Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wabash Fourth Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Ryan Reed, VP of Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and thanks for 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. A couple of items before we get started. First, please note that this call is being recorded. I'd also like to point out that our earnings release, the slide presentation supplementing today's call and any non-GAAP reconciliations are available at ir.onewabash.com. Please refer to Slide 2 on our earnings deck for the company's safe harbor disclosure addressing forward-looking statements. I'd also like to mention that you should see a Q&A tab on the lower right-hand corner of your screen. We'd like to encourage investors to submit questions, and we'll do our best to provide answers during the Q&A section of our call. I'll now hand it off to Brent.

Thanks, Ryan. Good morning, everyone, and thanks for joining us today. As we reflect on 2024, it's clear that this has been a pivotal year for Wabash. Building on the record-setting financial and strategic accomplishments of 2023, we continue to demonstrate the improved resilience of our business portfolio during the industry downcycle, and more importantly, we've continued to innovate and invest in a manner that's unprecedented relative to the market conditions. Our ability to maintain a strong balance sheet and stay focused on long-term value creation while navigating short-term challenges has positioned us exceptionally well for 2025 and beyond. We've seen the benefits of a more diversified portfolio of first to final mile solutions, which has been instrumental in stabilizing performance during the challenging market environment. While demand for dry vans has been impacted by freight market weakness, the stability of our truck-buying business has bolstered our broader portfolio. This diversity ensures that Wabash is less exposed to cyclical swings and better positioned to continue executing our strategy across a broad range of market conditions. In 2024, we made significant strides in laying out the strategic groundwork to grow our more recurring Parts & Services revenue streams. A key part of this has been the ongoing development of our Wabash Parts joint venture with HTI, our Wabash Marketplace joint venture with Fernweh Group and the continued broadening of our ecosystem, which includes customers, suppliers, dealers and technology partners. As these initiatives mature, they will allow us to better balance the cyclicality profile of our business portfolio, and they will also transform how we deliver value to our customers from our Trailers as a Service offering to the seamless digital integration of Parts & Services. Together, these initiatives form a foundation for scalable growth as we move toward an exciting future…

Thanks, Brent. I'm pleased to be able to share some key updates on Wabash's growth initiatives and how we are positioning the company for long-term success. Our Parts & Services offerings often sit at the intersection of seamlessly serving our customers, our first to final mile portfolio and our digital transformation. One example of this is our truck body upfitting initiative. In 2024, we upfitted over 1,100 bodies for customers, which provides them with a quick equipment turnaround, combined with location proximity advantages versus a traditional OE sale. This initiative has grown double-digits over the past few years, and we expect that will continue in 2025. I'd like to thank the team that is making this growth possible, and I believe this will be a big part of a significant growth year in 2025 for Parts & Services. One of the most significant areas of progress is the continued expansion of our preferred partner network, or PPN. During Q4, we announced the addition of 14 locations, extending their reach of Wabash Genuine Parts & Services to regions not previously covered by our van trailer dealers. Our PPN now includes partners such as Blaine Brothers, Great Western Trailer, North American Trailer and US Trailer Parts. These partnerships strengthen our aftermarket support, ensuring our customers have access to expert service and maintenance wherever they operate. The Wabash dealer network has always been an incredible competitive advantage for us, and these additions as well as more to be announced in 2025 will simply strengthen a very capable Parts & Service network. In 2022, we launched Wabash Parts to unify and enhance our parts distribution capabilities. This initiative supports all Transportation Solutions product lines, including van trailers, platform trailers, tank trailers and truck bodies. By leveraging a single distribution channel with multiple centers across…

