TRN - Earnings call transcript Q1 2024 | Trinity Industries, Inc.

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Operator

Good day, and welcome to the Trinity Industries First Quarter ended March 31, 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 include 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 of the business issues and risks, a change in 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 of Investor Relations. Please go ahead.

Leigh Mann

operator. you, Thank everyone. Good morning, you XXXX joining company's appreciate for us Results Conference Quarter Financial First Call. We the

Our prepared the remarks Chief will include comments from and Officer. and Financial Executive Jean President; Eric Chief Marchetto, company's Officer Savage, Trinity's

We will the from leaders. our session prepared remarks a hold Q&A following

today, information website reference slides, the in earnings Relations During quarter our available www.trin.net. and of Events the financial page supplemental reconciliations a.m. first are call call are Time Events pleasure certain appendix under metrics. accessible under will on Investor provided link. A the available of and Presentations call Relations Jean. non-GAAP website. the measures turn metrics our conference are my the over non-GAAP Replay These slides Presentations replay now Eastern of to The May today's which on with the It is the at call event to we will comparable GAAP to on is the through the XX:XX after midnight Investor along website, of be portion XXXX. X,

E. Savage

and morning, Thank Anne, progress. off pleased with good I Leigh everyone. Trinity's XXXX We strong, you, and started am

revenue to carried and XX% up of that more revenue Our year-over-year, quarter the first was line. bottom we

margin X for our to reprice mark of We the summary, full and our ago. Furthermore, the to of consistent rate first gives we business of year to us quarter FLRD our revenue, $X.XX represents confidence business. improvement differential our In performance. upwards demonstrates reflecting Trinity $X.XX of future years more Rail continue our first EPS highest the starting strength improvement start and momentum flow in EPS since guidance to higher reporting $X.XX, range quarter through lease the year to to a GAAP platform. achieved raise XX.X%, This and or fleet our had metric this second Products a significant FLRD margin began of

also to results, financial shippers update be our are industry, Before the what in metrics below segments term, we a of improving in near we I'd optimistic allowing making averages, in chains. service continue more storage and will seeing more that their on low. continue We're and briefly allowing transport. are times these like talk the supply about improve levels competitive the to rates [indiscernible] in rail Service historical fleet quicker efficient Overall to also remain well mode market. turnaround.

we in In quarter, have terms markets, improvements chemicals. of end since last significant seen

driven inflation continued supply challenges despite the high the by levels recovery borrowing and costs, years. has Additionally, in SUVs of demand auto for few the remained past supply high and automotive parts over chain strong, demand following chain

fleet, encouraging view lease cycle about support our more performance production as a continue at diversified Trinity the balanced this high as rates. And This let's utilization and lessor demand. for to level. We competitive lease with railcar levels to a differently stabilized is now a allowing segment talk

businesses. capabilities optimization our As structure Today's January fleet grow mentioned results parts services our better organizational call, on format. year-end support leverage X, presented our lease new to we services our maintenance and modified this and are in effective to to

FLRD positive of rates of with renewal expiring XX.X%, a services, over up logistics call, at substantially railcar higher segment. an digital this of and our of the As had XX% I and, leasing management, previously maintenance includes Products segment, now as a be to fleet Rail which services across modification, strong services part we & of presented part XX.X%. Lease which top the utilization rates business, our and our Leasing was segment Services maintenance Services Leasing and aligned types. are quarter, nearly rates, said within & The all

RSI additions to work, Our in up this continued these revenue of services details higher maintenance Digital the by and services our fleet. driven from segment, about acquisition year-over-year, and is in lease logistics few you external XX% improved year-over-year this are sales, the businesses by net portfolio growth up business. lease Revenue in XXX% margin, more revenue and fleet. Giving benefited is lease and excluding a maintenance these up year-over-year. rates support of

