Wabash National Corporation Stock

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 safe harbor disclosure addressing forward-looking statements. I'll hand it off now to Brent.

Thanks, John. Good afternoon, everyone, and thank you for joining us today. I'd like to start, as always, with safety because it's fundamental to how we operate Wabash. We saw continued improvement in total recordable injury rates with metrics tracking 26% favorable to the prior quarter and 42% favorable to the prior year. Q3 marks our fifth consecutive quarter of improvement. Meaningful progress is continuing even as working hours and the number of new hires increase. This is evidence that the proactive work we undertook over the past several years to reduce workplace hazards as well as recently strengthening our onboarding processes ahead of increased dry van production is working. We have maintained a steadfast focus on safety while preparing the organization for higher production, and we are seeing the benefit not only in safety performance, but in overall ramp execution.

Moving on to third quarter results. Financials represent another step forward in what continues to be a transition year for Wabash. Revenue for the quarter was over $476 million with non-GAAP adjusted EPS of negative $0.63. More importantly, beneath these results, we have explicit and material evidence of demonstrated customer demand. That gives us confidence that the conditions required for a broader recovery are solidly in place. As a direct result of customer order activity at scale, we aggressively pulled forward capacity addition actions into Q3, actions previously slated for Q1 and Q2 of 2027 to increase dry van output and direct response to that customer demand. 2026 has been a transition year.

Since late June, we have quickly moved from managing through a very difficult demand environment, having a liquidity preservation posture and a cost minimization mindset to fully mobilizing Wabash for a dry van cycle recovery. Our teams have been doing exactly that. This ranges from the convertible debt acquired last quarter to ensure we have the net working capital availability to operational actions, including securing strong long-term agreements with critical suppliers and then adding people and shifts to support the dry van volume we see ahead in 2027. I want to reiterate and make one important point about Q3 and the remainder of 2026. Our confidence in 2027 has increased. We have elected to incur certain costs in 2026 that otherwise would have occurred in early 2027. These include primarily labor and other production readiness costs associated with preparing our operations for improved demand.

Simply put, the required investments that advance the overall ability of Wabash to generate more profitable conversion of higher levels of demand sooner than later, investments we are happy to have been able to make. That distinction is important. These expenditures affect the timing of earnings, and they also reflect increased confidence in their underlying view of the dry van market.

We are making deliberate decisions today because our confidence in the opportunity ahead has strengthened through direct evidence called orders. As a result of absorbing these costs now, our positive EBITDA projections for late 2026 no longer are correct. We will now have a rapid sequential improvement through 2027, reaching a level of quarterly profitability by Q2, consistent with our annualized EBITDA run rate between $150 million and $170 million instead of being in the second half of the year as previously assumed. That is despite assuming the truck body market remains depressed for longer as we do not yet see meaningful green shoots in that segment.

At the same time, we remain disciplined. This is not indiscriminate spending ahead of a hoped for recovery. We have spent the last several quarters taking structural costs out of the business and improving the flexibility of our manufacturing footprint. Those actions were designed to preserve our ability to scale efficiently as demand improves, consistent with how we have framed our cost structure and capacity entering into this recovery. On a more constructive view of demand and our outlook entering into 2027 compared with prior quarters, it has been driven by both market-leading indicators and momentum within our backlog. We continue to see progress across freight indicators that ultimately support equipment demand, improving spot and rejection rates, carrier profitability and fleet sentiment, alongside an aging equipment base and deferred replacement cycle are contributing to a more robust setup. That does not mean we expect a straight-line recovery. What it does mean is that the balance of evidence is moving earlier at scale and in the right direction.

Just prior to quarter end, we released evidence of our improving backlog, which stood at over 12,000 dry van trailers for 2027. That pace did not let up. It took off. That number was almost 16,000 units by the end of the quarter. And by mid-October, it was almost 20,000 units with more orders in the process of closing. Across the organization, our total backlog has reached $1.3 billion by mid-October and with more 2027 demand to play out. Early movers remain steadfast in their buying decisions and continue to become more constructive. Improving freight economics combined with significant replacement needs are bringing equipment decisions forward at an increasing pace. Customers continue to place significant value on our long-standing relationships with Wabash, and those conversations increasingly point toward a more consistent replacement cadence and additional catch-up demand over the coming years, even without a traditional demand-driven recovery.

At the same time, a number of customers remain early in their budget and planning cycles, giving us further confidence in the opportunity for order activity to build over the coming months. While still relatively early in the 2027 sales cycle, historical order patterns would suggest that we are on track for a dry van volume in the 35,000 to 38,000 range at Wabash. That would align with our expected market size in the initial replacement cycle phase and our targeted market share percentage in the plus or minus 25% range. The current pace of backlog intake would suggest a higher volume case in the low 40,000 unit range. While we are not modeling this level of demand, we feel the effective capacity we are adding in Q3 and Q4 of 2026 would enable our execution of that possibility.

