Greenbrier Companies, Inc. (The)

Q2 2024 Earnings Conference Call

4/5/2024

spk05: Hello, and welcome to the Greenbrier Company's second quarter of fiscal 2024 earnings conference call. Following today's presentation, we will conduct a question and answer session. Each analyst should limit themselves to one question with a follow-up if needed. Until that time, all lines will be in a listen-only mode. At the request of the Greenbrier Companies, this conference call is being recorded for instant 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.
spk11: Thank you, Gary. Good morning, everyone, and welcome to our second quarter of Fiscal 24 conference call. Today, I'm joined by Lori Ticorius, Greenbrier's CEO and President, Brian Comstock, Executive Vice President and President of the Americas, and Adrian Downs, Senior Vice President and CFO. Following our update on Greenbrier's Q2 performance and an update on our outlook for the remainder of fiscal 24, 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 2024 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier. You will also notice that today we will refer to the words recurring revenue throughout our presentation and comments today. Recurring revenue is defined as leasing and management services revenue that excludes the impact of syndication activity. And with that, I will turn it over to Lori.
spk04: Thank you Justin and good morning everyone. Greenberg once again delivered strong performance as we move through our fiscal year. We're seeing operating efficiencies continue to improve and we're progressing on our organization-wide initiatives. We have good momentum as we head into the second half of our year and beyond. We remain confident in Greenberg's multi-year Better Together strategy and the three fundamental priorities underlying it. As a reminder, First is maintaining our manufacturing leadership position across our geographies. Second is meeting our customers' needs while optimizing our industrial footprint for efficiency and margin enhancement. And third is the pursuit of sustained, disciplined growth in leasing and services. Through Better Together, we're committed to enhancing our manufacturing performance while growing recurring revenue and cash flow by investing in the lease fleet. Turning to our results, we generated over $860 million in revenue and earnings per share of $1.03. A consolidated gross margin of 14% represents our second consecutive quarter of mid-teens margin. It reflects solid operating performance in manufacturing and leasing and management services, partially offset by lower wheelset volumes in maintenance services due to a milder winter. Last quarter, we said that one quarter of mid-teens margin was a great start towards our long-term strategic goal. It is still not a trend. We're continuing to work on facility rationalizations in manufacturing and maintenance services that commenced in fiscal 2023, advancing our make versus buy strategy, and remaining focused on enhancing margins. We also continue our long track record of product innovation. while incorporating sustainability into our designs. As you might recall, in 2021, we introduced our high-strength steel gondola. In Q2, we successfully launched our ultra-high-strength gondola. The gondolas use an innovative formula for high-strength, lighter-weight steel, reducing each gondola's unloaded weight by up to 15,000 pounds. We also successfully constructed and tested a new 89-foot slab tilt flat car built for heavy industrial applications, as well as a new high-strength box car door. Our focus on innovation, manufacturing excellence, and sustainability is earning Greenbar favorable notices. Recently, CN recognized us for our efforts and commitment to sustainability as part of its Echo Connections partnership program. This is the first year CN included suppliers to its recognition program, and Greenbrier was one of only seven supply chain partners to receive the award. While accolades are always nice to receive, most importantly, our emphasis on innovating and elevating our manufacturing expertise supports our leadership position across the markets we serve. This performance continued in Q2, with Greenbrier receiving a nice balance of orders across our geographies. Market conditions for rail car leasing remain positive. Our expanded leasing strategy is gaining traction in both North America and Europe. This is a critical element of our multi-year plan and is expected to result in the doubling of recurring revenues within the next five years. Importantly, our balance sheet remains very healthy, allowing us to invest in our business while continuing to return capital to shareholders. This has been our longstanding and preferred approach to capital allocation. I'm pleased to report our board declared a quarterly dividend of 30 cents per share this week, representing our 40th consecutive quarterly dividend. In the meantime, the economy in North America has been resilient. The probability of a soft landing is increasing, and the Fed has signaled it will likely make three interest rate cuts by the end of 2024. Of course, This year is also a U.S. presidential election year, not to mention national elections in the EU and Mexico. Our current disciplined approach in our core North American railcar market has attracted new capital to asset-based investing in railcars, which is encouraging. In Europe, while the economy is still lagging the U.S., the growth projections have been trimmed once again by the European Central Bank, but we're building momentum Stable demand across railcar types in both North America and Europe underpin new builds and lease renewals. The southern border remains a focus as we address developments that could impact deliveries from our suppliers or to our customers in real time. Border crossing issues impacted us at various times during the quarter, but the work performed by our skilled manufacturing and logistics colleagues have successfully avoided severe impacts on Greenbrier. Sustained high performance across our business is in view. Our commercial team with its powerful lease origination capabilities continues to outperform, giving us excellent near-term and longer-term visibility into manufacturing and steadily building our stream of lease revenues. We're confident in the long-term strategy and multi-year targets and look forward to sharing our progress on future calls. Now, before I conclude my remarks, I'd like to acknowledge the contributions of Adrian Downs, who's been at Greenbar since 2013. As we announced earlier this year, Adrian will be stepping down from his role as CFO. Adrian's service to Greenbar during challenging times, including the pandemic, has been essential. During his time here, Greenbar strengthened its balance sheet and expanded its global operations platform, integrating accounting and finance functions as we grew. We're incredibly grateful for his contributions to Greenbrier over the years and wish him all the best in his future endeavors. Thank you, Adrian. And with that, let me turn the call over to Brian Comstock, who will discuss our activities for the quarter in greater detail and review market conditions.
