Greenbrier Companies, Inc. (The)

Q1 2022 Earnings Conference Call


spk_0: oh and welcome to the greenbrier company's first quarter of two thousand and twenty two a conference call following to presentation we will conduct a question and answer session each analyst should limit themselves to only two questions until that time all life will be an son only mode at the request of the green companies with coffin call it being recorded for replay poker game at this time i would like to turn the and sober can muster justin robert vice president and treasurer mr roberts he may begin
spk_1: thank you i read good morning everyone and welcome your first quarter of fiscal twenty twenty two conference call today i'm joined by both farming rivers germany video laurie to korea's president and ceo ryan comstock executive vice president and chief commercial only lived in officer and adrian and downs senior vice president and ceo oh interrupted on rebreathers performance and or outlook for fiscal twenty twenty two 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 applied presentation posted today on our section of our website matters disgust on a conference call and good forward looking statements within the meaning of the private securities litigation reform act of ninety ninety five throughout our discussion today we will describe some of the factors that could cause greenberg actual results and tweets wouldn't do and beyond to differ materially from those expressed and any forward looking statements made by rob a half gram briar and with that are trying to call of the colorado thank you justin and morning everyone fiscal twenty two ought to a good start driven by strong commercial performance just of management of our production capacity and continued growth around current lease please
spk_2: momentum in our business is being suspect
spk_1: first quarter of fiscal on a tony you continued are strong ordered trajectory as result greenberg posted it's fourth consecutive quarter when book the bill ratio over one times new rail car owners and actually were one point five square you are new rail car owners of six point six thousand three hundred units were worth six hundred eighty five million or across a broad range of rail cars we ended the quarter was a backlog approximately three billion the highest level about three years our order and take for the first quarter alone or presents thirty five percent of new orders received during all of a skull twenty twenty one a recent partnership with us steel corporation and norfolk southern railway to design and launched new high strength steel got dollars having multiple environmental benefits demonstrates this momentum in addition i am ahmed or chief course and leasing officer brian comstock was your more about this his mother exciting exciting customer focused an issue and i should mention in terms of backlog to him of other two hundred million of rebutting word which is a sizable been accounted or backward we are now ramping up twenty one active production lines in north america
spk_2: and approximately eight internationally
spk_1: importantly we are harnessing are flexible manufacturing footprint to extract more production from each line which begs just to increase ah and deliveries to increase over the course of the year meat production requirements we recently expanded our global workforce by about ten percent
spk_2: intensive management of safety hiring and supply chain issues and any
spk_1: continued success in these areas key to maintaining our strong start to the year
spk_2: specifically on the supply chain on google searching team continues you're an exceptional job and mitigating disruptions to sport increase production our wheels repaired parts business is now known as maintenance services did you name doesn't change the back this business unit endured a challenging quarter labour markets and supply chain you're right disruptions have been impacted it's profitability
spk_1: actually explored are consolidated margins which were below our expectations to begin with are you will speak to the changes we're making to improve performance of our main services position we were losing continue to pour very well or investment activity is considerably considerably outpacing initial target as it utilization a keep performance metrics losing business is high at ninety seven point one percent with a portfolio that as well diversified across our types strong as he credits as well as majority labs additionally we've exceeded the initial investment target for gb actually sing by two hundred million to a portfolio of four hundred million and only nine months of operations this reflects the strong momentum in the business and our core any back factory markets in north america i'm sure there may be questions on this sub but or of other comments by management by be sure to read or this the but note in our press release and did you miss leasing supplemental information is great on it the a look around variant of covert ninety amber suddenly following the into the corner as result resulted well established safety protocols are aberrations have not been significantly impacted a present by rape the rise rising cases mobley and in north america
spk_2: but we are closely tracking rapid be spread of the spirit and we're taking all appropriate precautions we continue was safeguard protocols
spk_1: and we will enhance the is dictated by best practices as well as adhering to local hell are you requirements
spk_3: locations where we operate
spk_1: in the us and europe peers as wave my peak in the coming months there are indications that current marriott carries milder symptoms and previous versions of the virus particular he put a stop are those who are double vaccination and those with boosters nonetheless we must remain vigilant after two years ago contours of the and to make remain dynamic and unpredictable our resolve always effectively to manage greenberg through the evolving college challenges and an app remains at best our outlook remains unchanged except that we believe it is and growing be much more positive we maintain a positive outlook for the fiscal year for a variety of reasons is are supported by industry metrics as well as operating momentum given by a strong order book demand backlog and manufacturing ramping on sample a portion of idol railcars to north america decrease from thirty two percent in july two just below twenty percent by december and just a forecasts are twenty twenty two and twenty twenty three a very encouraging is frank comstock will share with you
