Greenbrier Companies, Inc. Aktie

Hello, and welcome to the Greenbrier Companies Fourth Quarter 2026 Earnings Conference Call.

[Operator Instructions] At the request of the Greenbrier Companies, this conference call is being recorded for instant replay purposes.

At this time, I would like to turn the conference over to Travis Williams, Head of Investor Relations. Mr. Williams, you may begin.

Thank you, operator. Good afternoon, everyone, and welcome to our fourth quarter fiscal 2026 conference call. Today, I'm joined by Lorie Tekorius, Greenbrier's CEO and President; Brian Comstock, Executive Vice President and President of the Americas; and Michael Donfris, Senior Vice President and CFO. Following their prepared remarks today, we will open the call for questions.

Our earnings release and supplemental slide presentation can be found on the IR section of our website. Matters discussed on today's conference call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Throughout our discussion today, we will describe some of the important factors that could cause Greenbrier's actual results in 2026 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier.

With that, I'll turn it over to Lorie.

Thank you, Travis, and good afternoon, everyone. We appreciate you joining us today. Fiscal 2026 was a year marked by significant macroeconomic factors, including geopolitical uncertainties, for shifting tariff and trade policies and higher interest costs, leading many of our customers to extend the timing of investment decisions in long-lived freight railcars.

In that environment, Greenbrier delivered 15,400 railcars generated revenue of $2.5 billion and earned core earnings per share of $2.60 with aggregate gross margin of 13.6%. While these results were below what we expected at the start of the year and fourth quarter, given the market conditions, our performance remained quite resilient. The last period of similarly low industry activity was 4 years ago during our fiscal 2022. Comparing fiscal '26 to '22 and Greenbrier delivered about 4,500 fewer units that delivered aggregate gross margin 330 basis points higher.

Core EBITDA was 30% higher and core net earnings were 76% higher. The changes that we've made over the last several years to our manufacturing footprint, our cost structure and our lease strategy have raised gray bars performance at a low point in our cycle. We remain focused on actively managing the business to ensure stronger through-cycle performance.

Shifting over to manufacturing, we adjusted production rates at head count to match demand while continuing to complete new railcar designs for customers. Our insourcing investments to produce key components continue to lower costs across our North American network. In Europe, market conditions remain soft, and we continue to align our footprint and cost structure with demand as we drive for improved operational efficiency. Our leasing and fleet management team had a strong year.

During fiscal 2016, we grew our owned lease fleet to approximately 21,000 railcars, and with high fleet utilization and stable lease renewals, this business continues to deliver strong performance. A larger fleet adds recurring revenue opportunities for Green bar that make us less dependent on new railcar demand. Now I'd like to take a minute to discuss our trade policy continues to affect our industry, particularly for tank cars. Earlier this month, our competitor filed petitions seeking duties on certain tank cars. And in September, U.S. Customs and Border Protection affirmed its determination regarding certain freight rail couplers on finished railcars.

We are vigorously defending our position in both of these matters, including appealing to the freight rail appealing the freight rail coupler case to the core of international trade. On the tank car matter, perfectly clear, we proudly built tank cars in Arkansas today and employ more than 2,000 individuals in the United States, including our amazing teams of engineers and procurement professionals. The U.S. MCA continues to benefit most of our products and will work with policymakers to ensure greater understanding and reestablish consistent trade treatment of railcars in the North American market.

We're starting to see customer interest that was initially stymied beginning to return. Customer inquiries have increased across most railcar types supported by growth in rail traffic and the cost advantages of freight movement by rail compared to trucks, particularly at current fuel prices. Brian will provide more detail on the market and our commercial activity in just a few minutes. I did want to mention that our balance sheet continues to support our leasing growth strategy, and we ended the year with liquidity of nearly $1 billion, and Michael will dive into the capital allocation details in his remarks.

As I reflect on the long-term targets we established in our April 2023 Investor Day. I'm pleased with the progress we've made. We are on track to double recurring revenue within 5 years, growing 55% to $175 million in fiscal '26. Our aggregate gross margin reached the mid-teens in fiscal '24 and '25 and remained solid at 13.6% in fiscal '26, and while ROIC fell below our targeted range in 2026, reflecting challenging manufacturing conditions, coupled with significant investment in our growing lease fleet. It's actually averaged approximately 9% over the last 3 years.

These results demonstrate the resilience of our business model and the benefits of our strategic transformation positioning Greenbrier for stronger returns as market conditions improve. Looking ahead, our priorities remain: employee safety, operational execution, cost discipline, strategic growth of the lease fleet and improved through-cycle performance.

Finally, before I turn the call over to Brian, I want to say a few words about our new Board member, Manny Perlman, who officially joins the Board tomorrow. Manny brings extensive experience in investment management and capital markets as well as deep financial expertise. We look forward to benefiting from his perspective as we continue to execute our strategy and drive shareholder value.

And with that, I'll turn the call over to Brian.

Thanks, Lorie, and good afternoon, everyone. During the fourth quarter, commercial activity took a meaningful step forward. We received orders for 3,400 railcars valued at approximately $600 million, our highest order value of the year, spanning a range of railcar types and end markets. These orders resulted in a book-to-bill ratio of nearly 1, the highest we've seen since Q3 fiscal 2024. For the full year, orders totaled 12,200 railcars valued at $1.9 billion. With many customers deferring purchasing decisions this year, I'm extremely proud of how our commercial team continued to win business.

Greenbrier's backlog increased to 14,000 railcars valued at $2.1 billion, the first sequential increase since fiscal 2024, with deliveries extending into fiscal 2020. We Lease originations represented about 40% of orders for the year, reflecting the value of an integrated commercial model that offers customers both direct sales and leasing solutions. As a reminder, programmatic railcar restoration work is excluded from our orders, backlog and deliveries. In fiscal '26, we performed this work on approximately 2,200 railcars, making Greenbrier a clear market leader.

Looking at the broader market, conditions are becoming more constructive. Rail traffic has grown across a broad range of commodities this year, and elevated fuel prices have improved rail's cost competitiveness relative to trucking. Recent operating results from the Class I railroads provide encouraging signs for the broader rail freight market. Several major railroads reported solid volume growth in the third quarter, while intermodal traffic has been particularly strong, reaching record levels and posting double-digit year-over-year growth in recent weeks.

At the same time, railcar scrapping has outpaced new builds in North America over the past 2 years, reducing overall fleet size. Railcars and storage have fallen for 4 consecutive months and now are at the lowest levels in over 4 years. We believe these trends point to strengthening underlying freight demand and support a more constructive outlook for railcar manufacturing as customer confidence and capital investment recover. Additionally, tighter fleet supply supports improved lease rates and secondary market values and increases demand for railcar conversions, tank requalifications and rejacking as well as routine maintenance.

FTR projects North American deliveries of $23,000 in 2026, growing to 31,400 in 2027. The an increase of 37%, driven mostly by replacement demand. Our fiscal '27 straddles these periods and based on industry order levels observed over the past few quarters, we expect deliveries to be stronger and back half weighted. These dynamics are creating momentum for our commercial activity. Over the past several weeks, inquiries have increased across railcar types, and we are converting more of them into orders. The tariff and trade matters Lorie discussed are weighing on tank car demand. but we expect orders to resume as greater certainty emerges.

Our Leasing & Fleet management business benefits directly from these fundamentals and delivered an outstanding year. We grew the old lease fleet by roughly 4,000 railcars or 23% to approximately 21,000 railcar fleet, primarily through disciplined secondary market acquisitions while maintaining utilization at 98%. Renewal rates remained well above expiring rates and recurring revenue reached $175 million for a year up from $113 million when we established our goal of doubling recurring revenue.

Turning to manufacturing. We optimized production rates in the fourth quarter to align with demand and adjusted head count accordingly. Our teams design and produce several new railcar types, which will benefit and support our back half forecast. Our insourcing investments continue to lower costs across our North American network and maintenance services, wheel shipments exceeded our expectations with strong forward demand.

Outside North America, demand in Europe remains muted. Two years ago, freight wagon deliveries in the region were nearly 14,000 units. The industry will deliver fewer than 10,000 in 2026, and the 2027 outlook is similar. Our lease syndication capabilities have been important in supporting our European backlog while large operating lessors have limited their purchases and we continue to align our footprint and cost structure in the region with demand. In Brazil, Greenbrier-Maxion delivered another strong quarter with more than 400 railcar deliveries, including export orders, supported by a favorable product mix and continued manufacturing efficiency.

Across Greenbrier's businesses, our capital markets team played an important role this year. Its syndication and secondary market activity generated liquidity and supported the growth of our lease fleet and expanded our relationship with investors and operating lessors. In summary, fourth quarter orders and backlog improved. Our lease fleet grew significantly, and we kept the production aligned with demand. We remain focused on order quality, disciplined fleet growth and operating efficiency and we enter fiscal '27 encouraged by the activity we are seeing.

And with that, I'll turn the call over to Michael.

Thanks, Brian, and good afternoon to everyone. Revenue for the quarter was $591 million, up approximately 3% sequentially, primarily driven by growth of our lease fleet and favorable mix in manufacturing. Aggregate gross margin was 13.5%, driven by the timing of syndication activity and operational inefficiencies resulting from lower production volumes.

Earnings from operations were $26 million or 4.3% of revenue. That included $4 million in facility-related rationalization costs for the quarter. We continue to evaluate and optimize our footprint to align capacity with demand. Our effective tax rate for the quarter was approximately 6.5% and that reflects the mix of income across jurisdictions where we operate, along with the impact of foreign currency.

Earnings per share were $0.27, excluding approximately $0.12 per share of facility-related rationalization costs for earnings per share were $0.39, while core EBITDA was $72 million or 12% of revenue. For the full year, fiscal 2026 revenue was $2.5 billion, and aggregate gross margin was 13.6%, reflecting continued cost discipline and the contribution from leasing and fleet management. Diluted earnings per share were $2.49 and core earnings per share were $2.60. Core EBITDA was $300 million or 12% of revenue.

Now turning to the balance sheet. Greenbrier ended 2026 with total liquidity of $962 million, consisting of $235 million in cash and $727 million in available borrowing capacity. Our debt maturity profile is well laddered with no significant maturities until 2028. In addition, at fiscal year-end, approximately 85% of our debt was fixed with a weighted average interest rate of just over 4%.

Operating cash flow for the quarter -- for the fourth quarter was approximately $32 million. We maintained strong liquidity throughout the year and continue to invest in our lease fleet, supporting recurring revenue growth and long-term earnings potential. Our capital deployment reflects the flexibility of Greenbrier's integrated business model. The timing and mix of railcar sales, leasing and fleet investments can influence reported deliveries, revenue, capital expenditures and cash flow from quarter-to-quarter. Ultimately, our decisions are guided by the returns we expect to generate and the long-term value of the assets rather than an individual operating metric. This flexibility is particularly important as we continue to grow leasing and fleet management. We also remain committed to returning capital to shareholders.

During the year, we raised our quarterly dividend by 6% and repurchased 13 million of our shares. Our Board recently declared a quarterly dividend of $0.34 per share, marking our 50th consecutive quarterly dividend. We remain committed to balancing investments in the business with shareholder returns while maintaining financial flexibility.

Before reviewing our fiscal 2027 guidance, I want to highlight a change to our annual outlook. As our lease fleet grows, company-specific deliveries have become less indicative of our financial performance, reflecting our flexibility to sell production or retain it for leasing. Additionally, manufacturing segment revenues includes maintenance, repair and programmatic railcar restorations, which are not captured in delivery volumes. Going forward, we will provide an outlook for North American industry deliveries rather than company-specific deliveries, better reflecting our evolving business model and aligning with industry practices.

For fiscal 2027, we anticipate North American industry deliveries of 26,000 to 28,000 railcars, total revenue between $2.8 billion and $3.2 billion, with operating margin ranging from 7% to 7.5%. We expect earnings per share to be between $2.75 and $3.75. Total capital expenditures net of proceeds from equipment sales are projected to range from $225 million to $275 million with approximately 70% allocated towards growth of the lease fleet.

To provide some additional context around our outlook, we expect Leasing & Fleet management revenue to grow 12% to 15%. Manufacturing gross margin in the low double digits and aggregate gross margin in the 14% to 15% range. You can find additional modeling assumptions in the fourth quarter earnings slides on our website.

In summary, we continue to make progress strengthening Greenbrier financial fundament and expanding our recurring revenue platform as we entered fiscal 2027, our priorities remain focused on managing costs, maintaining financial flexibility and deploying capital with discipline. We believe these actions position Greenbrier to deliver attractive through-cycle returns and create long-term shareholder value.

Before we open it up to questions, I will turn it over to Lorie to share a few final thoughts.

Thank you, Michael. And since this will be my final earnings call as CEO, I wanted to express my sincere appreciation to the entire Greenbrier team. It has been a true privilege to work alongside so many talented and dedicated individuals. Together, we've navigated challenges, celebrated successes and strengthen Greenbrier's position as an industry leader. I'm incredibly proud of what we've accomplished and confident in the company's future. Brian and the leadership team are well positioned to build on this foundation and lead Greenbrier into its next chapter.

I want to especially thank our employees for their hard work and dedication during a demanding year, and our customers, shareholders, Board of Directors and the broader investment community for the continued trust engagement and support. It has truly been an honor to lead Greenbrier and I look forward to the company's continued success.

And with that, we'll open it up to questions.

[Operator Instructions] Our first question today is from Ken Hoexter with Bank of America.

Lorie, great working with you over all these years from all your different roles. So I appreciate the help and discussions along the way and best of luck in your next endeavor.

Thank you.

I guess I'll start off with maybe, I don't know if Michael or Lorie, whoever wants to jump in, but your range the $275,375, right, so it's a dollar wide. Maybe talk a bit about your upside downside. Is that just the same as your top of your goal revenue in $2.8 billion to $3.2 billion? Is there anything more in there in terms of what you want to highlight I don't know if you want to start off with the midpoint and go risk to the upside, downside?

And then just one 1 clarification while I have you, is you talked about reducing costs. What did you do? Did you shut a facility down? Or is that just getting rid of I don't know, line of workers or a shift?

Well, so I'll take the last question first because that's kind of how my brain works. I can only remember so much at one point in time, maybe that's why retire. But we've been -- through this team has been through a number of ups and downs in our industry. And so yes, part of it is adjusting our workforce to match where demand is. We do that in a very respectful way with our workforce so that we can bring them back as demand improves.

The other thing that we're constantly doing is trying to see are there areas where we can refine how we're serving our customers. So whether that's our leasing customers, our management services customers, all of those things, how can we do that in a more efficient way, oftentimes, that's leveraging technology. But we've learned to just to be on that ever-continuing path. And I'd say, yes, we have closed a number of facilities over the last few years going back, I guess, it's probably been 3 years ago now when we sold our Gunderson facility here in Portland, where I'm very proud to say it's continuing to operate under the Gunderson name but doing business in a private way.

So yes, we've been looking at that footprint and trying to reduce costs where it does it make sense in the existing portfolio of Greenbrier and as we think through where are our investments returning value to our shareholders.

Yes. And I'll take the guidance question, Ken. As we think about the fiscal year, that range reflects just some of the uncertainty about customer inquiries, when they'll convert to orders and deliveries. And then just the industry forecast, as you know, was a pretty nice ramp from where 2026 is. And as we look across some of the things that we're focused on, as Lorie mentioned, we're very much looking at different cost opportunities, and as we invested in in-sourcing over the last few years, as we grow our volume, we can continue to take costs down with that in-sourcing investment.

In addition, we expect deliveries to be a little bit back half loaded in 2027, and we expect to see some of the absorption benefits that we'll have in additional production and additional volume. And the other part of it, we'll see the leasing and fleet management business grow and that will drive our aggregate gross margin, which is in that range as well. And then we continue to control SG&A. We continue to look for ways to focus on that as well.

Does that help, Ken?

It does. On the guidance outlook, I guess if I could just get a follow-up, Lorie, on the closing facilities. Is there anything like entire operation in Mexico or the joint venture or in Arkansas, did you close any complete facility? Or is this just, again, like a line or what have you?

Are you talking about in our fourth quarter, Ken?

Yes, yes, I'm talking about the charge you take you said you...

I apologize. I apologize. So the bulk of that was we exited our Omaha facility where we doing maintenance and repair work. So we did sell that to another party who is continuing to operate the business. We also had a small gain associated with exiting a long-time dormant joint venture that we have with Amsted and Ohio Castings, both to as Ohio I'm sorry, Omaha.

And then I guess my last one, if I can think 1 more in, is pricing. Are you assuming -- I guess, just looking at your net orders, and I'm trying to gauge since you're switching to an industry number versus your own target and what that might mean for you. But are you -- given your focus more on specialized equipment or increasing railcar demand overall or tank cars, is there an assumption here of an accelerating revenue per car? Or maybe you want to talk about pricing in the marketplace a bit?

Ken, it's Brian. Yes, I think I can take that. I think it's a little bit of everything that you talked about. There's a number of specialty cars out there that we've really been focused on, and that's a lot of the engineering we did early on. And A significant part of that production does begin in the back half of the year. Pricing on that is good pricing and margins, we have nice margins associated. So that's kind of part 1.

Part 2 is we're seeing a lot of interest on the intermodal side. Intermodal has been dormant for a long period of time. You guys are seeing the railroads report out, and you're seeing TTX and others start to look pretty seriously. And so we see some line ramp-ups coming in as well. And then just generally, as the market recovers you start to see better pricing discipline across the board. So it's a combination of all 3.

The next question is from Andrzej Tomczyk with Goldman Sachs.

Appreciate it. Curious, maybe if we could just first touch on the leasing margin in the fourth quarter. I think it was 5% I think that was a little lower than we were expecting down a couple of hundred basis points sequentially. Just kind of curious, is that a reflection of you building the fleet or maybe more maintenance costs in the near term? I know the lower utilization sort of sequentially that might be driving it as well? And then just going forward, how do we think about the overall gross profit margin level for leasing into 2027? And relative to sort of this recent high 50s, low 60% level?

Yes, Andre, it's Brian. So it's really -- as you guys will remember from our last call, we added a number of units in Q3 that then began to go on lease in Q4. So there's some acquisition timing as cars were coming into the fleet, and that's the timing of maintenance, quite frankly. There's a number of programs around requalification and things that had to get done some catch-up work. On a go-forward basis, we see it returning to normal levels. So you'll see it back up.

