles to avoid.
Speaker Change: Such a big decline in the EPS.
Just curious if you had any problems or issues with it.
Speaker Change: Purchasing steel pricing and steel or anything else kind of throwing off the margin profile very temporarily here other than.
Speaker Change: Trailer volumes.
Speaker Change: Yes.
Speaker Change: So well have to reconcile those decremental margins with you Mike.
Speaker Change: We don't quite have that big of a drop but as it pertains to your specific question.
Speaker Change: All of the all of the pricing.
Speaker Change: Pressure around commodities.
Speaker Change: Built into our full year guide as well as the price that we're going to see in our <unk>.
Speaker Change: <unk> right now.
Speaker Change: The <unk> sale, so I wouldn't I wouldn't say that there we expect a.
Patrick Keslin: So I wouldn't say that we expect an oversized reduction in our profitability. Certainly over the past three quarters from the first half of 2024, we've seen some pricing pressure relative to that period. But as it plays out for the rest of the year, we should see Q2 through Q4 being in a similar position to what we saw in the first quarter in terms of price and profitability. And I think just in the quarter we reported on, one of the issues is we had aspects of our business that were still in the end of February, beginning of March in an expansion mode with still receiving feedback post-tariff, call it saber rattling, that we're still moving forward in that direction from a customer standpoint.
Speaker Change: Oversized reduction in our profitability.
Speaker Change: Certainly over the past.
Speaker Change: Three quarters from the first half of 2024, we've seen some some pricing pressure relative to that period.
Speaker Change: But as it as it plays out for the rest of the year, we should see we should see Q2 through Q4 being in a similar position to what we saw in the first quarter in terms of price and profitability.
Speaker Change: I think just in the quarter, we reported on.
One of the issues is the.
Speaker Change: Had we had aspects of our business that we're still in the.
Speaker Change: End of February beginning of March in expansion mode.
Speaker Change: With still receiving feedback post tariff call at Sabre rattling that we're still moving forward in that direction from a customer standpoint.
Patrick Keslin: And that precipitously dropped over the last three to four weeks. really probably by the mid-March timeframe was starting to come out. And so there's a level of labor imbalance that was created very quickly both in truck bodies and in vans that had a hangover. through the balance of the quarter.
Speaker Change: And that is that precipitously dropped over the last three to four weeks.
Speaker Change: Really probably by the mid March timeframe were starting to come out.
Speaker Change: So there is a level of labor imbalance that was created very quickly both truck bodies and vans.
Speaker Change: That had a hangover.
Speaker Change: Through the balance of the quarter.
Michael Shlisky: That's less about what structural changes we've made and much more about a short period of time where a substantial amount of labor was ineffective and had to be quickly right-sized with changing market dynamics. Okay, okay. Thanks for that, Cutler.
Speaker Change: That's less about what structural changes, we've made and much more about a short period of time, where a substantial amount of labor was.
Speaker Change: Ineffective and had to be quickly right sized with changing market dynamics.
Speaker Change: Okay, Okay. Thanks for that color.
Patrick Keslin: I also want to just ask about parts and parts and service as well. Concerned about new Yeah, they haven't hasn't gone up, Mike. But what we're what we are really excited about is the fact that we're able to maintain what that implied level of growth was in parts and services, even though we've seen some weakness in the in the OE side of the business. And that's what we've always thought could happen. And we're seeing that in real time. And we do, we do continue to sell most of those parts into, into the same end market.
Speaker Change: I also wanted to just ask about parts and parts and service as well.
Speaker Change: Concerns about.
Speaker Change: New volumes coming in and I can understand that.
Speaker Change: Does that imply that maybe the.
Speaker Change: Outlook. So essentially may have improved the rest of the year given that people are being asked to maintain their old trailer fleets although.
Speaker Change: Longer or have things kind of stabilize from where you thought they were last quarter.
Speaker Change: Yes.
Mike: It Hasnt gone up Mike, but what we're what we are.