spk09: Thanks, Lori, and good morning, everyone. During Q2, Greenbrier secured new rail car quarters of 5,900 units worth nearly $690 million dollars. Demand continues to be broad-based and diverse across most railcar types. As of February 29th, Greenbar's global new railcar backlog was 29,200 units valued at an estimated $3.6 billion. Backlog continues to be stable, providing significant revenue visibility well into 2025. Our commercial performance reflects our leading market position strong lease origination capabilities, and direct sales experience. International orders accounted for about 40% of the activity in the quarter, reflecting the continuing momentum in Europe and Brazil. We have been performing well despite a challenging backdrop in Europe, and our backlog remains very healthy thanks to a broad portfolio mix. In Europe, volumes through our leasing distribution channel continue to grow. Our ability to originate and syndicate leases is critical to the long-term performance of our European manufacturing business. We remain excited about our opportunity in Europe, where the rail industry enjoys compelling secular tailwinds. We delivered 5,600 rail cars to customers in Q2, roughly the same as last quarter. We increased the midpoint of our delivery and revenue guidance, indicating that deliveries will be weighted to the second half of the year. Second quarter gross margins of 10.8% declined slightly from Q1, but still improved by 380 basis points compared to the second quarter of last year. While we are working on numerous activities to optimize manufacturing efficiency, several of the efficiency gains we have made over the last 12 months are being sustained. Expansion of in-house fabrication for basic primary parts and sub-assemblies as part of our make versus buy strategy remains on track, with the full benefit from insourcing expected to be realized by the middle of fiscal 2025. Leasing and management services also performed well in the quarter. We are steadily progressing to our stated goal of doubling recurring revenue from leasing and management services. Recurring revenue is growing from various sources, including new railcars added to our lease fleet and lease renewals at more favorable terms. We grew our lease fleet by about 500 units or 3.5% during the quarter. As a reminder, we have committed to invest up to $300 million per year on a net basis over the next several years to expand our recurring revenue, as long as we do so in a manner that meets our financial criteria. I want to reemphasize that we will only invest in the right assets with the right lease terms and counterparties, and we are focused on railcar types that keep our fleet portfolio balance. We regularly evaluate our financing strategies and are taking a prudent approach to financing growth of our lease fleet. Our average interest rate of 4.5% on our non-recourse leasing debt is significantly lower than current market interest rates. At the end of Q2, our fleet leverage was 77%, in line with our targeted fleet leverage framework. We leverage Rokart assets at an appraised fair market value, which results in borrowing ratios that are higher on a net book value basis. Our lease renewal rates continue to grow at double digits, and we have successfully renewed lease terms while maintaining a consistently high fleet utilization of nearly 99% in Q2. The leasing market remains healthy, characterized by a scarcity of in-demand Rokart types, and high fleet utilization among lessors. Moving in sequence with higher interest rates, our lease rates remain compensatory, resulting in elevated rates for both new originations and renewals. We have strategically staggered lease durations to lessen the impact of cyclicality and create opportunities for favorable renewals. We have already renewed more than half of our expiring leases this year at more favorable rates. Our team is working on the remaining lease renewals, and we are confident we will finish the year successfully. Fundamentally, the backdrop of North American railcar market remains solid, with demand approaching replacement levels. While overall traffic is projected to remain steady, there is potential for intermodal growth due to the current challenges at the Suez and Panama canals. These disruptions will likely redirect traffic to the West Coast ports, which benefits rail transport demand. Additionally, nearshoring trends support long-term growth in traffic across the southern border. The supply of available rail cars is still near trough levels, which has led to robust lease rate growth renewals in term length. We are confident we have the right strategy in place to successfully execute our plan in this environment. In Q2, we syndicated 1,400 rail cars with multiple investors, generating strong liquidity and margins. The syndication market remains liquid with a solid appetite for the asset class. The REL sector has proven to perform well over economic cycles, and we are continuing to see increased syndication interest from new investors motivated to diversify. Maintenance services performance was impacted by lower wheel sets and component volumes resulting from an unusually mild winter. We have several initiatives underway to improve this unit's efficiency by improving car flow, material planning, and cycle time at all facilities. The backdrop for maintenance services remains constructive over interim to longer term, driven in part by the last two peak tanker build cycles that will require repairs and requalification over the next several years. Now, I'll hand the call over to Adrian, who will speak to our financial highlights for the quarter.
