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spk01: Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Wabash third quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press the star one. Thank you. Ryan Reed, Senior Director, Corporate Development and Investor Relations.
spk03: You may begin your conference.
spk09: Thank you and good morning, everyone. We appreciate you joining us on this call.
spk10: With me today are Brent Yeagey, President and Chief Executive Officer, and Mike Pettit, Chief Financial Officer. Before we get started, please note 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 ir.onewabash.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 so he can get us started with his highlights. Thanks, Ryan.
spk08: 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 reviewing the exciting progress we've made in advancing our strategy over the past quarter. Our team has continued to execute on changes that are building the structure for Wabash to change how the world reaches you. During the third quarter, Wabash added two important partners to our industry-leading dealer network. Berge's Truck Centers and Alliance Trucks are both located in the Northeast and fill a critical gap in the Wabash network by providing the type of high-level expertise and service our customers desire to support their businesses in this rapidly changing logistics environment. We are very excited to welcome them to the Wabash family, and I believe this is another proof point on how we see our dealer network as a critical enabler to our strategy going forward. From a product brand standpoint, we announced the launch of our AccuTherm portfolio of solutions for intelligent thermal management. With superior thermal capability through the use of advanced materials and enhanced structural integrity enabled by breakthroughs in system design, AccuTherm solutions are positioned to provide enhanced thermal management performance over a wide range of use environments and applications. The AccuTherm product line shows our commitment to developing innovative cold chain solutions that ultimately will span beyond the transportation, distribution, and logistics landscape. The overarching AccuTherm brand umbrella encompasses our innovative EcoNext technology, which offers lighter weight paired with thermal advantages that do not require sacrifice and structural integrity. In August, we announced a $20 million investment to be made in our manufacturing capacity by 2023 to produce EcoNext. These efforts have Wabash well positioned, generating an incremental $125 million of cold chain revenue by 2025. I'd also like to say a few words about a recently held stakeholder conference called Ignite. Held in late September, Ignite was created to foster powerful collaboration between our suppliers, dealers, customers, and other innovative partners with expertise and experience in spaces like digital brokerage, electrification, cold chain, autonomous vehicles, regulatory forces, sustainability and social awareness, and changing logistics models. With Wabash acting as the connective tissue between these diverse constituents, This conference provided a peek into the future of what our company is working to create as we continue to build an ecosystem of innovative partners to help us bring forward-looking solutions to the transportation, logistics, and distribution space. At this event, we announced a new partnership with Feeding America, which builds on our decade-long history of supporting food banks and our local communities. As a Feeding America corporate partner, we look forward to working alongside some of our customers and suppliers, as well as other global businesses, in the fight to end hunger. Wabash's contributions to Feeding America are dedicated to supporting mobile food pantry programs, which increase the access to food in underserved areas and require equipment like Wabash's refrigerated truck bodies to keep the program running. We're excited to add this new partnership to our growing list of corporate responsibility efforts that positively impact our world. Before I move on, We also had the opportunity at our Ignite conference to recognize 34 of our top suppliers for excellence and performance during 2022. Although it has been a challenging year to maintain stability of supply throughout the whole of the industry, I believe our supply chain has worked diligently to ensure that Lovash receives supply commensurate with the strength of our product portfolio and our vision of the future. I also believe that we have done well to structure a supply base that is overwhelmingly centered in North America and insulating us from the geopolitical and port issues seen elsewhere. Finally, on the strategy front, I'd like to mention that we welcomed a new director to our board in September. Trent Broberg is the CEO of Assertus, an automotive logistics as a service platform. Trent previously spent time at truckstop.com, Real Time Freight LLC, and Swift Transportation. We look forward to the contributions Trent is able to pull from his extensive experience with major carriers as well as with digital and technology applications within the transportation management space. Lastly, with our board director's support, we amended our asset-backed lending facility, increasing the total credit facility to $350 