Good morning, everyone. Welcome to Wabash's 2022 investor meeting. We appreciate you joining us today. We've made meaningful changes to our company over the last few years in order to enable our new strategy, and we're looking forward to tying all of that together for you today. First, on the safe harbor statement, I'm not gonna read all of this, but I would like to say that today's presentation includes forward-looking statements and actual results may differ. Please refer to the slides for more information. On the agenda, I think we have a great series of presentations for you. First, Brent is going to give an overview of the strategy and the evolution of our company into who we are today. Dustin and Kevin will go into more details around the business and our strategic growth initiatives.
Following that, Mike will provide a review of our capital allocation framework and financial targets. Brent will close with some brief remarks, and then we'll finish up with a Q&A session. With that, I'll turn things over to our President and CEO, Brent Yeagy.
Thank you, Ryan, and thank you, everyone, for being part of our 2022 investor meeting. We're excited to share our story with you and give you some insights on how we plan to execute our strategy and generate shareholder value going forward. Let's start with our key messages for the day. First, we are a purpose-led organization capable of executing our customer-centric strategy, creating new capabilities and new value for our customers. Second, we are the leader in Transportation Solutions with the industry's only first-to-final-mile portfolio. Third, we're focused on driving higher margins and recurring revenue. Fourth, we're well-positioned in this dynamic environment based on the changes that we're driving through our Wabash Management System.
Lastly, we have proven our ability to be financially resilient and generate positive free cash flow through an economic downturn while coming out as a stronger company that is poised to create shareholder value through our business strategy and capital allocation priorities. Let's start with some of the highlights of who we are. Based in Lafayette, Indiana, we have 13 manufacturing locations throughout North America. We're poised for $2.5 billion in revenue and 6% operating margin in 2022. We've re-segmented our business in 2021 in order to highlight two strategic reporting units, Transportation Solutions, where we are focused on first- to- final- mile strategy. Additionally, we felt it was important to highlight our Parts and Service business, where we expect to generate growth or recurring revenue with higher margins.
At the heart of our company's transition and who we are is a reimagining of our purpose, vision, and mission. Our purpose is to change how the world reaches you. Our vision is to be the innovation leader in transportation, logistics, and distribution industries. That's a key area of focus and refinement from our prior strategy that now drives how we seek to create value for our customers. Moving on to our mission, we seek to create breakthrough ideas and solutions that help our customers move everything from first- to- final mile. We've rebranded our company because we need to share with the world how we've changed. We repositioned who we are, what our brand means, and how it speaks to how we have shifted our organization on creating value with a customer-centric approach that prioritizes ease of doing business.
We are well-positioned at the intersection of seismic change within the transportation, distribution, and logistics market. At no time in our past have we seen so much dramatic change occurring in such a short period of time. You'll learn throughout our presentation that we've changed our organization to better anticipate these demands and create solutions that will solve our customers' biggest challenges that face them in this rapidly evolving transportation landscape. Our future is about being One Wabash. We have restructured our commercial organization in order to provide one face to the customer and aligned our manufacturing organization to support this approach. We have unified historically disparate Parts and Service businesses under one leadership team in order to develop cohesive strategies to grow these businesses into the future.
At the same time, we have worked to optimize our portfolio, ensuring that all of our businesses are positioned to support our strategy. By creating a One Wabash organization, we've created the capabilities to solve the problems that matter most for our customers. We're increasing the ease of doing business, reducing friction, and enabling our customer to succeed. We're harnessing resources in a very efficient way, enhancing the agility of our organization and increasing returns on invested capital for our shareholders, all while meeting industry needs generated by the seismic changes across the transportation landscape. Going deeper on our commercial changes, we moved from a siloed strategic business unit structure that actually inhibited cross-selling opportunities and organizational leverage of the voice of the customer. In creating a customer-centric organization, we've enabled better execution from first to final mile.