spk06: Thank you, Brian, and good morning, everyone. Before moving into the highlights of the quarter, I'd like to remind everyone that quarterly financial information is available in the press release and supplemental slides on our website. Greenbrier's Q2 performance was robust in our manufacturing and leasing segments, as highlighted by Laurie and Brian in their remarks. After covering some of the highlights in the quarter, I'll provide an update to our fiscal 2024 guidance. Notable highlights for the second quarter include diverse new rail car orders of 5,900 units valued at nearly $690 million, the second highest over the past two years. Deliveries of 5,600 units include 300 units from our unconsolidated joint venture in Brazil. Consolidated revenue of $863 million grew sequentially due to a change in product mix, increasing manufacturing volumes and growth in our leasing and management services segment. Aggregate gross margin percent was 14.2%, resulting primarily from product mix, growth in the lease fleet, and higher lease rates. Selling and administrative expense of approximately $64 million increased sequentially, primarily due to higher employee-related costs. Earnings from unconsolidated affiliates of $4 million more than doubled from the first quarter, primarily due to higher earnings from our Brazilian joint venture, which are expected to moderate. Net earnings attributable to Greenbrier of $33 million generated diluted EPS of $1.03 per share. And finally, EBITDA for the quarter was $95 million, or 11% of revenue. As we look to liquidity, Greenbar generated positive operating cash flow of over $99 million in the quarter, resulting from strong earnings and a positive net change to working capital. Additionally, Greenbar's Q2 liquidity remains solid at $581 million, consisting of $252 million of cash and available borrowings of $329 million. Other notable financing items in the quarter include a retirement of the remaining $48 million of our 2017 senior convertible notes with cash. As mentioned in our first quarter remarks, we are providing a breakout between recourse and non-recourse desk in the footnote section of our 10Q under notes payable and revolving notes. Green Bear's debt composition is now composed of more non-recourse desk than recourse. This emphasizes our commitment towards reducing and retiring our recourse desk as cash flows improve and underscores our prudence with how we manage our capital structure and balance sheet. As Laurie mentioned, Greenbar's board of directors declared a quarterly dividend of 30 cents per share. Based on yesterday's closing price, our annual dividend represents a yield of approximately 2.3%. Including activity from the second quarter, Greenbar has returned nearly $510 million of capital to shareholders through dividends and share repurchases since reinstating our dividend program back in 2014. And these are actions that our board and management team remain committed to. We believe this is a great way to create long-term shareholder value, and we will periodically evaluate increases to our quarterly dividend and look to repurchase shares opportunistically. Finally, shifting focus to our guidance and business outlook, based on current trends and production schedules, We are raising the bottom end of our 2024 revenue and delivery guidance, updating our capital expenditure forecast, and reaffirming our gross margin outlook. We are raising the bottom end of our deliveries to 23,500, which includes approximately 1,400 units from Green Bear Maxxion in Brazil. We are increasing the lower end of revenues to 3.5 billion, Selling and administrative expense is expected to be approximately 230 to 235 million. Capital expenditures have also been updated. Forecasted expenditures in our manufacturing segment are expected to be around 140 million, which includes spend related to insourcing activities, followed by 15 million in our maintenance services segment. Gross investment of approximately 350 million in leasing and management services is unchanged, and includes current year capital expenditures as well as transfers of rail cars into the lease fleet that were manufactured and subsequently held in the balance sheet in 2023. Proceeds of equipment sales have been adjusted to approximately $75 million. And aggregate gross margin percent for the full year is expected to be in the low to mid teens. Overall, I am pleased with the performance in the second quarter and throughout the first half of the year, which has put Greenbrier on solid footing for a strong finish to the year. As we head into the second half, we are supported by a robust backlog, ample liquidity, and a strong balance sheet. We are confident our outlook for fiscal 2024 is positive with earnings expected to grow. And now, as this will be my final earnings call at Greenbrier, I would like to take this opportunity to say thank you. I am privileged to have spent 11 years at Greenbrier, both as the chief financial officer and prior to that as chief accounting officer. As Laurie mentioned, a lot has been accomplished over this time period and Greenbrier has a great leadership team reinforced by a strong balance sheet and improving results. I would like to thank our board of directors, shareholders and Laurie for the opportunities and support during this time. This has been a great place to work and although I will be leaving this role, I will still be involved as a strategic advisor to help with the transition process and other projects. Thank you, and with that, we will open up for questions.
