WABASH NATIONAL Corp(WNC)Q2 2026 法說會逐字稿

Hello, everyone. Thank you for joining us and welcome to the Wabash Second Quarter 2026 Earnings Release Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to John Cummings, senior director of financial planning and analysis and investor relations. John? 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, and Pat Keslin, chief financial officer. Before we get started, please note that this call is being recorded. I would 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 will hand it off now to Brent.

Thanks, John. Good afternoon, everyone, and thank you for joining us today. I would like to start by discussing something that is fundamental to how we operate at Wabash: safety. As we close out the second quarter, we are proud to have successfully improved our injury rate for the fourth consecutive quarter — 13% versus Q1 2026, 33% versus Q2 2025 — and total injuries are down 15% year over year. As we look ahead to increasing dry van production, we are increasing focus on our onboarding process to elevate workplace safety and manufacturing quality. Our long-term target is an injury rate of less than one. Every day, we are moving closer to that attainment. The second quarter continued to strengthen our conviction that the freight market recovery is taking shape. We are seeing a healthier combination of supply-side forces, safety-focused federally led enforcement, and improving carrier economics.

These factors are beginning to translate into better market fundamentals. Spot rates, contract rates, and tender rejection rates are moving in a direction that supports improved carrier profitability, and that matters because carrier profitability is what ultimately frees up capital to support increased replacement demand expenditure. We fully opened up our order book for 2027 production in late June. That timing is earlier than traditional order cycles and reflects what customers want: earlier visibility, delivery windows, and pricing. Our role is to help customers plan with greater confidence, and in a recovering market, those who plan early should be rewarded with better availability and greater certainty. Against that backdrop, we have continued to take proactive steps to position Wabash for the next stage of the cycle. We are controlling what we can control, aligning cost to demand, protecting liquidity, and continuing to invest in areas that differentiate Wabash with our customers.

We also recently announced a convertible note offering designed to enhance balance-sheet flexibility as we prepare to ramp production for dry van. That action is consistent with our approach to managing through the cycle: preserve resiliency in the near term, maintain the ability to move decisively, and make sure we are prepared to support customers as they increase activity. Earlier this month, Wabash announced its intention to issue convertible senior notes and, after the close of the quarter, secured $150 million of additional liquidity less associated expenses. Those funds strengthen our balance-sheet flexibility and are intended to be used for general corporate purposes, including repaying amounts outstanding under existing credit agreements. Just as importantly, they provide working capital as we prepare for the next phase of the market cycle. We view flexibility around net working capital as a strategic advantage.

When demand begins to accelerate, companies that can respond quickly, efficiently, and with discipline are best positioned to serve customers and capture profitable growth and share. This added liquidity gives Wabash greater ability to manage that ramp without compromising our broader priorities across cost control, operating execution, and long-term value creation. As part of our broader capital strategy, we are also continuing to pursue the refinancing of a revolving credit agreement. Multiple lenders have committed to funding and extending the agreement up to $300 million. We expect to provide an additional update on this topic soon. Turning to the market: leading indicators continue to build from what we saw earlier in the first quarter. Spot rates continued to strengthen, rising from roughly 14% above prior-year levels at the end of the first quarter to approximately 40% above last year by June, surpassing contract rates.

Tender rejection rates have moved above 16%, which represents the highest level since 2018. ATA for-hire truck tonnage continues to run ahead of the prior year, and the ISM manufacturing index has been in expansionary territory for six consecutive months. The Logistics Managers' Index reached its highest level since early 2022. We are encouraged by the direction of these data points, and we are also encouraged by what we are seeing in our own backlog. Backlog grew to $956 million at the close of Q2 2026, a 14% increase quarter over quarter, continuing the double-digit growth that was experienced in the first quarter. A more important point is the pattern: this was the first time in the company's history we have experienced backlog growth in the second quarter. That tells us that customers are beginning to move from deferral to committed demand as they work to stop three years of fleet aging.

Wabash is positioned well for the return of a replacement demand environment. Our U.S.-centric supply chain, leading manufacturing capabilities, increased dry van capacity, and strengthened liquidity position give us the ability to support customers as the market moves through its next growth phase. Our intent is clear and steadfast: to serve customers better, win share, and convert improved volume into stronger financial performance. In conjunction with our intent to grow share through the next stage of the demand cycle, the recovering freight market is also providing the opportunity to recover, through price, costs that Wabash has absorbed during this abnormally lengthy trough. That recovery will not appear all at once. Pricing will be gained incrementally as 2026 progresses and newly quoted deals layer into existing backlog and become more impactful as we move through 2027. Industry average selling prices for trailers have fallen from prior years while underlying costs have increased.