Critically, forward-looking pricing remains constructive, giving Wabash the opportunity to convert that demand into progressively higher levels of unit profitability. Our announcement prior to the quarter end referenced weighted average 2027 material margin exceeding Q2 2026 by 500 basis points. Our backlog portfolio now averages over 600 basis points in excess of Q2 2026, highlighting how improving freight economics and carrier profitability are supporting pricing that is better aligned with our actual cost base. Our proactive and thoughtful approach of this market inflection, coupled with strong supplier partnerships and an ability to expand our hourly workforce provide high confidence in Wabash's ability to win the early and mid-innings of the new cycle we are in, further enabled by executing aggressively to meet our customer needs with highly effective trailer capacity, thus giving Wabash the ability to fully capitalize on demand momentum.

Trade is another important part of the bridge between the environment we operated through and the one we see developing. We have previously discussed the impact of Section 232 and antidumping and countervailing duty actions. We believe these measures can favorably change industry dynamics into 2027. This is consistent with our prior framing of trade actions as helping level the competitive playing field and support pricing discipline following years of oversupply. Recently, on the 25th of September, the United States International Trade Commission made their final affirmative determinations that imports of van-type trailers and subassemblies from China materially injured the U.S. industry. The antidumping rate is almost 130%, while the countervailing duty rate is almost 135%. Stacking with the 25% associated with Section 232 tariffs results in an effective rate of approximately 290%.

Meanwhile, Canada and Mexico have preliminary affirmative determinations and are posting cash deposits today at the preliminary rates with a combined antidumping countervailing duty rate of approximately 10.2% being applied to the competitor, Hyundai. Final commerce decisions are expected by mid-December and final International Trade Committee votes by early 2027. Again, stacking the 25% associated with Section 232 tariffs result in an effective rate of approximately 35%. Our view is simple. Wabash should compete at a level playing field. We have an extensive U.S. manufacturing footprint, a highly capable workforce and substantial installed capacity. We believe an environment which all participants compete under fair trade conditions is good for our customers, good for American manufacturing and good for Wabash. Importantly, we already have the physical capacity to participate in an improving dry van market. Our South plant expanded our scalable dry van capability by approximately 10,000 units compared with prior up cycles, giving us the ability to respond without requiring another major capital investment.

Now turning to the fourth quarter. We expect Q4 revenue to be between $420 million and $450 million, adjusted operating margin of negative 8% to negative 5% and adjusted EPS of negative $0.75 to negative $0.55. Embedded in that outlook is labor and production readiness expense deliberately pulled from 2027. During Q3, we increased our dry van hourly workforce by 15%, and we'll continue to add shifts during the fourth quarter that were originally planned for the first quarter of 2027. Effectively, by the end of the year, all second shift production will be turned on. Of course, some of the inefficiencies are expected to lag into Q1 of 2027.

While we continue to monitor demand, we maintain a high degree of confidence that we can meet high side demand beyond our current projections within 2027 without adding a third shift. That leaves us exceptionally well positioned to respond to incremental demand opportunities. If demand were to warrant either a full or partial third shift layer of dry van capacity, that will add additional cost pressures and margin headwinds in the short term.

I want to spend a moment framing what this means for 2027 because we recognize investors are beginning to build next year's models. We are not providing formal 2027 guidance today. We are, however, increasing confidence that 2027 should represent a meaningful improvement in Wabash's financial performance. The recovery will not be uniform across the portfolio. In dry vans, we see improving demand conditions, significant deferred replacement needs and a more constructive regulatory and trade backdrop and ample Wabash capacity to participate as the market strengthens. Truck body is different. That business entered the downturn later, and we expect its recovery to remain meaningfully behind dry vans. The beginning stages of cycle recovery, we believe, are roughly 6 to 9 months behind dry vans with a slower recovery dependent upon broader macro conditions.

Therefore, as we think about 2027, we are encouraged by stronger year-on-year improvement in dry vans while recognizing a considerable more measured assumption for truck bike. Parts and services are expected to maintain a 5% to 10% top line growth trajectory and see strong incremental as 2026 start-up costs dissipate, resulting in mid-teen EBITDA percent performance returning. That is intentionally a directional framework rather than formal guidance, but we want to give investors sufficient information to build their models without drawing the wrong conclusions from either Q4 revenue or margins.

Before I turn the call over, I want to close where I always believe we should with our people. The last several years have demanded a great deal from the Wabash team. Managing through an extended freight downturn requires discipline, flexibility and at times, difficult decisions. At the same time, preparing for a recovery requires a different mindset. It requires us to look beyond today's production schedule and prepare the business for tomorrow's opportunity. Our people have done both. They have worked to reduce waste, improve safety, protect quality, serve customers and make Wabash stronger while volumes have been under pressure. Our continued emphasis on safety, quality and customer support has deliberately remained protected even while the costs have been reduced.