million and creating additional liquidity up to $125 million. Oh, that might give more details here, but the increased liquidity gives us even more optionality as we move forward with our trailers as a service offering as well as other investments required to move our strategy forward. Moving on to our third quarter financial performance, our team delivered record EPS of 73 cents, which certainly exceeded our initial expectations for the quarter. Between increased volumes and improved pricing, revenue increased 36% from the same quarter last year to an all-time record of $655 million. Profitability also continued to sequentially strengthen as we achieved 14% gross margin, and 8.1% operating margin. I'd like to call out that our operating margin has expanded by 430 basis points relative to the same quarter last year. Moving to market conditions, I'm not trying to add to the debate on macro conditions. What I think is important to mention is that implied demand for our products is so far above industry capacity that even if implied demand is reduced by a macro event, we suspect that it will result in what we would consider a good year for the industry. Additionally, we have already learned in 2022 that supply chain conditions don't magically get better with the turn of the calendar year, and as our industry continues to be constrained into 2023, this actually has a way of smoothing demand in the future years. When you layer in the structural changes in demand coming from digital brokers, power-only solutions, and the growth of trailer pools more generally, we continue to feel very confident in our longer term financial targets into 2025. Our backlog remains very strong at $2.3 billion, especially considering our strong record revenue coming out of the backlog during Q3. For anyone concerned that our backlog didn't continue to go up and to the right during the quarter, don't be. It's critical to explain that the way we are filling our backlog has changed. Although our backlog is open, This is not a first-come, first-served construct. We are intentionally curating our 2023 backlog to center upon important strategic conversations with customers who are not only interested in buying across the Wabash First to Final Mile portfolio of solutions, but also interested in collaborative demand planning and securing capacity for a period that looks beyond a given year. As you all know, we have undergone substantial organizational change over the last two years to create the right structure in order to enable this type of strategic progress, and we are beginning to reap the benefits of our one Wabash organizational structure as long-term customer agreements come into focus, and I fully expect to have updates to share with you on that front in the coming weeks and months. Once again, our backlog remained at $2.3 billion in Q3, and that is a purposeful outcome that we're very pleased with. Our backlog ending Q3 represents approximately a 20% increase in the same period last year and also implies $1.7 billion of orders for 2023. I'd like to conclude addressing our backlog by mentioning that cancellations across the business remain effectively non-existent. As I mentioned before, with near and present constraints to industry production meeting implicit demand, it's difficult to foresee a scenario where carriers meaningfully reduce their trailer purchases, knowing how many years it can take to make up for that on the other side, as well as the opportunity cost of missing out on the hot market conditions that have historically followed periods of weakness. Given our exceptional Q3 results and the visibility provided by our strong backlog, we're excited to raise our 2022 EPS outlook to $2.15. There are multiple ways of backing into a reasonable 2023 outlook based on our 2022 performance. we'll save 2023 guidance for a Q4 call because I believe our backlog speaks for itself. But however you arrive at your thoughts for 2023, we're likely to substantially outpace our 2022 performance as well as any EPS figure from the prior decade. I also think it's reasonable to point out that with our 2023 arriving in about two months and no clear return path to pre-COVID supply chain conditions, Demand may easily continue to push from 2023 into 2024, which may insulate our industry from some of the broader macro concerns. I hope that the execution against our strategy is becoming clear. It has not been for a lot of heavy lifting behind the scenes to structure our organization to enable our strategy. But we're here, and it's very gratifying to be in a phase where I can see progress quarter in and quarter out. We continue to engage an impressive array of strategic partners to help us move faster on our journey to bring innovative solutions to the transportation, logistics, and distribution industries. Product demand remains robust, evidenced by our strong backlog, and we remain well-suited in case the environment diverges from our expectations with a very strong balance sheet and excellent operators who generated $104 million of free cash flow during the turbulence of 2020. I'd like to close by thanking our team members who have executed extremely well to help us achieve record quarterly EPS and, more importantly, an accelerating pace of strategic progress.
spk09: With that, I'll hand it over to Mike for his comments.
