Q3 2026 Greenbrier Co Inc Earnings Call

July 1, 2026

Speaker #1: Hello, and welcome to the Greenbrier Companies' third quarter fiscal 2026 earnings conference call. Following today's presentation, we will conduct a question and answer session.

Operator 2: Hello, welcome to The Greenbrier Companies' Q3 fiscal 2026 earnings conference call. Following today's presentation, we will conduct a question and answer session. Until that time, all lines will be in a listen-only mode. 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 Travis Williams, Head of Investor Relations. Mr. Williams, you may begin.

Operator: Hello, welcome to The Greenbrier Companies' Q3 Fiscal 2026 Earnings Conference Call. Following today's presentation, we will conduct a question and answer session. Until that time, all lines will be in a listen-only mode. 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 Travis Williams, Head of Investor Relations. Mr. Williams, you may begin.

Speaker #1: Until that time, all lines will be in listen-only mode. At the request of The Greenbrier Companies, this conference call is being recorded for instant replay purposes.

Speaker #1: At this time, I would like to turn the conference over to Travis Williams, Head of Investor Relations. Mr. Williams, you may begin.

Speaker #2: Thank you, operator. Good afternoon, and welcome, everyone, to our third quarter fiscal 2026 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 Michael Donfris, Senior Vice President and CFO.

Travis Williams: Thank you, operator. Good afternoon, everyone, welcome to our Q3 fiscal 2026 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 Michael Donfris, Senior Vice President and CFO. Following our update on Greenbrier's Q3 performance, our outlook for fiscal 2026, we will open the call for questions. Our earnings release and supplemental slides can be found on the IR section of our website. Matters discussed on today's conference call include 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 2026 and beyond to differ materially from those expressed in the forward-looking statements made by or on behalf of Greenbrier. We will refer to recurring revenue throughout our comments today.

Speaker #2: Following our update on Greenbrier's Q2 and Q3 performance, as well as our outlook for fiscal 2026, we will open the call for questions. Our earnings release and supplemental slides can be found in the IR section of our website.

Travis Williams: Following our update on Greenbrier's Q3 performance, our outlook for fiscal 2026, we will open the call for questions. Our earnings release and supplemental slides can be found on the IR section of our website. Matters discussed on today's conference call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker #2: Matters discussed on today's conference call include 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 2026 and beyond to differ materially from those expressed in the forward-looking statements made by or on behalf of Greenbrier.

Travis Williams: Throughout our discussion today, we will describe some of the important factors that could cause Greenbrier's actual results in 2026 and beyond to differ materially from those expressed in the forward-looking statements made by or on behalf of Greenbrier. We will refer to recurring revenue throughout our comments today. Recurring revenue is defined as leasing and management services revenue, excluding the impact of syndication transactions. With that, I will turn it over to Lorie.

Speaker #2: We will refer to recurring revenue throughout our comments today. Recurring revenue is defined as leasing and management services revenue, excluding the impact of syndication transactions.

Travis Williams: Recurring revenue is defined as leasing and management services revenue, excluding the impact of syndication transactions. With that, I will turn it over to Lorie.

Speaker #2: With that, I will turn it over to Lorie.

Speaker #3: Thank you, Travis. And good afternoon, everyone. We appreciate you joining us today. Greenbrier delivered solid commercial, operational, and financial results in the third quarter.

Lorie Tekorius: Thank you, Travis. Good afternoon, everyone. We appreciate you joining us today. Greenbrier delivered solid commercial, operational, and financial results in the Q3. Global macroeconomic conditions in our markets support freight rail car lease rates and utilization, where Greenbrier is further strengthening as we serve our shipper customers. Those same conditions pressure demand for new freight rail cars, though maintenance and replacement needs continue and provide a foundation for future orders. This combination of market dynamics and a dedicated focus on operational efficiency led to sequentially improved gross margin and earnings. The improvements that have been made across Greenbrier over the last several years are yielding benefits and, combined with operating discipline, cost control, and commercial excellence, create a more resilient earnings profile through cycles. In other words, we're demonstrating our ability to deliver higher lows across the cycle due to the strength of our business platform.

Speaker #3: Global macroeconomic conditions in our markets support freight railcar lease rates and utilization, where Greenbrier is further strengthening as we serve our shipper customers.

Speaker #3: Though some conditions pressure demand for new freight railcars, maintenance and replacement needs continue and provide a foundation for future orders. This combination of market dynamics and a dedicated focus on operational efficiency led to sequentially improved gross margin and earnings.

Lorie Tekorius: This combination of market dynamics and a dedicated focus on operational efficiency led to sequentially improved gross margin and earnings. The improvements that have been made across Greenbrier over the last several years are yielding benefits and, combined with operating discipline, cost control, and commercial excellence, create a more resilient earnings profile through cycles. In other words, we're demonstrating our ability to deliver higher lows across the cycle due to the strength of our business platform.

Speaker #3: The improvements that have been made across Greenbrier over the last several years are yielding benefits. Combined with operating discipline, cost control, and commercial excellence, these create a more resilient earnings profile through cycles.

Speaker #3: Or, in other words, we're demonstrating our ability to deliver higher lows across the cycle due to the strength of our business platform. Our commercial team continues to expand Greenbrier's market reach, adding new customers while strengthening relationships with longstanding partners, supported by our lease origination capabilities.

Lorie Tekorius: Our commercial team continues to expand Greenbrier's market reach, adding new customers while strengthening relationships with longstanding partners, supported by our lease origination capabilities. These proficiencies leverage our integrated go-to-market model across direct sales, leasing partnerships, and syndication. Turning to the market, in our core North American market, railcar deliveries have averaged about 35,000 per year since 2020. The current industry forecasts indicate less than 25,000 new railcars for calendar 2026, which will be the lowest level recorded since 2010. The projection for calendar 2027 shows an increase to over 34,000 deliveries. Rail loading trends are up in several key commodity categories, including grain, petroleum products, chemicals, and intermodal. Although intermodal activity is uneven, as some commodities are shifting towards trucking to navigate service-related friction in the rail network. While the uptick in freight rail modal share is uneven, we believe the longer-term outlook is positive.

Speaker #3: These proficiencies leverage our integrated go-to-market model across direct sales, leasing partnerships, and syndication. Turning to the market, in our core North American market, railcar deliveries have averaged about 35,000 per year since 2020.

Speaker #3: Current industry forecasts indicate fewer than 25,000 new railcars for calendar 2026, which will be the lowest level recorded since 2010. The projection for calendar 2027 shows an increase to over 34,000 deliveries.

Lorie Tekorius: The current industry forecasts indicate less than 25,000 new railcars for calendar 2026, which will be the lowest level recorded since 2010. The projection for calendar 2027 shows an increase to over 34,000 deliveries.

Speaker #3: Rail loading trends are up in several key commodity categories, including grain, petroleum products, chemicals, and intermodal. Although intermodal activity is uneven, as some commodities are shifting toward trucking to navigate service-related friction in the rail network.

Lorie Tekorius: Rail loading trends are up in several key commodity categories, including grain, petroleum products, chemicals, and intermodal. Although intermodal activity is uneven, as some commodities are shifting towards trucking to navigate service-related friction in the rail network. While the uptick in freight rail modal share is uneven, we believe the longer-term outlook is positive.

Speaker #3: And while the uptick in freight rail modal share is uneven, we believe the longer-term outlook is positive. Our experience tells us it's a matter of when, not if, new railcar demand will increase, and activity coming out of a trough tends to arrive sooner and more robustly than anticipated.

Lorie Tekorius: Our experience tells us it's a matter of when, not if, new railcar demand will increase, and activity coming out of a trough tends to arrive sooner and more robustly than anticipated. In Europe, wagon deliveries are expected to be around 9,000 units for calendar 2026 and the next several years. We're utilizing our lease origination capabilities strategically in this market as well to serve our customers while managing productivity and reducing costs. Our Manufacturing segment, which includes maintenance, wheels, and parts activity in North America, executed well in Q3. Operating efficiency, cost discipline, and solid program and maintenance work helped drive the overall performance in the current macro environment. Our lease origination capabilities provide key flexibility to manage new car production and support utilization across our manufacturing footprint.