That spread is not sustainable over the long term, and pricing is an important part of restoring appropriate economics across the industry. We will continue to price in a way that reflects cost, capacity, customer value, and the reality of a market that is beginning to recover. There has also been meaningful progress in the antidumping and countervailing duty case brought to the International Trade Commission in late 2025. Affirmative preliminary rulings and rates have been established as follows: countervailing duties for China range between approximately 82% for cooperating entities and 129% for non-cooperating entities, and for Chinese antidumping duties they are set at approximately 131%. For Mexico, countervailing duties are approximately 2%, and antidumping duties are expected to be announced shortly. Wabash is a champion of American manufacturing. That commitment is evident in our continued investment in U.S. facilities, including the Lafayette South plant, which added 10,000 units of dry van capacity, and our sourcing strategy, with approximately 95% of our materials procured from the U.S. We support actions that provide relief to the domestic industry and help level the playing field because a healthy domestic manufacturing base is important for customers, employees, and the long-term competitiveness of the industry.

As a reminder, our foreign competition is also subject to Section 301 tariff duties that were modified in Q2, resulting in a 25% tariff rate applied to the full customs value of an imported trailer. Section 301 tariffs, antidumping tariffs, and countervailing duty rates are stackable. Looking forward, the outlook continues to show positive signals, including the atypical second-quarter backlog growth to $956 million. At the same time, we continue to monitor market sentiment closely and consider the ongoing potential for macro disruptors, geopolitical tensions, and broader economic impacts that could influence overall market recovery. For that reason, we will continue to provide quarterly guidance while this transitionary period converts into a more stable environment. For the third quarter, we expect revenue in the range of $440 million to $460 million and adjusted earnings per share in the loss range of $0.50 to $0.40 per share.

The outlook for the third quarter remains consistent with our prior qualitative guidance and reflects sequential improvement as we move through the year. While we are not providing quantitative guidance beyond Q3 at this stage, we do expect the fourth quarter to experience some top-line deterioration versus the third quarter in line with typical seasonality, while continuing to improve sequentially in earnings per share as cost recovery through pricing begins to filter into the financials and we benefit from focused cost control actions. Before I turn the call over to Patrick, I want to again recognize our employees. Their skill, experience, and commitment to execution are what allow Wabash to manage through a difficult environment while continuing to prepare for the upcycle. We have asked a great deal of our teams and they have continued to respond with discipline, resilience, and a focus on continuous improvement. And with that, I will now turn the call over to Patrick for his comments.

Thanks, Brent. I will begin with a review of our second quarter results. For the second quarter of 2026, consolidated revenue was $417 million, above the expectations we communicated on our first quarter earnings call. During the quarter, we shipped 8,290 new trailers and 1,380 truck bodies. Truck body volumes were in line with our expectations with the second quarter expected to represent the low point for the year. We continue to project the recovery in truck bodies to lag our traditional dry van business. We anticipate moderate sequential improvement in the second half of 2026. We were encouraged by the incremental volume we saw in the quarter, particularly within our core dry van product. While the financial profile is improving, the current market environment continues to suppress margins in the near term. Adjusted non-GAAP gross margin was 4.1%, marking a return to positive gross margin, and adjusted non-GAAP operating margin was -5.6%.

Results were impacted by higher material costs that we have been unable to fully recover through pricing. As a reminder, these adjusted results exclude costs associated with the idling of our Little Falls and Goshen facilities. Adjusted non-GAAP EBITDA for the quarter was -$9 million, or -2.1%. Adjusted non-GAAP net income attributable to common shareholders was -$21.6 million, or -$0.53 per diluted share. EPS was within our guidance range but was adversely impacted by the material cost versus price relationship I just mentioned. We anticipate this to be short-term in nature and not to affect our expectations for sequential profitability improvement as we move forward. Turning to our segments, Transportation Solutions generated $355 million in revenue and reported an operating loss of $12.1 million on a non-GAAP basis. The segment returned to positive gross margin supported by improved volume and better leverage of the cost base.

We continue to expect sequential improvement as pricing adjusts to offset cost pressures. Parts and Services delivered $63 million in revenue and $6 million in operating income on a non-GAAP basis. Segment profitability improved versus the prior quarter, reflecting a step-up in upfit business profitability. During the second quarter, we began to see the benefit of steady ramping at our new upfit sites, which carried elevated startup costs with minimal initial revenue in the first quarter. In addition, we continued to make progress on the development of digital technology and AI-powered tools that will help us to better serve the parts market in the areas of parts findability and availability. Over time, we expect these capabilities to create additional revenue generation opportunities while improving mix, efficiency, and margin performance across parts and services. Turning to cash flow, operating cash flow for the quarter was $5.1 million, resulting in free cash flow of $3.1 million.