spk12: Thanks, Brent. Starting off with a review of our third quarter financial results. Consolidated third quarter revenue was $655 million with new trailer and truck body shipments of approximately 13,365 units and 4,115 units, respectively. Shipment activity remains strong relative to ongoing supply chain unevenness. And combined with our pricing construct that quickly recovers commodity price increases, we achieved record quarterly revenue during Q3. Gross margin was 14% of sales during the quarter, while operating margin came in at 8.1%. This is a year-over-year improvement of 340 and 430 basis points, respectively. Operating EBITDA for the third quarter was $68 million, or 10.4% of sales, which is a 350 basis point improvement versus the third quarter of last year. This was yet another quarter of margin improvement as we are seeing the intended impact of a gaining input cost inflation experience in 2021, as well as some stabilization of costs inherent in ranking facilities to achieve record revenue. During our 2019 investor day, we laid out an operating margin target of 8%, and despite a lot of twists and turns thrown at us by a global pandemic, I'm very pleased to be able to exceed that threshold in our third quarter, and we are projecting to achieve that in Q4. Finally, for the quarter, that income attributable to common stockholders was $36.2 million, or 73 cents per diluted share. From a segment perspective, transportation solutions generated revenue of $612 million, and operating income of $63 million. Parks and services generated revenue of $47 million and operating income of $7.7 million. Year-to-date operating cash flow of $72 million, and I believe we have ample opportunity to reduce working capital going forward. With capital spending continuing to build throughout the year, our target for 2022 capital spending remains between $80 and $90 million as we are on track with our strategic capacity expansion and the conversion of our Lafayette-based south plant from reefer capacity to dry van capacity. Even with our increased growth CapEx budget, we expect to generate over $75 million of free cash flow in 2022. With regard to our balance sheet, our liquidity, which comprises both cash and available borrowings, was $350 million as of September 30th. During the third quarter, we increased the size of our asset-backed lending facility to $350 million, creating immediate additional liquidity of $100 million and up to $125 million depending on our asset base. We also extended the maturity of our ABL out to 2027, which reinforces our patient debt structure. This added liquidity provides us with more optionality in how we accelerate our strategic initiatives, specifically our trailers as a service platform. With regard to capital allocation during the third quarter, we invested $20 million in capital projects, utilized $11 million to repurchase shares, and paid our quarterly dividend of $4 million. Our capital allocation focus continues to prioritize organic growth via capital spending, while also maintaining our dividend and evaluating opportunities for share repurchase alongside of bolt-on M&A opportunities. Moving on to our outlook for 2022. I'm very proud of how our team has executed this year as we pull through yet another guidance increase due to our strong financial performance during the third quarter. We expect revenue of $2.5 billion, and we are increasing our outlook for EPS to $2.15 per share from $1.90 previously. This guidance implies that Q4 looks relatively similar to Q3 from an EPS perspective. As you can see from this slide, we are on pace to meet or exceed all facets of our financial outlook for 2022, as it was laid out at our investor meeting in May of this year. Our strong execution in 2022 gives us an increased level of confidence in achieving the longer-term financial targets we have issued for 2025. As Brett mentioned, we'll give formal guidance for 2023 on our Q4 call. But there are a few points I'd like to highlight. First, we would expect 2023 to show meaningful progress to all of our 2025 financial goals as laid out in May. And given our Q3 performance and Q4 guidance, that appears to be a very reasonable assumption. Secondly, we are launching our dry van capacity addition in the first quarter of 2023. And like all significant capacity additions, this will come with a volume ramp that will see lower volume early in the year and then much greater volume later in 2023. This will also mean that we will see a bit more margin pressure in the first quarter versus the rest of 2023, which is already the typical seasonal cadence. Lastly, I would expect 2023 to be a year when we'll start to see the consistent margin and growth profile of our parts and service segment. We remain very excited by the growth prospects of this business, along with the recurring revenue that it provides. In conclusion, I'm very pleased to report such a strong quarter on the way to a record year for Wabash. I'm excited to see how our team is executing on our strategy and also pleased with the moves we've made with our balance sheet to financially support the strategy. Our backlog is as strong as it's ever been, and the changing, more collaborative nature of filling our backlog is likely to generate more proof points over the coming quarter of how we are structurally improving the foundation of our company. With that, I'll now turn the call back to the operator, and we'll open it up for questions.
spk01: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. And your first question comes to the line of Justin Long from Stevens. Your line is open.
spk05: Thanks. Good morning and congrats on the quarter. I guess to start with the performance and 3Q and the guidance for 4Q, obviously things are playing out better than you expected in the second half of the year. I wanted to see if you could provide some more color on what specifically is driving this upside, just because the cake was kind of baked from a trailer pricing perspective. So I'm assuming this is all operational, but would love to get more detailed thoughts on what's driving the upside.
spk12: Yeah, Justin, as you mentioned, we're projecting Q4 to be in line with Q3, and a lot of it is just it's stability in our ability to produce units through all of our operations and manufacturing facilities. I wouldn't say it's near back to where it needs to be, which is part of why we're somewhat measured and looking at 2023. We want to continue to look at the macro landscape, but it's clearly reached a level of stability that's allowed us to get some conversion cost improvement, and that's what you're seeing in Q3 and Q4.
spk05: Got it. And thinking about next year, I know you're not giving specific guidance at this time, but just bigger picture from an industry perspective, I think ACT's forecast out there is for about 300,000 trailers next year in terms of production. I wanted to see how you feel about that estimate based on the demand you see today and the supply chain moving into next year, and then also if there's any color you could provide on trailer pricing into next year, particularly given what's gone on with commodity prices here recently.