spk05: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster.
spk00: Our first question today comes from Justin Long with Stevens.
spk05: Please go ahead.
spk02: Thanks. Good morning, and Adrian, congrats. Thank you very much. So maybe to start with a question on the gross margin outlook, you reiterated that outlook for the full year, the low to mid-teens. But through the first couple of quarters, we're tracking at the high end of that range. And the guidance also implies that production levels in the second half will be higher than the first half. And I would think that would create some positive operating leverage. So Is there anything that you would kind of point to that could drive a sequential moderation of margins? Or do you feel like the higher end of that gross margin outlook is most reasonable as we sit here today?
spk04: So, I'll give a couple of brief comments. We're excited about the progress we've made for the first half of this year. We're excited about what we see in the second half of the year. So, you know, I think that we're going to continue the steady progress. We're mindful that we have to put one foot in front of the other every day to move forward, and that's what we're doing. And I think the last six months or two quarters are showing others that that's what we're capable of, and I expect us to continue on a modest trajectory.
spk02: Okay, got it. And maybe for my second question, I wanted to ask about and see if you could provide any additional color on how orders progressed through the quarter month to month. I know there can be some seasonality around year end. And then anything you can share on the third quarter thus far and what you've seen in order and inquiry levels relative to 2Q.
spk09: Yeah, and thanks, Justin, Brian. It's a good question because as you know, coming out of the holidays, typically it's a little bit slower and the cadence is pretty much in line with your expectations. We came out of the holidays, people are now back doing their jobs and what we saw through the quarter is a progression of increased orders, particularly in North America as the quarter progressed. I would say that this quarter is off to a very strong start as well. The type line is still solid, visibility is still robust, and the car types are quite diverse.
spk00: Okay, great. That's good to hear. I appreciate it.
spk05: The next question is from Matt Elcott with TD Cohen. Please go ahead.
spk01: Thank you. Good morning. Staying on the order question, Brian, it's nice to see a solid number for the quarter and that the activity is strong in the third quarter. The ASP declined by a decent amount, I think 16%, Q2 versus 1Q. Is that a function of the international portion being higher this quarter than last quarter, or is there anything else in there?
spk09: It's a little bit of everything. At the end of the day, it's mixed, as usual, but also the mix of international orders has some headwinds to the average ASP as well. However, from a pricing perspective, what I can give you is that nothing has really changed in the industry. It's still very disciplined, and we're still seeing good pricing in the market.
spk01: Okay, that's good to hear. And then, you know, staying on kind of, you know, the mix question but going to production, the benefit of product mix in manufacturing for revenue, is that going to turn into a headwind going forward and thus the lack of what one would expect, you know, higher margin than you're guiding?
spk11: So I think, Matt, we don't expect to see a material shift in our mix at this point. What we would say is the reason we increased the bottom end of our range is we see more upside over the back half of this year. And part of this is just probably being aware that we are living in a very fluid time, fluid economy, and while we do have very good visibility in manufacturing, it's just trying to make sure that we have a little bit of caution in our remarks at times and in our outlook. One thing we continue to learn is that this is a very fluid world, very fluid economy, and what we see is very, very great outlook, strong order, strong backlog, great momentum in manufacturing and production, but I guess we're just trying to make sure that we are not going to get too far out of our skis and over-promise. But at this point, and I'm looking at Lori and Brian right now as we're almost or effectively a month into our Q3 and we don't see any significant changes from our trajectory.