spk_2: all his shirt suggests that industry for utilization is nearing eighty percent and and again brand comes i will add more on these points in a minute i and we can talk and question answering
spk_1: why it glory two koreas who will be greenberger see you in march six the helmet very important and exciting time and a long history of remember of or actor in the column or lorient like to provide some closing remarks were ringer stands today i became a studio and we were founded though my partner and i've cofounded small as leasing business nineteen eighty one
spk_2: we entered manufacturing with the acquisition of gunderson the nike and eighty five and at continue to build on those two foundations
spk_1: today's manufacturing is our largest unit rising by a percent or two and revenues but many bedrooms both driven and compliment by on the bus commercial and leasing business as well as asset management services
spk_4: today
spk_1: or asset management neighbors services touch about one third of the north american fleet it's been a remarkable journey for me and for the company rebar has steadily grown it's industry footprint and days leading real are manufactured in north america allowing as as to operate in scale we also are now operate and or continent serving over real or markets worldwide could similar shares each of these all of this has been accomplished through a gap he a hard work a remarkable people without guidance to their capacity for innovation discipline management and unyielding focus on the needs or customers as well as our workforce and other stakeholders we purposely built the company to grow and scale and prosper across business cycles and your lorries administration she plans to do more of that along with some new and issues of wrong as global rail our markets emerge from a cyclical try i never severely exacerbated by the pandemic i'm proud of what the agreement team is accomplished and the market leading positions with achieve
spk_2: i'm also proud of significant value we've created for shareholders i expected this will continue from a decade decades to come as greenberg continues to drive innovation and and industry run it's footprint on ugly and by product line and expands leasing and services business
spk_1: i would take just a brief moment as others made you later to welcome our to newer directors some to the voted by shareholders today games are buying an ambassador antonio garza
spk_3: there are a qualified and we welcome this step aboard refreshment
spk_5: i also would like to
spk_1: gradually to directors who served throughout almost the last eighteen years twenty years on are more a dwayne the google and on washburn next week we'll put out a brief a congratulatory note
spk_2: marking this milestone but i want to assure them that we remember them are always welcome to visit
spk_1: and we thank them for their strong contributions over the years announcer nichol over to north korea's reamers incoming ceo i've no doubt the green were or flourish
spk_3: and or administration
spk_1: am
spk_6: or you i'd next time a you're going to add be running said rains cops oh thank you and congratulations on your belt or the morning everyone
spk_7: and the fire going into the be found on the quarter to they have know that and i think they'll reference sadly we name's of our reporting adnan
spk_1: our wheels repair part segment and now made that services and leasing and services at now that anything and management their home
spk_6: the new name more closely reflect a customer solutions we provide and have no impact on the financial ago
spk_1: kramer that got you one reflected continued labour challenges in the united states competitive pricing from ordered taken during the depth of the pandemic drop and production and efficiency for line change over and ramping up capacity
spk_6: i'm proud of our employed around the world a continue to perform well even as uncertainty about it is certainly an understatement the day that increasing headcount they played by several thousand employed an increasing production led by forty to fifty percent a challenge
spk_7: the with an experience leadership team will be the opportunity to scale or operation all up keeping or what or healthy and safe
spk_6: safety across our organization has been and will continue to be our number one priority and the quarter just ended with delivered forty one hundred units including four hundred units and brazil delivery decreased by about nine percent the quits lee was primarily reflect the timing of vindication activity and line change over the north america
spk_7: a global manufacturing continue to take a measured approach to increasing production rate and activity and they work your order taken during the trial a global sporting team continues to perform minor miracle on a regular basis ensuring we avoid significant production delay
spk_1: or maintenance though it isn't would significantly impacted by labour shortages exacerbated by the coven endemic these shortages impact three foot building efficiency and profitability
spk_7: he made a number of changes to our hiring and training practices and were thing improve or sensibly that main mainly by compliance and be seventy five to ninety day so take some time for the benefit of the changes to blow through the operation further that been impacted by lower will change or volume i do believe the t that made the necessary changes that will lead to positive result over the course at the point wait to tell me that both of them
spk_6: i leave big advantage of third group a good order with strong for utilization and the integration of a previously the cause of all your project september between the portfolio after and origination of green brown gb actually think grew by brooklyn two hundred million and a quarter and as a court
spk_1: read that pleaded valued at nearly four hundred million nearly doubling and value across the quota
spk_7: importantly the girls were like the continued disciplined approach to portfolio construction underwriting and credit quality standards
