Wabash National Q3 2021 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2021

Key Takeaways

  • Positive Sentiment: Wabash reported a record backlog of $1.9 billion in Q3, an 87% increase year-over-year, driving strong visibility into production and revenues for 2022.
  • Positive Sentiment: The company issued 2022 EPS guidance of $1.70, underpinned by backlog strength, planned price increases of $5K–$6K per trailer and pass-through commodity pricing.
  • Positive Sentiment: A plant conversion to add 10,000 annual dry van units in early 2023 is expected to yield $0.15–$0.20 of incremental EPS accretion and support future capacity needs.
  • Neutral Sentiment: Wabash realigned into two reportable segments—Transportation Solutions (90% of sales) and higher-margin Parts & Services—to enhance transparency and focus on growth opportunities.
  • Negative Sentiment: Q4 2021 is expected to face margin headwinds from late-2020 order pricing and rising material costs, with EPS projected at $0.10–$0.15 despite robust demand.
AI Generated. May Contain Errors.
Earnings Conference Call
Wabash National Q3 2021
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to RABOS National Corporation Third Quarter 2021 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' remarks, there will be a question and answer session. Press star then the number 1 on your telephone.

Operator

I would like to hand the call over to your speaker today, Mr. Ryan Reed. Please go ahead.

Speaker 1

Call. Thank you.

Speaker 2

Good morning, everyone. Thanks for joining us on this call. With me today are Brent Yaege, President and Chief Executive Officer and Mike Pettit, Chief Financial Officer.

Speaker 3

A couple of items before we

Speaker 2

get started. First, please note that this call is being recorded. Call. I'd also like to point out that our earnings release, the slide presentation supplementing today's call and any non GAAP Call. Reconciliations are all available at ir.wabashnational.com.

Speaker 2

Please refer to Slide 2 in our earnings deck for the company's Safe Harbor disclosure addressing forward looking statements. I'll now hand it off to Brent.

Speaker 4

Thank you, Ryan. Good morning, everyone, and thank you for joining us today. Call. We have a number of exciting updates to share with you. Upon becoming CEO, our team began this journey of repositioning Wabash as Call.

Speaker 4

We have made Call. First, we build a portfolio of 1st to final mile equipment, which positions us to have the most complete set of solutions for our customers as they respond to changing logistics environments, Call, primarily driven by the growth of e commerce. 2nd, we implemented the Wabash Management System, a lean based Conference, an enterprise focused process development effort that drives breakthrough and scalable business capabilities. Lastly, we introduced the 1 Wabash approach to focus all Call. Our business, our processes and our people to create and deliver value to our customers.

Speaker 4

These significant advances to our company structure and culture have Call. Wabash provides our customers with an improved experience as they continue to increase purchasing from across our product and service portfolio. Call. Our innovation, product development and manufacturing capabilities from across all businesses are overseen by 1 Conference of a centralized team, which enables our talent to focus on solving the most pressing needs for our customers, focusing on deployment of resources, while driving the highest levels of innovation Co. This structure enables the Wabash Management System, the foundation of how we do things to drive connected thinking, Cooperative Agency achieved during 2020.

Speaker 4

This enhanced platform for growth positions Wabash to seize the opportunities created by an increasingly disruptive Landscape. The Wabash Management System has also enabled the company to focus on the growing opportunities within the transportation, logistics and distribution markets. Call. Our team has worked hard to align our portfolio of businesses with a new strategy, and as a result, we have divested 3 non core businesses: Call. These decisions all follow the principles of our system, such as assuring resources are focused on deployment of the strategy, Call.

Speaker 4

The powerful redeployment of capital and focus is critical to our success. The outstanding efforts of our extended leadership team Call. And all of our employees to accept and drive change has strategically repositioned Wabash to execute the next phase of our growth strategy. Cold chain, Call. The growth in e commerce and parts and services offer numerous secular growth opportunities within the transportation, logistics and distribution Conference, and we intend to leverage our people, our technologies and our existing and growing capabilities in order to foster profitable growth in these attractive Conference.