Got it. And in terms of just if I could follow up there. When you say normal levels is I think at 25% in fiscal '25, you guys did closer to 67%. so should we be thinking sort of between 60% and 67% on a full year basis for 2027, just on a clarification point.

I would say probably it's the mid-50s to low 60s is where we would try to see it. And I think there's oftentimes different things that are going on in particular periods that might have it impact. But I do think, as you're seeing us continue to stay focused on growing our own lease fleet, either from what we're originating and building in our shops or the secondary market transactions, some of the secondary market transactions were adding older cars, as Brian said, that have a little bit more maintenance on them. So that's where you're going to see a little bit of that variability. But we also have a great team that's evaluating these secondary market transactions.

So we're not just buying cars because we want to grow the fleet. We're buying cars that are good return on the investment that we're making, and then we've got a great team that manages how we're keeping those cars maintained.

Understood. Appreciate it. Maybe just on the leasing as well. What do you expect the leasing fleet count to end in 2027? I mean, obviously, you've been growing that pretty quickly. It was 17,000 units in; 25 -- or '26 and then up here at 21,000 in 2026, call it, 20% to 25% growth year-over-year. How are you expecting that level of growth sort of to trend here into 2027 on the lease fleet?

Right? Right. And I'll take that, Andrzej. As we look at 2027, there's certainly a very strong market in the secondary market, but we project that it's going to grow to somewhere between 22,000 cars and 23,000 cars as we look across the year.

Great. Maybe just shifting then to manufacturing here. So the guide for the industry deliveries of 26,000 to 28,000 during your fiscal year. Could you just help frame that up a little bit for you guys? I think if your share of industry delivery is sort of, and correct me if I'm wrong, maybe 30% to 40% I think that could still imply deliveries, depending on what you do in Europe could be down year-over-year if I have that math right this year. And I'm just curious if that's true, are we expecting more of that pressure to be front half loaded and then maybe you're expecting year-over-year improvements on a volume basis here in the back half?

Yes. And I think that you're thinking about it in a correct way in terms of the strength potentially more in the back half of 2027, fiscal 2027. As we look at year-over-year, we've got a kind of guide range that's kind of around where fiscal 2026 was that we expect to do a little bit better than 2026 in terms of deliveries.

And maybe I'll just add on to that, part of what Brian was talking about earlier is the mix of cars that we're delivering. So these specialized railcars that we're building they only count as one, but they can be a lot more impactful when it comes to the overhead absorption and the capacity that it consumes within our fleet. And then further, as a reminder as to why we are stepping back from giving our specific delivery guidance is because while we've brought a great commercial team that's originating both direct sales and lease originations, those lease originations, some of them will keep on our balance sheet. And therefore, not all of that production shows up in deliveries.

And then we have been focused for the last several years on how can we do things differently within our production facilities to make certain that they're optimized and creating a return. So that's the, I love this word, programmatic railcar restorations that don't show up in deliveries. This is wheel activity, it's maintenance activity. We have a number of other things that are captured within manufacturing revenue that makes the correlation with Greenbrier deliveries not be as tight as we would like. So that's why we've changed that guidance.

Yes. And it's Brian, Andre. I'll just put an exclamation point on what Lorie said, it's the quality of the earnings in the back half versus the front half. So it's less about volume and more about the quality of mix.

That's -- Andrzej, this is Travis. We can follow up and create a detail offline. But I would say, just to clarify, our industry forecast of 26,000 to 28,000 units, would represent growth over what we saw in our fiscal 2020 in terms of an industry. So just to clarify on that piece, and it is back-half weighted. So -- but we can get into some detail later.

That's very helpful. And maybe just for me to close off some broader thoughts here on the -- digging in a little bit more on the current state of the antidumping and the countervailing duty investigations that you guys kind of talked about in the opening script. Maybe just curious, like if -- one, if you think that's potentiality that, that could actually go through how you're thinking about that? And if prices ultimately have to go up for railcars on the back of that, maybe how are you and your customers speaking about the potential future impacts to the fleet strategy and maybe whether Greenbrier may have to pass on those higher input costs over time?

So if I could, I'll break it into 2 pieces, right? So there's the antidumping countervailing duties on couplers. Couplers are a smaller component of an overall new railcar. I would not expect duties on those couplers to have a significant impact on demand. The issue is how a railcar manufacturer separates the coupler on a brand-new railcar as it's coming across the border from the rest of the railcar. In my mind, I think about this is like how would you put a duty on the steering wheel on a passenger car separate from a duty on the overall car. So -- and some of that is just how does that -- how do the mechanics of that work because new railcars have been crossing our northern and southern borders for decades without being treated as consumables. So that's on couplers.

On the tank cars, our customers are with us on tank cars and part of the government's role is to talk to them. And I think that they're going to be really vocal about whether or not Greenbrier and others that build take cars in Mexico have been doing untoward activities when we bring these cars into the United States. I'll probably get the stink eye from someone in the room, but I will say that is not our intent, and I don't think that, that's reflected in the gross margins that our teams have been putting up. We are focused on making certain that our products are priced consistent with the market. We don't -- if anything, we prefer to get very robust pricing, not dump pricing in order to take market share.

Yes. And to be clear, this is Brian -- just to put a finer point again on it is this is an industry issue. It's not a Greenbrier issue. So if it does go through, then the price of tank cars go up. And unfortunately, that price gets passed through to our customers, which is not what we want to do but it is what one participant has put upon the industry. And so the industry will deal with it, and it will raise prices, but it won't impact our financial performance or it should long term.

I appreciate the thoughts there. Just to close off 2 quick ones for me. Just want to clarify, are you -- have you paid tariffs on tank cars at all? And then -- and then just secondly, I wanted to also express Lorie, it's been a pleasure working with you and wish you all the best going forward. Maybe just one for Brian off the back of that as you take the home in early 2027? Are there specific areas of the strategy where you see a need for pivot or acceleration in either direction?

Thank you for the nice words. It's been nice getting to know you as well. I'll take the tariff. We're continuing to work with CBP on how to navigate the system to do what they're asking us to do. Right now, the system is not set up to do that, but we continue to work very, very closely with that. And I look forward to hearing what Brian has...

No. Look, Lorie and I have worked together for 30 years. And what's great about our relationship is that we've developed a lot of the strategies together while she's led the initiatives. So these are things that I'm deeply rooted in as what we've progressed in the company. What you'll see for me is a continuation of what Lorie fundamentally has put in place. I think maybe with a newfound urgency around some of the business unit operations and their performance, leveling up the expectation from them, along with that, will be some of our costs and overhead structures and continuing to look at how we can improve our cost profile and then really putting and leaning in hard on the leasing growth side of our story so that we can continue to grow that side of the business.

This concludes our question-and-answer session. I would like to turn the conference back over to Travis Williams for any closing remarks.

Thank you, everyone, for joining us today and for your continued interest in Greenbrier. This is the end of our fourth quarter earnings call.

Thanks, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Hello, and welcome to The Greenbrier Companies Third Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] At the request of The Greenbrier Companies, this conference call is being recorded for instant replay purposes.

At this time, I would like to turn the conference over to Travis Williams, Head of [ Investments ]. Mr. Williams, you may begin.

Thank you, operator. Good afternoon, and everyone. Welcome to our Third Quarter Fiscal 2026 Conference Call. Today, I'm joined by Lorie Tekorius, Greenbrier's CEO and President; Brian Comstock, Executive Vice President and President of the Americas; and Michael Donfris, Senior Vice President and CFO.

Following our update, Greenbrier's Q3 performance our outlook for fiscal 2026. We will open the call for questions. Our earnings release and supplemental slides can be found on the IR section of our website. Matters discussed on today's conference call include forward-looking statements within the meaning of the Private Securities Relation Reform Act 1995. Throughout our discussion today, we will describe some of the important factors that could cause Greenbrier's actual results in 2026 and beyond to differ materially from those expressed in the forward-looking statements made by or on behalf of Greenbrier. We will refer to recurring revenue throughout our common today. Recurring revenue is defined as leasing and management services revenue, excluding the impact of syndication transactions.

With that, I will turn it over to Lorie.

Thank you, Travis, and good afternoon, everyone. We appreciate you joining us today. Greenbrier delivered solid commercial, operational and financial results in the third quarter. Global macroeconomic conditions in our markets support freight railcar lease rates and utilization where Greenbrier is further strengthening as we serve our shipper customers. Those same conditions, pressure demand for new freight railcars though maintenance and replacement needs continue and provide a foundation for future orders. This combination of market dynamics, a dedicated focus on operational efficiency led to sequentially improve gross margin and earnings.

The improvements that have been made across Greenbrier over the last several years are yielding benefits and combined with operating discipline, cost control and commercial excellence, create a more resilient earnings profile through sickles or in other words, we're demonstrating our ability to deliver higher lows across the cycle due to the strength of our business platform.

Our commercial team continues to expand Greenbrier's market reach, adding new customers while strengthening relationships with long-standing partners supported by our lease origination capabilities. These proficiencies leverage our integrated go-to-market model across direct sales, leasing partnerships and syndication.

Turning to the market. In our core North American market, railcar deliveries have averaged about 35,000 per year since 2020. The current industry forecasts indicate less than 25,000 new railcars for calendar 2026 which will the lowest level recorded since 2010. And the projection for calendar 2027 shows an increase to over 34,000 deliveries. [ Outloading ] trends are up in several key commodity categories, including grain, petroleum products, chemicals and intermodal. Although intermodal activity is uneven as some commodities are shifting towards trucking to navigate service-related friction in the rail network. And while the uptick in freight rail modal share is uneven, we believe the longer-term outlook is positive. Our experience tells us it's a matter of when, not if new railcar demand will increase and activity coming out of a trough tends to arrive sooner and more robustly than anticipated.

In Europe, wagon deliveries are expected to be around 9,000 units for calendar 2026 and the next several years. We're utilizing our lease origination capabilities strategically in this market as well to serve our customers while managing productivity and reducing costs. Our Manufacturing segment, which includes maintenance, wheels and parts activity in North America, executed well in the third quarter. Operating efficiency, cost discipline and solid program and maintenance work helped drive the overall performance in the current macro environment. Our lease origination capabilities provide key flexibility to manage new car production and support utilization across our manufacturing footprint. In addition, our in-sourcing investment is delivering broad-based sustained efficiency gains that will further improve earnings power as demand grows.

In Leasing & Fleet Management, we saw a significant expansion of our owned lease fleet with continued high utilization. We remain focused on growing this platform and doubling our recurring revenue base by 2028 through both our own manufacturing operations and secondary market opportunities as they arise. The enterprise-wide improvements that have been made at Greenbrier are supported by a strong financial foundation. A healthy and well-capitalized balance sheet and ample liquidity provides flexibility to support operations, invest in the business, return capital to shareholders and execute our strategy.

As we look ahead, our focus remains squarely on operational execution, commercial discipline, capital allocation and ongoing enhancement of through-cycle performance. You can expect Greenbrier's solid results across the cycle to continue driving long-term shareholder value.

Finally, I want to thank our employees for their focus, commitment and execution. Each and every one of their efforts demonstrates the strength of Greenbrier's culture and the durability of the platform that we've built.

And with that, I'll turn the call over to Brian to discuss our operations in more detail.

Thanks, Lorie, and good afternoon, everyone. Starting with commercial activity. We received orders for 2,200 railcars during the quarter valued at $340 million. Demand was led by tank cars and covered hoppers, with additional activity in gondolas, open-top hoppers and heavy-duty flats. In addition to constructive rail loading trends, it's also worth noting the significant increases in trucking spot rates driven by driver shortages, elevated fuel costs and carrier attrition. While this alone doesn't signal a broad-based freight demand recovery, sustained higher truck rates would improve the relative competitiveness of rail and intermodal service.

Turning to backlog. We ended the quarter with 13,800 railcars valued at $2 billion. Our commercial team remains highly engaged with customers across North America, Europe and Brazil, and we are seeing solid activity across several car types. As Lorie noted, our lease origination capabilities were a prominent feature of the quarter. Lease originations represented 60% of total global orders including 71% of North American awards and 53% of European awards. This highlights the value of our commercial model, flexible production capacity and our ability to respond to customer needs.

The Leasing & Fleet Management segment delivered another strong quarter. We expanded the owned lease fleet to 20,600 railcars and utilization remained exceptionally strong at 99%. Renewal rates were healthy, reflecting both the quality of our fleet and the depth of our customer relationships. During the quarter, we continued to pursue disciplined fleet growth through secondary market acquisitions of approximately 4,400 railcars and remained active in evaluating additional opportunities. These are strategic investments that support lease fleet growth, recurring revenue and long-term value creation.

Moving to our Manufacturing segment. Production rates were aligned with current demand levels. Consistent with our proactive management of the business. Headcount continues to be adjusted in line with our teams remain focused on maintaining operational efficiency as market conditions evolve. At these production levels, operating performance and margin progression improved, reflecting the benefits of our in-sourcing strategy and focus on cost competitiveness. Recent capital investments are yielding strong returns even at current production levels. [ Wheelset ] shipments exceeded expectations, the maintenance team sustained steady throughput, and we continue to see progress in cycle time execution. We also are taking actions to sharpen the focus and efficiency of our maintenance service network.

In Europe, demand remains muted, but we are making progress following recent footprint actions. With the facility consolidation complete, the team is focused on streamlining the production process, reducing inventory and improving quality and production rates. We are also seeing encouraging traction in the European leasing market. In Brazil, Greenbrier-Maxion delivered another quarter of strong operational performance driven by demand in agriculture and biodiesel sectors. Financial performance exceeded expectations supported by disciplined cost control, operating efficiency and improved pricing. Our capital markets team continued to support the integrated model through strong monetization activity, expanded investor relationships and secondary market. These activities generate profitable through margin recognition and fee income, provide liquidity, support the lease fleet growth and reinforce the benefits of reverse integrated platform.

In summary, we continue to align production with customer demand, execute with discipline across the platform, expand our leasing capabilities and advance key initiatives that support margin performance.

And with that, I'll turn the call over to Michael to review our financial results in a bit more detail.

Thanks, Brian, and good afternoon, everyone. Total revenue for the quarter was $577 million. Leasing & Fleet management revenue was $47 million, up 3% from Q2, primarily reflecting the addition of leased railcars. Manufacturing revenue was $529 million, down about 2% sequentially, primarily due to fewer new railcar deliveries, partially offset by higher maintenance program revenue. Aggregate gross margin was 14.1% within our long-term target range and improved from Q2. This performance demonstrates the strength of our integrated business model and the impact of our continued cost discipline.

Earnings from operations were $32 million or about 6% of revenue. These results reflect solid execution at current production volumes and our continued focus on the areas within our control. Our effective tax rate was about 20% primarily driven by discrete items related to foreign exchange impacts largely from the strengthening of the Mexican peso. Diluted earnings per share were $0.60 and EBITDA was $69 million or about 12% of revenue. Overall, results benefited from stronger margins favorable foreign exchange, lower net interest expense in Leasing & Fleet management and a lower effective tax rate.

Turning to the balance sheet. We ended the quarter with total liquidity of approximately $887 million, representing $274 million in cash and $613 million of available borrowing capacity. Operating cash flow for the quarter reflects $227 million of investment, primarily for leased railcars purchased in the secondary market. This investment supports our strategy to grow the lease fleet, increase recurring revenue and generate tax advantaged cash flows while maintaining strong asset quality and enhancing long-term earnings power. Over time, we expect to finance a portion of the newly acquired fleet, preserving balance sheet flexibility.

We also refinanced our leasing term loan with a new $300 million facility extending the maturity by 6 years, improving credit terms and adding a delayed draw that provides up to $125 million of additional capacity to support future growth. Our capital allocation remains disciplined and balanced. We continue to invest in opportunities that generate attractive returns while also returning capital to shareholders through dividends and share repurchases. Greenbrier's Board of Directors declared a dividend of $0.34 per share, marking our 49th consecutive quarterly dividend. At quarter end, approximately $65 million remained available under our share repurchase authorization. We will continue to use that capacity opportunistically guided by market conditions and our broader capital allocation priorities.

Turning to guidance. Our fiscal 2026 outlook is based on our latest view of fourth quarter manufacturing margins and delivery timing, reflecting that some activity is moving into fiscal 2027. While near-term market conditions remain dynamic, customer engagement is strong, and we are encouraged by the business activity developing for 2027. For fiscal 2026, we continue to expect total revenue of $2.4 billion to $2.5 billion and are narrowing our expected EPS range to $3 to $3.15 per share. Additional details are included in the earnings release and accompanying slides.

In summary, Greenbrier delivered solid third quarter results, supported by disciplined execution resilient aggregate gross margins and continued strength in leasing and fleet management, we remain focused on the priorities that create value. Serving our customers, managing costs, increasing recurring revenue and deploying capital with discipline. We believe these actions position Greenbrier to deliver attractive through-cycle returns and create long-term shareholder value.

With that, we'll open the call up for questions.

[Operator Instructions] The first question will come from Andrzej Tomczyk with Goldman Sachs.

Just curious if we could start off on the tariff front, just to get a little more clarity there. Our understanding is recent amendments to Section 232 investigations could be imposing a tariff on the full value of tank cars coming into -- coming out of Mexico into the U.S. Maybe if you could just speak a little more to your current understanding of that tariff situation? And what is Greenbrier's current tank car backlog mix? And then maybe just on that, if you guys are actually incurring any tariffs there to start, that would be helpful.

Sure. Andrzej, thanks. And I'll start out, and I'm sure that my colleagues here will jump in and fill in if there's anything that I'm missing. Let me start with the beginning. We are not currently entering tank cars or paying a tariff for equipment that's coming from Mexico into the United States. As you say, there has been some recent pronouncements and determinations that are -- that have industry-wide implications and we and our industry partners are seeking guidance from [ CBP ] on how best to navigate that. So really, right now, it's a situation where there has been some pronouncements made, but it's a change to what has been industry-wide practices. And so again, we and our partners, whether they're the Class 1 railroads, the short lines or even other manufacturers are seeking clarification from [ CBP ] on how to be compliant with the communications we've received.

Understood. And then maybe just if we could get a sense for the mix of tank cars that you guys have in the backlog, that would be helpful. But -- and then just I guess as a follow-up there, I guess, 2 follow-ups maybe if those -- if it ended up at those tank car or the tariffs were applied to the tank cars, is there then a risk of retroactive payments just to sort of be clear there? And then separately, are there discussions with customers that there could be potential price escalations, if that were to be the case? Just trying to get a sense for if you guys could actually pass through those excess costs.