It allows us to create deep customer relationships and ease of doing business, a deep understanding of how we'll create solutions for our customers, and ultimately gives us a strategic pathway to create a more meaningful commercial relationship. We are now able to bring greater long-term value to our customers, and therefore, we can look at deeper and longer-lasting customer contracts and commercial constructs that we think will provide mutual value on a longer-term basis. Leveraging our new strategy and structure, we bring six key competitive advantages. One, our organization is galvanized by our purpose of changing how the world reaches you. Two, we have a first-to-final-mile portfolio of products that is truly unrivaled in our industry. Three, we've accelerated our industry-leading R&D activities by centralizing the function and bringing customers closer.
Four, our Wabash Management System gives us the capability to solve the problems of the future in an organized and process-driven way. Five, we understand the ecosystems required to solve future challenges, and Wabash is cultivating some of the deepest and most profound relationships within the transportation industry. Six, sustainability is at the core of the strategy and how we bring value to our customers. With that, Susan O'Brien will spend some time talking to you about how the power of corporate responsibility and how that relates to our strategy.
We view corporate responsibility as an increasingly important strategic priority that touches every area of our business. Our business strategy includes, as a key outcome, four areas that positively impact our world. First, we are committed to sustainability. We believe our products can positively impact the world around us in meaningful ways as our customers increasingly prioritize reducing their environmental impact. For more than two decades, Wabash has continued to bring product innovations to market that improve fuel economy for our customers. Our DuraPlate and EcoNex technologies are advanced materials that are changing what's possible in weight reduction, thermal efficiency, and electrification and commercial transportation. Second, we are committed to an environment of diversity and inclusion. We know the single most important ingredient to our success is our people.
Having a rich range of individual differences and unique perspectives leads to innovative ideas and better decisions for our company and our customers, strengthening our reputation as a thought leader. We are committed to having a workforce that is diverse and embraces inclusion at all levels, reflecting the diversity of our customers and the communities in which we operate. Third, we are committed to employee engagement. We actively shape our workplace culture to create an environment where people can bring their best selves to work. Over the long term, we see better outcomes from having a highly engaged and values aligned workforce, including improved retention, productivity, customer satisfaction, quality and safety. We measure our progress with an annual survey and use the survey findings to implement action plans to improve the employee experience. Fourth, we are committed to meeting the needs of the communities in which we operate.
Our charitable giving program combines volunteer work with financial support to make a meaningful, lasting impact on our communities. In addition, we encourage all employees to become involved, lending their voluntary support to programs that positively impact the quality of life in our communities. That's why we established a day of giving program to allow employees paid time off to participate in the volunteer activities. Finally, I'd like to highlight our One Wabash approach to corporate responsibility. We have assembled a team of high performing individuals who come from diverse cross-functional backgrounds. Working together, we have been able to drive progress throughout our organization. With this approach, we seek to continue leveraging our corporate responsibility journey as a long lasting competitive advantage.
Thank you, Susan. Now let me talk about a few of the engineering technologies that we are bringing to life today and ultimately what we'll be scaling across the organization in the near term as we look to create further value for our customers. DuraPlate Cell Core technology allows us to bring the lightest trailer to the market, creating improved fuel efficiency for our customers, and is ultimately 100% a recycled product. Our EcoNex technology is proprietary composite solution applicable to the refrigerated space. It provides improved thermals up to 28% while reducing weight by 20%. This technology is directly applicable to the home delivery market, and we'll have a great example of this to share with you later in today's presentation. Finally, I'd like to address electric vehicles.
We're at the forefront of electrical vehicle adoption as we provide the technology that will enable EV over time by bringing some of the lightest weight materials to the market. Our designs will work to offset battery weight and improve vehicle range, and we're excited about where this market is headed. There's so much to learn about our corporate responsibility efforts, and I'd like to refer you to our third annual corporate sustainability report that can be found on our investor website at onewabash.com. Now I'd like to introduce Tony Hayes and Kristin Glazner as they talk about our Wabash Management System.
