Wabash National Corporation

Ladies and gentlemen, thank you for joining us and welcome to the Wabash fourth quarter 2025 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. I will now hand the conference over to John Cummings, Senior Director of FP&A and Investor Relations. Please go ahead.

Thank you and good afternoon, everyone. We appreciate you joining us on this call. With me today are Brent Yeagy, President and Chief Executive Officer, Pat Kesslin, Chief Financial Officer, and Mike Pettit, Chief Growth 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 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 hand it off now to Brent.

Thanks, John. Before turning to the fourth quarter results and outlook, I want to reflect briefly on 2025. It was a challenging year across the transportation industry with prolonged softness in demand and heightened uncertainty affecting customer spending decisions. While these conditions pressured our financial results, they also tested and ultimately reinforced the strength and resilience of our organization. Throughout the year, we remain disciplined and proactive, preserving a strong balance sheet, maintaining liquidity, and taking actions to align our cost structure with market conditions. That financial resilience gives us flexibility as we navigate the near term and positions us well to respond when demand begins to recover. Most importantly, I want to thank our employees. In a difficult operating environment, our team stepped up with professionalism, adaptability, and unwavering commitment to our customers and each other. Their efforts enabled us to continue executing, supporting our customers, and making progress on key strategic priorities, even in a down cycle. As we look ahead, we believe that the actions taken in 2025 have strengthened Wabash's foundation and improved our ability to perform through the cycle. While we continue to execute in a challenging environment in the near term, we enter 2026 with great operational flexibility, a resilient balance sheet, and confidence in our long-term strategy As we close out the fourth quarter, conditions across the transportation industry remain challenging and continue to pressure our near-term financial performance. While we are beginning to see early, incremental signs of stabilization in certain parts of the freight transportation market, it has not reached a level of sustained magnitude to positively drive increased demand for our products and services yet. Please remain cautious. Capital spending decisions continue to be highly managed and as a result, our fourth quarter performance came in below expectations. We also expect the demand environment to remain difficult as we move into the first quarter as customers seek sustainability in the current early signs of a freight market rebound. Across our end markets, demand remains soft as freight, construction, and industry activity continue to operate below normalized levels. That said, there are some encouraging indicators developing beneath the surface. Freight volumes have begun to stabilize off recent lows dealer inventories remain lean, and fleet utilization rates are gradually improving. However, these early signs have yet to translate into increased order activity, and we do not expect them to have a material impact on our financial results in the near term. More broadly, the industry continues to work through an extended freight downturn, with replacement cycles lengthening and order patterns remaining uneven. While this environment is contributing to growing pent-up demand, As the industry has been well below replacement levels for multiple years, visibility remains limited, and the timing of a broader recovery remains uncertain. Against this backdrop, our focus remains on what we can control. We are taking additional actions to align costs with demand, preserve liquidity, protect margins, while continuing to pursue market share opportunities and invest selectively in areas that strengthen our long-term position. Notably, our parts and service business again delivered sequential and year-over-year growth in the port, underscoring its resilience and its role in providing stability through the cycle. While near-term headwinds persist, our long-term conviction has not changed. We believe the early signs of industry stabilization combined with structural progress we've made across the organization position Wabash to respond powerfully when demand begins to normalize. Until then, We remain focused on disciplined execution and financial prudence as we navigate the current environment. During the quarter, we implemented additional cost actions in response to current market conditions, including the idling of our manufacturing facilities in Little Falls and Goshen. These actions were taken to better align our production capacity with current demand levels and to manage near-term operating costs, but are also part of a longer-term play to reduce overall fixed costs and other cost drivers over the next market cycle. We continue to evaluate our manufacturing footprint and cost structure now and into the future, and we'll adjust our operations as appropriate to reflect near-term reality and to improve our overall cost structure when producing at scale. The idling of our Little Falls and Goshen facilities resulted in approximately $16 million of total charges during the quarter, all of which were non-cash. We expect to recognize an additional $4 to $5 million in charges in the first half of 2026 of which approximately $1 to $2 million is expected to result in cash expenditures, primarily related to severance and other exit-related costs. These actions are expected to generate approximately $10 million in ongoing annualized cost savings, primarily related to fixed manufacturing overhead and operating expenses as we align our cost structure with current demand levels. We will continue to evaluate the timing and magnitude of these impacts as the actions are fully implemented. 2026 trailer quoting in Q4 reflected a highly competitive market as the industry navigates the bottom of the current protracted market cycle. Volume leads pricing, and we look forward to a more balanced market as we move through 2026 and into the 2027 order season later this year. Separately, the domestic trailer industry has filed anti-dumping and countervailing duty petitions with the U.S. Department of Commerce and the U.S. International Trade Commission concerning certain imported trailer products. the agencies have initiated formal investigations, which are currently in the early stages. As part of the process, the Department of Commerce will evaluate whether imports are being sold at less than their fair value or subsidized, while the International Trade Commission will assess whether domestic industry has been materially injured. The International Trade Commission's preliminary determination is currently expected on or about February 6th, so the date to be impacted by government shutdown and preliminary determinations from the Commerce Department are expected later in the year, with final determinations following thereafter. We will continue to monitor the process as it progresses. Turning to the broader market environment, demand across both the trailer and truck body industries remains soft. While conditions on the ground are improving for our customers, we have limited visibility in the timing, pace, and sustainability of the freight market recovery. With that said, the underlying conditions for a strong trailer demand response is growing once the freight market recovery threshold is met and our customers look to recapture profitability and get back to a growth mindset. But for now, our customers continue to defer capital spending decisions and order patterns remain uneven, reflecting a highly managed near-term reality across freight, construction, and industrial end markets. Given these conditions and the current lack of visibility, we are providing guidance only for the first quarter of 2026 and are not fully issuing full-year 2026 guidance at this time. For the first quarter, we expect revenue to be in the range of $310 million to $330 million, and adjusted earnings per share to be in the range of negative 95 cents to negative $1.05. Based on current order activity and customer discussions, we expect the first quarter to be the weakest of the year in terms of revenue and operating margins. While near-term conditions remain challenging, customer engagement around 2026 purchasing decisions is ongoing. and many fleet order commitments for the year remain open and active, a positive departure from historic norms for this period of the sales cycle for trailers. Based on these discussions and early order activity, we believe full-year 2026 revenue and operating margin is likely to be higher than 2025, even though the timing and shape of the demand recovery remains uncertain. We will continue to evaluate market conditions and customer activity as the year progresses and expect to provide additional guidance once visibility improves. As always, our focus remains on discipline execution, maintaining liquidity, and positioning the business to recapture profitable growth as market conditions stabilize. And I'll turn the call over to Mike for his comments.

