Good day and welcome to the Trinity Industries’ three quarter and 12 months ended December 31st, 2024, results conference call. [Operator instructions]. Please note, this event is being recorded. Before we get started, let me remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, and includes statements as to estimates, expectations, intentions, and predictions of future financial performance. Statements that are not historical facts are forward-looking. Participants are directed to Trinity's Form 10-K and other SEC filings for a description of certain business issues and risks, a change in which - any of which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. I would now like to turn the conference over to Leigh Anne Mann, Vice President, Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone. We appreciate you joining us for the company's fourth quarter and full-year 2024 financial results conference call. Our prepared remarks will include comments from Jean Savage, Trinity's Chief Executive Officer and President, and Eric Marchetto, the company's Chief Financial officer. We'll hold a Q&A session following the prepared remarks from our leaders. During the call today, we will reference certain non-GAAP financial metrics. The reconciliations of the non-GAAP metrics to comparable GAAP measures are provided in the appendix of the quarterly investor slides, which are accessible on our Investor Relations website at www.trin.net. These slides are under the events and presentations portion of the website, along with the fourth quarter earnings conference call event link. A replay of today's call will be available after 10:30 a.m. Eastern Time through midnight on February 27th, 2025. Replay information is available under the events and presentations page on our Investor Relations website. It is now my pleasure to turn the call over to Jean.

Thank you, Leigh Anne, and good morning, everyone. To begin today, I would like to extend my gratitude to all the Trinity employees for delivering strong financial results in 2024, and demonstrating the power and potential of the Trinity platform. Our full-year adjusted EPS of $1.82 represents a 32% year-over-year increase, driven by higher lease rates, significantly improved margin performance, and an increased volume of external repairs. We concluded the year with an adjusted ROE of 14.6%, within our target range, and cashflow from operations with net gains on lease portfolio sales of $645 million, reflecting a 65% increase over 2023. During our 2024 Investor Day last June, we emphasized that a less volatile operating environment, combined with the reduced cyclicality of our platform, would optimize our returns through the cycle. We believe our 2024 results provide solid evidence of our ability to consistently perform. I would also like to say a few words about our safety performance. Safety is a core value for Trinity, and we have continued to demonstrate incremental year-over-year improvements in safety metrics in each of the last several years, achieving approximately half the industry average of incidents for manufacturing. As we look forward to 2025, we remain confident in the strength of our leasing business, especially in light of the balanced market conditions. While there are ongoing pressures on manufacturing driven by macroeconomic forces, this environment favors our existing assets. We believe that moderated additions to the industry railcar fleet will enable us to continue pricing our existing fleet upward, thereby improving returns for our business. Today, I will discuss current market observations, provide specifics from our business segments, and then pass the call to Eric to discuss financial results and provide our thoughts and guidance for 2025 expectations. Let's start with a market update.…

Thank you, Jean, and good morning, everyone. I'll begin by discussing our fourth quarter and full-year financial statements, starting with the income statement. Fourth quarter consolidated revenues of $629 million reflect lower deliveries and higher eliminations as 36% of quarter deliveries were added to our lease fleet. For the full year, revenues were $3.1 billion, representing a slight improvement over 2023. For the full year, 20% of deliveries were delivered to our lease fleet. As Jean noted, operating profit significantly improved in 2024, driven primarily by margin improvement in the rail products group, partially offset by lower full-year gains on railcar sales and higher eliminations. We benefited in the quarter from a lower-than-expected tax rate. For the full year, our effective tax rate was 22.7%. Fourth quarter adjusted EPS was $0.39, and full-year adjusted EPS was $1.82, representing a 32% improvement over 2023, reflecting strong operating performance. I would like to reiterate Jean's earlier point that this significant earnings improvement occurred despite a flat delivery and revenue environment. This is encouraging as it demonstrates that our platform has the ability to generate strong returns in a flat economic cycle. Moving to the cashflow statement, full-year cashflow from continued operations was $588 million. Net fleet investment for the year was $181 million, which included $542 million of fleet additions and enhancements, offset by $361 million in secondary market sales. We returned $114 million to shareholders in 2024, comprised of $93 million through dividend payments and $21 million in share repurchases. In December, we announced a $0.02 increase to our quarterly dividend, which is now $0.30 per share. This represents a dividend yield of approximately 3.4% based on the year-end stock price and reinforces our commitment to dividend growth. We have consecutively paid a dividend for over 60 years. Our wholly owned…

[Operator Instructions]. The first question comes from Bascome Majors with Susquehanna. Please go ahead.

Good morning. Can you talk a little bit about the backlog coverage for the year and any shaping on how that looks differently in the first half versus the second half, or maybe even the fourth quarter? Thank you.