Fundamental to how we run the business at Wabash is the Wabash Management System, or WMS. The purpose of the Wabash Management System is to help us achieve our strategic objectives. It is one source of sustainable competitive advantage across all of our operations. WMS is about more than achieving stability and daily management. It is designed to facilitate breakthrough improvements at all levels of the organization. To do this, we believe leaders must be active contributors within our enterprise lean efforts. In the last year, we've made great progress in developing leaders as teachers with our WMS University. Our senior leadership team's participation in WMS University has been critical to our success. Since the program launched in May 2021, nearly 100 employees have graduated from the immersive WMS Champion training course.
That's 100 leaders who are now thinking differently about how they approach problem-solving and are practicing and scaling the key principles and disciplines of the Wabash Management System.
As an example, one of our plant managers, Dave, took his learnings from WMS University back to his team and through the use and implementation of the WMS principles and lean thinking to drive waste out of the process and develop robust standardized work, Dave and his team were able to improve product cycle times by 30 minutes. This is a great example of the importance of our WMS University and scaling lean thinking across our enterprise. With WMS, we are creating more efficient processes and aligned systematic behaviors across the organization. More importantly, we're helping leaders focus on strategic areas of high value. What problems can we solve today that will have the greatest impact on our customers?
As we continue to deploy the Wabash Management System across the organization, not only are we changing how people use lean tools, we're creating a culture where every employee has a voice. One of the four segments of the WMS is team, which is based on how we show respect for people. Last year, we rolled out our CARE framework, C-A-R-E, a systematic approach that drives action and creates measurable outcomes to improve the employee experience. CARE stands for communication, accountability, recognition, and engagement. Through the WMS, every employee has an important role in problem-solving, idea sharing, and continuous improvement. By being active participants in their workplace improvements, our people experience the three key outcomes of our care model, mastery of WMS principles, autonomy by being part of the solution, and purpose in knowing that all of us at Wabash play a role in changing how the world reaches you.
Lean thinking seeks to change established and conventional behaviors across our organization, and in that way, we have embraced lean on our culture roadmap as we improve the employee experience at Wabash.
Thank you, Tony, and thank you, Kristin, for sharing why our Wabash Management System is important to our company and what WMS means to our employees. Now, let me take it the rest of the way. I think it's important to understand that the Wabash Management System is allowing us to solve some of the most complex problems in our industry. It enables us to create the strategic capabilities that we need to deliver the future and provides the methodology that we use to execute our strategic plan. With the Wabash Management System, we are well positioned to benefit from the growth drivers within our industry. E-commerce is an undeniable force within transportation, logistics, and distribution. It's creating disruption, dislocation, and inefficiency across our industry and changing logistics models and the equipment needed to support the new flow of goods from first- to- final- mile.
Additionally, we're seeing customers consolidating various networks and ecosystems to solve problems for the future. Finally, demand for trailer pools are being generated by persistent driver shortages and power-only offerings that seek to create efficiency for shippers and carriers. I'd like to talk about how we're positioning to create value within these secular growth drivers. Kevin and Dustin will talk about this in detail, but I want to make sure that I hit these three things. First, we structured our R&D organization to meet the future needs of our customers during these dynamic times. Second, we understand that we can leverage our dealers and our strategic customers to create networks and provide solutions in a way to drive recurring revenue a nd third, we can utilize our strategic capacity in unique ways and compelling ways to meet the needs of our customers. Our strategic priorities are fueling long-term profitable growth.
We're expanding our cold-chain market share, specifically leveraging innovative technology of our proprietary EcoNex brand. We're growing in parts and services by unifying our revenue streams into one organization and driving cohesive strategy. Initially focused on organic growth, we'll drive parts and service opportunities across the first- to- final- mile strategy as we provide world-class after-sales support for our Transportation Solutions business. We're focused on the e-commerce and logistics disruption trend I described earlier because consumer expectations are changing and technology is advancing in ways that disrupts logistics models and requires new and innovative equipment solutions. I'm very proud of the team I have around me. They're seasoned professionals with over 125 years of combined experience, and I believe they are the right stewards of our strategy. I'd like to conclude by sharing our 2025 financial targets.
