Wabash National Corporation Aktie

Hello, everyone. Thank you for joining us, and welcome to Wabash First Quarter 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to John Cummings, Senior Director of FP&A and Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. We appreciate you joining us on this call. With me today are Matthew Lanigan, President and Chief Executive Officer; and Pat Keslin, Chief Financial Officer.

Before we get started, please note that this call is being recorded. I'd also like to point out that our earnings release, the slide presentation supplementing today's call and any non-GAAP reconciliations are available at ir.onewabash.com. Please refer to Slide 2 in our earnings deck for the company's Arbor disclosure addressing forward-looking statements.

I'll now hand it off to Brent.

Thanks, John. Before we begin, I want to recognize Mike [indiscernible] who as of April 8 is transitioning out of Wabash. Mike has been a meaningful contributor to Wabash for 14 years and playerd an important role in shaping our [indiscernible] and our strategy. This impact on the organization is lasting, and we are grateful for his leadership and commitment to Wabash. We wish him all the best as he enters this new chapter of his life. .

As we entered the first quarter, we did show a clear-eyed view of the environment in front of us. Freight markets were uncertain and customers continue to act cautiously. Order patterns were uneven, asset utilization inconsistent and capital decisions across the industry were being evaluated carefully. At the same time, we were encouraged by early signs of stabilization and improving fundamentals that typically perceive a broader recovery. Now as we move into the second quarter of 2026, both our customers and our visibility continues to improve. And it shows an environment that is building the set up for a constructive 2027 as spot rates contract rates, capacity and demand, all are coming together and drive back to replacements per equipment and possibly beyond as [indiscernible] begin to plan more confidently. Against that backdrop, our priorities have not changed. We are focused on controlling what we control, protecting margins through the cycle and executing against our long-term strategy. That means the winding cost to demand, maintaining pricing discipline and continuing to invest in areas that differentiate Wabash, particularly parts and services, digital enablement and our manufacturing operations. The actions we have taken positions us favorably for the market's return versus prior downsizes. We are deploying capital more effectively, more efficiently and at levels above what has been historically possible, managing liquidity with discipline and building a business that will emerge from this cycle stronger, more insulin and better positioned to perform as market growth accelerates.

Execution remained a focus in Q1. Key operating metrics including on-time to promise, first-line quality and total recordable incident rates continue to improve and set new benchmarks. That performance reflects the experience, commitment and capability of our team, I want to recognize our employees for their continued focus and discipline.

Market conditions in the first quarter were largely consistent with what we saw exiting last year. We are encouraged by the progress being to take shape across all underlying indicators. It brings us in spikes in manufacturing activity, for example, or increasing visibility into recovery. As evidenced by the 19% increase in backlog versus prior quarter to $837 million, while geopolitical uncertainty continues to influence customer behavior at present, with fleets remaining conservative, extending asset wise and prioritizing flexibility of expansion. The [indiscernible] is shifting quickly and customers are increasingly engaging to discuss their future needs. As expected, the early stages of this recovery continue to be supply driven. Capacity continues to contract as enhanced driver eligibility enforcement, designed to improve safety across the industry, improved freight rates and begin to restore carrier profitability. At the same time, key freight indicators are exhibiting some strongest year-over-year performance, including the ATA [ for-hire truck tonnage ] index having its largest year-over-year increase since October of 2022. And Logistics Managers Index increasing 4.2 points sequentially, the fastest level of expansion since May of 2022. As this recovery builds, so spending will follow. Wabash is well positioned to respond with the capabilities, capacity and customer relationships to support increased demand and increased market share. Looking ahead, our near-term demand outlook remains balanced as customers convert improving profitability and capital spending decisions. Beyond that, the outlook is increasingly constructive as we move into 2027. Multiple leading indicators continue to trend positively. Customer conversations are becoming more optimistic and the very positive impact of the recent change in Section 232 tariffs and the forthcoming positive progression of the antidumping and countervailing duty process further supports our confidence as we approach the Q3 and Q4 this season for 2027.

While we prepare to exit this stage of the market cycle, Operational discipline and cost management remains rational to how we run the business for both near-term assuredness and long-term improved profitability. That means stay disciplined on costs, protecting liquidity and remaining ready for multiple scenarios. The plant idling actions announced in our January 2026 goal are progressing as planned, with $3 million of the costs [indiscernible] in a prior call recognized in Q1 2026 and in line with projections. Beyond those actions, we continue to evaluate opportunities to rationalize our portfolio and rightsize fixed costs while remaining committed to our strategy of delivering industry-leading supply chain solutions from first to final line. Our objective is straightforward, renew cost in a sustainable way that protects margins and liquidity today and create leverage for improved profitability and cash generation as volumes recover. We remain agile and prepared to adjust spending, including capital expenditures [indiscernible] evolve. At this time, we have been deliberate about what we do not get.

Investments in safety, quality and customer support remain nonnegotiable. We continue to fund initiatives that expand recurring revenue and strengthen customer relationships, particularly within Parts and Services. The result of a cost structure that is more flexible, more resilient and better aligned with current market realities, while preserving our ability to scale efficiently as demand improves.

Recent developments related to Section 232 tariffs and the pending antidumping and countervailing duty rulings are expected to provide meaningful relief for the domestic industry. Wabash is proud of the [indiscernible] manufacturing footprint and workforce. And as these measures take effect and the playing field begins to level in late 2026 and into 2027. We are confident in our ability to continue grow share and benefit from greater pricing stability. We are also well positioned operationally. The additional dry van capacity from our Lafayette South plant completed in late 2023, provide scalable and efficient capability to produce approximately 10,000 incremental trailers versus prior up cycles. That flexibility allows us to support customer effectively as conditions normalize. As the market recovery continues to solidly take hold over the next few quarters, uncertainty across the industry will continue to subside. But until then, we will continue to provide quarterly guidance only as we navigate this transition [indiscernible]. This approach allows us to deliver more accurate and relevant outlooks while acknowledging limited visibility on timing.

Customer engagement is increasing and our sales team remains active. As mentioned earlier, backlog improved 19% sequentially, which is a historic high rate of growth for the first quarter. For the second quarter, we expect revenue in the range of $380 million to $400 million and adjusted EPS in the range of negative $0.40 per share and negative $0.60 per share. This outlook is consistent with our expectation of Q1 2026 represented the low point for the year, with the sequential improvement expected in each subsequent quarter. We remain focused on execution, liquidity and readiness to capture profitable growth as market conditions continue to improve.

I would now like to highlight some of our strategic initiatives. Digital enablement continues to be a key differentiator for Wabash. At the recent NTEA event, which showcased [indiscernible] we significantly reduced friction from the quoting and product configuration process for our customers. The response exceeded expectations, and we are focused on scaling these capabilities across our network as we create greater advances in both speed and quality of the customer experience. Key enablers to capture an additional market share in a broad coming expanding market. Across the organization, we are using digital tools to improve selling, tracking and supporting our products, enhancing fleet visibility, enabling smarter maintenance decisions, improving inventory efficiency and elevating the customer experience through data-driven AI insights. These capabilities are particularly critical within Parts and Services where they support more predictable revenue streams and reinforce our shift from products to solutions. What is coming into focus for Wabash are clear opportunities through the recent advancement in AI technology to lead forward in operations, supply chain, working capital efficiency and the customer experience. I am very excited to share in the future what we will look to accomplish over the next 36 months and beyond in terms of growth of profitability and customer satisfaction. The synergies from these initiatives lead us to target dry van share of more than 25% in the first half of the cycle. I also want to touch on upfit business, which remains an important component of our strategy and a clear example of how we are expanding beyond traditional equipment manufacturing.

Demand for vocational body-based solutions remains attractive, particularly across utilities, telecom, landscaping, highway construction and solid waste, where fleet complexity and uptime requirements create a strong need for local, fast-turn customization. New site openings are progressing in 3 of the largest using metroplexes designed to serve the Chicago, Atlanta and Phoenix areas. These markets set within the state concentration that drives many units and new locations are intended to improve proximity, reduce lead times and increase win rates by bringing install and customization capability closer to where customers operate. We are already supporting major national accounts out of our Atlanta location and we're confident the growth we have seen in our existing [indiscernible] locations will translate to the same new sites as volumes ramp and capacity utilization improves.

At peak, we expect the additional upfit sites to generate incremental revenue in the range of $10 million to $20 million per site and gross margins approaching 20%. There is more we can do with these assets over time and into the future. I will describe how we will bring the addressable markets of each of these and future locations on additional calls.

Over time, our work to deploy digital tools, AI insight and upfit capabilities strengthens our Parts and Service platform, deepens customer relationships across our products and creates a natural pull-through for additional offerings. They also strengthened our Transportation Products business in addition to recurring revenue. Together, they help reduce cyclicality and improve our margins.

I'm going to end my comments discussing Workplace Safety. I want to recognize the organization's continued drive for safety excellence. In Q1 2026, our overall [indiscernible] rate improved 7% versus Q4 of 2025 and 19% versus Q1 of 2025. Total injury declined 9% sequentially and 42% year-over-year. The injury rate of less than 1 is attainable and Wabash is on a mission to achieve it. It reflects the level of operational discipline we are driving today on our shop floor and the readiness we have to perform as the market moves upwards. I am very proud of our people on the manufacturing floor and I'm eager to have them show what they are truly capable of when they rise to meet the challenges and the opportunities contained within the acceleration of demand at the start of a new industry period of expansion.

With that, I'll turn it over to Pat for his comments.

Thanks, Brent. I'll begin with a review of our first quarter results. For the first quarter of 2026, consolidated revenue was $303 million, coming in slightly below the low end of our prior guidance range. During the quarter, we shipped 5,338 new trailers and 1,527 truck bodies. As expected, challenging market conditions persisted throughout the quarter. While we did see sequential top line growth in truck bodies from Q4 2025, that improvement was more modest than anticipated. The truck body business entered the down cycle later than traditional trailers. Based on current visibility, we now expect this segment to remain soft through the first half of 2026, with a recovery profile that trails dry vans by approximately 6 to 9 months. Lower production volumes continue to pressure operating efficiency. As a result, adjusted non-GAAP gross margin was negative 2.6% of sales and adjusted non-GAAP operating margin was negative 18.3%. As a reminder, these adjusted results exclude costs associated with the item of our Little Falls and [indiscernible] facilities as well as favorable purchase accounting impact from the acquisition of our Marketplace joint venture.

