Wabash National Corporation

Good day, and thank you for standing by. Welcome to the Wabash National Corporation Q1 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Brian Reed, Director of Investor Relations. Please go ahead.

Thank you, Lindsay. Good morning, everyone. Thanks for joining us on this call. With me today are Brent Yeagey, President and Chief Executive Officer, and Mike Pettit, Chief Financial Officer. A couple items before we get started. First, please note that this call is being recorded. I'd also like to point out that our earnings release, the slide presentation supplementing today's call, and any non-GAAP reconciliations are all available at ir.wabashnational.com. Please refer to slide two in our earnings deck for the company's safe harbor disclosure addressing forward-looking statements. I'll now hand it off to Brent for his highlights.

Thanks, Ryan. Good morning, everyone, and thank you for joining us today. I'd like to start by mentioning how pleased we were with our first quarter results. The broader operating environment has been unusual, to say the least, But we'll touch more on that in a minute. I'd like to highlight the dedication and intense focus our team demonstrated in delivering solid quarterly performance. First quarter operating profit and earnings per share came in above our expectations as we executed on the manufacturing side while continuing to tightly manage our overall cost structure. Indicators for our core transportation, logistics, and distribution markets continue to be remarkably strong. Record spot rates and expectations for continued increases in contract rates are indicative of a robust consumer demand and capital spending paired with already strained industry capacity. All types of transportation solutions are in high demand as we begin 2021, and I'll call out our final mile truck body business because a correction in F&P's markets during 2020 was more severe than we would have expected during non-pandemic circumstances and we're optimistic that the bounce back is going to be similarly strong. Indications from our large leasing customers is that demand has returned from small and medium-sized business segments of the market that they serve so effectively. Their rental businesses have also benefited as fleets scramble for equipment as well. We believe these trends have staying power as the pandemic has clearly accelerated changes that were already underway in transportation, logistics, and distribution and we feel good about the demand environment as we look forward to this year and beyond. We'll now talk about the labor and supply chain situation. Robust industrial and consumer demand across the broader manufacturing landscape has created imbalances throughout an array of manufacturing supply chains, leading to aggressive increases in the price of materials, as well as further compounding labor availability across the country. I'm not aware of any manufacturer that's been immune to these issues, and although we have introduced effective countermeasures to mitigate the impact within Wabash, we also feel the resultant headwinds rising from those labor availability and material cost increases. Hiring remains a challenge, and after a relatively successful fourth quarter, our intake of new team members was less than desired during the first quarter and reflective of the general reality of the U.S. labor market. We will continue to pursue additional manufacturing talent throughout 2021 as we work to meet our 2021 customer demand and prepare for our 2022 market reality. And our guidance is the reality that integrating additional manufacturing talent impacts overall productivity in the near term. This is just a simple reality of the situation. The other reality is that the bulk of this impact will not carry over in 2022. It is fair to say that supply chains were already stressed heading into this year. and we had some unique quarter one weather events, to say the least, that compounded supply chain issues as heavy winter storms impacted production both with ourselves and our suppliers. This did impact our final mile manufacturing in Texas, disrupted basic flow of commerce for an extended period of time, and significantly impacted chemical-related production across many industries, all adding to a stressed supply chain, which we feel in terms of increased disruption and further increases in material costs. The cost of commodities and semi-finished components has reacted strongly to the current manufacturing environment, constraints in basic feedstock, and lack of labor availability. Already elevated heading into the year, costs of unhedged inputs have continued to run on us, which is why, despite our EPS beat in Q1, we have maintained our prior EPS guidance. As I mentioned when referencing market conditions, our products remain high in demand with our customers. In particular, our molded structural composite technology is entering a new phase of market adoption, and we're moving into our next phase of modest MSC molded structural composite technology capacity additions for 2022. As we mentioned on a prior call, continued high demand for our current dry and refrigerated products, coupled with product innovation opportunities being brought forward by the structural changes made to our product innovation and technology team means that we are in need of manufacturing capacity to capture the full value of innovation in these traditional product markets. Our forward-looking innovation team has done excellent work to identify interesting new technologies that we can leverage across our integrated portfolio of transportation solutions and into other logistics and distribution markets. In support, we'll be committing new and additional resources into our product development and launch team that further scale and accelerate the introduction of new engineered solutions and our entry into new product and customer markets. As we have now organized our commercial organization around our dynamic customer base, we're in the early stages of creating the appropriate conditions to leverage new technologies across our industry, leading first to final mile product portfolio to extend our competitive advantage with key customers. With this evolving landscape, we see real opportunity to grow in our markets and grow the shared value created with our employees, our customers, and our shareholders. Given the opportunity ahead of us, being facilitated by strategic changes to our organizational structure and the ability to leverage flexible manufacturing across product lines, I can think of few opportunities more beneficial to our long-term shareholders than reinvesting in our business to support our future organic growth. Case in point is our backlog through the first quarter. It's typical for Q1 backlog to decline sequentially after we book large deals in the fourth quarter of the previous year. This year, new orders kept pace with our shipment activity during the quarter as we saw strong demand for our non-van business, which again is sold out for 2021 and obviously unable to book new orders for the year. This level of demand for diversified products and find-a-mile was expected given our customer conversations heading into the year, but it's always nice to see the committed customer orders come through. As we look to the future, demand for Wabash engineered solutions continues to grow in a manner that requires us to act on our ability to satisfy them. As I previously mentioned, we are maintaining our prior guidance. We are very pleased with how our demand environment has taken shape in 2021 and its extension into 2022 and beyond. We expected labor to be a challenge, and we were not disappointed on that. We remain on track to ramp our total manned capacity to enter 2022 in a very strong manner. However, I would say the rise in material costs has been greater than anything we could have reasonably expected, given that we are in uncharted territory with an all-time highs in a number of commodities. What I am pleased to see is that we have taken immediate, decisive action to recover a large portion of those costs and manage in other ways to mitigate the impact far beyond Wabash's performance of the past. As the world begins to return to something that resembles normalcy, We are optimistic that the labor and supply chain challenges of 2021 will normalize over time and leave us with a less challenging operating environment in 2022, while freight growth remains strong and customer demand continues to be robust. We are therefore excited about what the future holds as many of the structural and process-based changes that we've made to our organization and having the intended outcome of synergistically furthering our ability to execute on our strategy. Our improved ability to operate and the growing reality of the established vision of enabling our customers to succeed with breakthrough ideas and solutions that help them move everything the first final mile is now an act of play. We are executing the plan. And with that, I'll hand it over to Mike for his comments. Thanks, Brent.