Speaker 4

Our cold chain initiative leverages new technologies to add value within the rapidly growing refrigerated transportation and logistics space. Call. The e commerce space has been experiencing dynamic growth and our product portfolio is expanding to better serve that market from 1st to final mile. And our parts and service platform initiative is one where we are excited to build upon existing revenue streams to target growth of higher margin, more Call sales as we deliver to our customers' changing needs. We will deliver on this growth from a market leadership position, while continuing to innovate and deliver Industry leading customer service.

Speaker 4

The opportunities for profitable growth over the next decade have never been as significant in the company's history, and Wabash is positioned Conference. This moment is special. Transportation, logistics and distribution markets are going through a momentous transition Call. We see a different future reality than our competition in the context of social, technological Call and Logistics Changes, and we've chosen to go down a substantially different path to reshape the industry and pull that future forward for our customers. Call.

Speaker 4

It is time to be bold and send a message to all of our stakeholders that we choose to take the next step forward in our maturity as a company, Call as a solution provider and as part of a greater contributor to the sustainability and social awakening of the world. The decision to drop National from our name, call. While on the surface may seem insignificant, it is in fact a powerful change and symbolic from significant strategic changes that we have made Group has won Wabash and will continue to make on our growth journey. We are redefining and reimagining our identity with customers, dealers, suppliers, Call. Wabash has become a more dynamic place to work.

Speaker 4

We are reshaped to grow beyond our traditional markets, and we have a visionary Call and the capacity to prosper in a changing world. So today, we are announcing our name change. And in the near future, we will outline our plan to adapt our brand strategy to reflect our vision of the future. In addition to changing our identity, we are changing our segment reporting structure Call. We will now have 2 reportable segments.

Speaker 4

The first new segment, Transportation Solutions, Call comprises of vans, platforms, tank trailers and truck bodies and accounts for about 90% of our year to date sales. Call. We continue to provide disclosure of new trailer unit shipment volumes and we have added disclosure on unit shipment volumes for truck bodies to provide visibility to what we anticipate Call will be a strong growth trajectory for that business going forward. The second new segment is parts and services, a higher margin, more repeatable business Call that is poised to benefit from a changing logistics landscape, new and emerging customer needs and the rise of the digital marketplace.

Speaker 5

Call. While we currently generate

Speaker 4

a small portion of our company's total revenue from parts and service businesses, we appreciate the cyclicality damping effects and the margin uplift Call. That parts and services can create for OEMs. As such, we have shifted significant talent to lead our parts and service team, and they are focused on executing aggressive plans Call. They now underpin our growth initiatives in this space. Aftermarket parts, repair and maintenance services and upfitting, as well as equipment services all present compelling opportunities for revenue growth and margin expansion.

Speaker 4

We expect parts and services to benefit from our planned capital allocation activities to drive both organic and inorganic growth enabled by significant free cash flow generation by our Transportation Solutions segment. Call. Look, the mature strategic deployment process is one of our many new capabilities installed under the Wabash Management System. Call. This will be an area of extreme focus and will benefit from our enhanced ability to create scalable and profitable growth in both OEM and aftermarket parts, focused service and Conference as well as other service offerings.

Speaker 4

Our new segmentation structure reflects our enhanced focus on new growth opportunities Call as well as aligns how we discuss the business with how we operate the business. This will create enhanced transparency and a more simplified discussion call, how and where value is created at Wabash for our employees, our customers and our shareholders. Call. I will now discuss our plans of shifting capacity from traditional refrigerated vans to dry vans and the scale growth of our composite refrigerated products, Call, which includes Multistructural Composite Technology. I'm pleased to report that our progress remains on track for additional dry van production to begin in early 2023.

Speaker 4

Call. As we've discussed these capacity changes with the investment community over the last quarter, I'd like to revisit a few points 1 Wabash allows a portfolio selling approach that leverages the unrivaled breadth of our products. That capability to meet this new customer demand Call. Our flagship dry van product is tremendously important in supporting our portfolio selling approach. Additionally, Call.