Adjusted non-GAAP EBITDA for the quarter was negative $38 million or negative 12.5% of sales. Adjusted non-GAAP net income attributable to common shareholders was negative $47.5 million or negative $1.17 per diluted share. These results were below expectations, driven primarily by lower than planned volumes. While results were below our prior guidance, our view that Q1 represents the low point of the year remains unchanged, and we continue to expect sequential improvement as we move forward.

Turning to our segments. Transportation Solutions generated $250 million in revenue and reported an operating loss of $34.5 million on a non-GAAP basis. Results reflect lower demand across core markets and the inefficiencies associated with reduced production levels.

Parts and Services delivered $54 million in revenue and negative $2 million of operating income on a non-GAAP basis. Segment profitability was adversely affected during the quarter as we incurred stock costs for newly established upfit sites that have not yet begun generating revenue, resulting in a heavier cost burden, while volumes are still ramping. While upfit operations were breakeven in the quarter, we have clear line of sight to growth in the coming quarters and expect strong profitability as capacity utilization improves and we meet customers where they operate.

Turning to cash flow. Operating cash flow for the quarter was negative $33.7 million resulting in negative free cash flow of negative $37.3 million. As of March 31, total liquidity, including cash and available borrowings was $165 million. Throughout the ongoing market softness, we have remained focused on preserving liquidity and maintaining financial flexibility. This disciplined approach positions us to manage near-term headwinds, while continuing to support our strategic priorities and longer-term initiatives. During the first quarter, we invested approximately $4 million in traditional capital expenditures and returned $3.5 million to shareholders through our quarterly dividend. As we navigate uncertain market conditions, we are maintaining a prudent and conservative approach to cash management in 2026. Preserving liquidity and strengthening balance sheet resiliency remains central priorities. Working capital management continues to be an area of strong execution and we are preparing the organization for an efficient working capital ramp as markets recover. In support of this effort, we are engaged in discussions with our banking partners and we intend to address our [indiscernible] ABL facility ahead of September 2026 when the ABL would turn current.

Looking ahead to the second quarter, we expect revenue in the range of $380 million to $400 million, and operating margin of approximately negative 5% and adjusted earnings per share in the range of negative $0.40 to negative $0.60. Capital expenditures remain under close review. While we are prepared to adjust timing based on market conditions, we currently expect a modest sequential growth in Q2 spending following disciplined deferral actions in the first quarter. As we communicated on our prior call, Q1 was expected to be the weakest quarter of the year, and that expectation is reflected in our Q2 guidance. We anticipate continued improvement as we progress through the second half of 2026 with positive adjusted EBITDA expected in the second half of 2026.

In summary, the first quarter reflected continued change and uneven demand conditions across the transportation industry. At the same time, it reinforced the resilience of our organization and our ability to actively manage liquidity and costs in real time. We remain focused on disciplined execution, maintaining financial flexibility, and positioning the business to respond quickly and decisively as underlying market indicators continue to improve. Our priorities remain unchanged and we are committed to building long-term value while navigating near-term uncertainty with clarity in control.

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

[Operator Instructions] Our first question comes from the line of Mike Shlisky with D.A Davidson.

First, on the guidance you put out there for next quarter. Do you have the -- are your backlogs that we've already passed well past order season well past in March? Are your backlogs at this point? Do you still you have that both for the quarter, do you think? Or are you still kind of waiting on new orders?

Yes. Good question. We have complete visibility on the backlog that went into our guidance.

Okay. Great. I also wanted to ask about the truck body business. I assume some of the very largest truck buyers that you make or some of the [ weaker areas ], I'm long correct me there. And kind of what your looking for macro-wise in truck bosy to really feel good that things will in fact get better as next quarter or two.

Yes. So I would say that truck bodies are really being impacted both, I'd say, Class 3 all the way up to predominantly Class 6. As we sit here today, that's the majority of truck bodies that we're going to produce. So I wouldn't say there's a tremendous difference in the classes at this point. And it kind of goes to the second part of your question, we really need to see some of the discretionary spending related areas pick up, which is really going to reflect in the overall sentiment of the consumer as we go forward. I think the other part of it is that the consumption and -- well, I'll say, generation and consumption of some of the more consumable discretionary products that we're starting to see some movement in manufacturing, need to continue and hold as we move into 2027. .

Housing is a substantial part of the equation expect especially when you think about some of the largest consumers of truck bodies to support their rental businesses, which is really predicated on the movement of people into those new homes. So the housing market is a market that we're really paying attention to right now.

Got it. Maybe can you also update us on -- maybe another 2-part question. What is your current guidance and plan for reefers. And do you think you have to hire or get a ramp-up period to get that started again, get that rolling? And I guess also, the other part of it would be if you see improvement in demand generally dry vans, you have the people that you need to ramp that up too, once that arrives.

Yes. We'll start with the dry van piece. As we approach, I'll say the first quarter of 2027, we're in a good place in terms of installed capacity, sitting here midyear approaching midyear of 2026 with the shifts that we have running and our ability to flex those to meet initial demand. Couple that with the efficiencies that we've gained with our south plant, the relative hiring needs that we'll have on the early stages of the ramp are somewhat muted for us based on all those actions. Now as the ramp continues into the later half of 2027, there will be additional hiring that will have to be done to add additional shifts, which would be expected as we meet that demand. Specifically with refrigerated, refrigerated, we are still going down the process of development of a repositioned refrigerated van product. We've done low-level capital purchases in order to address long lead time areas and we've been committed to working through a deployment schedule for that to be a material addition to Wabash as the cycle progresses.

There are no further questions at this time. I will now turn the call back to John Cummings for closing remarks.

Thank you, everyone, for joining us today. We look forward to connecting with you throughout the quarter. Have a wonderful day.

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

Ladies and gentlemen, thank you for joining us, and welcome to the Wabash Fourth Quarter 2025 Earnings Call. [Operator Instructions] I will now hand the conference over to John Cummings, Senior Director of FP&A and Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. We appreciate you joining us on this call. With me today are Brent Yeagy, President and Chief Executive Officer; Pat Keslin, Chief Financial Officer; and Mike Pettit, Chief Growth Officer. Before we get started, please note that this call is being recorded. I'd also like to point out that our earnings release, the slide presentation supplementing today's call and any non-GAAP reconciliations are available at ir.onewabash.com. Please refer to Slide 2 in our earnings deck for the company's safe harbor disclosure addressing forward-looking statements. I'll hand it off now to Brent.

Thanks, John. Before turning to the fourth quarter results and outlook, I want to reflect briefly on 2025. It was a challenging year across the transportation industry with prolonged softness in demand and heightened uncertainty affecting customer spending decisions. While these conditions pressured our financial results, they also tested and ultimately reinforced the strength and resilience of our organization. Throughout the year, we remain disciplined and proactive, preserving a strong balance sheet, maintaining liquidity and taking actions to align our cost structure with market conditions. That financial resilience gives us flexibility as we navigate the near term and positions us well to respond when demand begins to recover.

Most importantly, I want to thank our employees. In a difficult operating environment, our team stepped up with professionalism, adaptability and unwavering commitment to our customers and each other. Their efforts enabled us to continue executing, supporting our customers and making progress on key strategic priorities even in a down cycle. As we look ahead, we believe the actions taken in 2025 have strengthened Wabash's foundation and improved our ability to perform through the cycle. While we continue to execute in a challenging environment in the near term, we enter 2026 with great operational flexibility, a resilient balance sheet and confidence in our long-term strategy.

As we close out the fourth quarter, conditions across the transportation industry remain challenging and continue to pressure our near-term financial performance. While we are beginning to see early incremental signs of stabilization in certain parts of the freight transportation market, it has not reached a level of sustained magnitude to positively drive increased demand for our products and services yet. Fleets remain cautious. Capital spending decisions continue to be highly managed. And as a result, our fourth quarter performance came in below expectations.

We also expect the demand environment to remain difficult as we move into the first quarter as customers seek sustainability in the current early signs of a freight market rebound. Across our end markets, demand remains soft as freight, construction and industry activity continue to operate below normalized levels. That said, there are some encouraging indicators developing beneath the surface. Freight volumes have begun to stabilize off recent lows, Dealer inventories remain lean and fleet utilization rates are gradually improving.

However, these early signs have yet to translate into increased order activity, and we do not expect them to have a material impact on our financial results in the near term. More broadly, the industry continues to work through an extended freight downturn with replacement cycles lengthening and order patterns remaining uneven. While this environment is contributing to growing pent-up demand as the industry has been well below replacement levels for multiple years, visibility remains limited and the timing of a broader recovery remains uncertain. Against this backdrop, our focus remains on what we can control. We are taking additional actions to align costs with demand, preserve liquidity, protect margins while continuing to pursue market share opportunities and invest selectively in areas that strengthen our long-term position.

Notably, our Parts and Service business again delivered sequential and year-over-year growth in the quarter, underscoring its resilience and its role in providing stability through the cycle. While near-term headwinds persist, our long-term conviction has not changed. We believe the early signs of industry stabilization combined with structural progress we've made across the organization, position Wabash to respond powerfully when demand begins to normalize. Until then, we remain focused on disciplined execution and financial prudence as we navigate the current environment.

During the quarter, we implemented additional cost actions in response to current market conditions, including the idling of our manufacturing facilities in Little Falls and Goshen. These actions were taken to better align our production capacity with current demand levels and to manage near-term operating costs, but are also part of a longer-term play to reduce overall fixed costs and other cost drivers over the next market cycle. We continue to evaluate our manufacturing footprint and cost structure now and into the future, and we will adjust our operations as appropriate to reflect near-term reality and to improve our overall cost structure when producing at scale. The idling of our Little Falls and Goshen facilities resulted in approximately $16 million of total charges during the quarter, all of which were noncash. We expect to recognize an additional $4 million to $5 million in charges in the first half of 2026, of which approximately $1 million to $2 million is expected to result in cash expenditures primarily related to severance and other exit-related costs.

These actions are expected to generate approximately $10 million in ongoing annualized cost savings, primarily related to fixed manufacturing overhead and operating expenses as we align our cost structure with current demand levels. We will continue to evaluate the timing and magnitude of these impacts as the actions are fully implemented. 2026 trailer quoting in Q4 reflected a highly competitive market as the industry navigates the bottom of the current protracted market cycle. Volume leads pricing, and we look forward to a more balanced market as we move through 2026 and into the 2027 order season later this year.

Separately, the domestic trailer industry has filed antidumping and countervailing duty petitions with the U.S. Department of Commerce and the U.S. International Trade Commission concerning certain imported trailer products. The agencies have initiated formal investigations, which are currently in the early stages. As part of the process, the Department of Commerce will evaluate whether imports are being sold at less than their fair value or subsidized, while the International Trade Commission will assess whether the domestic industry has been materially injured.