Our average are when years, double-digit ago, rates the year $XX now compared have to positive. lease a FLRD of in last repriced our turned X and about XX% up representing we fleet the

end usual markets, While a a lessor decision. decision way, optimal the for our the returns current the some was lower cases, to to specific XX% was success rate in this strategic on Put and us strength than make renewal another of quarter, long-term lease as in supply-driven asset. enables certain the

remain to renew at railcars as continue often into utilization better returns. other and our expect nonrenewal services, we railcars to We consistent assign

first from lease secondary in betterments purchases $XX was new our million, which additions, net investment portfolio in proceeds lease Our railcar market fleet $XXX million includes $XXX quarter million of sales. and and

components businesses, the X.X% we've we in efficiencies. in improvement to made which labor deliveries, Higher see and to and the business in our Products Moving of manufacturing our reflects operating margin improvements Rail continue and operating includes segment, highlights revenue the parts quarter significant operational higher our margin. and our

We service great and doing in chain, is supply rail improvement and a team job mitigating seeing issues. are our

to continues XXXX. and first volume Our quarter that the performance railcars we deliver first on demand, still views replacement-driven about quarter in industry support expect our of railcars reflects XX,XXX to order Trinity's dedication. X,XXX

We further an uptick seen replacement-level have support of order demand. in our encouraging to view inquiries

railcars were the were deliveries virtually all X,XXX included of of at closure border last end and by that railcar the year. the impacted Our

also XXX the conversions quarter. We completed in railcar

Our new railcar backlog at billion. remained healthy $X.X

of want to to call the dates. X important turn I I you remind Before Eric,

Time. will Central May First, XX a.m. Monday, take Meeting Annual place X:XX at Shareholder our

and Reach XX. the if about statements financial Second, to Texas our forward calendars discuss turn at providing update We you look XXXX business. on Day to hosting make our of the year. longer-term any out views in Leigh are of the and have event. I'll to to for your sure Anne marked you June our questions view Eric Investor the now a rest

Eric Marchetto

external morning, ago, railcar higher external statement. my the XX% start Jean, deliveries, on income volume up improved I'll comments of you, lease revenues higher and to everyone. Total and $XXX rates a reflect of Thank a million, quarter, compared a as $X.XX portfolio good repairs. gain year recorded a the Both adjusted GAAP EPS million. were with the from $X.XX quarterly quarter, in in of $X.X ago. modest were and EPS sales adjusted Lease improvement and year a we reflecting

margin and segment favorable deliveries driven rates, quarter rail lease with external First performance efficiency by strong was improved manufacturing. in higher

our are of benefits the progress. seeing the are and excited by platform We

cash Moving statement. to the flow

our higher operations offset balances by flow $XX impacted was flow cash balances, lower continuing cash was Our $XX investments the million. Cash receivables and partially and inventory after dividends operations adjusted was by free from our dividend delivered million, we were from quarter returned payment. Net the to in storage investment $XXX in We as the placed fleet quarterly $XX that million in railcars million. in quarter. the shareholders was quarter through our fourth

$X the to more the we Investor This last warehouse ROE of given commitment the representing our a investment prior billion in Our information entered expectations. we file goal There rightsized which new March, facility. warehouse mid-teen We set months a XXXX warehouse at XX.X%, was warehouse expect total later $XXX into is with our we loan XX-Q, today. replaces a new facility Day. In on amount fleet million. pretax our XX loan facility,

are XXXX, confident look deliver forward results. strong we we'll in As we

to of full durability Given these of to in support range year a are attainable elevated a start by guidance. our the and $X.XX. our $X.XX guidance improved to our and to raising this margins, believe EPS momentum of a We great year our in the target $X.XX we see is confidence lot business

Group Products margin year Rail operating X%. full We expect a X% to of

continue to million, the million full We fleet market and and are expect $XXX improve year year activity start the quarter. anticipate the between $XXX in pleased secondary year to expect railcar progresses. We this investment our to lease in as net and in second range a of

environment. the As Jean as the like we a of and company are we the making fundamentals said, operating progress

from continue services to here products will and believe we to views forward business long-term our We our Investor Dallas with are our benefit at We in June Day look on it. to discussing question. XX. Operator, ready leasing take you now first our supporting the