As we enter the final quarter of 2026, I am increasingly optimistic about where the industry is headed and about Wabash's position within it. 2026 has been about taking the actions necessary to create that readiness. Increasingly, our focus is turning to how we will convert that preparation into performance in 2027 and beyond. I want to thank every Wabash employee for their continued commitment to each other, to our customers and to our purpose.

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

Thanks, Brent. I'll begin with a review of our third quarter results. For the third quarter of 2026, consolidated revenue was over $476 million, exceeding expectations communicated in the second quarter earnings call. During the quarter, we shipped 9,563 new trailers and 1,685 truck bodies. We are encouraged by the higher volumes, particularly in our core dry van product line. The financial outlook is improving, though near-term results reflect the operational readiness costs Brent discussed.

Truck body volumes improved from the prior quarter but remain at historically low levels. Customer mix and manufacturing inefficiencies compounded by those low volumes continued to challenge financial performance during the quarter. Adjusted non-GAAP gross margin was 3.2% of sales and adjusted non-GAAP operating margin was negative 5.7% of sales. Adjusted non-GAAP EBITDA for the quarter was negative $10.4 million or negative 2.2% of sales. Adjusted non-GAAP net income attributable to common shareholders was negative $26 million or negative $0.63 per diluted share. GAAP EPS of negative $0.51 per diluted share includes the sale of the Gochin, Indiana manufacturing facility for gross proceeds approximating $17.8 million and recognition of an approximately $7.5 million gain.

EPS came in below our guided range, primarily reflecting the factors referenced above, which we expect to be short term in nature, and in the case of dry van, expedite our projected sequential profitability projections going forward.

Turning to segment performance. Transportation Solutions generated $408 million in revenue and reported an operating loss of $14.4 million on a non-GAAP basis. Transportation Solutions maintained positive gross margin during the quarter, building on the progress we saw last quarter as improved volumes continue to support better leverage of our cost base. We continue to expect sequential improvement as pricing adjusts to offset cost pressures. Parts and services delivered $69 million in revenue and $5.6 million of operating income on a non-GAAP basis. Parts and services continued to build momentum with revenue increasing 9% sequentially and 14% year-over-year. While profitability remains below our expectations, upfit margins continue to reflect the start-up costs associated with integrating our new 2026 upfit sites into their respective markets.

As these start-up pressures normalize, we expect the growing revenue base to translate into meaningful incremental profitability. Segment performance has stabilized, and we have a strong base from which to grow. That includes continued establishment of the upfit facilities in their local markets and an expanding presence in the aftermarket parts segment, which should also benefit alongside a recovery in dings. During the quarter, we delivered on our promise to renew our asset-based loan, the details of which were shared in August.

Looking ahead, our focus turns to our high-yield bonds, which we intend to address well ahead of becoming current in October of 2027. We are actively engaged with our banking partners and evaluating the options available to us with a focus on achieving the most economically attractive outcome for Wabash. We will provide additional updates as appropriate. As of September 30, total liquidity, including cash and available borrowings, was $277 million, up 44% versus the prior quarter, benefiting from execution of the convertible debt in July and sale of our Golchin manufacturing facility in August. The convertible debt allowed us to pay down our asset-based loan, which currently has a 0 balance and is ready to be deployed to support net working capital requirements associated with the production ramp.

Our disciplined approach to capital management and the actions taken to increase liquidity position Wabash uniquely well to prepare for the market recovery and support our customers as demand improves. In regard to cash flow, operating cash flow for the quarter was negative $37 million, resulting in free cash flow of negative $41 million. This reflects the start of our planned working capital ramp ahead of higher dry van production levels. We expect that investment to continue as volumes scale into 2027, supported by the liquidity secured through our July convertible issuance.

During the third quarter, we invested approximately $3.5 million in traditional capital expenditures and returned $3.3 million to shareholders through our quarterly dividend. Looking ahead to the fourth quarter, we expect revenue in the range of $420 million to $450 million and an operating margin of between negative 8% and negative 5%. Adjusted earnings per share expected to be in the range of negative $0.75 to negative $0.55. The guidance reflects seasonally lower revenues expected in the fourth quarter with improved price offsetting leverage loss and continued operational readiness expenditures. The 200 to 300 basis point improvement in dry van material margin percentage discussed on our last earnings call remains on track for the fourth quarter. Together with significant backlog growth, this reflects continued sequential improvement in underlying profitability as we prepare to leverage higher volumes across our second shift operations.