Thanks, Brett. When we formed this segment four years ago, we were very clear about the role parts and services could play in Sudwabesh, extending customer value beyond the original equipment sale while generating higher margin, more predictable revenue. That thesis continues to be validated. Despite a challenging freight environment, the segment delivered another solid quarter, reinforcing our belief that parts and services is becoming a more durable and resilient earnings stream through the cycle. In the fourth quarter, the segment grew 33% year-over-year and approximately 6% sequentially, even as the broader OE equipment market remains down more than 40% from its 2023 peak. Fourth quarter margins continue to be soft as we work through weak demand in our higher margin OE parts business and continue to absorb startup costs associated with recent expansion. While margins remain below our longer term expectations, the underlying trajectory remains intact. Over time, we continue to expect this business to operate in the high teens EBITDA. Let me say again, in the fourth quarter, the segment grew 33% year over year and approximately 6% sequentially. even as the broader OE market remains down more than 40% from its 2023 peak. Growth in this environment gives us confidence that what we're seeing here is structural, not cyclical, and reinforces the strategic importance of this segment to our enterprise. Our confidence continues to grow that we are building an exciting foundation for continued and more profitable growth within this segment that will heavily leverage improving market conditions. One of the strongest proof points behind the momentum continues to be our active business. Upfit allows us to deliver fully customized equipment in weeks rather than months, pairing the scale and efficiency of our manufacturing footprint with the customer service that defines parts and services. In the fourth quarter, we shipped approximately 550 units, bringing full-year volume to roughly 2,050 units. 2,025 full-year volume is more than double our 2,023 volume, demonstrating the growth we are experiencing in this space despite a weaker overall demand environment. As discussed previously, we opened three new outfit centers in the second half of 2025, Northwest Indiana, Atlanta, and Phoenix. These new sites materially expand our geographic reach and position us to exceed 2,500 units in 2026, and we continue to see multiple pathways for continued growth in this business well into the future. Our efforts to expand digital product enablement and our trailers as a service or TAS service concept continues to grow Wabash's innovation leadership through the generation of a much deeper understanding of challenges our customers are facing, allowing us to bring physical, digital, and business model innovation to life. We continue to expand the ledger of shippers, carriers, and brokers across North America who look to bundle preventive maintenance programs, operational and maintenance-based telematics solutions, nationwide uptime support, and repair and service management with trailer assets to enable their growth needs. We will be showcasing our cargo assurance solution at Manifest in Las Vegas in February and at TMC in Nashville in March. We are taking a new approach to overcoming the growing cargo theft challenges with our TrailerHawk technology platform. With this platform, we'll be highlighting how the trailer itself becomes part of a secure, connected system that helps prevent theft. We've continued to invest in both physical and digital readiness during the downturn. ensuring we're well positioned to scale when the market rebounds with more innovative and valuable solutions for our customers. We also remain convinced that flexible capacity solutions such as TAS will become increasingly attractive to our customers as they look for innovative ways to acquire capacity and operate in an increasingly challenging business liability and regulatory environment. In closing, Parts and Services continues to deliver connected end-to-end support that keeps customer assets running day in and day out. We're not just growing this segment, we're layering in new forms of customer value across up-fit services, flexible capacity solutions, and aftermarket parts and services, all designed to work together as an integrated ecosystem. As this segment continues to expand its margin profile and cash flow contribution through extended scale and enhanced offerings, it will be a core element in Wabash's overall financial performance and resiliency into the future. We are growing in this space right now during obviously difficult market conditions because we're finding better ways to serve our customers. This gives us great confidence that we are laying the foundation for Wabash to create mutual value far beyond the initial sale of a trailer or a truck body and throughout the life of the asset. With that, I'll turn it over to Pat for his comments.