Sure. And I'll start with the last question first. Yes, we believe that any adjustments associated with tariffs would be passed through to our customers. When it comes to retroactive obligations, right now, that's unclear. And again, this is where we would say that we're seeking clarification from [ CBP ] on what some of the language in their rulings needs and how we, as an industry, need to be compliant.

And then to, I think, the question I missed from the last, as percentage of backlog, so the backlog that Brian talked about, about 20% of that is tank cars.

Yes. I would just add, Lorie, that while it's 20% today, I think we're seeing the mix shift in the market kind of pivot away from tank cars. And so that mix is quickly diminishing. And Lorie's Lori's right, we have provisions in all of our contracts to pass through tariffs and duties as appropriate.

And just the other thing to highlight, because sometimes folks in our industry tend to forget, but we build tank cars not only in Mexico, using U.S. source steel and other U.S. source components, but we're also building tank cars in Arkansas at our [ Margarine ] facility.

Interesting point. And just on that, if I could, what is the capability of shifting production there to the Arkansas facility. Is that something feasible at a later date?

Absolutely. Well, we're building tank cars there right now, and we are evaluating how much we could just a lot of this comes down to getting employees to be in our shops. I think this is a struggle for many industries in the United States is just finding and training and retaining a skilled workforce.

Yes. And maybe just adding on, it's Brian again, is -- at the end of the day, we are increasing production at our U.S. facilities, and we have the capability to take on quite a bit of that capacity if need be.

Okay. Appreciate that color. Maybe just shifting to the core business with the [ ISM ] now over 50 for half a year now. Are you guys seeing any of that expectations, optimism from your customers, I guess, creep into conversations? Or do you think that the positive ISM readings are more so a reflection of other areas of the economy at the moment. I'm just trying to get a sense for when the broader ISM positivity might be able to translate into improving new railcar backlogs and deliveries?

So I'll kind of come high level, and I'm sure that Brian can speak to some of what he's hearing from our customers. But what I continue to hear and have been hearing for the last several months, is a lot of desire from our customers for additional railcars. The interesting point, though, is as the macro environment continues to shift, sometimes it's creating a delay in when they want to execute on an investment in these long-lived assets. This is part of what Brian was speaking to, I think, before about trucking, we are seeing some temporary shifts over to trucking if we have a shipper customer that is trying to evaluate how best they navigate for their business, whether they're a farmer or a chemical company or otherwise how to navigate that.

But we really do -- this is what we mean. We think there's quite a bit of pent-up demand for new equipment. We just need the broader economy to kind of settle down for a little bit so that people can make those long-term decisions. Brian?

Yes. And I'll just add on to what Lorie said, she's spot on is directionally, we've been watching the inquiries and the backlog. And while it's been fairly stable over the last few quarters, the pent-up demand is really beginning to rise. You're seeing it on the AI data center infrastructure area where there's a lot of heavy-duty infrastructure required. So when you look at orders to production type of ratios, one of the things that's a bit of an anomaly is some of these cars we're taking in have 3 to 4 to 5x the number of labor hours as let's call it like a tank car or covered hopper car. And so it's not a one-for-one trade. It's kind of a 4 or 5 to 1 trade.

We're also seeing significant improvement in the steel side of the industry as well, where a lot of cars are trading out. And then as Lorie said, if you look at driver service rules and just kind of what's happening in the industry, intermodal is really feeling the pressure for growth as well. So the pent-up demand is a real thing. It's a matter -- it's not -- if it's just kind of when and we're starting to see signs of that here in this quarter already.

Got it. And maybe just one more for me before I'll hop back in the queue here. Just a little bit more specific in terms of the manufacturing margin this quarter versus last, was a nice uplift. Just curious if you could share whether mix was a positive this quarter and maybe how you're thinking about core price versus mix dynamics here into the year-end?

Yes. I appreciate that [indiscernible], and is at the end of the day, mix always plays a bit of a role. But Lorie kind of hit it in her comments, and I think I touched on it briefly in mind as well as the initiatives we took a couple of years ago, the outsourcing initiatives are really starting to pay off. And it's not just the in-sourcing investment we made on manufacturing and primary parts but also the focus we have on labor efficiency, the focus our team has on overhead and variable costs associated with that have really been paying off in this time.

You can look back in time at Greenbrier. I've been here a long time, and we've never had these kinds of margins at this level of production, low level of production in the history of Greenbrier. So we're excited about the opportunity for this market to kind of change and see what we can really do as this -- as the market continues -- rises back up.

The next question will come from Harrison Ty Bauer with Susquehanna.

Great. Maybe to ask your sense of demand in a different way, how much of some of the regulatory backdrop on both the Section 232 proclamation on tank cars as well as your outstanding coupler and EPA case is eating into customer demand and sentiment on waiting for some clarity for going forward on some higher order amounts?

It's a great question, Harrison. And I would say, quite honestly, it's really not -- that is not the bigger thing that's holding back our customers for making those decisions to invest in long-lived assets. It's, again, more the broader macroeconomic situation is they're figuring out how to either put existing equipment through a program run it longer, maybe if they have pops in demand if they can shift that over to trucking, they do that. But that's really more where we're seeing the holdup is the macroeconomic situation, not what's going on with tariffs or [indiscernible]?

Yes. And I'll just tag on again, that it's spot on by Lorie. But also keep in mind, that there's a lot of Canadian customers that buy assets from us as well. And those tariffs and those things do not apply to cars that are being moved into Canada. It's really U.S. service at this point. So we're continuing to see that demand from a lot of the oil producers and chemical producers up in the Canadian region. But generally speaking, the U.S. customers are not holding back because of any uncertainty at this point. But we are seeing a shift, again, in mix to more covered hopper cars, flat cars, special purpose assets and really higher value backlog for Greenbrier.

Okay. And maybe sticking with some of the regulatory environment and on the coupler case, could you give us an update on where you're at with the EPA determination? I know you're waiting to appeal this case I know it's a specific office within the [ CVP ], but just any color on sort of what's going on in the coupler case and what your opportunities are in an adverse ruling to shift kind of coupler of procurement to U.S. sourced?

Sure. So today, we actually filed our administrative appeal so we have begun that process. And I just want to kind of take a big step back and say that the [ CBP ] determination letter does have industry-wide implications, right? This is not just a Greenbrier situation, but it impacts everyone who's building cars that are bringing them into the United States from Canada or Mexico. And their determination letter included a change in practice just like with the 232's, we and our industry partners are seeking guidance and clarification as how best to navigate this ruling and how best to be compliant.

That said, we do have, I would say, a very agile industry. We have history of working together to figure out across a variety of landscapes, how best to navigate, whether it's fluctuations in demand or situations that have to do with high prices of steel, whatever might be going on with couplers and where best to source them. So I have no doubt that as an industry, we will find a way to navigate this and come up with how best to continue serving our freight rail customers.

Yes. Maybe I would just point out, it's Brian, Harrison, is that while all of these are serious issues, the financial impact of the couplers is fairly small on a per unit basis. When you think about the total number of specialties and steel cost that's in the asset, it is -- it's probably let 1% of the total impact. So from a customer perspective, it really doesn't have significant impact to them.

Good point, Brian. Thanks.

Okay. And maybe moving to the leasing side of things, the pretty substantial step up in your lease fleet quarter-over-quarter. Can you walk through how you're thinking about building for your own fleet versus buying in the secondary market to grow that fleet over time? And how much of the step-up in leasing CapEx is related to producing more versus buying more in the secondary market?

Yes. It's Brian, Harrison. So it's -- it's really kind of a quarter-by-quarter call, to be honest, because we're looking at our concentration we're looking at our covenants within our debt financing agreements. We're looking at how we balance these things materially each quarter. And so as books come to market we evaluate whether or not that fits into our overall strategy from not only a concentration perspective and a risk perspective but also from a commercial customer perspective, and then we weigh that against what we're building ourselves internally. And so that's going to shift from quarter to quarter depending on how that looks, but it really is about managing the fleet in a very prudent and disciplined way.

And I think discipline is you're spot on. That's what it is, is looking at what are we building and what are those other opportunities that we can make an investment, whether it's investing in the cars that we're building or that someone else is putting out on the market to improve the quality and diversification of our on the balance sheet fleet.

And Harrison, I would just add, as we mentioned back a number of years ago on targets, we're investing up to $300 million a year in the lease fleet. And so really, that's not really impacting really how we're thinking about that.

Okay. Broad strokes, is there a target of size of fleet that you'd want to get to by end of fiscal 2027? And maybe just some of your thoughts on the secondary market as a seller and where you would expect gains to lend in the fourth quarter? What might be embedded in your guide and just an early look on gains on sale into next year?

Yes. I'll take maybe the more strategic question is we've stated publicly and we continue to follow the rule that we're going to invest, as Michael said, about $300 million a year. Do we have an ultimate goal of size in mind? No. But we but we do want to transform the company to where the recurring revenue from the leasing is more substantial or as substantial as the manufacturing income. And so what does that mean? I don't know that we can tell you that precisely because some of it depends on mix and the previous question, which you had, which was relative to how many of the new cars are going to go into the fleet versus how many cars we acquire in the secondary market. Because it's not about overall fleet numbers. It's really about the quality assets and the earning power of each of those assets.

That's a really good point. That's something we talk a lot about here internally is we don't want to be spending money just so we can say we grew a fleet, if it's not a good quality fleet. So that's where I'm really proud of the team over the last couple of years is to focus on growing a quality fleet, which I think you can see from first half of our fiscal year where we had some substantial gains on sale, taking those opportunities into consideration.

My recollection on gains on sale for the rest of the fiscal year are going to be probably fairly modest. But Michael, I'll let you respond to that.

Right, right. We'll continue to look across the fleet and determine what makes sense as we think about concentration as we think about just opportunistically, what's out there, but you can -- you will see that it's going to probably wind down in the fourth quarter.

And I would just say about 2027, it's a little bit early for us to start really kind of getting out there in terms of what we'll deliver in 2027, but we're going to go into planning here pretty soon and be ready to talk about that and when the time comes.

And I think that's why having the liquidity that you highlighted, Michael, is so important because we want to be able to take advantage of whatever situation. We unfortunately do not have a crystal ball into all of the other asset owners to know when they might be putting certain fleets out on the market. So we want to be able to have strong liquidity, so we can execute as it makes sense for our fleet.

The next question will come from Ken Hoexter with Bank of America.

It's Adam Roszkowski on for Ken Hoexter. Maybe just starting on the guidance. So no change to the revenue outlook but lowering the midpoint of deliveries and gross margin and EPS. So maybe just I know you noted some shift into 2027. But with revenue flat, that implying higher selling price per car? Is there more maintenance revenue kind of baked into that? Maybe just help on the -- on how should we interpret from a mix production leasing standpoint as well?

No, that's a really good question. As we get through looking through the fourth quarter, obviously, we're getting closer to what's actually happening. And as we look across what we see, we are -- as I mentioned in prepared remarks, we are seeing a little bit move into 2027. And also what we start looking at in terms of how much we were going to ramp up in Q4 and ramp up further, it just -- we just haven't had to need to do that. So there's been a little bit on absorption that's impacting us as well. And so really a combination of those things. I wouldn't read that much into it. I'd say we're just getting much more closer to being able to call the year.

And the other thing that I would point out is on the revenue is while the range didn't change. It's a pretty -- it looks like it's a small range, but it's really a $100 million, right?

There's still enough there.

Yes.

Got it. Maybe just getting going to 2027, how much visibility do you have into your production schedules? And you called out industry forecast to [ $34,000 from $25,000 ] this year, a 36% increase. Is that the right baseline to be thinking about the step-up into next year? So any thoughts around that?

Well, we're not prepared -- I think as Michael said, we're not really prepared to give explicit guidance on 2027. We do have -- we're very happy with the pipeline that we have. We do believe that the customers are going to -- those are going to convert into orders. It's just the timing of when they convert into orders is a little bit difficult, obviously, to predict in this current environment.

And just one quick reminder, so that some of the numbers that I was giving were calendar year and even though I've been here for 31 years, I still can't figure out why we have a fiscal year that begins on September 1. So there's a little bit of a mismatch there. But Brian, what did I miss on you're thinking about for 2020, our fiscal '27.

When you think about fiscal '27 and the visibility that we have gone in, I think about it in terms of backlog. So backlog is at 13,800 cars roughly publicly disclosed. Obviously, we continue to renew that backlog on a quarter-by-quarter basis. So when you think about it, if we're going to produce historically kind of along the same lines we've always historically produced, we've got visibility for the first several months into the year.

And I would say, actually, probably goes further out, it's just the separate gaps and sometimes have...

It's different lines, different gaps, different -- yes, exactly.

And sometimes having those gaps has been very beneficial for us because that means that when our customers start nearing the end of their calendar year and spending there a lot in dollars, we've seen some interesting activity at times to happen towards the end of the calendar year. Not to get out of side.

And then last one. You noted some of the trucking market drivers and potential impact that, that could have on intermodal type cars. And it sounds like the mix is a bit broad based on what you've been calling out. But just any thoughts on reservice, these current levels and the extent that, that -- or a deterioration in service or fluidity could spur maybe some upside into fiscal or calendar year 2027, however you want to frame it?

Sure. Again, we've been able to navigate any variety of markets. My overarching message is always about the railroads providing better service to our shipper customers so that we can grow modal share by rail. Let's make the pie bigger because then even if we stay at our current market share, everybody gets a bigger piece of pie. So that's the focus. Do you think that, that is what the Class 1s want to do? It's just I'm very thankful to not be the CEO of a Class 1 railroad because there's a lot more levers and dials to manage than on my side. Brian, what are you seeing?

Yes, we're seeing -- definitely, we're seeing a resurgence of intermodal on rail. I think it will be interesting to see how railroads can respond to that from a labor perspective and whether or not they have power available on the network. You're starting to see a degradation of velocity on rail. That's always good for the car builders, not necessarily good for the rail system itself. So we're always a bit conflicted by that. But 1 proxy we've always used, and it's proved to be a fairly close signal as for every mile per hour of degradation and velocity or gain. It's about a 40,000 car demand change network-wide. So you think about degrading velocity increased pressure on intermodal to grow and some of these other areas that could bode well for pent-up demand in our space.

[Operator Instructions] Showing no questions. This will conclude our question-and-answer session. I would like to turn the conference back over to Lorie Tekorius for any closing remarks.

I just want to say thank you, everyone, for your attention and for your time, learning and understanding more about Greenbrier, and I wish everyone a safe and happy fourth of July.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Hello, and welcome to The Greenbrier Companies Second Quarter 2026 Earnings Conference Call. Following today's presentation, we will conduct a question-and-answer session. [Operator Instructions]. At the request of the Greenbrier Companies, this conference call is being recorded for instant replay purposes.

At this time, I would like to turn the conference over to Mr. Travis Williams, Head of Investor Relations. Mr. Williams, you may begin.

Thank you, operator. Good afternoon, everyone, and welcome to our second quarter fiscal 2026 earnings call. Today, I'm joined by Lorie Tekorius; Greenbrier's CEO and President; Brian Comstock, Executive Vice President and President of the Americas; and Michael Donfris, Senior Vice President and CFO.

Following our update on Greenbrier's Q2 performance and outlook for fiscal 2026, we'll open the call for questions. Our earnings release and supplemental slide presentation can be found in the IR section of our website.

Matters discussed on today's call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Throughout our discussion, we will describe some of the important factors that could cause Greenbrier's actual results in 2026 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier. We will refer to recurring revenue throughout our comments today. Recurring revenue is defined as leasing and management services revenue, excluding the impact of syndication transactions.

And with that, I'll turn the call over to Lorie.

Thank you, Travis, and good afternoon, everyone. We appreciate you joining us today. Greenbrier delivered resilient second quarter results. Steady execution across our integrated business model and disciplined pricing supported our performance as our customers' needs continue to evolve and the expected production ramp up shifts beyond the current fiscal year. .

Consistent with our expectations and production schedules as we exited Q1, deliveries and revenues were lower sequentially. Notably though, aggregate gross margin and earnings exceeded prior periods with similar delivery levels. The structural improvements we've executed over the last several years drives our ability to deliver better financial performance on lower volumes and achieve what we like to call higher lows.

Current FTR forecasts indicate approximately 24,000 new railcar deliveries for the North American market in calendar 2026. The last time the freight railcar industry generated annual deliveries at these levels, Greenbrier was a much different company. Our cost structure was higher, our capital planning was less targeted, our market position was narrower, and our earnings profile was materially less dependable. That context matters because Greenbrier is fundamentally stronger today. We have structurally and systematically improved our operations and grown our market presence, resulting in a more balanced and durable business model. As a result, even in a more moderate railcar investment climate, we're generating solid profitability and positive cash flow while maintaining a high level of liquidity.

Market conditions can be dynamic. Customers are deliberate with capital investments amid evolving freight conditions, changing trade policies, geopolitical developments and a mixed macroeconomic backdrop. However, as we entered March, customer commitments increased, reinforcing our view that underlying demand remains intact over the long term. In North America and Europe, we're experiencing longer customer decision-making times, which has shifted the timing of production. However we remain confident in market fundamentals. We expect the constraints on order activity to begin to loosen in the near term. You'll hear more about the market from Brian in just a few minutes.

In more limited order environments, execution and customer alignment are critical and our commercial team remains closely engaged with customers as their timing requirements and other needs take shape. We continue to align our manufacturing footprint with current demand levels. Production rates moderated during the quarter, and we took targeted actions to rightsize our workforce while ensuring the flexibility to respond to evolving market conditions. These are thoughtful, proactive steps that protect profitability and preserve operational agility.

In Europe, the operating environment is driving our footprint rationalization initiatives in Poland and Romania and includes a full exit from Turkey. Our leasing and fleet management business continues to perform at a high level and remains a vital source of stability and growth, supported by high railcar utilization and retention and strong renewal rates. We are optimizing the composition of Greenbrier's owned railcar fleet and expanding it through thoughtful investments, including pursuing opportunities in the secondary railcar market.

Our balance sheet remains strong. We ended the quarter with over $1 billion of available liquidity, providing us with the flexibility to continue investing in the business, pursue opportunities in the secondary market and return capital to shareholders, including this quarter's 6% dividend increase to $0.34 a share.

