Freightcar America, Inc.

Welcome to FreightCar America's second quarter and fiscal year 2026 earnings conference call. At this time, all participants are in our listen-only mode. For those of you participating on the conference call, there will be an opportunity for your questions at the end of today's prepared comments. Please note this conference is being recorded. An audio replay of the conference call will be available on the company's website within a few hours after this call. I would now like to turn the call over to Chris O'Day with JBG Advisory.

Thank you and welcome. Joining me today are Nick Randall, President and Chief Executive Officer, Mike Riordan, Chief Financial Officer, and Matt Tonn, Chief Commercial Officer. I'd like to remind everyone that statements made during this conference call related to the company's expected future performance, future business prospects, or future venture plans may include forward-looking statements as defined under the private securities litigation reform act of 1995. Participants are directed to FreightCar America's Form 10-K for description of certain business risks, some of which may be outside of the control of the company, that may cause actual results to materially differ from those expressed in the forward-looking statements. We expressly disclaim any duty to provide updates to our forward-looking statements, whether as a result of new information, future events, or otherwise. During today's call, there will also be a discussion of some items that do not conform to U.S. generally accepted accounting principles, or GAP. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the earnings release issued yesterday afternoon. Our earnings release for the second quarter of 2026 is posted on the company's website freightcaramerica.com, along with our 8K, which was filed at market close yesterday. With that, let me now turn the call over to Nick for a few opening remarks.

