Wabash National Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
April 30, 2025

There are 7 speakers on the call.

Operator

Thank you for standing by. My name is Ian, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wabash First Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. I would like to hand the call over to Ryan Reed, Vice President, Investor Relations. You may begin your conference.

Speaker 1

Thank you, and good morning, everyone. We appreciate you joining us on this call. With me today are Brent Yeage, President and Chief Executive Officer Pat Kesselin, Chief Financial Officer and Mike Pettit, Chief Growth 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.

Speaker 1

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

Speaker 2

Thank you, Ryan. Let me start by level setting where we are in terms of the business environment. Compared to what we expected at the beginning of the year, there's no question that conditions have softened. We're seeing it across the board. Our customers are sharing that their own customers are delaying decision making, which is creating a cascading effect that slows activity across our business.

Speaker 2

As a result, third party industry forecasts for 2025 have been steadily revised downward over the past several months, and we've seen recent confirmation during this earnings cycle with many carriers reducing their CapEx estimates for the year. This isn't isolated to any one product or market. It's a broader macro driven slowdown. And while the situation certainly presents a fresh set of challenges, in some ways, it's reinforcing the strategic importance of how we're organized Wabash over the last few years. One of the key benefits of our work structure is that it allows us to be agile.

Speaker 2

While we're running our downturn playbook on transportation solutions to take costs out where necessary to align with near term demand conditions, we're continuing to execute without distraction on growth opportunities within the parts and services side of the business, which achieved positive year on year revenue growth during the first quarter. We expect our sustained efforts to grow parts and services and strategically integrate these offerings across our equipment solutions portfolio to play a key role in helping us achieve greater balance over cyclicality as we move forward. As I mentioned during a difficult quarter for equipment demand, we were able to grow revenue in our parts and service business. I'd like to call out a couple of highlights from the quarter. First off, I'd like to congratulate our Upfit team for their efforts to lead a doubling in year over year Upfit volumes in Q1.

Speaker 2

Another exciting development within parts and services during the first quarter is the continued expansion of our trailers as a service initiative. Mike will give more color on these topics in a few minutes, but these are both accomplishments that give us a sense of parts and services' ability to contribute enhanced stability within our overall portfolio as we continue to scale our offerings. During the first quarter, our team appreciated the opportunity to connect with customers at a couple of important industry events, TMC and Work Truck Week. Both provided valuable opportunities to reinforce Wabash's position as a technology forward leader. At TMC, we connected with industry professionals to show off our capabilities and innovation.

Speaker 2

We showcased our new more efficient dry van manufacturing capacity, which increases line rates while driving enhanced consistency and build quality. We also used the event to highlight our forty year history of innovation and partnership. At NTA's Work Truck Week, we showcased our AccuTherm refrigerated truck body with EcoNext technology. These units deliver 25% better thermal efficiency compared to conventional refrigerated products, which translates directly to lower fuel costs and reduced maintenance. We also promoted our Ready to Mount program, which provides our Wabash competitive advantage within the truck body space by allowing customers to get preconfigured fleet equipment faster than ever before.

Speaker 2

At the end of the day, the time we invest in building and strengthening relationships during down years like this will pay dividends as the demand environment recovers. Even in the face of a transportation market characterized by near term unprecedented uncertainty, we find that customers at these recent events remained remarkably upbeat and resilient. Their optimism about the future provided interesting contrast to the current softness in equipment demand, and that contrast serves as a reminder that sentiment often leads to fundamentals. Let me pivot to tariffs now. This has been obviously a frequent market topic with everyone from suppliers to customers to investors alike, so allow me to unpack how we think about these both in the short term and the longer term implications.

Speaker 2

Our exposure is very limited from a manufacturing perspective. Outside of one small tank trailer facility in Mexico, our manufacturing footprint is distributed entirely throughout The United States. Additionally, about 95% of our materials are sourced domestically. That proximity not only shields us from potential volatility and trade barriers, but also allows us to manufacture with speed and reliability. That said, we're not completely immune from secondary impacts.

