Thank you for standing by. My name is Ian, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wabash First Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. I would like to hand the call over to Ryan Reed, Vice President, Investor Relations. You may begin your conference.

Thank you, and good morning, everyone. We appreciate you joining us on this call. With me today are Brent Yeagy, President and Chief Executive Officer; Pat Keslin, Chief Financial Officer; and Mike Pettit, Chief Growth Officer. Before we get started, please note this call is being recorded. I'd also like to point out that our earnings release, the slide presentation supplementing today's call, and any non-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'll hand it off now to Brent.

Thank you, Ryan. Let me start by level setting where we are in terms of the business environment compared to what we expected at the beginning of the year, there's no question that conditions have softened. We're seeing it across the Board. Our customers are sharing that their own customers are delaying decision making, which is creating a cascading effect that slows activity across our business. As a result, third-party industry forecasts for 2025 have been steadily revised downward over the past several months and we've seen recent confirmation during this earnings cycle with many carriers reducing their CapEx estimates for the year. This isn't isolated to any one product or market. It's a broader macro driven slowdown and while the situation certainly presents a fresh set of challenges, in some ways it's reinforcing the strategic importance of how we're organized Wabash over the last few years. One of the key benefits of our work structure is that it allows us to be agile. While we're running our downturn playbook on transportation solutions to take costs out where necessary to align with near-term demand conditions, we're continuing to execute without distraction on growth opportunities within the Parts & Services side of the business, which achieved positive year-on-year revenue growth during the first quarter. We expect our sustained efforts to grow Parts & Services and strategically integrate these offerings across our equipment solutions portfolio to play a key role in helping us achieve greater balance over cyclicality as we move forward. As I mentioned, during a difficult quarter for equipment demand, we were able to grow revenue in our Parts & Services business. I'd like to call out a couple of highlights from the quarter. First off, I'd like to congratulate our upfit team for their efforts to lead a doubling…

Thanks, Brent. I'd like to take a moment to expand on how we're continuing to move Wabash toward being a more durable, resilient and higher margin business. Central to that work is our strategic initiative to grow our Parts & Services revenue, generating greater recurring revenue to reduce the company's exposure to cyclicality. Our Parts & Services offerings sit at the intersection of seamlessly serving our customers, our first to final mile portfolio and connected services that deliver life cycle solutions. During the quarter, we were able to demonstrate tangible progress in all these areas through organic and strategic growth coupled with some nice technological accelerators. I'd like to personally thank Dave Hill and his Parts & Services team for their Q1 sequential and year-over-year growth in the face of a very challenging industry and macroeconomic backdrop. One area where we've seen outside growth is in our upfit value stream. In the first quarter, we doubled the volume of units moving through this business, which includes shelving systems, lift gates, partitions, roof racks, thermal solutions and most recently ready-to-mount truck bodies. These offerings allow customers to tailor their equipment to their specific operational needs and our growing competency in this space is allowing customers to increasingly see Wabash not just as an equipment provider but as a solutions partner. As demand for upfit solutions grows, Wabash is building a national network that delivers faster turnaround times and brings deep industry expertise to customers. With the support of our national dealer network, our momentum is being driven by an expanding footprint of Parts & Services locations underscored by a new Chicago land upfit location opening in Q2 of this year and in an Atlanta location opening in the second half of 2025. We recognize that potential for meaningful value creation sits…

Thanks, Mike. Beginning with a review of our quarterly financial results, in the first quarter, our consolidated revenue was $381 million. During the quarter, we shipped approximately 6,290 new trailers and 3,000 truck bodies. First quarter shipments were below our prior expectations and resulted in a revenue shortfall of about $55 million. While the weaker than anticipated volumes resulted in less fixed cost absorption leading to lower than expected gross margins of 5% and adjusted operating margins of negative 7.2% during the quarter. In the first quarter, adjusted EBITDA was negative $9 million or negative 2.4% of sales. Finally, for the quarter, adjusted net income attributable to common stockholders was negative $24.8 million or negative $0.58 per diluted share. Moving on to our reporting segments, Transportation Solutions generated revenue of $347 million and operating loss of negative $10 million. Overall demand did not fill in as expected in some of our equipment businesses that experienced quick turnarounds from order to shipment, leaving us overexposed to labor costs in those areas during the quarter, we have taken action to right size direct labor and production support costs going forward. Parts & Services generated revenue of $52 million and operating income of $6.9 million. While Parts & Services is certainly less cyclical, it's also not immune from freight market conditions, so we view the year-over-year revenue growth in this segment as a particularly positive sign. Year-to-date operating cash flow was flat with sequential working capital trends in Q1 being incrementally helpful to operating cash driven primarily by widening out of accounts payable during the quarter. Additionally, the increase in inventory experienced during the first quarter was due to a gap between equipment production and shipments during the quarter. Regarding our balance sheet, our liquidity, which comprises both cash and available borrowings, was…

Thank you. [Operator Instructions]. Our first question comes from the line of Mike Shlisky with D.A. Davidson. Your line is open.