With $3 billion in revenue at our margin targets, we aim to deliver $3.50 of EPS. This is a meaningful increase in the financial performance I believe we can generate. To provide more detail on how we'll achieve these results, I'll now turn it over to Dustin Smith and Kevin Page.
Thanks, Brent. As he just outlined our five key messages, Kevin and I will now expand upon this with more insight into our strategy. As One Wabash, we've increased our focus on three specific areas of growth: cold chain, Parts and Services, and the logistics disruption underway. We find the structural opportunities in each of these areas meaningful, and we have technologies and capabilities to act on these opportunities in an advantageous way that'll make our customers more successful. With our focus on customer centricity, strategic capacity, and our industry-leading new product development.
We're further fortifying the company to win by all measures. Wabash is focused on complementing our Transportation Solutions with Parts and Services to provide an unrivaled customer experience, extending our lead in the marketplace. Our commitment to the Wabash Management System with lean training and leadership principles is about investing in our people and creating a management system that scales with our growth. Lastly, driving recurring revenue through our business to build more resiliency in our cash flows. To ground you, this provides a summary of our newly established reporting segments, some 2021 highlights, and where our various revenue streams live. Not only does this reflect how Wabash is organized and operated, it reflects our strategic focus with transparency into our Parts and Services segment, which enjoys a higher margin profile. For Transportation Solutions, Wabash is clearly the superior brand in our industry.
With a full first-to-final mile solutions portfolio to meet our customers' shifting needs in a dynamic period like today, our customers can be confident it takes one call regardless of equipment type, and we surround them with the expertise and the portfolio to solve their problems. For Parts and Services, we're focused on recurring revenue and leveraging the Wabash brand. While only 10% of total revenue in 2021, we see great opportunity to capture growth in several areas of unmet needs with both current and new customers. Wabash has been carefully listening to its customers and studying freight markets for some time. We believe e-commerce is driving a structural shift in transportation, logistics, and distribution, and our strategy centers on it. The old freight model, which our industry has refined with incredible efficiency, is obsolete.
We're referring to the model that takes one or two hauls to transport goods from the port to a massive distribution center, then one more move to deliver goods to the store. Finally, you, the consumer, drives to the store to purchase the goods. Our industry spent 30 years refining this model. With the dramatic rise in e-commerce and next-day delivery, which we believe will only continue to grow over time, shippers are no longer able to maximize efficiency with these distribution centers and structured store replenishment models alone. Smaller fulfillment centers have grown exponentially over the past several years with the need of moving inventories closer to the consumer. Constant rebalancing of inventories between fulfillment centers is required in order to deliver on the promise of next-day delivery, which the consumer expects as normal rather than a delight.
All of this drives more gross inventory and substantially more touches or moves that complete the process of getting goods into the hands of consumers. This is driving the structural need for more equipment. While the obvious need is more equipment for the final mile or home delivery haul, more first and middle mile equipment is needed with this new freight model, which is why trailers has become one of the largest constraints to meeting the high demanding expectations of consumers. Wabash is uniquely positioned as the only company with the capability to have these first- to- final- mile discussions all at once to ensure our customer success. This is why our focus on strategic capacity optimization is so important. The art of strategy is about making decisions, and this represents a portfolio of decisions that stem from carefully executing our strategic plan.
In addition to what we believe is a structural shift in industry needs, our One Wabash first-to-final-mile organization is unlocking more cross-selling opportunities than ever before. Our added dry van capacity remains on target for a job one in the first quarter of 2023, and this will allow our customers access to higher volumes of the Wabash DuraPlate dry van than ever before. We're proud to offer the lightest composite dry van in our industry, and we're building a more strategic supply chain to ensure when our industry becomes constrained, Wabash will have the advantage compared to others. Lastly, this clearly signals our full confidence in our proprietary EcoNex technology as we wind down the manufacturing of our legacy reefer line. We're proud of the innovation and sustainability awards issued to Wabash from various associations over the past two years regarding EcoNex.
