Earnings call: Wabash National projects growth despite Q1 setbacks

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Earnings call: Wabash National projects growth despite Q1 setbacks
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Wabash National Corporation (NYSE: NYSE: WNC ), a leading manufacturer of semi-trailers and liquid transportation systems, reported a slight miss in revenue and income for the first quarter of 2024, attributing the shortfall to delayed customer equipment pickups. Despite the hiccup, the company expects to recognize revenue from these goods in the coming quarters, particularly Q2.

Wabash maintains its financial outlook for the year, projecting revenues of $2.3 billion and an EPS midpoint of $2.25. The company is optimistic about its strategic growth initiatives, especially in the Parts and Services sector, which is poised to become a significant contributor to Wabash's portfolio.

The launch of their digital platform, Wabash Marketplace, and the Trailers as a Service program are key elements of their growth strategy. With a robust backlog and anticipated improvements in the freight market, Wabash aims to demonstrate resilience and growth across its diversified product segments.

Key Takeaways

  • Q1 revenue and income fell short of expectations due to delayed customer pickups.
  • Revenue recognition for finished goods expected to improve in Q2 and beyond.
  • Wabash Marketplace digital platform launched to enhance customer-centric solutions.
  • 2024 financial outlook remains steady with $2.3 billion revenue guidance and $2.25 EPS midpoint.
  • Backlog at the end of Q1 stood at $1.8 billion, with $1.5 billion expected to ship within 12 months.
  • Q2 revenue projected between $550 million and $600 million, with EPS ranging from $0.50 to $0.55.
  • Investment in capital projects and Trailers as a Service program, expecting at least 1,000 units in 2024.
  • Strategic growth initiatives focused on Parts and Services, aiming for significant contribution to the company's portfolio.

Company Outlook

  • Full-year guidance reiterated, with stable financial outlook for 2024.
  • Anticipated year-over-year growth in truck bodies, with less pullback in tanks compared to dry vans.

Bearish Highlights

  • Delay in trailer pickups affected Q1 results, with expected catch-up in subsequent quarters.
  • Pricing for trailers expected to decrease due to raw material cost reductions.

Bullish Highlights

  • Positive leading indicators and reduced capacity in the transportation industry signal improvements in the freight market.
  • Strong ASPs in truck bodies and trailers, with stability expected to continue in truck bodies.
  • Impressive margins in Parts and Services, although caution advised for modeling margins above 20% going forward.

Misses

  • Revenue and income for Q1 were below expectations.
  • Gross and operating margins of 21% in Parts & Services segment for Q1 are not sustainable long-term.

Q&A Highlights

  • Executives expressed confidence in managing pricing effectively despite market conditions.
  • Revenue from Trailers as a Service to be recorded under Parts & Services, with lease revenue based on service duration.

In summary, Wabash National Corporation is navigating a challenging market with strategic initiatives aimed at driving growth, particularly in the Parts and Services sector. The company's diversified portfolio and new digital offerings are expected to bolster its position in the transportation, logistics, and distribution industries. With a solid backlog and a clear strategy for the year ahead, Wabash National remains committed to delivering value to its shareholders and customers alike.

InvestingPro Insights

Wabash National Corporation (NYSE: WNC) is navigating through market challenges with a clear strategic focus on growth, particularly in the Parts and Services sector. To provide a deeper understanding of the company's financial health and market position, here are some insights based on real-time data from InvestingPro and InvestingPro Tips.

InvestingPro Data highlights Wabash's market capitalization at approximately $1.11 billion, signaling a significant presence in the industry. The company boasts an attractive P/E ratio of 4.97, which is consistent with the adjusted P/E ratio for the last twelve months as of Q4 2023. This low earnings multiple may suggest that the stock is undervalued relative to its earnings. Additionally, Wabash's revenue for the same period stands at $2.536 billion, with a stable revenue growth of 1.37%.

In terms of InvestingPro Tips, it's noteworthy that Wabash's management has been actively buying back shares, indicating confidence in the company's value and future prospects. Moreover, the valuation implies a strong free cash flow yield, which could be appealing to investors looking for companies with the potential to generate substantial cash.

For those interested in further analysis and additional insights, InvestingPro offers more tips on Wabash National Corporation. In fact, there are 11 InvestingPro Tips available, which can be accessed at https://www.investing.com/pro/WNC. These tips provide a comprehensive overview of the company's financial performance and market expectations.

Investors may also consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes access to these valuable insights.