spk_1: we're not pursuing grow at all costs our strategy remains to create repeatable revenue and table tax advantaged cashflow that will take the edges of the debt and new rail or the ban that are well known by on and call
spk_7: in addition to managing our lead body or management services or gms group continue to provide creative railcar apple pollution or over four hundred fifty thousand and railcard and the north america and britain and three
spk_6: one added of the development of going to portland and that are leaving team successfully and create the died of are three hundred million not record wrong or were up thirty five fifty million the three and two three hundred fifty nine
spk_7: our cap a market team executed well the corner and with back and the case activity to grow throughout the year
spk_1: daimler to are over up in a delivery
spk_6: indication remains an important source of acquitted and profitability of by
spk_1: looking ahead would be strong momentum for the goods when it's on into and on we are talented employed and experience management or focused on driving result and shareholder now i'm very excited about the long term opportunity agree while and now brian comstock will provide an update on the clock real hard man environment they worry and hope everybody had a great holiday season overs a lot be excited about as we move work as much of in october i remain excited about the momentum we're seeing and all of our markets globally and rebar spurs were we had a month to build one point five report the a deliveries of forty one hundred units and orders of sixty three hundred units is is the fourth consecutive quarter with about the know ratio exceeding one times and reflective of the drink strengthening environment you realm on backlog of twenty thousand viewers when the market value three billion of a strong multiyear visibility these are the type of demand environments would greenberg's flexible manufacturing is a vital you know in addition to new real coders we read recently received orders to revive fourteen hundred real colors is part of green buyers car refurbishment program this program is an important part of our growing partnership with on customers to sustainably reapers north american aging fleet to ensure that rail remain the most environmentally friendly mode of service transport as of november thirtieth or modernization backlog included thirty five hundred units valued at two hundred million this is a valuable business that an additional two our new real combat backlog and absorbs production capacity in addition to a real party for dessert program we announced another sustainable initiative in early december a collaboration between us feel normal southern and revive for a new gondola using an innovative on author of high strength lighter weights steel developed by us deal each condos unloaded weight is reduced by up to fifteen thousand pounds norfolk southern will initially require eight hundred of these greenberg engineered gondolas the work done by greenberg and our partners and promises significant benefits to all three companies and the free transportation industry as a whole as we lead the way to admit your own carbon economy one item worthwhile by in the eight hundred gondolas will be part of the queue to order activity in december we also announced by joining of the realm polls coalition i'm personally excited about the prospects of this technology with the goal to aggregate north american fleet data onto a single platform the fed the potential to improve safety and operating efficiency while providing enhanced visibility into cars was reinforcing rails competitive share of free transportation reminds least wait utilization enter the porter and over ninety seven percent we continue to see improved least pricing and turn on all new lease originations and least or knows as well as continued strong demand for least of women north american industry delivery protection so an increase the nearly forty nine thousand units and twenty twenty two and over sixty thousand units and twenty twenty three yemen the strong reduction in rockers and storage akin to continue congestion as imports which is impacting traffic and overall
spk_7: economic growth we believe these projections are very reason home and be similar dynamics yup
spk_1: as you can see from i recently announced initiatives reverse global commercial emily leasing team remains focused on providing innovative solutions to our customers
spk_7: now over to a room or more about on t one financial performance
spk_8: thank you brian and good morning everyone as a reminder quarterly financial information is available in the press release and supplemental fly on our website
spk_1: i'll discuss a few highlights i'm also provide an update to our fiscal twenty twenty two guidance
spk_8: highlights for the first quarter include revenue of five hundred and fifty point seven million deliveries of four thousand one hundred units which include four hundred units from our been consolidated joint venture and brazil
spk_1: aggregate gross margins at eight point six percent reflecting competitive new rail car pricing from orders taken earlier in the pandemic and labor shortages
spk_8: selling and a minister the expense of forty four point three million is down twenty percent and queue for primarily as a result of lower employee related costs
spk_1: gain or lose possession of equipment was a point five million like many leasing companies we carry out ugly sell assets from our these least as opportunities arise
spk_8: wait an income tax benefit of one point four million and a quarter primarily or something that benefits from amending party or tax returns
spk_1: not controlling interest provide the benefit of five point two million from early resulting from the impact of line changeovers and production ramping at our mexico joint venture
spk_8: net earnings attributable to a bar of ten point eight million or thirty two cents per diluted share and he the dog party two point two million or seven point seven percent of revenue
spk_1: moving to liquidity when brown has a strong bounties liquidity of six hundred and ten million it's comprise the cache of over four hundred and ten million and available borrowings of nearly two hundred million we are well positioned to navigate any market disruptions we expect to persist into calendar twenty twenty two asthma