Capital expenditures remain under close control. We commit to appropriately funding the organization and are in a strong position to fund net working capital requirements, having previously invested the necessary capital into capacity. Having made the decision to pull forward ramp costs, we now anticipate negative EBITDA in the fourth quarter, but strong incremental exceeding 20% moving into the first quarter. This performance is expected to mark a meaningful step closer to breakeven operating income ahead of further favorable incremental moving into the second quarter and beyond as the volume and pricing that Brent described really takes shape and quarter 2 becomes the new performance floor.

In summary, the third quarter reflected a critical step forward. The rapid progression of the dry van unit backlog supported by accretive material margin through price provided strong validation of the signals we are seeing in the market. We read those signs and accelerated the activities required to position Wabash to meet the needs of our customers. The organization is fully supporting those onboarding activities and our operations teams are excited to ramp multiple production lines across incremental shifts. Wabash is ready ahead of the competition and is set to capture share and recover profitability in 2027.

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

[Operator Instructions] Your first question is from the line of Michael Shlisky with D.A. Davidson & Co.

I guess I want to start out with more of a broader market view. Based on the orders we've seen so far and from customers, do you still think that -- or do you think that 2027 kind of the industry volumes are going to be roughly in line with an average replacement year? And I guess I'm curious, given what we've seen in the last 2 or 3 years here, is that probably too low, there will still be more -- if that's what ends up happening, there will still be more to go in 2028.

Yes, Mike, this is Brent. I'll take that one. I think the activity that we're seeing right now are extremely supportive of what I would call a baseline replacement in 2027. That's about as far as I'm willing to go right at this moment. I'm peg that at approximately 135,000 to 140,000 dry van units. I think when you look at the potential upside in 2027, maybe in the second half of that year, I think you are starting to -- as robust as it's coming in and what we're hearing from customers, you at least have to pay attention that their desire to make up for the 100,000 units that weren't purchased over the last 3 years may come to bear. And that's factoring into how we think about the capacity that we're bringing online today earlier than later.

I think that speaks very well for what 2028 can be, where if you think about 140,000 baseline replacement going into 2028, anywhere from 30,000 to 40,000 units of incremental demand to just catch up partially with that decrement in replacement that occurred in the previous 3 years. I think it's starting to frame that 165,000 to 175,000 units is a real possibility when you stare at 2028, and we think about our capacity in that way.

To follow up there, Brent, your comments earlier were about 35,000 to 38,000 would be the range of dry vans, but I wanted to get a little bit more of a broader view because you do have other products, right? You have tanks and other areas that you have a good presence in. So do you think that you can be above -- overall above 400 next year? I'm sorry.

Yes. So when you think about Wabash, we'll be north of 40,000 units when you think tank and platform in consideration from a total unit volume perspective, somewhere in the range of 41,000 to 42,000 in total trailers is kind of, I'd say, a base number that we're shooting for from a capacity add. The upside to that would be that incremental dry van volume that I'm referencing.

That helps tremendously. And then commenting on some of the orders that you've received in the near term versus the industry. Do you think that you've been able to outperform on market share the last few months either based on, one, just sell of products that you've got or the fact that there's been some tariffs based on competition and they might be able to have great pricing or great visibility at the current time? Just any comments on whether you're outperforming would be tremendous.

I think the -- without taking any, call it, cause or factor into account, we have absolutely outperformed on market share really since the ordering -- the opening of our order book in the June, July time frame. And I would say -- and I think it's absolutely factored into our need to pull capacity forward. Now I'm not going to go as far and say that, that holds throughout the rest of the sales cycle as we try to look at the effective use of capacity, coupled with pricing. But we've actually came out of the chute pretty well, coupled with this -- the pricing that we have gotten is a very advantageous place to be, not something I've exactly seen before with this level of demand increase, with this level of pricing increase.

Is that because of trade? Possibly. I also think it's because Wabash is adding capacity earlier and more effectively than the competition. I think our customers after their last 3 years are wanting to go where they know they can execute their recovery. And I think we're benefiting from that in a world of uncertainty. Wabash is a good place to go to make sure that you can -- if you're a customer that your recovery is sound.

Maybe one last one for me on the margin side for '27. And I do know that you pointed to hitting a certain run rate starting in the second quarter for your EBITDA. And you mentioned the 6 points of material margin. But -- and I'm just curious, just to sum up what you said earlier, it sounds like you pulled a lot of the costs you were thinking about doing in 1Q into 3Q and 4Q, so you can start off on the right foot next year. But what can you tell us about your costs are concerned beyond materials, so things like labor and absorption. Do you think you can return to kind of -- if you're at a year of more normalized travel demand, I know we're having some pull from truck buys here, but do you feel like you can maybe return to a more normal level of EBITDA in 2027 as well?

Yes. I think that's -- this is Pat. I think that's going to be a question of the timing in 2027. So while true that we did pull forward costs -- incremental costs into the back half of 2026, we are still going to be ramping throughout 2027. So we still would expect some of that inefficiency to flow into most likely the first half of 2027. But then we could see a scenario in the back half of '27 where we get back to those historical margin run rates.