Thank you, Chris, and good morning to everyone. Thank you for joining us today. The second quarter demonstrated important progress across three areas of our business. First, we delivered one of the strongest commercial quarters in freight car America's recent history with an exceptional order intake, significant sequential backlog growth, and continued expansion of our customer base. Second, we continue to build a broader and more durable business through organic aftermarket growth and a second acquisition in the aftermarket space. Third, we completed an important structural optimization of our Castaneos manufacturing operation, locking in the productivity gains achieved over the past two years and positioning the business to operate at a meaningfully lower cost base going forward. Against those positive developments, the production ramp we anticipated for the second quarter began later than originally planned. Customer demand was deferred rather than canceled, but the timing shift means that a portion of the units previously expected to be delivered in 2026 will now move early into 2027. As a result, we are updating our full year delivery and revenue outlook. We believe the second quarter represents the low point of the year for adjusted EBITDA and margin. Production is scheduled to increase meaningfully during the second half with the significant majority of our planned second half deliveries supported by our firm backlog. and we will begin realizing the benefits of the structural operation actions completed during the quarter. The key point is that the lower 2026 delivery outlook does not reflect a weakening of our commercial position. In fact, the opposite is true. We booked approximately 3,000 units during the quarter, including approximately 2,600 new rail cars. These new car orders represented roughly 45% of the total industry new rail car orders during the period, our largest quarterly share of industry orders in recent history. That activity was anchored by a milestone multi-year award for 1,900 rail cars with deliveries extending through 2028. orders came from both repeat customers and first-time buyers and covered each of our principal market segments. That breadth is important. It demonstrates that our customer reach is expanding while our established relationships continue to deepen. Customers do not make multi-year commitments of this scale unless they have confidence in the supplier's products, responsiveness, and the ability to execute. We have consistently said that we must earn the right to win every order, and this quarter, our team did exactly that. We ended the period with a backlog of 3,972 units valued at approximately $344 million, compared with 2,058 units valued at $156 million at the end of the first quarter. Backlog units increased approximately 93% sequentially, while backlog value increased 121%. The backlog is diversified across new railcar builds, conversions, and retrofit programs, with deliveries extending through 2028. It provides meaningful visibility through the balance of 2026 and increasingly into 2027 and 2028. This performance is particularly significant given the broader market environment. Industry demand remains well below long-term replacement requirements, with annual deliveries expected to remain below 25,000 units compared with normalized replacement demand of approximately 35,000 to 40,000 units per year. Despite that environment, we continue to gain ground by offering customers what they value. We have not built our strategy around being the lowest price producer. We are focused on being the most valuable and responsive producer, combining quality, Engineering Capability, Flexible Manufacturing, and Reliable Execution. For certain products and available production slots, our manufacturing model allows us to move from order placement to delivery in as little as 9 to 12 weeks. That responsiveness matters to customers whose requirements can change quickly and who increasingly value certainty of execution. Alongside the strength of our new car order intake, we continue to expand our aftermarket platform. Aftermarket revenue grew 13% year over year, reflecting both continued organic growth in parts and components and the contribution from our first acquisition in this space. Following the end of the quarter, we completed our second aftermarket transaction in less than a year. Together, these businesses broaden our parts and components offering, expand our customer relationships, and deepen our involvement across the railcar lifecycle. This is a deliberate element of our strategy. Aftermarket demand is more repeatable and less cyclical than new railcar manufacturing and generally carries a stronger margin profile. It allows us to serve customers beyond the initial manufacture of a railcar and creates additional opportunities across parts, repairs, conversions, and ongoing fleet support. We are building this platform through a combination of organic growth and disciplined acquisitions. We believe it will become an increasingly meaningful contributor to revenue, earnings, and cash flow over time. Turning to operations, we completed an important structural optimization during the quarter. Over the past two years, our true track operating system, continuous improvement culture, and targeted investments in automation and virtual integration have increased manufacturing productivity by approximately 50%. Those gains have fundamentally changed how we build rail cars and how many resources are required to support a given level of production. During the second quarter, we used a period of lower production activity to complete a concentrated realignment of our Castaneos footprint, staffing model, and operating resources around that new productivity baseline. These actions were not a reaction to a single quarter or simply a response to lower near-term volumes. They were the next step in capturing and institutionalizing the benefits of the operational improvements delivered over the past 24 months. Completing the work during the slower production period allowed us to make the changes efficiently and less disruptive to our customer deliveries than would have been possible during a peak period of output. The realignments resulted in a $2.2 million of costs during quarter, and is expected to generate approximately $12 million of annualized structural savings. Importantly, we preserved our installed production capacity, principal manufacturing lines, and the critical skills and capabilities required to increase output as demand recovers. The result is a more efficient operating structure that improves the economics of each railcar we produce while maintaining the ability to scale. As volumes increase, We expect the combination of a lower structural cost base and improved fixed cost absorption to create stronger margins and generate greater operating leverage across the cycle. The benefit begins in the third quarter and extends well beyond the current year. Cash generation also remained a strength during the quarter. We generated $12.1 million of operating cash and $11.3 million of free cash flow, an increase of 43% year over year. Stepping back, the freight car industry remains in a cyclical trough, but the underlying fundamentals continue to build. Rail cars are being scrapped faster than they are being ordered, the average fleet continues to age, and traffic growth is broadening across many of the commodity segments we serve. Prolonged periods under investment have historically been followed by stronger replacement demand. We continue to believe that the normalization towards annual demand of approximately 35,000 to 40,000 rail cars is a question of timing rather than fundamental need. When that recovery develops, Freight Car America will enter with available capacity, a more efficient operating footprint, a broader product portfolio, a growing aftermarket platform, and a substantially stronger customer and market position. In the meantime, we are not building our plan around waiting for the cycle to improve. Our priorities for the second half are clear. We will convert our backlog into profitable deliveries, increase production, and restore margin performance, realize the benefits of our lower structural cost base, continue scaling our aftermarket platform, and execute the initial phase of our tanker car retrofit program. The opportunity ahead of us is significant. but the focus is now execution. We have the orders, the capacity, the operating improvements, and the commercial momentum. Our responsibility is to convert those advantages into stronger earnings and cash flow through the balance of 2026 and into 2027. With that, I'll turn it over to Matt to discuss the market environment and our commercial performance in greater deal.