Speaker 4

Our enhanced dry van capacity will allow us to more adequately supply product to our Wabash exclusive and industry leading dealer network. Call. This added capacity is also necessary to supply a logistics market that continues to drive changes Call, but have become more severe since 2020 with little clarity on how or when the situation will materially improve. Call. Overall, our customers' incremental economics of adding a trailer to a tractor have meaningfully increased and represent a compelling value proposition in Marketplace.

Speaker 4

Additionally, incremental demand for dry van trailers is being generated by customers that did not consume trailers 5 to 10 years ago. Call. Private fleets and freight brokers are building trailer pools to ensure consistent access to capacity and more effectively leverage power only capacity. Call. Given our efforts to grow dry van production, we have also planned several steps ahead to ensure stability of component supply.

Speaker 4

Call. As one example, our management team has spent time with our supply partners at Hedro, a global leader in aluminum extrusions, Call, which have historically been in high demand during times of elevated trailer industry build rates. The Idro team appreciates the vision that Wabash is working to bring to life, and Idro Call for both our existing and new dry van capacity. When considering the differentiation facilitated by our industry leading lightweight panel Call. Our innovative molded structural composite technology within refrigerated vans, truck bodies and other transportation, logistics and distribution related products.

Speaker 4

Call. We believe we have a unique technology and operational capability that has the ability to disrupt the broad cold chain product market as well as change operating models for carriers and Shippers. These composite technologies facilitate improved operating efficiency for our customers, changes the model of asset usage and life, call, while also supporting a customer base that is increasingly focused on sustainability and reducing their carbon footprint. Call. We now have over 25,000,000 miles logged to date, and we are excited to scale this opportunity as we move into full commercialization of this product technology.

Speaker 4

Finally, we believe long term investors will be rewarded in the near term by our dry van capacity project Call as our converted traditional refrigerated van facility will produce 10,000 units post conversion, which is twice compared with our conventional refrigerated product. All told, we expect to realize $0.15 to $0.20 of annual EPS accretion in 2023 Call and beyond as a result of this near term capacity movement. This capacity project will also enable us to further create shareholder value as as we fully commercialize our breakthrough all composite refrigerated technology over the next several years. Moving to market conditions. Call.

Speaker 4

Demand for freight remains robust and supply continues to be constrained by a multitude of factors. Strong business investment and consumer spending paired with consistently low inventory levels continue to propagate robust levels of freight activity. We see the overall freight environment remaining positive through 2022 and well into 2023. Coupled with structural changes as previously discussed in terms of e commerce related logistics disruption, Call. The entry of new customers and the emergence of large trailer pools, we see demand remaining robust for an extended period of time, Conference, possibly the strongest period of demand we have seen in history.

Speaker 4

As a reminder, the trailer industry has a strong Call. Seasonal pattern of ordering activity in which OEM backlogs build during the second half of the calendar year. The strength within our customer businesses from first to final mile Call has been well reflected in our backlog, which increased by $600,000,000 sequentially in Q3 to a total of $1,900,000,000 Call. This represents an 87% increase versus the same period last year. Dollars 1,900,000,000 in backlog also establishes a new record for our order book, Call, which is testament to our new commercial structure, end market strength as well as changing dynamics of how the market utilizes trailers.

Speaker 4

Call. The strength in our backlog creates the visibility necessary to offer an initial EPS outlook for 2022 of Call of $1.70 assuming no improvement in supply chain conditions. In closing, Call. We're excited to announce our identity change and the realignment of our external reporting with our operating structure, our growth initiatives and our strategy going forward.

Speaker 3

Call.