Your next question is from the line of Jeff Kauffman with Citizens Bank.

Well, thank you for that explanation of the differential in the fourth quarter and the pull forward on the ramp-up. Just a couple of questions about that. So once you're at 2 shifts and you're up and running, how many trailers will that accommodate? And should I just think about it as only dry van or dry van plus flatbed and other things that you're doing?

I can unpack that for you, Jeff. So when I think about capacity, we should -- we're adding 2 shifts across the board, except for one line, which we'll hold off on just a little bit longer to see how a couple of subsegments go. But even with that implementation, we should be in that 42,000 to 45,000 unit run rate just on dry vans on an annualized basis. That's what we're looking to install with about 5,000 units of additional second shift volume with that last remaining line, and we'll look to pull that sometime in Q1 or Q2. We've seen a couple of things to work itself out in terms of demand profile.

Then on top of that, you'll have the incremental -- and that's without overtime. That's without overtime, which can be anywhere from 5%, 10% to 20% that you can then tack on to it from a modeling perspective. And I'll just jump to it. A third shift is not going to be just a linear extrapolation. It will be a little bit less than that, but it will be kind of ballpark similar, but I would discount that a little bit in terms of what the effective capacity would be. And again, I'll catch up. That is on an annualized basis. That's assuming we have demand to utilize every day fully. That is just dry vans. We still have incremental shifts, both on tank and on platform that we can add as well as full contingent of labor on a 1-shift operation, specifically in tank. We're not even talking trucks.

No, I got it. So the drop that I'm seeing second quarter to the third quarter in average trailer ASP, and I understand there's a lot of things that go into that number. Is that largely mix related? And then I also saw a decline on the truck body average ASP. Can you help me understand kind of what's happening 2Q to 3Q? And when do I start to see those ASPs go up on the new business that you're signing? Am I not going to see that until '27? Or are we going to start to see a little bit of that in 4Q?

Yes, I'll take that one, Jeff. So if you look at the consolidated trailer pricing, that is greatly impacted by mix. Specifically, we've been ramping dry vans, whereas our higher ASP product line, specifically tanks on the trailer side has not seen that sort of increase. So I would describe our dry van pricing Q2 to Q3 similar. So there wasn't a significant reduction there. And we are going to start to see -- if you take mix out of the equation, we are going to see an uptick in the fourth quarter. So we referenced it in the prepared remarks, talking about a 200 to 300 basis points material margin improvement. So that is specific to dry vans and is currently in our backlog pricing for the fourth quarter, but then you're really going to see a significant uptick once we get into '27. And that was the reference that our '27 backlog right now in dry vans is a 600 basis point improvement on what we saw in Q2.

So most of that improvement you're going to see flowing through in our ASPs. But you always have to take into account the percentage of the total that is drive vans because that's -- as that goes up, that's going to bring the average ASP down.

All right. So if I just do a little back of the envelope math here, if I look at operating margins, they peaked at about 12%. Now that was in the sugar high induced COVID. But I would hope toward peak of cycle, we're up in that double-digit range or close to it. And they're going to be closer to negative 6% in 2026, and they were negative 6.5% in '25. If we're saying up 600 basis points, in '27 based on our backlog, that kind of gets us back to breakeven, right, before we consider operating efficiencies and things like that to scale up. Let's say, you get to that 35,000 to 40,000 unit production range, what kind of operating margins should we be seeing at that range? Should we be seeing -- and you could talk about gross margins, if you want. Should we be seeing something in that mid-single-digit range? And if so, is that mainly driven by operating efficiencies? Or do we require additional raw material recapture to get up to those kind of middle of cycle profit levels?

Yes. You've nailed the projection out there. I would put at the kind of volumes that we talked about at the current pricing levels, to be in that mid-single-digit percentage of margins. So it would take an incremental step-up in pricing relative to material costs to get back to the numbers that you were referencing in previous cycles.

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

Thanks, everybody, for joining us today. We look forward to speaking with you throughout the quarter. Have a wonderful rest of your day.

This concludes today's call. You may now disconnect.

Thank you. Hello, everyone. Thank you for joining us and welcome to the Wabash Second Quarter 2026 earnings release call. [Operator Instructions] 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 Patrick 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 safe harbor disclosure addressing forward-looking statements. I'll 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 4th consecutive quarter, 13% versus Q1 of 2026, 33% versus Q2 of 2025, and total injuries are down 15% year over year. As we look ahead to increasing dry van production, we're increasing focus on our onboarding process to elevate workplace safety and manufacturing quality. Our long-term target is an injury rate less than 1, and every day we're moving closer to that attainment.