The International Trade Commission's preliminary determination is currently expected on or about February 6, though the date could be impacted by government shutdown and preliminary determinations from the Commerce Department are expected later in the year, with final determinations following thereafter. We will continue to monitor the process as it progresses.

Turning to the broader market environment. Demand across both the trailer and truck body industries remain soft. While conditions on the ground are improving for our customers, we have limited visibility in the timing, pace and sustainability of the freight market recovery. With that said, the underlying conditions for a strong demand response is growing once the freight market recovery threshold is met and our customers look to recapture profitability and get back to a growth mindset. But for now, our customers continue to defer capital spending decisions and order patterns remain uneven, reflecting a highly managed near-term reality across freight, construction and industrial end markets.

Given these conditions and the current lack of visibility, we are providing guidance only for the first quarter of 2026 and are not fully issuing full year 2026 guidance at this time. For the first quarter, we expect revenue to be in the range of $310 million to $330 million and adjusted earnings per share to be in the range of negative $0.95 to negative $1.05. Based on current order activity and customer discussions, we expect the first quarter to be the weakest of the year in terms of revenue and operating margins.

While near-term conditions remain challenging, customer engagement around 2026 purchasing decisions is ongoing and many fleet order commitments for the year remain open and active, a positive departure from historic norms for this period of the sales cycle for trailers. Based on these discussions and early order activity, we believe full year 2026 revenue and operating margin is likely to be higher than 2025, even though the timing and shape of the demand recovery remains uncertain.

We will continue to evaluate market conditions and customer activity as the year progresses and expect to provide additional guidance once visibility improves. As always, our focus remains on disciplined execution, maintaining liquidity and positioning the business to recapture profitable growth as market conditions stabilize. I'll now turn the call over to Mike for his comments.

Thanks, Brent. When we formed this segment 4 years ago, we were very clear about the role parts and services could play inside Wabash, extending customer value beyond the original equipment sale while generating higher margin, more predictable revenue. That thesis continues to be validated. Despite a challenging freight environment, the segment delivered another solid quarter, reinforcing our belief that parts and services is becoming a more durable and resilient earnings stream through the cycle. In the fourth quarter, the segment grew 33% year-over-year and approximately 6% sequentially, even as the broader OE equipment market remains down more than 40% from its 2023 peak.

Fourth quarter margins continue to be soft as we work through weak demand in our higher-margin OE parts business and continue to absorb start-up costs associated with recent expansions. While margins remain below our longer-term expectations, the underlying trajectory remains intact. Over time, we continue to expect this business to operate in the high teens EBITDA. Let me say again, in the fourth quarter, the segment grew 33% year-over-year and approximately 6% sequentially, even as the broader OE market remains down more than 40% from its 2023 peak.

Growth in this environment gives us confidence that what we're seeing here is structural, not cyclical and reinforces the strategic importance of this segment to our enterprise. Our confidence continues to grow that we are building an exciting foundation for continued and more profitable growth within this segment that will heavily leverage improving market conditions. One of the strongest proof points behind the momentum continues to be our upfit business. Upfit allows us to deliver fully customized equipment in weeks rather than months, pairing the scale and efficiency of our manufacturing footprint with the customer service that defines parts and services.

In the fourth quarter, we shipped approximately 550 units, bringing full year volume to roughly 2,050 units. 2025 full year volume is more than double our 2023 volume, demonstrating the growth we are experiencing in this space despite a weaker overall demand environment. As discussed previously, we opened 3 new outfit centers in the second half of 2025, Northwest Indiana, Atlanta and Phoenix. These new sites materially expand our geographic reach and position us to exceed 2,500 units in 2026, and we continue to see multiple pathways for continued growth in this business well into the future.

Our efforts to expand digital product enablement and our Trailers as a Service or TaaS service concept continues to grow Wabash's innovation leadership through the generation of a much deeper understanding of challenges our customers are facing, allowing us to bring physical, digital and business model innovation to life. We continue to expand the ledger of shippers, carriers and brokers across North America who look to bundle preventive maintenance programs, operational and maintenance-based telematics solutions, nationwide uptime support and repair and service management with trailer assets to enable their growth needs.

We will be showcasing our cargo assurance solution at Manifest in Las Vegas in February and at TMC in Nashville in March. We are taking a new approach to overcoming the growing cargo theft challenges with our Trailer Hawk technology platform. With this platform, we will be highlighting how the trailer itself becomes part of a secure connected system that helps prevent theft. We've continued to invest in both physical and digital readiness during the downturn, ensuring we're well positioned to scale when the market rebounds with more innovative and valuable solutions for our customers. We also remain convinced that flexible capacity solutions such as TaaS will become increasingly attractive to our customers as they look for innovative ways to acquire capacity and operate in an increasingly challenging business liability and regulatory environment.

In closing, Parts and Services continues to deliver connected end-to-end support that keeps customer assets running day in and day out. We're not just growing this segment. We're layering in new forms of customer value across upfit services, flexible capacity solutions and aftermarket parts and services, all designed to work together as an integrated ecosystem. As this segment continues to expand its margin profile and cash flow contribution through extended scale and enhanced offerings, it will be a core element in Wabash's overall financial performance and resiliency into the future.

We are growing in this space right now during obviously difficult market conditions because we're finding better ways to serve our customers. This gives us great confidence that we are laying the foundation for Wabash to create mutual value far beyond the initial sale of a trailer or a truck body and throughout the life of the asset. With that, I'll turn it over to Pat for his comments.

Thanks, Mike. Beginning with a review of our quarterly financial results. In the fourth quarter, consolidated revenue was $321 million. During the quarter, we shipped approximately 5,901 new trailers and 1,343 truck bodies. Lower-than-expected production volumes within the truck body business created operational inefficiencies, which contributed to an adjusted gross margin of negative 1.1% of sales during the quarter, while adjusted operating margin came in at negative 13.6%. As a reminder, our adjusted non-GAAP results exclude the impact of the noncash charges related to the idling of the Little Falls and Goshan facilities.

In the fourth quarter, adjusted EBITDA was negative $26.2 million or negative 8.1% of sales, and adjusted net income attributable to common stockholders was negative $37.8 million or negative $0.93 per diluted share. Moving on to our reporting segments. Transportation Solutions generated revenue of $263 million and non-GAAP operating income of negative $31.7 million or negative 12.1% of sales. Parts and Services generated revenue of $64.5 million and operating income of $5.1 million or 7.9% of sales, continuing the 2025 trend of both sequential and year-over-year revenue growth in the segment.

Full year operating cash generation totaled $12 million with negative $31 million of free cash flow in 2025, excluding the $30 million legal settlement paid in the fourth quarter, reflecting strong execution and disciplined working capital management. Regarding our balance sheet, our liquidity, which comprises both cash and available borrowings, was $235 million ending December 31. Throughout the difficult market conditions, prioritizing liquidity and the resulting financial resilience enables us to continue navigating the near-term headwinds without losing sight of our key strategic priorities and longer-term initiatives. Turning to capital allocation during the fourth quarter. We invested $5 million via capital expenditure and invested $7 million in revenue-generating assets for our Trailers as a Service initiative.

We utilized $0.7 million to repurchase shares and paid our quarterly dividend of $3.2 million. For the full year, we invested $25 million in traditional capital expenditures, invested $48 million in revenue-generating assets, allocated $34 million to repurchase shares and returned $13.8 million to shareholders via our dividend. As we continue to manage through the persisting uncertainty in the market, we're maintaining a prudent and conservative approach to cash management into 2026. For our Trailers as a Service initiative, in particular, we do not anticipate any more near-term investments as we have established the foundation and groundwork for this business in 2025.

Until we have greater insight into the timing and shape of the market return, our focus will remain on preserving liquidity and maintaining financial flexibility while positioning ourselves to act quickly and intentionally when demand begins to recover. Moving on to our outlook for the first quarter. We expect revenue in the range of $310 million to $330 million, an operating margin midpoint of approximately negative 15% and adjusted earnings per share in the range of negative $0.95 to negative $1.05 as deferred capital spending decisions and persistent uncertainty carry into 2026.

As previously mentioned, we expect to provide additional guidance as visibility improves throughout the year. However, we do expect the first quarter to be the weakest of the year in terms of both revenue and operating margins. While we continue to assess the shape and timing of a recovery, we remain confident that 2026 will represent an improvement from 2025. Our strategic decisions throughout 2025, continued focus on recurring revenue and realigned cost structure will enable us to effectively manage near-term headwinds and position us to deliver improved financial performance as demand returns.

As Brent noted, 2025 presented significant challenges across the transportation industry, but it also reinforced the resilience of our organization. Our employees rose to the occasion, demonstrating focus, accountability and a strong commitment to our customers and each other. Looking ahead, we remain disciplined in our execution and focused on aligning our cost structure to today's environment. while ensuring we are well positioned to capitalize on a market rebound and continue investing in the capabilities that support long-term growth. I'll now turn the call back to the operator, and we'll open it up for questions.

[Operator Instructions] First question comes from the line of Michael Shlisky of D.A. Davidson.

Can you hear me okay?

Yes.

Okay. All right. Maybe a couple of quick questions. The idling of capacity in Little Fall -- actually both of the facilities, I always thought that since you did the expansion in Lafayette, most of your products, whatever they were, were made in one place. So I thought Little Falls was meant for reefers. So does this mean you're not making any more reefers at least for the time being? And -- or has anything changed to what product lines you're making and not making? And are you actually exiting any businesses entirely with the idling of capacity here?

Yes. I'll take that. This is Brent. Good questions. No, we are not pulling out of the -- specifically the refrigerated market as we sit here right now with the Little Falls closure. We are, what I would say, looking at how do we reposition the product going forward, specifically into an improving market, which we believe will exist in 2027. It's just a prudent move that we're making right now as we kind of reenvision what our fixed cost structure will be as we position for the market upswing. So we're taking a time out to be able to let those things take place, which will ultimately put a better product on the road to have a better cost structure and the market will be more responsive when we do that.

Specifically with refrigerated truck bodies, we retain refrigerated truck body capacity throughout our network. That is not compromised in any way, shape or form. The removal or the shutdown of the Goshan facility is really about overhead optimization and taking advantage of structural changes that we've made over the last several years to be able to service the overall truck body market in a more efficient way. The market allows us to pull the lever on that right now. It's a move to make us stronger going forward. There's nothing that takes away our ability to serve the market as we move into what we believe will be a better market in 2027.