spk08: Yeah, Justin, I'll take that one. This is Brent. I'll start with the pricing side of it. In general, we see pricing still generally in line with Q3 and Q4 when you look out through 2023. We are still going to have some settling of commodities, but at the same time, we're going to have offsetting inflation on individual components and labor and other things that are based into our variable pricing construct for how we look and manage our portfolio for 2023 and with $1.7 billion in the backlog. Effectively, in 2023, we're pretty knowledgeable in what the pricing is going to do and what customers are willing to spend. One of the reasons we opened up our backlog a little earlier than the rest, one, because the demand for our product is unique, the long-term agreements that we're working on, and then the pricing constructs that we have are resonating with the market. in terms of supply chain and what's going on with demand. You know, look, there's a lot to integrate with that. I would just say this. I think taking everything into consideration, I think ACT-FTR's general forecast is in the appropriate range for what 2023 should be. That's barring some unknown thing that's not on the table right now. The supply chain in general is going to constrain industry growth across the board, and we alluded to that in our narrative, which is going to moderate 23, it's going to protect 24 a little bit. And because of that, carriers and our customer base in general is very concerned about taking a timeout in 23, because they may not be able to make that up in 24 and 25. We feel pretty good about where those estimates are, again, barring any unforeseen macroeconomic issue that is not on the table right now.
spk09: Got it. Thanks. That's helpful.
spk01: And your next question comes from the line of John Joyner from BMO Capital Markets. Your line is open.
spk06: Good morning. So stocks actually do go up on good results, so that's good to see.
spk08: Every once in a while it does work that way.
spk06: It does. So, Brent and Mike, I mean, regarding your discussions, and you kind of touched on this a little bit already, but discussions with large carriers around longer-term agreements, how long do these agreements run? Are there opportunities for them across kind of your product lineup? And also, are there – parts and services opportunities with them?
spk08: Yeah. So, a great question. The way that we look at long-term deals are very inclusive of all product lines and service lines that we offer through that one Wabash set of product and service portfolio options. We are generally looking at two to three years in length in general. Obviously, these are tailored to the individual customer at this point. We are specifically leading this is the first the final mile construct everything that we do is based off that as its core to our strategy at this time so when you look at those customers uh embedded into that is the ability of you know some are buying because they're wanting to move more uh from a truck body perspective some are entering in from a drive-in perspective and so on and so forth but every one of them that we court uh has opportunities for generally platforms tanks
spk06: truck bodies from dried refrigerated vans dried refrigerated and parts and service and that's what allows them to be in the funnel to be considered for a strategic long-term agreement okay thank you that's uh that's very good color appreciate that and then just maybe just one more question regarding the uh the reefer to uh driving conversion at your uh south plant lafayette I guess, how do you see that ramping up, and when do you expect to reach full line run rates?
spk12: Yeah, so I would say mid-next summer is when I would expect us to reach full line rates. So we will hit job one in Q1 as planned, and we'll ramp through Q1 and into Q2. And I would say exiting Q2 into Q3 at some time, we'll hit full line rates. And that's why in my prepared remarks I made the comment about Q1 we'll see that normal ramp costs you have in your edging capacity where you'll have people but you won't have full output. So we'll see some of that in Q1.
spk11: But I would expect by the second half of 2023 we'll be at full rate for our capacity addition in our south plant.
spk09: Okay, excellent. Very helpful. Thanks for the time. Thanks, John.
spk01: Your next question comes from the line of Mike Schliske from D.A. Davidson. Your line is open.
spk02: Yes, hello, good morning, and thanks for taking my question. Yes, hello. I wanted to touch on your truck-buy business. You're seeing volumes creep up quarter by quarter now for basically a year. Can you update us on the chassis supply situation in that business and the demand situation in that part of your business?
spk08: Yeah, so I'll start with the chassis supply. You're fully aware that chassis supply did begin to improve early in the quarter. That has continued to progress as we sit here today, and that's beginning to translate itself into improved build rates, and it goes to Mike's point about improved conversion costs as we sit here today as noise is dropping out of the system. We take a measured approach in the way that we schedule truck bodies, knowing that there is still just inherent instability It's a prove it and then ramp it is kind of the way we look at it. With that said, we're seeing enough coming forward with chassis stability that you can begin to start to scale truck bodies in a meaningful way as we control conversion costs along that path. And that's a distinct, I'll call it philosophy that we're employing as we manage that business.