spk_8: and last quarter or tax receivables stands at one hundred and six million as of november thirty and we expect to as they wanted as rape and in the second quarter of fiscal twenty twenty two this refund is an addition to revise available cash and borrowing apathy
spk_1: liquidity is imparted to support the working capital needs of the business as we significantly increase new rail car production beginning and twenty one and into twenty twenty two
spk_8: liquidity also enables main bar to invest and growth as demonstrated by the rail car but while you're purchasing he won an expansion a gtx leasing at a pace exceeding our initial announcement
spk_1: it has also allowed us to continue to pay a dividend try to pandemic during a time of economic uncertainty reimburse board of directors remains committed to a balanced by the capital and believe that are devlin program in not the shareholder value and attract investors today we announced a dividend of twenty seven cents per share which is our thirty first consecutive dividend as of yet space closing price our annual dividend represents a yield of a car
spk_9: excellent a two point three percent
spk_1: since twenty four dean ween brothers has returned nearly three hundred and seventy million of capital to shareholders through dividends and sherry purchases
spk_8: additionally you may have noticed an increase of approximately seventy million and rainbows notes payable balance on compared to the prior quarter that noncash increase is result of green beret opting a new accounting standard with simplified accounting convertible notes are no longer requires calculation of that discount and associated with the components we believe the standard provides better transparency to how to convertible notes appear on our balance sheet and to declare reinvited not and car any impact liquidity or cashflows as a result of this adoption based on current business trends and production schedules were adjusting reimburse the still twenty twenty two i'd love to reflect the following
spk_1: increased deliveries by one thousand five hundred units now to arrange of seventeen thousand five hundred to nineteen thousand five hundred units which included approximately one thousand five hundred units from bremer a the on and brazil selling an immense with expenses run changed and expected to be approximately two hundred to two hundred and ten million for the year
spk_7: gross capital expenditures of approximately two hundred and seventy five million and losing a management services
spk_8: fifty five million and manufacturing and ten million and maintenance services
spk_1: gross margin percent as expected the steadily increase over the course of the year from high single digits in the first have to between low double digits and low teens by the fortress of border as well cars ordered during the pandemic trough are delivered and conditions and the maintenance services business and brew we expect deliveries to continue to be that have waited with a forty five percent of the buy presents well
spk_8: as a reminder and best twenty twenty two approximately one thousand four hundred units are expected to be belt and capitalized and our least leagues
spk_0: these units are not reflected in the delivery guy is provided we consider a real are delivered on it leaves rainbows balance sheet and is owned by an external third party as mentioned than the commentary earlier on the cob momentum continues to build nervous and i'm excited about what the future holds for rain bar and now we will hold open it up or questions
spk_10: we will now begin the question and answer session to ask the question may press die than one on your touched home phone if you are using make a sound pick up your handset before passing it and again please limit yourself to only two question so i try a question a press die then jail
spk_11: i first question today comes from justin long with stephen thanks and good morning
spk_7: i wanted dab start with a question on manufacturing gross margins i know on the last call you were very weary about the timing of of one at you and in that game that low low point of the year that alpha know you were hoping for double digit manufacturing gross margin than we were a bit below that so can you help but kind of bridge in a what happened on that brian the a relative to expectations and anyway you can help but think about that sequential progression of factoring gross margins moving beyond that in the next few quarters
spk_1: there are you want to go help not good you should i be great though and you're right we're really have that very high expectations i think that our manufacturing felt did an excellent job in the first quarter i'm and and actually exceeded and some of our expectation and the we get run into use them headwinds in certain areas am as they work through as a said order that were taken during the downturn and some of the overhead absorption during the ramping just wasn't quite as well but as we would have expected so ah those were the issues and then we can send you to faith labor and difficulties particularly here in united states or ability here in portland oregon as well as our operation in arkansas so it's not only ah on the impact
spk_3: the cold there but adult though attracting and retaining the labour to be able to be efficient in our shop
spk_10: i'd only add dad died and we the maybe just a bit of delay here are the momentum in the second half should be strong add to the degree that are i'm and or margins i'm a word to lag respect as as been engaged or in guidance that our production rates will increase significantly than earlier guidance so
spk_6: i think that if only i'd certainly be offset okay and so as we move into the second quarter what would your expectation be that manufacturing gross margin can get back to the double digits and when we think about the four year when you say that your expectation for margin is better than it was three my
spk_1: ago given that production and guidance increase or are the labor issue that betting on
spk_3: lead the labour off issues are upsetting thought that we are optimistic am i i don't want to get into quarter by quarter specific guidance on margin i know our expectations as we move across the quarter an entire across the year margins well and grilled and get to that double digit area