While this technology was born with trailers in mind, its scalability across our portfolio is substantial, evidenced by the recent introduction of a cold chain home delivery vehicle launched with a national grocer. Next, we'll share a short video highlighting our new dry van expansion.
The expansion of Wabash's dry van capacity is an exciting opportunity to capitalize on the pivot in our strategy. As we reorganize to optimize our customer interactions and leverage the power of our first-to-final-mile portfolio, we recognize that this was the ideal time to recapitalize the manufacturing capacity of our dry van product line. With this investment, we'll finally be able to satisfy our customers' needs for our dry van product. That has seen demand outpace our capacity during much of the last decade. With a disrupted transportation environment, new entities growing their logistics and distribution capabilities, as well as structurally increasing trailer-to-tractor ratios, customers are now thinking longer term about their access to dry vans to both optimize existing operations as well as facilitate network growth.
This is a pivotal time for Wabash to enhance our ability to serve demand, and in doing so, ensure a more complete product portfolio offering to our customers. In addition to direct customers, our indirect channel has been meaningfully strengthened over the last decade and is viewed as a best-in-class dealer network. This alternative channel to market has the capability to consume more trailers when fully supplied. Added capacity will allow Wabash to manufacture an additional 10,000 of our flagship DuraPlate dry van product in a highly efficient manner, utilizing the industry's most advanced capital equipment with an experienced workforce already in place. Our Lafayette plant is in process of being converted to dry van capacity during 2022, and we continue to expect this facility will be producing dry vans by early 2023.
While this net capacity addition is a small change for the industry, it represents a significant opportunity for Wabash to close the loop on being the easiest transportation solutions provider to do business with by enabling customers to buy across our first-t o- final- mile portfolio. With the retirement of Wabash's conventional refrigerated van product, another exciting growth opportunity lies on the horizon. Full commercialization of the lighter, more thermally efficient EcoNex refrigerated product. Ramping up this technology sets up Wabash for growth across refrigerated vans, refrigerated truck bodies, parts and services, as well as opportunities to scale EcoNex in adjacent industries. With a few moves, the company is positioning itself for growth over the medium term that is supported by a set of drivers that is unique to Wabash.
Moving towards our middle- and- final- mile offerings, our One Wabash model has created clarity through customer insights as well as leveraging Wabash Management System tools to identify and eliminate waste while increasing value to our customers. This product offering is critical to our first- to- final- mile strategy. Presently, we're utilizing an 80/20 focus on our product offerings, rationalizing the 20% of revenue that drives 80% of the margin diluted variation. This is strategic because not only will this rationalization improve the mixed profitability of our present book of business, it will allow us to reallocate resources, both in terms of manufacturing capacity as well as engineering resources, towards our new and exciting product introductions targeted at home delivery.
As you can see in the press release headlines here, a significant portion of our research and development and business and product development resources have been focused on new product innovations in this space, and our ability to integrate these new offerings in our existing manufacturing system completes the strategy. Here shortly, Kevin will be covering some case studies that'll highlight an example of this. Regarding our newly formed parts and services segment, our focus is to scale recurring revenue through a powerful business platform, facilitating interactions between our partners. The trusted Wabash brand, our nationwide dealer network, and our best-in-class customer and supplier relationships create the foundation of a platform model. We have recently announced the startup of Wabash Parts, an enhanced distribution joint venture to meet the demanding need for speed to deliver on our markets.
While immediate growth in aftermarket parts is the clear expectation, we see this new distribution capability as a strategic backbone to facilitate additional recurring revenue opportunities within this business platform. We are blueprinting a digital customer-facing portal to connect and facilitate interactions between our partners, again, leveraging the Wabash brand as well as our large dealer network. Lastly, we're in the early stages of introducing Trailers as a Service through this platform to meet the previously mentioned growing needs of equipment in our industry through a recurring revenue model. As Wabash builds out this platform model, focusing on these core foundational elements, we believe the ability to scale revenue through it will be substantial. Early discovery discussions around this strategy with our partners has been positive regarding its potential and what we see as an unmet need in the markets we serve.
