The Greenbrier Companies, Inc.

Hello and welcome to the Greenbrier Company's first quarter of 2022 earnings conference call. Following today's presentation, we will conduct a question and answer session. Each analyst should limit themselves to only two questions. Until that time, all lines will be in a listen-only mode. At the request of the Greenbrier Company, this conference call is being recorded for replay purposes. At this time, I would like to turn the conference over to Mr. Justin Roberts, Vice President and Treasurer. Mr. Roberts, you may begin.

Thank you, Eileen. Good morning, everyone, and welcome to our first quarter of fiscal 2022 conference call. Today, I'm joined by Bill Furman, Greenbrier's chairman and CEO, Lori Tikorius, president and COO, Brian Comstock, executive vice president and chief commercial and leasing officer, and Adrian Downs, senior vice president and CFO. Following our update on Greenbrier's performance and our outlook for fiscal 2022, we will open up the call for questions. In addition to the press release issued this morning, additional financial information and key metrics can be found in a slide presentation posted today 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 factors that could cause Greenbrier's actual results in 2022 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier. And with that, I'll turn the call over to Bill.

Thank you, Justin, and good morning, everyone. Fiscal 22 is off to a good start, driven by strong commercial performance, disciplined management of our production capacity, and continued growth of our rail car and lease fleet. Momentum in our business is being sustained. The first quarter of fiscal 2022 continued our strong ordered trajectory. As a result, Greenbar posted its fourth consecutive quarter with book-to-bill ratio over one times. New railcar orders, and actually we're at 1.5 for this quarter, new railcar orders of 6,300 units worth $685 million were across a broad range of railcars. We ended the quarter with a backlog of approximately 3 billion, the highest level in about three years. Our order intake for the first quarter alone represents 35% of new orders received during all of fiscal 2021. Our recent partnership with US Steel Corporation and Norfolk Southern Railway to design and launch new high-strength steel gondolas having multiple environmental benefits demonstrates this momentum In addition, in a moment, our Chief Commercial and Leasing Officer, Brian Comstock, will share more about this and some other exciting customer-focused initiatives. And I should mention, in terms of backlog, we have booked another $200 million of re-body work, which is sizable but not counted in our backlog. We are now ramping up 21 active production lines in North America and approximately eight internationally. Importantly, we are harnessing our flexible manufacturing footprint to extract more production from each line. We expect this to increase and deliveries to increase over the course of the year. To meet production requirements, we recently expanded our global workforce by about 10%. Intensive management of safety, hiring, and supply chain issues continue. Continued Success in these areas is key to maintaining our strong start to the year. Specifically on the supply chain, our global sourcing team continues to do an exceptional job of mitigating disruptions to support increased production. Our wheels repair parts business is now known as maintenance services. The new name doesn't change the fact that this business unit endured a challenging quarter. Labor markets and supply chain disruptions have both impacted its profitability. Naturally, this lowered our consolidated margins, which were below our expectations to begin with. Laurie will speak to the changes we are making to improve the performance of our maintenance services business unit. Greenbar leasing continues to perform very well. Our investment activity is considerably outpacing initial targets. Asset utilization, A KEY PERFORMANCE METRIC FOR THE LEASING BUSINESS IS HIGH, AT 97.1%, WITH A PORTFOLIO THAT IS WELL DIVERSIFIED ACROSS CAR TYPES AND STRONG LESSEE CREDITS, AS WELL AS MATURITY LADDERS. ADDITIONALLY, WE'VE EXCEEDED THE INITIAL INVESTMENT TARGET FOR GBX LEASING BY $200 MILLION TO A PORTFOLIO OF $400 MILLION IN ONLY NINE MONTHS OF OPERATIONS. THIS REFLECTS THE STRONG MOMENTUM in the business and our core manufacturing markets in North America. I'm sure there may be questions on this or other comments by management, but be sure to read the footnote in our press release having to do with leasing supplemental information. It's very informative. The Omicron variant of COVID-19 emerged suddenly following the end of the quarter as a result of well-established safety protocols our operations have not been significantly impacted at present by the rise in cases globally and in North America. But we are closely tracking the rapid community spread of this variant, and we're taking all appropriate precautions. We continue with safeguard protocols, and we will enhance these as dictated by best practices, as well as adhering to local health authority requirements in the locations where we operate. In the US and Europe, it appears this wave might peak in the coming months. Their indications with the current variant carries milder symptoms than previous versions of the virus, particularly for this double for those who are double vaccinated and those with boosters. Nonetheless, we must remain vigilant. After two years, the full contours of the pandemic remain dynamic and unpredictable. Our resolve is effectively to manage COVID challenges, and that resolve remains steadfast. Our outlook remains unchanged, except that we believe it is growing to be much more positive. We maintain a positive outlook for the fiscal year for a variety of reasons. These are supported by industry metrics, as well as operating momentum, driven by a strong order book, demand backlog, and manufacturing ramping. For example, the portion of idle rail cars in North America decreased from 32% in July to just below 20% by December. Industry forecasts for 2022 and 2023 are very encouraging, as Brian Comstock will share with you. All this suggests that industry fleet utilization is nearing 80%. And again, Brian Comstock will add more on these points in a minute, and we can talk in question and answer it. Lori Tricorius, who will be Greenbar's CEO in March, takes the helm at a very important and exciting time in the long history of Greenbar. Before I turn the call over to Lori, I'd like to provide some closing remarks on where Greenbar stands today. I became the CEO when my partner and I co-founded a small asset leasing business in 1981. We entered manufacturing with the acquisition of Gundersen in 1985 and have continued to build on those two foundations. Today's manufacturing is our largest unit, comprising about 80% of our total annual revenues. But manufacturing is both driven and complemented by a robust commercial and leasing business, as well as asset management services. Today, our asset management and maintenance services touch about one-third of the North American fleet. It has been a remarkable journey for me and for the company. Greenbrier has steadily grown. industry footprint and today is the leading rail car manufacturer in north america allowing us us to operate at scale we also now operate on four continents serving global rail car markets worldwide with similar market shares in each of these all of this has been accomplished through the hard work of remarkable people who have helped guide us through their capacity for innovation discipline management, an unyielding focus on the needs of our customers, as well as our workforce and other stakeholders. We've purposely built the company to grow at scale and prosper across business cycles. Under Lori's administration, she plans to do more of that, along with some new initiatives of her own. As global rail car markets emerge from a cyclical trough, one that was severely exacerbated by the pandemic, I am proud of what the Greenberg team has accomplished and the market-leading positions we've achieved. I'm also proud of the significant value we've created for our shareholders. I expect that this will continue for many decades to come as Greenberg continues to drive innovation in its industry, broaden its footprint globally and by product line, and expands its leasing and services business. I would take just a brief moment, as others may do later, to welcome our two newer directors subject to the vote of our shareholders today, James Huffine and Ambassador Antonio Garza. Both are highly qualified and we welcome this step for board refreshment. I also would like to congratulate two directors who have served throughout almost the last 18 years, 20 years on our board. Dwayne McDougall, and Don Warshburn. Next week, we'll put out a brief congratulatory note marking this milestone, but I want to assure them that we remember them. They're always welcome to visit, and we thank them for their strong contributions over the years. I'll now turn the call over to Lori Takorius, Greenbrier's incoming CEO. I have no doubt that Greenbrier will flourish under her administration. Ann? Lori, next time you're going to be running this call. So thank you and congratulations.