The second quarter continues to strengthen our conviction that the freight market recovery is taking shape. We are seeing a healthier combination of supply-side forces, safety-focused federal-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 time is earlier than traditional order cycles, but it reflects what customers want, which is earlier visibility in 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 vans. 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 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 levels 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 6 consecutive months, and 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 our own backlog. Backlog grew to $956 million at the close of Q2 2026, a 14% increase quarter over quarter.

While continuing the double-digit growth that was experienced in the first quarter, the more important point is the pattern. This was the first time in the company's history that we had experienced backlog growth in the second quarter. That tells us that the customers are beginning to move from deferral to committed demand as they work to stop the 3 years of fleet aging. Wabash is positioned well for the return of 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 to 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 disciplined 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 anti-dumping 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 at a range between approximately 82% for cooperating entities and 129% for non-cooperating entities, and for Chinese anti-dumping duties, they are set at approximately 131%. For Mexico, countervailing duties are approximately 2%, and anti-dumping 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 232 tariff duties that were modified in Q2, resulting in a 25% tariff rate being applied to the full customs value of an imported trailer. Section 232 tariffs and anti-dumping 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 continue to 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 Pat, 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 Pat for his comments.

Thanks, Brent. I'll 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 8,292 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, though 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% of sales, marking a return to positive gross margin. An adjusted non-GAAP operating margin was negative 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 negative $9 million or negative 2.1% of sales. Adjusted non-GAAP net income attributable to common shareholders was negative $21.6 million or negative $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 continue 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 1/3 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're 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 negative 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'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 Michael Shlisky with D.A. Davidson & Co. Michael, your line is open. Please go ahead.

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're a little bit more challenging than I expected, but it sounded like from your comments, and if I'm wrong here, please correct me. It sounds like you're just still working through the low point of pricing and the backlog, and maybe some ramp-up inefficiencies as you're getting ready to ramp up in the next couple of quarters. Is that the right way to characterize it? And how much better do you think the pricing and margin is in the backlog currently in the $956 million compared to what you just built the last quarter or two here?

Just a reminder that if you are muted locally to please unmute your device.

Am I muted or are they muted perhaps?

I think the main line might be muted at the moment.

Hello? Can you hear us?

Yes, the main line is now unmuted.

Okay, sorry about that. Okay, so I'll start over, Mike. Sorry about that. So this is a really good answer too. So, yes, where you're heading is exactly where we're at. If you think about just where we were in the first quarter, the uncertainties that we had, how backlog was being kind of executed in Q1 and early Q2, we weren't really in a great place from a pricing standpoint. That had really changed coming into mid-second quarter, but that's backlog that's really laying into the tail end of the third quarter and primarily into the fourth quarter and now technically into 2027. So 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.

And we've made substantial pricing increases just in the last, you know, really in almost 3-week increments for the last 9 to 12 weeks with a pretty substantial amount of backlog that's flowed into the business. We do have some inefficiencies, efficiency costs that would have crept into the second quarter as we began to add some additional labor and shifts in response to the demand that's come in. There'll be incrementally similar levels when we get into Q3. But remember, we're going to be ramping for the next, you know, 9 to 12 months based on the replacement cycle that we see.

But I think that part will generally be in line. Pat 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're 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, there is a big portion of that that's going to convert here in the third quarter. So the profitability in the third quarter is tied in 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, the price-weight, what we refer to as material margin, so price adjusted for your material costs, Q3 will look very similar to Q2. Now, going into Q4, we expect that number to incrementally get better, the material margin percent by 200 to 300 basis points.

And that is backed by orders that we have in the backlog right now, and then of the remaining available slots, we are seeing elevated pricing that more than offsets the material cost increases that we've seen this year, which is very different than what we experienced in our second quarter results and subsequently what our third quarter backlog looks like. 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 '27 for a moment, if you wouldn't mind. Some of the big forecasters out there are saying the trailer market is 260 or so, kind of back to a more, what I would say would be replacement level demand or some more normalized average level of demand. Big jump from '25 and '26. And I looked back at history, I've 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 the price and your ability to catch up, hopefully largely by the fourth quarter or late in the first part of '27, given what you know about what you've changed and the brand new facility that you've opened up and haven't used much of the last couple of years, how do you feel about reaching a more average normalized EBITDA in '27? If any of you agree with that, with the ACT Research of the world that their values are correct, and if they get there, you know, how do you feel about your profitability this time around compared to previous times we've seen a 250 or so level trailer demand?

Yes, yes, I'll address the profitability question. Brent can chime in on the forecast for '27 and how we align to that. But to answer your question of if '27 does get back to a replacement level demand, we fully anticipate that we would be back in that range of profitability. So back to a more normalized EBITDA level. With that will come certainly an increase above our current pricing levels that we're seeing in the Q2 results and the Q3 backlog. But where we are currently pricing 2027 bids at would be enough to get back to that, return to that between that $150 million to $170 million of EBITDA range for 2027, assuming, like you said, that the ACT forecasts are in line with what actually happens in '27.