Speaker #3: In Europe, wagon deliveries are expected to be around 9,000 units for calendar 2026 and the next several years. We're utilizing our lease origination capabilities strategically in this market as well, to serve our customers while managing productivity and reducing costs.

Speaker #3: Our manufacturing segment, which includes maintenance, wheels, and parts activity in North America, executed well in the third quarter. Operating efficiency, cost discipline, and solid program and maintenance work helped drive the overall performance in the current macro environment.

Lorie Tekorius: Our Manufacturing segment, which includes maintenance, wheels, and parts activity in North America, executed well in Q3. Operating efficiency, cost discipline, and solid program and maintenance work helped drive the overall performance in the current macro environment. Our lease origination capabilities provide key flexibility to manage new car production and support utilization across our manufacturing footprint.

Speaker #3: Our lease origination capabilities provide key flexibility to manage new car production and support utilization across our manufacturing footprint. In addition, our insourcing investment is delivering broad-based, sustained efficiency gains that will further improve earnings power as demand grows.

Lorie Tekorius: In addition, our insourcing investment is delivering broad-based sustained efficiency gains that will further improve earnings power as demand grows. In Leasing & Fleet Management, we saw significant expansion of our own lease fleet with continued high utilization. We remain focused on growing this platform and doubling our recurring revenue base by 2028 through both our own manufacturing operations and secondary market opportunities as they arise. The enterprise-wide improvements that have been made at Greenbrier are supported by a strong financial foundation. A healthy and well-capitalized balance sheet and ample liquidity provides flexibility to support operations, invest in the business, return capital to shareholders, and execute our strategy. As we look ahead, our focus remains squarely on operational execution, commercial discipline, capital allocation, and ongoing enhancement of through-cycle performance. You can expect Greenbrier's solid results across the cycle to continue driving long-term shareholder value.

Speaker #3: In leasing and fleet management, we saw significant expansion of our own lease fleet, with continued high utilization. We remain focused on growing this platform and doubling our recurring revenue base by 2028 through both our own manufacturing operations and secondary market opportunities as they arise.

Speaker #3: The enterprise-wide improvements that have been made at Greenbrier are supported by a strong financial foundation. A healthy and well-capitalized balance sheet, along with ample liquidity, provides flexibility to support operations, invest in the business, return capital to shareholders, and execute our strategy.

Speaker #3: As we look ahead, our focus remains squarely on operational execution, commercial discipline, capital allocation, and ongoing enhancement of through-cycle performance. You can expect Greenbrier’s solid results across the cycle to continue driving long-term shareholder value.

Speaker #3: Finally, I want to thank our employees for their focus, commitment, and execution. Each and every one of their efforts demonstrates the strength of Greenbrier's culture and the durability of the platform that we've built.

Lorie Tekorius: Finally, I want to thank our employees for their focus, commitment, and execution. Each and every one of their efforts demonstrates the strength of Greenbrier's culture and the durability of the platform that we've built. With that, I'll turn the call over to Brian to discuss our operations in more detail.

Speaker #3: And with that, I'll turn the call over to Brian to discuss our operations in more detail.

Speaker #2: Thanks, Lorie. And good afternoon, everyone. Starting with commercial activity, we received orders for 2,200 railcars during the quarter, valued at $340 million. Demand was led by tank cars and covered hoppers, with additional activity in gondolas, open-top hoppers, and heavy-duty flats.

Brian Comstock: Thanks, Lorie Tekorius, and good afternoon, everyone. Starting with commercial activity, we received orders for 2,200 railcars during the quarter, valued at $340 million. Demand was led by tank cars and covered hoppers with additional activity in gondolas, open-top hoppers, and heavy-duty flats. In addition to constructive rail loading trends, it is also worth noting the significant increases in trucking spot rates driven by driver shortages, elevated fuel costs, and carrier attrition. While this alone does not signal a broad-based freight demand recovery, sustained higher truck rates would improve the relative competitiveness of rail and intermodal service. Turning to backlog, we ended the quarter with 13,800 railcars valued at $2 billion. Our commercial team remains highly engaged with customers across North America, Europe, and Brazil, and we are seeing solid activity across several car types. As Lorie Tekorius noted, our lease origination capabilities were a prominent feature of the quarter.

Speaker #2: In addition to constructive rail loading trends, it's also worth noting the significant increases in trucking spot rates driven by driver shortages, elevated fuel costs, and carrier attrition.

Speaker #2: While this alone doesn’t signal a broad-based freight demand recovery, sustained higher truck rates would improve the relative competitiveness of rail and intermodal service. Turning to backlog, we ended the quarter with 13,800 railcars valued at $2 billion. Our commercial team remains highly engaged with customers across North America, Europe, and Brazil, and we are seeing solid activity across several car types.

Speaker #2: As Lorie noted, our lease origination capabilities were a prominent feature of the quarter. Lease originations represented 60% of total global orders, including 71% of North American awards and 53% of European awards.

Brian Comstock: Lease originations represented 60% of total global orders, including 71% of North American awards and 53% of European awards. This highlights the value of our commercial model, flexible production capacity, and our ability to respond to customer needs. The Leasing & Fleet Management segment delivered another strong quarter. We expanded the owned lease fleet to 20,600 railcars, and utilization remained exceptionally strong at 99%. Renewal rates were healthy, reflecting both the quality of our fleet and the depth of our customer relationships. During the quarter, we continued to pursue disciplined fleet growth through secondary market acquisitions of approximately 4,400 railcars and remained active in evaluating additional opportunities. These are strategic investments that support lease fleet growth, recurring revenue, and long-term value creation. Moving to our Manufacturing segment, production rates were aligned with current demand levels.

Speaker #2: This highlights the value of our commercial model: flexible production capacity and our ability to respond to customer needs. The leasing and fleet management segment delivered another strong quarter.

Speaker #2: We expanded the owned lease fleet to 20,600 railcars, and utilization remained exceptionally strong at 99%. Renewal rates were healthy, reflecting both the quality of our fleet and the depth of our customer relationships.

Speaker #2: During the quarter, we continued to pursue disciplined fleet growth through secondary market acquisitions of approximately 4,400 railcars and remained active in evaluating additional opportunities.

Speaker #2: These are strategic investments that support lease fleet growth, recurring revenue, and long-term value creation. Moving to our manufacturing segment, production rates were aligned with current demand levels.

Speaker #2: Consistent with our proactive management of the business, headcount continues to be adjusted in line with our team's focus on maintaining operational efficiency as market conditions evolve.

Brian Comstock: Consistent with our proactive management of the business, headcount continues to be adjusted in line with our teams, which remain focused on maintaining operational efficiency as market conditions evolve. At these production levels, operating performance and margin progression improved, reflecting the benefits of our insourcing strategy and focus on cost competitiveness. Recent capital investments are yielding strong returns even at current production levels. Wheelset shipments exceeded expectations. The maintenance team sustained steady throughput, and we continue to see progress in cycle time execution. We also are taking actions to sharpen the focus and efficiency of our maintenance service network. In Europe, demand remains muted, but we are making progress following recent footprint actions. With the facility consolidation complete, the team has focused on streamlining the production process, reducing inventory, and improving quality and production rates. We are also seeing encouraging traction in the European leasing market.

Speaker #2: At these production levels, operating performance and margin progression improved, reflecting the benefits of our insourcing strategy and focus on cost competitiveness. Recent capital investments are yielding strong returns even at current production levels.

Speaker #2: Railcar shipments exceeded expectations, the maintenance team sustained steady throughput, and we continue to see progress in cycle time execution. We are also taking actions to sharpen the focus and efficiency of our maintenance service network.

Speaker #2: In Europe, demand remains muted, but we are making progress following recent footprint actions. With the facility consolidation complete, the team has focused on streamlining the production process, reducing inventory, and improving quality and production rates.

Speaker #2: We are also seeing encouraging trends and traction in the European leasing market. In Brazil, Greenbrier Maxion delivered another quarter of strong operational performance, driven by demand in the agriculture and biodiesel sectors.