Thanks, Nick, and good morning, everyone. I'll offer some perspective on the market environment and our commercial activity during the quarter. Industry order activity remained muted in the second quarter, with new rail car orders across the industry totaling approximately 5,800 units compared to approximately 6,200 units in the prior year period, as customers continued to evaluate timing of new rail car acquisitions. Despite the challenging market environment, our commercial performance stood out. Our team captured approximately 45% of all industry new rail car orders in the quarter, and excluding tank cars, our share of the addressable market was approximately 56%, significantly above our historical market share levels for order intake in the quarter. Our disciplined commercial strategy is centered on earning long-term customer trust through transparent engagement, collaborative product development, operational expertise, and reliable execution. These capabilities continue to support repeat business, strengthen customer relationships, and enhance the quality of our order book. Our success in the covered hopper market is a strong example of how our new product strategy is creating value. Covered hoppers represent the largest railcar segment in North American fleet, making this an important strategic market for freight car America. Over the past four years, our focused commercial strategy, combined with innovative engineering and close collaboration with customers has resulted in new and enhanced real car designs that improve operational efficiency, reduce lifecycle operating costs and address evolving customer requirements. As a result, we have increased our market share, demonstrating the strength of our differentiated approach and continued market acceptance. However, this is only part of the story. Conversions, retrofits and other specialized programs supplement our new car activity and give us second avenue for growth. This kind of customized work takes engineering expertise and manufacturing flexibility, and those capabilities continue to differentiate us in the market and help support our strong order momentum while the new car market recovers. The underlying demand picture continued to improve through the second quarter. 16 of the 20 carload segments tracked by the Association of American Railroads showed year-over-year growth, up from 13 segments in the first quarter and the broadest gains in five years. Carload traffic, excluding coal, through the first half was the highest since 2008, and June set an all-time record for intermodal volume. Grain and grain mill shipments posted some of the strongest gains, consistent with the activity we see in our covered hopper pipeline. These trends support the replacement demand that continues to build as fleets age. Looking at the broader picture, freight car America continues to execute well in challenging market. We are gaining share in new rail car orders while our conversion retrofit and specialized manufacturing business provides a stable source of earnings and customer engagement. Although industry order activity remained below historic levels during the quarter, we are encouraged by customers increasingly moving from inquiry to order supported by healthy diversified pipeline across multiple railcar segments. As industry demand returns toward long-term replacement levels, we believe our differentiated product portfolio, disciplined commercial execution, and deep customer relationships position FreightCar America for success while delivering sustainable, profitable growth. With that, I'll turn the call over to Mike to walk through the financials in more detail.