Okay. Okay. I only got one follow-up question, so I'll just choose carefully here. I got a bunch of other questions. So maybe just maybe one for Mike. The Parts and Services run rate that we saw in the fourth quarter, can that continue into 2026 and possibly with better margins? Obviously, the trailer business has pretty low visibility, but I'm kind of wondering if you could give us a little bit additional detail on the parts and service side that might have better visibility. Just some detail as to what to expect there? And could that be a very solid year shaping up for that business?

Yes. We should expect to see nice growth in 2026 versus 2025. So what we were able to deliver in Q4 from a revenue perspective, you could see that type of that quarterly type average continue into '26 for sure. I would say on the margin side, the struggle we have is that we've got markets that we serve are still down. So while we've been able to continue to get growth, we are having to fight through a market that no one is really that excited about, even sometimes buying repair parts for their equipment.

So we have seen some margin compression. We've also seen some OE where we sell into the actual OE part of the industry pull back. So those things as well as our growth in upfit, while very positive, does require a little bit of start-up costs. But that will normalize probably after Q1. Q1 will be the weakest quarter from a margin perspective in Parts and Services. But we should see the margins bounce up off what we're seeing in the second half of the year for sure.

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

Your next question comes from the line of Jeff Kauffman of Vertical Research Partners.

Can you hear me?

Yes.

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

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

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

Yes. So we did have related to the shutdowns, significant impairment of the assets at Little Falls and then a reserve taken against the remaining raw material sitting at Littlefalls. So all in all, the adjustment was roughly $16 million in the fourth quarter. So you'll see that in our GAAP results, and then we adjust it out in what we reported as non-GAAP.

And then related to the shutdown, we'll also see in the first quarter an additional $4 million to $5 million of expense come through as onetime, which will again adjust out in our non-GAAP results. And of that Q1 expense, roughly $1 million to $2 million of that will be a cash expense, but all other expenses related to the shutdown are noncash.

Okay. So treat those as out of the events if you one-timers and then we -- and then final question, I'll get back in queue.

Brent, in your initial comments, you were talking about customer optimism, some encouraging signs, but nothing really come across the transom yet. I know some of the truck OEMs are getting a little more confident, and I know PACCAR called for bottom of the cycle in 1Q and then things get better. When I look at the ACT Research conversation, it looks like they're putting prebuy back into the Class 8 numbers, 40,000 units higher, but they're not really getting enthusiastic about trailers for 2026. And I think they're believing the trailers are kind of another lackluster year kind of flattish on the whole year. What are you seeing that either confirms what ACT is saying or maybe suggests that things could be a little better for the industry than one would think?

Yes. The way I look at it right now, Jeff, is that what we're seeing in terms of, we'll call it, positive initial tailwinds forming for the, I'll call it the trailer industry as a whole as measured by performance in the freight markets by our carriers, is really more stabilizing in terms of the initial projections that were given for trailer demand in 2026. And that's the way that we're approaching it right now. It's too early to say on whether they will manifest this positivity that they're experiencing into, we'll call it, second half of the year demand.

I would say if I'm a betting person, we'll see -- what we will see is that translate into quoting activity for 2027 as they prepare and think about deploying capital for that time frame because they want to run into the '27 market and they can actually utilize the asset to generate revenue. I think that's probably what's going to happen. And so again, I don't think it's necessarily what I would say, a revision this type activity where ACT FTR will be revising up. I think we're in a position where we're able to stabilize and somewhat have a better idea of what demand is going to be this year.

Okay. So the positive -- I can't pronounce it today. The positive thoughts are less bad is the way I should think about it.

Your next question comes from the line of Michael Shlisky of D.A. Davidson.

All right. Can you hear me okay? All right. Second round of questions here. Just a few more, if you would. Maybe quickly on the dumping comments you made and the issue that's outstanding. What changed? Has anything changed over the last few quarters with respect to the imported trailers and the potential dumping of those trailers? Are there any near-term costs you've got to undertake surrounding the effort to get that case resolved? And if it's resolved favorably, are you due any payments or penalties that I don't know, the appending parties might have to pay?

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

Well, yes, just to clarify, so that would happen if it were in your favor plus a more favorable environment post the decision, a more fair environment. I just wanted to go back to the root causes. Has this been like a few quarters in the making? Has this always been this way [indiscernible] recently? Or what's...

No, there's nothing in the last few quarters in and of itself that has explicitly frame the issue. This is much more of a longer-term effect that technically would have started upon inception of when we started to see international competitors enter the landscape. Now the process itself only looks at a period of time roughly this is directionally the case, really 2022 through 2024. That's the relevant time period at which they are basing their determination.

So that -- nothing in the last few quarters, they're really going to do it off of what have been the dynamics in the industry and what does the data say through the investigative process that must be disclosed by the international competitors to defend the position that we've taken as a set of domestic manufacturers to counter the information that we provided as part of the investigation.

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

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

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

There's no...

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

Your next question comes from the line of Jeff Kauffman of Vertical Research Partners.

Am I live?

You are.

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

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

Okay. Great. And then last question.

Jeff, if you let me add just a little bit there, just around the framing of, we'll call it, markets and how -- and it forms how we think about capital investment, how we think about liquidity management, how do we think about incremental options to use capital in the, call it, the second half of the year. And it goes to your previous question, what are the markets doing and what do we see.

If we're sitting here right now, very -- in a very pragmatic way, there's a lot of reasons to believe and trust that the market fundamentally at the freight level and the drivers of that are getting substantially better from where they've been. There are -- the rate of change of that has been fairly significant in the last 90 to 120 days, which has peaked people's interests. If those can remain sustainable into the second half of the year -- I'm sorry, through the second quarter, it absolutely can change the feeling of what is the forthcoming market, not to less bad, but to good.

How we'll reflect that is how do we think about somewhat possibly pricing in the second half of the year still remains to be seen. There may be some specifically with dedicated-related deals, some positive second half of the year impact from a revenue standpoint. But the majority of it, just based on the sales cycle, the timing and the dynamics are going to probably find its way most likely into the quoting and the early-stage order activity as people wanting to make sure they are well positioned to receive assets, which in probably a relatively constrained supply chain-related industry.

So they can -- the whole definition of what's good and bad is relative to the time frame at which you are framing it. We are absolutely moving into a world that if it can sustain, is moving into good. The reality of it is it's offset a couple of quarters from what it will feel in the moment. And we'll have to navigate those 2 conflicting stories at exactly the same time. And that will impact how we deploy capital, how we prepare for growth, how we staff the operation as those dynamics will be very changing and fluid as we go forward.

And we're prepared to do that, right, to operate in both those environments. But we're positioning Wabash on one hand to prepare for the reality of the moment. And on the other hand, absolutely preparing for a much better environment as we move into the second half of the year, getting ready for '27, just to throw that out there again.

I appreciate that clarity, thank you very much. You don't want to get over your skis. But on the other hand, for the first time in a couple of years, there's a reason to be enthusiastic about a couple of quarters down the road.

You got it.

So one last question. If I look at cost of goods sold, it's not going down as quickly as revenue, which would make sense with some of the tariff-related costs. Where I want to draw that down to is tremendous growth in parts, as Mike Pettit was talking about, but the margins were down about 130 basis points. How much of a structural drag is what's going on with tariffs creating for cost of goods sold? And when do you think we can try to recapture that in terms of passing those increases through to customers?

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

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

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

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

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wabash Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Jacob Page. Please go ahead.

Thank you, and good morning, everyone. We appreciate you joining us on this call. With me today are Brent Yeagy, President and Chief Executive Officer; Pat Keslin, Chief Financial Officer; and Mike Pettit, Chief Growth Officer. Before we get started, please note that this call is being recorded.

I'd also like to point out that our earnings release, the slide presentation supplementing today's call and any non-GAAP reconciliations are available at ir.onewabash.com. Please refer to Slide 2 in our earnings deck for the company's safe harbor disclosure addressing forward-looking statements. I'll hand it off now to Brent.

Thanks, Jake. As we look back on the third quarter, it's clear that the softer market conditions we've been navigating through the year persisted and, in some cases, intensified. Demand across the transportation industry remained below expectations as customers continue to delay capital spending decisions, creating further pressure on order activity. This environment contributed to our Q3 performance coming in below plan.

Turning to our truck body business. Market conditions remain difficult through the third quarter, evidenced by continued softness across medium-duty chassis production. Demand continued to ease across most end markets as freight activity, construction and industrial sectors slowed further.

Larger fleets have also pulled back, influenced by ongoing housing market stagnation, a sharp reduction in household relocations and persistent uncertainty around consumer confidence. While these dynamics have weighed on near-term demand, they're also setting a stage for a potential snapback in truck body orders once replacement needs and end market confidence begin to rebuild.

More broadly, the industry continues to work through the effects of prolonged freight recession and an extended replacement cycle following the elevated purchasing that occurred post pandemic. As a result, order intake and backlog came in below expectations and revenue finished below our guidance range.

Looking ahead, we anticipate market conditions will remain soft in the near term, especially through the fourth quarter. In the meantime, we're focused on what we can control, maintaining cost discipline, pursuing share gains and strengthening our service and distribution capabilities so that we're well positioned to capture growth when demand begins to recover.

While near-term headwinds have intensified, they also underscore the importance of the steps we've taken to strengthen Wabash's foundation. Our organizational structure and diversified portfolio enable us to respond quickly and align costs with demand. Within Transportation Solutions, we're executing additional actions to further adjust to the current environment.

At the same time, our parts and service business once again delivered both sequential and year-over-year revenue growth in Q3, demonstrating its resilience and critical role it plays in providing stability to our overall performance. We recognize that the coming quarter will remain challenging, and we revised our guidance accordingly.

However, our long-term view remains unchanged. We're confident that the structural progress we've made, particularly the continued expansion of parts and services, positions Wabash to emerge stronger when demand normalizes and capital spending resumes. With the recent inclusion of dry van and refrigerated trailers in the Section 232 steel and aluminum derivative tariffs, we expect to see gradual effects on the competitive landscape as the industry adjusts over the coming quarters.

This development may ultimately serve as a catalyst for improved market share dynamics as the cycle strengthens through 2026. However, we recognize that these effects may take time to materialize as competitors evaluate their sourcing strategies and pricing responses. Our focus remains on maintaining cost stability and supply chain resiliency, areas where Wabash holds a clear structural advantage.

Through our long-term agreements with partners such as Hydro and Ryerson, our 95% domestically sourced supply chain and our vertically integrated composite panel production, we are far better positioned than our peers to manage input cost volatility. As the full impact of the 232 tariff action unfolds over the coming months, it's important that we continue to educate our customers on the growing risk of pricing instability within the market.