In light of the InvestingPro data and tips, Wabash National Corporation's strategic initiatives and financial outlook for 2024 remain promising, backed by solid financial metrics and management actions that reflect a commitment to shareholder value.

Full transcript - Wabash National (WNC) Q1 2024:

Operator: Good day, and welcome to the Wabash National Corporation First Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be question-and-answer session. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Ryan Reed, VP Corporate Development and Investor Relations to begin the conference. Ryan, over to you.

Ryan Reed: 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 Mike Pettit, 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.

Brent Yeagy: Thanks, Ryan. Good afternoon, everyone, and thanks for joining us today. Beginning with the first quarter of 2024, our revenue and income fell slightly short of our expectations, due to slower customer pickups of equipment. I'd like to emphasize that, particularly for a year of weaker demand Q1 tends to be seasonally weaker. Additionally, the size of our products, necessitates that we rely on customers to pick up their equipment before we were able to recognize revenue. That said, our production outstripped shipments during the first quarter to the delta versus our anticipated quarterly revenue and the associated income will flow into subsequent quarters during 2024 particularly Q2. As we'll discuss later, our financial outlook for the year remains unchanged. From a strategy perspective, we continue to enhance our network at 78 dealer locations. Through our marketplace joint venture we launched the initial version of our Wabash Marketplace in the first quarter. Collaborating with leading technology and logistics providers, the platform seeks to deliver customer-centric solutions through an integrated partner ecosystem that sets new industry standards for parts services and trailer capacity. The ultimate objective of the Wabash Marketplace is to develop a comprehensive end-to-end digital platform that transforms the experience for dealer's customers and suppliers. Utilizing advanced technology and connectivity, we aim to streamline the supply chain experience, making it more efficient, connected, and user-friendly. Dealers and customers will benefit from improved access to a wide range of parts and services with a particular focus on our Trailers as a Service or TAAS capabilities and the expansion of our Wabash Parts distribution network. The marketplace has significant potential for growth as the team focuses on opening up opportunities for additional value-added offerings. Also, our Wabash Parts distribution JV is reaching an initial stage of maturity that will facilitate meaningful growth in 2024. Of course, the synergy between our comprehensive First to Final Mile equipment portfolio, Wabash Parts and the Wabash Marketplace, and our Parts and Services segment, more broadly affirms our position in this market as we seek to add more value for our customers by supporting equipment through the course of its life cycle. Confidently, investing in strategic growth initiatives during a down year in the trailer industry marks a new chapter for Wabash, one that we have not previously had the opportunity to explore. As we gain more clarity for 2024, it's important to emphasize the resilience of our portfolio that has grown over the last decade. We see relative stability in customer demand for our truck bodies and tank trailers, which helps mitigate the anticipated decline in dry van demand this year. In addition to benefiting from strategic customer relationships with best-in-breed participants in trucking, logistics and retail, our expanded and diversified equipment portfolio not only enhances our stability through market cycles but also provides a stronger foundation for layering on strategic growth. This backdrop positions us well to capitalize on market shifts and continue our innovation and leadership in the transportation, logistics and distribution industries. As we continue to advance our strategic objectives, a vital component is fostering higher levels of employee engagement, which we believe leads to enhanced execution and improved financial performance. At Wabash, we are dedicated to building a culture that embodies our core values and emphasizes respect for individuals. In line with this commitment, we have established a Culture Council, a multiyear initiative aimed at addressing critical aspects of our organizational environment. These include our work environment, working relationships while being in community, growth in autonomy, flexibility and consistency and systems and processes. To bring these areas to life, we have formed cross-functional teams tasked with implementing changes that positively affect all employees and creating an environment where everyone can succeed. These teams represent various functions in geographical locations, ensuring a wide range of perspectives and ideas are being represented across the teams. This investment in our people and elevation of our internal standards not only aligned with our leadership responsibilities and values but also advance the interest of Wabash, our customers, partners, shareholders and our communities to the acceleration of our strategic vision and increasing sustainability of value creation. Moving on to market conditions. While our customers continue to experience a challenging freight environment, we have seen important leading indicators like the ISM index rising above 50, indicating expansion returning to the manufacturing sector, while surveys of inventory levels at shippers suggest abating headwinds from destocking that have been working against the freight market over the last couple of years. While these positive indicators have yet to meaningfully translate into improved freight conditions, we are optimistic that improvements maybe on the horizon when you pair the strengthening macro backdrop with the amount of capacity that has left the transportation industry since the market downturn began in early 2022. Thinking beyond the current freight cycle, we remain bullish on our core markets benefiting from secular trends like power only, persistent driver shortages and the resurgence of nearshoring activity within North America. Shifting focus to our backlog. At the close of the first quarter, we had a total of $1.8 billion in orders with $1.5 billion of that figure expected to be shipped in the next 12 months. Both figures were lower by roughly $100 million sequentially, but it's important to note that with over $500 million in revenue for the quarter, the relative stability of our backlog implies that we continue to see meaningful volumes of new orders. Moving to our financial outlook. With the benefit of further visibility provided by our sizable backlog, we are reiterating our full year 2024 guidance of $2.3 billion of revenue and a midpoint of $2.25 of EPS. In closing, we are capitalizing on the opportunities presented by the market environment in 2024. With a diverse portfolio of First to Final Mile equipment and a growing Parts and Service business, Wabash is positioned with unprecedented strength paired with minimal leverage at this stage of the freight cycle. I believe our ability to maintain focused execution on our unique organic growth projects, underscores the strength of our strategic positioning for the future. We are actively working to deepen relationships with our dealers, suppliers and customers, as well as engaging with interesting new players within the transportation, logistics and distribution landscape. Simultaneously, we are committed to fostering a culture of continuous improvement, within our own employee experience ensuring that we remain well equipped to act on our strategy. We are confident that this approach will not only enhance our financial performance at all points in the cycle, but also enable Wabash to sustainably grow our level of value creation for all stakeholders. With that, I'll hand it over to Mike for his comments.