Speaker 1

Our

Speaker 4

portfolio of transportation solutions positions us to leverage unmatched product breadth as a competitive advantage, Call, short up by a unified commercial structure and go to market strategy. We expect our increased dry van capacity to be a linchpin to many new and expanded customer

Speaker 3

Call. Our parts and

Speaker 4

service business enhances visibility to our higher margin, more repeatable business that features ample potential for growth. Call. These reporting changes are the culmination of modifications to our organization to facilitate our refreshed strategy,

Speaker 3

and we're eager to share our

Speaker 4

progress with you Call as the new reporting structure enables more effective communication. We believe a story that started with a change in vision and a deep desire by so many at Wabash to be different Call to be better. Ultimately, we are living our purpose with action to change how the world reaches you. With that, I'll I'll hand it over to Mike for his

Speaker 3

comments. Thanks, Brent. I'd like to start by offering some brief thoughts on the announcements French has discussed. Following our strategic, Call. Organizational and capacity update, today's company branding and segmentation refreshes are the culmination of work that has been going on behind the scenes for the last few years.

Speaker 3

Call. Our decision to narrow our strategic focus to transportation, logistics and distribution markets comes at a time of dramatic and exciting changes within the Group. We are tremendously excited with how the following moves have positioned us to leverage our commercial organization and innovation and product development Call. Consolidated 3rd quarter revenue was $483,000,000 with new trailer and truck body shipments of approximately 12,000 Corp, 455 units and 3,780 units respectively. Gross margin was 10.6% of sales during the quarter, while operating margin came Group.

Speaker 3

Operating EBITDA for the 3rd quarter was $33,000,000 or 6.8 percent of sales. Call. Finally for the quarter, net income was $11,000,000 or $0.22 per diluted share. From a segment perspective, Transportation Solutions generated revenue of 4 Corp. Of $43,000,000 and operating income of $26,000,000 Arts and Service generated revenue of $42,000,000 and operating income of $4,100,000 Call.

Speaker 3

Year to date, operating cash flow was negative $74,000,000 Shipments that were skewed very late in the quarter caused our receivables to increase significantly from Q2. Call. We have also increased inventory in certain areas of our business to help buffer supply chain interruptions. Call. We would expect Q4 to have a significant amount of free cash generation.

Speaker 3

Our current target for 2021 capital spending is Cost $50,000,000 which is higher than normal as we catch up on projects that were deferred during COVID and prepare for our strategic capacity expansion and the conversion of our Lafayette Bay South Plant from reefer capacity to drydamp capacity. With regard to our balance sheet, Call. Our liquidity or cash plus available borrowings as of September 30 was $259,000,000 with $49,000,000 of cash and cash Equivalent and approximately $220,000,000 of availability on our revolving credit facility. Call. In September early October, we upsized our revolving credit facility by $50,000,000 to $225,000,000 and closed an issuance of $400,000,000 in senior notes, respectively.

Speaker 3

Call. After repaying our previous senior notes and term loan, our improved debt structure will result in $3,000,000 of annual interest Conference savings and more importantly, create a reasonably priced patient debt structure that allows us to invest in our business and enhances our opportunity Credit value with a lower cost of capital. With regard to capital allocation during the Q3, we utilized $14,000,000 to repurchase shares, Call and our quarterly dividend of $4,000,000 and invested $9,000,000 in capital projects. Our capital allocation focus continues to Call. Prioritize reinvestment in the business through growth CapEx, while also maintaining our dividend and evaluating opportunities for share repurchase alongside bolt on M and A Call.

Speaker 3

Thinking about the next 3 to 5 years, I expect our capital allocation to continue to support our internal opportunities for organic growth. Call. We have exciting opportunities to generate rates of return well in excess of our cost of capital as we progress with initiatives in our Transportation Solutions and Parts and Services segment. Call. Our dividend also remains an important element of returning capital to shareholders.

Speaker 3

Given that we expect our future free cash flow profile to remain robust, Call. We will continue to evaluate opportunity to repurchase shares when we consider them to be undervalued. While we will continue to evaluate smaller acquisition that would easily fold into our existing operations. I believe any large deal will be a lesser priority compared to the internal opportunities we have in front of us. Call.

Speaker 3

Moving on to our outlook for 2021. We do expect Q4 to represent peak pain for us from a margin perspective. Call. This will be the quarter where price cost most heavily works against us as we produce for orders that were booked in late 2020, after which material costs have run substantially. Call.