Thanks, Mike. Looking ahead to 2025, we are entering the year with unparalleled strength and readiness. Our continued investments will create new opportunities for our customers and partners. Combined with our balanced and more resilient portfolio, we are poised to capitalize on what the industry environment gives us to further expand our leadership in the transportation, logistics and infrastructure markets. In the short-term, the industry may need to contend with some incremental complexity in the form of tariffs. I believe it's important to mention that the actions we took as an organization in response to the first round of Trump tariffs has held over the past four years and we feel that our supply chain is very well positioned to insulate Wabash from any direct impacts stemming from tariffs on components manufactured abroad. Thinking more broadly about the potential impact of US tariffs, we've already seen near-shoring activity ramp up for multiple reasons in recent years. To the extent that tariffs act as an accelerant to the nearshore in trend, we believe that foreign imports of goods being replaced by North American manufacturing activity has an outside positive impact on dry van trailer utilization. Looking at our backlog generally, I would describe bookings across most of our businesses and aligning well with our expectations. Industry reports have shown slow 2025 dry van order season thus far. This coincides with customers indicating freight market conditions are likely to follow normal seasonal patterns in 2025 with a modest degree of inflection during the second half of the year. Based on this outlook, the feedback we received from our customers is that they are interested in communicating throughout the year as our dry van needs become more clear rather than booking orders in a lump-sum manner that's traditional for the industry. This is…

Thanks, Brent. Beginning with a review of our quarterly financial results, in the fourth quarter, consolidated revenue was $417 million. During the quarter, we shipped approximately 6,770 new trailers and 3,010 truck bodies. Gross margin was 10.3% of sales during the quarter, while operating margin came in at 0.9%. In the fourth quarter, adjusted EBITDA was $21.1 million or 5.1% of sales. Finally, for the quarter, net loss was $1 million or negative $0.02 per diluted share. Moving on to our reporting segments. Transportation Solutions generated revenue of $370 million and operating income of $17.9 million or 4.8% of sales. Parts & Services generated revenue of $48.6 million and operating income of $4.5 million or 9.2% of sales. Full year operating cash generation amounted to $117 million, aided by working capital released during the year. Free cash flow for 2024 was $38 million as traditional capital expenditure reduced from peak levels in 2023, a trend we anticipate continuing in 2025. Regarding our balance sheet, our liquidity, which comprises both cash and available borrowings, was $422 million ending December 31. We finished Q4 with a net debt leverage ratio of 1.7 times. Turning to capital allocation during the fourth quarter, we invested $21 million via capital expenditure and invested $6 million in revenue-generating assets for our trailers as a Saervice initiative. We utilized $8.6 million to repurchase shares and paid our quarterly dividend of $3.5 million. For the full year, we invested $72 million in traditional capital expenditures, invested $7 million in revenue-generating assets, allocated $64 million to repurchase shares and returned $14.8 million to shareholders via our dividend. I'd like to take a moment to drill down on share repurchases as we're proud of our consistent track record of repurchase activity. We took out approximately 2.9 million shares during 2024,…

[Operator Instructions] Your first question comes from the line of Mike Shlisky with D.A. Davidson. Please go ahead.

Good afternoon, and thanks for taking my questions here.

Hey, Mike.

Hey, there. I wanted to maybe start off by just a quick thought about the guidance that you just provided. It looks like you've got potentially, at the midpoint at least, a small increase in the revenue side, but then a decline in the margin. I'm curious if you could just give us a little more granular detail as to why that might be taking place. Is some of the investments that you're making ongoing in '25 or mix changes or what might be behind that phenomenon?

Yeah. Mike, Pat here. I will say, if you were to peel back the expense side, and take a look at our SG&A guide, there is going to be a delta year-over-year related to variable compensation expenses. And then, as I just alluded to, legal expenses related to the verdict will also be a headwind for us in 2025 as it relates to margins.

Okay. Great. And then, Brent, as you discussed the freight market being still at a challenging moment, maybe talk about some of the KPIs that you and the team track on a regular basis. I know you're always given us kind of your view, but what KPIs look the most promising right now and which KPIs are maybe the least promising? And what should we be kind of watching for to see when we will start seeing a true inflection in trailer orders?

Yeah, it's a great question. As you can imagine, over the last, I'll just say a decade, we've had a lot of opportunities to think about what are leading indicators and things that we can look at to try to be better predictors of what the future brings. As we sit here today, Mike, I would say one of the things we're really focused on is the underlying subsegment generators of freight within the overall carrier landscape. So, what I mean by that is there are arguably 40-plus different subsectors of freight-generating activity in the United States. Some are much more important than others in terms of where it creates, we'll call it overall freight volume, regional freight volume and its effect on rates in general. And what you're seeing right now and what we're looking for is that there should be a subset of those subsegment freight drivers that are beginning to move in a positive direction, and we're seeing that. Those were not moving. They actually were going in the opposite direction this time last year, right? And that's a fundamental difference from where we're at today than where we were a year ago. So that gives us underlying -- what I want to say, we'll call it conservative optimism in terms of the market beginning to turn because that's really where the market starts to turn is there. And then, those carriers that are more exposed to those subsectors will tend to do better first. And we can somewhat see that by the conversations that we're having with our customers. And we think that's a more straight-line linkage to what really drives the market than some of the lagging indicators that we have tended to use that we would see like tonnage numbers and even the rates themselves are a tail-wagging dog in terms of what really gives you first indication of the market moving. I hope that helps.