Mike Pettit: Thanks Brent. Beginning with a review of our quarterly financial results. In the first quarter our consolidated revenue was $515 million. During the quarter, we shipped approximately 8,500 new trailers and 3,690 truck bodies. As Brent mentioned, we saw some delays in customer pickups of equipment during the first quarter and we do anticipate the opportunity to recognize revenue on these finished goods in subsequent quarters, including second quarter. Gross margin was 14.8% of sales during the quarter, while operating margin came in at 5.7%. In the first quarter, we generated operating EBITDA of $46 million, or 8.8% of sales. Finally for the quarter, net income attributable to common stockholders was $18.2 million, or $0.39 per diluted share. From a segment perspective, Transportation Solutions generated revenue of $470 million and operating income was $44 million. Parts and Services generated revenue of $49 million and operating income of $10.5 million. Year-to-date operating cash was an outflow of $17 million reflecting what is typically a back-ended quarter of shipments in Q1. Concerning our balance sheet, our liquidity which comprises both cash and available borrowings of $389 million as of March 31. We finished Q1 with net debt leverage ratio of 0.9 times. On capital allocation, during the first quarter we invested $19 million in capital projects utilized $16 million to repurchase shares and paid quarterly dividends of $4.2 million. Our capital allocation focus continues to prioritize capital expenditures above and beyond our annual maintenance CapEx spend of $20 million to $25 million in order to support our organic growth initiatives. We are committed to maintaining our dividend and then we anticipate continuing to evaluate opportunities for share repurchase alongside of bolt-on M&A. Moving on to our outlook for 2024. We are reiterating guidance of a revenue range of $2.2 billion to $2.4 billion with a midpoint of $2.3 billion; and an EPS range of $2 to $2.50 per share with a midpoint of $2.25. We believe this outlook is well supported by a stable backlog and new order flow that continued at a reasonable pace during the first quarter. We continue to see truck body tank trailers and Parts and Services as stabilizing forces within our portfolio in 2024, as market conditions remain stronger in those businesses relative to dry van. In particular, we anticipate year-on-year growth in Parts and Services to accelerate as we move through 2024. Thinking specifically about our second quarter, our expectation is for revenue to come in between $550 million and $600 million and for EPS to be between $0.50 and $0.55 per share. Moving on to capital deployment expectations for 2024. We anticipate traditional capital investments to be between $75 million and $85 million in 2024, as a result of planned expenditures to support our strategic growth initiatives. We also expect to invest in CapEx that will be immediately revenue generating through our Trailers as a Service program. We anticipate investment in that program will be back half loaded and we will give more specific guidance as the figure comes into focus, but we would expect at least 1,000 units in 2024. In conclusion, I'm excited about 2024 as we take the opportunity to demonstrate what we believe is an improved through-the-cycle financial profile for the company. Additionally, Wabash currently enjoys the most significant potential for strategic growth in the company's history, by pursuing our Parts and Service adjacencies and we're eager to demonstrate our capacity to grow the top line of this business, to allow us to become a more meaningful contributor to our portfolio as a whole. As an industry leader in transportation equipment, positioned at the epicenter of an increasingly complex ecosystem of participants within the transportation, logistics and distribution industries, we have a unique opportunity to unite diverse stakeholders to address industry challenges via our Wabash Marketplace digital platform, as well as the Wabash Parts distribution business. And we look forward to updating you on the progress of this initiative. We firmly believe that this area of strategic growth will define the next chapter in our journey to change how the world reaches you. I'll now turn the call back to the operator, and we'll open it up for questions.