Mike: Really excited about is the fact that we're able to maintain what that imply a level of growth was in parts and services, even though we've seen some weakness in the OE side of the business and that's what we've always thought could happen and we're seeing that in real time, and we do we do continue to sell most of those parts into.
Mike: Into the same end markets, so theres cyclicality, there, but it's much less than we've got some growth to offset some of the cyclicality that exists.
Patrick Keslin: So there's cyclicality there, but it's much less and we've got some growth offset some of the cyclicality that exists.
Patrick Keslin: So it's a it's a really good story, we think that we can grow the business and continue to grow it, we expect to see sequential growth into Q2, three and four.
Mike: It's a really good story, we think that we can grow the business and continuing to grow that we expect to see sequential growth.
Mike: Into Q2, three and four so not going up from what we said at the at the year end call, but it's we're able to maintain it.
Patrick Keslin: So it's not going up from what we said at the at the year end call, but it's we're able to be Just to follow up there on the profitability, I know there was tough comps, but it was down quite a bit over the prior year in the parts and service segment for an operating margin stamp. Can you maybe share what might have been going on there? I mean, you had higher sales. What would be the reason for a decline in the profitability? Yeah, you hit on it. We had a really strong Q1 2024. We did expect to see a year-over-year step down.
Mike: And just to follow up there on the profitability.
Mike: I know there was tough comp, but it was down quite a bit over the prior year in the parts and service segment from an operating margin standpoint.
Mike: Can you maybe share what might have been going on there I mean, you had higher higher sales what would be the reason for a decline in the property.
Mike: No you hit on it we had a really strong Q1 2024, we did expect to see a year over year step down.
Patrick Keslin: I've said pretty consistently, we think this business will be a high-teens EBITDA business across the full year. We expect still to be that high-teens. So we're a little below that in Q1, a little bit of a mix in Q1 2025. It causes us to be a little lower, we hope. But we came up from Q4 2024, which we expected. We expect to step margins up into the second half of 2025. So we expect to finish the year in that high-teens EBITDA level for parts and services in 2025.
Mike: Said pretty.
Mike: Pretty consistently we think this business will be a high teens.
Mike: EBITDA business.
Mike: Across the full year, we expect still to be that high teens. So were a little below that in Q1, a little bit of mix in Q1, 2025 that caused that to be a little lower we hope, but we came up from Q4 2400, we expected we expect to step margins up into.
Mike: And in the second half of 2025, so we expect to finish the year in the high teens EBITDA level for parts and services in 2025.
Speaker Change: Great. Thanks for that information and ill pass it along appreciate it.
Michael Shlisky: Great. Thanks for that information. I'll pass it along. Appreciate it. Thanks Mike.
Speaker Change: Thanks, Mike Thanks, Mike.
Speaker Change: Our next question comes from the line of Jeff Kauffman with vertical research partners. Your line is open.
Jeff Kauffman: Our next question comes from the line of Jeff Kauffman with Vertical Research Partners. Your line is open. Hey guys, thank you. So a couple questions. Mike, you mentioned you were still growing TAS despite the environment. Where are total TAS units today? So there are just over 1,000, Jeff. They were, I commented they were between 500 and 1,000 at the year-end call, now they're just over 1,000. We're actually seeing some demand for that product, even beyond some of the weakness you see on the called the asset sale trailer. So we think we can grow that business throughout this year.
Speaker Change: Hey, guys. Thank you.
Speaker Change: So couple of questions. Mike You mentioned you were still growing past despite the environment.
Speaker Change: Okay.
Speaker Change: Where our total tops units today.
Speaker Change: So there are just over a 1000.
Jeff Kauffman: Jeff They were I commented theyre between 500000.
Jeff Kauffman: Year end call and while they are just over 1000.
Jeff Kauffman: We're actually seeing some demand for that product, even if even beyond some of the weakness you see in the <unk>.