spk04: And Matt, maybe just to add as well, while we love having a big backlog, Solid gives us ability to plan our production lines and be very efficient. At the same time, we are investing, particularly in Mexico, with our insourcing project that will continue to add to efficiencies in our cost, which will enhance our margins.
spk01: Okay, got it. And Laurie and Justin, you guys alluded and Brian alluded to Intermodal possibly starting to recover late this calendar year. Those are lower ASP cars, but can you talk about the margin effect? Would they be margin dilutive, or are they margin neutral, even though they're lower ASP?
spk04: I would say they're either margin neutral or they're margin benefit, depends on. So you're right on the top line, but we would expect to maintain the margin. And actually, I think Now that I'm quickly thinking through math in my head, a lower sales price with good margin dollars should be a benefit to margin percentage.
spk05: Got it. Great. Thank you very much. The next question is from Harrison Bauer with Susquehanna Financial Group. Please go ahead.
spk03: Hi, this is Harrison on for Baskin Majors. Thanks for taking my questions today. Lori and Brian both mentioned the milder winter affecting the maintenance business. But now that's been revenue dropping for three quarters sequentially and then profits have dropped the last two. Could this be a broad cyclical adjustment or maybe specific customers pulling back the use of their network? And then when would you expect stabilization and maybe what's some of your trajectory for the maintenance business going forward?
spk11: Hey Harrison, this is Justin. Good to hear from you today. I would say that actually this business has always had some seasonality and cyclicality so that you see a run-up in our fiscal Q2 in the winter and then a further step up in our fiscal Q3 in the spring because the winter does drive volumes in the wheel business and then there's a spring restocking and then Q4 and our fiscal Q1 definitely have some, I would say, more normalization. So we see this as a broader, this isn't a change in the business, This is more of just the normal seasonality we see in the wintertime didn't manifest this year. So it's not a big cyclical shift in the business. It's more of just, nope, things did not manifest as they historically do. And we are moving into our Q3 and undertaking various remedial actions to kind of make sure that our volumes are going to manifest as expected and that we're, I'd say, managing the cost structure and overhead as proactively as possible. I don't know if there's anything else you'd like to add, Brian, on that.
spk09: No, I think you hit it perfectly, Justin. The seasonality typically is over two, two and a half quarters. We're already seeing that moderate as we move into this next quarter, and we're not projecting any major changes. you know, shortfalls moving forward in that business.
spk03: Thank you for that. And for my second, now that the North American manufacturing production rate and margin profile seem to be stabilizing with solid order recovery sequentially, can you share some updated thoughts on what your ultimate margin range you'd expect to generate in a manufacturing with a mid-cycle backdrop? And then from where we sit today, if orders are stable, would you expect a higher or lower margin, maybe just directionally for fiscal 2025? Thank you.
spk04: Great question, Harrison. I would say that if I look out into 2025 and we have stability and the kind of visibility that we have right now, I would expect to be at the upper end of the range that we've provided. I know that the men and women that are working in Specifically within our manufacturing organization as well as our commercial organization, we're always finding ways to improve the throughput so that we can drop more of the revenue through to margin and to the bottom line.
spk00: The next question is, excuse me, go ahead.
spk05: The next question is from Ken Hexter with Bank of America. Please go ahead.
spk07: Great. Good luck to Adrian and congrats on the team on building the backlog. But maybe if I can, Laurie, unpack that margin, your multiple margin outlook a little bit better. I guess near term, I know you just gave a long-term 25, but given your low to mid-teens outlook, are you still expecting manufacturing margins to stay at double digits here for the second half? And then do you expect to see maintenance margins. I didn't quite get the answer there. Are you expecting them to return to double digits, or maybe you can give your thoughts on that?