Operator: [Operator Instructions] And your first question comes from the line of Mike Shlisky of D.A. Davidson. Your line is open.

Q – Mike Shlisky: Yes. Hello. Thanks for taking my question.

Brent Yeagy: Good morning, Mike.

Q – Mike Shlisky: So I guess, I wanted to ask first about some of the pickup and logistical issues that might have changed things from the first quarter to the second quarter, or elsewhere during the year. I'm curious, was this an industry-wide phenomenon? Was it just an issue with Wabash and -- having to get forced in [ph] andbeyond to get their trailers, and other people didn't have an issue if they're based elsewhere in the country. Just curious to see if, this is something that we should be thinking of as everyone is facing or is it just a strictly Wabash issue?

Brent Yeagy: Yes, Mike. I mean as we said in the release, and on the actual call, narrative we put out there. I mean, this is a normal type of situation that our industry feels across the board at any time that we are in, not only the first quarter of the year, but when compounded by being in a down year relative to dry vans, this is a normal and customary type of issue to have. So, everyone is feeling it throughout the overall industry, at this point. And in general, is to be expected in terms of weak pickups, as people are working to understand what needs to be put in service at this time of the year. So, while we were a little short in what those expectations are, the phenomenon itself, is a normal and customary industry fact

Q – Mike Shlisky: Okay. Okay. Thanks for that. I also want to ask about Trailer as a Service. Mike, you outlined a couple of details there. I understand that maybe you won't get into actual numbers and guidance per se. I mean, you did mention at least 1,000 units. But just, how do we start to start to model that out? Do we model that as 1,000 units of sales, 1,000 units per inventory, with rental attached to it or leasing revenue attachment? I'm not sure, like what to put in my current model and what's incurring guidance as far as that business is concerned.

Mike Pettit: Yes. So from a P&L perspective, Mike it will show up as a lease-type expense. You wouldn't see a full unit of revenue recognition, like you would a ship. It will be a leasing-type model. So, you'll see a monthly expense, you'll see in monthly revenue and the associated expense From a cash flow perspective, you'll see it show up in -- we break it out in our statement of cash flows as a revenue-generating asset. And it will be separate from our normal plant property equipment. So, you can see as those units get put into service that will show up on that line in our cash flow statement.

Mike Shlisky: Okay. Maybe one last one for me. I guess some thoughts Brent about what you think has to improve in the market to see orders go up from current levels? I mean I guess we've had one large -- or a few large bankruptcies happen over the last 12 months they had largely older units that probably didn't get back in the market -- in the used market sorry. I'm curious whether if there is capacity exiting the market today that might improve the high demand between [indiscernible] and loads whether some of those units exiting the market will be much newer and some of that used equipment may end up taking away from new over the next couple of quarters?

Brent Yeagy: Yes, Mike, I think what needs to happen is already happening. And I think the -- what has always been evident within our industry is that when it is most confusing when there are mixed, kind of, at a level of most mixed signals is when the market is actually beginning to make the improvements that it needs to get it on the path of the upswing, right? So, we are seeing gross manufacturing activity begin to move a number of direction. We're seeing capacity leave the market. We're seeing imports continue to improve. The things that need to be happening are happening. Now, -- and what they don't have a real-time effect on freight and the spot market. That's going to happen incrementally over the course of the next six months as it should from where we're sitting right now. So, everything still lines up for the I'll say market forecasts that are out there by ACT and FTR there is really no deviation from the forces that drive that. And it's exactly what should be happening to set up for the estimates for 2025. It's already in play nothing new needs to happen. The I think from -- one thing that gets questioned is what is the Fed going to do from an interest rate standpoint. The forces in play are already in play. It's already factoring in where the Fed is at right now. So, if the Fed waits until let's just say Q4 to have an interest rate reduction that is not going to probably materially affect the forces that will drive the upswing into 2025. So, I think the play is set that's been called. It's happening. It just needs to work itself out over time.