Jeff Kauffman: The asset sale of trailers. So we think we can grow that business throughout this year, we're trying to really evaluate the market. We don't know exactly how thats going to perform through the rest of the year, but we do think we can see growth and pass through 2025.
Michael Pettit: We're trying to really evaluate the market. We don't know exactly how that's gonna perform through the rest of the year, but we do think we can see growth in tasks through 2025.
Brent Yeagy: Yeah, I would add the unit, Jeff is Brent, the from a unit standpoint, I alluded to that, but I think the other piece to it is that if you were to look back, six months ago, you know, we had a handful of prospective customers that were working through the process of getting Business Agreements in place, comfortable, starting to experience the service. When you sit here today, we have, you know, between 20 and 25 customers that are engaged in understanding how they will use the product. They are either using the product, they are sampling the product, they are putting the business on the line.
Jeff Kauffman: Yes, I would add.
Speaker Change: The unit Jefferies Bret B from a unit standpoint.
Speaker Change: Mike alluded to that but I think the other piece to it is that if you were to look back.
Speaker Change: Six months ago, we had a handful of prospective customers that we're working through the process of <unk>.
Speaker Change: Eating.
Speaker Change: Business agreements in place comfortable starting to experience the service when you sit here today, we have.
Speaker Change: Between 20, and 25 customers that are engaged in understanding how they will use the product. They are using the product. They are sampling the product they are putting the business.
Unknown Executive: Contracts in place, receiving pricing so that they are poised and ready to use it in a scaled manner as the market decides what it's going to do. So when we think about the Transcripts provided by Transcription Outsourcing, LLC. That was helpful.
Speaker Change: Contracts in place receiving pricing so that they are poised and ready to use that <unk>.
Speaker Change: Scaled manner as the market decides where the market's going to do.
Speaker Change: So when we think about the.
Speaker Change: Positioning of this from a growth standpoint, all the right things are happening to put it in the right position yes.
Speaker Change: Capability set is increasing as well so as customers become more interested we're developing the capabilities necessary to support.
Speaker Change: Most helpful. Thank you.
Jeff Kauffman: Thank you. Also, you know, it kind of looks like the earnings forecast is kind of flat from this point to the rest of the year, give or take. And I know you talked about costs in the first quarter and how you flushed out some of those excess costs, and there's going to be more G&A to match the environment. But I guess I was wondering, you know, you gave a revenue outlook of about $420 to $460 million for the second quarter, about $1.8 billion on the year. What kind of deliveries, whether they be trailer deliveries or final mile deliveries, are kind of underlying those revenue forecasts?
Speaker Change: Also kind of looks like the earnings forecast is kind of flat from this point to the rest of the year give or take.
Speaker Change: And then I know you talked about costs in the first quarter and how you flushed out some of those excess cost and theres going to be more G&A.
Speaker Change: To match the environment, but I guess I was wondering you gave us a revenue outlook of about $420 million to $460 million for the second quarter about $1 $8 billion on the year.
Speaker Change: What kind of deliveries, whether it'd be trailer deliveries or final mile deliveries or kind of underlying those revenue forecast.
Speaker Change: Yes, Jeff we've got a slight step up in trailer shipments in Q2.
Patrick Keslin: Yeah, Jeff, we've got a slight step up in trailer shipments in Q2. And we've got, you know, again, a slight step up in truck body shipments. So really not looking for anything heroic in Q2. And then, you know, for the full year, I'm assuming that you're not undercutting the ACK research forecast at this point, which has come down, I think, to about 205 on the year, give or take. If I look at the market share that you had in the first quarter, and, you know, who knows if that's the right way to think about it, about 13.3% in the first quarter.
Speaker Change: And we've got.
Speaker Change: Again, a slight step up in truck body shipments, so really not looking for anything heroic in Q2.
Speaker Change: And then for the full year I'm, assuming that you're not undercutting. The act research forecast at this point, which has come down I think to about 205 on a year give or take.