spk02: And again, from a demand perspective, is there still plenty of demand in that audio backlog?
spk08: Yeah. So, the truck body market has been inherently underserved for going on, you know, from a pre- and post-pandemic standpoint. And that is just now starting to really unfold as chassis come into view. So we have ample demand. That's why we take a very diligent approach to how we schedule it and what we're going to be taking as we go forward to manage that in a similar constructive way that we manage dry van and other product platforms at Wabash.
spk02: Can I clarify just a little bit further there? The pricing on chassis, is that also seeing large increases in the prices on the bodies that you guys do? Are you getting similar pricing that you're seeing in your main drive-in business? And does that pricing have the same kind of dynamics in 2023?
spk12: Yes. So what we've seen is, I will call it a very similar price-cost recovery in the second half in the truck body product line that you're seeing in the Vans product line. just to make sure for no confusion on the call, the chassis cost itself really isn't in our P&L, but the truck body piece is, and that piece is seeing very similar pricing dynamics where we've been able to recover the inflation of 2021, and we'd expect the basic price-cost construct we have right now to continue into 2023, both in truck body and the bands business.
spk02: Great. That's great color. Can I just almost squeeze one more in, and that is your comments, Brent, on Curating the backlog. I guess I know what the word curating means, but I guess I'm trying to, I just kind of want to figure out, when you say you're curating the backlog, is it in an effort to start booking multi-year orders, or in an effort to just, you know, figure out which of the, what's the right production schedule, or is it an effort to find the best margin orders?
spk08: Like, can you give us a little bit of a color as to what's the... Yeah, I would say it's a comprehensive look at all the variables that you just talked about. The business systems that we've been able to put in place over the last two to three years under a one Wabash system coupled with our management system and talent that we brought into the organization allows us to integrate all those variables into what's the strategic importance of that customer first to find a mile, what does it do to maximize conversion cost and flow through the plant, their ability to help work with us to manage an inflationary environment because they have unique demand needs, we take all that into account to curate or optimize what we bring into our backlog. It's a much different way than a first come, first serve, who speaks the loudest version of filling in your backlog.
spk02: Okay. Thank you so much for that. Appreciate it. I'll pass it along.
spk09: Thanks, Mike.
spk01: Your next question comes from the line of Felix Boschen from Raymond James. Your line is open.
spk00: Hey, good morning, everybody, and congrats on the results. Thank you. Hey, just a quick follow-up, maybe for Mike, on the capacity expansion. You know, understood 1Q might have some relative margin pressure as you're still ramping those volumes. But can you remind us of mixed implications on margins as you're doing more dry van versus conventional reefers through the year? Just kind of trying to square that away with a comment on margin trajectory.
spk12: Yeah, that's going to be kind of multifaceted because what you'll see is as we ramp up and you produce more units, you'll actually see better margins with dry vans there because we're getting – don't forget, we're taking installed capacity – And we're more than doubling the output. So you're going to see some nice conversion cost improvement, which will actually be margin accretive over time. But that won't be probably the first half of that particular facility. You'll see more of that in the second half. So it will be a margin tailwind over time. The one area where it will compress a bit is ASPs, because a drive-in typically has a lower ASP than a refrigerated trailer.
spk11: So you'll see some ASP compression potentially from a mixed component, but we wouldn't expect to see margin compression due to the capacity change.
spk00: Okay. That's helpful. And then, you know, it feels like just broadly from an industry perspective, I'm going to call it more traditionally asset light folks are leaning into owning trailers or certainly garnering trailer capacity. And so I'm curious on the back of curating backlog commentary, and I don't know if it's possible to put numbers on this, but say relative to pre-COVID, is there any way to frame how your trailer customer mix might look different in 23 and 24 versus sort of pre-COVID levels?
spk08: I think the easiest way of framing it from a baseline is there was little to no. What I would call digitally enabled light asset trailer pool whatever vernacular you want to use to label that didn't exist prior really to the pandemic. There were discussions around it, but not actual demand polls. As we exited the, you know, post-COVID, you know, getting into mid-2021 is when we started to see real demand signals coming forth as they approached us for long-term capacity. What I would say is when I think about 23, 24, and 25, we see that as a potentially meaningful demand component for dry vans and possibly other products that will build over time. We are still trying to understand the exact trailers as a service suite of models that we'll employ. I would say if I was trying to put just a general idea, It will start to become close to significant when we think about 2024. We'll still be seeding in 2023.
