The Greenbrier Companies, Inc.

Hello and welcome to the Greenbrier Company's third quarter of fiscal 2023 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 instant replay purposes. At this time, I would now like to turn the conference over to Mr. Justin Roberts, Vice President and Treasurer. Mr. Roberts, you may begin.

Thank you, Anthony. Good morning, everyone, and welcome to our third quarter and fiscal 2023 conference call. Today, I'm joined by Lori Ticorius, Greenbrier's CEO and President, 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 in Q3 and our outlook for fiscal 2023, 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 important factors that could cause Greenbrier's actual results in 2023 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier. And with that, I will hand the call over to Lori.

Thank you, Justin, and good morning, everyone. I hope everyone's enjoying the start to summer. Yesterday, hopefully you saw that we announced that Pat Ottensmeyer will join the Greenbrier Board of Directors. I'd like to publicly welcome Pat to our board and look forward to working with Pat to get his perspectives on the freight rail market, as well as his insight into the US-Mexico activity. As many of you know, Greenberg hosted our inaugural Investor Day on April 12th. For those of you who are unable to attend in person or via webcast, the replay will be available on our website for a short period of time, and the full presentation will be available forever at the SEC website. And during the three-hour event, we touched on four areas. First, our leadership position in our markets. Second, our diverse manufacturing capabilities and long track record of innovation. Third, our strong lease origination capabilities and differentiated syndication model. And lastly, the consistent improvement in our financial performance across economic cycles. We also laid out Greenbar's strategy to increase margins in our manufacturing segment, grow our recurring revenue base through lease fleet investments, and follow a capital allocation strategy focused on returning value to shareholders. And while it's only been two months since that Investor Day, I'm pleased to share the progress we've made in each of these areas. In some cases, we're ahead of our own internal schedules, and in others, we're laying the foundation to execute our strategic plan. And as I briefly recap results for this quarter, I'll highlight some achievements towards these goals with the important caveat that we do not expect our progress to be linear, and our strategic plan and targets contemplate a five-year time horizon. So turning to the quarter, we generated revenue of $1 billion. Our deliveries totaled 6,600 units, down from Q2 due to the timing of syndication activity. And while revenue dipped slightly compared with the prior quarter, aggregate gross margin improved by 190 basis points to 12.3%. Increasing our aggregate gross margin to the mid-teens by fiscal 2026 is one of the targets we provided during the investor day, and we're pleased to report the progress on that front. Gross margins in manufacturing at 9.6%, increased 260 basis points compared with the prior quarter, as some of the efficiencies we discussed during the investor day materialized more quickly than expected. And while there will be unforeseen issues that occur during some quarters, we're confident that many of the efficiencies achieved thus far will continue. In particular, supply chain issues that have been a recent headwind seem to be largely in the rearview mirror. And as we've discussed previously, we're bringing fabrication in-house for basic primary parts and sub-assemblies as part of our make versus buy strategy. The first phase of this work will be completed in the fourth quarter that we're in today, and we expect to achieve our full cost savings targets of $50 to $55 million in fiscal 2025. Additionally, in the quarter, we completed the sale of Gundersen Marine in Portland as part of our capacity rationalization plan that's expected to result in annual savings of 15 to 20 million. These are costs that are getting taken out of the system permanently. Gundersen Rail completed its last rail car on May 18 after shipping over 110,000 units since 1985. I'm extremely pleased to share that Gundersen's new owner will retain many of the hardworking production workforce at that facility. Now moving across the business, Maintenance services continue the positive momentum seen since the start of the year, despite ongoing labor challenges. Their margins continue to improve sequentially on improved pricing, volume, and the operating efficiencies we've been focused on establishing over the last two years. We're expecting a strong end to the year from this segment. And as Brian will discuss shortly, we've laid the foundation for our expanded leasing strategy. This is an important component of our multi-year plan and is expected to result in the doubling of recurring revenues within the next five years. The market backdrop for leasing remains very positive and we're in a great position to execute our plan. Now, returning capital to shareholders is an integral part of our capital allocation strategy. I'm pleased to report that our board increased our quarterly dividend by 11% to $0.30 per share yesterday. Our dividend has doubled since its reinstatement in 2014 and illustrates the importance the Board places on this activity. The broader economic background is somewhat mixed with several factors creating economic cross-currents. Despite the ongoing economic murkiness, our outlook in North America remains unchanged with railcar deliveries to be at or near replacement levels for the next few years. In Europe, there's softness in demand for intermodal wagons but this is being more than offset by the bulk rail freight sector, where we continue to see strong demand across wagon types. Backdrop aside, at the company level, we continue to take actions to create a stronger, more sustainable Greenbrier. We're confident in the long-term strategy we set forth during our investor day and our team's ability to execute on that strategy, which is focused on the things we can control and not reliant on an overly optimistic demand scenario. I look forward to sharing our progress towards these targets on future calls. And now I'll turn it over to Brian to discuss the rail car demand environment and our leasing activity.