Looking ahead, our updated outlook for this fiscal year accounts for the near-term demand environment and a shift of some deliveries from the second half of fiscal 2026 to fiscal 2027. Our attention is focused on the elements within our control, driving operational efficiency, maintaining commercial discipline, aligning capacity with demand and allocating capital to the highest return opportunities.

In closing, I want to thank our employees for their continued focus and commitment. Their execution in a dynamic market environment demonstrates the strength of our culture and operating model. We have an experienced team, a robust platform and the agility to navigate changing market conditions as we remain focused on delivering long-term shareholder value.

And with that, I'll turn the call over to Brian to discuss our operations in more detail.

Thanks, Lorie, and good afternoon, everyone. I'll cover our second quarter operational performance, including commercial activity, manufacturing, leasing and fleet management. Starting with commercial activity. We received broad-based orders for approximately 2,900 new railcars globally with demand concentrated in North America and supported by leasing activity. As you know, our programmatic railcar restoration activity is not reported as part of our new railcar orders, deliveries or backlog.

Turning to backlog. We ended the quarter with approximately 15,200 railcars valued at $2.1 billion, providing solid visibility into production as we move through the year. Our backlog continues to provide a meaningful base of production support, and our commercial team is focused on continuing to convert market opportunities into orders. Importantly, more than half of our orders in the quarter were driven by lease originations, underscoring our strong lease origination capabilities key for our lease fleet growth in manufacturing stability.

Leasing and fleet management delivered another strong quarter. Fleet utilization remained above 98%. Retention was strong and renewal rates continue to be robust. These dynamics reflect both the quality of our fleet and the value of our customer relationships. The strength of our leasing platform was demonstrated by our recent $300 million ABS financing in February that saw incredibly strong demand from investors, resulting in favorable terms. We continue to optimize the portfolio through disciplined asset sales, the strong secondary market for railcar equipment has enabled us to refine the composition of our owned portfolio and allows us to recycle capital where we are seeing the strongest returns.

While our lease fleet was modestly lower compared to the first quarter, this reflects timing related to asset sales and new additions. As we move through the second half of the fiscal year, fleet growth will benefit from our recurring revenue profile and continue to strengthen the earnings contribution of the leasing platform with asset purchases recently completed in a pipeline of additional near-term opportunities we expect to finish fiscal 2026 with a lease fleet of over 20,000 railcars. As we deploy capital, we remain disciplined. We are focused on opportunities that meet our return thresholds and support long-term value creation.

In addition, our asset management capabilities continue to scale. We expanded relationships with key partners and now manage a significantly larger railcar fleet on behalf of third parties, further reinforcing our position as a leading provider of fleet management services.

Moving to manufacturing. Our results were influenced by a planned 2-week shutdown for maintenance over the holidays. We will continue to scale our flexible manufacturing footprint as we have many times in the past to align with production expectations. In Europe, we are continuing to execute footprint optimization actions designed to improve the competitiveness and profitability of our European operations over time. When completed, these actions are expected to generate about $20 million in annualized savings.

Our actions are focused on maintaining efficiency, protecting profitability and preserving the flexibility to respond as conditions evolve. At the same time, we continue to advance our manufacturing excellence initiatives. We are driving improvements in our cost structure, productivity and process efficiency. These initiatives are structural and enhanced through cycle margin performance.

Finally, our syndication team delivered solid execution in the quarter, supported by strong investor demand. These activities generate attractive recurring fee income significant liquidity and risk management and remain an important component of our integrated model. In summary, we continue to align production with demand, maintain operational discipline and advance key initiatives across the platform. These actions support margin resilience today and position us to respond to changing market conditions with flexibility.

And with that, I'll turn the call over to Michael to review our financial results.

Thanks, Brian. Revenue for the quarter came in at $588 million reflecting the timing of deliveries in North America and Europe. Aggregate gross margin for the quarter was 11.8%. This performance demonstrates the resilience of our integrated business model as leasing and fleet management and syndication activity, partially offset lower fixed overhead absorption and less favorable product mix in manufacturing.

Earnings from operations were $25 million or 4.3% of revenue. Results reflect the revenue timing dynamics I just mentioned, partially offset by resilient margin performance and disciplined execution across the business. Our effective tax rate for the quarter was 14.9%, driven primarily by discrete items related to foreign exchange impacts, particularly the strengthening of the Mexican peso. Diluted earnings per share were $0.47 and EBITDA for the quarter was $61 million or 10.3% of revenue.

Turning to the balance sheet. Greenbrier ended Q2 with total liquidity of over $1 billion, the highest level in Greenbrier history consisting of approximately $520 million in cash and $560 million in available borrowing capacity. We generated approximately $159 million of operating cash flow during the quarter. supported by earnings and disciplined working capital management. Liquidity remains robust and reflects both the strength of our capital base and our disciplined approach to capital recycling in a healthy secondary market.

In addition to investing in our lease fleet, we remain committed to returning capital to our shareholders through a combination of dividends and share repurchases. Greenbrier's Board of Directors declared a dividend of $0.34 per share. This represents our 48th consecutive quarterly dividend. The 6% increase reflects confidence in our business model, cash generation capability and ability to deliver through cycle performance.

Through the first half of fiscal 2026, we repurchased $13 million of common stock under existing authorizations. As of quarter end, approximately $65 million remain available for repurchases. We will continue to access this capacity opportunistically consistent with market conditions and our broader capital allocation framework.

Now turning to guidance. We are updating our fiscal 2026 outlook to reflect a more gradual production ramp-up resulting from a shift of deliveries into early fiscal 2027. This is driven by order timing rather than changes in underlying demand. Our focus remains on driving profitability through operational efficiency growth of our recurring revenue from leasing and fleet management and disciplined capital use. Importantly, aggregate gross margin performance remains aligned with our long-term targets.

Our guidance for fiscal 2026 is as follows: new railcar deliveries of 15,350 to 16,350 units, including approximately 1,500 units from Greenbrier-Maxion Brazil, total revenue of $2.4 billion to $2.5 billion, aggregate gross margin between 14.8% and 15.2% and operating margin between 7% and 7.8%. We continue to anticipate a reduction in SG&A of about $30 million versus prior year. We are now forecasting EPS between $3 and $3.50 per share.

From a cadence perspective, we expect Q3 to be similar to Q2 in terms of deliveries with modest sequential improvement in aggregate gross margin. We anticipate Q4 to see further sequential improvement in both deliveries and aggregate gross margin. Greenbrier's capital expenditures and manufacturing are unchanged at $80 million. I noted on our previous earnings call that we were opportunistically pursuing leased railcars in the secondary market and could end up with a higher level of investment in the lease fleet. To that point, gross investment in leasing and fleet management is now projected to be roughly $300 million, up from $205 million. Proceeds from equipment sales are forecast to be $175 million as we take advantage of the strong secondary market to optimize our lease fleet. As Brian mentioned earlier, we will end fiscal 2026 with more than 20,000 railcars in our lease fleet.

In summary, Greenbrier delivered solid financial performance in the second quarter. particularly in light of the current market backdrop, our integrated business model, disciplined capital allocation and focus on execution position us to deliver through-cycle profitability and continue creating long-term shareholder value.

With that, we'll open it up for questions.

[Operator Instructions]. And the first question will come from Harrison Bauer with Susquehanna.

Great. I just want to start off on maybe the large increase in your planned gross capital expenditures for the lease fleet. Can you provide a sense of how much you are building into the fleet from your own manufacturing capabilities versus your utilization of the active secondary market .

Yes, Harrison, this is Brian. So to give you an idea, I'd say it's a pretty even mix. We continue to have a strong lease origination profile in the back half of the year. So we'll see a number of new units go in -- but we've also been very active in the secondary market and acquiring assets as well. .

Great. And then maybe as a follow-up on the secondary market. Your equipment gains were substantially lower this quarter from last. I know maybe last quarter, you're a little bit more opportunistic. Can you provide maybe -- and you did increase your equipment sales, your proceeds target for the year. Can you give us maybe a sense of where you expect gains to be up for the year? How is the secondary market holding up? And just further color on that part of the leasing business.

Sure, Harrison. This is Lorie. What I would say is while we don't give quarterly guidance, we do expect the second half to be more of an investment in our lease fleet as opposed to secondary market sales. So while we do expect to continue to have gains on sale because it's just a normal part of having a lease fleet, we do expect it's probably less than in the first half. .

The next question will come from Ken Hoexter with Bank of America Merrill Lynch.

So Lorie, we were both at the Relacom Finance Conference and the industry was talking about manufacturing down 27% last year and 20% this year. So at the midpoint, it looks like your number is down about 26% in production year-over-year versus the market. Are you now underperforming or losing share? Or maybe in that, if you want to talk about what is getting pushed out to next year, what kind of -- maybe it's mix, maybe something else. I don't know how you want to phrase it, but all in on kind of what's going on with the numbers pushing up?

Sure. I'll start, and Brian may want to come back with a little bit more on what he is seeing in the market. But yes, it was lovely to see you in Palm Springs as always. I would say that what we've really seen is with more recent economic uncertainty, we're seeing our customers just take a little bit more of a pause. So while we're excited about the activity that we've seen in March and are continuing to work from a demand perspective, it required us to be a little bit more moderate in our ramp-up expectations that we had planned to do towards the back half of this fiscal year.

So we're still seeing -- having the same conversations, we're not seeing any fallaway in underlying demand for railcars. We're not seeing any substantial adjustments to our share. What we're just seeing is a timing shift out of the back half of our fiscal '26 and into 2027.

Yes. Maybe I'll add a little bit on. This is Brian. Ken. I think what Lorie said is absolutely accurate. At the end of the day, we're not seeing any share decline at all. What really happened is there was a conflict that kind of popped up in the middle here in the last few weeks, and that has put some of these projects behind by I would say about 4 to 6 weeks. So what we had anticipated ramping up on -- and these are projects that are imminent. They're not projects that might happen. These are projects that we have a high degree of confidence have just simply gotten pushed back by probably about 1.5 months to 2 months. So it's going to put it more into the late August time frame in kind of the early September.

Okay. I don't know how to phrase the next one, but I guess the last time we saw the backlog this low I think it was back in the second quarter of 2014, I've got a model that I've been doing this too long, right? So the model goes back pretty far. So the last time we were at 15,200, it's what, over a decade ago. So how should we think about that and kind of a normal cycle, right? I guess if I look at timing of 40-year rail assets, it seems like we could have a few years of relatively weak carload orders, although Lorie, at the conference, I guess, somebody was thinking that we might see a rebound in '27 on some cars.

Is this just a normal car low point in the cycle? Or I guess, how do you think about the backlog and -- and I guess just 1 other statement outside of the question would be just -- I'm surprised on Turkey. I don't even think you've ever talked about Turkey. And I know it's in the queue that you have assets in Turkey, Poland and Romania, but surprise you're seeing at closing. So I'd love some thoughts on the timing of the cost savings.

So maybe I'll start with the end of yours first, and then we can go back around. So I think we've been talking about some of our footprint optimization that we've had going on in Europe. And I guess we've just been remiss and calling out Turkey, but specifically, that's 1 of the things. As we looked at what our capabilities are in our existing footprint. That was just an area that was not necessary and the logistics transportation distance just made it not be feasible anymore in support of our operations in Romania and Poland. So I think that's kind of the gist of it there. .

And I'll turn the other over to Brian because I can't remember this is the question about the backlog .

Yes, I think you really talked about the backlog and order and kind of where we're at in the cycle. If you kind of look at the orders over the last few quarters, it's been fairly consistent and kind of that 3,000 -- somewhere between the high 2s to the mid-3s and we continue to project that we'll be fairly consistent, almost 1:1 kind of -- if you look at our current build rate, we're kind of at a 1:1 ratio at this point. We've already seen a significant uptick in March, for example. We're on a cadence to significantly improve backlog this next quarter with just even a little bit of help.

So we're off to a pretty good start. We're starting to see some of that come in that we thought was going to come in a little bit sooner. And again, I think some of the delay has really been around what's happening in the world today and a little bit more uncertainty that was thrown at us. And now as people kind of look at their supply chains and they rethink about where things are, we're in the planting season for crops, there's a lot of things that are starting to happen. Storage is down, by the way, 36,000 cars from January, the fleet is tight. People are starting to move forward.

So I tend to subscribe to the '27. You talked about you talked to 1 individual data Palm Springs that '27 was going to be a stronger year. I think for sure, it's going to be a stronger year. We're already seeing some of the big buyers come to the plate. The other thing that the 15,200 cars does not include as any multiyear opportunity. So that's 1 of the things if you look backwards can kind of skew what the actual buildable backlog is because some of that was going to be built over a period of years. So all in all, I feel like we're in a pretty strong position again you can look at a 1:1 book-to-bill is kind of where we're at, and we see that building this quarter. So...

And just maybe a couple of things to [indiscernible] as well is you do have a really experienced team here at Greenbrier and for better or for worse, we've been through a few cycles, and this is why we take the deliberate actions we take around production rates and making certain that we're moderating those rates because it benefits our workforce and our financial results to keep things on a steady pace as opposed to having pops and drops. .

The other thing that I'll comment on is part of what we've been doing over the last few years, which is to utilize our footprint in North America for more than just new railcars, right? So we're doing some of this large program work that Brian Comstock has a really fancy long term for. And -- but that's where our commercial team and our folks, men and women on the shop floor have made adjustments thinking about the environment that we're operating in and being responsive to our customers' needs, not just for new railcars, but how can we take care of their broader business. And that's part of what you're seeing in our financial results, and it's not part of deliveries. It's not part of orders, it's not part of backlog.

The next question will come from Andrzej Tomczyk with Goldman Sachs. .

Just wanted to follow up quickly on the manufacturing. I wanted to dig in on the this quarter's margin performance, specifically the gross profit margin was down 600 basis points year-over-year. But I'm curious if you could share what you think that margin drag would have been had you not taken the cost out actions that you did last year. So that's sort of the first part of that.

And then separately, just the confidence, the degree of confidence on 2Q marking a bottom for the margins? I think you mentioned it would, but the confidence there into the back half as well.

So the first thing I'll start with, and I won't get into specific details, I'll let Michael decide if he wants to go there. But -- the big difference between this year and a whole year ago, it feels like there are so many things that are different from months ago. But it's really mix. I think Michael might have mentioned in his remarks that we have -- we've had a shift in the mix of what we're currently manufacturing. So these are more general purpose car types as opposed to some more specialized cards that we were doing last year. .

That's not to say that those specialized car types aren't going to come back. And I would say that looking at Brian and knowing what our operating group is doing, we're very confident about where we see margins going in the near term. and knocking on this wood conference table that yes, this marks the low spot. But I think all of us know that you can't anticipate everything that might happen tomorrow or next week.

Yes. Maybe I'll jump in and then Mike can add as well. But from the operating perspective, I think 1 of the questions, Andrzej, you were asking is what kind of efficiencies have we been able to manage over the years that has improved the higher end of the low cycles. And when we look at -- we look at what we've done with our in-sourcing projects and with our efficiency projects, I figure we've added 2 or 3 basis points to the bottom line just through manufacturing efficiencies and focus. Yes, 200, 300, sorry. .

Yes, I would agree with that. And also, if you look back to last year under -- it was at a higher volume number versus this quarter. And so we do have fixed cost absorption as we mentioned in the prepared remarks that are impacting this quarter. given where we are in the cycle, this is a -- we're pretty happy with kind of where we are. And we do think that it's potentially at an inflection point, and we'll see a better third quarter and a better fourth quarter as we move forward from a margin percent standpoint.

And just one more thing. Just to say, I think the last time, if my numbers in my spreadsheet, it's probably not as good as extra spreadsheet, but -- if I'm looking at my spreadsheet correctly, the last time we had deliveries in this neighborhood, our gross margin was around aggregate gross margin around 8.6%. So we with the changes that we've made over the last few years, we have substantially improved how we're able to convert activity into gross margin and bottom line. .

Understood. Very helpful color there. I did want to switch over just to the leasing and focus really on the back half, the gains on sale. You mentioned, I think, could come down a little bit. Is there any way to think on a full year basis, how you would look to manage gains into 2027 as an early look. And then separately, just as a clarification point, you had the leasing gross margins more recently, close to the low to mid-60% range. I'm wondering if that should persist in the near term. I think last year, it was closer to the 71% range, that might be a function of mix, et cetera. I just -- could you just talk about what's driving that gross margin within leasing and if we should use that as a sort of run rate into the back half?

And I'll take this one. I think the margins in leasing will continue in that low to low 60% range. So I think you can think about that as you kind of go forward. In terms of how we think about secondary market, activity and gains on sale, that's just part of our business model. And so we did see, as Laurie mentioned, a little bit of it benefiting the first half of the year, and it's really more of a build in the back half of the year. We'll continue to look at our lease fleet and determine from a concentration perspective, what makes sense for us and how the market is reacting to secondary market activity to determine what 2027 looks like. It's a little bit early for us to look at that.

And I'll just say maybe this can come up on your follow-up calls. But if I heard you correctly saying that maybe last year, leasing and fleet management was in the 70% range. I think we should probably provide you some updated information because we adjusted where -- some of our syndication activity is now flowing through manufacturing. So when I look back at history with that adjustment, our leasing and fleet management gross margins are in that low 60% range. So I think maybe we just have some clean up we can help with. .

Understood. And then last one for me on a more sort of a medium-term basis. Any updates to your thinking on the pending Class 1 rail merger or any comments you want to make regarding how your customers are thinking about the merger? Appreciate the time today.

Sure. Thank you. And I will just say, having been , I think at Mars, and that's before the application was turned back for them to -- they're resubmitting that, I think, this month. I think the point is for shippers and the users of freight rail to think about will emerge or benefit them will the efficiencies that are being counted, will they come to pass. I will continue to say anything that benefits our customers, the customers of Greenbrier, the customers of any of the railroads should attract more shift of transportation onto the rails because it is a more fuel-efficient way to transport materials and anything that grows modal share should mean -- it's a bigger pie for all of us. So even if our market share stays absolutely the same, if we can grow modal share in the North American market, then we're all going to enjoy more pie. I like pie.

[Operator Instructions] Showing no further questions, this will conclude our question-and-answer session. Pardon me, it looks like Harrison Bauer with Susquehanna has a follow-up.

You guys had a comment earlier in the call regarding that a lot of your maybe more recent orders or demand activity was actually lesser driven. Can you just talk about a little bit of what's driving that? Is that more speculative? Is that underlying expectation for carload growth to resume? Just curious if you could dive a little bit more into that comment.