Speaker 3

We expect revenue in the range of $490,000,000 to $520,000,000 and EPS of $0.10 to $0.15 for the quarter. Call. As Brent mentioned, our record backlog allows us to offer an initial outlook for 2022 of $1.70 per share. Call. I'd like to be clear about the assumptions behind our 2022 outlook.

Speaker 3

Pricing recovery from commodity headwinds experienced in 2021 has been effective, Call, and we expect average selling prices for trailers to increase in the range of $5,000 to $6,000 year over year. Call. This would represent a $0.60 tailwind in the bridge from our anticipated $0.62 of EPS in 2021 to our guide of $1.70 in 2022. Call. I'd like to emphasize a modification to our pricing construct for 2022, where we have implemented pass through commodity pricing with Call.

Speaker 3

We have targeted a certain margin and have agreed to pass through commodity costs. We feel this provides more certainty around our forward financial expectations, and Call. We expect to gain a total $0.10 from the combination of reduced year over year share count as well as lower interest expense. Fixed overhead and SG and A Group will partially offset these significant gains as a result of the impact from the current inflationary environment. We are assuming no improvement in supply chain in our guidance.

Speaker 3

Call. Clearly, we hope that as time goes on, the supply chain situation improves, but we're not building that level of optimism into our outlook. Call. However, this clearly would provide upside opportunity should the present state of the supply chain improve. Call.

Speaker 3

Operating margins are expected to be approximately 6% at the midpoint and we are well on our way to achieving our 8% operating margin target by 2023. Call. We are excited about our opportunity to meaningfully expand the company's profitability and earnings per share year over year Call and about the strong underpinnings of the demand for our products driven by both strong demand conditions and structural changes in the market. Call. In conclusion, the announcements we've made today are the culmination of work that has been going on behind the scenes for the last 3 years.

Speaker 3

Our strategic focus is well set Conference as our organizational structure improvements proactively position us to drive innovation at a time when the market most needs it. Call. Additionally, while our new segment structure provides visibility to our important parts and service business, I'd like to reinforce that our parts and services team Call for customers, further enhancing Wabash's value to our industry leading dealer network and effectively leveraging our carefully curated supplier partnerships. Call. We are building something exciting by building the white space around our traditional first to final mile portfolio of transportation solutions.

Speaker 3

Call. All told, narrowing our strategy to focus on transportation, logistics and distribution, Call. Restructuring our organization around these customers and going to market as one Wabash to most effectively leverage the breadth of our portfolio of solutions Call as building new identity for our company. This new identity is underlined by the modification of our company's name. Our ticker will remain WNC, Call.

Speaker 3

I'll now turn the call back to the operator and we'll open it up for questions.

Operator

Call. The Your first question comes from the line of Justin Long from Stephens. Your line is open.

Speaker 5

Thanks and good morning.

Speaker 4

Call. Good morning, Troy. Good morning.

Speaker 5

So I wanted to start with a question around trailer delivery expectations going forward. I didn't See anything and I could have missed it on trailer delivery expectations for the Q4. And then as we think about Call. Next year in this bridge that you just walked through, Mike, it's a pretty significant tailwind from increased volume despite the Clear capacity constraints that we're seeing in the market today. So can you just kind of help us think through what level of trailer deliveries Call is needed to achieve the 2022 guidance and just your comfort and visibility in seeing that ramp?

Speaker 3

Call. Yes, sure. So we didn't give a specific unit guidance for Q4. We did give a revenue range, which is call. Slightly a slight uptick from Q3.

Speaker 3

If you look at going in the run rates, what's important to know is call. We have clearly been able to man our installed capacity to be able to come out of the gates in Q1 of Call. And hit the guidance that we laid out. And we're running faster today than we Corp. So if you just allocate out and normalize where we were first half, step it up into second half and then take it Q1 of 2022, you'll see we've done some of the hard work already.

Speaker 3

But there's obviously in our

Speaker 4

implied Call?

Speaker 3

Guidance we gave for 2022, we're nowhere near some of the run rates we would have seen in 2018 2019 from a unit count perspective. Corp. And that's the upside that still exists if the supply chain improves.