Thanks, Matt, and good morning, everyone. I'd like to begin with a few second quarter highlights. Revenue for the quarter was $113.1 million compared to $118.6 million in the second quarter of 2025, and we delivered 927 rail cars compared with 939 units in the prior year period. Year-over-year comparison primarily reflects production timing ahead of the planned second half RAB that Nick described. Aftermarket revenue increased 13% year-over-year, driven by organic growth in parts and components, together with the contribution from our recent acquisition. We expect the aftermarket to remain an increasingly meaningful contributor to our profitability, cash flow, and long-term growth. Gross profit was $6.2 million, representing a gross margin of 5.5%, compared with gross profit of $17.8 million and a margin of 15% in the prior year period The decline primarily reflects lower delivery volumes and the resulting reduction in fixed cost absorption, as well as $2.2 million of costs associated with the workforce realignment completed during the quarter. Turning to that realignment, the actions we took align our cost structure with the productivity improvements achieved across our manufacturing operations over the past two years. We expect the program to produce approximately $12 million of annualized cost savings with benefits beginning in the third quarter and building toward the full run rate thereafter. Importantly, these savings are structural at current production levels and do not limit our ability to increase output as demand recovers towards long-term replacement levels. Selling general and administrative expenses were $10.5 million compared with $10.1 million in the prior year period. We expect SG&A to remain relatively consistent during the second half of 2026 creating favorable operating leverage as our backlog converts into meaningfully higher deliveries compared with the first half of the year. We reported a net loss of 30.1 million, or 94 cents per diluted share. This result included a $24.9 million non-cash loss associated with the remeasurement of our warrant liability, reflecting the appreciation in our share price during the quarter. Excluding non-cash and other adjusting items, adjusted net loss was 0.8 million, or $0.02 per diluted share compared with adjusted net income of $3.8 million or $0.11 per diluted share in the prior year period. During the quarter, a shareholder exercised a substantial portion of its outstanding warrants. As a result, the warrant liability declined from $119.4 million at March 31st to $14 million at quarter end and stockholders' equity became positive at $36.2 million. The warrant exercise did not result in incremental dilution to our reported earnings per share because the underlying shares had already been included in the weighted average share count used to calculate basic and diluted EPS since the warrants were issued. Following the exercise, our actual common shares outstanding are now much more closely aligned with the share count reflected in our EPS calculation. Additionally, the significant reclassification from liability to equity accounting should substantially reduce the future quarterly earnings and balance sheet volatility associated with remeasurement of the remaining warrant liability. Adjusted EBITDA was $1.2 million, representing a margin of 1%, compared with $9.3 million and a margin of 7.8% in the prior year period. The decline was primarily driven by lower deliveries and fixed cost absorption, consistent with the production timing discussed earlier. We expect profitability to improve sequentially as deliveries increase through the balance of the year and the benefits of our cost savings program begin to take effect. Cash generation was a notable strength during the quarter. Cash flow from operating activities was $12.1 million compared with $8.5 million in the prior year period. Free cash flow was $11.3 million, an increase of 43% year over year, and capital expenditures were $0.7 million. We ended June with $63 million of cash and cash equivalents and have reduced total debt by approximately $7.3 million since year end. For the full year, we continue to expect capital expenditures of $7 to $10 million, including approximately $4 to $5 million in maintenance capital and the completion of our previously announced tank car manufacturing investments. Turning to capital allocation, we completed the acquisition of Southern Parts and Equipment in July, representing our second aftermarket transaction in less than a year. The acquisition fits squarely within our discipline investment framework by adding capabilities adjacent to our core rail markets, and we expect it to be immediately accretive. With the production capacity required to support future rail car growth already in place across our existing manufacturing footprint, we are positioned to direct capital towards opportunities that increase the durability of our revenue, earnings, and cash flow. Moving to our full-year outlook. We have revised our 2026 guidance to reflect the later start to the second half ramp with some deliveries now expected to shift into early 2027. We now expect railcar deliveries of $3,500 to $3,900, revenue of $410 to $460 million, and adjusted EBITDA in the range of $36 to $44 million. Importantly, this change is isolated to the timing and mix of new railcar deliveries. Our aftermarket business continues to grow and remains on plan, and the second half of the year is underpinned by orders already in our backlog. Looking ahead, our cost saving initiatives will partially offset the impact of lower full-year deliveries and improve the profitability of each railcar we produce. At the same time, the growing contribution from aftermarket continues to improve the quality and diversity of our revenue mix. These initiatives are complementary. One lowers our structural cost base, while the other expands our higher value and less cyclical revenue streams. Together, they improve the underlying margin and cash flow profile of the business at current production levels, with benefits extending into 2027 and beyond. Overall, Freight Car America exits the first half of 2026 structurally stronger than it entered the year. We have a lower cost base, increased revenue visibility, a growing aftermarket platform, strong liquidity, and a cleaner balance sheet. As we move through the second half, we expect higher deliveries, improving profitability, and continued cash generation. We will remain disciplined in deploying capital across our operating segments to strengthen the business and create long-term value for our shareholders. With that, we will now open the line for Q&A.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question is from Mark Reichman for Noble Capital Markets. Please go ahead.

Thank you. Well, I was very encouraged with the strong order activity, so congratulations on that. What I was wondering is, If you look at your midpoint of your guidance, so that would be 3,700 rail cars, which would imply at the midpoint roughly 2,196 in the second half. Meanwhile, you've got the backlog of 3,972. So I was just kind of wondering, not that the guidance is overly wide, but what gets you to the high end versus the low end? What are the variables there?

Hey Mark, good morning. It's Nick. I'll start with this one and then Matt can help us if we need to cover any further details. So really it's a question of, we talked about in how Q2, the ramp up was somewhat delayed from our original assumptions and some orders pushed into 2027. And it's more to do with being able to have customers who are willing to take orders in 2026 so that we can really fill out that upper end. You know, the order backlog we've had, as you just mentioned, is pretty significant now. We've got a lot of orders. It's a question of we don't want to be in a position where we're building things too far ahead of when our customers want them. It's not good for us or the customers in that position within an acceptable range. So the real sort of big mover on there is the orders that we get from this point to the end of the year, if customers are still willing or wanting to take them before December 31st, then that will push it up towards that upper half of that guidance, if that makes sense.