Sure. I'll set it up for Brian, who will probably understand better what's driving people choosing to purchase versus choosing to lease and just give a shout out to our commercial teams who are always right there next to our customers and willing to help them with whatever makes sense for their capital structure, right, if the -- if they need to commit spending dollars or they just want to lease depending on what activities are going on. But I will also emphasize that our team thinks about every single deal that we originate, whether it's a direct sale or a lease with the expectation that those cars will stay active and not doing something that is speculative or short term in nature to come back home or to go into storage. .

Yes. And Harrison, I think the comment around if operating lessors are becoming more active in the market is true. I don't recall saying that, but it is true. We are seeing more operating less order activity. And the reason is they're seeing the same things we are. They're hearing the same the same sounds from the same customers, the optimism, you got through the planting season, there's been a falloff of covered hopper cars, the 750 fleet. -- the fleets are tight. And so people are anticipating continued to build up in demand next year.

So we are seeing many of the operating lessors who have been sitting on the sidelines starting to dip their toes in the water a bit on -- and I wouldn't say they're speculative buys, I would say they're strategic buys because they're very focused on specific opportunities.

This concludes our question-and-answer session. I would like to turn the conference back over to Lorie Tekorius for any closing remarks.

Thank you very much. I appreciate everyone's time and attention. Happy to take any follow-up calls. Travis is happy to take any follow-up calls later today if you'd like. Have a great day. .

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Hello, and welcome to the Greenbrier Companies First Quarter 2026 Earnings Conference Call. Following today's presentation, we will conduct a question-and-answer session. Until that time, all lines will be in a listen-only mode. At the request of the Greenbrier Companies, this conference call is being recorded for instant replay purposes. At this time, I would like to turn the conference over to Mr. Justin Roberts, Vice President of Financial Operations, the Americas. Mr. Roberts, you may begin.

Thank you, Gary. Good afternoon, everyone, and welcome to our first quarter of fiscal 2026 conference call. Today, I am joined by Lorie Tekorius, Greenbrier's CEO and President; Brian Comstock, Executive Vice President and President of the Americas; and Michael Donfris, Senior Vice President and CFO.

Following our update on Greenbrier's Q1 performance and our outlook for fiscal '26, we will open the call for questions. Our earnings release and supplemental slide presentation can be found on the IR section of our website. Matters discussed on today's conference call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Throughout our discussion today, we will describe some of the important factors that could cause Greenbrier's actual results in 2026 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier. We will refer to recurring revenue throughout our comments today. Recurring revenue is defined as leasing and fleet management revenue, excluding the impact of syndication transactions.

Before I turn the call over to Laura, I would like to take a moment and introduce Travis Williams, Greenbrier's new Head of Investor Relations. Travis joined Greenbrier this week to lead the IR function. This background includes buy-side and sell-side analyst experience and most recently held the higher function in-house at a publicly traded industrial tool manufacturing company. Please join me in welcoming him.

Thanks, Justin. Excited to be on board.

Welcome, Travis, and thank you, Justin, and good afternoon, everyone. Appreciate you guys joining us today. Greenbrier delivered good first quarter performance, exhibiting our disciplined execution and the resilience of our business. Our results demonstrate the strength of our integrated manufacturing and leasing model, [indiscernible] and through cycle resilience.

Turning briefly to capital allocation. Our priorities remain unchanged. We continue to deploy capital where returns are strongest maintain balance sheet strength and liquidity and return capital to shareholders. We opportunistically sold railcars from the fleet at attractive values, recycling capital while contributing meaningfully to earnings and cash flow.

Looking ahead, we are reiterating our fiscal 2026 guidance. And while near-term market conditions remain varied, our outlook reflects the improved foundation of our business, disciplined execution and the flexibility built into our operating model. We remain confident in our ability to navigate current conditions and position Greenbrier for long-term value creation.

In closing, I want to recognize our employees for their continued focus, flexibility and commitment. Periods like this demand discipline and teamwork, and I'm proud of how the Greenbrier team continues to execute. Our integrated model, strong liquidity position and experienced leadership team position us well to manage the current environment and to capitalize as markets recover.

And with that, I'll turn the call over to Brian, who will walk through our operational performance in more detail.

Thank you, Laurie, and good afternoon, everyone. I'll briefly cover our operating performance for Q1, including orders and business activity in our manufacturing, leasing and management services units. Commercial activity strengthened late in the quarter, and we converted that into diversified high-quality orders in a competitive market. We remain focused on order quality and backlog mix prioritizing opportunities where we offer differentiated value and can achieve attractive returns.

We received global orders for approximately 3,700 railcars valued at roughly $550 million. Orders were diversified across regions and car types. led by tank cars and covered hoppers. Included in this figure were several specialty railcar orders with higher average selling prices, reflecting our ability to support complex and unique customer requirements.

Backlog value was relatively unchanged. And and we ended the quarter with a backlog of approximately 16,300 units valued at about $2.2 billion. As always, we remain focused on order quality and mix to support efficient production scheduling and attractive margins.

Turning to manufacturing. We continue to proactively align production levels with current demand conditions and expect to modestly adjust rates further in the second quarter. Headcount reductions continued across North American manufacturing, primarily in Mexico, reflecting disciplined workforce alignment.

Our management team is experienced and agile, and we continue to manage the business to efficiently navigate the current demand environment. At the same time, we are using this period to achieve greater structural efficiency and cost discipline. Overhead optimization initiatives continue to gain traction with teams identifying opportunities to streamline processes, reduce fixed costs and improve productivity.

These efforts position our manufacturing platform to scale efficiently as demand recovers. The lease fleet performed at a high level with utilization nearly 98% strong retention and improving economics on renewals. The size of the fleet remained relatively stable as we recycled capital through opportunistic asset sales in a strong secondary market.

We also optimized fleet mix, both in terms of credit quality and car tech composition. We expanded use of Greenbrier's maintenance network for our lease fleet and drove other enhancements to the customer experience. Combined, these efforts support consistent execution and position the leasing business to continue contributing meaningfully through the cycle.

In summary, our teams executed well in Q1. We aligned production with demand advanced efficiency initiatives, strengthened our backlog and continue to grow and optimize our leasing platform. These actions reinforce the durability of our operating model and position Greenbrier to navigate current conditions, while remaining well prepared for future market expansion.

And with that, I'll turn the call over to Michael to discuss our financial results.

Thank you, Brian. Revenue for Q1 was $706 million, essentially in line with expectations. Aggregate gross margin of 15% reflects lower production rates and deliveries in Q4, partially offset by continued strong margins in leasing and fleet management and disciplined execution across the broader manufacturing floor.

Selling and administrative expenses were $11 million less than Q4 totaling $60 million. This was driven primarily by lower employee-related expenses. And in addition, Q4 included $3.1 million in European footprint rationalization costs. Operating income was $61 million, approximately 9% of revenue.

Diluted EPS was $1.14 and EBITDA for the quarter was $98 million or 14% of revenue, representing a strong result and reflecting the benefits of disciplined execution, selectively recycling capital through fleet sales in a strong used equipment market and growing contribution from our leasing platform.

For the 12 months ending November 30, 2025, our return on invested capital was 10% and continues to be within our 2026 target of 10% to 14%. As noted in our earnings release, effective September 1, 2025, we changed the methodology for allocating syndication activity, resulting in syndication activity being reflected in the manufacturing segment instead of leasing and fleet management segment. This change has no impact on consolidated results.

Turning to the balance sheet. Greenbrier's Q1 liquidity has was the highest in the 20 quarters at over $895 million, consisting of more than $300 million in cash on hand and $535 million in available borrowing capacity. We generated $76 million in operating cash flow for the quarter, supported by solid earnings, proceeds from fleet sales and favorable working capital movements.

Liquidity remains robust, reflecting disciplined execution, ongoing working capital management and a well-structured capital base. Now switching to capital allocation. We remain committed to responsibly returning capital to our shareholders through a combination of dividends and stock buybacks. Greenbrier's Board of Directors declared a dividend of $0.32 per share, this is our 47th consecutive quarterly dividend and reflects our confidence in the business.

Additionally, during the first quarter, we repurchased about $13 million of common stock under our existing authorization. As of quarter end, approximately $65 million is available for future repurchases. We will continue to access this capacity opportunistically consistent with marketing conditions and our broader capital allocation framework.

Now turning to guidance. We are reiterating our operating guidance and updating capital expenditure guidance for fiscal 2026. Our focus remains on driving profitability through operational efficiency increased recurring revenue and disciplined capital use. With our resilient business model and strong balance sheet, we are well positioned for continued performance and long-term value creation.

Our guidance for fiscal 2026 is as follows: new railcar deliveries of 17,500 to 20,500 units, including approximately 1,500 units in our Greenbrier [ Max ] in Brazil. Revenue between $2.7 billion to $3.2 billion. aggregate gross margin of 16% to 16.5%, operating margin between 9% and 9.5% and earnings per share of $3.75 to $4.75.

Greenbrier's capital expenditures and manufacturing are projected to be approximately $80 million. And gross investment in leasing and fleet management will be roughly $205 million. Proceeds from equipment sales are expected to be around $165 million. I will point out, we are pursuing assets in the used equipment market in an opportunistic, disciplined manner and may end up at a higher investment level.

Greenbrier delivered good financial performance in the first quarter and maintained a strong balance sheet and liquidity position. Our integrated business model, disciplined capital allocation and focus on execution position us well to navigate throughout the cycle and create long-term shareholder value.

With that, we'll open the call for questions.

[Operator Instructions] Our first question is from Andrzej Tomczyk with Goldman Sachs.

Happy New Year. I wanted to start on the manufacturing deliveries and maybe we're just curious if you could talk a little bit more detail on what visibility you currently have into the second half of this year as far as year-over-year delivery growth and when you might expect to see that? And then maybe just what's driving that between Europe and North America?

Yes, Andre, it's good to hear from me. Hope you had a good holiday. This is Justin. Yes, we've got pretty good visibility with, I would say, most of our open space, as historically, we see it as in the summertime, so kind of the June, July, August time period. But leading into that, we do have pretty good visibility.

And I think I would say that we do see some opportunities for year-over-year growth in that time period, since we were kind of ramping down production last summer, and we'll be increasing production heading into our next fiscal year.

Got it. That's helpful. And I know it's very early here, but I was just curious, given the recent news and events Greenbrier's thinking on maybe the potential medium- to longer-term impacts related to Venezuela any indirect or direct impacts on your manufacturing business that we should consider maybe that you guys have thought through?

Andrzej, this is Brian. We don't see any impacts at all at this point from Venezuela. There's no -- there's no lag between what we do in Brazil or other areas. And so quite frankly, we don't think for our business, it will be impactful.

And maybe longer term, Andre? I would say, broadly, a lot of -- if there is going to be additional kind of oil activity, it will be typically handled via pipeline typically. And any oil over via tank cars is it going to be more of a short-term phenomenon.

Okay. That's helpful. Maybe 1 more for me on manufacturing and then delivery environment. I'm curious as we sit here today, if you're seeing any incremental improvement or changes in the tenor of customer ordering behavior into December and January?

And maybe in that same context, would you expect sequentially or what would you expect, I guess, sequentially in terms of deliveries 1Q to 2Q as well as margin expectations throughout the year relative to the 11% you guys just did?

Yes. I'll take the first part of that, and I think, Michael, you take the second part. From a customer perspective, I think in our scripts, we talked about how the order activity towards the end of Q3 had picked up and we're continuing to see that our Q4, and we're continuing to see that activity into Q1.

December was unusually high for that period. It's typically a slower month. And we had a nice number of diverse deliveries come in, in December. So we're seeing it continue to tick up.

Right. And I'll take the margin question. we look across the year, we continued our guidance in aggregate gross margin. And we do see some variability quarter-to-quarter in margin, but we are looking at a stronger back half of the year versus the first half of the year.

Got it. That's helpful. Maybe just shifting a little bit to the leasing side of your business. Are you able to share how lease rates trended sequentially 4Q to 1Q? And maybe also just remind us how much of your lease book is up for renewal this year?

Yes. So I would say for the lease rates they've been, especially for more of the, I would say, specialty cars like tank cars lease rates on an absolute basis have been relatively stable. We continue to see strong renewal activity. And then on the more commoditized cars, lease rates have been pressured some for us, it's about maintaining our focus on discipline around pricing and returns focused. Then with regard -- go ahead.

Yes. And I would add -- this is Brian, Andrzej. I would add that year-over-year renewals, we're still seeing double-digit increases on the renewal side. Justin is correct that we're seeing rates hold. But keep in mind, some of these renewals were done 4 or 5 years ago. And so we continue to see nice uplift in our renewals that are coming up as well.

And I'll just jump in as well to say that when we see more moderated demand for new builds, current market, that means the existing equipment becomes more valuable, more desire. So that's another thing that's adding to those renewal rates.

And then on the kind of the cars in the fleet to be kind of renewed overall, we had about 1,500, 1,800 up for renewal as we entered the fiscal year in September, and we've successfully renewed kind of around 35% of that. So we're continuing to trend in the right direction there and feel pretty positive about the rest of the fiscal year.

Understood. And then I guess just on the first quarter, there was the large gain, I think, $18 million roughly was more than you did in the entire year last year. was curious what we should be thinking in terms of full year gains this year or maybe relative to the first quarter levels if you could provide that?

Yes. We did have an opportunistic gain in the first quarter, looking at the market. And we continue to to look at that as the year progresses, we're really excited in terms of what that could do for us this year.

I guess I'd just throw in that we're active in the secondary market, whether it's from trying to look for assets to add to our owned fleet that we want to grow, but also to take advantage if there's something that's very accretive to our return on those investments.

And Andrew, maybe just to take a step back and you think about, as you are managing a leasing business, Part of this is you're always taking a look at your portfolio concentrations, your build-out and things like that and really taking a look at, okay, so where do we maybe have a little exposure, what do we have in our backlog that we're building out and bringing it into the fleet.

And so there's kind of this constant active management of the portfolio itself. And than when you're able to decide to sell assets and generate gains, you have an assumption around that. But sometimes markets give you a little more than what you expect. And sometimes, they don't give you as much as what you expect. But this quarter, we were pleased with where that laid out.

Very clear. And maybe just as a follow-up on the leasing fleet itself and growth expectations. Should we expect maybe like high single digits? Or can you comment on the type of fleet growth that you guys expect this year in terms of the lease fleet? I think you did close to double-digit growth in 2025 and mid-teens in 2024 as you guys have pushed more into leasing. So I'm just curious what trajectory we should be thinking about over the near term, would be very helpful.

Yes. I mean I think we would say that we're not going to give an explicit number because this is still a very active environment. But we do believe that we will grow this year probably in the single-digit range, maybe a little higher. It kind of depends on how a few different opportunities manifest.

But ultimately, we are committed to growing the leasing business and kind of thinking about this from the long-term shareholder value perspective.

Understood. And maybe just to close out for me to sort of higher level questions. On the tariff front, would you say that those are ultimately an incremental positive or negative to your business? And then the same question also goes for the potential for Class 1 rail consolidation. With Greenbrier be a proponent of rail mergers? Or would you rather sort of the merger not go through?

Sure. And I'll launch into these, and I'm sure that my colleagues will jump in and help out. When it comes to tariffs, I will say that thus far, it's been neutral to our financial performance, although the uncertainty created by the changing landscape in tariffs definitely has been a headwind or has our customers take a pause on committing additional capital for new railcars.

So that has been an impact as well where there are tariffs on foreign sourced materials, it allows U.S. sourced materials to have higher prices. So that also has resulted in, I would say, a bit higher prices right now for railcars, which are primarily utilizing steel. So that can also be a consideration when you're thinking about an investment.

So overall, I would say the dollar or percentage amount of tariffs has not had a tremendous impact. It's more the uncertainty to try to understand the operating environment and what those tariffs might do to supply chains and logistics as our customers are looking at where they're sourcing their materials and where their finished goods going to go and how are they going to be transported.

That said, and Brian is shaking his head, so I'm saying I'm going to get this right. I think that most of our customers are coming to terms with the fact that we're just going to all have to live in a slightly more uncertain world. and we just have to get after running our business, and that's what we do day in and day out as deal with whatever is coming up and and deal with that. Anything that you would change...

No, I think you nailed it, Laurie, it's really at the end of the day, we've had no financial impact from tariffs, but it does continue to weigh on customers' minds and has been a little seized up, although pent-up demand. We're starting to see that release as we said, towards the end of the last Q and the first part of this Q. We're already seeing that start to release a little bit. So we're starting to find that equilibrium, I believe, between that pent-up demand and the tariff challenges.

Super. And then when it comes to railroad mergers, I try to stay really consistent with my message, which is anything that makes our industry stronger I am a proponent of. anything that helps to increase the shift of transportation of goods off of highways and on to the rails.

I think, is good for our business. So whatever it takes to make our industry a more efficient circulatory system for the U.S. economy. I am in favor of. I've been in this business long enough. I've seen a few of these mergers. They can be bumpy at times. And I'm sure the STB will go through an appropriate process to review it, and we will all just take it 1 day at a time.

The next question is from Bascome Majors with Susquehanna. .

Maybe just to follow-up on some of the geopolitical angles that we closed with in the prior session here. The USMCA, how engaged are your people or industry organizations or internal or external obvious in that effort as that review comes closer and what are you hearing as far as how that may play out? And how do you feel about the exemptions that have been favorable for the no tariff impact on the railcars existing into 2027 and beyond.

Bascome, thank you for that question. I strongly am supportive of USMCA. I do believe, as I was saying that the rail network is a circulatory system of the U.S. economy, and I think the free flow of railcars across our border to the north and south is very critical, not just for the rail industry, but for the overall economy.

So just like with everything and maybe as we each get a little bit older, we can look back in the past and say there might be opportunities to refine things and do things a little bit better. I think that we could all try to have continuous improvement as part of our vocabulary. But I don't think it needs to be totally upside down and redone. I think it's been working really nicely for a very long time, and I hope that, that's the conclusion that we come to on that.

And maybe back to the guidance. Just want to follow some of the pacing comments on deliveries earlier. You talked about, I think, 4,500 or so deliveries for this quarter if you include roughly the run rate on Brazil, that would be kind of annualized to the lower end of your guidance.