Speaker 2

Tariffs on raw materials like steel and aluminum can create pricing pressure even from domestic suppliers, and more impactfully, uncertainty tends to inhibit our customers' ability to deploy capital for equipment. In our recent experience, companies aren't posturing to make speculative bets in this environment. There's an increased willingness to preserve cash until we have greater clarity. Still, we see a bright spot. It seems clear that the current administration has a goal of revitalization

Speaker 2

S. Manufacturing sector. That would be a significant structural tailwind for us because manufacturing carries an outsized impact on freight activity. More domestic production means a multiplier on freight moves, more trailers and more demand for exactly the kinds of solutions Wabash offers. Because we've been consistent in calling out the long term benefits of near shoring on our business, it's important to draw a comparison between near shoring and revitalization of American manufacturing that has recently become a part of the discussion.

Speaker 2

On the surface, they may appear to be similar concepts, but the implications differ in meaningful ways. Nearshoring suggests a growing role for Mexico in a broader North American manufacturing strategy. What we're hearing from the current administration, however, indicates a major emphasis on rebuilding domestic U. S. Manufacturing capacity.

Speaker 2

That distinction matters. A U. S.-focused manufacturing resurgence changes logistics patterns, supply chain dynamics and freight flows in a way that more directly impacts our customers and ultimately demand for trailers and equipment solutions. Now continue with initiatives from the current administration. On the regulatory front, the EPA recently announced a review of their twenty twenty seven Phase three emission standards for heavy trucks.

Speaker 2

This initiative is part of a broader reassessment of regulations generally viewed as burdensome. While these changes targeted a reduction in CO2 emissions, they did so at the expense of a significant increase in truck cost, which has led to a short term prioritization of truck refreshment relative to trailers. I believe it's a consensus view that assuming the implementation of these standards, some diversion of CapEx is set to act as a headwind for trailer demand in 2025 and 2026. While no decisions regarding the review has been announced, we'll continue to monitor the situation as removal of these regulations would be a near term positive for trailer demand. I also want to briefly touch on the ongoing legal matters stemming from the 2019 motor vehicle accident.

Speaker 2

As many of you know, a jury in St. Louis originally returned a verdict of $462,000,000 in damages against Wabash. But in March, the trial court amended the judgment down to 119,500,000.0 We stand firmly behind the safety integrity of our products and remain confident in our ultimate legal position as such. We filed notice of appeal and obtained the necessary appeal bond in April as we continue to pursue all available legal options to achieve a more reasonable outcome. Turning back to market conditions and our outlook.

Speaker 2

In terms of demand, we've seen a notable shift in customer behavior recently that coincides with the step up in uncertainty created by tariffs. Although there's a lot of noise in the environment right now, I think it's fair to say that the signal is clear. The trailer industry has already experienced eight consecutive quarters of contraction in orders. Our total backlog ending Q1 was approximately $1,200,000,000 and while this showed a slight sequential step up, like most data through March, we believe there is a level of re entrenchment happening now given the uncertainty being generated by tariffs. Forecast for trailer volumes this year indicate shipments will undercut basic replacement demand, resulting in the aging of fleets across the industry.

Speaker 2

The last time we saw this dynamic play out was in 2020 when pent up demand built and was later unleashed as the freight market recovered. There are similarities between the two time periods where an external shock causes CapEx retrenchment that results in a building of pent up demand. For now, we've undertaken a reassessment of 2025 and now expect the midpoint of $1,800,000,000 in revenue and negative $0.60 of adjusted EPS. I'll now turn the call over to Mike for additional comments.

Speaker 3

Thanks, Brent. I'd like to take a moment to expand on how we're continuing to move Wabash toward being a more durable, resilient and higher margin business. Central to that work is our strategic initiative to grow our parts and services revenue, generating greater recurring revenue to reduce the company's exposure to cyclicality. Our parts and services offerings sit at the intersection of seamlessly serving our customers, our first to final mile portfolio and connected services that deliver lifecycle solutions. During the quarter, we were able to demonstrate tangible progress in all these areas through organic and strategic growth coupled with some nice technological accelerators.