Our leadership puts our people first and puts our purpose of changing how the world reaches you at the root of decision-making, so our employees understand why we do what we do. Our ever-expanding first to final mile portfolio is unrivaled in our industry. Our customers are increasingly benefiting from having long-term strategic discussions with our team. We have accelerated our R&D and innovation processes to focus on voice of customer, introducing new products that'll put our customers out in front. Our Wabash Management System continues to mature, allowing us to structurally scale the business appropriately. Pulling our deep industry relationships into an ecosystem that brings partners closer together to solve the complex problems our industry is facing in a world of dynamic change. Sustainability, it's core to our portfolio solutions, which we believe will be more strategic than ever over the next five years.
Now, I'd like to turn it over to Kevin Page to share more about our strategy by sharing case studies that utilize these competitive advantages.
Thanks, Dustin. Wabash is bringing great focus to an addressable market of $24 billion. These markets are dynamic and provide ample opportunity for Wabash to grow profitably moving forward. Wabash's base business has many favorable trends. Demand across our portfolio is currently greater than supply, and we expect that to continue for the foreseeable future. Additionally, we've experienced acute supply chain constraints within chassis flow, which has recently limited replacement of truck bodies. This situation has been building pent-up demand in a market that also has secular tailwinds pushing the pace of growth. As supply chains stabilize, we expect robust demand from this segment. Our exclusive dealer network is strong and getting stronger. This is a unique asset to Wabash and serves as a real competitive advantage as they provide Wabash with exceptional reach to small and medium-sized fleets.
Shippers are increasing their asset base as they seek better control of their deliveries and service levels. Trailer pools are forming as power-only brokers seek to generate efficiency by avoiding friction caused by live loads and unloads. Finally, trailer-to-tractor ratios are increasing as customers use trailers in interesting ways, including drop and hook, storage, and warehousing. Let's shift to the right side of the slide, which speaks to our organization. When you look at our purpose, vision, and mission, we had to put together an organization that was capable of delivering our new strategy. We are changing how the world reaches you by providing innovation that develops meaningful solutions for our customers. Our organization is now structured to accelerate innovation and new product development. Additionally, our One Wabash commercial structure reduces transactional friction for customers while promoting a true portfolio selling approach.
As we bring customers closer, we're doing so with a collaborative mindset that returns the critical voice of the customer as a key input in our innovation process and seeks to take a longer view as we develop solutions to industry needs. With our focus on these key markets, we feel that Wabash is well situated for growth. Let's move to discuss our three strategic growth priorities, expanding cold chain, growing Parts and Services, and focusing on e-commerce and logistics disruption. Demand for our cold chain products has been strong, but grossly unmet due to the supply chain conditions. As we scale our production capacity for our revolutionary EcoNex products, we expect to benefit from strong industry demand that will be accentuated by the value proposition of our unique product. The EcoNex brand proposition is compelling.
This material boasts greater thermal capability while being lighter weight and substantially reduces corrosion and enhances asset life. This all comes together to create a sustainability advantage that is additive to our customers' environmental objectives. We have proven this unique value proposition out with over 30 million miles of actual use. The EcoNex advantage will drive our expansion of cold chain sales as we scale the technology. We expect refrigerated vans with EcoNex technology to grow share over the next three years. EcoNex also scales well and provides a great solution in Class two through seven truck body applications. To support these truck body applications, we are launching a refrigerated insert into cargo vans as a replacement for spray-in foam. Lastly, we think EcoNex has applications beyond our core markets because of its product characteristics of weight, thermals, and strength. Moving on to our Parts and Service initiative.