It does. Just a question for Michael on the aftermarket business. So the revenue growth was impressive at 13% year over year. Gross margin was pretty much flat. So the gross margin as a percentage of revenue I think went from about 36% in the second quarter of 2025 to about 32%, 32% plus thereabouts. So we're at 32.6%, I guess. So do you think that 32.6%, is that kind of a normalized level going forward, or would you expect that as you continue to make acquisitions and grow volumes in revenue that you might see that gross margin as a percentage of revenue go down a little bit?

Hi, Mark. That's a good question. I think we'll see. So historically, our aftermarket was primarily focused on The rail cars and coal replacement parts, and that's now expanded pretty significantly. In terms of a long-term rate, I think that 32%, 33% is a good overall rate. Some of the differences quarter to quarter in the aftermarket is the difference between the new segments we're getting into with distribution and replacement parts for the coal fleet out there. So you will see quarter to quarter, the margin might change a little bit, one quarter higher than the other, depending on mix. but a good long-term rate would be that 32, 33% for the next 27, 28.

And then the last question is just a question for Nick on the tank plan entry into the tank car business. Now that you have those 232 tariffs on tank cars for Mexico, I think Greenbrier has mentioned that on their conference calls. And it may not be as onerous, you know, depending on what parts are actually, you know, the tariff applies to. But how does that influence your thinking in terms of moving into the tank car business?

Well, it's certainly something we look at, Mark. It's a good question. You know, we've got a – there's two ways to answer this. One is we have – The retrofits, which are imminent Q3, Q4 onwards into 2027. So they are not wrapped up in that same 232. So that's one thing to avoid. And then our entry into the new tank car market, we've always said sort of late 2027 into 2028 and beyond when we would work through that to release it to the market to make shipments. So we've got some time to fully review what happens with those 232s and how they're calculated. You know, it's still something significantly important. So this is a general overview You know generally in a normal year tank car demand is about 10,000 to 11,000 units across North America And there certainly isn't that capacity installed in the United States to fulfill 10 to 10 to 11,000 So the question is going to be you know, the demand stays there likely. Yes and you know the question of where can they be manufactured and what tariffs rates would they apply and and who would pay those tariffs. So we will continue to work through that. When it comes to the things we're planning to do in the near term, none of the processes that we've done for the retrofit program are in jeopardy. So they'll continue as we've always said. And then we don't have to make any key Thank you very much. Thank you. configure our manufacturing operations with the engineering required and the approvals required because they're kind of low cost. We'd obviously make that review and decision before any serious commitment to capital, but that will be quite some time yet before we need to do that. So we will keep getting ourselves smarter up until that point, and then we'll have to make a call at that point. But that won't be for another 12 months, 13 months of the year list before that commitment needs to be made.

Meanwhile, you're experiencing strong order activity. You're becoming leaner with the productivity improvements, and so margins should benefit from that. Okay, and like you said, you kind of push any capital commitments. Maybe that's kind of the flip side is you kind of avoid that if you choose to delay. Is that the right way to think about it?

Yeah, I mean, there's a number of unknowns, you know, what happens with the appendix on the 232 as to whether tank cars remain there, yes or no, and is that going to continue to over multiple years, and let's assume it does stay in place. And then there's a whole point of, you know, where you source all the materials from. So there's quite a number of complex nuances to look at. Either way, we'd be fully prepared to go through them, but From a outlook and a multi-year outlook and what we've said about entering the tank car market, it's just another thing to consider. It certainly doesn't change our thinking that it's an attractive market. We think we've got great products. We've got a great support of a great engineering and manufacturing process, a great commercial process. So we will meet what customers need and we'll figure out how to be compliant and still fulfill customers' needs at the same time. That's how we typically thought about it. You know, we've navigated through a lot of tariff questions and concerns over the last two years or three years, two years now. So I don't see it as a reason to stop that thought, if that's the question. It's another thing to think about as we think through. But right now, we'll continue to making the same progress we were planning to make. And then when we get to those large commitments, some points in the future, we'll have better prepared thoughts at that time. But nothing's slowing down at the moment, Bob.

Nothing's slowing down at the moment for it. Right. Well, that's very helpful. Thank you very much. No problem. Thank you.

The next question is from Brendan McCarthy from Sedoti. Please go ahead.