Brian Comstock: In Brazil, Greenbrier Maxion delivered another quarter of strong operational performance driven by demand in agriculture and biodiesel sectors. Financial performance exceeded expectations, supported by disciplined cost control, operating efficiency, and improved pricing. Our capital markets team continued to support the integrated model through strong monetization activity, expanded investor relationships, and secondary market. These activities generate profitable through-margin recognition and fee income, provide liquidity, support the lease fleet growth, and reinforce the benefits of Greenbrier's integrated platform. In summary, we continue to align production with customer demand, execute with discipline across the platform, expand our leasing capabilities, and advance key initiatives that support margin performance. With that, I will turn the call over to Michael Donfris to review our financial results in a bit more detail.

Speaker #2: Financial performance exceeded expectations, supported by disciplined cost control, operating efficiency, and improved pricing. Our capital markets team continued to support the integrated model through strong monetization activity, expanded investor relationships, and secondary market activities.

Speaker #2: These activities generate profitable through-margin recognition and fee income, provide liquidity, support the lease fleet growth, and reinforce the benefits of Greenbrier's integrated platform. In summary, we continue to align production with customer demand, execute with discipline across the platform, expand our leasing capabilities, and advance key initiatives that support margin performance.

Speaker #2: And with that, I'll turn the call over to Michael to review our financial results in a bit more detail.

Speaker #3: Thanks, Brian. And good afternoon, everyone. Total revenue for the quarter was $577 million. Leasing and fleet management revenue was $47 million, up 3% from Q2, primarily reflecting the addition of leased railcars.

Michael Donfris: Thanks, Brian, good afternoon, everyone. Total revenue for the quarter was $577 million. Leasing & Fleet Management revenue was $47 million, up 3% from Q2, primarily reflecting the addition of leased railcars. Manufacturing revenue was $529 million, down about 2% sequentially, primarily due to fewer new railcar deliveries, partially offset by higher maintenance program revenue. Aggregate gross margin was 14.1%, within our long-term target range, and improved from Q2. This performance demonstrates the strength of our integrated business model and the impact of our continued cost discipline. Earnings from operations were $32 million or about 6% of revenue. These results reflect solid execution at current production volumes and our continued focus on the areas within our control. Our effective tax rate was about 20%, primarily driven by discrete items related to foreign exchange impacts, largely from the strengthening of the Mexican peso.

Speaker #3: Manufacturing revenue was $529 million, down about 2% sequentially, primarily due to fewer new railcar deliveries, partially offset by higher maintenance program revenue. Aggregate gross margin was 14.1%, within our long-term target range and improved from Q2.

Speaker #3: This performance demonstrates the strength of our integrated business model and the impact of our continued cost discipline. Earnings from operations were $32 million, or about 6% of revenue.

Speaker #3: These results reflect solid execution at current production volumes and our continued focus on the areas within our control. Our effective tax rate was about 20%, primarily driven by discrete items related to foreign exchange impacts, largely from the strengthening of the Mexican peso.

Speaker #3: Diluted earnings per share were $0.60, and EBITDA was $69 million, or about 12% of revenue. Overall, results benefited from stronger margins, favorable foreign exchange, lower net interest expense, leasing and fleet management, and a lower effective tax rate.

Michael Donfris: Diluted earnings per share were $0.60, EBITDA was $69 million, or about 12% of revenue. Overall, results benefited from stronger margins, favorable foreign exchange, lower net interest expense in Leasing & Fleet Management, and a lower effective tax rate. Turning to the balance sheet, we ended the quarter with total liquidity of approximately $887 million, representing $274 million in cash and $613 million of available borrowing capacity. Operating cash flow for the quarter reflects $227 million of investment, primarily for leased railcars purchased in the secondary market. This investment supports our strategy to grow the lease fleet, increase recurring revenue, and generate tax-advantaged cash flows while maintaining strong asset quality and enhancing long-term earnings power. Over time, we expect to finance a portion of the newly acquired fleet, preserving balance sheet flexibility.

Speaker #3: Turning to the balance sheet, we ended the quarter with total liquidity of approximately $887 million, representing $274 million in cash and $613 million of available borrowing capacity.

Speaker #3: Operating cash flow for the quarter reflects $227 million of investment, primarily for leased railcars purchased in the secondary market. This investment supports our strategy to grow the lease fleet, increase recurring revenue, and generate tax-advantaged cash flows while maintaining strong asset quality and enhancing long-term earnings power.

Speaker #3: Over time, we expect to finance a portion of the newly acquired fleet, preserving balance sheet flexibility. We also refinanced our leasing term loan with a new $300 million facility, extending the maturity by six years, improving credit terms, and adding a delayed draw that provides up to $125 million of additional capacity to support future growth.

Michael Donfris: We also refinanced our leasing term loan with a new $300 million facility, extending the maturity by six years, improving credit terms, and adding a delayed draw that provides up to $125 million of additional capacity to support future growth. Our capital allocation remains disciplined and balanced. We continue to invest in opportunities that generate attractive returns while also returning capital to shareholders through dividends and share repurchases. Greenbrier's Board of Directors declared a dividend of $0.34 per share, marking our 49th consecutive quarterly dividend. At quarter end, approximately $65 million remained available under our share repurchase authorization. We will continue to use that capacity opportunistically, guided by market conditions and our broader capital allocation priorities. Turning to guidance, our fiscal 2026 outlook is based on our latest view of Q4 Manufacturing margins and delivery timing, reflecting that some activity is moving into fiscal 2027.

Speaker #3: Our capital allocation remains disciplined and balanced. We continue to invest in opportunities that generate attractive returns, while also returning capital to shareholders through dividends and share repurchases.

Speaker #3: Greenbrier's board of directors declared a dividend of $0.34 per share, marking our 49th consecutive quarterly dividend. At quarter end, approximately $65 million remained available under our share repurchase authorization.

Speaker #3: We will continue to use that capacity opportunistically, guided by market conditions and our broader capital allocation priorities. Turning to guidance, our fiscal 2026 outlook is based on our latest view of fourth quarter manufacturing margins and delivery timing, reflecting that some activity is moving into fiscal 2027.

Speaker #3: While near-term market conditions remain dynamic, customer engagement is strong, and we are encouraged by the business activity developing for 2027. For fiscal 2026, we continue to expect total revenue of $2.4 billion to $2.5 billion, and are narrowing our expected EPS range to $3.00 to $3.15 per share.

Michael Donfris: While near-term market conditions remain dynamic, customer engagement is strong, we are encouraged by the business activity developing for 2027. For fiscal 2026, we continue to expect total revenue of $2.4 billion to $2.5 billion and are narrowing our expected EPS range to $3 to $3.15 per share. Additional details are included in the earnings release and accompanying slides. In summary, Greenbrier delivered solid Q3 results supported by disciplined execution, resilient aggregate gross margins, and continued strength in Leasing & Fleet Management. We remain focused on the priorities that create value, serving our customers, managing costs, increasing recurring revenue, and deploying capital with discipline. We believe these actions position Greenbrier to deliver attractive through-cycle returns and create long-term shareholder value. With that, we'll open the call up for questions.

Speaker #3: Additional details are included in the earnings release and accompanying slides. In summary, Greenbrier delivered solid third quarter results, supported by disciplined execution, resilient aggregate gross margins, and continued strength in leasing and fleet management.

Speaker #3: We remain focused on the priorities that create value: serving our customers, managing costs, increasing recurring revenue, and deploying capital with discipline. We believe these actions position Greenbrier to deliver attractive through-cycle returns and create long-term shareholder value.

Speaker #3: With that, we'll open the call up for questions.

Speaker #2: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone.

Operator 2: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then two. At this time, we'll pause momentarily to assemble the roster. The first question will come from Andre Tomchik with Goldman Sachs. Please go ahead.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then two. At this time, we'll pause momentarily to assemble the roster. The first question will come from Andrzej Tomczyk with Goldman Sachs. Please go ahead.

Speaker #2: If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2.

Speaker #2: At this time, we'll pause momentarily to assemble the roster. The first question will come from Andre Tomchik with Goldman Sachs. Please go ahead.

Speaker #4: Hey, good evening, everyone, and thanks for taking my questions. Just curious if we could start off on the tariff front, just to get a little more clarity there.