Speaker 3

I'd like to personally thank Dave Hill and his parts and services team for their Q1 sequential and year over year growth in the face of a very challenging industry and macroeconomic backdrop. One area where we've seen outside growth is in our upfit value stream. In the first quarter, we doubled the volume of units moving through this business, which includes shelving systems, lift gates, partitions, roof racks, thermal solutions, and most recently, ready to mount truck bodies. These offerings allow customers to tailor their equipment to their specific operational needs and our growing competency in this space is allowing customers to increasingly see Wabash not just as an equipment provider, but as a solutions partner. As demand for upfit solutions grows, Wabash is building a national network that delivers faster turnaround times and brings deep industry expertise to customers.

Speaker 3

With the support of our national dealer network, our momentum is being driven by an expanding footprint of parts and services locations underscored by a new Chicagoland Upfit location opening in Q2 of this year and an Atlanta location opening in the second half of twenty twenty five. We recognize that potential for meaningful value creation sits at the intersection of where we can wrap services around our industry leading equipment portfolio. As we demonstrated in Q1, upfit services is a good example of this. In leveraging our integration skills to coordinate between our equipment, multiple suppliers and value added components and the end customer, our upfit service is a microcosm of our broader parts and services goals. Turning now to trailers as a service.

Speaker 3

We're excited to have added customers to our offering in Q1. Shippers, carriers and brokers are seeing the value of using our TAS solution to access capacity on demand across The U. S. They're not just gaining trailer units, but a comprehensive bundle that includes maintenance, repair, telematics and national uptime support. It's both a capital light and capital efficient way for them to expand their network while maintaining flexibility.

Speaker 3

We have over 1,000 trailers deployed into our fleet and are increasing our operational capabilities by the day. And we're not just expanding our capabilities organically. With our acquisition of Trailer Hawk, we're working to embed cargo security technology directly into our CAS platform and ultimately across our product portfolio. This allows customers to monitor freight conditions in real time, manage trailer access digitally and validate the entire custody chain from origin to delivery. These aren't just bells and whistles.

Speaker 3

They're mission critical tools in today's supply chain where cargo theft is a significant and growing problem that needs to be addressed. We're also fortunate to have Brett Summa, Trailer Hawk's founder, join us as part of the acquisition. Having spent years in numerous logistics roles, including as the founder of LoadSmith, a freight brokerage that was an early task customer, his experience as well as that of his team and insight will be instrumental as we scale this offering. We're also advancing our capabilities through a partnership with Uplabs, a pioneering corporate venture studio. We're collaborating to build two high impact startups that will simultaneously create value within Wabash's operations.

Speaker 3

The first is an AI powered equipment configuration tool that simplifies how customers choose equipment specifications and powerfully enables Wabash to execute faster and more efficiently. Instead of a slow manual process, users will be able to generate real time proposals that clearly lay out trade offs in cost, time and performance. Wabash keeps the customer at the center of how we structure our organization, and we expect this tool to enhance our customers' experience and continue to elevate Wabash's ease of doing business. The second venture is focused on parts intelligence. This tool uses predictive analytics to optimize inventory levels through the channel, ensuring the right part is in the right place at the right time.

Speaker 3

It helps reduce downtime, improve customer satisfaction and eliminate excess capital tied up in parts stock. This enables breakthrough ability to meet customer demand across our aftermarket, our supply chain and our distribution operations. Together, these two initiatives represent a big step forward in how we serve our customers and enable our dealers and service partner network. 2025 is a year we will show the full breadth of capabilities and growth potential within parts and services. So whether it's through internal initiatives, partnerships or acquisitions, our focus is clear.

Speaker 3

We're building parts and services capabilities that deliver for our customers regardless of what's happening in the broader economy. Surrounding our industry leading equipment with a growing set of capabilities and offerings is a model that brings value, scale and enhances the power of our portfolio. And we're just getting started. With that, I'll hand it over to Pat for his comments.