As of June 30, total liquidity, including cash and available borrowings, was $193 million, 17% up versus the prior quarter. Cash makes up just over one-third of the $193 million with the remainder being available borrowings on our existing revolving credit agreement. Throughout the ongoing market softness, we have remained focused on preserving liquidity and maintaining financial flexibility. This disciplined approach allows us to manage near-term headwinds while continuing to support our strategic priorities and longer-term initiatives. In addition, we secured $150 million of additional liquidity through the convertible senior notes issued after quarter-end. That decision was driven by a desire to strengthen our liquidity position ahead of an expected market recovery, giving us the flexibility to support working capital needs, manage the production ramp, and pursue value-creating opportunities without compromising financial discipline.

During the second quarter, we spent approximately $2 million on traditional capital expenditure and returned $3.3 million to shareholders through our quarterly dividend. As we look ahead and prepare for market recovery, we will continue to closely monitor cash and liquidity. The convertible senior notes provide additional flexibility and optionality, including the ability to pursue early payment discounts with our supply base where we see attractive financial returns as we progress through 2026. We are also nearing completion of the refinancing efforts associated with our revolving credit agreement, with $300 million already committed. We expect that to formally complete in the very near term, well ahead of it becoming current in September. Looking ahead to the third quarter, we expect revenue in the range of $440 million to $460 million, an operating margin of approximately -4% and adjusted earnings per share in the loss range of $0.50 to $0.40.

Capital expenditure remains under close review. We remain committed to appropriately funding the organization while retaining the ability to calibrate spending to business conditions. As we communicated on our prior call, Q1 was expected to be the weakest quarter of the year and the second quarter showed meaningful financial improvement. We expect that trend to continue as we progress through the year and our expectation for positive EBITDA in the second half of 2026 remains unchanged. In summary, the second quarter represented an important step forward off the bottom. There is still work ahead, but as we evaluate the growing backlog and improving sentiment in the marketplace, we remain cautiously confident in the outlook. We are focused on disciplined execution, capturing share as demand improves, and positioning the business for stronger financial performance as volumes recover. The important steps taken to strengthen working capital availability reinforce our ability to respond quickly and decisively to customer needs while expanding long-term value for our stakeholders. I will now turn the call back to the operator and we will open it up for questions.

Thank you very much. We will now begin the question-and-answer session. To withdraw your question, press one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from the line of Michael Shlisky with D.A. Davidson & Co. Michael, your line is open. Please go ahead.

Hello, and thanks for taking my questions. Let's see. I wanted to figure out some of the more recent challenges you saw in EPS this quarter and EPS in your third-quarter outlook. They are a little bit more challenging than I expected, but it sounded like from your comments — and if I am wrong here, please correct me — it sounds like you are still working through the low point of pricing in the backlog and maybe some ramp-up inefficiencies as you are getting ready to ramp up over a couple of quarters. Is that the right way to characterize it? And how much better do you think the pricing margin is in the backlog currently — the $956 million — compared to what you built the last quarter or two here?

Just a reminder that if you are muted locally to please unmute your device. Was I muted, or were they muted perhaps? I think the main line might be muted at the moment.

Hello? You hear us?

Yes. The main line is now unmuted.

Alright. Okay. We are in. Sorry about that. We heard you, Mike. I will start over. Where you are heading is exactly where we are. If you think about where we were in the first quarter — the uncertainties that we had and how backlog was being executed in Q1 and early Q2 — we were not in a great place from a pricing standpoint. That changed coming into mid second quarter. But that backlog is really laying into the tail end of the third quarter, primarily into the fourth quarter, and now technically into 2027. We have to work our way through to where that shows up in the P&L, but we have great visibility to what that is. We have made substantial pricing increases in almost three-week increments over the last nine to twelve weeks with this substantial amount of backlog that has flowed into the business. We do have some inefficiency costs that crept into the second quarter as we began to add additional labor and shifts in response to the demand that came in.

There will be incrementally similar levels when we get into Q3. Remember, we are going to be ramping for the next nine to twelve months based on the replacement cycle that we see. That part would generally be in line. Patrick will talk more here in a second about the real visibility that we have in terms of pricing and why we feel comfortable and confident that we are seeing it go in the right direction at the right scale to regain profitability relatively soon.