Speaker Change: If I look at the market share that you had in the first quarter.
Speaker Change: Who knows if that's the right way to think about it.
Speaker Change: About 13, 3% in the first quarter.
Patrick Keslin: Are we thinking kind of use that as a guide to similar percentage for the year, so we can kind of, I'm in the 28,000 range on trailer deliveries based on that. How should I think about, you know, 62.90 in the first quarter, slight step up in the second. Is that the right way to think about it? It is. Yeah. So I think all of your inputs there are going to be certainly in the right ballpark, Jeff. Okay, good enough for me.
Speaker Change: We thinking kind of use that as a guide to a similar percentage for the year. So we can kind of.
Speaker Change: 28000 range on trailer deliveries based on that.
Speaker Change: How should I think about hill.
Speaker Change: 60, <unk> hundred 90 in the first quarter, a slight step up in the second.
Speaker Change: Is that the right way to think about it.
Speaker Change: It is yeah. So I think all of your inputs theyre going to be certainly in the right ballpark Jeff.
Speaker Change: Okay. Good enough for me.
Patrick Keslin: And thank you also for giving the liquidity update because I think with the shares trading where they are, you know, we're shifting from valuing you on earnings to valuing on liquidity. So could you kind of walk through that liquidity, I see the cash on the balance sheet, and I see the total liquidity number. But, you know, if this environment is a little worse than expected, I know there's levers you can pull, but how should we think about access to liquidity if needed? Yeah, so we have the high yield bonds of 400 million that mature in 2028.
Speaker Change: And thank you also for giving the liquidity update because I think with the shares trading where they are.
Speaker Change: We're shifting from valuing you on earnings to valuing on liquidity.
Speaker Change: Could you kind of walk through that liquidity I see the cash on the balance sheet and I see the total liquidity number but.
Speaker Change: If this environment is a little worse than expected I know, there's levers you can pull but how should we think about access to liquidity if needed.
Speaker Change: Yes, so we have the high yield bonds.
Speaker Change: $400 million.
Speaker Change: That mature in 2028.
Patrick Keslin: And then on top of that, we have our revolver, which provides additional liquidity. So the 310 million that I mentioned as of the end of the first quarter, includes that cash on the balance sheet plus the availability on the revolver.
Speaker Change: And then on top of that we have our revolver.
Speaker Change: Which provides additional liquidity so the $310 million that I mentioned as of the end of the first quarter.
Speaker Change: Including our cash on the balance sheet plus the availability on the revolver as we think about capital allocation.
Patrick Keslin: As we think about capital allocation, I'll say that we're going to weigh our options and a lot of our investment decisions will depend on the way that the markets evolve over time. So we right now have a plan to that capital number that I mentioned of 50 million. We also pay the dividend, just like we always do, we will continue to do that. But then as it pertains to shareware purchases, traditional CapEx investment, more investment in TAS, all of those items we will evaluate on an as needed basis, certainly to what our liquidity position looks like, and what we expect the future markets to look like.
Speaker Change: I will say that.
Speaker Change: We're going to way weigh our options and a lot of.
Speaker Change: Our investment decisions will depend on the way that the markets evolve over time.
Speaker Change: So we right now have a plan.
Speaker Change: To that capital number that I mentioned of $50 million.
Speaker Change: We also paid the dividend just like we always do we will continue to do that.
Speaker Change: But then as it as it pertains to share repurchases.
Traditional capex investments more investment.
Speaker Change: Task.
Speaker Change: All of those items, we will evaluate.
Speaker Change: On an as needed basis certainly too.
Speaker Change: What our liquidity position looks like and what we expect the future markets to look like.
Speaker Change: Alright, and then just kind of a swag question, who knows the right answer, but I'm asking for your best guess.