Wabash's consistent and reliable supply chain represents a distinct value differentiator, particularly as customers prepare for the next freight up cycle and look to manage profitability in the early stages of recovery. We remain disciplined and focused on execution, maintaining cost rigor and operational control while avoiding premature assumptions about pricing benefits.

Our structural advantages position us to respond quickly and capture value as market pricing strengthens naturally over time. During the third quarter, we finalized a settlement related to the 2019 legal matter involving one of our trailers. The case had previously resulted in a jury verdict that included punitive damages exceeding $450 million, along with approximately $12 million in compensatory damages.

Following post-trial motions, the court substantially reduced the verdict amount prior to the settlement. Under the terms of the settlement, Wabash payment obligation is approximately $30 million, with the remaining amount covered by insurance. As a result of this resolution, we recorded a net adjustment of approximately $81 million in the third quarter.

The evidence in the product liability matter was undisputed that the trailer fully complied with all applicable regulations. Despite precedent to the contrary, the jury was prevented from hearing critical evidence in the case, including that the driver's alcohol level was over the legal limit at the time of the accident and the fact that neither the driver nor the passenger were wearing seatbelts.

Unfortunately, this case reflects a troubling trend in America's courts, where aggressive plaintiffs' attorneys target reputable companies regardless of the facts. Verdicts like this threat not only innovation, but the stability of manufacturing and transportation companies that serve as economic anchors in communities across the country. While this matter has a significant overhang on the business, its resolution provides meaningful clarity and removes a source of uncertainty from our financial outlook.

Wabash remains committed to maintaining rigorous safety, quality and compliance standards across our operations as well as a disciplined approach to risk management. We continue to manage our balance sheet prudently and prioritize capital allocation decisions that drive long-term shareholder value.

Turning to the broader market environment. Demand across both the trailer and truck body industries remain soft with limited signs of near-term improvement. This slowdown is reflected in our own business with backlog declining to about $800 million at the end of the third quarter. Given these conditions, we're lowering our full year 2025 guidance to midpoints of $1.5 billion in revenue and approximately negative $2 in adjusted EPS.

We expect the fourth quarter to be the weakest of the year, both in terms of revenue and operating margins. As a result, we're taking this opportunity to evaluate our cost structure to better align with near-term market demand and expect to share more on this topic in the quarters ahead. Even with this revised outlook, we still expect to be near cash flow breakeven for the year, including approximately $40 million of investment related to our Trailers as a Service initiative.

Looking ahead, our 2026 order book is now open, and we're already seeing a few early wins in the fourth quarter. The bulk of larger fleet orders typically comes together between now and year's end, which will give us much better visibility into next year's demand profile. Based on early customer discussions and the most recent forecast, we remain cautiously optimistic that 2026 could mark the beginning of a gradual recovery, supported by pent-up replacement needs and improving freight conditions.

Additionally, we're beginning to see signs of capacity exiting the market at an accelerating rate, driven in part by new driver qualification standards such as the English proficiency requirements that are reducing available labor supply. Over time, this tightening capacity should rebalance the freight market, setting the stage for a healthier demand environment as conditions stabilize.

As always, we stay disciplined, aligned with our customers and ready to capture profitable growth as the market finds its footing. I'll now turn the call over to Mike for his comments.

Thanks, Brent. Dating back to when we formed this segment 4 years ago, we discussed how we would be able to use a parts and service network to become an enterprise that can provide more value add to our customers as well as produce higher margins with a more predictable revenue stream. It was validating to see a revenue number in the third quarter that was among the best we've recorded in a very challenging freight environment.

We believe this continues to prove we have established a revenue stream that will prove more resilient in all phases of the freight cycle. Third quarter margins were lower than what we would have expected to see on an ongoing basis as we are experiencing some soft demand in our high-margin OE parts supply business as well as some start-up costs at upfit as we successfully opened 2 new upfit centers in the quarter.

We would expect margins in Q4 to be higher than Q3, but still below our longer-term expectation of high teens EBITDA. In the third quarter, the segment grew 16% year-over-year and about 2% sequentially. We have seen this growth in a market that is down over 40% in OE equipment from the peak in 2023, and that gives us confidence that we are seeing structural growth.

One of the clearest proof points behind the parts and services momentum sits in our upfit business. Our upfit offerings let us deliver fully tailored equipment in just a couple of weeks, combining the scale of truck body production with the deep customer intimacy that defines parts and services. This is also a business where we are introducing some of our latest cutting-edge digital tools.

Using AI, we are now able to quote and upfit a truck body almost instantaneously, allowing our customers to make pricing decisions in real time and place orders for their chassis and truck body together. This process has historically taken days or weeks in the truck body market. We shipped over 540 units in Q3 and about 1,500 units year-to-date.

As discussed on the Q2 call, we did open 2 new upfit centers in Q3, one in Northwest Indiana and another in Atlanta, giving us capability in 2 strategic markets and keeping us on pace to exceed 2,000 units in 2025. We would expect to open another new location in Phoenix in the fourth quarter.

These 3 new sites established in the second half of 2025 will set the stage for continued growth in this business into 2026 and beyond. We expect to do over 2,500 updated truck bodies in 2026. Trailers as a Service or TaaS, continues to help Wabash extend our manufacturing and distribution leadership through business model innovation.

We continue to sign shippers, carriers and brokers across North America, many of whom bundle the trailer with preventative maintenance, telematics, nationwide uptime support and repair management. Wabash continues to redefine trailer accessibility with new trailers as a service offerings that have expanded to include TaaS pools.

With pools, we continue to develop solutions that enable logistics providers to grow with flexible, scalable trailer solutions. TAS pools provide shippers with a universal trailer pool that replaces the complexity of managing fragmented pools across different partners.

Shippers gain access to a nationwide pool of trailers positioned to support their operations. Every trailer in the pool is supported by Wabash Fleet Care for maintenance and compliance, giving customers confidence that equipment is always road ready. We continue to accelerate the technology road map inside TAS and have either launched or will soon be launching predictive analytics, alerts and automated tracking and billing, capabilities that turn raw data into actionable, measurable savings.

We have continued to prepare our physical and digital capabilities for the eventual market upturn, and we'll be ready to ramp TaaS when our customers require it. We believe access to the flexible capacity that TaaS offers will become even more attractive as the market rebounds.

We also continue to expand our aftermarket parts and service offerings in both physical locations and digital solutions. With our world-class dealer groups at the backbone, the parts network is extending our reach for our customers as well as providing a nationwide service network that underpins TaaS and fleet care.

We've continued to expand our PPN network to over 115 locations, and each new location broadens our network and extends our reach and continues to fulfill our aim of providing more holistic aftersales support for our customers.

In conclusion, parts and services provides our customers with connected support that keeps assets running day in and day out. We continue to layer entirely new forms of customer value, creating improvements with our parts and services offerings. From TaaS to upfit to aftermarket parts, these initiatives are closely linked to provide value for our customer.

Importantly, we have been able to continue to develop these capabilities in a tough market, ensuring we'll be able to scale quickly as demand returns. The rationale behind scaling parts and services continues to be clear. While the freight market has continued to put pressure on equipment orders in Transportation Solutions, parts and services deliver secular growth and helps in stabilizing earnings through the cycle.

As this segment expands, its higher margins will play an ever larger role in Wabash's bottom line and cash flow generation. We continue to grow because we found innovative ways to serve customers, solutions that extend value beyond the original equipment sale and well into the life of the asset.

With that, I'll turn the call over to Pat for his comments.

Thanks, Mike. Starting with our third quarter financial results. Consolidated revenue was $382 million. During the quarter, we shipped approximately 6,940 new trailers and 3,065 truck bodies. Challenging market conditions, particularly in our truck body business, led to softer-than-expected demand and revenue coming in below our guidance range of $390 million to $430 million.

The lower production volumes also created operational inefficiencies, which contributed to a gross margin of 4.1% and an adjusted operating margin of negative 6.2%, both below our expectations for the quarter. As a reminder, our adjusted non-GAAP results exclude the impact of items related to the settlement of the Missouri legal verdict.

In the third quarter, adjusted EBITDA was negative $5 million or negative 1.4% of sales. Adjusted net income attributable to common stockholders was negative $21.2 million or negative $0.51 per diluted share, below expectations, primarily due to lower volumes.

Moving on to our reporting segments. Transportation Solutions generated $334 million in revenue and negative $13 million in operating income. Parts and services delivered $61 million in revenue and $6.6 million in operating income, marking our third consecutive quarter of both sequential and year-over-year revenue growth.

Despite the challenging market backdrop, we continue to execute on our strategy to build more resilient and recurring revenue streams through our parts and services business. This performance reinforces the stabilizing role of parts and services in our portfolio and highlights the value of a balanced business model as we navigate this down cycle and prepare for recovery.

Year-to-date operating cash flow totaled $69.1 million with $60.6 million of free cash flow generated in the third quarter, reflecting strong execution and disciplined working capital management.

Turning to the balance sheet. Total liquidity, including cash and available borrowings stood at $356 million as of September 30. On capital allocation, during the third quarter, we invested $5 million in traditional CapEx, $19.3 million in revenue-generating assets to support our Trailers as a Service initiative, repurchased $6.2 million of shares and returned $3.3 million to shareholders through our quarterly dividend. I'll provide additional commentary on our future capital deployment plans shortly.

Turning to guidance. Our outlook for the fourth quarter includes revenue in the range of $300 million to $340 million and EPS between negative $0.70 and negative $0.80. This brings our full year 2025 outlook to approximately $1.5 billion in revenue and EPS between minus $1.95 and minus $2.05.

From previous midpoints, this represents a reduction of roughly $100 million in revenue and $0.85 in EPS. The most significant changes from our prior outlook stem from lower volumes in Transportation Solutions, driven primarily by the truck body business, which Brent discussed earlier.

In addition, the pricing required to fill our remaining Q4 backlog came in lower than anticipated. Combined, these factors have resulted in a gross profit reduction of roughly $0.85 per share versus our prior guidance. As Brent highlighted, this environment underscores the importance of being responsive and disciplined.

With much of our 2025 cost structure already set, our focus in the fourth quarter is on realigning costs to current market realities while preserving flexibility to capture opportunities amid continued uncertainty. Looking ahead to 2025 capital deployment, we've adjusted our plans to reflect the current environment. We now expect traditional capital investment in the range of $25 million to $30 million.

As you recall, our initial guidance for traditional capital spending for the year was in the range of $50 million to $60 million. We now expect to spend approximately half of that amount as we are managing our cash and balance sheet to reflect market conditions. Year-to-date free cash flow is $9 million, and we now expect to be near breakeven for the full year, including approximately $40 million of investment to support our Trailers as a Service initiative.