Speaker 4

Thanks, Mike. Beginning with a review of our quarterly financial results. In the first quarter, our consolidated revenue was $381,000,000 During the quarter, we shipped approximately 6,290 new trailers and 3,000 truck bodies. First quarter shipments were below our prior expectations and resulted in a revenue shortfall of about $55,000,000 while the weaker than anticipated volumes resulted in less fixed cost absorption, leading to lower than expected gross margins of 5% and adjusted operating margins of negative 7.2% during the quarter. In the first quarter, adjusted EBITDA was negative 9,000,000 or negative 2.4% of sales.

Speaker 4

Finally, for the quarter, adjusted net income attributable to common stockholders was negative $24,800,000 or negative 0 5 8 dollars per diluted share. Moving on to our reporting segments, Transportation Solutions generated revenue of three forty seven million dollars and operating loss of negative 10,000,000 Overall, demand did not fill in as expected in some of our equipment businesses that experienced quick turnarounds from order to shipment, leaving us overexposed to labor costs in those areas during the quarter. We have taken action to rightsize direct labor and production support costs going forward. Parts and Services generated revenue of $52,000,000 and operating income of 6,900,000.0 While parts and services is certainly less cyclical, it's also not immune from freight market conditions. So we view the year over year revenue growth in this segment as a particularly positive sign.

Speaker 4

Year to date operating cash flow was flat with sequential working capital trends in Q1 being incrementally helpful to operating cash driven primarily by widening out of accounts payable during the quarter. Additionally, the increase in inventory experienced during the first quarter was due to a gap between equipment production and shipments during the quarter. Regarding our balance sheet, our liquidity, which comprises both cash and available borrowings, was $310,000,000 as of March 31. We finished Q1 with a net debt leverage ratio of 3.2 times. On capital allocation, during the first quarter, we directed $9,000,000 to traditional CapEx, invested $20,100,000 in revenue generating assets to support our Trailers as a Service initiative, utilized $13,700,000 to repurchase shares and returned $3,900,000 to shareholders via our quarterly dividend.

Speaker 4

Our capital allocation priorities continue to focus on capital expenditure above and beyond our annual maintenance CapEx spend of 20,000,000 to $25,000,000 in order to support our organic growth initiatives. We are committed to maintaining our dividend and we will continue to evaluate opportunities for share repurchase alongside of bolt on M and A. I'll provide a bit more on our capital allocation outlook, more specific to 2025 in a few minutes. Moving on to our guidance for 2025, we are reducing our revenue outlook to approximately $1,800,000,000 and EPS to a range of negative $0.85 to negative $0.35 From previous midpoints, this represents a reduction of roughly $200,000,000 in revenue and $1.55 of EPS. As Brent mentioned, the level of tariff related uncertainty in the business environment has been a constraint on our customers' capital expenditure plans in the short term, and we're updating our guidance to fully read through the impact of this heightened uncertainty on our financial outlook.

Speaker 4

But more plainly, we have not seen the level of order flow we had previously anticipated. And given prevailing uncertainty, combined with the importance of seasonal timing to annual order flows, we believe it's prudent to adjust our outlook accordingly. The most significant changes from our prior outlook come from a reduction in volumes within Transportation Solutions flowing through to a decrease in gross profit equivalent to 1.7 dollars in EPS versus our prior guidance. This is partially offset by cost containment actions taken within SG and A that recoup approximately $0.15 of EPS. As I mentioned, the weakness in demand flow through during the first quarter resulted in a higher cost structure, an issue that has been addressed.

Speaker 4

We believe that the organization is now better situated to manage through the remainder of 2025, and we do not anticipate the weakness seen in first quarter financial performance to reoccur without significant macro degradation. Our updated guidance implies second quarter revenue of $420,000,000 to $460,000,000 and EPS of minus $0.25 to minus $0.35 This guidance implies modestly positive EPS during the second half of the year as we anticipate volumes to stabilize at lower levels paired with a right sized cost structure. Moving on to capital deployment expectations for 2025. We continue to anticipate traditional capital investment to be between 50,000,000 and 60,000,000 That said, given the heightened uncertainty in 2025, our capital expenditure plans are flexible. While it would not be our preference, we do have room to bring down capital outlays if the outlook dictates.