Thanks, Mike. Beginning with the review of our quarterly financial results in the fourth quarter, consolidated revenue was 321 million. During the quarter, we shipped approximately 5,901 new trailers and 1,343 truck bodies. Lower than expected production volumes within the truck body business created operational inefficiencies, which contributed to an adjusted gross margin of negative 1.1% of sales during the quarter. While adjusted operating margin came in at negative 13.6%. As a reminder, our adjusted non-GAAP results exclude the impact of the non-cash charges related to the idling of the Little Falls and Goshen facilities. In the fourth quarter, adjusted EBITDA was negative 26.2 million, or negative 8.1% of sales. And adjusted net income attributable to common stockholders was negative 37.8 million or negative 93 cents per diluted share. Moving on to our reporting segments, transportation solutions generated revenue of 263 million and non-GAAP operating income of negative 31.7 million or negative 12.1% of sales. Parts and services generated revenue of 64.5 million and operating income of 5.1 million, or 7.9% of sales, continuing the 2025 trend of both sequential and year-over-year revenue growth in the segment. Full-year operating cash generation totaled 12 million, with negative 31 million of free cash flow in 2025, excluding the 30 million legal settlement paid in the fourth quarter. reflecting strong execution and disciplined work in capital management. Regarding our balance sheet, our liquidity, which comprises both cash and available borrowings, was $235 million ending December 31st. Throughout the difficult market conditions, prioritizing liquidity and the resulting financial resilience enables us to continue navigating the near-term headwinds without losing sight of our key strategic priorities and longer term initiatives. Turning to capital allocation during the fourth quarter, we invested $5 million via capital expenditure and invested $7 million in revenue generating assets for our trailers as a service initiative. We utilized $0.7 million to repurchase shares and paid our quarterly dividend of $3.2 million. For the full year, we invested $25 million in traditional capital expenditures invested $48 million in revenue generating assets, allocated $34 million to repurchase shares, and returned $13.8 million to shareholders via our dividend. As we continue to manage through the persisting uncertainty in the market, we're maintaining a prudent and conservative approach to cash management into 2026. For our trailers as a service initiative in particular, We do not anticipate any more near-term investments as we have established the foundation and groundwork for this business in 2025. Until we have greater insight into the timing and shape of the market return, our focus will remain on preserving liquidity and maintaining financial flexibility while positioning ourselves to act quickly and intentionally when demand begins to recover. Moving on to our outlook for the first quarter, we expect revenue in the range of $310 million to $330 million, an operating margin midpoint of approximately negative 15%, and adjusted earnings per share in the range of negative $0.95 to negative $1.05, as deferred capital spending decisions and persistent uncertainty carry into 2026. As previously mentioned, we expect to provide additional guidance as visibility improves throughout the year. However, we do expect the first quarter to be the weakest of the year in terms of both revenue and operating margins. While we continue to assess the shape and timing of a recovery, we remain confident that 2026 will represent an improvement from 2025. Our strategic decisions throughout 2025 continued focus on recurring revenue and realigned cost structure will enable us to effectively manage near-term headwinds and position us to deliver improved financial performance as demand returns. As Brent noted, 2025 presented significant challenges across transportation industry, but it also reinforced the resilience of our organization. Our employees rose to the occasion demonstrating focus, accountability, and a strong commitment to our customers and each other. Looking ahead, we remain disciplined in our execution and focused on aligning our cost structure to today's environment, while ensuring we are well positioned to capitalize on a market rebound and continue investing in the capabilities that support long-term growth. I'll now turn the call back to the operator, and we'll open it up for questions.

