Wabash National Corporation

Hello and welcome to WBASH second quarter 2022 earnings call. At this time, I would like to turn the call over to Ryan Reed for opening remarks and introductions.

Thank you and good morning, everyone. We appreciate you joining us on this call. With me today are Brent Gagee, President and Chief Executive Officer, and Mike Pettit, Chief Financial Officer. Before we get started, 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 available at our investor site at onewabash.com.

Please refer to slide two on our earnings deck for the company's safe harbor disclosure addressing forward-looking statements. I'll now hand it off to Brett so he can get us started with his highlights. Thanks, Ryan. Good morning, everyone, and thanks for joining us today. We have a strong quarter and outlook to discuss, but I'd like to start by recapping the investor meeting we held on May 19th to reiterate our strategy, growth goals, and financial targets. We've made meaningful changes to our organization, which began with reimagining our purpose, vision, and mission as we seek to change how the world reaches you. Narrowing our focus to the transportation, logistics, and distribution industries provided us with the charter to change our organization to be more customer-centric in practices from R&D to product development to how we interface with the customer. Resegmenting our external reporting structure and rebranding our company are external manifestations of several years of purposeful change and internal growth inside our company. I believe our organization is now ideally designed to execute on our base business while leveraging growth initiatives across cold chain, e-commerce, logistics disruption, and parts and services. By 2025, we anticipate revenue of $3 billion, operating EBITDA margin of 11%, and earnings per share of $3.50. We look forward to updating you on the progress we make on the strategic initiatives that move us closer to these financial targets and our purpose of changing how the world reaches you. One exciting update I'd like to spend some time on today relates to our parts and service initiatives. Earlier this month, we announced our trailers as a service with Freightvana to support their power-only offering. We've previously spoken about how trailer pools and power-only offerings are eliminating waste in the transportation ecosystem, not only by using trailers to optimize drivers' time, but also to allow trailer drop and hook operations to permeate much deeper into the fragmented end of the carrier space. Our partners at Frey Vada are efficiently connecting shippers with carriers, utilizing drop trailers, and they expect to immediately scale this offering as their business continues to grow. Our Trailers as a Service program provides partners like Frey Vada with the access to trailers that's critical in growing their business while connecting them with a robust maintenance and repair network underpinned by our recently announced Wabash Parts distribution joint venture. We're excited about the opportunities to continue scaling this program in the marketplace. The financials from our trailers as a service initiative will run through our parts and service segment and will be additive to our ambitions of increasing the amount of our business that comes via a recurring revenue model. Moving on to our second quarter financial performance, our team generated revenue that exceeded our initial expectations in EPS within the range of our prior outlook. Between increased volumes and improved pricing, revenue increased over 40% from the same quarter last year to an all-time record of $643 million. Profitability also continued to sequentially strengthen as we began shipping 2022 backlog, which recovers cost increases experienced during 2021. As pleased as we are with the second quarter, we still see opportunity to do even better in the second half of the year and beyond. Moving to market conditions, we spent time with investors during visits and road shows during the quarter, and we appreciate the prevailing concerns about the macro environment. Our management team watches a variety of macro leading indicators, which I think would most fairly be described as mixed right now. Credit has tightened, although it's not constrained. Consumer sentiment has weakened, although the labor market and retail sales remain very strong. Supply shortages persist in the industrial sector, although industrial production and durable goods demand remains strong. All this is to say that we appreciate the warning signs and the broader environment. That said, the reality that we have at the present is that we have seen no cancellations within our order backlog, and we are experiencing strong 2023 quote demand and very productive 2023 demand discussions with our strategic customers, which has allowed us to open our 2023 order buckets. Just to tie a couple of things together here, I believe that there are a few different factors combining to create a less cyclical environment for our business under any sort of impending economic stress. First, as we've covered in discussion of power only and the expanding use of drop-in hook, trailers are being used in new and interesting ways in order to create efficiencies in the transportation, logistics, and distribution industries. The creation of these trailer pools results in immediate tailwinds to demand and ongoing increases to the rate of replacement. Additionally, we're coming off of two solid years of constraints across the transportation equipment complex, which is fresh in the minds of equipment users. As we have seen and we are still experiencing, Dialing back trailer purchases during times of economic uncertainty is a recipe to ensure that you're boxed out of participating in the prosperous times that typically follow short bouts of uncertainty. Even if overall consumer spending does pull back, the long-term trend on e-commerce is well established and has shown the ability to maintain and even continue expanding through economic uncertainty. The structural changes to logistics models required by continued growth in e-commerce will continue to utilize more transportation equipment as passenger vehicle miles are replaced by commercial vehicle miles. And finally, let me reiterate that we showed in 2020 Wabash's capability of managing through significant cyclicality, and we have only improved that capability over the past two years. We will continue to closely monitor the economy. but I think it's important for the investment community to more fully understand the unique and secular demand environment we see before us by looking beyond the traditional measures and headlines and more of what Wabash is creating in terms of strategic portfolio management and moves to capture the benefits of a changing logistics landscape. As a reminder, the trailer industry has a strong seasonal pattern of ordering activity in which OEM backlogs build during the second half of the calendar year, then burn off through the first two calendar quarters. The second quarter typically sees the most pronounced weakness, with industry backlogs contracting by about 15% on average over multiple decades. As such, the fact that our backlog remained flat at $2.3 billion from Q1 to Q2 is a purposeful outcome we're very pleased with. Our backlog ending Q2 also represented a 71% increase versus the same period last year. Given our in-line Q2 results and the visibility provided by our strong backlog, we are comfortable maintaining our 2022 EPS outlook of $1.90. In closing, we're excited to have the opportunity to fully articulate our strategy, growth initiatives, and updated financial targets at our May investor meeting. Paying full respect to the prevailing macro uncertainty, our conversations with customers regarding both 2023 as well as long-term agreements remain very positive. We continue to work on increasing recurring revenue through our parts and service business with trailers as a service being another tangible example of how we can engage with the marketplace differently to capture more of the value that our products create for the transportation, logistics, and distribution ecosystem. More immediately, I'm pleased with our execution so far in 2022 and look forward to updating you on our early thoughts of 2023 as those figures come into sharper focus over the next one to two quarters. With that, I'll hand it over to Mike for his comments.