Speaker 4

The same goes for the rest of our capital allocation priorities. I would say that generally, we do have quite a bit of flexibility with regard to how we allocate capital in 2025 depending on how market conditions evolve. While 2025 is shaping up to be a more difficult year than anyone assumed during our last earnings call, we've been through cycle troughs before and we're taking the necessary actions to reduce costs and we structure our liquidity position to be able to withstand these experiences. We've also seen what follows cycle trough, which is typically an up cycle that exceeds expectations, and we will be ready to capitalize on this once tariff uncertainty eventually clears way for freight markets to improve and more importantly, businesses to regain the necessary level of clarity to increase capital investments. I'll now turn the call back to the operator, and we'll open it up for questions.

Speaker 5

Thank you.

Operator

Our first question comes from the line of Mike Schlisky with D. A. Davidson. Your line is open.

Speaker 6

Good afternoon and thanks for taking my questions here. So your updated full year outlook, it seems to imply decremental margins of about 75%. And when I look back to previous downturns prior to the pandemic, things are kind of similar back then. I mean, you there's now an EPS loss coming up here in 2025. I had thought you had made quite a few strides since those last down cycles to avoid such a big decline in the EPS.

Speaker 6

I'm kind of just curious if you had any problems or issues with purchasing steel, pricing of steel or anything else that's kind of off the margin profile very temporarily here other than trailer volumes?

Speaker 4

Yeah. So we'll have to reconcile those decremental margins with you, Mike. We don't quite have that big of a drop. But as it pertains to your specific question, all of the pricing pressure around commodities is built into our full year guide as well as the price that we're going to see in our backlog right now from the end sale. So I wouldn't say that there we expect a oversized reduction in our profitability.

Speaker 4

Certainly, over the past three quarters from the first half of twenty twenty four, we've seen some pricing pressure relative to that period. But as it plays out for the rest of the year, we should see Q2 through Q4 being in a similar position to what we saw in the first quarter in terms of price and profitability.

Speaker 2

Yes. I think just in the quarter we reported on, one of the issues is the we had aspects of our business that were still in of February, beginning of March in an expansion mode, with still receiving feedback post tariff, call it, saber rattling, that we're still moving forward in that direction from a customer standpoint. And that precipitously dropped over the last three to four weeks. Really, probably by the mid March time frame, we're starting to come out. And so there's a level of labor imbalance that was created very quickly both in truck bodies and vans, that had a hangover, through the balance of the quarter.

Speaker 2

That's less about what structural changes we've made and much more about a short period of time where a substantial amount of labor was ineffective and had to be quickly rightsized with changing market dynamics.

Speaker 6

Okay. Okay. Thanks for that color. I also wanted to just ask about parts service as well. Concerns about new volumes coming in, I can understand that.

Speaker 6

Does that imply that maybe the outlook for parts and service actually may have improved for the rest of the year given that people are being asked to maintain their old trailer fleets a little bit longer or have things kind of stabilized from where you thought they were last quarter?

Speaker 3

Yeah. They haven't gone up, Mike. But what we're what we are really excited about is the fact that we're able to maintain what that implied level of growth was in parts and services even though we've seen some weakness in the OE side of the business. And that's what we've always thought could happen and we're seeing that in real time. And we do continue to sell most of those parts into the same end market.

Speaker 3

So there's cyclicality there, but it's much less and we've got some growth to offset some of the cyclicality that exists. So it's a really good story we think that we can grow the business and continue to grow it. We expect to see sequential growth into Q2, Q3 and Q4. So it's not going up from what we said at the year end call, but we're able to maintain it.

Speaker 6

And just to follow-up there on the profitability. I know there was tough comps, but it was down quite a bit over the prior year in the parts and service segment from an operating margin standpoint. Can you maybe share what might have been going on there? I mean, you had sales. What would be the reason for a decline in the profitability?

Speaker 6

Yes.

Speaker 3

Now you hit on it. We had a really strong Q1 twenty twenty four. We did expect to see a year over year step down. I've said pretty consistently, we think this business will be a high teens EBITDA business across the full year. We expect still to be at the high teens.