spk_1: sometimes the second quarter has the headwind of it's just you got more holidays and the more difficulties we've been what happened with call the case of popping up on whether and other difficulties though you know i would say that we always have high expectations but i don't want to get into that quarter of a quarter accepted that type
spk_11: gregor i think the second half and i should let go stronger variety of reasons the operating momentum should drive on the or expectations but i think the timing is is really would say happened here just
spk_0: it's a spin that little bit more of a lag than that what job
spk_1: what we might have some type of work but again we're going out higher volumes than we expected before and then are going well and manufacturing to that that there's a a as a big bunch of glitches a it's really ramping up and and laurie said earlier and that's not a seamless matter by destroying very very well
spk_12: understand appreciate the time
spk_1: i you our next question comes from that alcott with callen
spk_12: good morning yeah thank you for taking my question that own as he about the on the pricing side more yeah right i think you mention on the cars that were taken during the twenty twenty trough war that war the delivery of every the first fiscal quarter mostly those orders or you know if not what percentage of the bowling alleys were or that were taken during a very depressed pricing environment and also
spk_1: how many of those cars are still to be delivered on in this fiscal year
spk_13: as a this is brian's great question on your analysis is correct to be ended the day we had a bit of a tail on orders come in under twenty twenty that moved into que one arm looking beyond que wine or we don't have many those orders are left in the backlog so we started getting into
spk_12: ah what i'd call of the newer price backlogs and queue to use rink you on so not a lot of tail beyond you want but certainly there was quite a bit of jail going into one on some of the legacy price a deals in the trump the market
spk_1: uk and and brian when via the that the order that are covered in now can you talk about how the price taking dynamic differs from the that the owners that you're actually deliver the today are adjusted for commodity price on obviously
spk_12: prices yeah yeah i would say it gets say it's markedly improved
spk_6: look at on now it baby the industrial landscape looks really different from a couple of years ago it's it's a lot more consolidated you guys any eternity have you know maybe not seventy five or eighty percent of the manufacturing landscape i'm so should you know if we do have a robust ups
spk_7: i call and the next couple of years on you know kids we see materially better pricing and if so what do you guys think we can pick margin at the peak in a cycle good luck like in in i'm in a couple of years i know you're gross my
spk_6: arjun peaked in twenty sixteen to twenty two percent but gallagher a highly anomalous time deliveries from the crew by rally around will probably not be repeated ah but any color on what margin of look like at the top in the cycle when they deliberated the highest number of guys added a great question and i think that's one of the things that keep many of us in the industry for a long time again if you never know what's gonna happen to we certainly think that there's a lot of opportunity over the coming here i'm at our manufacturing game continue to
spk_7: impressed with what they're able to achieve and you're spot on with as we get to a higher production rate i'm you get to see the benefit of that oh the overhead being absorbed across a broader group of cards though
spk_12: you know a lot of it depends on mic we have had a really disciplined approach to how we're taking ordered an thinking about thing so i can be margin getting into you know the upper gi i'm excited if they were in in the mid twenty hour but it a lot of that doug come down from next and while
spk_6: our and competitive landscape here in north america has you know changed the bet we also have the very strong customers that pay attention to own you know what they're and bad thing in the dorm online doubt that they can only have you have that balance i think the other thing is we have the a benefit of having our lead in platform though we also look at you know how many cars me want to build and bell earth as we're building cars and weekend and put them into a fleet where we will be that repeatable revenue and cash flow over the coming year to it is the night blaring of fact that it is a good blend of different activity that we have here green by
spk_1: let's hope for the more just one last follow up on to this question are you know based on the other dynamics together are seeing now where do you think this production peaked might occur actually could be made to what calendar twenty twenty three lead counter twenty one twenty three or earlier if i think i think you're right would probably miss twenty twenty three i think some of us could depend on supply chain going gonna depend on the label dynamics are making certain that we can continue to operate across on the north american market on and getting some the applied shame at issue shook and out we have been fortunate to not really have any of those impact of significantly arm but it a definitely something that is managed everyday
spk_3: maybe brian now or just and good talk to the that the data that supports say it on twenty twenty three and even be on i just in terms of the industry a forecast by a good to be going to invite everybody with those i'm sure forecaster
spk_1: ah look like yeah i know anybody i think that's good builders to kind of remind everybody that as you look at the projections are in twenty twenty three the projecting sixty thousand regardless i will be built the other are interesting dynamic years you think about where the teachers added a rail and is that the north american week continues to contract and they were in the twenty first month of contraction which means of versa heavy heavy scrap a rate that is going on even while new cars are being injected into the system so as yours we think about the future as you know the chip situation resolve themselves as a supply chain of starts to become one fluid you're going to see more and more pressure in demand on the roads to ship more what product
spk_14: so sixty thousand or right now is at his industries best guess but you can see that extend our beyond twenty twenty three as well and but the man comes on as the as we think it will