Andre Tomchik: Hey, good evening, everyone. Thanks for taking my questions. Just curious if we could start off on the tariff front just to get a little more clarity there. Our understanding is recent amendments to Section 232 investigations could be imposing a tariff on the full value of tank cars coming out of Mexico into the US. Maybe if you could just speak a little more to your current understanding of that tariff situation and what is Greenbrier's current tank car backlog mix. Maybe just on that, if you guys are actually incurring any tariffs there to start, that would be helpful. Thank you.

Andrzej Tomczyk: Hey, good evening, everyone. Thanks for taking my questions. Just curious if we could start off on the tariff front just to get a little more clarity there. Our understanding is recent amendments to Section 232 investigations could be imposing a tariff on the full value of tank cars coming out of Mexico into the US. Maybe if you could just speak a little more to your current understanding of that tariff situation and what is Greenbrier's current tank car backlog mix. Maybe just on that, if you guys are actually incurring any tariffs there to start, that would be helpful. Thank you.

Speaker #4: Our understanding is recent amendments to Section 232 investigations could be imposing a tariff on the full value of tank cars coming into, or going out of, Mexico into the US. Maybe if you could just speak a little more to your current understanding of that tariff situation, and what is Greenbrier's current tank car backlog mix? And then, maybe just on that, if you guys are actually incurring any tariffs there to start, that would be helpful.

Speaker #4: Thank you.

Speaker #3: Sure. Andre, thanks. I'll start out, and I'm sure my colleagues here will jump in and fill in if there's anything that I'm missing.

Lorie Tekorius: Sure. Andre, thanks. I'll start out, and I'm sure that my colleagues here will jump in and fill in if there's anything that I'm missing. Let me start with the beginning. We are not currently entering tank cars or paying a tariff for equipment that's coming from Mexico into the United States. As you state, there has been some recent pronouncements and determinations that have industry-wide implications. We and our industry partners are seeking guidance from CBP on how best to navigate that. Really right now it's a situation where there's been some pronouncements made, but it's a change to what has been industry-wide practices. Again, we and our partners, whether they're the Class I railroads, the short lines, or even other manufacturers, are seeking clarification from CBP on how to be compliant with the communications we've received.

Speaker #3: Let me start at the beginning. We are not currently entering tank cars or paying a tariff for equipment that's coming from Mexico into the United States.

Speaker #3: As you state, there have been some recent pronouncements and determinations that have industry-wide implications. We and our industry partners are seeking guidance from CPP on how best to navigate that.

Speaker #3: So really, right now, it's a situation where there have been some pronouncements made, but it's a change to what have been industry-wide practices. So again, we and our partners—whether they're the Class 1 railroads, the short lines, or even other manufacturers—are seeking clarification from CBP on how to be compliant with the communications we've received.

Speaker #4: Understood. And then maybe if we could just get a sense for the mix of tank cars that you guys have in the backlog, that would be helpful.

Andre Tomchik: Understood. Maybe just if we could get a sense for the mix of tank cars that you guys have in the backlog, that would be helpful.

Andrzej Tomczyk: Understood. Maybe just if we could get a sense for the mix of tank cars that you guys have in the backlog, that would be helpful.

Speaker #4: But and then just, I guess, as a follow-up there, I guess two follow-ups. Maybe if those if it ended up that those tank car or the tariffs were applied to the tank cars, is there then risk of retroactive payments just to sort of be clear there?

Lorie Tekorius: Yeah.

Andre Tomchik: Just as a follow-up there, I guess two follow-ups. Maybe if it ended up that the tariffs were applied to the tank cars, is there then a risk of retroactive payments just to sort of be clear there? Separately, are there discussions with customers that there could be potential price escalations if that were to be the case? Just trying to get a sense for if you guys could actually pass through those excess costs. Thanks.

Andrzej Tomczyk: Just as a follow-up there, I guess two follow-ups. Maybe if it ended up that the tariffs were applied to the tank cars, is there then a risk of retroactive payments just to sort of be clear there? Separately, are there discussions with customers that there could be potential price escalations if that were to be the case? Just trying to get a sense for if you guys could actually pass through those excess costs. Thanks.

Speaker #4: And then, separately, are there discussions with customers that there could be potential price escalations if that were to be the case? Just trying to get a sense for if you guys could actually pass through those excess costs.

Speaker #4: Thanks.

Speaker #3: Sure, and I'll start with the last question first. Yes, we believe that any adjustments associated with tariffs would be passed through to our customers.

Lorie Tekorius: Sure. I'll start with the last question first. Yes, we believe that any adjustments associated with tariffs would be passed through to our customers. When it comes to retroactive obligations, right now that's unclear. Again, this is where we would say that we're seeking clarification from CBP on what some of the language in their rulings means and how we as an industry need to be compliant. To, I think the question I missed from the last, as percentage of backlog, so the backlog that Brian talked about 20% of that is tank cars.

Speaker #3: When it comes to retroactive obligations, right now that's unclear. Again, this is where we would say that we're seeking clarification from CBP on what some of the language in their rulings means, and how we as an industry need to be compliant.

Speaker #3: And then to, I think, the question I missed from the last—as a percentage of backlog, so the backlog that Brian talked about—about 20% of that is tank cars.

Speaker #2: Yeah, I would just add, Lorie, that while it's 20% today, I think we're seeing the mix shift in the market kind of pivot away from tank cars.

Brian Comstock: Yeah. I would just add, Lorie, that while it's 20% today, I think we're seeing the mix shift in the market kind of pivot away from tank cars, so that mix is quickly diminishing. Lorie's right, we have provisions in all of our contracts to pass through tariffs and duties as appropriate.

Speaker #2: And so, that mix is quickly diminishing. And Lorie's right. We have provisions in all of our contracts to pass through tariffs and duties as appropriate.

Speaker #3: And just the other thing to highlight, because sometimes folks in our industry tend to forget, but we build tank cars not only in Mexico.

Lorie Tekorius: Just the other thing to highlight because sometimes folks in our industry tend to forget, but we build tank cars not only in Mexico-

Speaker #2: Exactly.

Brian Comstock: Exactly

Speaker #3: Using U.S.-sourced steel and other U.S.-sourced components, but we're also building tank cars in Arkansas at our Marmaduke facility.

Lorie Tekorius: using US-sourced steel and other US-sourced components, but we're also building tank cars in Arkansas at our Marmaduke facility.

Speaker #4: Interesting point. And just on that, if I could, what is the capability of shifting production there to the Arkansas facility? Is that something feasible at a later date?

Andre Tomchik: Interesting point. Just on that, if I could, what is the capability of shifting production there to the Arkansas facility? Is that something feasible at a later date?

Andrzej Tomczyk: Interesting point. Just on that, if I could, what is the capability of shifting production there to the Arkansas facility? Is that something feasible at a later date?

Speaker #3: Absolutely. Well, we're building tank cars there right now, and we are evaluating how much we could shift. A lot of this comes down to getting employees to be in our shops.

Lorie Tekorius: Absolutely. Well, we're building tank cars there right now, and we are evaluating how much we could shift. A lot of this comes down to getting employees to be in our shops. I think this is a struggle for many industries in the United States, is just finding and training and retaining a skilled workforce.

Speaker #3: I think this is a struggle for many industries in the United States—just finding, retraining, and retaining a skilled workforce.

Speaker #2: Yeah, maybe just adding on, as Brian again, is at the end of the day, we are increasing production at our U.S. facilities, and we have the capability to take on quite a bit of that capacity if need be.

Brian Comstock: Yeah, maybe just adding on, it's Brian again. At the end of the day, we are increasing production at our US facilities, and we have the capability to take on quite a bit of that capacity if need be.

Speaker #4: Okay, thanks. Appreciate that color. Maybe just shifting to the core business—with the ISM now over 50 for half a year—are you guys seeing any of that expectations optimism from your customers, I guess, creep into conversations?

Andre Tomchik: Okay, thanks. Appreciate that color. Maybe just shifting to the core business with the ISM now over 50 for half a year now. Are you guys seeing any of that expectations optimism from your customers, I guess, creep into conversations? Do you think that the positive ISM readings are more so reflection of other areas of the economy at the moment? I'm just trying to get a sense for when the broader ISM positivity might be able to translate into improving new rail car backlogs and deliveries.