Good afternoon, and thanks for taking my questions here. So your updated full year outlook seems to imply decremental margins is about 75% and when I look back to previous downturns prior to the pandemic, things were kind of similar back then. I mean you -- there's now an EPS loss coming up here in 2025 and I thought you had made quite a few strides since those last down cycles to avoid such a big decline in the EPS. I'm kind of just curious, have you had any problems or issues with purchasing steel, pricing of steel or anything else that's kind of throwing off the margin profile very temporarily here other than trailer volumes?

Yes. So we'll have to reconcile those decremental margins with you, Mike. We don't quite have that that big of a drop. But as it pertains to your specific question, all of the pricing pressure around commodities is built into our full year guide as well as the price that we're going to see in our backlog right now from the end sale. So I wouldn't say that there we expect a oversized reduction in our profitability certainly over the past three quarters from the first half of 2024, we've seen some pricing pressure relative to that period. But as it plays out for the rest of the year, we should see Q2 through Q4 being in a similar position to what we saw in the first quarter in terms of price and profitability.

Yes. I think just in the quarter, we reported on, one of the issues is we had aspects of our business that were still in the end of February, beginning of March in an expansion mode with still receiving feedback post tariff, call it saber rattling, that we're still moving forward in that direction from a customer standpoint and that that precipitously dropped over the last three to four weeks really probably by the mid-March timeframe was starting to come out. And so there's a level of labor imbalance that was created very quickly both in truck bodies and vans that had a hangover through the balance of the quarter that's less about what structural changes we've made and much more about a short period of time where a substantial amount of labor was ineffective and had to be quickly right sized with changing market dynamics.

Okay. Okay. Thanks for that color. I also want to just ask about Parts & Services well. Concerns about new volumes coming in, I can understand that. Does that imply that maybe the outlook for Parts & Services actually may have improved for the rest of the year? Given if people are being asked to maintain their old trailer fleets with longer or have things kind of stabilized from where you thought they were last quarter?

Yes. They haven't -- hasn't gone up, Mike. But what we're really excited about is the fact that we're able to maintain what that implied level of growth was in Parts & Services, even though we've seen some weakness in the OE side of the business and that's what we've always thought could happen. And we're seeing that in real time. And we do continue to sell most of those parts into the same end market. So there's cyclicality there, but it's much less and we've got some growth to offset some of the cyclicality that exists. So it's a really good story. We think that we can grow the business and continue to grow it. We expect to see sequential growth into Q2, 3 and 4. So it's not going up from what we said at the year-end call, but its -- we're able to maintain it.

Just to follow-up there on the profitability, I know there was tough comps, but it was down quite a bit over the prior year in the Parts & Services segment from an operating margin standpoint. Can you maybe share what might have been going on there? I mean you had higher sales. What would be the reason for a decline in the profitability?

Now you hit on it. We had a really strong Q1 2024. We did expect to see a year-over-year step down. I've said pretty consistently we think this business will be a high-teens EBITDA business across the full year, we expect still to be that high-teens. So we're a little below that in Q1. A little bit of mix in Q1 2025 that caused that to be a little lower we hope. But we came up from Q4 2024, which we expected. We expect to step margins up into the second half of 2025. So we expect to finish the year in that high-teens EBITDA level for Parts & Services in 2025.

Great. Thanks for that information. I'll pass it along. Appreciate it.

Thanks, Mike.

Thanks, Mike.

Our next question comes from the line of Jeff Kauffman with Vertical Research Partners. Your line is open.

Hey guys, thank you. So a couple questions. Mike, you mentioned you were still growing tasks despite the environment. Where are total tasks units today?

So there are just over 1,000, Jeff. They were -- I commented there between 500 and 1,000 at the year-end call. Now they're just over 1,000. We're actually seeing some demand for that product even beyond some of the weakness you see on the call it the asset sale trailer. So we think we can grow that business throughout this year. We're trying to really evaluate the market. We don't know exactly how that's going to perform through the rest of the year. But we do think we can see growth in tasks through 2025.

Yes, I would add the unit -- Jeff, it's Brent, the -- from a unit standpoint, Mike alluded to that. But I think the other piece to it is that if you were to look back six months ago, we had a handful of prospective customers that were working through the process of getting business agreements in place, comfortable, starting to experience the service. When you sit here today, we have between 20 and 25 customers that are engaged in understanding how they will use the product. They're either using the product, they're sampling the product, they are putting the business contracts in place, receiving pricing, so that they are poised and ready to use it in a scaled manner as the market decides, whatever market's going to do. So when we think about the positioning of this from a growth standpoint, all the right things are happening to put it in the right position.

Yes, the capability set is increasing as well. So as customers become more interested, we're developing the capabilities necessary to support.

That's helpful. Thank you. Also, it kind of looks like the earnings forecast is kind of flat from this point to the rest of the year, give or take. And I know you talked about costs in the first quarter and how you flushed out some of those excess costs and there's going to be more G&A to match the environment. But I guess, I was wondering, you gave it a revenue outlook of about $420 million to $460 million for the second quarter about $1.8 billion on the year. What kind of deliveries, whether it be trailer deliveries or final mile deliveries are kind of underlying those revenue forecasts?