spk_15: and in just to kind of moved as to little bit bigger picture a longer term also
spk_3: rail freight is the most sustainable form of transportation and as the world continues to focus on carbon neutrality zero emission go of things like that we continue to believe that there will be a
spk_1: medium to long term growth in the fleet because there there has to be a shift in of modal transportation and that not and anyone's numbers are forecast or anything at this point so it you know we can do believe that what we see for the next few years is great and of give you a great market but there's also some long term tailwind that are are going to be dynamic that we haven't ever dealt with before in excess
spk_0: partially true and our second largest market which is a in europe where we have significant
spk_16: industry momentum to move
spk_1: i do and net army zero goals much earlier you route removed congestion is is read the government mandates really pushing this so we see much stronger demand environment over there got it thank you very much appreciated i next question come from alison pulling out with wells fargo hi guys good morning and to the now that i kind of go on that next day to make much i understand sort of your industry get the you're saying twenty three that sixty thousand industry be a would basically to be a catch up to replace met with potential for real growth her neck rather the fleet and twenty four that way to think of it
spk_16: yeah i think this is brian i i think that's a good way to think about it today you yeah did you think about contraction using them weed and how many cars are being added there's a scrap right probably somewhere in the only bows and call range from year and so when you think about sixty thousand cars
spk_1: it it's almost a year depending on how many cars are scrappage year it really is almost his replacement man versus organic growth the and and again keep in mind that is today with a very ah
spk_16: light footprint in auto because of the gym shortages
spk_1: you know there's tremendous demand and the auto sector and when that starts to free up it's gonna put more pressure on roads and velocity and just moving equipment
spk_16: got it now that's how far an unholy think i'd obviously and growing am or which is good better than you expected athlete leverage at sixty five percent i think it your target the wrong and seventy five percent i guess what do you anticipate accelerating am fiscal trying to enter the fleet leverage the share is it that sort of at sixty five
spk_17: percent or that expanding
spk_18: i think we would expect it to continue to increase as we
spk_19: put more assets under the gpl leaving in warehouse out of canada legacies way and then out of our order book is wild so you'll see a kind of moving closer to that seventy five percent rate
spk_20: agree and then a think brian and mention two hundred million of modifications that and manufacturing that aren't part of like your delivery is that offer fiscal twenty two or that spread over a multiyear kind of aspect
spk_3: yeah i have another great jaguars the most of it is and than twenty twenty two or so the does have a tail and twenty twenty three based on our as good year laid out but a lot of it is calendar twenty twenty two got it okay thank you
spk_1: without them our next question comes from can sector
spk_21: at the bank of america
spk_5: hey good morning on and off that very good luck as you as you transition to that
spk_1: go off topic
spk_22: follow up on match question on pricing where we talked about cada a great market you know it look like be law order book when up about in on i can percent year over year in the price or car can you talk about comics as you normally do it is there any constable change in that makes for a that can we consider that you know what a
spk_6: real impact on pricing on a on a year of your airbase it added that more a factor of of looking at your labor costs gotta
spk_1: so so i can handle the that the mixer side of that equation he lives as a before and it continues to ring true and that the mix is the most diverse i've seen in my forty one and forty two years the in the industry which about the be as a real ban by into i'm just a baby the baby the garden by tom he is it really is a little bit of everything which is a fantastic for us getting a growing our least leaders while from a diversity perspective credit profile perspective and at least maturity perspective but it is everything from i have multiple types of covered hopper cars auto intermodal guy
spk_2: dollars
spk_19: boxcars some it's very very very diverse there's no single there's no single ah particular area that is creating a demand cycle this time which normally would be an ethanol them it would be a crude bomb it's it's not cases years berry berry a diverse
spk_1: and the other thing as a limited audibly impact the and he is gonna be you have commodity price and labor costs have gone after those are flowing through and been reflected in of hire a at the
spk_7: that's a good point to remember it we're doing great job on hedging a things like interest rates a you know of rising i be no of the bleaching products and also money bryson
spk_1: i then the says we're protecting ourselves in that sense back to that bomb and then i mean you off address the by the of refurbishment didn't die this really begins to scale on a car basis are are you doing that that the existing facilities but they can add on that because of the i acquisition maybe talk a little bit about how that impacts the margin it is that reflected entered the matter services that in manufacturing were so he did you have given that scaling and growth of that where do we see that the impact of that and what what should we expect that are the margin contribution from that business relative to the incumbent eight right great class and and we are doing because these are very large programme on and based on our customer needs we are going to be running this work through our manufacturing facilities because it that kind of repetitive work that we think that we can do very efficiently and effectively at those facility from a margin percentage or stuff
spk_11: active it's in a flow through and manufacturing and what you're gonna be under financial day been it's gonna be beneficial because these are