Mike Shlisky: Got it. I appreciate the color Brent. I'll pass it along. Thank you.

Brent Yeagy: Thanks Mike.

Operator: Your next question comes from the line of Justin Long of Stephens. Your line is open.

Justin Long: Thanks and good morning.

Brent Yeagy: Good morning Justin.

Justin Long: So, I guess getting back to the delayed pickup of trailers, is there any way to quantify what that headwind was in the first quarter versus your expectation to just help us think through the catch up we could see in the second quarter? And then as you just take a step back and look at trailer shipments over the balance of the year is there any color you can provide on the quarterly cadence that is reflected in the guidance?

Mike Pettit: Yes. I would say that generally the disconnect we saw between our guidance and Q1 results was largely that delayed in pickups that we had. And then you see some of that stepping into Q2 obviously with a little higher revenue and EPS guidance in Q2 versus Q1. We would expect the back half to continue to see moderate increases in revenue and EPS but not significant. So obviously you can do the calendarization with our full year guidance. But we will see that pretty good step up from Q1 to Q2 which will does compensate quite pickup miss that we had and then a little further affirming Q3 and Q4 to set up for what Brent just mentioned what we think will be a much stronger 2025.

Brent Yeagy: Yes. Just to put -- I'll put some additional color to it. Most of the gap in pickups were in January and early to mid-February. And then we saw pickups dramatically improve as we moved into the tail end of the first quarter and then kind of I would say continuing on that pace as we move into the second quarter. So that piece of it has generally abated. And that timing of that gap in January and February kind of really is about fleets really trying to understand what is the operating environment that they're working into for the first half of the year. Where do they need to move trailers to because remember when they pick them up they're putting them into service and rounding the areas to create revenue. So they're waiting to see where that's going to be. Then once they know they move and we saw that happen, right? And then it just flows from there.

Justin Long: Okay. Got it. That's helpful. And I guess along similar lines I was wondering if you could talk about the cadence of operating margins that you're expecting over the balance of the year. If I look at the first quarter you were a touch below 6%. The guidance for the full year is around 7%. So that implies we need to be above that level to kind of average up. So just wanted to get some more color on the cadence you're expecting and what will drive that improvement sequentially through the year?

Mike Pettit: Yes I think it's largely going to follow the volume I described earlier because that's what's holding it down below 7%. We held our full year at 7% and finished Q1 at 5.7% and less largely a fixed over contribution margin impact of a little lower revenue number in Q1 that we expect will naturally grow as we move into Q2 and the second half of the year. The other thing that we talked about in our remarks is we expect Parts and Services to continue to perform well this year and grow in the second half of the year. That will also be a tailwind to our margin performance as we get into the second half as Parts and Service delivers an outsized margin component of our business compared to the OE side.

Justin Long: Got it. And I think the last one for me along those lines two other areas you've talked about historically as being areas of resiliency in addition to Parts and Service are the tank trailer business and the truck body business. So I'm curious if you could talk a little bit more about what's getting baked into the 2024 guidance for those two segments are you expecting growth in those areas?

Mike Pettit: Yes, we would expect year-over-year growth in truck bodies for sure. Q1 was a little bit some of the things we discussed on the trailer side we were very specific in our trailer commentary but it also pertains a bit to truck body shipments were a little bit weaker than we hoped in Q1 for truck bodies. But we do expect to see some pretty nice sequential step-ups for the truck body business. So we should see shipments increase year-over-year in that business which has always been saying that that's -- while all of our OE products participate in the broader transportation and logistics industries, and so there is some cyclicality it's less cyclical than we've seen in the dry van business. And we would actually expect to see a little bit of growth in truck bodies this year. Tank is -- we'll see -- we won't see growth in tanks year-over-year this year, but we'll see less of a pullback in tanks [indiscernible] dry vans. And I think to circle back to conversations we've had on these calls tanks, truck bodies, and parts and services really form three legs to a stool of stable earnings, more stable earnings than what we have in our more classic dry van business at Wabash. And we're excited to continue to show it off this year. So while they all participate in an industry that has cycles, they tend to be less cyclical than we see in dry vans.

Brent Yeagy: Yeah. The ability to see the overall resiliency can be evident in a set of markets that we have today where it's much more secular in nature where different courses are affecting different sub-segments differently. We're not experiencing a 2009 event. We're not experiencing, a macro type of negative set of forces that affect all different groups simultaneously. This is segment based forces, which really allows us to leverage the resiliency of the portfolio.