We're taking a prudent and conservative approach to cash management as we move through this period of uncertainty. Until we have greater clarity on how 2026 shapes up, our focus will be on preserving liquidity and maintaining financial flexibility while positioning ourselves to act quickly when demand begins to recover. With that, I'll turn it back to Brent for closing comments.

As we close out the third quarter, I want to emphasize that we stay true to our values while making the prudent but sometimes difficult decisions needed to manage the cost basis of our business in this environment. Our balance sheet is working, and our liquidity provides the flexibility we need to both navigate near-term headwinds and invest in long-term growth.

We remain active in advancing our strategic growth initiatives, building capability and scale even as we align our operations to current demand. We're growing share in dry vans, driven by improved on-time performance and higher customer satisfaction. And our new dry van manufacturing capacity is now fully online, delivering efficiency benefits today and ready to scale as demand improves.

Across the organization, we continue to work on the business, strengthening our systems and processes, developing our talent and driving continuous improvement to position Wabash for the future. We will continue to align our structure and strategy with the environment we face today while also preparing for the inevitable freight recovery ahead, one that we believe will allow us to create outsized value for our shareholders, our customers and our people. We are not standing still.

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

Our first question will come from the line of Jeff Kauffman with Vertical Research Partners.

So Brent, can we dive into the tariff question because now we have the Section 232, which I guess is supposed to level the playing field for domestic OEMs versus the OEMs that produce in Mexico. Can you talk a little bit about how you were hit by tariffs in your third quarter, whether it was steel and aluminum on the trailers or parts or things like that?

And then you mentioned that the Section 232 is going to help a little more in '26. I assume that's because you have to kind of register different parts or different aspects of your costs with Department of Commerce and get it approved before you can get the rebate. And kind of walk us through how that's going to level the playing field or level margins and maybe address competition your product versus your competitors that build in Mexico.

Sure. Let me talk about the larger question about how the 232 tariff works and what specifically it's intended to do. And then I'll let Pat talk about what was the Q3 specific tariff impact to Wabash. So the 232 finding from the federal government was specifically framed around the steel and aluminum that is purchased and then incorporated into our non-U.S. domestic competitors.

So it doesn't take into account the full trailer cost structure. It's just the specific steel and aluminum content, both the base metal and then the aluminum and steel incorporated into the procured subassemblies as applicable.

So the way we think about it is that once that ruling is done, and so we're roughly about 45 days old on that, you go through a period of language writing that makes up the literal tariff structure that will then be put in place. That typically takes multiple months to occur and then gets put in place over the course and for us, that would primarily be -- or for the industry in the first and somewhat second quarter.

That's when it starts to become real for the industry and for our competitors. And then you'll see a period of their decisions after that on how they manage it, in terms of how they look at pricing, how much they pass along to their customers, and then we'll respond accordingly. The 232, in this case, specifically, again, deals with steel and aluminum, it does not exactly level the playing field in all aspects that we're looking at in terms of the reality of how our competitors play in the marketplace.

Those are ongoing conversations that we're having on how best to deal with that going forward, specifically in the climate that we're in right now. That's why we say that the 232 will primarily have an impact to a degree in the latter half of 2026, really setting up primarily for the 2027 buying season.

So Brent, quick question. Maybe it applies differently to trailers than the truck OEs. But I thought there was a rebate component of the 232 that could be used to offset the steel and aluminum tariff cost to U.S.-based production or, let's say, the component of the parts that may come from outside the U.S. that are tariff. I thought that was supposed to kind of also help the U.S.-based producing guys.

That is a very unique construct that is specific to the steel and aluminum related tariffs that were part of the heavy-duty tractor-related, 232 binding. That is not applicable to the specific trailer 232 binding. Those are 2 different things. Our 232 binding is a much more traditional methodology and application.

Okay. So the real benefit to you is just leveling the playing field to some degree versus your competition that builds trailers in Mexico and around the U.S.

And flipping follow up on your question about the third quarter.

Yes. So we've talked about it in the past couple of quarters about our ability to insulate Wabash from direct impact of tariffs because of our mostly domestic sourced position. That doesn't mean there isn't the secondary impacts where our vendors, some of our vendors are getting hit with tariffs and then passing those along to us or engaging in negotiations with our team to pass those along.

So the estimate that we have for the Q3 actual results is about $1 million, but those would be not from direct tariffs to Wabash, but price increases from our vendors that were passed through to us related to tariffs that are being imposed on them. So that's a fairly minimal number for the third quarter. We would expect to see a similar number in the fourth quarter.

But then as we turn to 2026, we would expect those sorts of increases coming from our suppliers to increase into '26, and we're pricing our trailers and truck bodies accordingly with the anticipation of those second derivative tariffs coming to us get baked into our finished good price as well.

Okay. And then one last follow-up. Just based on the guidance you're giving for fourth quarter on a revenue basis, $320 million at the midpoint, can you give us a rough idea of what the implied shipment count is beneath that in terms of you did 69-40 this quarter. What level in the fourth quarter would underlie that, that $320 million midpoint?

That is just the trailers, Jeff?

Yes, trailers and truck bodies, whatever you're comfortable.

Yes. Truck bodies will be less than Q3, significantly less. We did roughly 3,000. We're looking at probably around 2,000 in the fourth quarter. That will be the biggest impact sequentially from Q3 to Q4.

Okay. And then for trailer deliveries?

It will be slightly lower. I don't have an exact number that I could give you right now.

No, that's fine. I was just looking for a little ballpark there.

Our final question will come from the line of Mike Shlisky with D.A. Davidson.

As I look to some of the data in the market and talk to some folks, if there's a bright spot in the trailer market right now, it's in platform trailers. I'm not exactly sure, Brent, if you have any commentary as to what's behind that, whether it's either under construction and some of the large components needed to ship or people are anticipating an off-highway machinery improvement next year that would need more of these kind of trailers or what?

I'd be curious whether you're participating in that kind of upside, if that's been a bright spot for you as well. I know it's a somewhat small size of the business, but any commentary you can tell us about how you might be able to find some growth in platforms in the near term, that would be helpful.

Sure. So for the platform business, that was a business that led into the freight recession almost 2.5, 3 years ago. It has been stable. There are absolutely some tailwinds that are starting to form, and there is a significant amount of customer rhetoric. We just got back from ATA, and it was there. There is some belief across that customer base that we could see a meaningful uptick in freight demand within the Platform segment.

Hopefully, that results, right, in trailer purchases. A big part of it is the AI data center alcohol-related infrastructure actions that are coming to fruition. You're seeing a further increase in just general infrastructure spending as permits, building permits that were issued 18, 24 months ago are now becoming actionable. And so we see those types of activities kind of coming into the forecast for that specific segment. We look for...

Hello? Did I lose you guys? Can you hear me?

This is the operator. I apologize but there will be a slight delay in today's call.

So I'm not sure where we got cut off, but let me follow up and ask that we fully address your question.

Yes. I sound like, hey, is going well in platforms. There's some specifics there on data centers and infrastructure. All sounds great. What I did want to just get the final part of the answer was how is Wabash capitalizing? Are you seeing the orders increase at least for that part of the business currently? And maybe...

Where we're at right now is that we absolutely see it stabilizing the momentum that we've relatively had throughout 2025. I would say right now, we are in the quoting and discussion phase of how our customers are interpreting where they think the market is going, specifically in platforms in 2026. Those look to be, we'll call it, beneficial at this point, but we have to work those through the actual sales process to get those back into the backlog.

Got you. Great. And then I just wanted to touch on the orders you've gotten so far last month or the last few weeks here in the fourth quarter. Pricing-wise, are you seeing any major trends there? Are people really asking -- are you getting a lot of pushback on price and you even raise price, et cetera? Just get a sense for the kind of environment there.

Yes. I would say the pricing environment is exactly what we thought it would be going into 2026. There are aspects of the market, certain products with I'll call it, certain industry niches that there are opportunities to have some level of, we'll call positive pricing influence.

There are absolutely areas that there is a holding of serve in terms of just generally lower ASPs as compared to maybe where we were 18 months ago, but it is appropriate for what we would expect for the market as forecasted in 2026 sitting here right now.

Got you. And then maybe one last one. I guess I was curious, you touched on it in your comments about some fleet some fleets kind of winding down business. I know some of these are beloved customers or long-time customers. I've been seeing a little bit of that, too, just looking at social media, people kind of starting off, things of that nature. But can you quantify -- I mean, if you can ballpark what percent of maybe the national trailer fleet has maybe taken a step back? And how far along do you think we are as far as what inning we're in or what quarter we're in to seeing the correct national fleet kind of go forward?

I want to make sure I'm perfectly clear on your question. You're talking about where are we at in terms of the ongoing, we'll call it, fleet construct as capacity comes out of the market?

Yes. I hate to use the word fleet bankruptcies, but I just want to make sure is how far along are we to find the correct national fleet size?

We'll call it fleet rightsizing. So I think we are going to see a fairly measurable -- I don't want to necessarily use the word substantial because it's relative, but a meaningful level of capacity come out of the market over the next 6 months at a faster rate than what we have seen over the previous 6, which was faster than the 6 before that. And I think we are right at that level where we can break through a level of equilibrium and begin to create some positive influences in the overall freight pricing dynamics, which our customers desperately need, and we'd be very thankful for.

The -- we'll call it, underlying information and data is showing this. We see through the data that we talked to. And again, we just came from ATA we somewhat got it from the horse's mouth that the data that they track is also creating some optimism on their part that if sustained, can absolutely begin to tilt the market in the first half of -- begin to tilt the market meaningfully in the first half of 2026, changing the freight lands into the latter half of '26.

If we start seeing fleets file do you anticipate a period of transition where there's asset liquidation has to take place first of some generally used units prior to new?

No. Because I mean, there can be some, I won't call it reconciliation of assets. But honestly, most of the carriers that tend to fall out at this stage are already -- they're past the first and second level use of these assets. So they play within a different market that we are very much arm's distance away from. So we see much less of an impact.

What will primarily be the case is that as they see that meaningful level of capacity come out, our customers are just on the level of anxiety in terms of their lack of keeping up with replacement and cost per mile management is significant. They just need to know that they -- that it is a solid investment to begin to replace and to make up for the gap in replacement for them to begin to meaningfully come to the table with asset purchases as early as midyear 2026.

That's all we're looking for right now. And I think that's where most of the, we'll call it, precipitated activity will be for us when we see this capacity come out. And that's before we even get into a growth conversation. Let's say that for 2027, just coming back to replacement and beginning to chew into replacement has very meaningful impact for us in terms of volume, not only now for vans, but for truck bodies, tanks and platforms. So it really serves itself up for a very interesting point acceleration as this capacity comes out.