Andrzej Tomczyk: Okay, thanks. Appreciate that color. Maybe just shifting to the core business with the ISM now over 50 for half a year now. Are you guys seeing any of that expectations optimism from your customers, I guess, creep into conversations? Do you think that the positive ISM readings are more so reflection of other areas of the economy at the moment? I'm just trying to get a sense for when the broader ISM positivity might be able to translate into improving new rail car backlogs and deliveries.

Speaker #4: Or do you think that the positive ISM readings are more a reflection of other areas of the economy at the moment? I'm just trying to get a sense for when the broader ISM positivity might be able to translate into improving new railcar backlogs and deliveries.

Speaker #3: So, I'll kind of come in at a high level, and I'm sure that Brian can speak to some of what he's hearing from our customers. But what I continue to hear, and have been hearing for the last several months, is a lot of desire from our customers for additional railcars.

Lorie Tekorius: I'll kind of come high level, and I'm sure that Brian can speak to some of what he's hearing from our customers. What I continue to hear and have been hearing for the last several months is a lot of desire from our customers for additional rail cars. The interesting point, though, is as the macro environment continues to shift, sometimes it's creating a delay in when they want to execute on an investment in these long-lived assets. This is part of what Brian was speaking to, I think, before about trucking. We are seeing some temporary shifts over to trucking if we have a shipper customer that is trying to evaluate how best they navigate for their business, whether they're a farmer or a chemical company or otherwise, how to navigate that.

Speaker #3: The interesting point, though, is that as the macro environment continues to shift, sometimes it's creating a delay. And when they want to execute on an investment in these long-lived assets, this is part of what Brian was speaking to, I think, before about trucking. We are seeing some temporary shifts over to trucking if we have a shipper customer that is trying to evaluate how best to navigate for their business—whether they're a farmer, a chemical company, or otherwise—how to navigate that.

Speaker #3: But we really do. This is what we mean by—we think there’s quite a bit of pent-up demand for new equipment. We just need the broader economy to kind of settle down for a little bit so that people can make those long-term investment decisions, right?

Lorie Tekorius: We really do, this is what we mean by we think there's quite a bit of pent-up demand for new equipment. We just need the broader economy to settle down for a little bit so that people can make those long-term investment decisions. Brian?

Speaker #2: Yeah. And I'll just say, on what Lorie said—she's spot on. Directionally, we've been watching the inquiries and the backlog, and while it's been fairly stable over the last few quarters, the pent-up demand has really begun to rise.

Brian Comstock: Yeah, I'll just add on to what Lorie said. She's spot on is directionally we've been watching the inquiries in the backlog, and while it's been fairly stable over the last few quarters, the pent-up demand is really beginning to rise. You're seeing it on the AI data center infrastructure area, where there's a lot of heavy-duty infrastructure required. When you look at orders to production type of ratios, one of the things that's a bit of an anomaly is some of these cars we're taking in have three to four to five times the number of labor hours as a, let's call it like a tank car or covered hopper car. It's not a one-for-one trade, it's kind of a four or five-to-one trade.

Speaker #2: You're seeing it on the AI data center infrastructure area, where there's a lot of heavy-duty infrastructure required. So when you look at orders-to-production type of ratios, one of the things that's a bit of an anomaly is some of these cars we're taking in have three to four to five times the number of labor hours as a, let's call it, like a tank car or covered hopper car.

Speaker #2: And so, it's not a one-for-one trade. It's kind of a four- or five-to-one trade. We're also seeing significant improvement in the steel side of the industry as well.

Brian Comstock: We're also seeing significant improvement in the steel side of the industry as well, where a lot of cars are attriting out. As Lorie said, when you look at driver service rules and just kind of what's happening in the industry, intermodal is really feeling the pressure for growth as well. The pent-up demand is a real thing. It's not if, it's just kind of when, and we're starting to see signs of that here in this quarter already.

Speaker #2: Where a lot of cars are attriting out and then, as Lorie said, when you look at driver service rules and just kind of what's happening in the industry, intermodal is really feeling the pressure for growth as well.

Speaker #2: So, the pent-up demand is a real thing. It's not a matter of if; it's just kind of when. And we're starting to see signs of that here in this quarter already.

Speaker #4: Got it. And maybe just one more for me before I hop back in the queue here. Just a little bit more specific in terms of the manufacturing margin.

Andre Tomchik: Got it. Maybe just one more from me before I hop back in the queue here. Just a little bit more specific in terms of the Manufacturing margin this quarter versus last was a nice uplift. Just curious if you could share whether mix was a positive this quarter and then maybe how you're thinking about core price versus mix dynamics here into the year-end.

Andrzej Tomczyk: Got it. Maybe just one more from me before I hop back in the queue here. Just a little bit more specific in terms of the Manufacturing margin this quarter versus last was a nice uplift. Just curious if you could share whether mix was a positive this quarter and then maybe how you're thinking about core price versus mix dynamics here into the year-end.

Speaker #4: This quarter versus last was a nice uplift. Just curious if you could share whether mix was a positive this quarter, and then maybe how you're thinking about core price versus mix dynamics here into the year-end.

Speaker #2: Yeah, I appreciate that. As Brian again, Andre, at the end of the day, mix always plays a bit of a role. But Lorie kind of hit it in her comments, and I think I touched on it briefly in mine as well. The initiatives we took a couple of years ago—the insourcing initiatives—are really starting to pay off.

Brian Comstock: Yeah, I appreciate that. It's Brian again, Andre. At the end of the day, mix always plays a bit of a role, but Lorie kind of hit it in her comments, and I think I touched on it briefly in mine as well, is the initiatives we took a couple of years ago, the insourcing initiatives are really starting to pay off. It's not just the insourcing investment we made on manufacturing primary parts, but also the focus we have on labor efficiency, the focus our team has on overhead and variable costs associated with that have really been paying off in this time. You can look back in time at Greenbrier. I've been here a long time, and we've never had these kinds of margins at this level of production, low level of production in the history of Greenbrier.

Speaker #2: And it's not just the insourcing investment we made on manufacturing primary parts, but also the focus we have on labor efficiency, the focus our team has on overhead and variable costs associated with that, have really been paying off in this time.

Speaker #2: You can look back in time in Greenbrier. I've been here a long time, and we've never had these kinds of margins at this level of production — low level of production — in the history of Greenbrier.

Speaker #2: So, we're excited about the opportunity for this market to kind of change and see what we can really do as the market continues to rise back up.

Brian Comstock: We're excited about the opportunity for this market to kind of change and see what we can really do as the market rises back up.

Speaker #4: Understood. Thanks, everyone. I'll hop back in the queue here.

Andre Tomchik: Understood. Thanks, everyone. I'll hop back in the queue here.

Andrzej Tomczyk: Understood. Thanks, everyone. I'll hop back in the queue here.

Speaker #1: The next question will come from Harrison Bauer with Susquehanna. Please go ahead.

Operator 2: The next question will come from Harrison Bauer with Susquehanna. Please go ahead.

Operator: The next question will come from Harrison Bauer with Susquehanna. Please go ahead.

Speaker #5: Great, thanks for taking my questions. Maybe to ask about your sense of demand in a different way: how much are some of the regulatory backdrops—both the Section 232 proclamation on tank cars, as well as your outstanding coupler and EPA cases—eating into customer demand and sentiment? Are customers waiting for some clarity before going forward on some higher order amounts?

Harrison Bauer: Great. Thanks for taking my questions. Maybe to ask your sense of demand in a different way, how much of some of the regulatory backdrop on both Section 232 proclamation on tank cars, as well as your outstanding coupler and EAPA case, is eating into customer demand and sentiment on waiting for some clarity before going forward on some higher order amounts?

Speaker #3: That's a great question, Harrison. And I would say, quite honestly, that's really not the biggest thing that's holding back our customers from making those decisions to invest in long-lived assets.

Lorie Tekorius: It's a great question, Harrison, and I would say quite honestly, that is not the bigger thing that's holding back our customers from making those decisions to invest in long-lived assets. It's again, more the broader macroeconomic situation is they're figuring out how to either put existing equipment through a program, run it longer, maybe if they have pops in demand, if they can shift that over to trucking, they do that. That's really more where we're seeing the holdup is the macroeconomic situation, not what's going on with tariffs or couplers.