Sure, Bascom. Great question. So, as we said in the prepared remarks, we're expecting industry deliveries for 2025 to be down about 20% to 35,000. What we've seen in 2024 was uncertainty around the election. We saw inquiry levels pick up and then the tariff question came in. Right now, the tariff question has people deciding or customers delaying decisions on placing some of the orders until they know what those impacts are going to be. So, you know we don't give quarterly guidance, but based off of the macroeconomics and the uncertainty out there, I would say that we're comfortable in letting you know that we believe second half will be better and higher than the first half of the year. A lot of that is going to depend over the next couple of months as we get clarity on what's going to happen with those tariffs or other regulations that do go into place.

And just to clarify, when you say second half better than the first half, are you talking about deliveries and earnings, or are you talking about the order cadence?

I'm talking about both in that. So, we do expect deliveries and backlog to pick up as the year goes on, because if you look at the three years, we still strongly believe there'll be about 120,000 cars delivered between 2024 and 2026, which means we're expecting 2026 to tick back up.

And to the tariff uncertainty piece, I appreciate the color you've given throughout your guidance on that. Given how fluid that still is, have you been able to maybe adjust some of the terms of your new purchase contracts? I mean, how is that uncertainty shared between the buyer who might pay more or your margin that might get eaten up by something that changes before a car is delivered? Just want to understand the risk-sharing in that and how that's evolving, and if you have a plan to maybe share that in a way that one side doesn't take the full hit if something changes.

Sure. When you look at the tariffs overall, the majority of our contracts have escalation in them, which would allow us to pass those tariffs on. That being said, we have a really good team in supply chain and also in our compliance who are working to mitigate what some of those tariffs could be so we can avoid passing all of that on to a customer. But we're not taking risk on the tariffs. It is a pass-through. We're just working between all of our different groups to see how we can minimize that effect.

And last one, just similar question, but the lease business, when you're originating leases but holding the car on your own balance sheet, is there a similar escalation cost if the cost of that car changes materially from what was anticipated at lease?

Yes, there is escalation in that too. And as you know, with interest rates staying higher for longer, we're still bullish on what we can do with our lease rates, right? We've just recently gone over 50% of our lease rates being repriced in that double-digit positive FLRD range. So, we still see room to continue to raise those rates.

Thank you for the time.

[Operator instructions]. The next question comes from Justin Bergner with Gabelli Funds. Please go ahead.

Good morning, Jean, Eric, and Leigh Anne. Thank you for taking my questions. Just first off, you mentioned that incentive comp was going to come down this year in how you framed guidance as part of the SG&A decline. Could you maybe quantify sort of how much that is contributing, I think to the $40 million or so lower SG&A cost, just to get an idea as to how much it might set back upward 2026?

Sure, Justin. And effectively, we had a good year in 2024, so our incentive compensation was up. As we reset our guidance, we kind of put everything back to target. When you look at the magnitude, more than half of the $40 million cost savings is coming from kind of other cost takeout, whether that's headcount or other spending costs. And then less than half of it is the incentive compensation, but it’s a meaningful number. That's why we called it out.

Okay. Just to understand that, I mean, it's not that you're forecasting a lower-than-normal incentive comp. It's just more of a reset off of a good year in 2024. So, while could and hopefully does go up in 2026, it's not going to go up by that full.

That's correct. It’s just all about, we have a large variable compensation program on our short-term incentive. And so, when we we set our guidance, we have our targets that we've set and we're planning that target and the guidance is based off the target.

Right. Secondly, just to confirm, some of these numbers came at me a bit fast, so the railcar products, or sorry, the rail products margin 6% to 8% and tax rate 25% to 27%. Did I hear correctly, or please correct me if I didn't.

On the rail group margin for the guidance, you heard 7% to 8%. And the tax you got right.

All right, thank you. And then just lastly, help me understand in the quarter what weighed down leasing and services margins ex gains on sale. I guess the press release talked about higher maintenance and compliance costs and is that persisting into 2025?

Yes, so when you look at the maintenance, Justin, we've been talking about compliance interval that's come up on the cars that were built in the last 10 years. We expect those maintenance costs to be elevated for 2025 and the next couple of years after that until that compliance event is over. That's some of the weight that you're seeing on the leasing segment margin staying between 38% and 41%. It's increased maintenance cost for that compliance interval plus lower secondary market sales.

Got you. All right. And then do you think - I realize there's no normal to secondary market sales, but do you think the 40 to 50K in secondary market sales reflects as best as one could estimate like a new normal in the current environment for secondary railcar sales? Or do you think the 54 this year was more?