Speaker 4

So we are basically baking in. We have visibility, obviously,

Speaker 3

on the demand side with our backlog of $1,900,000,000 We have the demand and backlog surety to hit the rates, and we've call. Maintain some conservatism around the supply chain, but I think the other point is that we do have the installed manpower to do what we need to do to hit those Conference.

Speaker 4

Yes, I think another point of optimism as we go into the Q4 and we start thinking about the Q1 of 2022 is that we've been Call. Very successful over the last 45 to 60 days with onboarding new associates. We really saw that change in the middle of September. Call. And the other good piece is we're hearing the similar output throughout our supply base as well.

Speaker 4

That is capacity Call and resilience that will come into the supply base really in the Q1 of 2022. That gives us A much better feeling in the stability of the supply base going forward, which gives us a very nice jumping off point with the labor that we've been able to bring in At a minimum, maintain, but more than likely able to incrementally do better from a general production standpoint going into the 1st of the year.

Speaker 5

Call. Okay. That's helpful. And maybe another way to ask it is when you look at the ACT Research forecast for industry trailer production in 2022. I think they're up just under 20% next year.

Speaker 5

So is the message

Speaker 4

Group Assessment.

Speaker 5

Okay. And then Mike, maybe just following up on the EPS guidance for 2022. So for the 4th Quarter, we're going to be at $0.10 to $0.15 of EPS. You kind of run the math on where we're headed next year, and it's a pretty So I was wondering if you could help us think through the cadence of earnings you're expecting next year, even if it's just kind of high level Conference? First half versus second half as we think about how things should ramp over the course of next year.

Speaker 3

Yes, absolutely. So Corp. You would expect Q1 to be the lowest quarter of the year from an EPS generation perspective, but that's normal for Wabash National. Call. If you look back over the last 7 to 8 years pre pandemic, it was very normal for Q1 based on how equipment's Call.

Speaker 3

So you would see you also see a little bit of overhang from Q4 units that pushed into Q1 from the Conference that we'll work through in the 1st part of the quarter. And then you'll see Q2 will be we should be off to the races at that point Call. With a repriced backlog from the 2022 order season, a fully staffed manufacturing facility, and we would hope to see Call. Even more stability from the supply chain. So Q2, I think, is where

Speaker 4

you're going to see a

Speaker 3

meaningful step up from Q1. Corp. And I would say Q2, Q3 and Q4 should all could all be relatively similar in terms of EPS generation after a big step up in Q1.

Speaker 5

Call. Okay. That's really helpful. And last one for me. When you just look at what the guidance implies for the step up in SG and A Next year, it's around $40,000,000 Can you kind of help us unpack the key drivers to that increase?

Speaker 5

And does that include any Call. Kind of temporary operating expense associated with adding capacity before you actually see that revenue play out in 2023?

Speaker 3

Call. Yes, there's a lot that goes into that when we talk about the step up in SG and A. But obviously, Conference. We are going to have to add some SG and A for our ramp facility that we've got both Little Falls for MSC Call. And with Surge, but a big part of that actually is just some of the normalization and inflation throughout the business and from low levels in 2020 2021 in some areas, incentive comp and other areas of the business that are we turn to more normal levels in 2022.

Speaker 5

Call. Okay. That's helpful. I appreciate the time.

Speaker 3

Thank you. Thanks, Justin.

Operator

Thank you. Next up, we have Joel Tiss from BMO. Your line is open, sir.

Speaker 3

Call. Hey, guys. How's it going? Hey, Joel. I wonder if you

Speaker 1

could Corp. Talk a little bit about any signs. I know it well, everyone's disrupted out there. And I wondered if there's any signs that you guys are seeing About gaining share in the market in some of your new targeted areas.

Speaker 4

Call. Yes. What I would say is that where do you want to start? So when we think about the various trailer segments that we have, and we'll start there, Call. We have a you can see by our backlog that we've been very successful of leaning into Call.