Operator

Justin comes Stephens. Long first question The Instructions] [Operator with from

Justin Long

talked maybe forecast? the quarters? products Any it you on being around color that in but change, about on to didn't was can -- guidance change a the think what margins, railcar think questions sales full going few from the with we I to rail start any impact Eric, So margins the quarter as the think of of half provide And maybe last the Group on as numbers XXXX you our year. next couple of forward. about Rail you Products cadence about

Eric Marchetto

Yes. in Justin. your a Rail high it the really about and At hasn't answer, no, short I'll Jean talk Thanks changed. level, a for start question. can Group,

million activity activity half pick in from that gain. XXXX We quarter, we of quarter, first guidance the in activity do still modest, saw you our as expect just year. and will be $X our was second the sales very think our that and throughout the a really kind expect do of railcar to XXXX gains the holds. up I And

E. Savage

year. the come as And and quarters, supply us. than starting employees been doing that And give the But as gone guidance these to of our you value we the work we there. on And when last know don't captured quicker had has products, chain expect the efficiencies, team at with the you they've more that. expected throughout look quarterly finally at the tenured When what the has longer hard you show. out we several continue far over rail to look for that,

to range entire the year. X%, and for keeping is range X% we're the of So that

Justin Long

orders to that was provided to didn't bit based in it other little Fair anticipated. on of got quarter, the improvement you as on levels but sounded you Okay. we much it see on see of were late February, enough. the in I like And inquiry when encouraging you pickup margins. an commentary the improvement that coin, a side last reported a guess just see as better sequentially, I starting

just if improving ahead? the an we sequentially? I'm going on to to how curious So as in there's anything flow order backlog it converting get you're relates to inquiries orders, the where about back quarters and Can environment thinking just is

E. Savage

a we third that quarter of XXXX, Justin, large very multiyear remember, had So order. in

when see sitting half We a following number this the even look we're in, quarter, the So still industry under still improve sometimes orders continue just backlog our quarter. And And those inquiry we that, come they in big you quarter-to-quarter range. have if at happening. when you to the normal our don't orders received as on quite at have you books. within look you levels, large the

replacement So the that. still orders we supports industry talking in. that And backlog at it's level those see about, coming keep that we that I demand think

Operator

Majors question from next Bascome The with comes Susquehanna.

Bascome Majors

last do last levels? a understand and you're seeing you've where Justin's about little on up the this the can inquiry backlog, greater Can follow orders, I to sustain being but seen for on that? pace XXXX. question. conversion into improved half us does at of X little replacement bit if bit rate in of talk a roughly it a industry appreciate And whether the Because you And months give pause production

E. Savage

Bascome. And Sure. for thanks question, the

us one to second tank half alternative And the If fuels along to orders thing markets. more. you is of the chemicals into goes is the look that encouraging coming year, those we're that starting we the and very up. at it, creep see with play see car And

a As this as out freight you know, car-led started recovery.

from So margins higher standpoint cars. cars that's tank have freight typically the great of than

to say that is were scrapped. quarter, thing first this going there I'm other cars X,XXX The on

scrapped. XX,XXX say number cars If the that's year, have rest for of be same we you that would the the

the Over cars X there years, scrapped. and XX,XXX were especially last 'XX 'XX, over

So to And demand for that X inquiry levels us up versus make support or a build car the still for the that replacement and others. of scrapped numbers for lot we're of X last level room years. there's still over seeing

Bascome Majors

plan, the feel throughout on fairly based And productivity and be a next of visibility be production whether how cadence some the about can it today, there little and quarters couple bit or downs? about the on talk the should and you your will you have you steady ups

E. Savage

of tenure to that. efficiency always that I'm with But has tenure, off employees to so go turnover linear, so going Okay. Thanks, see the start we It's Bascome. fact our reduced, based that our up. With improvements. continues the never

that expect persist year. We throughout to the

in We orders overall some our continue confident very improve to are at our year. the filling end ability the of But performance. to out overall, we're

Bascome Majors

feel in February, full sale you're that it And it healthy. little like year seeing talk on you qualitatively mean in but you meaningful headwind and out I up, more that's when with the the to the a it's a bit you're that. already drill gains love what that lastly, quantitatively. And come like sounds in bit I'd on I little rather was still than about markets, just outlook a rolled sticking piece. know profit does secondary to maybe Can quite

you out that depth X? over your the extend sort conviction or change to there deals about or if in will done strategy look or as able a X X put be when the partner, anything and that new there's marketplace, of the any Just next primary to X you've the you last of years things to you how find

Eric Marchetto

Sure, guidance, because increase outlook sales. of Bascome. in change at you look We was business. the our Yes, first, I'll not all margins When just the that on any operating in did on gains reiterate.