Jeff Kauffman: All righty, and then just kind of a swag question and who knows the right answer, but I'm asking you for your best guess. We had a weird first quarter, right? I mean, weather was a factor. We didn't talk much about it, but, you know, it did affect the manufacturing facilities and the number of days they worked. You know, there was probably not an alignment of costs relative to volume. You know, there was a function of kind of how the market surprised in the quarter. And you talked about how we've got that back to where it should be as a quarter end.
Speaker Change: We had a weird first quarter right I mean weather was a factor we didn't talk much about it but it did affect the manufacturing facilities and the number of days they worked.
Speaker Change: There was probably not an alignment of costs relative to volume, yes, there was a function of kind of how the market surprised in the quarter and you talked about how we've got that back to where it should be as of quarter end. So I think we got the surprising operating loss relative to the units you delivered and I think Mike's Liskey Kenneth.
Jeff Kauffman: So I think we got this surprising operating loss relative to the units you delivered. And I think Mike Shlisky kind of hinted at it. You know, how did margins do this? Because we thought margins were stronger than this. If you wouldn't have had the weather. Right, so let's figure out the weather impact as best we can. And you had your cost structure in the right place from the beginning of the quarter. What might this quarter have looked like?
Speaker Change: How did margins do this because we thought margins were stronger than this.
Speaker Change: If you wouldn't have the weather.
Speaker Change: Alright, so let's figure out the weather impact is.
Speaker Change: First we can hedge.
Speaker Change: As your cost structure in the right place.
Speaker Change: From the beginning of the quarter what might this quarter have looked like.
Speaker Change: So I think a good way to attack that Jeff is we feel like in Q2 here, we do have the cost stack in better condition, and we are guiding to a quarter that looks roughly like a 3% loss for Q2, just given where volumes are at and again they.
Patrick Keslin: So I think a good way to attack that, Jeff, is, you know, we feel like in Q2 here, we do have the cost stack in better condition, and we're guiding to a quarter that looks roughly like a 30 cent loss for Q2, just given where volumes are at. And again, you know, they're not exactly the same, but I think volumes from Q1 to Q2 are going to be in a similar ballpark. So I think that's probably a good way to think about what Q1 could have looked like, you know, with maybe better information.
Speaker Change: They are not exactly the same but I think volumes from Q1 to Q2, we're going to be in a similar ballpark. So I think that's probably a good way to think about what Q1 could have looked like.
Speaker Change: With maybe better information.
Brent Yeagy: One aspect I would add to that, Jeff, is that even looking at everything that Ryan said absolutely is correct, but I'd say in additional, when we think about Q2 and Q3 specifically, We are still navigating through a period of whether it be uncertainty increase or uncertainty reduction. That's a crystal ball that we're all trying to search for. There is still some level of assumption built in even to that level of projected Q2 earnings that estimates that we're still saddled with, I'll just call it The disruptive nature of the uncertainty movement within the schedule. just noise that ways on the profitability of the business, we have to take that into account.
Jeff Kauffman: One aspect I would add to that Jeff is that even looking at everything.
Speaker Change: Brian said, absolutely is correct, but I would say.
Jeff Kauffman: Additional when you think about Q2 and Q3 specifically.
Speaker Change: We are still navigating through.
Speaker Change: A period of whether it be uncertainty increase or uncertainty reduction.
Speaker Change: That's a crystal ball that we're all trying to search for.
Speaker Change: There is still some level of assumption built into that level of projected Q2 earnings.
Speaker Change: Estimates that were still saddled with I'll just call it.
Speaker Change: The disruptive nature of the uncertainty movement within the schedule.
Speaker Change:
Speaker Change: Just noise that.
Speaker Change: Weighs on the profitability of the business, we have to take that into account.
Brent Yeagy: So, even with what Ryan said, if magically. Executive, policy change and some level of stability was obtained. That would be positive relative to how we would operate in Q2 and Q3, which would dramatically both improve the cost. and absolutely in Q3 improved the volume that we're seeing right now. So the noise is affecting us in a very nontraditional way than how you would think about the normal execution of cost and execution inside the business. No, that's helpful.