spk_19: you know competitively priced transactions and the work that go into the facility is going to add to the overhead absorption so i'm we don't see it as you know a drag on manufacturing earnings it's also not going to be something that's gonna you know sky rocketed the other way it if the night
spk_23: bland with the other new car worth going on
spk_7: his interesting you know that this is a purely i'd deep market and given the modernization capabilities of the aging fleet i and i both trinity and and green bar are you know i finding that does is modernization is a good could really use giggles as well so i
spk_24: because a very attractive future market's going on through the cycle won't be much along the lines of what you document you might clarify your views on it now that absolutely correct this is not something that is a short term of phenomena of is actually something that as you see scrub car rates go up and you see the value in
spk_1: in repurchasing a components you're going to see a our along along live ah a process here that terrible extend for multiple years
spk_19: great project the that's that i guess that's running the rounded that lawyer you a mention of a a creative so i phone our stance
spk_0: is that gonna be a creative to existing margin that the upper teams you were talking about one perpetual a trap are you putting out a chiropractor on that
spk_25: i'm i got too many people and and me you know yes it's gonna be i think it's gonna be positive for our overall margin obviously out we don't let to take work into our saw that isn't gonna be positive overall for green wire and far shareholders just look at it this way or another two hundred enough a backlog give people go that way and but we're we're not going to industry i
spk_1: he ate a industry and conviction were including it in our manufacturing backlogs been done or manufacturing plants not i principally in our with their facilities it's it's really new car type work on blood major project nature
spk_25: cricket the dock that thakur business and
spk_6: our next question comes from back on major it was such a hammer brian you talked a few times about the sixty thousand twenty twenty delivery projections for some of the industry forecasters we took a step back is that something that you feel like you have conviction in and can manage the business to based on your conversations with customers and and railcar me
spk_25: manage man and in leading indicators that really just that you know here's what the experts say so that could happen type situation yeah the banks basque i'm so so we do our own analysis some in obviously we take guidance on the exterior of on an the as well but we've really from last few years relied more on our internal consensus which is built up by a multiple a number of vantage points we have a customers and
spk_8: outreach programs that we haven't the industry and that we feel very confident that those numbers look good in the future
spk_1: thank you for that in your to triangular that further lower your comment about you know as the cycle strengthens we think we can generate high teens margins again this is is a sixty thousand kind of environment whether or not that happens exactly and twenty two twenty three is that the kind of backdrop you would need for overhead absorption and pricing assumptions and other things to drive that
spk_3: i've been gathered them i did that will be bent either be great to be at that guy that did it out than level and and stay at that steady level for a while but has of a plane
spk_26: the ramping up are ramping down things that can be had when to isn't been so getting said that sort of i demand and delivery environment in the being able to stay there is that can be very beneficial legend
spk_27: thank you and and in not to leave anyone out here adrian am he talked about the tax receivable the last couple of quarters come and in cash flow obviously with
spk_28: that consumes catches you ramp up production and and invest in the lease fleet but can you help us think about for your cash flow and some of these things even out on of it's an operating cash basis or a free cash flow before some of the lease investment but but how do you think about the cash consumption the business on kind of a sustainable moron
spk_0: right basis versus on the quarter to quarter volatility we'd expect quite quite positive cash flow in the back half of the year
spk_29: you know we're our as you say you're supporting ramp up in our business or working capital at moments our were being cautious there with the supply chain issues as so
spk_30: he had not made as efficient as would be a normal times out there were protecting ourselves by having extra inventory on hand ah but i'd expect to see that are normalize outs as our production stabilized that these higher levels and back half of the year and our casper to be positive
spk_31: and we get when you say quite as in the back half a year just to clarify are you talking free cash flow are operating cash flow
spk_1: operating cash flow thank you for the time think that is best our next question comes from steve he bade capital market
spk_31: a morning everyone
spk_1: up when he's a brian
spk_2: yeah thanks op ryan's you said not a lot of lower margin cards left and backlog but i believe adrian said gross margin would be single digit in the first half so first like i hear that margin comic correctly and if so does that mean we should expect another tough quarter from maintenance and lower sequential marginally thing and to que
spk_1: well are all into that one this is just do i think what we would say is ah
spk_6: i'm gg was always a challenge and quarter for amendments business because of whether typically i mean you know that locations out the deal with inclement weather snow rain freezing temperatures and if you gonna look back at years of many times that there are most challenging quarter and up isn't so we we see that as normal seasonality we would expect to be better than first quarter which was was much more challenging than we expected but with the manufacturer impede with you see that there's that opportunities for improvement and growth and that man in the margin and and you to in while most of the competitively priced cars are out of it we are still ramping up barriers