spk09: So I wouldn't call it significant yet.
spk00: Okay. And then maybe my last follow-up is kind of along those lines, but it sounds like trailer as a service is sort of at its infancy and really starting to grow within that parts services segment, you know, maybe into next year, maybe into 2024. Can you directionally talk about the margin impact of that as the pie grows within parts and services?
spk12: Yeah. So what we've consistently said we could do in parts and services is, you know, get mid-teens plus EBITDA margins. And we would expect any offering from our trailers as a service to be at that level or higher. So we've shown that margin growth. EXPANSION, I'LL BE ON A PRETTY SMALL BASE IN PARKS AND SERVICES, BUT WE WOULD EXPECT TO SEE SOMETHING MID TO HIGH TEENS, APPROACHING 20 IN MOST OF OUR TRAILERS OF SERVICE OFFERING. WE'RE TRYING TO GET THAT REVENUE STREAM TO SOMETHING THAT CAN CONSISTENTLY be closer to 20. And so we would expect all of our trailers and service offerings to be there. And I don't know how much impact it's going to have in 23 because, as we were talking before, it's going to be relatively small as a proportion of that.
spk08: But as we get into 24, you'll start to really see that. Yeah, I guess this is more qualitative. But as you can imagine, for the asset-like growing customer segment, the ability of bundling a unique set of product and service offerings for that type of customer allows it to be significantly margin accretive to just a standalone, you know, make one, buy one type of business model. And obviously, that's why we're experimenting with it right now, really trying to understand how to expand it.
spk00: Got it. And then, sorry, but if I could just sneak one more in. Clearly, it feels like demand is still outstripping supply in that drive-in piece for a lot of reasons. Do you see anybody out there adding any incremental capacity such as yourself?
spk08: No, not in any meaningful way. Everybody is still working through just getting labor to manage the capacity that's installed right now. The difference for us, again, is that we're converting existing labor into meaningful capacity, and that's the unique difference for us at this moment.
spk12: That's a key point. We wouldn't have done it if we didn't have installed capacity already because the supply chain is the constraint. We're able to sneak a few more units through there with the same install capacity, but it's hard for the supply chain to supply any more componentry to the industry right now.
spk01: Got it.
spk09: Thanks for the time. Thank you.
spk01: Your next question comes from the line of Jeff Kaufman from Vertical Research Partners. Your line is open.
spk07: Hey, guys. Fantastic quarter. Congratulations.
spk01: Thank you, Jeff.
spk07: I'm going to apologize in advance because I have two conference calls going on at the same time here, so I just jumped on. I might have missed some of these comments. But I guess these questions are related. Your share of the trailer sales in the quarter dipped by about 100 basis points versus last quarter. Can we attribute most all of that to the shutdown of operations that you have going on right now while you're reconfiguring the south plant?
spk08: I think that's a part of it. I think the other part of it is we have an extremely deliberate sales and operations planning process that is based on what the supply chain can do to manage conversion costs and waste and cost friction in the system. And so what we produced and shipped in the quarter is relevant for what was optimal based on those conditions.
spk07: All right. And then shifting focus to the progress on the manufacturing changeover, I'm sure you comment on this in your general comments, but what is the latest update on timing? Are you still looking on time? And then in that fantastic $2.3 billion backlog, Is there a part of that backlog that just isn't being booked right now because you're not done with the conversion, so we don't necessarily want to commit to the slot until we're sure of that, or are you taking orders for those slots at the new South Campus?
spk08: Okay, several questions there. Let me start with, so we are on time relative to a redeployment of that facility with job one in the first quarter with meaningful ramp, meaning we'll call it generally target by mid-year. So we're completely on target for that. In terms of how we manage the backlog, no, we are not holding back on backlog, waiting to see what's going on between capacity that we have on existing lines or surge. What we are doing with our backlog is purely managing it for maximum profitability and and strategic purpose. And the timing and the way that we fill the backlog is based on that process. It has nothing to do with will slots be available or not. We're pretty confident in what we'll have and how we'll build in 2023 based on the same supply chain we see right now.
spk07: Okay, well, that's all I have, so thank you for the answers, and congratulations on a fantastic quarter and outlet.
spk11: Thank you, Jeff.
spk01: And there are no further questions at this time. Mr. Ryan Reid, I turn the call back over to you for some final closing comments.
spk10: Thanks, Rob, and thanks, everybody, for joining us today. We'll look forward to following up during the quarter.
spk01: This concludes today's conference call. Thank you for your participation. You may now disconnect.
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