Absolutely. I appreciate those comments. Maybe one last one for me. I appreciate, Pat, your comments about the seasonality in the first quarter. Can you give us a little bit more granularity about the rest of the year, specifically, what just took place in the fourth quarter? It was one of the lowest quarters for the industry in quite some time. You also had a challenging quarter on your shipments, too. Do you think at least you can see a positive quarter in the fourth quarter? And would you anticipate potentially other quarters of the year being up at this time?

Yeah, let me try that one. I would say, in general, yeah, we absolutely see that we'll call it air being put in the balloon over the course of 2025 as the market begins to gradually pick up steam. And so, I'm not going to go as far as trying to do year-over-year at this point, but I would just say momentum should build throughout the year. The fourth quarter of 2024, so let me reiterate, 2024 was a very specific event relative to a declining market that just could not sustain itself moving into the fourth quarter. We should be at a different place going into 2025 for the reasons we just talked about. So, I would not anticipate the amount of tail off or tail off in general that we saw in '24. That should not happen. And so, just kind of to the previous statement, I think it's just a general glide up throughout 2025, and then it's all setting itself up for 2026 as people begin to move into full replacement and incremental growth based on what we see starting to show in proverbial green shoes that we really do see right now, and there's a real dichotomy going on out there between what carriers are saying and doing. They want to be very positive. Many of them know it's more positive than it was this time last year, but they don't really want to say it, because they got burned so hard last year. And believe me, I understand that one. But there really is a level of quiet optimism that we're seeing the right things turning.

Got it. I appreciate all those comments, Brent. I'll pass it along. Thank you.

Thanks, Mike.

Your next question comes from the line of Jeff Kauffman with Vertical Research Partners. Please go ahead.

Thank you very much. I was wondering if we could get a deeper dive on the fourth quarter and what happened to profit margins, because not just in the core trailer business, but also in the parts business. It just seemed like a much weaker fourth quarter than one would have expected given the revenues you put on the board.

On parts specifically, Jeff, we had a couple, I'll call it, one-time activity event that happened in Q4 that won't repeat. And as I think about the full year, I have been talking for the last year about we would expect Parts & Services to be high-teens EBITDA margins. I think we're about 18.5% full year EBITDA. I expect that rate to pick back up in 2025. So, it was -- there was a couple of things that happened towards the end of the year that we would not expect to roll in 25%. So, we'd be back on that high-teens type glide path for 2025 for Parts & Services as far as the whole...

Yeah. Just overall, it really does come down to the volume leverage there, where fourth quarter was our lowest in the Transportation Solutions segment, both in trailers and in truck bodies. So that certainly impacts margins.

Well, yeah, I would think as new units aren't being purchased as much, older units would need a little more parts. So, I was just a little surprised by that. Mike, how big is the cost fleet right now? And where do you expect that to be at the end of next year?

Yeah. So, right now, it's still -- I'd say it's in between 500 and 1,000, it's in different phases of full service capabilities that we've been rolling out for the last couple of years. It will grow, we believe, relatively significantly this year. It's going to trend, obviously, with some of the dynamics that Brent was talking about. In terms of the -- early indications are that they're going to need -- if our customers need capacity, we would expect TaaS to be one of the first levers they pull. And we've got several customers now that have a small number of TaaS units in their fleet, but what we're excited about, we have a growing customer base that has some TaaS units in their fleet. So, as they see the capabilities of those, we could see that hit an inflection point mid-year. We're not giving official guidance on unit count for 2025, but we would expect to update that as we see the market unfold in Q1 and Q2. We'll give -- we'll provide a little greater guidance on the next couple of calls what we think that will be.

Mike, maybe you can give some insight just into, I'll call it, new customer acquisition and early-stage onboarding just in the last 45 days.