Speaker 4

The beginning of the order season, and that really illustrates the amount of demand we had Call for our product really since the beginning of the year. What I can tell you is that we are specifically targeting customers Call. For the purposes of building out our portfolio, we're also targeting customers that understand the value proposition of our product Call. Now we're also setting up, to your explicit point of market share, purposely building and expanding market share slightly in 2022. But what will be more interesting is how we talk about the mix of Call.

Speaker 4

What that customer portfolio is as we've come out of the Q1 and we're excited about talking about what that is. It goes Call. Hand in hand with having a very robust and pragmatic view of the pricing that we're getting as we go into 2022. I think that's probably the most important thing to take away from it. Now if I want to expand out of trailers, I think about MSC Reapers, Call.

Speaker 4

While it may not be necessarily a market share gain today, I want to talk about where we're at with that. This year, we'll build somewhere between 220,250 based on the limited amount of capacity that we had in pre commercialization phase of launch. Call. As we move into 2022, we're looking at scaling that up to approximately 1,000 units, Call. Only factoring in foam availability as a mitigating factor, which we'll look to resolve.

Speaker 4

And we're approximately already at 50% booked as we Call. Today for that product. We're already doubled the amount of MSC booked orders today and still are processing and have no had 0 concern of filling out that backlog to approximately $1,000 for 2022, that's almost a 400% improvement from where we are. Call. We are investing in our product I'm sorry, our platform business to increase specifically aluminum related trailers, and Call.

Speaker 4

And that business is effectively booked for the year at full capacity based off of labor availability today. And our truck body business is just beginning to open up. And I think what we would see there is Group. Same market share, just an expanding market. So that would be the color I would give right now.

Speaker 1

Okay. That's beautiful. And then Call. Can you give us a sense like, I don't know how to measure, are you gaining your fair share? Do you have your fair share in parts and service?

Speaker 1

Or call. Maybe the better way to ask it is, where do you think this business could be in 5 years or 10 years, whatever longer term timeframe you want to put on it?

Speaker 4

Call? No, the reality of it, Joel, is that we at Wabash National have really underserved the parts and service segment of our business for the last 20 plus years. We see this as a tremendous growth opportunity, something that could easily double Call? In terms of revenue and probably with some level of margin improvement along the board as we grace gross scale. Call.

Speaker 4

The environment is clamoring for a, we will call it some business innovation in the way parts and services are delivered today with the changing logistics marketplace. So we really feel we approach it in a more innovative manner, a more modern manner, that sky is the limit on where we can go Call. As Mike talked about, we also see it as a destination for deployed capital to be very specific and aggressive And the way that we grow that. So between organic and inorganic opportunities, I will today say, I have no concern in doubling it call. And we'll see where we go from there.

Speaker 1

Okay. That's great. And then the last one for me is, can you just Call. Talk a little bit about acquisitions. In your view, do you think we would be a little more technology focused Or more capacity focused or more spreading out the product line?

Speaker 1

Just a little bit of color in that direction. And then I'm done. Thank you.

Speaker 4

Call. So when I think about capital allocation in terms of acquisitions, technology is absolutely an area of Call? Capital deployment that would be useful assuming that it fits into our innovation pathway as we target our portfolio of customers. Call. 2nd, I think there are opportunities from a capital deployment standpoint to shore up our supply chain, Whether that's a level of vertical integration or expanding our ability to buffer those concerns over the next several years, let's just say for the next half decade, I think that's an opportunity.

Speaker 4

And we absolutely are going to look at capital deployment for the purposes of capability enhancement for our parts and service Call business to round out a very extensive, what I want to say, worldly portfolio of Service capabilities, business capabilities and in some cases, I'd say capacity, but it's much more about organic capability that we want to bolt on.

Speaker 3

Yes. Call. I think there's a lot of opportunities, as Brent mentioned, in parts and services too for corporate development that may not be pure M and A that's capital light with partnerships and other Corps and other ventures that could really help us round out that initiative, and we'll be talking more about that over the coming quarters.

Speaker 1

Group. Thank you. Thank

Speaker 3

you. Thanks, Joel.

Operator

Thank you. Our next question comes from the line of Jeff Hoffman from Vertical Research. Your line is open.