Yep. So just quantitatively, Mike, of that $956 million in backlog, a big portion of that is going to convert here in the third quarter. So the profitability in the third quarter is tied with the guidance that we gave, which at its highest level looks very similar to what we saw in Q2 from a margin standpoint. Think of it as the price we refer to as material margin: price adjusted for your material costs. Q3 will look very similar to Q2 on that basis. Now going into Q4, we expect that number to incrementally get better — material margin percent improving by 200 to 300 basis points — and that is backed by orders that we have in the backlog right now. Of the remaining available slots in the fourth quarter, of which there are not many at this point, we are seeing elevated pricing that more than offsets the material cost increases we have seen this year, which is very different than what we experienced in our second quarter results. Subsequently, our third-quarter backlog looks better. So positive momentum going into the fourth quarter from a margin standpoint that we also expect to continue into 2027.

And let's talk about 2027 for a moment, if you would not mind. Some of the big forecasters out there are saying the trailer market is around 260,000 or so — back to more replacement-level demand or a more normalized average level of demand. That's a pretty big jump from 2025 and 2026. I looked back at history and have seen Wabash make between $150 million and $200 million-plus of EBITDA in years that are similar to that. Given what you just said about price and your ability to catch up largely by the fourth quarter or early 2027, and given the new facility you opened that you haven't used much the last couple of years, how do you feel about reaching a more normalized EBITDA in 2027 if the forecasters are correct? How do you feel about your profitability this time around compared to previous times?

I will address the profitability question and Brent can chime in on the forecast for 2027. To answer your question: if 2027 does get back to replacement-level demand, we fully anticipate that we would be back in that range of profitability — back to a more normalized EBITDA level. With that will come an increase above our current pricing levels that we are seeing in Q2 results and the Q3 backlog. But where we are currently pricing 2027 bids at would be enough to get back to that $150 million to $170 million of EBITDA range for 2027, assuming those forecasters are in line with what actually happens in 2027.

Yeah, I will add two additional points. First, how we see the market: yes, ACT, FTR, call it in the net 260,000 unit total trailer range. Almost all that change from 2026 to 2027 is predicated on dry vans, and we fully see it. From discussions with top-tier executives at some of the largest carriers in the country, they are fully focused on replacement volume; it is reflected in their words, their quoted volumes, and their stated intent to purchase. So we feel very comfortable with market conditions for 135,000 to 145,000 dry vans, which would be right in that replacement level in the way we see it. The other piece I want to be clear on is that we are pricing today based on a reasonable expectation of covering the inflationary costs that we have incurred over the last two to three years. It is a relatively straightforward conversation with our customers. The pricing balance we need to see in 2027 is also bridged concisely with that walk around inflationary pressures. It is not taking into account anything with countervailing or antidumping pricing factors at this stage as they continue to play out. We feel very comfortable on the back of general market economics in terms of the pricing levels that we are able to quote, win, and achieve right now.

To follow up there, Brent, as I look back to previous pricing — inflation's happened every year — so when I think back to what has happened on pricing the last couple of years, it has come down a bit. When I try to look at forward numbers in late 2026 or 2027, would previous higher watermark pricing from a couple years ago be the right place to look for what might happen in the future, or even higher than that given several years beyond that previous time?

I do not think early 2024 is a realistic or practical view of where the market is right now or will be in 2027. When you start looking at 2022 and you think about dry vans — spec agnostic — in that $35,000 to $41,500 range is appropriate for where the market is in terms of the cost base we have right now. Our customers are very aware of that in their own math and how they are thinking about capital allocation going forward. That would be a reasonable place to think about it.

When we are sitting at the end of 2027, I would agree with everything Brent just said. The 2023-2024 profitability that we saw I would not model as repeating into the future, but 2022 would be a very good comparable to what we would expect going forward.

Got it. And then I just also want to ask about opening the order books early. Typically, that is usually in advance of a pretty solid year coming up. What has been the customer reaction since you did it? Do you feel like you are getting better visibility on how to buy, when to produce, and when to schedule six-plus months in advance? Has that helped you get even more orders? Have customers been receptive or are some just saying they'll call in November? Just curious what you are hearing from some of the fleets out there.