Thank you, we will now begin the question and answer session, please limit yourself to one question and one follow up, if you would like to ask a question, please press star one to raise your hand please stand by while we compile the Q amp a roster. First question comes from the line of Michael whiskey of da Davidson your line is open, please go ahead.

Hello, can you hear me okay? Yep. Okay, great. All right, thanks for all those great comments, guys. Maybe a couple of quick questions. I think the capacity in Little Falls, actually both of the facilities, I always thought that since you did the expansion in Lafayette, most of your products, whatever they were, were made in one place. So I thought Little Falls was meant for reefers. So does this mean you're not making any more reefers, at least for the time being? Or has anything changed as to what product lines you're making and not making? And are you actually exiting any businesses entirely with the islanding of capacity here?

Yeah, I'll take that. This is Brent. Good questions. No, we are not pulling out of specifically the refrigerated market as we sit here right now with the Little Falls closure. We are. what I would say, looking at how do we reposition the product going forward, specifically into an improving market, which we believe will exist in the 2027. It's just a prudent move that we're making right now as we kind of re-envision what our fixed cost structure will be as we position for the market upswing. So we're taking a timeout to be able to let those things take place, which will ultimately put a better product on the road, you'll have a better cost structure, and the market will be more responsive when we do that. Specifically with refrigerated truck bodies, we retain refrigerated truck body capacity throughout our network. That is not compromised in any way, shape, or form. The removal or the shutdown of the Goshen facility is really about overhead optimization and taking advantage of structural changes that we've made over the last several years to be able to service the overall truck body market in a more efficient way. The market allows us to pull the lever on that right now. It's a move to make us stronger going forward. There's nothing that takes away our ability to serve the market as we move into what we believe will be a better market in 2027.

Okay, okay. I only got one follow-up question, so I'll just choose carefully here. I got a bunch of other questions. Maybe just maybe one from Mike. The part of the services run rate that we saw in the fourth quarter, can that continue into 2026 and possibly with better margins? Obviously, the trailer business has pretty low visibility, but I'm kind of wondering if you can give us a little bit additional detail on the parts and service side that might have better visibility

visibility just some detail as to what to expect there and could that be a very solid year shaping up for that business yeah we should we should expect to see nice growth in 2026 versus 2025 so we what we were able to deliver in q4 from a revenue perspective uh you could you could see that type of uh that quarterly tap average continue into into 20 uh to 26 for sure I would say on the margin side, the struggle we have is that we've got markets that we serve are still down. So while we've been able to continue to get growth, we are having to fight through a market that no one's really that excited about, even sometimes buying repair parts for their equipment. So we have seen some margin of compression. We've also seen some OE where we sell into the actual OE market. part of the industry pull back. So those things, as well as our growth and update, while very positive, does require a little bit of startup costs, but that will normalize probably after Q1. Q1 will be the weakest quarter from a margin perspective in parts and services, but we should see the margins bounce up off what we're seeing in the second half of the year for sure.