Speaker #3: Again, more broadly, the macroeconomic situation is that they're figuring out how to either put existing equipment through a program, run it longer, or, if they have pops in demand, shift that over to trucking if they can.

Speaker #3: But that's really more where we're seeing the holdup—it's the macroeconomic situation, not what's going on with tariffs or couplers.

Speaker #2: Yeah, and I'll just tag on. Again, that's spot on by Lorie, but also keep in mind that there are a lot of Canadian customers that buy assets from us as well.

Brian Comstock: Yeah, I'll just tag on. Again, it's spot on by Lorie, also keep in mind that there's a lot of Canadian customers that buy assets from us as well. Those tariffs and those things do not apply to cars that are being moved into Canada. It's really US service at this point. We're continuing to see that demand from a lot of the oil producers and chemical producers up in the Canadian region. Generally speaking, the US customers are not holding back because of any uncertainty at this point. We are seeing a shift, again, in mix to more covered hopper cars, flat cars, special purpose assets, and really higher value backlog for Greenbrier.

Speaker #2: And those tariffs and those things do not apply to cars that are being moved into Canada. It's really U.S. service at this point. So we're continuing to see that demand from a lot of the oil producers and chemical producers up in the Canadian region.

Speaker #2: But generally speaking, the U.S. customers are not holding back because of any uncertainty at this point. But we are seeing a shift again in mix, to more covered hopper cars, flat cars, special purpose assets, and really higher-value backlog for Greenbrier.

Speaker #5: Okay, thank you for that. And maybe sticking with some of the regulatory environment and on the coupler case, could you give us an update on where you're at with the EPA determination?

Harrison Bauer: Okay. Thank you for that. Maybe sticking with some of the regulatory environment and on the coupler case, could you give us an update on where you're at with the EPA determination? I know you're waiting to appeal this case. I know it's a specific office within the CBP, just any color on sort of what's going on in the coupler case and what your opportunities are in an adverse ruling to shift some of the coupler procurement to US-sourced.

Speaker #5: I know you're waiting to appeal this case. I know it's a specific office within the CBP, but is there any color on what's going on in the coupler case and what your opportunities are, in an adverse ruling, to shift some of the coupler procurement to U.S.-sourced?

Speaker #3: Sure. So today, we actually filed our administrative appeal, so we have begun that process. And I just want to kind of take a big step back and say that the CBP determination letter does have industry-wide implications, right?

Lorie Tekorius: Sure. Today, we actually filed our administrative appeal, so we have begun that process. I just want to take a big step back and say that the CBP determination letter does have industry-wide implications, right? This is not just a Greenbrier situation, but it impacts everyone who's building cars that are bringing them into the United States from Canada or Mexico. Their determination letter included a change in practice, that just like with the 232s, we and our industry partners are seeking guidance and clarification as how best to navigate this ruling, and how best to be compliant. That said, we do have, I would say, a very agile industry.

Speaker #3: This is not just a Greenbrier situation, but it impacts everyone who's building cars that are bringing them into the United States from Canada or Mexico.

Speaker #3: And their determination letter included a change in practice that, just like with the 232s, we and our industry partners are seeking guidance and clarification on how best to navigate this ruling and how best to be compliant.

Speaker #3: That said, we do have, I would say, a very agile industry. We have a history of working together to figure out across a variety of landscapes how best to navigate, whether it's fluctuations in demand or situations that have to do with high prices of steel—whatever might be going on with couplers and where best to source them.

Lorie Tekorius: We have a history of working together to figure out across a variety of landscapes how best to navigate, whether it's fluctuations in demands or situations that have to do with high prices of steel, whatever might be going on with couplers and where best to source them. I have no doubt that as an industry, we will find a way to navigate this and come up with how best to continue serving our freight rail customers.

Speaker #3: So I have no doubt that, as an industry, we will find a way to navigate this and come up with how best to continue serving our freight rail customers.

Speaker #2: Yeah, maybe I would just point out, as Brian, Harrison, that while all of these are serious issues, the financial impact of the couplers is fairly small on a per-unit basis.

Brian Comstock: Maybe I would just point out, it is Brian Harrison, that while all of these are serious issues, the financial impact of the couplers is fairly small on a per unit basis. When you think about the total number of specialties and steel cost that is in the asset, it is probably less than 1% of the total impact. From a customer perspective, it really does not have significant impact to them.

Brian Comstock: Maybe I would just point out, it is Brian, Harrison, that while all of these are serious issues, the financial impact of the couplers is fairly small on a per unit basis. When you think about the total number of specialties and steel cost that is in the asset, it is probably less than 1% of the total impact. From a customer perspective, it really does not have significant impact to them.

Speaker #2: When you think about the total number of specialties and steel cost that's in the asset, it's probably less than 1% of the total impact.

Speaker #2: So, from a customer perspective, it really doesn't have significant impact to them.

Speaker #5: That's a good point, Brian. Thanks.

Lorie Tekorius: Good point, Brian. Thanks.

Speaker #1: Okay. Thanks for that.

Harrison Bauer: Okay. Thanks for that. Maybe moving to the leasing side of things, the pretty substantial step up in your lease fleet quarter-over-quarter. Can you walk through how you are thinking about building for your own fleet versus buying in the secondary market to grow that fleet over time? How much of the step up in leasing CapEx is related to producing more versus buying more in the secondary market?

Speaker #5: And maybe moving to the leasing side of things—the pretty substantial step up in your lease fleet quarter over quarter. Can you walk through how you're thinking about building for your own fleet versus buying into the secondary market to grow that fleet over time?

Speaker #5: And how much of the step-up in leasing capex is related to producing more versus buying more in the secondary market?

Speaker #2: Yeah, it's Brian Harrison. So it's really kind of a quarter-by-quarter call, to be honest, because we're looking at our concentration, we're looking at our covenants within our debt financing agreements.

Brian Comstock: It is Brian Harrison. It is really kind of a quarter-by-quarter call, to be honest, because we are looking at our concentration, we are looking at our covenants within our debt financing agreements. We are looking at how we balance these things materially each quarter. As books come to market, we evaluate whether or not that fits into our overall strategy from not only a concentration perspective and a risk perspective, but also from a commercial customer perspective. Then we weigh that against what we are building ourselves internally. That is going to shift from quarter-to-quarter, depending on how that looks. It really is about managing the fleet in a very prudent and disciplined way.

Brian Comstock: It is Brian, Harrison. It is really kind of a quarter-by-quarter call, to be honest, because we are looking at our concentration, we are looking at our covenants within our debt financing agreements. We are looking at how we balance these things materially each quarter. As books come to market, we evaluate whether or not that fits into our overall strategy from not only a concentration perspective and a risk perspective, but also from a commercial customer perspective. Then we weigh that against what we are building ourselves internally. That is going to shift from quarter-to-quarter, depending on how that looks. It really is about managing the fleet in a very prudent and disciplined way.

Speaker #2: We're looking at how we balance these things materially each quarter. And so, as books come to market, we evaluate whether or not that fits into our overall strategy.

Speaker #2: From not only a concentration perspective and a risk perspective, but also from a commercial customer perspective. And then we weigh that against what we're building ourselves internally.

Speaker #2: And so, that's going to shift from quarter to quarter depending on how that looks. But it really is about managing the fleet in a very prudent and disciplined way.

Speaker #5: And I think discipline is you're spot on. That's what it is, is looking at what are we building, and what are those other opportunities that we can make an investment, whether it's investing in the cars that we're building or that someone else is putting out on the market to improve the quality and diversification of our on the balance sheet fleet.

Lorie Tekorius: I think discipline is, you're spot on. That's what it is looking at what are we building and what are those other opportunities that we can make an investment, whether it's investing in the cars that we're building or that someone else is putting out on the market to improve the quality and diversification of our

Brian Comstock: Yep

Lorie Tekorius: on the balance sheet fleet.

Speaker #1: And Harrison, I would just add, as we mentioned back a number of years ago, on targets, we're investing up to $300 million a year in the lease fleet.

Michael Donfris: Harrison, I would just add, as we mentioned back a number of years ago on targets, we're investing up to $300 million a year in the lease fleet. Really that's not really impacting really how we're thinking about that, so.

Speaker #1: And so really, that’s not really impacting how we’re thinking about that. So, broad strokes, is there a target size of fleet that you’d want to get to by end of fiscal 2027?