Yes, I'll answer to that too. One, I'll answer your question around how do we see the market. Yes, so you know, ACT, FTR, we'll just call it in that 260,000 unit total trailer range. Almost all that change from 2026 to 2027 is predicated on dry vans. And yes, we fully see both from the discussions that we're having with, you know, top-tier executives with some of the largest carriers in the country, is that they are fully focused on a replacement volume level. It's reflected in their words, it's reflected in their quote volumes, and their stated intent to purchase.

So, we feel very comfortable with market conditions as they are for 135,000 to 145,000 dry vans, which would be right in that replacement level in the way we see it. We've got a market backdrop that supports that. And then the other piece I want to make sure we're clear on is that we're pricing today based on, you know, what I would say is the reasonable expectation of covering the inflationary costs that we've received over the last 2 to 3 years.

So it's a relatively straightforward conversation with our customers, and the balance and pricing that we need to see in 2027 is also bridged very concisely with that walk around the inflationary pressures. It is not taking into account anything with countervailing or anti-dumping pricing factors at this stage as they continue to play out. And so we feel very comfortable on just the back of general market economics in terms of the pricing levels that we're able to quote, win, and achieve right now.

To follow up there, Brent, as I look back to previous pricing, I mean, inflation's happened every quarter, every year since the beginning of time. So when I think back to what's happened on pricing the last couple of years, it's come down a bit. When I try to look at the forward numbers in '27 perhaps, or even late '26, would previous kind of high watermark pricing from a couple of years ago be the right place to look for what might happen in the future or even higher than that, given we're several years beyond previous time?

Well, I mean, I don't think 2023, early '24 is a realistic or even practical view of where the market is right now, or will be in 2027. I think when you start looking at 2022 and you think about dry vans in the, I'll say, you know, we'll say spec agnostic right now, in that $39,500 to $41,500 range is something that is appropriate for where the market is in terms of the cost base that we have right now. And I think that our customers are very aware of that in their own math and how they are thinking about capital allocation going forward, and that would be a reasonable place to think about it, you know, when we're sitting at the end of 2027.

Yes, I would agree with everything Brent just said. The '23, '24 profitability that we saw, I would not model that in repeating into the future, but 2022 would be a very, very good comparable to what we would expect going forward.

Got it, got it. And then I also want to ask about opening the order books early. Typically that's usually in advance of a pretty solid year coming up. What has been the customer reaction to that since you did it? And do you feel like you're getting good visibility on perhaps, I would say better than ever visibility as to how to buy, when to buy, when to produce, when to schedule 6 plus months in advance here? Kind of just curious whether that's helped you get even more orders, customers been receptive to it, or some just saying, call me in November, just a sense as to what you're hearing from some of the fleets out there.

I mean, the reason we did it is because we had customers asking us to. So the response we've gotten is the follow-through on those requests for active quoting and, we'll call it, early cycle negotiations and closing of deals so that they can have certainty in terms of allocated capacity and slot timing. So I think it's exactly what we expected would occur based on customer feedback, which is great because, you know, theoretically, customers could say one thing and do another. They've carried through with what they've asked, we carried through on what we executed, and we're working through it right now.

So July orders for Wabash here compared to other Julys normally have been awfully good just because you had the ability to take orders...

Yes. I think it's a carry-forward what we've already said in Q2. This is atypical in terms of customer acquisition and order closure. It started in June, it'll carry forward into July and so forth. The dealer body has already started to come into play, which is, shoot, 6 to 9 months ahead of where it's been the last 2 years in terms of them being prepared for the beginning of the year.

So it should be. I will put Q2 in perspective, just to give a scale. We talk about it being 14% up, but that's a world where typically we would have contracted $200 million in backlog. So we're really talking almost $300 million swing in backlog under a normal Q2-ish type of world, a little bit less than 300, but, you know, rounding, it's in that kind of ballpark of what we're experiencing right now. July will be something similar in terms of cost direction. We'll need to see how August and September continue to play out. But the trend is generally continuing.

Do you know if the competition out there has also opened order books early? Are some concerned about the ability to import or price to where you have? I think there's activity going on everywhere for domestic manufacturers right now.

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 here. As I think about kind of this journey from 180,000 back to 300-plus thousand orders at some point in '28 or '29, I look at the margins on Transportation Solutions, right? Gross margins right now, about 2%. At that level of production, we should be up in the 11%-ish, 12%-ish range. I look at what's going on in Parts and Services, and you're at 14% gross margins, and we should be kind of in that 25% to 26% gross margin range.