Thank you, and thanks for taking my questions here. I wanted to start off on the delivery shift underpinning the new guidance. Is this simply customer preference here? And ultimately, why do you think customers are preferring to delay deliveries at this point?

Hey, Brendan, it's Nick. Yeah, I mean, it's making sure we, you know, meet our customers' expectations and customer preferences, being able to, you know, we don't want to be in a position where we're pre-building too many cars with an order behind it. but before a customer needs it because it ends up with congestion and costs to store things. So we looked at making sure that we could build as we would normally to the demand schedules of our customers. And that's typically how we run our supply chain processes. It can take up a lot of cash in inventory if we start building too far ahead of when customers truly need cars. That's really what was the driver for being able to take orders from our order book and make it to really ship in Q3 as opposed to building ship in Q2 with a slight delay.

That makes sense. I appreciate the detail there, Nick. And when you look out to these deliveries shifting into early 2027, I guess what really gives you confidence that those deliveries will occur in early 2027 or do you think there's a chance they get you know, further kind of kick down the road to 2028?

I doubt that we'd kick to 2028. So these are the ones where, you know, when we talk about 2027, it's the difference of someone wanting to take something December versus January. It's not a huge shift, but, you know, 30 days or 60 days can make a difference at the end of the year. And that's what you see in Q2 that it was, you know, the delivery dates are measured in, you know, a deviation of days, not quarters. But when that happens and it rolls over past December 31st, we just have to be conscious that if a customer doesn't want something in 2026 and they want it in 2027 because of their own needs, we just have to be respectful of that within a reasonable limit. So it's not something that I think there's a risk that we've got booked orders and all of a sudden they shift by quarters. That's not the risk we were managing through. It's really about making sure that we don't have things built in month one that are shipped in month two. And we just tie up a lot of capital for 30, 60 days that we don't want to do.

Understood. That's very helpful to understand. And then, you know, obviously really strong order intake in the quarter. I think that's great to see. But did you have to make any pricing concessions there to win these orders? Or do you anticipate the same kind of mid-teens gross margin profile on the orders that are in the backlog at this point?

So I'll answer in the same way, Joyce. I mean, our strategy is not to be the cheapest one out there. I know we build a very engineered, tailored car to the needs of our customers. Some of these multi-year orders, because if we've carefully configured our product to really maximize the value for our customers, so we really don't have to take massive pressure on pricing discounts or various things that you alluded to. So our key strategy is to meet the value proposition of our customers and to truly understand what they need. We've talked many times about the benefit of being a purpose builder is that we can have a level of intimacy with our customers, that we can truly expose what the pain points are. and design and configure our product around those pain points thus creating value for the end user and the customer. We continue to do that and we will continue to do that. So that just puts us in a position where we're not in the position where we're going to try and be price discounts or any of those sort of related activities. So in a secondary question, when the As the higher volumes go through the second half, and then as we look out to the future years of that volume returns, then yes, I would fully expect with the improvements we've made on operations and the productivity lock-in, plus the volume of return to sort of a normal build rate for us, then yeah, you'd expect those margins to quickly get back to those lower teens and above across our product mix.

That makes sense. Thanks, Nick. Last question for me just on the aftermarket segment. I know I think it's only been roughly 10% of total revenue at this point through the first half of 2026, but it's a highly fragmented industry. Just curious as to how large you think that you're aiming to grow this business long term.

Hi, Brendan. Yeah, so I don't think we're going to comment on the long-term target yet, but I will say we do view this as a meaningful growth platform for us, as I mentioned, and with, you know, Castaño is pretty well situated when we look at capital allocation. This is an area that's very attractive to us to continue to grow and generate meaningfully higher revenue and earnings and cash flow as a percentage of the consolidated entity.

Understood. Thanks, Mike. Thanks, Nick. That's all from me.

Thank you. You're welcome.

As a reminder, to ask a question, please press star one. The next question is from Aaron Reed from North Coast Research. Please go ahead.

Great. Thank you. Yeah, I was hoping to get a little more color in terms of, you know, obviously we're looking at more of the trough and the overall, you know, rail car demand. I was wondering if you had any better idea in terms of cadence of what that recovery might look like in terms of Is it something to be expected a little bit more gradual, a little bit more sharp as things progress? What's it looking like to you right now?