Harrison Bauer: Okay, thanks. Broad strokes, is there a target of size of fleet that you'd want to get to by end of fiscal 2027? Maybe just some of your thoughts on the secondary market as a seller and where you would expect gains to land in the Q4, what might be embedded in your guide, and just an early look on gains on sale into next year. Thank you.

Speaker #1: And maybe just some of your thoughts on the secondary market as a seller, and where you would expect gains to land in the fourth quarter.

Speaker #1: What might be embedded in your guide? And just an early look on gains on sale into next year. Thank you.

Speaker #2: Yeah, I'll take maybe the more strategic question. As we've stated publicly—and we continue to follow this rule—we're going to invest, as Michael said, about $300 million a year.

Brian Comstock: Yeah, I'll take maybe the more strategic question is, we've stated publicly, and we continue to follow the rule that we're going to invest, as Michael said, about $300 million a year. Do we have an ultimate goal of size in mind? No. We do want to transform the company to where the recurring revenue from the leasing is more substantial or as substantial as the manufacturing income. What does that mean? I don't know that we can tell you that precisely, because some of it depends on mix and the previous question which you had, which was relative to how many of the new cars are going to go into the fleet versus how many cars we acquire in the secondary market. Because it's not about overall fleet numbers. It's really about the quality of assets and the earning power of each of those assets.

Speaker #2: Do we have an ultimate goal in terms of size in mind? No. But we do want to transform the company so that recurring revenue from leasing is more substantial, or at least as substantial, as the manufacturing income.

Speaker #2: And so, what does that mean? I don't know that we can tell you that precisely, because some of it depends on mix and the previous question that you had, which was relative to how many of the new cars are going to go into the fleet versus how many cars we acquire in the secondary market.

Speaker #2: Because that's not about overall fleet numbers; it's really about the quality of assets and the earning power of each of those assets.

Speaker #3: That's a really good point. That's something we talk a lot about here internally—we don't want to be spending money just so we can say we grew a fleet if it's not a good quality fleet.

Lorie Tekorius: That's a really good point. That's something we talk a lot about here internally, is we don't want to be spending money just so we can say we grew a fleet if it's not a good quality fleet.

Speaker #3: So, that's where I'm really proud of the team over the last couple of years—the focus on growing a quality fleet, which I think you can see from the first half of our fiscal year, where we had some substantial gains on sale, taking those opportunities into consideration.

Brian Comstock: Yeah.

Lorie Tekorius: That's where I'm really proud of the team over the last couple of years, is the focus on growing a quality fleet, which I think you can see from H1 of our fiscal year, where we have some substantial gains on sale, taking those opportunities into consideration. My recollection on gains on sale for the rest of the fiscal year is they're going to be probably fairly modest. Michael, I'll let you respond to that.

Speaker #3: My recollection on gains on sale for the rest of the fiscal year is they're going to be probably fairly modest, but Michael, I'll let you respond to that.

Speaker #1: Right, right. We'll continue to look across the fleet and determine what makes sense as we think about concentration, as we think about—just opportunistically—what's out there.

Michael Donfris: Right. We'll continue to look across the fleet and determine what makes sense as we think about concentration, as we think about just opportunistically what's out there. You will see that it's going to probably wind down in Q4. I would just say about 2027, it's a little bit early for us to start really kind of getting out there in terms of what we'll deliver in 2027, but we're going to go into planning here pretty soon and be ready to talk about that when the time comes.

Speaker #1: But you can—you’ll see that it’s going to probably wind down in the fourth quarter. And I would just say about 2027, it’s a little bit early for us to start really kind of getting out there in terms of what we’ll deliver in 2027, but we’re going to go into planning here pretty soon.

Speaker #1: And be ready to talk about that when the time comes.

Speaker #3: And I think that's why having the liquidity that you highlighted, Michael, is so important—because we want to be able to take advantage of whatever situation. We unfortunately do not have a crystal ball into all of the other asset owners to know when they might be putting certain fleets out on the market.

Lorie Tekorius: I think that's why having the liquidity that you highlighted, Michael, is so important, because we want to be able to take advantage of whatever situation. We unfortunately do not have a crystal ball into all of the other asset owners to know when they might be putting certain fleets out on the market. We want to be able to have strong liquidity so we can execute as it makes sense for our fleet.

Speaker #3: So, we want to be able to have strong liquidity so we can execute as it makes sense for our fleet.

Speaker #1: Lorie, Brian, Michael, thank you all for your time today.

Harrison Bauer: Lorie, Brian, Michael, thank you all for the time today.

Speaker #2: Thank you.

Lorie Tekorius: Thank you for your attention.

Speaker #5: Thank you, Harrison.

Michael Donfris: Thank you.

Speaker #1: The next question will come from Ken Hexter with Bank of America. Please go ahead.

Operator 2: The next question will come from Ken Hoexter with Bank of America. Please go ahead.

Operator: The next question will come from Ken Hoexter with Bank of America. Please go ahead.

Speaker #6: Hi, it's Adam Roskowski on for Ken Hexter. Thanks for taking my question. Maybe just starting on the guidance—so, no change to the revenue outlook, but lowering the midpoint of deliveries, and gross margin, and EPS.

Adam Ritzer: Hi, it's Adam Ritzer on for Ken Hoexter. Thanks for taking my question. Maybe just starting on the guidance. No change to the revenue outlook, but lowering the midpoint of deliveries and gross margin and EPS. Maybe just, I know you noted some shift into 2027, but with revenue flat, is that implying a higher selling price per car? Is there more maintenance revenue kind of baked into that? Maybe just help on how should we interpret from a mix production leasing standpoint as well. Thanks.

Adam Roszkowski: Hi, it's Adam Roszkowski on for Ken Hoexter. Thanks for taking my question. Maybe just starting on the guidance. No change to the revenue outlook, but lowering the midpoint of deliveries and gross margin and EPS. Maybe just, I know you noted some shift into 2027, but with revenue flat, is that implying a higher selling price per car? Is there more maintenance revenue kind of baked into that? Maybe just help on how should we interpret from a mix production leasing standpoint as well. Thanks.

Speaker #6: So maybe just—I know you noticed some shift into 2027, but with revenue flat, is that implying higher selling prices per car? Is there more maintenance revenue kind of baked into that?

Speaker #6: Maybe just help on how we should interpret this from a mixed production leasing standpoint as well. Thanks.

Speaker #2: No, that's a really good question. As we get through looking at the fourth quarter, obviously we're getting closer to what's actually happening. And as we look across what we see, we are, as I mentioned in my prepared remarks, seeing a little bit move into 2027.

Michael Donfris: No, that's a really good question. As we get through looking through the Q4, obviously we're getting closer to what's actually happening. As we look across what we see, we are, as I mentioned in prepared remarks, we are seeing a little bit move into 2027. Also what we start looking at in terms of how much we were going to ramp up in Q4 and ramp up further, we just haven't had to need to do that. There's been a little bit on absorption that's impacting us as well. Really a combination of those things. I wouldn't read that much into it. I'd say we're just getting much more closer to being able to call the year.

Speaker #2: And also, what we started looking at in terms of how much we were going to ramp up in Q4 and ramp up further is, we just haven't had the need to do that.

Speaker #2: So there's been a little bit on absorption that's impacting us as well, and so really a combination of those things. I wouldn't read that much into it.

Speaker #2: I'd say we're just getting much closer to being able to call the year.

Speaker #3: And the other thing that I would point out is on the revenue is while the range didn't change, it's a pretty it looks like it's a small range, but it's really a $100 million, right?

Lorie Tekorius: The other thing that I would point out is, on the revenue is, while the range didn't change, it looks like it's a small range, but it's really $100 million, right?

Speaker #2: Right. Right.

Michael Donfris: Right. There's still enough there.

Speaker #1: There's still enough there.

Speaker #3: Yeah.

Lorie Tekorius: Yeah.

Speaker #1: Got it, thanks for that. Maybe just then, going to 2027, how much visibility do you have into your production schedules? You called out industry forecasts to 34,000 from 25,000 this year—a 36% increase.