Yeah, I'll add a little bit to that. When you look at the second half of the year for 2025, we had multiple moves In terms of the standing up to those upfit locations, we have other upfit locations that we will be standing up throughout 2026. We have Phoenix that will be coming online here soon. So those are all potentially additive. Let me say it differently. They will be additive to the overall revenue profile throughout 2026. So the ability of continuing to scale within the points of distribution that we have, as well as new coming online, gives us somewhat of a unique ability to continue to grow even in a difficult market. That's true for aftermarket parts. That's true for upfit. And so that gives us a tremendous amount of confidence in the way that we believe we can continue to grow in the market, even when it is challenging.

Got it. All right. Well, thanks so much. I will jump back in queue.

Thanks, Mike. Your next question comes from the line of Jeff Kaufman of Vertical Research Partners. Your line is open. Please go ahead.

Hey, can you hear me? Yep, you're here. Okay, beautiful. Getting used to the new structure here. So with the actions that were taken, I'm gonna follow up on Mike's question a little bit. He was asking about reefer trailers. I'm asking about the refrigerated truck bodies. Is that something that is affected going forward? Does it not really affect it based on the actions taken on the factories and kind of how we thinking about truck bodies for 26?

Now, our ability to meet, we'll call it customer demand for refrigerated truck body is really not encumbered in any way, shape or form. We retain ample capacity to do that with our existing facilities. And that's an area that we're still continuing to work to grow in. We see opportunity for that when we think 25, I'm sorry, 2026 and beyond. So there's no wavering in commitment or opportunity in that way. We are able to refine the manner in which we do it that we think will be more profitable for us and a better position for the customer for consumption.

Okay, and then a follow-up on that, more for Pat. Hey, Pat. With some of the strategic actions you've taken, it looks like goodwill balance changed a little bit. I think the intangible amortization is similar, but how does this affect the cost structure? in the trailer business and it looked like the operating expense going from gross margin line down to operating income line was a little high this quarter. Were there other things that affected that on a temporary basis or is 20 million a good go forward base for kind of gross to operating margin differential on the trailers?

Yeah, so we did have, related to the shutdowns, significant impairment of the assets at Little Falls, and then a reserve taken against the remaining raw material sitting at Little Falls. So all in all, The adjustment was roughly $16 million in the fourth quarter. So you'll see that in our gap results. And then we adjusted out in what we reported as non-gap. And then related to the shutdown, we'll also see in the first quarter an additional $4 to $5 million of expense come through as one time, which we'll again adjust out in our non-gap results and of that q1 expense uh roughly one to two million of that will be a cash expense but all other expenses related to the shutdown are non-cash okay so treat those as as oddity events uh if you want timers and then we um and then final question I'll get back in queue um

Brent, in your initial comments, you were talking about customer optimism, some encouraging signs, but, you know, nothing really come across the transom yet. I know some of the truck OEMs are getting a little more confident and I know PACCAR called for bottom of the cycle in one queue and then things get better. When I look at the ACT research conversation, it looks like they're putting pre-buy back in to the class eight numbers, 40,000 units higher, but they're not really getting enthusiastic about trailers for 2026. And I think they're believing the trailers are kind of another lackluster year, kind of flattish on the whole year. What are you seeing that either confirms what ACT is saying or maybe suggests that things could be a little better for the industry than one would think?