But I think you also talked about maybe taking reduction down a little bit in the second quarter and then raising it into next year and also mentioned some white space in the summer. So how do I bring all that together? Where do you have visibility to get kind of closer to the midpoint of the production guidance for the year, where do you need orders to come in and fill some of that white space? And how do you feel about inquiry levels and the level of certainty you need to get there?

Yes. I think I can start out with that, Justin, and then maybe and Michael can fill in. From the order perspective, Bascome, that white space is getting filled as we speak. And -- in fact, we're already making plans to ramp the back half of the year to some degree. So some of these head count reductions are temporary in nature, just as we get through the order book and we get to the more robust part of the cycle. So the white space itself is very limited at this stage. And in fact, in some of our more specialty type of cars, we are indeed going through the planning exercise of bringing people back.

Yes. And I think Bascome, I mean, if you kind of look at basically kind of how Michael laid out the guidance, we do have a more of a ramp in the back half of the year. And I think at this point, we would say we have pretty good visibility on that. It's just a matter of assuming that the inquiries we have continue to translate into orders, which we have seen an improvement in that over the last few months. And then also barring any unforeseen events in the geopolitical front, which I'm not ready to place a bet on, but we do feel pretty good about the trajectory we're on right now.

And I'll just throw in on there. As Capo said, of having additional order activity that means we're going to be bringing people back. We want to do that in a mindful way. We don't -- we've learned from the past that it's not good to bring back and try to ramp up too quickly, but we try to do that in a very, very mindful way.

And I realized Bascome that I didn't answer the second half of your earlier question about engagement in U.S. MCA. And I will say that we at Greenbrier have been very engaged in submitting comments back on the review for USMCA. And I would be -- I will be encouraging all of the rest of the industry participants to get more engaged because it is very important.

And last 1 for me, and then I'll pass it on. But if we think about the production cadence and rising visibility and to be able to ramp that back up in the second half of the year if the order conversions continue at the pace that's improved recently, is the manufacturing gross margin largely a function of the volume you're pushing through? Are there some issues with mix and pricing where that may not be sort of linear?

Yes. And I think you've got it, Bascome. I think it's really a combination. It's not necessarily linear. And so a mix component to it. But there's also a production component and absorption of fixed costs and all those things combined as we look at the remainder of the year.

As you do more volume, if you get to that increase in the back half of the year that you're shooting for, do you think that will be a lift on margins? Or is it really just more of a revenue story? .

Yes. No, I do think it will be a lift on margin from where we are right now.

The next question is from Ken Hoexter with Bank of America.

You kept your EPS outlook $3.75 to $4.25, but it looks like you have a $0.55 gain on sale this quarter, the $17.7 million which sounds like, Lorie, you said you're being opportunistic on some asset sales. So are you decreasing your EPS guide for the rest of the year given the gain on sale presumably to this scale was not in your outlook? Or is there something else adjusting in those numbers?

Yes. Yes. And thank you for the question. Really, that was about a $0.30 impact to our earnings per share as we looked at it. And it is impacted by just when when we're looking at the market and how opportunistic it is. So that shifted possibly between quarters as we look at it and that's why we didn't really affect our guidance.

And 1 thing, just to clarify, I may have misheard Ken, but our EPS guidance is $3.75 to $4.75, which implies a midpoint of $4.25.

All right. That's what I might misread. But the -- so no change to that $3.75, $4.75, $4.25 midpoint despite the gain, does that -- I'm sorry, from that last answer, does that mean you were expecting these gains in your original target? Or is this -- I'm just trying to misinterpret or interpret. -- the commentary.

Yes. Yes. So Dan, as we have a growing own lease fleet and just like you see with other operating lessors, we will take advantage of opportunities within the market. And as we put together our guidance for FY '26, we did assume that we would be doing some transactions that would benefit EPS.

Okay. So can we presume then, Lorie, on that answer, then you've pulled forward all that opportunity? Or are there still a lot of opportunity going forward with these large game potential?

I would say that timing is difficult to predict. When we have a good transaction as much as we would like to perfectly slot things into each quarter in a lovely even smooth peanut butter way, it doesn't always work that way. And we will close on transactions as they present themselves and as our customers need to close on the transactions. That said, it's a strong market out there. So I'm not saying that we're done on doing transactions. We're looking at stuff that we might sell. We're looking at stuff that we might buy. So it's just going to be part of our business going forward.

Okay. And then -- you mentioned in the -- given the backlog, right, if I look at the new -- the cars out of the backlog, the [ 3,700 million ], $550 million added, that's about $150,000 average ASP, which is up significantly from the 125, but even kind of going back the last few years, I don't know if we've seen a number that high. I think there was commentary in the prepared remarks that there was some higher value cars in there.

Can -- is that a couple of cars that are just so highly valued. Can you just maybe walk through 1 you never break out number of whatever it might be a specific type of tank car or whatever it is. But can you just kind of give us an idea what would drive something so high?

Yes. Ken, it's Brian. At the end of the day, I don't want to give away too much sensitive information for our competitors. But we do have a number of units that have I'd say, fairly high ASPs. They're specialty cars for specialty type of service. It's 1 of the things that's unique to Greenbrier that we spent a lot of money in the innovation and R&D side of the house. to perfect so that we could be in a position like this as markets come to us. And it's a market, I would say that's a growing market that we're looking forward to continuing to build into.

Do they have outsized margins? Or just given the components and specialty kind of similar margins to others despite the higher ASP?

Yes. I prefer not to go into that level of detail.

Okay. SG&A jumped up to 8.5% or somewhere around 8.5%, which was similar to 4Q, but kind of above, I think, the guidance was somewhere in the type range, so maybe an extra $10 million. Is there -- are we -- were there costs added back in? Maybe just walk us through kind of what's going on in SG&A?

As we set the guidance at the beginning of the year, we did say we're going to take about $30 million out year-over-year so if I look at sequentially where we ended in the fourth quarter, we came down about $11 million. There's really nothing significant in that as a percent of revenue calculation that I would look at. We're still taking $30 million out year-over-year.

Okay. So was that higher than than you would have expected?

I think we would say the G&A was -- is trending in line with what we expected for the year. Maybe it's up a little bit in the quarter by a few million dollars, but not significantly.

So is that -- I'm trying to understand the impact on margins, right? So we're talking about 11% on manufacturing, but then higher SG&A. Was that timed because you added more people or to get more sales just walk us through what's driving that?

I think the big piece is there's some additional translation and currency adjustments out of Mexico -- or not out of Mexico out of Europe. That, I would say, artificially changed kind of how G&A was tracking. We're not adding people. There's not G&A that is being grown. In fact, I think if you looked at last year, we tracked -- we ended around $260 million and this year, we're going to be in the kind of $2.25 to $2.30 range is what we're guiding to. So pretty substantial reductions year-over-year.

Helpful. And last 1 for me, just is always the below-line stuff, Justin, if you can be any helpful in terms of how we should think about going forward. The minority was a positive versus a negative equity in loss of unconsolidated was negative versus a positive. I don't know, is there any ballpark how we should think about that below the line?

I think -- probably our activity is -- well, I don't know, maybe we can take that kind of touch base on our follow-up calls. I think broadly, we're expecting to track where we were at in the prior year and kind of based on our preliminary guidance, earnings from unconsolidated affiliates, which is primarily Brazil, is going to be modestly positive throughout the year that would be accretive to earnings.

And I'm not saying that to you, I have to say it out loud to myself to make sure I don't get myself confused. The earnings or loss attributable to noncontrolling interest is our partner's share of earnings in Mexico and in Europe, a negative of about -- or an earnings deduction of about $1 million. We do see that fluctuating throughout the year based on cadence of activity in Mexico, in Northern Mexico and in Europe. And that's -- I guess that's about kind of as far as we're going to go at this point.

Yes. I would say that if you were to think about where we're doing our operations and not what I still call minority interest piece, it's going to -- if our earnings are and margin are back half weighted, you're going to have a little bit more of that that's going to be going to our partners in the back half of the year. And yes, I think based on our comments, we expect Brazil to remain stable. We're having good performance down there right now.

Wonderful. All right. I think that's it for me. It looks like reiterating all your targets, right? So you're -- even with this 4,400, are you still looking for second quarter to decelerate from this fourth quarter? Or do you think we kind of hold -- is this your minimum value in terms of delivery -- quarterly deliveries.

Yes. We really, really don't really give quarterly guidance. What we are saying though is we do expect the back half of the year to be a little bit stronger than what we're seeing in the first half of the year. So...

You can do the math.

Yes.

This concludes our question-and-answer session. I would like to turn the conference back over to Lorie Tekorius for any closing remarks.

Thank you, everyone, for your attention and your interest in Greenbrier. We appreciate it. And as always, if you have follow-on questions, I know you can reach out to Justin, but you'll quickly come to know Travis Williams. So we're excited to have and be part of the team. Happy New Year, everyone. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Okay. Awesome. It's good to get started here. We have Greenbrier to kick off the railcar manufacturing and leasing portion of the Industrials Conference this year. My name is Andrzej Tomczyk, and I'm pleased to introduce CEO, Lorie Tekorius; CFO, Michael Donfris; as well as Justin Roberts, VP of Financial Operations. Thanks for being here.

Thank you for having us.

Maybe just to kick off before we get too much into Q&A, are you guys able to provide an overview of Greenbrier to the audience? And maybe just for those less familiar, how the business works and a little bit about your story.

Sure. So I'll start out. So Greenbrier is a manufacturer of freight railcars. We serve the North American market, the Europe market and the Brazilian market. We have manufacturing facilities in each of those areas. So our manufacturing in Arkansas and Mexico serves North America, while we have three plants in Poland and Romania and then a facility in Brazil for that market. We are -- our strategy is to continue to our journey of manufacturing excellence, where we've done a really great job over the last few years, generating some really nice margins in a moderate demand period.

At the same time, we have a fleet -- a lease fleet of freight railcars for the North American market that we've been growing over the last couple of years, we've got a stated goal to double our recurring revenue over the next 5 years. We're about halfway there, a couple of years into that goal. Because as we look at it, the manufacturing side of our business, particularly North America, can have some cyclicality to it.

So in addition to focusing on manufacturing excellence where we continue to have higher financial performance even during low periods, we're growing that lease fleet to generate that recurring revenue and predictability that seems to be loved so much by Wall Street to have that predictability.

Yes. No, absolutely. And So maybe just to touch on the leasing fleet. You've successfully grown that pretty fast to 17,000 cars at this point. And the general guide is $300 million of investment into the lease fleet year in and year out. Can you talk a little bit about where the ultimate composition of that fleet can get to? Or if you have sort of thoughts around the long term?

Sure. So the one thing that we focused on, on this journey is having disciplined growth, right? We don't want to just build railcars through our facilities and put them on our balance sheet in a way that you have end up with a portfolio that is overweighted in one product or credit or customer. So we've got really strong commercial capabilities. So we're able to generate those leases and then keep some of those cars on our books.

The long-term goal is to have the composition of our fleet be very similar to the broader North American fleet of 1.6 million railcars, excluding coal. I don't see us put any coal in there, but a combination of cars that we originate and build as well as we're active in the secondary market. So the focus is on discipline and keeping that we've had now two or three ABS offerings that have two, and been very, very well received from a credit perspective.

And is that $300 million investment, can you share like what that translates into for cars per year that might be added to your fleet?

Yes. Yes. When you look at it, it depends on the types of cars that are added. And as we look at the North American fleet, some cars are less costly than other ones. We'd like to talk to up to $300 million a year. But in round terms, it's probably 2,000 railcars a year. It's probably in that ballpark, but it can go up and down based on the types of cars that we add to the fleet.

Got it. And so this is a little bit of a change from your strategy before. I mean, you're pushing more into leasing. How does this change sort of your capital allocation strategy versus prior to sort of pushing into leasing?

Sure, sure. And I love to talk about capital allocation being in this role. One of the advantages that Greenbrier really has is that customers can come to us and determine, do they want to buy a car or do they want to lease a car. And then once they lease the car, do they want to maintain it through our network. And so we're really unique that way. So as you think about capital allocation and you really think about how are we going to deploy cash, we like to look at the ones that give us the best returns for our shareholders. And so right away, looking at quick paybacks in our business, we look at investing first in areas where I know I can get a strong payback, and I know that I have a strong return, so that's always going to be first.

The second that's really pretty exciting for us is the leasing fleet. And so we target mid-teen returns on that fleet. And so those kinds of investments have done very well for us. We continue to grow that. Also, as we look at opportunistically look at acquisitions, we try to bounce them against our framework. So as Lorie mentioned, we have recurring revenue as a strategy for us. We want to grow returning revenue. We want to increase our aggregate gross margin, and we want strong returns for our investors. So as I think about capital allocation, if I bounce it up against those criteria and it fits that criteria and it first fits the strategy for the company, I want to make sure I have capital available for that.

And then from a dividend standpoint, we continue to think about our business bullish in a bullish way, and we're really excited about our strategy and how it's moved forward. So we're going to continue to do that every year.

And then lastly, our Board approved $100 million of share repurchase, and we did just over $22 million in this last fiscal year. And so we have $78 million to do this fiscal year. And we're going to opportunistically look at that, too. So leasing has become a bigger part of our capital allocation, to answer your question, but there's other considerations as well.

Got it. Super -- it's an interesting strategy to push more into leasing. And the last thing I sort of want to touch on there is what has really driven the -- like what's driven the change to push more into leasing from your perspective? Being more of a manufacturer historically. What is -- from a market standpoint is sort of driving that change from your perspective?

So I'll start and you can add in. But I would say that if you look back at Greenbrier's origin under our founder, Bill Furman, we actually started out in leasing. We just never were particularly disciplined about it and really got after it because we were on an acquisition strategy and expanding our manufacturing portfolio. So as we completed the acquisition of the ARI facilities in Arkansas back in 2019?

2019.

It was like, okay, so now what are we going to do? Our industry does have peaks and troughs. Again, we focus on how can we improve our manufacturing excellence and generating better gross margins, which helps those troughs to be higher. But in studying feedback from Wall Street and talking to some of our shareholders, having some of that predictability, that steady revenue stream, cash flow, it's tax advantaged. We thought, you know what, we're originating these lease transactions that we're building? Why not keep some for us? People really love buying them. Why don't we keep some for ourselves because this is where we can deploy our capital and get that return.

So we look at the forward P/Es on some of the other folks who are in more of leasing, and it generates a higher P/E. So that's what we're focused on. Again, not ignoring our history of manufacturing and continuing to grow that.

Of course. And maybe just to shift gears a little bit to manufacturing. You touched on ARI as well. So your aggregate gross margins exited sort of, I guess, FY '25 around 19%, which is above your mid-teens target. And I think some of that's come from the in-sourcing initiatives from ARI. So could you just sort of talk about that for what's structurally sort of taken out of the business? And I know that 19% is going to sort of moderate into the 2026 as well given the delivery environment, but maybe just talk about that as well.

Sure, sure. I'll take that. ARI was really kind of the proof of concept for us, to prove to ourselves that we could successfully do in-sourcing. It's one of those strategies that you look at it initially and you say, what's the return? How can I be successful at it? And it worked really well with some of the locations around the Arkansas footprint. And so then we looked across the rest of the company and said, we could lower landed cost. We've got a competitively advantaged workforce that's really good at making things, and I can reduce working capital.

And so the concept of I can use the workforce to make what I need. I can design the bill of materials that I can basically bring them in-house and be more successful than someone else doing it. It really made a difference in our North American business, and we're continuing to kind of look at it and say, now that we have the capability to do it, now that we have control over and not that we didn't on our bill of materials, but we have better visibility and can do design engineering for the kinds of parts that we can make inside, it just -- it fits really well. And so it started with ARI, and it's really worked out well for the North American footprint.

And what about -- so are there more -- is there more that you can do sort of based on what you've already done in sourcing and ARI that you can apply sort of across the business?

Yes. And mostly, this is across the footprint looking across -- it started in ARI, but it's across the whole footprint. And what you find is our workforce is also always thinking about how can they help the delivered cost situation? How can we continue to maximize and utilize the equipment we have at our plant. So it started, but it's one of those things where then it's like, hey, we're getting a delay on this part. It's not coming in as fast as we wanted to. Why don't we try to bring it inside, what would it take to do that?

And so the team is very entrepreneurial, looking across the ecosphere parts and saying, what else can I bring in that I wasn't bringing in? And then what else is out there that I could do this for customers as well. So I mean, it's kind of an exciting -- it's an exciting idea that is kind of built.

And I would just add to that, just in case it wasn't clear. So we did make a significant investment in our Central Mexico facility to in-source. And what we're seeing is that we were having to go quite a ways away from our Central Mexico facilities to source certain products. It was a time suck, it was expensive, and we weren't as in control of some of the quality. So by bringing that in-house, we could utilize steel more efficiently. We could manage that workflow and getting the products into our production lines in a more effective manner. Now there's always opportunities to look at some of the parts for secondary -- not secondary market, aftermarket parts.

So maybe thinking about when volumes sort of -- we're on a variable environment. So when volumes do come back, how much of that cost does come back? And like how do we think about incremental margins in the recoveries scenario?

That's a really good question. It's one that our FP&A team and our leadership team think about quite a bit. When you think about how we've looked at how we manufacture and how we go to market, we've had footprint reductions. So we started with Gunderson, we started with Southwest Steel, and that gave us certainly a carryforward in reducing fixed costs and improving our overall margins with some SG&A and so forth. We've also looked across our European footprint and said, we don't want to reduce capacity. What we want to do is take out excess capacity. And so we've had 6 cost reductions there and really overhead reductions.

And so the part that's really kind of come down and continues to come down, is that overhead, that fixed cost part, we believe as we continue to see strength in the back half of '26 and in '27, the variable part of the cost is going to come back up. But with the in-sourcing with some of the things we've done with footprint reductions, we don't expect it to come back up as much as it was before.

Is there sort of -- what's the rule of thumb for planning for like labor ahead of an upturn? Like if you're expecting sort of back half recovery this year, how are you thinking about that now in planning for the back half? And is that -- what's the visibility on that sort of uptick in the back half?

Well, and that's a really good question, too. As we think about where we're manufacturing, our facilities have become part of the community. And so we have a history of where employees want to come back and work with us. And we have a lot of success with that. And we have a leadership team that understands that really well. As we look back, there's not one rule of thumb, but it's typically in that 3- to 6-month range. We really want to be careful with safety. We want to make sure that we have the team members remember and work through and continue to think about safety every day. And then it's just the efficiency of if they've done something else in that short period of time, come back in and learn how to do it the Greenbrier way.