And that will conclude our question-and-answer session. I'll hand the call back to Jacob Page for any closing comments.

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

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

Thank you for standing by. My name is Jen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wabash Second Quarter 2025 Earnings Call. [Operator Instructions]

I would njow like to turn the call over to Jake Page. Please go ahead. .

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

Before we get started, please note that this call is being recorded. I'd also like to point out that our earnings release, the slide presentation supplementing today's call and any non-GAAP reconciliations are available at ir.onewabash.com. Please refer to Slide 2 in our earnings deck for the company's safe harbor disclosure addressing forward-looking statements. I'll now hand it off to Brent. .

Thanks, Jay. Before we dive into the quarter, I want to take a moment to thank our incredible team. These continue to be challenging across the industry, and I'm continually inspired by the dedication, resilience and heart our employees bring to their work, whether it's supporting our customers helping each other or finding new ways to move the business forward, their efforts are what keep Wabash strong, and we're truly grateful.

As we reflect on the second quarter, the broader market dynamics we observed earlier in the year have largely persisted. Economic conditions remain softer than anticipated at the start of 2025, with customers continuing to report increased hesitation and capital making. The slowdown is creating a ratable effect across the industry, contributing to more cautious behavior and tempered activity levels. Industry analysts have continued to lower their forecast for the remainder of the year. And for this quarter, we saw additional confirmation as several carriers revised their CapEx plans downwards.

These trends reflect a transportation market environment that remains under pressure rather than any product specific or segment-driven softness. While the current climate brings headwinds, it also highlights the strategic foresight behind the way we have reshaped Wabash over the past several years. Our organizational structure was intentionally designed to support agility and resiliency through the economic cycles.

In our Transportation Solutions business, we're proactively managing costs to align with reduced demand. At the same time, we're maintaining momentum in parts and services, which once again delivered year-over-year revenue growth this quarter. This continued outperformance in parts and services reinforces our confidence in its role as a key driver of long-term stability and growth.

By integrating these offerings more deeply with our equipment solutions, we believe we're laying the foundation for a more balanced business that can perform through varying market conditions. Even in a softer environment for equipment demand, our parts and services business continued to deliver growth in Q2. I want to highlight a couple of wins from the quarter that speak to the momentum we're building.

First, congratulations to our FFT team for another record quarter. Their efforts continue to drive significant growth as we are on pace to almost double units year-over-year. We also made meaningful progress with our Trailers as a Service and Preferred parts network initiatives, both of which continue to gain traction as we expand our offerings. Mike will share more details shortly, but these developments are strong indicators of how parts and services is helping bring greater balance and resilience to the broader Wabash portfolio as we scale.

We continue to monitor inflationary pressures across our supply chain. While our 95% domestic sourcing and U.S.-based manufacturing footprint have helped insulate us from some of the volatility others are experiencing, we're not entirely immune to cost increases, particularly in key inputs and services.

To date, we've been successful in holding off on price adjustments, and we remain focused on operational efficiency and cost discipline to offset as much pressure as possible. However, based on the current trajectory, we expect that pricing for 2026 orders will need to be adjusted to reflect the rising cost environment.

As always, we're committed to communicating transparently with customers and providing as much lead time as possible. We're continuing to deliver the value and reliability they've come to expect from Wabash.

Now to briefly touch on the ongoing legal matters stemming from the 2019 motor vehicle accident, in April, we filed a notice of appeal and posted the necessary appeal bond as we continue to pursue all available legal options to achieve a more reasonable outcome. We want to reiterate that we stand firmly behind the safety and integrity of our products, and remain confident in our ultimate legal position.

Turning to the broader market environment. Demand remains muted across the trailer industry. Industry forecasters have continued to revise their outlook downwards, and recent updates now suggest that 2025 shipment volumes will fall well below basic replacement demand. This prolonged softness is reflected in our own backlog, which declined to approximately $1 billion at the end of Q2.

While that's not unexpected given the current landscape, it's clear that customers continue to take a wait-and-see approach to capital spending. For now, we've undertaken a reassessment of 2025 and now expect midpoint of $1.6 billion in revenue and negative $1.15 of adjusted EPS, even with the revised guidance, we still expect to be near free cash flow breakeven for 2025, excluding our capital investments in Trailers as a Service.

While our order book for 2026 is not yet open, we're actively engaged in conversations with customers and preparing quotes for next year's demand. Based on these early discussions and current industry forecast, we're cautiously optimistic that 2026 will reflect a retirement growth.

Of course, the outlook assumes relative stability in the broader environment. If we avoid further deterioration in business and consumer sentiment, we believe 2026 has the potential to align with current growth expectations. As always, we'll continue to monitor market signals closely and stay in close alignment with our customers as planning progresses. I'll now turn the call over to Mike for his comments.

Thanks, Brent. Over the past couple of years, we've talked about turning parts and services into a steadier, higher margin engine within Wabash. The first half of 2025 proves we are continuing to deliver on that strategy. Parts and services sit squarely between our first to final mile equipment portfolio and the connected support that keeps those assets running day in and day out. Think of this expanding Parts and Services segment as the connective tissue that combines our equipment portfolio with best-in-class partners across distribution, digital, maintenance and repair. .

Together, we're not only moving faster. We're layering in entirely new forms of customer value, creating durable improvements in Wabash's financial performance. In the second quarter alone, the segment grew 15% sequentially and 8.8% year-over-year, while seeing EBITDA margins return to the high teens, right, where we believe this business can perform on a sustainable basis.

Keep in mind, this has all been done right into the teeth of a very difficult market backdrop, showing this growth is indeed structural and will provide stability for the enterprise for years to come. One of the clearest proof points behind the parts and services momentum is our upfit business.

Our offerings let us deliver fully tailored equipment in just a couple of weeks, combining the scale of truck body production with the deep customer intimacy that defines parts and services. To put hard numbers around that, last year, we completed approximately 1,100 upfit units. This year, we doubled first quarter throughput to 406 units and added another 556 in the second quarter, bringing the year-to-date unit count to 962 units.

On top of that, we are opening 2 new upfit centers, 1 in Northwest Indiana and another in Atlanta, giving us capability in 2 strategic markets and putting us on pace to exceed 2,000 units in 2025, while setting the stage for significantly more growth in 2026.

Trailers as a Service, or TaaS, is another example of Wabash extending our manufacturing and distribution leadership through business model innovation. We continue to sign shippers, carriers and brokers across North America, many of whom bundle the trailer itself with preventive maintenance, telematics, nationwide uptime support and repair management. The result, customers focus on moving freight while Wabash handles a trailer, which maximizes customer value and efficiencies.

As mentioned in the first quarter, our acquisition of Trailer Hawk accelerated the technology road map inside the Taas. In June, we rolled out Version 1.2, the Trailer Hawk app, enabling shippers to reserve capacity directly on the platform while tracking assets in real time.

Coming to the back half of the year, our predictive analytics alerts and automated tracking and billing capabilities that turn raw data into actionable, measurable savings. We have been continuing to prepare our physical and digital capabilities for the eventual market upturn and we'll be ready to ramp past when our customers require it.

Over the past year, we've also pushed hard on expanding our preferred partner network, or PPN. We brought Dan Millar on board to lead this effort in September of 2024, a parts industry veteran with over 25 years of experience. And in less than a year, we're already seeing significant results. With our world-class dealer group at the backbone, the network is extending our reach so that we can grow parts distribution, accelerate repair turnaround and provide the services and infrastructure that underpins TaaS.

Our North Star target is 300 points of service and parts distribution, and today, we're well on our way. The addition of 29 locations in the first half of 2025 has grown our network to over 110 locations with more coming online every month. Each new location strengthens our network and provides aftersales support for our customers.

Financially, the rationale behind scaling parts and services couldn't be clearer. While the freight market has continued to put pressure on equipment orders and transportation solutions, parts and services continue to deliver secular growth, stabilizing earnings through the cycle. As this segment expands its higher margins will play an ever larger role in Wabash's bottom line and cash flow generation.

But more importantly, we're winning because we found new ways to serve our customers, innovative solutions that extend value far beyond the original equipment sales and well into the life of the asset. With that, I'll hand the call back to Pat for his comments.

Thanks, Mike. Beginning with a review of our quarterly financial results. In the second quarter, our consolidated revenue was $459 million. During the quarter, we shipped approximately 8,640 new trailers and 3,190 truck bodies, slightly better than expectations, resulting in a revenue on the top end of our $420 million to $460 million guidance range, gross margins of 9% and breakeven adjusted operating margins. .

As a reminder, the adjusted non-GAAP numbers reflect the removal of items related to the Missouri legal verdicts. In the second quarter, adjusted EBITDA was $16 million or 3.6% of sales. Finally, adjusted net income attributable to common stockholders was negative $6.1 million or negative $0.15 per diluted share, beating expectations due to slightly higher revenue and cost containment actions throughout the quarter.

Moving on to our reporting segments. Transportation Solutions generated revenue of $400 million and operating income of $13 million. Parts and services generated revenue of $60 million and operating income of $9.1 million. We view the sequential and year-over-year revenue growth in the Parts and Services segment as particularly positive despite challenging market conditions, we have been able to execute on our strategy of building out more resilience and recurring revenue streams to our Parts and Services segment.

Year-to-date operating cash flow was negative $16.1 million as timing of revenue within the quarter created a drag on working capital in Q2. Regarding our balance sheet, our liquidity, which comprises both cash and available borrowings, was $312 million as of June 30. We finished Q2 with a net debt leverage ratio of 6.2x.

On capital allocation, during the second quarter, we directed $6 million to traditional CapEx, invested $0.7 million in revenue-generating assets to support our Trailers as a Service initiative, utilized $10.4 million to repurchase shares and returned $3.4 million to shareholders via our quarterly dividend.

Our capital allocation priorities remain disciplined and growth oriented. We continue to invest above our $20 million to $25 million annual maintenance CapEx to support organic growth initiatives. At the same time, we remain committed to our dividend, and we'll evaluate share repurchases and strategic bolt-on M&A opportunities in a balanced, return-driven framework.

I'll provide additional color on our 2025 capital deployment plans shortly. Moving on to our guidance for 2025. We are reducing our revenue outlook to approximately $1.6 billion and EPS to a range of minus $1 to minus $1.30, from previous midpoints, this represents a reduction of roughly $200 million in revenue and $0.55 of EPS.