So outlook overall. our just an improvement that's in

going recall of the last back referenced deliveries have up. And different. the our that the different? fleet We're a the bit I assumptions to still on One, of lease that's go are Our additions sales things as bit the manufacturer planned were lease on than of XX% originating side little are we in car about why lot it's holding we're a a -- of and deliveries quarter year. a the of the little it's why to year call, our you fourth gains historically. in half fleet There's less. And few our less

terms not So those we're of transact assuming good is that assumption. just going to in additions a

we So secondary adds market you into coming a shifting seeing -- look ads. overall backlog. and fleet why see seeing there. When secondary -- holding you We're lessors market lot the the and speculative look more we're lot from their buying overall depth. at that's the when market, a They're at We lessors, of it growth encouraged. we're breadth just independent transactions. not We're of secondary is --

small a we to have look than think on you originations looking but healthier activity yield. face backlogs rather and probably lease like that other speculate. deals the the on yield a doing, we're buy of in So at is thing. They're on continue seeing in the that's that's car I we hurdle our a And we're assets. rates, we overall, raise those that's indication new order thing the changes But may side. for That market. the -- When driving to interest us the the good impact known like rates that

standpoint. so to $XXX million feel million about additions this good And year, a the fleet net $XXX we of from return that

Operator

Barger Capital next with Markets. Instructions] The from question comes Steve [Operator KeyBanc

Steve Barger

I but the did Not to dwell it industry per know quarter. lumpy, on past average quarters. X can the be X,XXX

just back we on I'm or as contingency share? to lower Or lines to you that returns plans. curious this do If So if optimize run in meant XXXX? you and for would is price year, can keep the about the half rate were that see you the as share discipline focus next utilized in even for

E. Savage

model taking. on see that have we're we that So to switched disciplined the changing. a I orders don't

on those. orders and got continue a profit We at to look make say to we've

few at the if And to we've range industry, we so our XX% of last the with the orders, to quarters, even look as expect I forward, And discipline. stay. in that off normal that based move XX%, would you been

plan don't is cycle to XX,XXX we're talking about seen that in past. And much we cars industry. this approximately remember, to the muted So any that. But than the cycle more change you've

So lower going and cycle into you and very have floors tight highs band. the higher

overall not of disruption causing a it's So in manufacturing. lot

Steve Barger

LTV Understood. is Yes. XX%. says And X about Slide

Is year? to this you do lever? cars. the about unencumbered fleet And year, $XXX cars utilizing of Or you expect the that the for encumbered year? have think net at rest maintain investment be those end how You will of of million the the LTV given that

Eric Marchetto

we I in read quarter our we improving question, -- my prepared up was remarks, our Good in on ended in Steve. assets. warehouse, the And advance this mentioned those up LTV Yes. rate that tick

it so quarter. ticked And that's why up this

So as little that really unencumbered. unencumbered the was bit not a good. I've We managing as overall like the leverage. having much managed

and We'll went give long-term XX% to revisit our to it still I warehouse We XX%, in hold Investor June. that the up that but coming But because XX% would do is to refinancing. Our at for of target right XX%. views. up have longer-term now, Day

Operator

back to remarks. I session. the like Savage any question-and-answer our would to concludes Jean closing turn This for conference over

E. Savage

Well, today. for joining us thank you

Trinity our heard targets you great continue to a progress see about to As off we're June believe start look We lot sharing you on and to excited you is hopefully our in of our to with voices, XXXX forward reach and improve. and to hope to a XX.

Operator

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

disconnect. may You now

Trinity Industries (TRN) 1 May 242024 Q1 Earnings call transcript