Greenbrier Companies Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Justin Long - Stephens Inc. - Analyst : Thanks. Good morning and Adrian, congrats.

Question: Justin Long - Stephens Inc. - Analyst : So maybe to start with a question on the gross margin outlook. You reiterated that outlook for the full year, the low to mid-teens. But through the first couple of quarters, we're tracking at the high end of that range. And the guidance also implies that production levels in the second half will be higher than the first half, and I would think that would create some positive operating leverage. So is there anything that you would kind of point to that could drive a sequential are moderation of margins? Or do you feel like the higher end of that gross margin outlook is most reasonable as well sit here today, so I'll give a couple of brief comments that we're excited about the progress we've made for the first half of this year.

Question: Justin Long - Stephens Inc. - Analyst : Okay, got it. And maybe for my second question, I wanted to ask about orders and see if you could provide any additional color on how orders progressed through the quarter month-to-month. I know there can be some seasonality around year end and then anything you can share on the third quarter thus far and what you've seen in order and inquiry levels relative to 2Q?

Question: Justin Long - Stephens Inc. - Analyst : Okay, great. That's good to hear. I appreciate it.

Question: Matt Elkott - TD Cowen - Analyst : Thank you. Good morning. Staying on the order question, Brian, on, it's nice to see a solid number for the quarter and that the activity is strong in the third quarter on the ASP decline by decent amount, I think 16%, Q2 versus 1Q. Is that a function of the international portion being higher this quarter than last quarter or is there anything else in there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 05, 2024 / 3:00PM, GBX.N - Q2 2024 Greenbrier Companies Inc Earnings Call

Question: Matt Elkott - TD Cowen - Analyst : That's good to hear. And then staying on kind of the mix question. But going into production, the benefit of product mix in manufacturing for revenue on, is that going to turn into a headwind going forward and thus the lack of and what one would expect are you at a higher margin than you're guiding?

Question: Matt Elkott - TD Cowen - Analyst : Okay, got it. And Lori, and Justin as you guys put it and Brian alluded to intermodal possibly starting to recover late this calendar year on those are lower ASP cars, but can you talk about the margin effect or would they be margin dilutive or are they margin neutral even though they're lower ASP.

Question: Matt Elkott - TD Cowen - Analyst : Great. Thank you very much.

Question: Harrison Bauer - Susquehanna Financial Group, LLLP - Analyst : Hi, this is Harrison on for Bascome Majors. Thanks for taking my questions today. Lori And Brian, both mentioned the milder winter affecting the maintenance business, but now that's been revenue dropping for three quarters sequentially and then profits have dropped the last two. And could this be a broad cyclical adjustment or maybe customers specific customers pulling back the use of their network? And then when would you expect stabilization and maybe what's some of your trajectory for the maintenance business going forward at Harrison?

Question: Harrison Bauer - Susquehanna Financial Group, LLLP - Analyst : Thank you for that. And for my second now that the North American manufacturing production rate and margin profile seem to be stabilizing with solid order recovery sequentially, can you share some updated thoughts on what your ultimate margin range you'd expect to generate in manufacturing with a mid-cycle backdrop? And then from where we sit today, if orders are stable, would you expect a higher or lower margin, maybe just directionally for fiscal 2025. Thank you.

Question: Ken Hoexter - BofA Securities - Analyst : Great. Good luck to Adrian and congrats on the team on building the backlog, but maybe if I can for you unpack that margin, your multiple margin outlooks a little bit better on, I guess, near term, I know you just gave a long-term '25, given your low to mid-teens outlook, are you still expecting manufacturing margins to stay at double digits year for for the second-half? And then what do you expect to see maintenance margins? Are I didn't quite get the answer there.

Question: Ken Hoexter - BofA Securities - Analyst : Very helpful. And then, Lorie, if I can revisit, I think it was maybe Matt's first question on the ASP decline. I guess if I just look at the backlog, total revenue per ASP per car. Right. In terms of your total backlog, if it fell, as you mentioned, is that I just want to revisit, is that just a mix issue in terms of what you're selling versus anything going on the industry? Just want to clarify that, that won't answer there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 05, 2024 / 3:00PM, GBX.N - Q2 2024 Greenbrier Companies Inc Earnings Call

Question: Ken Hoexter - BofA Securities - Analyst : That's helpful.

Question: Ken Hoexter - BofA Securities - Analyst : Great. I appreciate your time and thoughts. Thanks, guys.

Question: Steven Barger - KeyBanc Capital Markets Inc. - Analyst : Hey, guys, good morning. Just looking at slide 12, with the fleet levered to 77% of book value, do you expect incremental debt from here to primarily just fund additions to the lease fleet at that ratio plus or minus?

Question: Steven Barger - KeyBanc Capital Markets Inc. - Analyst : And it is lease fleet leverage, the primary metric that you're focused on going forward? Or is there a net debt to EBITDA target for the Company. I'm just trying to think how you're changing your mindset to think about the balance sheet?

Question: Steven Barger - KeyBanc Capital Markets Inc. - Analyst : Couple more leasing questions, asset, the flood can I think the average term is 4.2 years. What is that for recent renewals sections?

Question: Steven Barger - KeyBanc Capital Markets Inc. - Analyst : Got it. Thanks. And I know the lease fleet is still relatively small but growing. It is obviously a focus initiative for you. Do you anticipate putting out a lease renewal index similar to the LPI. or the FLRD.

Question: Steven Barger - KeyBanc Capital Markets Inc. - Analyst : Okay, great. Thank you.

Question: Steven Barger - KeyBanc Capital Markets Inc. - Analyst : I appreciate you anticipating that for me as well, and that's good to hear. I look forward to seeing positive free cash flow. Thanks.