Ongoing economic uncertainty continue to weigh on our customers' capital expenditure plans and contribute to a softer overall market environment. In Q2, third-party trailer forecast dropped by roughly 13% for 2025, and our updated guidance reflects this sentiment.

The most significant changes from our prior outlook come from a reduction in volumes within Transportation Solutions, flowing through to a decrease in gross profit equivalent to about $0.80 in EPS versus our prior guidance. This is partially offset by continued cost containment actions taken that recoup approximately $0.25 of EPS.

In a continued environment of soft demand our ability to stay agile and disciplined in cost management remains critical. I'm proud of how our teams executing Q2, they responded quickly and effectively, delivering strong progress on our cost containment initiatives. We expect the same level of focus and execution to carry on in the second half of the year.

As for the third quarter, our updated guidance implies third quarter revenue of $390 million to $430 million and EPS of minus $0.20 to minus $0.30. Moving on to capital deployment expectations for 2025, given the updated outlook, we have reduced our anticipated traditional capital investment to be between $30 million and $40 million.

As mentioned on previous calls, our capital expenditure plans are flexible and capital outlays will continue to adjust as the market dictates. The same goes for the rest of our capital allocation priorities. I would say that generally, we have flexibility with regard to how we allocate capital in 2025, depending on how market conditions evolve.

While our first half free cash flow, excluding investment in trailers as a service was negative $31 million, we expect to be near breakeven by the end of the year as we rightsize working capital to the current needs of the business. While 2025 has brought its share of challenges, we remain focused on disciplined execution and advancing our long-term strategy.

Our teams have shown strong resilience and sound judgment, particularly in managing costs and maintaining a healthy liquidity position to navigate the current environment. As we work through this cyclical trough, history reminds us that the rebound often comes stronger than expected.

We're positioning the business to be ready when that inflection point arrives, when market conditions stabilize and businesses regain the confidence to reinvest. I'll now turn the call back to the operator, and we'll open it up for questions.

[Operator Instructions]

Your first question comes from the line of Mike Shlisky with D.A. Davidson.

Bret, just looking at 2026 for the overall trailer cycle, just talking us on kind of what you're watching today. What has to happen orders or order rates to kind of pick up? Are you hoping that -- or thinking that folks might be ensuing the trailer fleet market and making the market a little smaller for those who are left, just better rates and volumes. Just guesses of maybe the 2 or 3 key things that you're watching for currently. .

Yes. So great question. So when we think about 2026, I think it really comes down to capacity coming out of the market being -- they're really the only factor right at this moment that we would be looking at in the context of the, I would say, the forecast that the third parties are putting out there at this moment in time.

Now that's echoed by our customers as well, who if you -- when you really talk around the horn with them, they believe that enough is starting to exit as long as nothing else changes in the environment, to see where they can look at, we'll call it -- we'll call directional capital deployment in line with those expectations, which is really nothing more than getting back to a replacement level of capital deployment and then eating into the slightly the deficit that they've created by the underway over the last couple of years.

So I think that is the main thing that we're looking at right now. And then the secondary thing that we'd be looking at is the fundamental freight producing subsectors of the market, which is really what would be the truly the more positive precipitating event that we're all looking for to really change the game going forward. .

I want to follow up with that question, Brent. Just asking a little more broadly. Do you get the sense that the industry is quietly being able to do a bit more with fewer assets these days. Has the industry gotten more efficient over the last couple of years, with use of AI more efficient, load board anything to tell us there is the national fleet just shrinking because of technology and not due to volumes of .

No, I don't have any -- there's nothing that I see at this moment that would say there's anything happening at scale around substantial efficiency that's moving into the market through technology deployment right at this moment. I would say the net inefficiency is still greater than efficiency being created.

Now that doesn't mean that there's not inroads happening, at the fleet. And it doesn't mean that they're not building platforms that ultimately show promise. But when you integrate, right, all of it happening right now, plus the disruption that's happening in logistics, I think is much more of a market-related situation as we sit here today. So I do not -- I would not expect to see as the market unfolds over the next 3, 4, 5 years, a depressing element relative to efficiency gains. It's not my calculus right now. .

Got it. So maybe just lastly, can you give just a little bit more detail on the parts and service growth. That was pretty impressive. I'm curious, do you think the traditionally business is on that you've still got growth tailwinds into 2026, and what might be behind that, whether it's offerings or extending the network, et cetera? .

Yes. I think we hit on that a little bit, but it fits a big piece of it. Obviously, our parts initiative that we've been doing now for about 3 years is starting to get traction with our PPN expansion. .

We believe second half can be 20% better than the first half, and we can see on the top line revenue, we think we can grow into '26 as well. So we don't -- we expect there is a long runway ahead of us. We're just getting started. So we're coming off of a lower base, but we're now hitting some levels that I think are meaningful from the top and bottom line that are starting to move the enterprise, and that's just going to keep going as we go forward. And we resegmented in '21, we're at this point now where I think we're finally starting to see that sustainable growth at levels that really will start to move the needle. .

Your next question comes from the line of Jeff Kauffman with Vertical Research Partners. .

A couple of questions, that $30 million to $40 million in CapEx, does that include the investment in trailers as a service? .

Does not. So that would be just our traditional CapEx. .

Okay. And -- so where is the top fleet right now? And how much incremental investment went in 2025 to TaaS?

So in terms of dollars that we've spent through the first half of the year, it's roughly $21 million. I'll let Mike expand on the -- where we're at in terms of total trailers and deployment. But that's the spend right now is about $21 million through the first half of the year. .

Yes. The total fleet is still directionally in line with what we said it was in Q1, over 1,000. We've added a few in total. And I would say that we would expect it to grow second half, obviously, that's market-driven. And -- but we would expect to see a move up in the second half from where we've been in the last 2 quarters in terms of our total fleet and TaaS. .

Okay. So Brian, in your comments, you talked about the need for a price increase in 2026 to handle inflation, at least on my numbers, I'm calculating average sales price in the transportation business dropped by about 9% sequentially from 1Q to 2Q and is down about 13% year-on-year. What is driving that? Is that a mix change? Is that because of the way the contracts are structured? How should I think about that? And then how should I think about that moving forward to 3Q, 4Q? .

Yes, I'll let Pat start and then I'll follow up. .

Yes. The sequential ASP is almost entirely mix driven, Jeff. So if you were to do the percentage of the total trailers that are dry vans first quarter to second quarter with the increase in that percentage, it's a drag on our ASP across the Transportation Solutions group. If you were to look at it on a like-for-like basis and exclude that mix, ASP would be relatively flat to what it was in the first quarter. .

Okay. So less tanks, more dries is kind of more what's driving it? Okay. And then the delivery number for 2Q, 8,640, congratulations. That was a lot higher than I thought it would be, you mentioned in your comments a timing issue. Is that what happened here? Did we have more trailers that went in 2Q that maybe won't go in 3Q, 4Q? .

Yes. We -- so the timing issue specifically that we mentioned was just around cash collections. So we did it very big June shipments. So as you know, you could straddle between due in July and Q2 and Q3, but that was -- that comment was specifically related to where our net working capital is at the end of the second quarter because we did have higher shipments in the quarter in that third month. .

Yes. I'll give a little qualitative feedback on that, Jeff. I was overall pretty happy all things being considered with second quarter revenue, specifically in the context of all of the, we'll call it, tariff noise that jumped into the mix at the end of the first quarter, right?

So think about that affecting everything from incoming orders, pushouts and cancellation risk. When I step back and look at what the industry did through, what we call it, feedback on the street and to our supply chain, Wabash weathered that extremely well, extremely well.

Let me say that again, extremely well. in terms of continuity of production and not having maybe the disruption that others have seen and I think that's going to show in market share numbers when the year is all said and done, helped us dramatically in being able to leverage also cost reduction efforts because we've managed a much again, relatively more stable platform than maybe some of the rest.

We hope maybe that we could take advantage of that when we go into 2026 as well. So the big numbers are not what we'd like, but pretty happy with the way we're running the show right now when it comes to running the shop floor and making choices on how best to navigate this thing. .

All right. Can I follow that point because you did have a great quarter. And the deliveries above what I expected profits that are better than expected. As I look to the '25 guide of a loss of $1.15 at the midpoint on $1.6 billion of revenues, how much of that is the operations of the business that's coming through? And how much of that is a drag on the P&L because of some of these new projects and new businesses that you're funding. .

Yes. So I would say it's market-driven for sure. We do have some SG&A expenses related to our investments that we're still going to continue to invest in future growth of the business. But for the most part, I mean, you could do the math on the top line drop from guide to guide. That's entirely market-driven, and we've taken actions on the cost side that we feel are prudent given the market reality of what our top line is going to look like, and that's what's implied in the guide that we gave you.

All right. So one final question, and I'll pass it on. So year-to-date, we're looking at an operating earnings number of about a $0.73 loss, the guidance is for, let's say, $1.15 for the full year, so we're implying about a $0.40 loss for the second half of the year.

As I turn to the discussions for the New Year, as I turn to the benefits from the big beautiful bill and what that might mean for the industry. Is your sense that we're in the darkest part of the trailer cycle right now and that we -- you had mentioned in your comments you were hoping for better '26, until the orders come in, we don't know, but can you talk about this new activity? And what gives you enthusiasm that maybe we're seeing the darkest days right now?

Yes. The -- well, Jeff, I would like to say we're in the darkest days, there's nothing that we're not. The only thing that changes that statement is what happens in the future that we don't know. Something has to act probably on the market for that to change the outlook of that. And your guess is as good as mine of what that may or may not be. .

When I talk to customers right now, I just had a discussion yesterday with one of the big ones and the -- being below replacement is a big deal now, and the more prominent, well-managed carriers are doing the best they can so that they can maintain -- so they can leverage margins going forward. right, when this thing goes, right?

They're not getting behind the curve too much right now. But they don't have much further they can go before they are going to have to spend not only to get to replacement, which will be a bump from 2015 -- I'm sorry, 2025, but they've also got to start catching up some, which I'm kind of repeating myself, but that's a very broad discussion that's happening out there right now, and the general consensus that I've gotten is, hey, if it can just hold what's going on right now? And we -- and it just gets a couple of tenths of a percent of spot rate right now is not a bad thing.

You got to go, that's not very much. In the world we live in, if they can just knock off a few of those, that's enough from what I'm getting for them to have to and want to spend a little more in 2026. And I think that's how I think about it. And from where we're at, hey, that's a good story from being, like you said, in the darkest days because all you got to then have happen is another -- the next shoe to drop, and this thing will take off again.

There are no further questions at this time. I will now turn the call back over to Jake Page for closing remarks. .

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

Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect.