00:05 Good morning. My name is David and I’ll be your conference operator today. At this time, I like to welcome everyone to the Wabash Fourth Quarter 2021 Earnings Call. Today’s conference is being recorded. [Operator Instructions] Thank you. 00:36 Ryan Reed, Director of Investor Relations. You may begin your conference.

00:44 Thank you. Good morning everyone and thanks for joining us on this call. With me today are Brent Yeagy, President and Chief Executive Officer; and Mike Pettit, Chief Financial Officer. Couple of items before we get started. 00:57 First, 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 all available at our investor side at onewabash.com. Please refer to Slide 2 in our earnings deck for the company’s Safe Harbor disclosure addressing forward-looking statements. 01:19 Also just a quick reminder that registration is open for May 19 Investor Meeting on our investor website. We’re looking forward to the opportunity to address trends in our market, the changes we’ve made in support of our refreshed strategy and our longer-term outlook. 01:34 I’ll now hand it off to Brent.

01:37 Thanks, Ryan. I’d like to start today’s call with an important announcement about the next step we are taking in our company’s transformation. With our investors and other stakeholders, we often talk about the momentous transition that happened in transportation, logistics, and distribution as the industry adapts to the compilation of forces. 01:56 At Wabash, we see a different future reality in our competition. In the context of social, technological, and logistic changes and we’ve chosen to go down a substantially different path to reshape the industry and pull that future forward for our customers. 02:11 There is no other truck body or trailer manufacturer that thinks the way we do, that acts the way we do, that is making the kind of [indiscernible] changes prepare our customers for a very different world. One that is coming fast and the forced disruption. 02:26 On our last earnings call, we announced the change of our company name from Wabash National to Wabash. We signaled a strategic shift in our brand strategy. Today, we're excited to reveal that Wabash National and our family of brands have rebranded under one powerful Wabash Brand that unites our products, our people, and our customers, and our business partners. 02:48 As released in our 8-K disclosure in early January, all legacy brands, including Supreme, Walker, Brenner, Bulk, Transcraft and Benson will hence fourth share the market as Wabash. Over the next year, we will also introduce new brands to the market, including a new brand for our proprietary molded structural composite technology, which will go to market as EcoNex Technology. One of the most environmentally conscious materials in the market to advance sustainability throughout the transportation, logistics, and distribution industries. 03:22 Moving on to capacity and product updates. Our [conventional refer] [ph] in dry van…

10:25 Thanks, Brent. Turning to our review of our quarterly financial results. On a consolidated basis, fourth quarter revenue was $479 million with new trailer and truck body shipments of 11,655 units and 3,230 units respectively. 10:43 In terms of operating results, consolidated gross profit for the quarter was $42.6 million or 8.9% of sales. On a GAAP basis, the company recorded an operating loss of approximately $19 million. This result includes a non-cash charge for impairment of trade names and trademarks related to the retirement of legacy product brand names. 11:05 On a non-GAAP basis, adjusted for the non-cash impairment operating income was $9.7 million or 2% of sales during the fourth quarter. Operating EBITDA for the fourth quarter was $23.8 million or 4.8% of sales. 11:21 Finally, for the quarter, GAAP net loss was $25.3 million or negative $0.51 per diluted share. On a non-GAAP basis, adjusted for impairment of trade names and trademarks, as well as debt transaction costs, net income was $3.7 million or $0.07 per share. These quarterly results were somewhat below our expectations as the supply chain continued to struggle to support our production activity with issues temporarily causing acute disruption within certain product lines. 11:53 Additionally, COVID-related [absenteeism] [ph] spiked towards year-end in relation to the Omicron variant as we saw [absenteeism rates] [ph] in late November and December increase well over rate experienced during the rest of 2021. 12:07 From a segment perspective, transportation solutions [with an] [ph] operating income of $80 million or 4.1% of sales. Parts and services [Technical Difficulty] revenue of $38.1 million and non-GAAP adjusted operating income of $4.4 million or 11.6% of sales. 12:27 While operating cash outflows of approximately $7 million for the year shows the impact on working capital driven by significant year-on-year revenue growth.…

16:58 Thank you. [Operator Instructions] And we’ll take our first question from Felix Boeschen with Raymond James.

17:16 Hey, good morning, everybody.

17:18 Good morning.

17:19 Good morning.

17:20 I wanted to start off on some of the comments around the backlog and sort of forward sales expectations, but obviously the backlog is actually a little bit higher than your 2022 sales guidance as of now. So, I’m just trying to understand and recall the incremental 200 million is there a chance that we’d get booked in 2022 or is that specifically earmarked for 2023 at this point?

17:45 Yes. Thanks, Felix. I'll take that one. So, as a whole has done a really outstanding job of constructing a backlog that gives us a tremendous amount of optionality. And that was very purposeful on how we looked at managing the supply chain and available capacity in 2022. 18:00 So, with the guidance being predicated on the supply chain, not getting better, we wanted to make sure that [Technical Difficulty] did, when it does, we have the ability of pulling that backlog into 2022 assuming timing allows. 18:20 So that gives us tremendous flexibility. That's why we say there is – we constructed the backlog in a way to allow a constructive upside to be possible and we're working every day to see if we can make that happen.

18:35 Okay. Got it. That's super helpful. And then Brent in the release, you specifically mentioned some of the new pricing initiatives and specifically about [indiscernible] and raw materials. Can you broadly comment on how that pricing change has been received by your customers? And I just want to clarify, is this exclusively on the trailer book or truck bodies also?

18:58 Yeah. So, first off, let me say, I am exceptionally pleased with how we are executing based on how our commercial group is executing our variable pricing model and how we've been successful passing through incremental inflation even in the last 30 days as we manage component and other related price increases. 19:20 So, I feel very good about that. It is primarily based where most of the work has been done to date on the van side of the business. However, we are implementing, I will call it purposeful variations to that same mindset across the entire business throughout 2022. So, we are managing well on that front.

19:46 Okay. Helpful. And then just my last one, maybe this was better from Mike, but just around the 1Q guidance, you mentioned that there would be some of the 2022 or 2021 backlog that's going into 2022 that is going to be a negative, is there any way to quantify how much of the 1Q sales is going to be a 2021 backlog? And I kind of understand how we can isolate some of the mixed dynamics in that guide.

20:18 Yes. It is – I would say you could have a look at generally the shipment and build [miss] [ph] that we had in Q4 is really the main piece that pushes into 2022. It's not a build and ship, but it is going to be a headwind and [Technical Difficulty] so you've got really two factors of much lower than what we'll see in Q2 to Q4. As the shipments are always a little bit lower in Q1 and we have that overhang. 20:57 I would say, it's – of the build is going to be in the 5% to 10% range is what you have pushed in some of that ballpark.

21:08 I'll add a little bit more beyond your question, just anticipating others. When we think about Q1 as it carries forward, not only do you have the, I'll call it that's moderate margin headwind that Mike is talking about. When we think about Q4 and what we shipped and how we execute on the production front, the Omicron reality did create a pretty forceful event in the December timeframe. And just as the World and the United States is dealing with it, that's continued through really the month of January. We're now starting to see it trail off, just as we're seeing it around the country. 21:53 So, that's another reason when we think about Q1 being not only our most seasonal lowest quarter of the year, leading into it as well. There's nothing surprising about that based off of what's going on around the world.

22:17 Got it. Very helpful. I’ll stop there.

22:19 Thank you.

22:24 Next we'll go to Justin Long with Stephens.

22:28 Thanks and good morning.

22:30 Hi, Justin.

22:32 I wanted to ask about new trailer ASP, obviously, a lot of momentum on that front, any updated thoughts on how that metric could trend going into 2022? And if I look at the fourth quarter, I know there's been the re-segmentation, but it looks like new trailer ASP actually went up a good bit sequentially, maybe 10% or so in the fourth quarter, but margins in the Transportation Solutions segment actually went down. So, Brent, you may have answered this question a moment ago with Omicron, is that really what drove that discrepancy or is there anything else that’s contributing to that?

23:17 We continue to see into 2022, which we talked about that a lot in the Q3 call. We also mentioned that Q4 would be the peak paying quarter of the price cost relationship. So, what you really are seeing is you're seeing the price starting to catch up, but you still have that extra material cost in Q4 that wasn’t fully 100% priced in, which we knew is going to happen in 2021. 23:41 We believe most of that is behind us in 2022. If you continue to see the ASP increase and the material costs will essentially flatten out is the best way to think about that. Also, as you mentioned and Brent mentioned, Omicron did get us in December, which was some of the conversion costs. 23:56 The majority of that margin, you're seeing, compression is on the material cost versus price relationship.

24:01 Yes. I guess a little bit more on the Omicron piece. Mike alluded to the fact that we've been very successful in the last quarter bringing in additional headcount to meet our 2022 capacity plan requirements, our supply plan requirements that happens – and that was very favorable in the context with the absenteeism rates spiking in December. 24:25 The additional headcount that we brought in was able to mitigate that to some degree, but it did preclude us from building the extra volume that we’ve planned on getting from that. All [Technical Difficulty] and conversion cost, math, when you think about the quarter, right? But the bright side of that is that we have labor in place, we continue to add plan for all 2022. And while we're taking a little bit of conversion costs [once in the] [ph] near term, we're setting the table for full 2022.

25:01 Okay, That makes sense. And that's helpful. [Technical Difficulty] guidance for the first quarter [Technical Difficulty] on the remainder of the year in terms of the cadence of EPS and maybe where you're expecting to exit the year, kind of [Technical Difficulty] what's embedded in the guidance once pricing catches up with cost?

25:31 Yeah. We’re going to see is the big step up is going to be from Q1 to Q2. And that again, some of the units that we push from Q4 to Q1, some of the Omicron that Brent mentioned, so Q1 in the lower shipments is going to be the lowest. You’ll see the big step up into Q2. You'll see some moderate increase from there and then we get to Q4, but it's going to be much more – much smoother EPS profiles in Q2 to Q4 with a moderate step up. And then if you calendarize Q4 into 2023, that's when you can really start to see the EPS power that it will have in 2023.

26:06 Okay. And last question I had was just given the re-segmentation, can you give us some help around gross margin by segment and what's getting baked into the guidance for [Technical Difficulty]?

26:21 Obviously, you're going to see a much larger step up in gross margin from 2021 in the transportation [Technical Difficulty] getting – that's where we have the real price material cost disconnect. So, you'll see that normalize in 2022. I don't expect to see a significant change in the gross margins on the parts and services business. We're really happy with the steadiness of that business. 26:47 Underneath the hood, I said in my prepared remarks, but it's worth mentioning again, is don't forget we divested the extract business last year and we discontinued some on-site [Technical Difficulty] you see really nice growth into 2021 from [Technical Difficulty] continues. So, I don't expect a lot of margin improvement in that business, but I would expect some pretty nice top line and bottom line growth in the parts and services business.

27:20 Great. Thanks for the time.

27:23 Thank you, Justin.

27:26 [Operator Instructions] Next, we’ll go to Mike Shlisky with D.A. Davidson.

27:39 Hey guys, good morning.

27:41 Good morning, Mike.

27:43 So, can you tell, first off, are there any unusual one-time expenses that have to take place in 2022 as you rebrand all the other companies and all the other segments under the One Wabash system?

28:00 No, we’ve took that whole charge in the Q4 financials on our GAAP presentation of the financials for Q4. All of the charges related to the One Wabash and branding changes in Q4. There'll be some minor, obviously signage and branding things, but nothing as material to call out for 2022.

28:20 Great. Maybe just a little deeper on that. I was curious about the supreme brand change over as well. I mean, that's a pretty big well established company as you bought it a few years back and the brand name was really important there. I know you had an impairment here, but just tell us about a little bit like [roots on the ground] [ph], what are the steps you’re taking to kind of ensure the old brand fades out, the new brand comes in a way that doesn't challenge customer brand recognition or the way customers view those products?

29:01 Yeah, this is Brent. What I would say is that when we took on this initiative to understand what was the right direction going forward [with how] [ph] we represent the company to all of our stakeholders, we did a significant amount of third party research facilitated by outside partners to make sure that we had real data on what was the truth on the ground across that stakeholder group. 29:31 The feedback has been overwhelming that when we think about how the strategy is being executed, how to bring engineered solutions to the world. The Wabash brand is what carries. Now that does not take away necessarily from any of the brands that we’ve had, but to make sure that we have a One Wabash approach that matches how we operate internally, how we'll represent to the customer, how we'll sell them versus the final mile solutions? The Wabash brand is what tested, it was shown to carry across all of that. 30:09 So, we feel extremely comfortable based on feedback from our largest customers that move the needle that they are enthused, as well as our dealer body is enthused with the direction that we're going. So, where we anticipated, possible push back we got the opposite, which was embracing of the idea.

30:38 Got it. That's great color. I also wanted to ask about the new upcoming walk-in brand product. That is a – market that's been [indiscernible], can you give us a little more color as to how you intend to compete there? Is your product being relative with EVs solely in mind, will it be an only EV type product or do you plan to try and go [indiscernible] chances that are out there today?

31:08 Let me answer the second part of the design application that we're working on would be compatible with all engine types or power going forward. That was a key design criteria as we look to meet our customer’s expectations. Yes, there’s a limited amount of call it competitive entry into the specific space from a body type standpoint. 31:36 How we approach this is really being pulled by our customers. As we sell, first to final mile, we sold them a full portfolio, they are asking us to get into this and provide a superior solution than what's being presented to – with different materials and to do it with a different mindset. This is our entry into that space. It is very holistic in the way that we're approaching it. And so, you can think about our portfolio strategy with customers. 32:07 Those would we most strategically aligned with that we are giving them very specific solutions to pull through to do the initial conversion of profit. Once we build a platform, [call it design] [ph], look at how we can broaden that to a larger market segment, but we have our hands full just meeting the expectations, asking us to do something different.

32:36 Got it. Got it. Well said. Thank you very much.

32:40 Thanks Mike.

32:43 As there are no further questions at this time, I now turn the call back over to Ryan Reed for any additional or closing remarks.

32:50 Thanks David, and thanks everyone for joining us today. We'll look forward to following up with you during the quarter.

33:00 And that does conclude today's conference. We thank you for your participation. You may now disconnect.