And I'd just add in, Andrzej, I think the other thing that we've done as part of this process is saying, so what else could we be doing in our footprint that serves the market. So in Arkansas where it is more difficult to get the workforce back or even to attract workers because it's tough work. This is not easy stuff that we're asking people to do.

So we've been able to work with our customers where there's significant kinds of program work. So tank cars have to go through a requalification or sometimes covered hoppers have to be relined. And we've had customers who can send us a steady volume and that can have work that's going through what would traditionally be a new car facility, but it's keeping the workforce engaged. It's a nice return. That's where I would say, I should have said this at the beginning, for FY '25, we had record financial performance on 2,000 fewer railcars delivered.

So this is where we are changing over time that it's not just about how many railcars do we build, but what are we doing where we've made our investments.

Yes. No. That's a great point. Maybe just shifting a little bit to tariffs. I'm curious on sort of the impacts that you've seen in your business? If that's -- I know it's more on the sort of customer ordering front and it's impacting that side of the business. But have you seen any of your input costs sort of rise as a sort of...

As you can appreciate, right, steel and steel components are a big part of any freight railcar. There's been a lot of focus on what are called 232 tariffs on steel derivatives. You're right that our contracts provide for a pass-through of any sort of tariffs or things like that as they come into play. Right now, railcars that we're building in Mexico, they're USMCA compliant. So we're bringing those cars into the North American market without tariffs.

And if you step back and think about history, the rail system is like the circulatory system of the U.S. economy. We have been for decades moving all of the stuff that's in this room in some early form was probably in a railcar and circulating around the North American content. So this is what's been happening for so long, and we would hope that the administration is paying attention to as we want the economy to thrive, we need to keep moving railcars and moving stuff in freight rail cars because you don't want that on the highway.

That being said, early in this calendar year, we did have the steel companies come out looking to put 232 steel derivatives on finished railcars. When we went in and explained to our suppliers, the steel companies that we're sourcing steel from their U.S. facilities to take down into Mexico to build these cars, and tariffs and uncertainty and higher cost is a headwind to demand. And so yes, you may get a tariff, but it's going to mean demand is going to go down and we're going to end up buying the industry, not just Greenbrier, the industry will be buying less steel. So they thought through that, and they pulled back their request for those tariffs.

So it's one of those things where I think one of our things that's in our DNA at Greenbrier is working with our customers and our suppliers to say, "So what's the problem you're trying to solve?" I think there are a number of companies right now that are weaponizing some of these tariff opportunities to just try to get a leg up and I try not to get a little bit too bitter. I would say we'd just focus on running their companies as opposed to trying to use something crafty like a tariff, so that I didn't have to spend my time in D.C. educating our policymakers on the value or lack of value thereof. And I'm not passionate at all.

I can't tell. So I mean, has it actually increased the cost of a new railcar already?

Yes, I should have started that out, right? Steel is a global commodity, right? So to the extent that there are tariffs on foreign steel, it gives the opportunity for U.S. steel manufacturers to have higher prices as well because that's who they're competing with. So yes, I would say the cost of railcars has gone up because the cost of steel has gone up. And that's what -- that combined with uncertainty, overall economic uncertainty is what's been driving this headwind to demand.

Now in talking with our customers, they're getting comfortable with living in this world of uncertainty that we're just going to have to get comfortable living in, right? Things are going to change from week to week, month to month. And we're hearing from our customers that they're just going to figure out how to run their business in a time where there's not as much certainty. And that's where we think second half, we're going to see this pick back up in demand.

Does that help leasing at all in terms of the cost of a new car is going higher? Is there more impetus for customers to push into leasing in terms of let's lease a car instead of buying new one?

Sure. And our customers are typically very, very knowledgeable. They'll do a lease versus buy, which, as I mentioned, is kind of a competitive advantage for us because we want to buy it -- we can sell it or we can go to the lease. I do think, though, as you look at -- and some of the companies talk about forward lease rates, some of the reason why rates are rising in leasing is there's not a lot of cars available. So that's one of the things. And railcars are kind of sticky. So once you get in, you want to stay in. But because the new prices have risen a little bit the rates have been able to go up as well. And so if you kind of broke out why is the forward lease rate -- why are the forward lease rates rising, some of it is the fact that new cars are more expensive.

Makes sense. Just while we're on manufacturing on the backlog, are you able to just provide a breakdown for sort of where your railcar orders are coming from? And then just framing sort of where the backlog sits today relative to where you would see as like a normal backlog?

Sure, sure. And backlog is something we watch very closely. Our investors watch it closely as well. Our -- as it kind of breaks out across the -- our international business, about 1/3 of our backlog is related to Brazil and mostly Europe. So you can kind of think about it that way.

As we think about what's the right size backlog, obviously, we'd like a huge backlog. It really helps us with visibility. It helps reduce our cost structure and so forth. But as we look back and kind of think about it, about a 20,000 car backlog is probably pretty normal, and we're like just under 17,000 right now. And so we'd like to see that bump up a bit, book-to-bill, I'm sure everyone's watching that, too. We are too. And so we'll continue to kind of look forward for that to get back to that level.

And you did mention the Brazilian business. I'm curious, and even in your '26 guidance, you mentioned that Brazil's continued success sort of story there. Can you talk about what's contributing from Brazil in 2026 and then maybe longer-term thoughts on what's driving demand there?

Well, so I would say that there's been a big focus in Brazil about trying to -- by the government to shift movement of product off of the highways and onto the rail. If anyone's ever been to Brazil, it can take you an hour to go 5 miles. It's worse than New York. But what's really improving the impact to Greenbrier is the fact that our leadership team down there started embracing how can they get more efficient in what they're doing to produce railcars. They had really just kind of kept building cars without really focusing on costs. So it's really that team down there digging in and figuring out how can they get more efficient, how can they take care of their customers. And so we've been getting really good market share in Brazil, and we expect that to continue for the next several years.

And just adding to that, you hear about on the infrastructure investment that's going on in Brazil. There's a huge need to move products, large products in what rail can provide. And so as you think about a growth avenue for us as a company, we're really excited about the market and really what it can be.

So Brazil is going to be a big long-term story for you guys in terms of -- it will always be part of your business in your mind. It's going to be a big part of your business or a sizable part, I should say, for the foreseeable future.

Yes. I don't know if it's a big, big part of our business, but it certainly is one of those ones where we're excited about what they've been able to deliver. We're excited about the progress they've made in cost and we like how they're connected into where the growth could be. So it's a very good bet and a very strong return for us is how I would think...

Including cash returns, right? So they are paying dividends out. So it's not just income on the P&L.

Maybe just while we're on other geographies, touching on Europe a little bit as well. What is that contributing to 2026? And then I know it's been a little bit of a weak demand environment in Europe. Can you talk about sort of dynamics over there. Maybe if there's any expectation for a recovery at some point and what that looks like for you guys?

Yes. We are -- it has been a tough time in the European market, right? Economic and geopolitical uncertainty have been headwinds, which make lemonade out of lemons, and this is where we started accelerating what we knew that we needed to do around optimizing our footprint. So we've exited our Arad, Romania facility. We're exiting two other facilities in Poland. And really, as Michael was saying earlier, concentrating our administrative and overhead costs into a smaller footprint while still maintaining the same production capacity. So it's just continuing that same journey that we've done here in North America.

We are seeing some green shoots. I was talking to our President of the European operations yesterday, there is a lot of this focus on movement of particularly military sort of equipment and thinking about that. They're talking about some corridors where for it being the European Union, crossing borders between countries can still be difficult. So this is where they're looking at how do they define some particular corridors that will make freight or transportation via freight, rail, more efficient. So...

Maybe shifting a little bit to your syndication dynamics in your model. It's a little bit unique to your business. Curious if you could just share for the audience what that is. You've talked about in the past. And then do you expect -- that's had a strong sort of investor appetite post-COVID, especially, I'm wondering if you see that appetite continuing in syndication market and what's driving that going forward or so?

Sure. Sure. Syndications, for us, it's a word, we talk about, we think everyone understands it. And really, all it really is, is it's kind of another channel. We think about it as another channel for sale to drive revenue. And it's basically a group of railcars that have leases on them that we bundle and give an investor group an opportunity to participate in that flow or that benefit over a period of time.

And as you mentioned, I mean, the appetite for this has been really, really high. We can manage it over the period of time because we have a lease fleet and we have a fleet management business as well. And so for us, we get the revenue from the sale, which is just like a direct sale, and then we get the long-term revenue and earnings as well as the earnings upfront for managing it.

For us, it continues to be a really nice strategic way to, as Lorie mentioned, manage the fleet for us from a concentration standpoint because we want to basically make the cars that our customers want to buy. And so -- and it allows us to take orders that maybe I don't want to put in my lease fleet because I might have -- I may have more tank cars than I need in my lease fleet, for example. So it gives me another avenue to build the car that will have a lease on it, put it together and then sell it to someone else basically and then manage it for the long haul. So I think it's been really, really positive for us.

And I think it just emphasizes the fact that the transactions that we originate those leases are money good deals. Otherwise, someone wouldn't be interested in buying them from us, getting a long-live car on the stream of cash flow.

Maybe just shifting to like broader industry trends and I'm curious on green shoots, if there are any specific car types, if you can share that, what's challenging in terms of car types that may remain under pressure for medium term, near term?

I think, we can bring in Justin...

Yes, come on, Justin.

Thank you. Yes, I would say that what we're seeing upside in right now is around more of the specialty cars. The more general commoditized cars that anyone can build continue to have a little more pressure. But broadly, tank cars are performing well. And cars that really not everyone can build is where we see more strength. And we've definitely seen that over the last 2 months, and I think we're cautiously optimistic that our back half expectations are kind of being realized as we expected.

On the tank car and sort of the specialty car, mix in your business and that's sort of -- that was improved, obviously, as part of your margin structure in the most recent years in addition to your own in-sourcing and facility rationalization efforts. I'm curious if you could share -- you touched on the tank cars and specialty, how much of the margin gains recently in manufacturing were sort of mix related? And if that sort of tapers off? Or is that supposed to sort of maintain in the business, given those are sort of higher complex cars that demand higher payment?

That's a great question. And I think the way that we've thought about it and talked about it is that we have probably a couple of hundred basis points of benefit, say, like a year ago, and even Q4 of our fiscal '24. And you saw this big kind of run up and we had 17% manufacturing margins and I think 20% aggregate gross margins in earlier in fiscal '25. But then as the year progressed and margin in manufacturing kind of moved back down, that to us is a little more of a more normalized margin profile for us, where we're building a more diversified, less specialized kind of car mix at that point.

And so kind of what we see going forward is not a big shift from where we're at right now. But we will be ready when these cars are needed, they will age out and there will be growth in this area. So we'll be ready to go.

I know we have a couple of minutes because I wanted to touch on this topic of sort of rail modal shift, taking share from trucks is a topic, if these railroads can sort of undergo these mergers, that's Union Pacific, Norfolk Southern 2027 time frame. There's two sides to this argument. You could make the railroads more efficient by eliminating interchanges and that may increase the cycle times for every car across the network. And that's one aspect of it, and we get questions on, does that potentially mean you need fewer cars across the network in the longer term if the rails can become more efficient. On the other hand, if the rail become more efficient, you can take share. So I'm curious...

You just answered your question.

Well, I'm curious, what's your perspective on sort of what wins out in those scenarios? And what's more impactful to your business?

I think you captured it just right, right, that on one hand, if the railroads get more efficient, are they going to need more cars. I've been in this business now for a long time. So I've seen some very interesting mergers. I've seen some interesting bizarre things that happen. Hopefully, the railroads if they do go forward with a merger, they figured out ways for it to not create the congestion that we've seen in the past. And a perverse thing that happened when there was congestion is they order even more cars.

So hopefully, we've learned, I focus on going back to my point that I made earlier about the rails being the circulatory system of the U.S. economy is whatever it takes to make the rails more efficient to transport these products should be good for the overall industry, right? And if it's good for the industry, it will be good for Greenbrier because we'll be able to serve our customers. So we've gone through a lot of different markets. I'm not particularly worried about it in one way, shape or another.

All right. Well, thanks for that perspective. And maybe a few, I guess, 30 seconds left here. Do you guys want to have any parting thoughts that you'd like to share?

No, I just appreciate everyone's interest in Greenbrier. I do think it's a -- we are on a very great journey with what we've done over the last couple of years of -- really, again, driving great financial performance more through to the bottom line on less top line, less deliveries. We are transforming. I feel like at times, we constantly are in this prove it or show me situation of "Oh, yes, yes, yes, you guys say that you're going to do this." I think we've done it, and we're going to keep doing it. So we've got a great team, and I look forward to the future.

Absolutely. Thanks for coming out.

Thank you.

Thank you.

Thanks, Andrzej.

Appreciate it.

Hello, and welcome to the Greenbrier Companies Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] At the request of the Greenbrier Companies, this conference call is being recorded for instant replay purposes.

At this time, I would like to turn the conference over to Mr. Justin Roberts Vice President of Financial Operations, the Americas. Mr. Roberts, you may begin.

Thank you, Megan. Good afternoon and evening, everyone, and welcome to our fourth quarter and fiscal 2025 Conference Call. Today, I am joined by Lorie Tekorius, Greenbrier's CEO and President; Brian Comstock, Executive Vice President and President of the Americas; and Michael Donfris, Senior Vice President and CFO. .

Following our update on Greenbrier's record-setting 2025 performance and our outlook for fiscal '26, we will open up the call for questions. Our earnings release and supplemental slide presentation can be found on the IR Section of our website. Matters discussed on today's conference call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Throughout our discussion today, we will describe some of the important factors that could cause Greenbrier's actual results in 2026 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier. We will refer to recurring revenue throughout our comments today. Recurring revenue is defined as leasing and fleet management revenue, excluding the impact of syndication activity.

Finally, Greenbrier will be participating in the following conferences over the next few months. The Stephens Annual Investment Conference on November 19, the Goldman Sachs Industrials and Materials Conference on December 4 and the Susquehanna Virtual Freight Forum on December 10.

And with that, I'll hand the call over to Lorie.

Thank you, Justin, and good afternoon, everyone. I appreciate you joining us today. A strong finish in the fourth quarter made fiscal 2025 Greenbrier's best year yet. We achieved record full year diluted earnings per share and delivered record core EBITDA, supported by disciplined execution across our business. Our aggregate gross margin was nearly 19%, and and Greenbrier generated more than $265 million in operating cash flow. We also achieved a return on invested capital of nearly 11% within our long-term target range. These results reflect our team's resilience and the strength of disciplined execution paired with efficient operations. We're seeing the tangible results of the transformation we set in motion nearly 3 years ago, with key long-term performance goals being realized. Greenbrier today is a stronger, more agile organization, a business better positioned to deliver performance across market conditions as proven by our record financial results for 2025 on 2,000 fewer deliveries than in fiscal 2024. Strong operating performance in manufacturing led to healthy margins and our network is operating with greater efficiency, precision and alignment than ever before. Process improvements, balanced production lines and disciplined cost control have driven sustained expansion in manufacturing margins. Our flexible manufacturing capacity allows us to rapidly respond to changes in demand and maximize operating efficiency. Our [indiscernible] capacity expansion in Mexico is effectively complete and the full value of the initiative will be realized as production scales through 2026 and beyond. Likewise, we continue to drive overhead efficiencies throughout our global manufacturing network. This agility and responsiveness are a competitive advantage for Greenbrier.

In Europe, we continue to unlock efficiencies through ongoing footprint rationalization driving cost savings and developing a more competitive and responsive platform for the region. As we announced today, we're proceeding with the closure of 2 additional facilities. Combined with our previously announced actions, we expect annualized savings of $20 million from this footprint rationalization. I should note that these actions and savings will not impact our European production capacity. Rather, they position Greenbrier to sustain higher margins and varying demand environments. The steady growth of our Leasing & Fleet Management business has been an important contributor to our performance. Our lease fleet continues to perform exceptionally well with high utilization rates and strong renewals. We've maintained a disciplined approach to growth, and are on track to meet our goals of doubling recurring revenues by fiscal 2028. Our capital allocation framework remains focused and disciplined. We deploy capital where returns are strongest, while maintaining balance sheet strength and liquidity. This prudent approach and a strong liquidity position support our ability to fund strategic priorities while delivering attractive returns to shareholders. The growth of our recurring earnings, combined with our strong manufacturing provide a durable recycle foundation for Greenbrier. Integration is a defining feature of our model. manufacturing generates efficiencies and scale and leasing provide stability. And together, they create an earnings base that differentiates Greenbrier. The operational progress and recurring earnings we've built into our business means that Greenbrier now operates at a structurally higher level of resilience. Our results this year clearly demonstrate that our efficiency and lease fleet growth initiatives have raised the baseline of our performance and position us to achieve what I described as higher lows. Today, we are well positioned to continue generating cash flow, financial performance and shareholder value for years to come.

Our fiscal 2026 guidance reflects this improved foundation. Our model is designed to perform with durable returns and the flexibility to respond to market demand. Looking ahead, we remain committed to operational excellence, innovation and responsible growth.

In closing, I want to recognize our employees, customers and shareholders for their trust and partnership. Fiscal 2025 was a milestone year for Greenbrier, setting the stage for continued momentum into the year ahead and beyond.

And with that, I'll turn the call over to Brian.

Thanks, Lorie, and good afternoon, everyone. Greenbrier delivered exceptional performance in fiscal 2025. In addition to the record financial results already mentioned, we maintained consistent execution during the year and our gross margin improved from the actions we've taken over the last 2 years to enhance our production efficiency. Many of these improvements are structural and are continuing to deliver benefits. We view the near-term market conditions as an opportunity to intensify our focus on production layout, process improvements, cost reduction initiatives and optimization projects ahead of a production ramp-up anticipated later this year. While demand is an external factor, we remain relentlessly focused on improving operating efficiencies and reducing costs.