Yeah, the way I look at it right now, Jeff, is that what we're seeing in terms of, we'll call it positive initial tailwinds forming for the, I'll call it the trailer industry as a whole, as measured by performance in the freight markets by our carriers, is really more stabilizing in terms of the initial projections that were given for the trailer demand in 2026. And that's the way that we're approaching it right now. It's too early to say on whether they will manifest this positivity that they're experiencing into, we'll call it second half of the year demand. Um, I would say if I'm a betting person, we'll see what we will see is that translate into quoting activity for 2027 as they prepare and think about deploying capital. For that time frame, if they want to run into the 27 market, they can actually utilize the asset to generate revenue. I think that's probably what's going to happen. And so, again, I, I don't think it's necessarily. what I would say, a revisionist type activity where the ACT FTR will be revising up. I think we're in a position where we're able to stabilize and somewhat have a better idea of what demand is going to be this year.

Okay, so the positivism, I can't pronounce it today. The positive thoughts are less bad is the way I should think about it. All right, well, best of luck with everything and thank you. Yep, thanks, Fred.

Your next question comes from the line of Michael Schliske of DA Davidson. Line is open, please go ahead.

All right. Can you hear me okay? Yes. All right. Second round of questions here. Just two more, if you would. Maybe quickly on the dumping comments you made and the issue that's outstanding. What changed? Has anything changed over the last few quarters with respect to the imported trailers and the potential dumping of those trailers? Are there any near-term costs you've got to undertake surrounding the effort to get that case resolved? And if it's resolved favorably, are you due any payments or penalties that the offending parties might have to pay?

Yeah, so it doesn't exactly work that way in terms of the process you go through. Wabash is in no position where it will be negatively impacted with fees or any type of Material costs related to this in terms of how it may or may not affect those that have been named in the process, the international located competitors. As we think about the next step in the process, if that continues to be an affirmative position, we'll see a level of duties and penalties applied at the February 6th hearing. At that time, they would be potentially subject to the enforcement of those penalties while the process goes through further review and a final determination in the second half, generally the October timeframe of 2026. And that's an impact that would be completely on those named competitors, not with Wabash. Does that help answer the question?

Well, just to clarify, so that would happen if it were in your favorite plus a more favorable environment post the decision, a more fair environment. But I guess, yeah, I just wanted to go back to the root causes. Has this been like a few quarters in the making? Has this always been this way?

No, there's nothing in the last few quarters in and of itself. that has explicitly framed the issue. This is much more of a longer-term effect that technically would have started upon inception of when we started to see international competitors enter the landscape. Now, the process itself only looks at a period of time, roughly, this is directionally the case, really 2022 through 2024. That's the relevant time period at which they are basing their determination. Um, so that nothing in the last few quarters, they're really going to do it off of what have been the dynamics in the industry. And what does the data say? Through the investigative process that must be disclosed. By the international competitors to defend the position that we've taken as a set of domestic manufacturers to counter the information that we provided as part of the investigation.

Okay, okay. Maybe my last one is more of just a quick modeling question, if you will, guys. If you're not investing in the fleet so much in 2026, what's your broader CapEx outlook? And is whatever you're doing this year effectively just maintenance CapEx at this point?

Yeah, I would say our outlook for 26 for maintenance capex would look similar to what we spent in 25, which was 26 million. But we do not anticipate any near-term expenditures in the revenue-generating assets.

But again, like growth capex around the parts and service, around the parts part of it, that's all been done basically at this point?

No, that would be included in the capital expenditures, the roughly year over year of $26 million in 2025, a very similar number that we expect in 2026. That would include some growth capex in it. Just not anything related to TAS.

Got it. Okay. Thanks so much, everybody. Appreciate it.

Your next question comes from the line of Jeff Kaufman of Vertical Research Partners. Line is open. Please go ahead.

There you go. All right. Am I live? You are. Awesome. Awesome. Sorry, it's the Jeff and Mike show here in Q&A. So just a couple quick modeling questions. So just based on your comments on CapEx and what we're thinking about the market, I guess the good news is it looks like you should be throwing off some cash flow even after the dividend. Is your thought on capital allocation more debt reduction since you did take on some debt in 2025? Is your view that we can split it probably between share repurchase and balance sheet freeing up. I guess just kind of big picture thoughts. If the environment gets less bad to neutral at some point this year, what are your thoughts on capital deployment beyond CapEx and dividends?