Justin Long: Okay, great. I leave it there. Thanks for the time.

Brent Yeagy: Thanks, Justin.

Operator: Your next question comes from the line of Jeff Kauffman of Vertical Research Partners. Your line is open.

Jeff Kauffman: Thank you very much. Hey, congratulations everybody.

Brent Yeagy: Thank you, Jeff.

Jeff Kauffman: A couple of modeling questions. I want to get back to the units that were not picked up on time. I mean this happens every now and then. It just is what it is. Let's just say for argument's sake that number was 500 in the first quarter. I don't know what the number is and you guys haven't thrown one out. But would we normally see something like two-thirds of it in the following quarter and then the one-third of it maybe in the third quarter. How does this typically work when we have this happen? It doesn't all happen in 2Q necessarily, right?

Brent Yeagy: No Jeff. You've been doing this long enough to know how it works. And I would say that is a generally good approximation for how the world works.

Jeff Kauffman: All right. And then ASP was pretty strong a little stronger than I was looking for both in truck bodies and in trailers, which is great. But I would assume with raw material costs coming down at ASP levels off a little bit. Could you give us an idea of what trailer ASP might look like without the mix issue of tanks being a little bit stronger and give us a feel for what was driving the higher truck body ASP?

Mike Pettit: Yeah. I would say -- I'll start with trailers. I would say as you think about, obviously, we have a long backlog business. So the price that shows ASP that shows through in the revenue for the quarter comes in at all different times over the last year or so. So you would see some ASP reduction as we go through 2024. I think you'll see volume increase in ASP come down as we go through the year. For truck bodies there can be some mix in that business. But generally speaking I think it just -- it represents what we've been saying a more stable borderline strong demand environment in that business that is able to have pricing stability. So I wouldn't expect as much of a pricing move in truck bodies as we go through the year. But for trailers you will see a step down as we go through Q2 and the second half of the year.

Brent Yeagy: And this general commentary Jeff is that -- and I would just say pricing across all the segments minus, maybe platform Trailers. The overall pricing resiliency has I would say, net, in some cases exceeded our expectations for the market that we're in. And I think a big part of that is, we're seeing the actual value of the product shining through and the nature of the portfolio changes that we've made and kind of channel movement really starting to have an impact on pricing which mutes the effect of just more of a dog-eat-dog pricing environment that you might expect in the past. We're just doing a little better in how we manage it.

Jeff Kauffman: Okay. Great. And as you mentioned Brent, I've seen these things a bunch of times, but sometimes you forget. And then lastly, very impressive margins in Parts & Services, the gross margins pretty strong, but the operating margin flow-through was a lot better than I expected which is fantastic. Is 21% which I don't remember seeing on an operating margin basis is this a new level that we've reached because of what's changed in Parts & Services? And is this more sustainable? Or was there something that helped that number a little bit in 1Q?

Mike Pettit: Yeah. I wouldn't guide to something over 20%, Jeff. We have been saying high-teens upwards of 20%. And that's -- I would maintain that. So we had a really strong margin performance in that revenue stream in Q1. And while it is outsized compared to the rest of the portfolio, I wouldn't want to model something above 20% going forward, while that may be something we can do down the road in a few years from now I would still say high-teens up to 20% in the business.

Jeff Kauffman: Okay. And then final question, you talked a little bit about how Trailers as a Service is going to be accounted for. Could you just -- could I ask you to go back and repeat what you said, because I wasn't entirely clear. You talked about the lease expense and the revenue. I wasn't really sure where that's going to show up.

Mike Pettit: So from a revenue perspective, we will -- you'll see how or many months in service the unit is in the field that will show up as a lease revenue coming through. And if it will -- and then the capital expense will show up as a revenue-generating asset in our statement of cash flows.

Brent Yeagy: So Jeff that will come to, Parts & Services.

Mike Pettit: Yeah. Is that your question?

Jeff Kauffman: Okay. That was my question. Yeah, Parts & Services.

Mike Pettit: [indiscernible] Parts & Services, I'm sorry.

Jeff Kauffman: Okay. Awesome. Well, congratulations challenging environment, solid results, best of luck. Thank you.

Brent Yeagy: Thank you.

Mike Pettit: Thanks Jeff.

Operator: There are no further questions at this time. So I'd like to hand back to, Ryan.

Ryan Reed: Thanks, Kevin. Thanks, everybody for joining us today. We'll look forward to following up during the quarter. Have a great day.

Operator: That does conclude our conference for today. Thank you for participating. You may now all disconnect.

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