spk04: And thank you, Ken. I hope I didn't misspeak, but we are not expecting low to mid-teen margins. We're expecting mid-teen margins with the expectation that we will continue marching through this fiscal year on a solid trajectory. And on a consolidated basis. And on a consolidated basis, yes. Thank you, Justin. From the maintenance services business perspective, we do, as Brian said, we're taking a number of actions to think about how we're running that business, how we're thinking about how we schedule equipment into those shops to strain efficiencies. That's part of the reorganization of some of our activities and combine some of our operating resources around engineering, quality and things like that so that we can take the strengths that we have in our manufacturing operations and share those more broadly with our rail services group and vice versa, take some of the strengths of what we've been able to do in those repair shops and share those with our manufacturing facilities. So I would say we do expect in the third quarter the main services margins and we expect to continue on the overall path for consolidated margins to improve.
spk11: And if I could just draw a firm line under your manufacturing question, Ken, we do not anticipate manufacturing margins going backwards, much less dropping back into the single digits at this point on a gross margin basis, just to be very clear about that.
spk04: Thank you, Justin.
spk07: Very helpful. And then, Lori, if I can revisit, I think it was maybe Matt's first question on the ASP decline. I guess if I just look at the backlog total revenue per ASP per car, right, in terms of your total backlog, it, it, it fell as, as you mentioned, is that, I just want to revisit, is that just a mix issue in terms of what you're selling versus anything going on in the industry? I just want to clarify that, that one answer there.
spk11: So it's, it's, sorry, you were asking Lori, but I have a hard time not talking. So it's a combination of mix and then there is, there is some, um, As you're well aware, we do have the ability to escalate and de-escalate raw input costs on our backlog. And so as there is some moderation on our input costs, primarily steel, steel surcharge and whatnot, that pricing comes down a little bit too. The piece to really reiterate is that on a core pricing basis, the pricing that drives profitability and on lease rates, that is being disciplined, that is stable to up kind of across the various car types.
spk08: All right, that's helpful. Oh, go ahead, sorry.
spk04: I said well said, Justin.
spk08: Oh, great. I appreciate your time and thoughts. Thanks, guys.
spk05: The next question is from Stephen Barger with KeyBank Capital Markets. Please go ahead.
spk12: Hey, Dykes. Good morning. Looking at slide 12 with the fleet levered to 77% of book value, do you expect incremental debt from here to primarily just fund capital additions to the lease fleet at that ratio, plus or minus?
spk04: Yes.
spk12: And is lease fleet leverage the primary metric that you're focused on going forward, or is there a net debt to EBITDA target for the company? I'm just trying to think how you're changing your mindset to think about the balance sheet.
spk04: Well, so I would say that as we think about our lease fleet and the leverage associated with that, as Brian has talked about, we're very disciplined about what we're putting on our balance sheet, and then we want to leverage it appropriately, locking in interest rates, thinking about the term, thinking about the conditions. I think the team has done a really good job of being in the market at the right time and having the right sort of flexibility in the types of debt that we put on our balance sheet. take into consideration the market as to what's going on at that point in time as to what's the right debt. I think with the cash flow that we'll be generating from the leasing business as well as the margins in our other businesses, we would expect to be paying down some of our corporate recourse debt over time.
spk12: Okay. A couple more leasing questions. The slide 10, I think, says average term is 4.2 years. What is that for recent renewals?
spk09: So most of the renewals are coming in substantially longer. We're seeing five to seven years on average. That's what's bringing up. As you look quarter over quarter, you'll notice that it brings it up. But it takes a lot of renewals to move it incrementally, you know, beyond the 4.2 years. So, but most of the renewals are kind of coming in at the five to seven year range.
spk12: Got it. Thanks. And I know the lease fleet is still relatively small, but growing it is obviously a focus initiative for you. Do you anticipate putting out a lease renewal index similar to the LPI or the FLRD?
spk04: We were just talking about that the other day and trying to figure out what acronym we would come up with. Yes, but we don't have anything to unveil today.
spk12: Okay, great. Thank you.
spk11: Hey, Steve, this is Justin real quick. To answer the question I know you usually ask is we do expect the back half of the year to be stronger from an operating cash flow perspective, and then that will also generate some free cash flow that we can deploy into delevering and other aspects of our business.
spk12: I appreciate you anticipating that for me. Well, and that's good to hear. I look forward to seeing that positive free cash flow. Thanks.
spk05: Definitely.
spk04: Thanks, Dave.
spk05: This concludes our question and answer session. I would like to turn the conference back over to Lori Takorius for any closing remarks.
spk04: Thank you, sir. I appreciate everyone's time and attention. I know Justin will be speaking with some of you later today. Thank you, and we look forward to sharing progress in the future.
spk05: Thanks, everyone. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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