Speaker 3

So we're a little below that in Q1, a little bit of mix in Q1 twenty twenty five that caused that to be a little lower than hoped. But we came up from Q4 twenty twenty four as we expected. We expect to step margins up into the second half of twenty twenty five. So we expect to finish the year in the high teens EBITDA level for parts and services in 2025.

Speaker 6

Great. Thanks for that information. I'll pass it along.

Speaker 3

Appreciate it.

Speaker 1

Thanks Mike. Thanks Mike.

Operator

Our next question comes from the line of Jeff Kaufman with Vertical Research Partners. Your line is open.

Speaker 5

Hey, guys. Thank you. So a couple of questions. Mike, you mentioned you were still growing despite the environment. Where are total TOS units today?

Speaker 3

So they're just over 1,000, Jeff. They were I commented they were between 500 and one thousand the year end call, another just over 1,000. We're actually seeing some demand for that product even beyond some of the weakness you see on the call it the asset sale trailer. So we think we can grow that business throughout this year. We're trying to really evaluate the market.

Speaker 3

We don't know exactly how that's going to perform through the rest of the year, but we do think we can see growth in TAS through 2025.

Speaker 5

I would add that

Speaker 2

the unit Jeff, this is Brent. From a unit standpoint, Mike alluded to that. But I think the other piece to it is that if you were to look back six months ago, we had a handful of prospective customers that were working through the process of getting business agreements in place, comfortable starting to experience the service. When you sit here today, we have between twenty and twenty five customers that are engaged in understanding how they will use the product. They're either using the product, they're sampling the product, they are putting the business contracts in place, receiving pricing so that they are poised and ready to use it in a scaled manner as the market decides what the market's going to do.

Speaker 2

So when

Speaker 3

we think about

Speaker 2

the positioning of this from a growth standpoint, all the right things are happening to put it

Speaker 3

in the right position. Yes. Capability side is increasing as well. So as customers become more interested, we're developing the capabilities necessary to support.

Speaker 5

That's helpful. Thank you. Also, it kind of looks like the earnings forecast is kind of flat from this point to the rest of the year, give or take. And I know you talked about costs in the first quarter and how you flushed out some of those excess costs and there's going to be more G and A to match the environment. But I guess I was wondering, gave a revenue outlook of about $420,000,000 to $460,000,000 for the second quarter, about $1,800,000,000 on the year.

Speaker 5

What kind of deliveries, whether it be trailer deliveries or final mile deliveries are kind of underlying those revenue forecasts?

Speaker 1

Yes, Jeff, we've got a slight step up in trailer shipments in Q2. And we've got, again, a slight step up in truck body shipments. So really not looking for anything heroic in Q2.

Speaker 5

And then for the full year, I'm assuming that you're not undercutting the ACC Research forecast at this point, which has come down, I think, about $2.00 5,000,000 on the year, give or take. If I look at the market share that you had in the first quarter, and then who knows if that's the right way to think about it, about 13.3% in the first quarter. Are we thinking kind of use that as a guide to similar percentage for the year so we can kind of I'm in the $28,000 range on trailer deliveries based on that. How should I think about $62.9 in the first quarter, slight step up in the second. Is that the right way to think about it?

Speaker 1

It is. Yes. So I think all of your inputs there are going to be certainly in the right ballpark, Jeff.

Speaker 5

Okay. Good enough for me. And thank you also for giving the liquidity update because I think with the shares trading where they are, we're shifting from valuing you on earnings to valuing on liquidity. So could you kind of walk through that liquidity? I see the cash on the balance sheet and I see the total liquidity number.

Speaker 5

But if this environment is still worse than expected, I know there's levers you can pull, but how should we think about access to liquidity if needed?