Speaker Change: So even with what Brian said.
Speaker Change: Magically.
Speaker Change: <unk>.
Speaker Change: Executive policy change and some level of stability was obtained.
Speaker Change: That would be positive relative to how we would operate the in Q2, and Q3, which would dramatically improve the cost.
Speaker Change: And absolutely in Q3 improved the volume that we're seeing right now so that this is the noise is affecting us.
Speaker Change: A very non traditional way than how you would think about the normal execution of cost and execution inside the business.
Speaker Change: No that's helpful last follow up.
Jeff Kauffman: Last follow up. So you lost 58 cents in the first quarter. The midpoint of the guidance is 60 cents for the whole year. You've guided to a midpoint of 30 cent loss for the second quarter. The implication there is the net of 3Q and 4Q are going to be positive 30 cents, however that plays out. Is that based on the idea that at some point we get clarity in the next couple of months and that clarity drives better industry volume in the second half of the year?
Speaker Change: So you lost 58 for the first quarter the midpoint of the guidance at <unk> 60 for the whole year.
Speaker Change: <unk> guided to a midpoint of 30 <unk> loss for the second quarter is the implication there is the net of <unk> and <unk>, we're going to be positive 30, however that plays out.
Speaker Change: Is that based on the idea that at some point, we get clarity.
Speaker Change: And the next couple of months and that clarity drives better industry volume in the second half of the year kind of what's driving that expectation that were going to make 30 in the second half of 2025.
Patrick Keslin: What's driving that expectation that we're going to make 30 cents in the second half of 2025? It is, I would say it is an assumption that uncertainty does not go up. and so therefore it doesn't worsen, it is not necessarily assuming that we get a near-term meaningful improvement in demand and operating conditions. That's how I would frame it right now, because we can't necessarily know how to predict that. So we're assuming there's a level of noise that perpetuates the year at this point. So it's based on what we know, not what we need it to be.
Speaker Change: It is I would say it is an assumption that uncertainty does not go up.
Speaker Change: And so therefore, it doesn't worsen it is not necessarily assuming that we get a near term meaningful improvement.
Speaker Change: Demand and operating conditions.
Speaker Change: That's how I would frame it right now because.
Speaker Change: We can't necessarily know how to predict that so we're assuming there is a level of noise.
Speaker Change: That perpetuates the year at.
Speaker Change: At this point.
Speaker Change: And so it's based on what we know not what we needed to be.
Speaker Change: Okay and on the theory that at some point, we will have an up cycle and we will go back to buying trailers I get that.
Jeff Kauffman: Okay, and on the theory that at some point, we will have an upcycle and we will go back to buying trailers. I get that.
Unknown Executive: Well, good luck. Good luck and thank you. Thank you.
Speaker Change: And good luck.
Speaker Change: So they tell me that good luck. Thank you.
Jeff Kauffman: Thanks, Jeff.
Jeff Kauffman: There are no further questions at this time ill hand things back over to Ryan Reed for closing remarks.
Ian: There are no further questions at this time.
Ryan Reed: I'll hand things back over to Ryan Reed. Thanks, Ian. And thanks, everybody, for joining us today. We'll look forward to following up during the quarter.
Ryan Reed: Thanks, Ian and thanks, everybody for joining US today, we'll look forward to following up during the quarter.
Ryan Reed: This concludes today's conference call you may now disconnect.
Operator: This concludes today's conference call. You may now disconnect.
Ryan Reed: Good day.
Ryan Reed: Okay.
Ryan Reed: [music].
Ryan Reed: Sure.
Ryan Reed: Yeah.
Ryan Reed: [music].
Ryan Reed: Okay.
Ryan Reed: Okay.
Ryan Reed: [music].
Ryan Reed: Okay.
Ryan Reed: Yes.
Ryan Reed: [music].
Ryan Reed: Yes.
Ryan Reed: [music].
Ryan Reed: Yes.