The reason we did it is because customers asked us to. The response we have gotten is follow-through on those requests for active quoting and early cycle negotiations and deal closings so they can have certainty in allocated capacity and slot timing. Customers have carried through with what they asked for, and we have carried through on what we executed. We are working through it right now. July orders for Wabash, compared to other Julys, have been awfully good because customers had the ability to take orders. The price is a carry forward of what we said in Q2, and this is atypical in terms of customer acquisition and order closure. It started in June and will carry forward into July. The dealer body has already started to come into play, which is shaping six to nine months ahead of where it has been the last two years in terms of them being prepared for the beginning of the year. To put Q2 in perspective: we talk about it being 14% up, but that is a world where typically we would have contracted $200 million in backlog.

We are really talking almost a $300 million swing in backlog under a normal February-type world. July will be something similar in terms of cost direction. We will need to see how August and September continue to play out, but the trend is generally continuing. There is activity going on everywhere, including domestic manufacturers. Thanks, Mike. I will pass it along.

Thank you very much. Our next question comes from Jeff Kauffman from Citizens Bank. Jeff, your line is open.

Hey, everybody. I think Mike covered almost everything. I do have some follow-ups. As I think about the journey from 180,000 back to 300,000-plus orders at some point in 2028 or 2029, I look at the margins on Transportation Solutions. Gross margins right now are about 2%. At that level of production, we should be up in the 11% to 12% range. I look at what is going on in Parts and Services, and you are at 14% gross margins; we should be in that 25% to 27% range. Help me think through how we get there. How much of that is from pricing rising 200 to 300 basis points, how much from mix normalizing versus where we are today? Are we at structurally lower margins because of what has happened in the market since the last cycle?

I do not have exact numbers to give you, Jeff, but the majority of the recovery will absolutely come through price. When I talked about a 200 to 300 basis point improvement in the fourth quarter, there will be more price needed in 2027 to get back to the historical margin profile. That is all related to recovering the inflationary cost we have seen over the last two to three years; that is what is dragging current profitability. We have line of sight to get that back. There will also be volume leverage from higher production levels since our fixed-cost structure can benefit from higher production. So yes, price is the major driver, and volume leverage contributes as well.

Okay. On the Parts and Services side, you are talking about gross margins going from this 14% level right now. You mentioned startup costs in these upfit centers that are dragging that down. Where can those gross margins go in the next two to three years, and how do you get there?

From a general perspective, we would expect over the next couple of years to be back into the mid to high teens. We have meaningful categories inside our parts business that are directly influenced by the state of the OEM market today — components, tank heads, and proprietary aftermarket parts — and those areas have superior margins. When those ramp up, mix contributions are substantial. They generally begin to layer in at the end of the third quarter or beginning of the fourth, based on the natural cycle when those begin to creep in. There is a pricing element as well because there have been inflationary pressures that have been difficult to pass along. Those are pricing recovery actions we initiated in Q2 based on a changing market dynamic, and we are executing on them as volume begins to layer in.

If I think about market share, which is a little lower now than it used to be — some of that was because we got out of the reefer business — maybe we get back into it this cycle. I am curious about timing. Some competitors grew with other companies that were outgrowing the market. You have argued that tariffs and duties provide an opportunity to recapture market share, and you have expanded dry van production. How do we get the share back? What is the longer-term plan with reefer? The tank market is about half of where it normally is in a cycle — big opportunity for share. How do we recapture it this cycle?

Starting with tanks: you are right that the market is substantially lower, but we have actually grown market share there — arguably over 800 basis points over the last two years — though that was on weak overall demand. We expect to hold some of that share as the market climbs, although perhaps not all. On the dry van side, we are sitting at about 23% market share for 2026, which is about where we were during much of the 2010s when we executed a price-over-volume strategy that grew the gross margin of our trailer business. One initial hurdle is 25% market share. Being able to operate without allocation and to secure a larger percentage of given customers' splits is a big part of regaining share. Another piece is prospecting more direct customers because we now have capacity we can count on throughout the cycle. Dealers can have a larger level of allocation, which they effectively lacked for many years. Making capacity available and sustainable is a tremendous advantage in our ability to win customers because they know we can serve them through the cycle, not just at the beginning or end. We can do that with reasonable pricing expectations described by Patrick. That is the straightforward way we think about recapturing share, with differentiation and service being the other important components.

Just FYI, one of your large national customers was musing on their conference call a few hours ago that they needed to start buying more trailers in 2026 and 2027, which supports your comments. That is all I have. Thank you.

Thank you. Thank you.

Thank you. We have reached the end of the Q&A session. I will now pass the call back to John Cummings for closing remarks. John, please go ahead.

Thank you everybody for joining us today. We look forward to following up with you throughout the quarter, and have a wonderful rest of your day.

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