Yes, Jeff, we've got a slight step up in trailer shipments in Q2 and we've got again, a slight step up in truck body shipments. So really not looking for anything heroic in Q2.

And then for the full year, I'm assuming that you're not undercutting the ACT Research forecast at this point, which has come down; I think to about 205 on the year, give or take. If I look at the market share that you had in the first quarter and who knows if that's the right way to think about it, about 13.3% in the first quarter, are we thinking kind of use that as a guide to similar percentage for the year so we can kind of -- I'm in the 28,000 range on trailer deliveries based on that. How should I think about 6,290 in the first quarter, slight step up in the second? Is that the right way to think about it?

It is. Yes. So I think all of your inputs there are going to be certainly in the right ballpark, Jeff.

Okay. Good enough for me. Thank you also for giving the liquidity update because I think with the shares trading where they are, we're shifting from valuing you on earnings to valuing on liquidity. So could you kind of walk through that liquidity? I see the cash on the balance sheet and I see the total liquidity number. But if this environment's a little worse than expected, I know there's levers you can pull, but how should we think about access to liquidity if needed?

Yes. So we have the high yield bonds of $400 million that mature in 2028 and then on top of that we have our revolver, which provides additional liquidity. So the $310 million that I mentioned as of the end of the first quarter includes that cash on the balance sheet plus the availability on the revolver. As we think about capital allocation, I'll say that, we're going to weight -- weigh our options and a lot of our investment decisions will depend on the way that the markets evolve over time. So we right now have a plan to that capital number that I mentioned of $50 million. We also pay the dividend, just like we always do. We will continue to do that, but then as it pertains to share repurchases, traditional CapEx investment, more investment in tasks, all of those items we will evaluate on an as needed basis certainly to what our liquidity position looks like and what we expect the future markets to look like.

All right. And then just kind of a swag question and who knows the right answer? But I'm asking you for your best guess. We had a weird first quarter, right? I mean, weather was a factor, we didn't talk much about it, but it did affect the manufacturing facilities and the number of days they worked. There was probably not an alignment of costs relative to volume. It was a function of kind of how the market surprised in the quarter. And you talked about how we've got that back to where it should be as of quarter end. So I think we got this surprising operating loss relative to the units you delivered. And I think Mike Shlisky kind of hinted at it. How did margins do this? Because we thought margins were stronger than this if you wouldn't have had the weather, right? So let's figure out the weather impact as best we can. And you had your cost structure in the right place from the beginning of the quarter. What might this quarter have looked like?

So I think a good way to attack that, Jeff is, we feel like in Q2 here we do have the cost stack in better condition and we're guiding to a quarter that, that looks roughly like a $0.30 loss for Q2 just given where volumes are at. And again, they're not exactly the same, but I think volumes from Q1 to Q2 are going to be in a similar ballpark. So I think that's probably a good way to think about what Q1 could have looked like with maybe better information.

One aspect I would add to that, Jeff, is that even looking at everything that Ryan said absolutely is correct. But I say in additional, when we think about Q2 and Q3 specifically, we are still navigating through a period of whether it be uncertainty increase or uncertainty reduction. And that's a crystal ball that we're all trying to search for. There is still some level of assumption built in even to that level of projected Q2 earnings that estimates that we're still saddled with. I'll just call it the disruptive nature of the uncertainty movement within the schedule. Just noise that weighs on the profitability of the business. We have to take that into account. So even with what Ryan said, if magically executive policy change and some level of stability was obtained, that would be positive relative to how we would operate in Q2 and Q3, which would dramatically both improve the cost and absolutely in Q3 improve the volume that we're seeing right now. So this is the noise is affecting us in a very non-traditional way. And how you would think about the normal execution of cost and execution inside the business.

No, that's helpful. Last follow-up, so you lost $0.58 in the first quarter. The midpoint of the guidance is $0.60 for the whole year. You've guided to a midpoint of $0.30 loss for the second quarter. The implication there is the net of 3Q and 4Q are going to be positive $0.30 however that plays out. Is that based on the idea that at some point we get clarity in the next couple months and that clarity drives better industry volume in the second half of the year kind of what's driving that, that expectation that we're going to make $0.30 in the second half of 2025.

It is. Yes, I would say, it is an assumption that uncertainty does not go up and so therefore doesn't worsen; it is not necessarily assuming that we get a near-term meaningful improvement in demand and operating conditions. That's how I would frame it right now, because we can't necessarily know how to predict that. So we're assuming there's a level of noise that perpetuates the year at this point. And so it's based on what we know, not what we need it to be.

Okay. And on the theory that at some point we will have an upcycle and we will go back to buying trailers. I get that. Well, good luck and thank you.

Thanks, Jeff.

Thank you.

There are no further questions at this time. I'll hand things back over to Ryan Reed for closing remarks.

Thanks, Ian, and thanks, everybody, for joining us today. We'll look forward to following-up during the quarter.