spk_2: production line and that's where he had more of the overhead under absorption that were that that were you know try to be that may be cautious around a little bit
spk_1: yep
spk_32: ah yeah i saw i guess i mean i hear you on seeing better momentum and some of the lines of business but the town on this call seems much more conservative versus the last cop as we think about some of the one you tell from tax and equity earnings this quarter good yes be down sequentially
spk_0: are you getting made really because i got we were much more conservative glasgow maybe we're just night day articulating or i read story gorilla by the oil you think you make your or were more conservative i had my double digit margin and the first half last quarter
spk_12: yeah we yeah that's right and we added a we had a little bit disappointing started have and it was dragged down by a by me and send some other things that that i think our self correcting like glad i didn't i am mean a jump and ula should ask that's and i am just i just taken aback by out by the i would go you know and and i would have to go back and i'm you know rather than admitted that sometimes i have a hard time remembering last week my flat black or the call and while in light of that but ah we are a lot more positive we have come through this first quarter and have performed better than
spk_33: what we expected when we put together our initial expectations for the fiscal year always be a lot of opportunities well the are ramping of are adding line or more quickly than what we expected that we are still doing it in the modern hey so you know it it it's fine to feel that me we're talking out of both sides of our mouths that we we're
spk_1: as brian had that was thing broad demand on a variety of current site and we're figuring out how can we have addressed that man solve our customer problem and i think that all going to be positive now does it actually work its way out into double digit margins in the first half or there's some bleed over
spk_11: or avenue and of buckingham again that getting into trying to parse the by quarter an arm that's the part of why we try not to get into a running a business day to day ah we think that we've got a lot of momentum we think we're gonna have you know as we move through this year and gonna increase and you're going to be the largest number what let me elaborate
spk_2: on the on the economic to that it you know is we look at the backlog and as really significant factor in our business we look at the leasing momentum as the two areas where momentum that are significant or with the backlog we are evil and ram and day increase production and every line or many of the
spk_1: lines and in one case on an article regarding strong backlog were troubling the production absorbed overhead is laurie said so the timing of it is more problematic but we're still very optimistic about the year and the financial results with you okay thanks our next question is a follow up from that alcott with talent thank you for taking my a followup questions are so shortly after he has acquired american railcars as in july twenty nineteen obviously the world's changed and the production cycle got cut like basically hands off of the industry employs one a and state
spk_7: at thirty thousand and twenty twenty one which is below replacement so i guess this production of cycle this year and much more so next year if you're sixty thousand the school i will be the first time you have a major op cycle with a right
spk_6: can you talk about how this could have different this could lead from your prior our expenses for you guys how the mix will be the fed what the impact on pricing and margin will be and are at you and i realized that this could be more at twenty twenty three calendar three twenty three dynamic and that
spk_1: damn it on would wager
spk_6: on going tried just just set a proper say glory and brain can address this question
spk_12: can be an acquisition of a or i you're right the timing i we got hit by calling them we also had the on and the as driving on efficiency by the class one railroads i'm so that of lot volume our our own la he had gone up so we were hit by a many recession when that on a ship triggered him in ab
spk_1: i utilization on the railroad then covered by and ah so we have been operating in the usual times on a rise a real asset and i were a positive about the admission that day or i me made to our product portfolio which is i reflected in it and ability to attract stronger backlog and stronger customers it's expanded our customer base enhanced hansard of cost efficiency to geographic dispersion aren't so i added gotchas a general background former how we see a arrived today we're in a us company it gives us a production capability in the heartland or in the it's a positive thing dreamer
spk_12: lorry out why don't you go into the would grand yo things well known i think that that you're you're exactly right i mean the timing of that acquisition what followed on that timing was difficult i think be done i'm a nice job managing through that the last couple of years i'm excited about having that footprint i'm out we go into the uptick in the man with you have a strong skilled workforce there on they got experience building a variety of cover hopper of and can car it got a lot of experie
spk_6: i am on delivering rail cars to ship or big customers that have been a nice addition to our portfolio and an enhancement of our portfolio of customer arm and as you mentioned the location is great from our delivery and transportation to our customers though either all things that are going to be positive he took the opportunity during the downturn and doing during lower production rate to be able to get into those facilities and take some of the an efficiency is that we have grown and in the greenback organization and start putting out into the arkansas facility the we actually be that the up time is the main on turning into something that we should be more positive growth that out
spk_34: got it up it from a purely mix perspective is it
spk_35: favorable or of i had one
spk_0: we we believe in favorable go board
spk_1: got it
spk_0: arm and then not a sorry if i missed that earlier guys but did you say anything about the and korean or activity the our after water and

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