Adam Ritzer: Got it. Thanks for that. Maybe just going to 2027, how much visibility do you have into your production schedules? You called out industry forecasts to 34,000 from 25,000 this year, a 36% increase. Is that the right baseline to be thinking about the step-up into next year? Any thoughts around that? Thanks.

Adam Roszkowski: Got it. Thanks for that. Maybe just going to 2027, how much visibility do you have into your production schedules? You called out industry forecasts to 34,000 from 25,000 this year, a 36% increase. Is that the right baseline to be thinking about the step-up into next year? Any thoughts around that? Thanks.

Speaker #1: Is that the right baseline to be thinking about for the step-up into next year? Any thoughts around that? Thanks.

Speaker #3: Well, we're not prepared. I think, as Michael said, we're not really prepared to give explicit guidance on 2027. We do have—we're very happy with the pipeline that we have.

Lorie Tekorius: Well, I think as Michael said, we are not really prepared to give explicit guidance on 2027. We are very happy with the pipeline that we have. We do believe that those are going to convert into orders. It is just the timing of when they convert into orders is a little bit difficult, obviously, to predict in this current environment. Oh, just one quick reminder, that some of the numbers that I was giving were calendar year, and even though I have been here for 31 years, I still can not figure out why we have a fiscal year that begins on September 1. There is a little bit of a mismatch there. Brian, what did I miss on-

Speaker #3: We do believe that the customers are going to convert into orders. It's just the timing of when they convert into orders is a little bit difficult, obviously, to predict in this current environment.

Speaker #3: And oh, just one quick reminder: some of the numbers I was giving were calendar year. And even though I've been here for 31 years, I still can't figure out why we have a fiscal year that begins on September 1.

Speaker #3: So there's a little bit of a mismatch there. But Brian, what did I miss on?

Speaker #2: No, I think.

Brian Comstock: No, I think-

Speaker #3: What you're thinking about for 2020, our fiscal '27.

Lorie Tekorius: What you're thinking about for our fiscal 2027.

Speaker #2: Yeah. When you think about fiscal '27, and the visibility that we have going in, I think about it in terms of backlog. So, backlog is at 13,800 cars, roughly, as publicly disclosed.

Brian Comstock: When you think about fiscal 2027, the visibility that we have going in, I think about it in terms of backlogs. Backlogs at 13,800 cars, roughly, publicly disclosed. Obviously, we continue to renew that backlog on a quarter-by-quarter basis. When you think about it, if we're going to produce historically kind of along the same lines that we've always historically produced, we've got visibility for the first several months into the year.

Speaker #2: Obviously, we continue to renew that backlog on a quarter-by-quarter basis. So, when you think about it, if we're going to produce historically kind of along the same lines that we've always historically produced, we've got visibility for the first several months into the year.

Speaker #3: Yeah, and I would say actually, it probably goes further out. It's just that there are different gaps, and sometimes having those gaps—

Lorie Tekorius: I would say actually, probably goes further out. It's just.

Brian Comstock: Yeah

Lorie Tekorius: Different gaps. Sometimes having those.

Brian Comstock: It's different lines, different gaps. Yeah, exactly.

Speaker #2: It's different lines, different gaps, different—yeah, exactly.

Speaker #3: And sometimes, having those gaps has been very beneficial for us because that means that when our customers start nearing the end of their calendar year and spending their allotted dollars, we've seen some interesting activity at times happen towards the end of a calendar year.

Lorie Tekorius: Sometimes having those gaps has been very beneficial for us because that means that when our customers start nearing the end of their calendar year,

Brian Comstock: Yep

Lorie Tekorius: Spending their allotted dollars, we've seen some interesting activity at times happen towards the end of a calendar year.

Speaker #2: Yeah.

Brian Comstock: Yeah.

Speaker #3: Not to get too excited.

Lorie Tekorius: Not to get too excited.

Speaker #1: Thanks for that. And then, last one: you noted some of the trucking market drivers and the potential impacts that could have on intermodal-type cars, and it sounds like the mix is a bit broad-based, based on what you've been calling out.

Adam Ritzer: Thanks for that. Last one. You noted some of the trucking market drivers, and potential impacts that could have on intermodal type cars, and it sounds like the mix is a bit broad-based on what you've been calling out. Just any thoughts on rail service, these current levels, and the extent that a deterioration in service or fluidity could spur maybe some upside into fiscal or calendar year 2027, however you want to frame it.

Adam Roszkowski: Thanks for that. Last one. You noted some of the trucking market drivers, and potential impacts that could have on intermodal type cars, and it sounds like the mix is a bit broad-based on what you've been calling out. Just any thoughts on rail service, these current levels, and the extent that a deterioration in service or fluidity could spur maybe some upside into fiscal or calendar year 2027, however you want to frame it.

Speaker #1: But just any thoughts on rail service at these current levels, and the extent that that, or a deterioration in service or fluidity, could spur maybe some upside into fiscal or calendar year 2027—however you want to frame it?

Speaker #3: Sure. Again, we've been able to navigate any variety of markets. My overarching message is always about the railroads providing better service to our shipper customers, so that we can grow modal share by rail. Let's make the pie bigger, because then, even if we stay at our current market share, everybody gets a bigger piece of pie.

Lorie Tekorius: Sure. We've been able to navigate any variety of markets. My overarching message is always about the railroads providing better service to our shipper customers so that we can grow modal share by rail. Let's make the pie bigger, because then even if we stay at our current market share, everybody gets a bigger piece of pie. That's the focus. I do think that that is what the Class Is want to do. It's just, I'm very thankful to not be the CEO of a Class I railroad because there's a lot more levers and dials to manage than on my side. Brian, what are you seeing?

Speaker #3: So that's the focus. I do think that is what the Class Ones want to do. It's just, I'm very thankful to not be the CEO of a Class One railroad, because there are a lot more levers and dials to manage than on my side.

Speaker #3: Brian, what are you seeing?

Speaker #2: Yeah, we're definitely seeing a resurgence of intermodal on rail. I think it'll be interesting to see how railroads can respond to that from a labor perspective and whether or not they have power available on the network.

Brian Comstock: Definitely we're seeing a resurgence of intermodal on rail. I think it'll be interesting to see how railroads can respond to that from a labor perspective and whether or not they have power available on the network. You're starting to see a degradation of velocity on rail. That's always good for the car builders, not necessarily good for the rail system itself. We're always a bit conflicted by that. One proxy we've always used, and it's proved to be a fairly close signal, is for every mile per hour of degradation in velocity or gain, it's about a 40,000 car demand change network-wide. You think about degrading velocity, increased pressure on intermodal to grow and some of these other areas, that could bode well for pent-up demand in our space.

Speaker #2: You're starting to see a degradation of velocity on rail. That's always good for the car builders, but not necessarily good for the rail system itself.

Speaker #2: So we're always a bit conflicted by that. But one proxy we've always used, and it's proved to be a fairly close signal, is for every mile per hour of degradation in velocity or gain, it's about a 40,000-car demand change network-wide.

Speaker #2: So you think about degrading velocity increases, pressure on intermodal to grow, and some of these other areas. That could bode well for pent-up demand in our space.

Speaker #1: I appreciate the time. Thank you.

Adam Ritzer: Appreciate the time. Thank you.

Adam Roszkowski: Appreciate the time. Thank you.

Speaker #4: Again, if you have a question, please press star, then one. Please stand by as we poll for questions. Seeing no questions, this will conclude our question and answer session.

Operator 2: Again, if you have a question, please press star and then one. Please stand by as we poll for questions. Showing no questions, this will conclude our question and answer session. I would like to turn the conference back over to Lorie Tekorius for any closing remarks.

Operator: Again, if you have a question, please press star and then one. Please stand by as we poll for questions. Showing no questions, this will conclude our question and answer session. I would like to turn the conference back over to Lorie Tekorius for any closing remarks.

Speaker #4: I would like to turn the conference back over to Lorie Tekorius for any closing remarks.

Speaker #3: I just want to say thank you, everyone, for your attention and for your time, learning, and understanding more about Greenbrier. I wish everyone a safe and happy Fourth of July.

Lorie Tekorius: I just want to say thank you everyone for your attention and for your time learning and understanding more about Greenbrier, and I wish everyone a safe and happy 4th of July.

Operator 2: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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

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