Yeah, so we're $45 million pulled on the ABL as of the end of 2025, which is what you're seeing as the debt increase. So certainly as cash comes available, our primary use would be to pay down that ABL. But beyond that, we'll stick to the same capital allocation plan that we've had, which is paying the dividend, using it to fund our internal CapEx. And then whatever is remaining, we'll reevaluate for share purchases or paying down of the high yield bonds that are due in 2028.

Okay, great. And then last question. Jeff, if you let me add just a little bit there, just around the framing of, we'll call it markets, and it forms how we think about capital investment, how we think about liquidity management, how do we think about incremental options to use capital in the second half of the year. And it goes to your previous question, what are the markets doing and what do we see? If we're sitting here right now in a very pragmatic way, there's a lot of reasons to believe and trust that the market fundamentally at the freight level and the drivers of that are getting substantially better from where they've been.

Mm-hmm.

the rate of change of that has been fairly significant in the last 90 to 120 days, which has piqued people's interests. If those can remain sustainable into the second half of the year, I'm sorry, through the second quarter, it absolutely can change the feeling of what is the forthcoming market, not to less bad, but to good. How we'll reflect that is how do we think about somewhat possibly pricing in the second half of the year? Still remains to be seen. There may be some specifically with dedicated related deals, some positive second half of the year impact from a revenue standpoint. But the majority of it, just based on the sales cycle, the timing and the dynamics, are going to probably find its way most likely into the quoting and the early stage order activity as people want to make sure they are well-positioned to receive assets, and probably a relatively constrained supply chain-related industry. So it can... The whole definition of what's good and bad is relative to the timeframe at which you are framing it. We are absolutely moving into a world that if it can sustain is moving into good. The reality of it is it's offset. a couple quarters from what it will feel in the moment. And we'll have to navigate those two conflicting stories at exactly the same time. And that will impact how we deploy capital, how we prepare for growth, how we staff the operation, as those dynamics will be very changing and fluid as we go forward. And we're prepared to do that, right? To operate in both those environments. We're positioning Wabash on one hand, to prepare for the reality of the moment, and on the other hand, absolutely preparing for a much better environment as we move into the second half of the year, getting ready for 27. Just to throw that out there again.

No, I appreciate that clarity. Thank you very much. As always, you don't want to get over your skis, but on the other hand, for the first time in a couple of years, there's a reason to be enthusiastic about a couple of quarters down the road. So one last question. If I look at cost of goods sold, it's not going down as quickly as revenue, which would make sense with some of the tariff-related costs. Where I want to draw that down to is tremendous growth in parts, as Mike Pettit was talking about. But the margins were down about 130 basis points. How much of a structural drag is what's going on with tariffs creating for cost of goods sold? And when do you think we can try to recapture that in terms of passing those increases through to customers?

Yeah, we talked about this at the last call as well, Jeff. The direct impact to our material cost directly due from tariffs is pretty minimal. The phenomenon you're seeing in our financials is really more of a market price driven reality. As things have become more competitive with less units out there, we've been in a pricing competition to, to win units, uh, which has impacted margins. Uh, when you look at it 24 to 25, that is much more the driver of, of what you're seeing there, squeezing gross margins, um, than material costs and specifically material costs driven by tariffs.

Okay. Thank you for that clarity. And, uh, thank you for your answers.

Yep. Yes. And Jeff, appreciate the question. One clarity point, uh, For both of you, when we think about the anti-dumping and countervailing duties, the next round specifically that we will go through on February 6th will be an initial determination of where do they, one, if it's affirmative, what we're talking about in terms of what the percentage penalties could actually be. Once it moves through the process, and then it gets the final determination, we'll actually implement the physical collection of those, because it requires everything to change in terms of tariff codes and all the things that have to be done to pull that off. But there'll be an understanding within the industry of what the impact could be sooner than later, then that actual impact will occur later in the year. So with that said, you know, we really appreciate all the questions and I'll turn it back over to John to finish up.

Thank you everyone for joining us today. We look forward to following up with you throughout the quarter and have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.