Yeah. Just -- yeah. So, it trends with what we've seen in the markets, little -- maybe seeing some early signs of life. We have brought on several new customers just in the last 45 days. Again, it's a small unit count, but new customers that we believe could be much larger users of TaaS. And we're also developing some capabilities and look for some -- potentially some announcements in the next couple of weeks to have additional capabilities that we think will be key to the TaaS offering longer term, how we can help our customers with some of their logistics needs around security and surety of load. So that's -- it's all happened, and it has happened pretty quickly, and we think that will -- it's going to be a positive trend throughout '25.

One more question for Brent. Kind of go back to 10,000 feet and look at what's going around in the market, will we tariff, will we not tariff, not 100% sure, but don't you have less of a footprint in Mexico than most of your competitors that build trailers for a living? And I guess the second part of that is, trailer pools were a big deal a few years ago. That talk went away in the downturn, but listening to some of the trucking companies, they're talking about trailer pools still being a thing. So, separate from kind of what happens if we tariff Mexico and does that change your competitive position, what customers saying to you about tariff or trailer pools right now?

Great. Those are two good questions. So, let's start with tariffs. Yeah, Wabash on two different fronts are extremely well positioned relative to whatever happens from a tariff standpoint. So, let's go supply chain side first. We made substantial strategic changes in our supply chain construct, coming out of the 2018 truck tariff onslaught. And so, we have dramatically, dramatically reduced our exposure to that to make it almost de minimis at this stage. So, we are -- we have built quite a moat around the incoming supply tariff risk. We know our competitors are still substantially exposed to that tariff risk across many different dimensions. So, we feel pretty good about that. From a manufacturing location standpoint, we have one facility that has some leveled exposure to potential tariffs on Mexico. Our competitors have substantially more exposure than we do and we have available capacity in our domestic operations to shift production as needed to minimize those tariff impacts if they were to occur. So, we watch them very closely. We don't know exactly how they will or in what construct or how long. But we know that we have put the right pieces in place to manage it one way or the other. So, we're not overly concerned at this point.

All right. And then, trailer pools, customer discussions, I'm just a little surprised to hear a couple of truckers actually talking about trailer pool and they call it powered by the hour, I guess, but trailer pool is a growth concept, yeah...

Yeah. So, trailer pools as a concept are absolutely still in play. You're right, the rhetoric and kind of the momentum of it stalled as the market began to constrict, but the concept is still there because it's extremely valid in remaking up the, call the asset management model and cost model and the flexibility for these fleets. That's going to continue to go forward. And what we're finding is it is changing the way that we can position the TaaS fleet going forward as many of the inquiries that we're having are from larger shippers and carriers that are seeing now different ways in which they can construct layers of a trailer pool concept. So, we see that still -- we'll see that -- we believe we will see that trend/concept grow and become much more publicly talked about once the market kind of gets into full swing as we approach second half of '25 going in the $26 million. And that's a lot of the inquiries. Again, we've had our people are wanting to experiment around the edges because they see a more efficient model for them, possibly layering in TaaS as part of that solution. Mike, do you want to...

Yeah. I just going to add. So, TaaS can solve a lot of our customers' needs, carriers and shippers, but fundamentally, it really plays well as a solution for a customer that wants to deploy a trailer pool. And that's a place where we think it will continue to grow and scale. And I think some of the same things you're hearing, Jeff, are some of the reasons why I have optimism is we had capabilities to TaaS, it will drive demand for that product to our customers that are looking to deploy.

When Mike talks about things that will drop and capabilities we're creating, just providing a physical trailer in a pool concept what we're finding is not enough. And what you have to do is think about every barrier that it takes to seamlessly agilely, high flexibility and with speed being able to get that asset upon, you call it, declaration of need to revenue producing. So, the ecosystem in the marketplace, what we're doing is constructing this landscape of all pieces that make it easy, frictionless to say, I can create revenue if I just had, and then we can provide the rest of the equation to get them making more money.

Okay. Well, good luck, and thank you.

Thanks, Jeff.

That concludes our Q&A session. I will now turn the call back over to Ryan Reed for closing remarks.

Thanks, Kate, and thanks for everyone joining us today. We look forward to following up during the quarter.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.