Speaker 6

Call. Thank you very much. Well, this sounds exciting. Could I ask just a couple of detail, Nits. Call.

Speaker 6

With the new reporting structure, I know we're blending everything together, but can you break out kind of where your Volumes were between, say, dry reefer and tank in the quarter?

Speaker 3

Call. We've never broken out that dry and reefer. Tank was a step separate in DPG. Group. I would say the mix between tank and classic CTP volume was similar in Q3 as

Speaker 6

Conference. Okay. And then you said when you break out the 10,000 new capacity for dry, That's almost double what you were doing before. I'm assuming the implication is about 5,000 for reefer?

Speaker 4

4000 to 5000, right.

Speaker 6

Call. Okay. And then you mentioned that you'll be around 1,000 MSC units next year. Call. So when fully built out and we're going forward in 'twenty three and 'twenty four, is MSC going to be Group.

Speaker 6

Around that 4000 to 5000 level that reefer was before? Is there kind of a ramp build or where do we see that MSC business size wise long term?

Speaker 4

Conference. Yes. So when we think about let me be very specific when we talk about MSC as a technology and I want to we'll break it into its product Call. A minimum expectation is that we are equal to our conventional historical production, so in that 4000 to 5000 Conference. We obviously have sites to be greater than that based off of our commercialization efforts, how those truly pan out.

Speaker 4

So being that we'll be directionally around $1,000 in 2022, I think $4,000 to $5,000 is a reasonable target at Call. In addition, we are planning to build at least 900 to 1000 MSC related truck bodies, Which I would cast as primarily market sharenew business creation in the way that we're applying it. Call. I think some things that you will be giving to the Street in the next several weeks with detail is some output with some very interesting work that we've been doing with multiple players in the area of refrigerated delivery Corp. And how we're partnering with them to give them some very unique use of solutions with MSC.

Speaker 4

So when we think about MSC in Call. Total, while it may be 4000 to 5000 refrigerated vans, we may be well over that. We will be well over that in terms of MSC utilization call. As we lean into the marketplace, Jeff.

Speaker 6

That was really helpful. Just one last follow-up if I can. Thank you. Call. What you're going to do with the parts business sounds exciting.

Speaker 6

I was just kind of wondering how do we affect the growth of parts when you've largely gotten out of Call. The dealership business, how do we double parts over time? How do we distribute kind of help me understand how that business grows?

Speaker 4

Call. Well, first off, well, Wabash National historically, and obviously you've been covering Wabash for a long time. What you're really referencing Call is our Wabash owned service dealerships that we had as part of the Cruehub acquisition Call of assets back in 1999. While we have transitioned those, what we did for the most part is transition those into And as a result, we have created the most extensive, deepest and most talented group of Call. Dealers in the industry.

Speaker 4

We plan on leveraging that in a very purposeful way that really hasn't been harnessed in the past 20 years for Wabash National. We're going to do that with enhanced distribution that will be both, let's just say, partnership like in The way that we look at that, we're going to go further in the way that we digitally enable that beyond what the offerings are to The Street today. Call. And we're going to couple that with bringing together not only truck body parts, but also van and tank parts Call. To have again a first to final mile total portfolio solution in the way that we do it.

Speaker 4

No one else can do that, Jeff. Call. So we think we can create the premier over time, a premier portal for the distribution of parts Across those companies that value going to a one stop shop.

Speaker 6

So your point is that Call. Even though it's not a Wabash owned network, your ability to use a distributor network to get out there is still very much intact? Call.

Speaker 4

Oh, absolutely. And we think we can do it in a very capital efficient way as a result.

Speaker 6

Okay, great. Thank you very much.

Speaker 3

Thanks, Jeff. Call.

Operator

Thank you. Presenters, there are no further questions at this time. I will turn the call over back to Mr. Ryan Reade for any closing remarks. Quarter.

Speaker 2

Thanks, Craig. Thanks, everyone, for joining us today. We look forward to following up during the quarter. Have a great day.

Operator

Call. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining and all disconnect.

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