Speaker 4

Yes. So we have the high yield bonds of $400,000,000 that mature in 2028. And then on top of that, we have our revolver, which provides additional liquidity. So the $310,000,000 that I mentioned as of the end of

Speaker 3

the first

Speaker 4

quarter includes that cash on the balance sheet plus the availability on the revolver. As we think about capital allocation, I'll say that we're going to weigh our options and a lot of our investment decisions will depend on the way that the markets evolve over time. So we right now have a plan to that capital number that I mentioned of $50,000,000 We also paid the dividend just like we always do. We will continue to do that. But then as it pertains to share repurchases, traditional CapEx investments, more investment in TaaS, all of those items we will evaluate on an as needed basis certainly to what our liquidity position looks like and what we expect the future markets to look like.

Speaker 5

All right. And then just kind of a swag question and who knows the right answer, but I'm asking you for your best guess. We had a weird first quarter, right? I mean weather was a factor. We didn't talk much about it, but it did affect the manufacturing facilities and the number of days they worked.

Speaker 5

There was probably not an alignment of costs relative to volume. That was a function of kind of how the market surprised in the quarter and you talked about how we've got that back to where it should be as of quarter end. So I think we got this surprising operating loss relative to the units you delivered. And I think Mike Schlisky kind of hinted at it, how did margins do this because we thought margins were stronger than this. If you wouldn't have had the weather, right?

Speaker 5

So let's figure out the weather impact as best we can. And you had your cost structure in the right place from the beginning of the quarter. What might this quarter have looked like?

Speaker 1

So I think a good way to attack that Jeff is we feel like in Q2 here we do have the cost stack in better condition and we're guiding to a quarter that looks roughly like $0.30 loss for Q2 just given where volumes are at. And again, they're not exactly the same, but I think volumes from Q1 to Q2 are going be in a similar ballpark. So I think that's probably a good way to think about what Q1 could have looked like with maybe better information.

Speaker 2

Yes. One aspect I would add to that, Jeff, is that even looking at everything that Ryan said absolutely is correct. But I'd say in additional, when you when we think about Q2 and Q3 specifically, we are still navigating through a period of whether it be uncertainty increase or uncertainty reduction. And that's a crystal ball that we're all trying to search for. There is still some level of assumption built in even to that level of projected Q2 earnings that estimates that we're still saddled with, I'll just call it, the disruptive nature of the uncertainty, movement within the schedule, just noise that weighs on the profitability of the business.

Speaker 2

Have to take that into account. So even with what Ryan said, if magically, executive policy change and and some level of stability was obtained, that would be positive relative to how we would operate in Q2 and Q3, which would dramatically both improve the cost and absolutely in Q3 improve the volume that we're seeing right now. So this is the noise is affecting us in a very nontraditional way than how you would think about the normal execution of cost and execution inside the business.

Speaker 5

No, that's helpful. Last follow-up. So you lost $0.58 in the first quarter. The midpoint of the guidance is $0.60 for the whole year. You've guided to a midpoint of $0.30 loss for the second quarter.

Speaker 5

So the implication there is the net of 3Q and 4Q are going to be positive $0.30 however that plays out. Is that based on the idea that at some point we get clarity in the next couple of months and that clarity drives better industry volume in the second half of the year? Kind of what's driving that expectation that we're going to make $0.30 in the second half of twenty twenty five?

Speaker 2

It is I would say it is an assumption that uncertainty does not go up and so therefore doesn't worsen, it is not necessarily assuming that we get a near term meaningful improvement in demand and operating conditions. That's how I would frame it right now because we can't necessarily know how to predict that. So we're assuming there's a level of noise that perpetuates the year at this point. And so it's based on what we know, not what we need it to be.

Speaker 5

Okay. And on the theory that at some point, we will have an up cycle and we will go back to buying trailers. I get that. Well, good luck. Yes.

Speaker 5

Good luck and thank you.

Speaker 3

Thanks, Chris. Thank you.

Operator

Are no further questions at this time. I'll hand things back over to Ryan Reed for closing remarks.

Speaker 1

Thanks Ian and thanks everybody for joining us today. We'll look forward to following up during the quarter.

Operator

This concludes today's conference call. You may now disconnect. Have a good day.

Powered by Quartr
Earnings Conference Call
Wabash National Q1 2025
00:00 / 00:00