So I just like to think through those businesses in terms of when business comes back, you know, we make up 800 to 1,000 basis points in gross margin in Transportation Solutions. How much of that is going to be driven by just volumes getting higher? How much of that needs to come from pricing rising, you know, 200 or 300 basis points? How much of that is going to come from mix normalizing versus where we are today? Can you just kind of help me through how we get there, or are we just at structurally lower margins because of what's happened in the market since the last cycle?

Yes, I don't have exact numbers to give you, Jeff, but I will say that the majority of it will absolutely come through price. So when I talked about a 200 to 300 basis point improvement in the fourth quarter, there is going to be more price needed in 2027 to get back to what you're referring to as the historical margin profile. And that's all related to exactly what Brent was talking about. And it's the, you know, recovering the inflationary cost fully that we've seen over the last 2 to 3 years. That's really what's dragging the profitability currently, but we absolutely have line of sight to get that back.

And then there obviously will be a volume leverage play to it, just from what our contribution margin looks like. Fixed costs, relatively, you know, we have the fixed cost structure to be able to get to those much higher production levels. So there will certainly be a benefit in the margins related to volume leverage as well. But a lot of it's coming directly from price.

Okay. And on the Parts and Services side, you know, we're talking about gross margins going from kind of this 14% level right now. And I know you mentioned a lot of startup costs in these upfit centers that are dragging down on that. You know, where can those gross margins go in the next 2 to 3 years? And how do we get it there?

Well, I think just from a general perspective, we would expect over the next couple of years to at least be back in the mid to high teens in the way we would think about that. We have what I call meaningful categories inside of our parts business that are directly influenced by the kind of state of the OEM market right now. Air freight components are one of those. Tank heads are one of those. And then we have, from a proprietary parts standpoint with an aftermarket, is directly related to the state of the business or state of the industry.

Those are all areas that will naturally ramp up, and they all have superior margins than what would flow through the P&L. So their mix contribution is substantial when they begin to ramp up, which from, I would just say, generally, you'd expect to begin to layer in at the end of the third quarter, beginning of the fourth, just based off of the natural cycle when those begin to creep in.

So we feel there's nothing that we see that is not market-centered in terms of how we naturally, call it, mix-adjust those margins up. Now there is a pricing element to that as well because there has been absolutely inflationary pressures there that have been difficult to pass along. And those are pricing recovery actions that we have initiated in Q2 based off of a changing market dynamic that we are executing that will lay the groundwork when that volume begins to layer in.

Okay. If I think about market share, which is a little lower now than it used to be. Yes, some of that was because we got out of the reefer business. You know, maybe we get back into it this cycle. I'm kind of curious about the timing of that. You know, some of it is our competitors grew with other companies that were outgrowing the market. You've made the argument, and I agree, that because of the tariffs, because of the dumping and countervailing duties, there's an opportunity for the company to recapture market share, and you've even expanded that ability to drive production in dry van.

How do we get the share back? What is the longer-term plan with reefer? I know the tank market's about half of where it normally is now in a cycle. Big opportunity for share. How do we go about recapturing at this cycle?

Yes, let's start with tanks. Tanks, you're absolutely right. That market is substantially lower. We actually have grown market share there arguably 800-plus basis points over the last 2 years. It just happened to be on fairly dismal market demand. So will we hold on to all of that when it climbs? There's some mix aspects to it. Probably not, but we think we've made some substantial gains. We just need the market to return.

On the dry van side, we're sitting at about 23% market share as we think about 2026 right now. 23% is about where we were under most of the, call it, 20-teens as we executed a price over volume kind of centric way that really grew the gross margin of our trailer business. Now, ultimately, I won't say ultimately, initially, we were 25% market share is kind of the first hurdle. And we think being able to not have to manage through the cycle on kind of an allocated basis and our ability to get a larger percentage of, say, a given customer's split of orders is a big part of it.

Another piece to it is being able to go out and prospect on a greater number of direct customers that can now make up the portfolio because we have capacity that we can actually count on throughout the cycle. And our dealers can have a larger level of allocation, which they had been on effectively for 15 years, minus a couple of COVID years in terms of what they had available.

And so in that, just making capacity available and sustainable is a tremendous shot in the arm and our ability to go out and win customers because they know that they can work with us through the cycle, not just at the beginning or the end. And we can do that with reasonable pricing expectations, pricing expectations that fit inside of what Pat's already laid out. And so that's the straightforward kind of simple way that we think about it.

Now there's all the differentiation in the way we take care of the customer that are precursors. But the biggest thing is that we can go out and hunt, find, and cultivate customers with known capacity that can serve them over a cycle which they need to run their business.

Just FYI, one of your large national customers was musing on their conference call just a few hours ago on how they needed to start buying more trailers in '26 and '27. So just kind of supporting your comments earlier. That's all I have. Thank you.

Thank you. Jeff.

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.

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.