So, if you look - if you go back to last year, our guidance was about $40 million of secondary market gains. And so, this year, 40 to 50 kind of reflects that similar activity. Included in our guidance is we have increased our net fleet CapEx. And so, our net fleet in CapEx is - last year in 2024 was a little bit lower than we had projected. This year for 2025, we're back to that $300 million to $400 million range, and that reflects that we think leasing is a good investment. We see the nice returns there. And so, it's a choice to invest in the fleet rather than sell more out of the fleet, but we think long term it's the right value creation choice.

Got it. Thank you for taking my questions.

The next question comes from Andrzej Tomczyk with Goldman Sachs. Please go ahead.

Hi, morning. Thank you for taking my questions. First question I just had on the deliveries for 2025, I think implied down roughly 18% versus 2024. Relative to the industry expectation, would you expect Trinity's deliveries to fall roughly in that range, the relative to the 18% or should we think higher or lower?

So, Andre, we are expecting industry to be down around that 20%, and we're expecting to be in our normal range, which is between 30% and 40% of deliveries during the same timeframe. So, we typically fall there and have been there.

Got it. And just for the margin though in manufacturing, I think you mentioned the 7% to 8% full-year. Is there any way we could think about how that trends through the year, maybe starting off in the first quarter?

So, typically we're not giving margin range quarter by quarter because again, it can vary depending on what's going on in that quarter, the mix of cars, the number of setups and all that we have there and then also the volume. We did indicate that we expect the second half to be better than the first half. So, I would expect to see improvement from that standpoint. And Andre, it may be helpful, I'm going to ask Eric to go ahead and just give you a bridge walk from 2024 to 2025, if that's okay.

Sure. Hey Andre, welcome to the coverage team. Appreciate you doing the work on Trinity.

Yes, thanks for having me.

Yes. So, when you just look at 2024 to 2025 and you just kind of - you’re kind of on the right path when you kind of frame it. We see railcar deliveries down in that 20% range. We've talked about our gains on sale being down about 20% as well if you look from last year to the midpoint of our guidance. And then when you take our earnings guidance and you go to the midpoint, it's down about 9%. So, when you just frame that, when you look at lower deliveries on the manufacturing side, which is leading to a little bit lower margins on the 7% to 8% side versus our three-year plan, that's volume related. But we're really excited about the performance of this platform when you take that macro context into consideration. We look at just headwinds and tailwinds. So, the lower deliveries, as I mentioned, also we're planning on more fleet adds. So, we have higher eliminations, with about 30% of our deliveries going into our fleet. We also, as I mentioned, lower gains when car sales. Jean mentioned the higher maintenance due to compliance events. And then as Justin referenced on his question earlier, we are expecting the tax rate to go up about 400 basis points. So, those are kind of the headwinds. The good guys are, we're still in a very good lease price environment. And so, we're expecting as we've repriced a little more than 50% of our fleet, 54% of our fleet in a double-digit FLRD environment, we expect that to continue as the fleet is nicely in balance. And so, we still have pricing power on renewing assets. To reiterate, in the fourth quarter we renewed about 77% of our leases up 24%. And so, with four-year renewal terms. So, really locking in those contractual cashflows longer in an up environment. And then as I mentioned, we're going to see fleet growth to $300 million to $400 million. And then we've taken some cost savings, the $40 million that we referenced earlier. So, you take all that in account, we feel real good about the performance that we're going to expect in 2025. We're focused on improving the return on equity of the business. The balance sheet is we think in a good spot and the earnings from the platform should be fairly resilient in a flat-ish economic environment.

I appreciate the color there. Maybe just to close off, two final questions from my end. You mentioned I think the order inquiries were picking up into 2025. If you could just - unless I heard that wrong. And then is that tank car-led or freight car specific? So, that's the first question. Then the last question would just be if there's any update on the parts business, how that's doing, how that's expected to perform in 2025. Thanks for taking my questions.

Thanks, Andre. So, when we look at the inquiries, they have picked up. We've got some strong ones there. This is still a freight car-led recovery. Still more of a replacement demand, but I will say tank cars have been fairly consistent on the level of inquiries there. So, that is nice for us to see overall when you're looking at that. When you go to the parts business, we're really pleased with the work that they're doing, both for internal and external sales. As we look at our acquisition we did with Holden, it is proved out very well with the automotive increase, the other racks that we've seen go in and performed extremely well in 2024. Our traditional business has also picked up in new areas and they continue to look for either other agreements or ways that we can provide more parts both to our only fleet and to the external fleet that's out there. So, good improvement there. We'll continue to look for other areas that we can grow that business.

Okay, that's it from my end. Thanks very much. Appreciate it.

Well, I'll go ahead and go to the close. I want to thank everyone for your time today. While there's still a lot of uncertainty around government policy and how it impacts our business, we believe that our 2025 performance will demonstrate the strength of our platform and our ability to generate strong returns and consistent margin performance. So, we look forward to sharing our first quarter progress and results with you on our next earnings call.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.