Aaron, Matt Tonn. I think when you look at the current environment, we still see an environment, demand environment that's tied very closely to retirements, real car retirements. We don't see that changing in the near term. This year looks to be total order activity and deliveries in the 20 to 23,000 range. But as we look ahead at when rail cars are going to expire due to the 50 year age limit and then overall demand approaching 30,027 and then upwards of 40,028. So all of the all the markers are there for a return to The replacement demand of that 35 to 40,000 rail cars just based on two successive years or two past years of sub replacement demand deliveries, along with cars scrapping at a higher rate than new cars being delivered. It's just not sustainable to maintain operations for the shipping community.

Great, that's helpful. And then one other question on the tank car retrofit. You know, right now, you have a pretty good visibility into the orders right now. Do you expect any additional tank car demand to come from more retrofits or new builds? Do you have any idea which way that might fall when demand continues to come in?

On the retrofit side, we think we're at the tail end of the demand of taking the .111s to the .117Rs. Many of those cars have already been converted and we think we're at the tail end of that. Moving forward, as Nick had mentioned, we will be evaluating are entering into the marketplace, which is really a late 27, early 28 discussion.

Great. Thank you.

The next question is from Mark Reichman from Noble Capital Markets.

Please go ahead. Mark Reichman, your line is open.

Yes, I just wanted to follow up on your market share gain. You know, you captured 45% of the industry new rail car orders during the quarter, which is pretty impressive. You know, according to the Railway Supply Institute, orders were 5826 in the second quarter and deliveries were 5527. So I was just wondering, you know, you've had kind of this history of gaining market share, but The second quarter, I guess, clearly was influenced by you had that 1,900 multi-year order from a key customer, and then you had 3,000 orders in the second quarter. 2,600 of those were for rail cars, I guess. What do you see as your competitive advantage here? Was it just a low order quarter for the industry, and you just happened to snag a really big order? or do you see, you know, is this kind of a good signal, you know, that the market share gains could actually accelerate? Just some color there, if you can.

Hey, Mark, so I'll start with, I think, thank you for highlighting that, you know, Q2 auto intake was significant. A good signal for us. It's not the first time we've seen a reasonable increase in market share. So I would characterize it as that we've been growing market share on order intake consistently quarter over quarter for a number of quarters now. So there's a piece where it's more of a buildup and more of a testament to the credibility of that buildup. I'll turn over to Matt to talk about some of the things we do commercially. But just to reinforce the same question that Brandon asked about pricing, we truly take our commitments to creating value for our customers seriously, from the first contact of our commercial and engineering leads right through to the production, manufacturing, and shipments of the products to the customers' needs on time, in full, high-quality products. So I think, you know, it's being able to repeatably deliver what the customers want and when they want it and they recognize that as they get that service that, you know, looking at future orders and repeat orders, why would you sacrifice that given that you've had that experience from freight car America? But Matt will talk a bit more in detail because obviously the commercial lead or the tip of that spear leading that charge for us. Matt?

Yeah, obviously Q2 was a very strong quarter for us, but I would point out that our customer engagement and how we win has been tied to the value that we create for our customers and truly understanding specific operational needs. That's sort of how we win, not sort of how we win. It is how we win. And when we look at our activity and market share growth over the course of the last couple of years, just looking at 2022, We were about 5% of the market. And every year since then, we have grown our market share. And looking at year to date, including Q1 and Q2, we are over 27% of order intake. So for the last four years, despite a declining overall market of demand, we have continued to increase our market share year over year. And it is because of how we engage with customers the collaboration from an engineering perspective, the ease of doing business, and an overall commitment to excellence and on-time delivery. Those are the things that differentiate us.

And then, Mark, just to hammer that, as the market migrates back to its normal sort of 35,000 to 40,000 units a year, we fully intend to continue to take the same approach and be able to defend our market share by the value proposition that we have rather than price.

Well, that's a very good point because now you've got leverage to growth in the overall market when you've been growing in a kind of a down market. So, well, that's really helpful color. I very much appreciate it. You're welcome. Thank you.

Thanks, Mark. Thanks, Mark.

This concludes the question and answer session as well as today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.