In Q4, Greenbrier received approximately 2,400 new railcar orders valued at more than $300 million, bringing full year orders to more than 13,000 units. We closed the year with a backlog of 16,600 units valued at $2.2 billion. This backlog reflects a healthy mix of product types and customers demonstrating our market leadership. As a reminder, programmatic railcar restoration work is excluded in these figures, this work bolsters manufacturing margin and has performed on approximately 2,000 to 3,000 units annually. We continue to focus on order quality with activity that supports efficient production scheduling and sustained attractive margins. Our commercial team has done an excellent job navigating a complex operating environment. In North America, freight trends and tariff dynamics are moderating new railcar demand, leading many fleet owners to extend acquisition time lines. I think it's worth reiterating what Lorie mentioned earlier, we achieved record earnings despite operating in a modest market for new railcar demand. In my 27 years at Greenbrier, earning more than $6 per share in a 30,000 car build year seemed unlikely until now. This is a clear reflection on how this leadership team has evolved and what it's capable of achieving.

Across our global businesses, we are focused on optimizing our manufacturing footprint and driving additional cost efficiencies. In Europe, ongoing footprint actions are expected to yield about $20 million in annualized savings. Leasing & Fleet Management delivered another solid year. Recurring revenue reached nearly $170 million over the last 4 quarters, representing almost 50% growth from our starting point of $113 million just over 2 years ago. Our lease fleet grew by about 10% in fiscal '25 to just over 17,000 units with high fleet utilization at 98%. The fleet remains diversified by car type, lease term and customer. In fiscal '26, 10% of our leased railcars are up for renewal, and we've already renewed 1/3 of those units at substantially higher rates. We're building a balanced railcar portfolio through discipline and selectivity and we see opportunities to accelerate fleet investments in the medium to long term.

Our lease fleet debt facilities, including the warehouse credit facility, senior term debt and asset back term notes are structured as nonrecourse obligations. They are prudently aligned with current needs and support growth at an average interest rate in the mid-4% range, well below prevailing market rates. These facilities provide stability, flexibility and efficient access to capital. Greenbrier enters fiscal '26 with backlog visibility, a disciplined commercial pipeline, and an operating platform designed for consistencies. Our teams remain focused on sustaining execution, optimizing mix and maintaining the balance between manufacturing and leasing which has proven so effective. As Lorie noted, the transformation of our business has positioned Greenbrier to deliver more stable outcomes through the cycles. The commercial organization is fully aligned with that goal, pursuing opportunities that enhance the through cycle of earnings, strengthen relationships and extend our competitive advantage. We are confident in our near-term performance and long-term outlook. Our experienced leadership team has consistently demonstrated the ability to successfully manage through market cycles. We remain focused on steady execution and sustained performance as we advance our strategic plan. The progress we've achieved meaning or surpassing every target we have put forward reflects the expertise, commitment and teamwork of Greenbrier employees worldwide. I'm deeply appreciative of their efforts and proud of what we continue to accomplish together.

And with that, I'll hand the call over to Michael.

Thank you, Brian. Greenbrier's momentum carried through the fourth quarter, driven by strong operational performance and meaningful progress on our strategic priorities. We delivered record profitability through effective cost management and disciplined execution. These results position us well entering fiscal 2026.

Fourth quarter revenue was nearly $760 million, in line with expectations, enabling us to meet our full year revenue guidance. Aggregate gross margin for the fourth quarter was 19%, an improvement of 90 basis points sequentially. This was driven by stronger operating performance at our Mexico facilities, favorable foreign exchange from a stronger Mexican peso and disciplined manufacturing execution. These gains were partially offset by a $3 million impact related to our European footprint rationalization. Notably, this marks the eighth consecutive quarter in which we've met or exceeded our mid-teens gross margin target.

Operating income was $72 million, nearly 10% of revenue and this was partially impacted by $6 million in our European footprint rationalization. Our effective tax rate of 36.4% above -- was above both our prior quarter and our full year structural rate of about 28% to 30%. This was primarily due to jurisdictional income mix.

Core diluted earnings per share was $1.26 and core EBITDA for the quarter was $115 million or 15% of revenue. For the 12 months ending August 31, 2025, our return on invested capital was nearly [ 1% ] and continues to be within our 2026 target of 10% to 14%.

Shifting our focus to the balance sheet. Greenbrier's Q4 liquidity level was the highest in 10 quarters at over $800 million consisting of more than $305 million in cash and almost $500 million in variable borrowing capacity. We generated nearly $98 million in operating cash flow for the quarter and delivered positive free cash flow for the year, driven by strong operating performance and working capital efficiencies. Liquidity remains robust, supported by solid operations, continued improvements in working capital and expanded borrowing capacity. On debt specifically, we updated our financial statements and disclosures to clearly distinguish between our leasing debt, which is nonrecourse and the rest of our business. This additional disclosure should help us clarify metrics and performance as we grow our lease fleet and nonrecourse debt.

Now switching to capital allocation. We are committed to responsibly returning capital to our shareholders through a combination of dividends and stock buybacks. Greenbrier's Board of Directors declared a dividend of $0.32 per share. This is our 46th consecutive quarterly dividend and reflects our confidence in our business. Additionally, during fiscal 2025, we repurchased about $22 million in shares, leaving $78 million remaining in our share repurchase authorization. We will access the capacity opportunistically during the fiscal year and within the framework of a broader capital allocation strategy. With a resilient business model and strong balance sheet, we're positioned for continued performance and long-term value creation. Our guidance for fiscal 2026 is as follows: New railcar deliveries of 17,500 to 20,500 units, including approximately 1,500 units from Greenbrier, [ Max ] in Brazil. Revenue is expected to be between $2.7 billion to $3.2 billion. We expect aggregate gross margin between 16% and 16.5%.

Operating margin is expected to be between 9% and 9.5%. I will point out that included within our guidance is a reduction in SG&A of about $30 million versus fiscal 2025.

Earnings per share will be between [ $3.75 and $4.75 ]. For capital expenditures, we expect investment in manufacturing to be approximately $80 million and gross investment in Leasing & Fleet Management of roughly $240 million. Proceeds from equipment sales and -- are expected to be around $115 million, resulting in net capital investment around $205 million. With our strategic goal of investing of $300 million to grow our lease fleet each year, we plan to continue to look for opportunities to increase this investment. This year, our team delivered record earnings and the highest liquidity in 10 quarters, while continuing to execute our long-term strategy to strengthen the business ahead of the next growth phase. We remain focused on consistent execution and disciplined capital deployment with strong financials and operating excellence, we're well positioned to navigate near-term market conditions and drive long-term shareholder value.

And now we'll open it up for questions.

[Operator Instructions] Our first question comes from Ken Hoexter with Bank of America.

So just looking at the outlook, right, so you're starting off at 17,500 to [ 25,000 ] cars down from 21,500 this year. At earlier at an industry conference at the start of this year, the expectation was car builds are going to be lower for the next few years. Maybe just your insight on the backdrop in the market. Your anticipation of if Europe can help offset that? And is this -- we just heard from another company, I guess, a locomotive manufacturer last week that the expectations are down 30%, 40% for car builds into next year based on industry stats. Can you just talk about what's going on in the backdrop and how you can kind of make up for that?

Yes. Ken, it's Brian. I'll take this down and maybe Lorie can [indiscernible] in around the edges. At the end of the day, when we look at -- we think we're -- if you look at the cycle, we think we're at the low point of the cycle right now is -- and our inquiries are getting substantially more robust. We are forecasting bringing back some product in the back half of the year. And keep in mind that we made a material shift in the way that we think about this business a couple of years ago when we pivoted to utilizing some of our manufacturing space for programmatic railcar restorations. These are large programs that were typically done at repair shops in a very inefficient manner. And they have offset a lot of the degradation that we've seen over the last couple of years in a and we continue to see that building as a partial offset. But we also think the market is a bit stronger than what a lot of people are predicting, particularly when you think about the tank cars side of the world and the market and what we're seeing with some resurgency in oil demand as well as just upstream and downstream chemicals and replacement.

Let me just say -- I think you said it really well, Brian. While we see green shoots coming in our markets, the [indiscernible] thing to think about what we have done here at Greenbrier is deliveries and backlog is an important metric, but it's not the only metric that's driving our financial results and our cash flow. So we're really proud of how the team is putting up great performance and results even in a more modest background.

Great. And then you noticed -- noted at the beginning of the call, something was done in Mexico. I just didn't hear what you said. Can you explain what's going on? And I just want to understand within that, right, given the tariffs, what has been the impact on whether it's cost of inputs, pass-through of costs? Maybe just take a minute on what's going on. But if you could start with what you had noted -- you had done or changed or improved in Mexico. I missed that.

Sure, Ken. So this is -- actually, I think we announced it at our Investor Day a couple of years ago, where we embarked on a journey to invest in our facilities in Central Mexico for in-sourcing because as we ramped up demand, we realized that we were having to go further and further to source significant components. So we've wrapped up the insourcing project this year, and it has been providing benefits to our financial results, our manufacturing and aggregate gross margin over the last couple of years, and we expect that to continue for many years to come.

Yes. I'd just add on to what Lorie said is our charter has been taking cost out of the business for the last couple of years, along with the in-sourcing investment we've really been focused on taking hours out of our units and reducing cost overall, which provides us a bit of lift in softer markets.

And any thoughts on the tariff implications?

No. On the tariff side, I just want to remind everybody that we take pride in the way that we construct our contracts. We feel like we're pretty well protected in our contracts just depending on which way they go. The U.S. footprint is also an important strategic part of what we've always maintained. And so we have some ability to pivot in the event that there are some substantial changes. And then again, we continue to work with our colleagues on the Hill to really find balance in these negotiations as there -- they seem to ebb and flow every day.

Okay. And if [indiscernible] can indulge me for 1 or 2 more. Just you mentioned after closing 2 facilities, how many did you have in Europe? And what are you down to?

We had 3 facilities in Romania and 3 in Poland. So now we will be down to a total of 3 facilities, 2 in Romania and 1 in Poland.

Okay. Are you done with the rationalizations at this point do you think? Or have you -- is that just consolidating production? Or is it reduced activity?

Actually, Ken, what is really great about this. And if you are ever over in Europe, we'd be more than happy to host you into 1 of our facilities. But the properties that we acquired, particularly in Romania, have fairly significant acreage. And what we've been on a journey over the last few years is to really bring more modern -- modernization to how we produce wagons. Now wagons in Europe are a lot more specialized than they are in the North American market because we share the rails more frequently with passenger transmission. But what we realized as we modernize some of our processes, is that you have more footprint than we really needed, which meant that we have more overhead than we really needed. So we embarked on the closure of the Arad facility, which was the largest facility in Romania in our second quarter. And then with economic uncertainty in Europe, we accelerated the pace of rationalizing 2 other of our smaller locations in Poland. I think that, yes, this wraps up what we think we need to do, but I think that this leadership team has shown that as opportunities present themselves or as we need to make adjustments in whatever market we are in, we will make that adjustment.

Yes. Ken, it's Brian. Maybe just a little escalation point on what Lorie said is we really are consolidating production into fewer facilities. .

Maintaining the [indiscernible] capacity.

Exactly. Just consolidation because we have a lot of capacity at those facilities. And as far as the journey goes, we continue to look at North America as well and what we can do to continue to [indiscernible] cost out. So I'd say while it's kind of 80-20 rule, we're done, there's still always opportunity to continue to improve and rationalize further.

Last 1 for me is you gave the full year. Anything you want to comment on first quarter outlook? I guess you ended at 4,900 deliveries. How should we think about first quarter? And with that, I thank you for your time.

Hats off to U.K. You don't never know if you don't ask, but no, we're not inclined to give quarterly guidance. Unless Justin or Michael, you guys want to have something you want to share.

No, I think that's fine, Lorie.

Is there a normal seasonal move from how you end in fourth quarter to first quarter? Or does that not play just given your move to balance production?

Yes. And I'll take that one. I do think we'll see a stronger back half of the year than the beginning of the year. We're still working through our backlog, and we're still really excited about, as Brian mentioned in his prepared remarks that we're expecting the back half of the year to pick up as well. So it's probably stronger in the back half than the first half.

And I would say we've also been reminding workforce that just because we moved from August 31 to September 1, it's not like a reset the clock. We've focused on just moving forward each day, doing the best that we can and looking to great long-term value for our shareholders. .

Next question comes from Bascome Majors with Susquehanna.

I'll start out where Ken left off. I know you don't want to give quarterly guidance nor probably should you. But can we talk about maybe the build pace? I mean, I think there were some prepared remarks talking about we hope they get better in the second half of the year. I would assume that suggests some back-end loadedness but that doesn't necessarily flow through to the bottom line, not at the bottom line. So can we just walk through kind of maybe frame it as like where we were in 4Q? Is that the run rate into 1Q just from a pure production standpoint, and what sort of recovery are we embedding in the second half? And is that order driven?

Yes. So Bascome, good to hear from you, by the way. And I would say that we kind of -- if you think about the last 4 quarters and then what we see in the next 4 quarters ahead, you'll see kind of the first 2 quarters of fiscal '25 were higher production, but we kind of stair stepped down throughout the year. And we expect the Q1 and Q2 of fiscal '26 to be at similar rates as what we're -- what we exited fiscal and then we'll be ramping up in Q3 and into Q4 to kind of ideally have more state stability in fiscal '27. But it's a little more of our normal seasonal back half loading and some of that is explicitly order driven at this point, just driven by [indiscernible] customers need cars and some of it is driven by expectations. It's just kind of you think about longer lead time items and things that we've talked about in the past. You just have to allow a little extra time you don't turn on light switches or reactivate or ramp up lines overnight, unfortunately. So -- and we can probably -- if there's any additional kind of detailed questions, we can handle on our call downs as well.

Yes. And just to maybe frame it up qualitatively, though, is the production plan based on the current backlog back half loaded? Or is there an assumption that orders could improve to drive that back end loaded this primarily?

It's based on backlog orders that we're in discussions with that we expect to finalize and then a fair amount -- not a fair amount, but some improvement as we turn the year into calendar '26 just based on what customers are telling us they need.

And I would say that we go into every single fiscal year with some open production because we actually -- that's beneficial for us to be able to be quickly responsive to customers' needs.

Yes. And just -- this is Brian, just chiming in a little bit as well on the order side. So when we think about the previous question was related to locomotives, keep in mind that there's a real large number of cars that continue to attrit out of the North American fleet. And we're at the lowest levels that we've been in probably 4 or 5 years from a national fleet perspective. So there still is a lot of replacement-driven demand versus growth demand, which may be different than what the locomotive people and some others are seeing in our space.

All right. And -- we talk a little bit about the balance sheet and funding for the leasing business? I mean you talked about hitting your recurring revenue being on pace for your recurring revenue target. And do you expect your investment in the lease fleet to be similar? And over the long term, I know you have a CapEx guide for this year, but over the long term, do you think that's pretty similar year-to-year? Or is there some cyclical gyrations to that?

And maybe lastly, as part of that, has the secondary market maintained its stability? And do you have product to continue to support a P&L impact from that net revenue or sorry, our net sales piece of the net CapEx?

And so maybe I'll just say something right quick, and then I know Michael and Brian will fill in behind me. But we are looking at all opportunities. We do see secondary market opportunities as well as new lease originations that can into our lease fleet. So we have got a focused and agile leadership team that is going to be [ velcro ] to our customers to understand their needs and figure out how we can drive value.

Yes, it's Brian. I just would add that our strategy remains consistent. We have talked about adding about $300 million net each year that continues to be our plan, good steady growth. However, to Lorie's point, the secondary market is still very robust. There's a number of books in the market today that we're looking at as well as sort of others. And we have assets that we continue to trade as we rebalance portfolios and we think strategically about how we align our lease fleet long term. So we're very active in the secondary market.

And from a shaping perspective, you talked a little bit about the production plan and reasons why you think it can be stronger in the second half of seasonality and some of the conversations you're having with your customers that you think will convert in the calendar '26. Is -- mean you've talked about your cost takeout program in Europe and frame that as maybe 1 driver to margins. But beyond that, is it really just production rates and absorption that are going to be the biggest durational driver of margins? Or are there some other things going on between pricing and other inputs that we should think about on the margin cadence for the year?

As we think about Baskin, from a cost takeout perspective, this is actually an interesting time period from an operational perspective because this is giving the manufacturing teams an opportunity to take a little bit of a deep breath and look at our -- not just our overhead costs as we've talked about in the past, with an eye for reduction, an eye for reducing inefficiencies but also take a look at overall our production processes and take unnecessary moves out and basically take hours out, take cost out, and it's kind of a soup-to-nuts approach of how can we reimagine some of our production processes and manufacturing. And so what we're seeing is that started this journey, as Lorie nd Brian and Michael mentioned over the last few years. But this is an opportunity this year as we've got a little bit of a slower cadence in the first half to focus on some of that activity versus just trying to get cars out the door as effectively as possible. And so this is an opportunity where we're able to redeploy some of our plant engineers, our industrial mechatronic engineers and move them around to different facilities and cross-pollinate to make sure that we're sharing best practices, make sure we've got uniform designs. And all of these are really adding up to improved margins. It's not just about overhead absorption, although that always plays a key role as well.

Which I'll then throw in a plug for why we keep thinking differently about how do we serve our markets and if it means doing what you call it, programmatic...

Yes, railcar restoration and [indiscernible].

Programmatic railcar restoration in what would be traditionally a new car facility, that's fantastic. And it's taking -- it's utilizing capacity where we've made an investment. It absorbs overhead, and it generates good returns.

Maybe lastly for me, can you talk really high level about the competitive landscape in new car builds and order taking. I mean, has has price become more difficult as the production rate of the industry has gone down to this level? Has it been pretty stable? I mean, you've been pretty clear on focused on doing the right things for your shareholders and returns on your business. But if you could just kind of talk about the back and forth between you and the remaining competitors in the space and whether that's able or getting more competitive in this downturn?

Yes. It's a good question, Bascome. It's Brian. And at the end of the day, it's a little both. So when you look to more commoditized markets, some of your covered hopper cars and what have you. You're seeing a lot more pricing pressure on cars. I'd say that everybody can build versus tank cars and some of the more niche cars that we're building today. So it's a mixed bag. You're seeing good discipline on the tank side. You're seeing good discipline on other specialty-type cars, which is quite a bit of the market today. But where you do see the pricing pressures on those cars that I deem more commoditized, [ grain ] cars and things like that.

And with that, we'll go ahead and end the call. Thank you very much for your time and attention, and --- Oh sorry, Lorie wants to say something.

And I'll just say for all of our employees that are listening to the earnings call today, I want to, again, appreciate all of the work that each of you bring every day, staying safe and executing to take care of our customers, each other to generate a record year of financial performance. Thank you very much.

Thank you very much, everyone. If you have questions, please reach out to Investor Relations at gbrx.com. Have a great evening.

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