This strategic growth priority is more than just aftermarket parts. With Wabash's unique place in the center of the transportation industry, we have the opportunity to connect the suppliers, dealers, and customers together in a way that creates value for all parties. We think we can make some very powerful connections and leverage our brand in new and interesting ways, and we are actively blueprinting those opportunities. Additionally, we are focused on the trends of e-commerce and logistics disruptions. E-commerce continues to have a great impact and has created substantial disruption to the movement of freight. We see great opportunity in this ongoing disruption. Consumers' expectations around delivery times have become more demanding, which feeds the need for shippers to locate closer to customers, resulting in more warehouses and distribution centers being built.
We see constant balancing of goods among fulfillment centers, which is generating a thriving middle mile segment of freight movement. As a result of this goods balancing, freight is now experiencing many more touches before arriving to the final consumer. E-commerce and home delivery continues to expand, and we are creating new solutions needed to properly service this space. We also see disruption coming from technology in other areas. Shippers and carriers are being connected via power-only models and increasing the use of drop and hook to offset the inefficiency of live loads and unloads. Wabash sees this changing landscape as opportunity to innovate and grow. The grocery home delivery vehicle is where commercial intent meets innovation, which means rapid product development and prototyping, resulting in a successful launch. There has been a shift within groceries being delivered to the home, which was accelerated during COVID.
A leading grocer needed a vehicle to optimize their delivery system. We engaged the customer with high levels of collaboration and combined our new EcoNex material with our rich history of truck bodies and created a multi-temperature delivery vehicle that is capable of moving chilled, frozen, and deep frozen cargo. The results have been very positive. We had an initial backlog of $12 million that has grown to $20 million in 90 days. We now have a scalable product that augments Wabash's first- to- final- mile strategy that is tailored to a growing market. The grocery home delivery product is a great case study that speaks to our growing capability and the many positive initiatives taking place at Wabash. Growing our parts business is an exciting opportunity for Wabash. We have a broad product portfolio. We have great suppliers. We have a powerful brand.
We have an exclusive dealer network that wants to do more with us, and we have customers with deep relationships that trust Wabash to deliver. The only thing we really needed was the distribution of the part itself. In the spirit of not doing everything alone, we have partnered with a company that has great expertise in parts distribution and has a customer-first culture. Most importantly, they encouraged Wabash to take the lead. We recently launched Wabash Parts, where we own the customer interface, where we can leverage our best-in-class suppliers and brand, all while delivering a great customer experience. The bottom line is we have improved the consistency, accuracy, and timeliness through a closed loop Wabash experience. The world of logistics is rapidly changing due to e-commerce and other technologies. In this changing world, we want to create and find solutions for our customers.
We have created a research and development group that lives in our office of strategy and is focused on three to five years in the future, not the next quarter. We are proud to have some of the best and brightest scientists, engineers, and business development people in the industry. This group is focused on developing solutions to our customers' biggest problems. Wabash desires to go faster and further than this group can go alone. With full recognition that we can go faster if we do not do everything ourselves, the real power here is realized by linking our team into an ecosystem of technology partners we are creating. Our research and development group is working with startups, research groups, universities, traditional OEs, designers, and material science experts. We are focusing this entire ecosystem on innovation and creating customer solutions.
With that understanding, let's take a look at the use case zero emissions vehicle. We view EV as inevitable, but in its infancy with much to be decided around the ultimate technology or platform. We do not view ourselves as a sole provider in the EV space, and as such, we're partnering in order to make a greater contribution. We bring meaningful voice of customer that is being leveraged to develop collaborative solutions in the EV space. Our composite material technology brings a combination of weight and strength that is advantageous in an EV application. We have the opportunity to scale these technologies through our parts and services business as other OEMs look to remove weight while adding strength. The ecosystem we're building in EV is just an example or case study. We expect this ecosystem approach to be a powerful enabler in many other areas of our business.
Finally, I would like to reinforce what I see as the key takeaways from the presentation on our businesses. We are creating innovative solutions and services focused on cold chain, parts and services, and logistics disruption. Our customers are at the center of everything we do, and we are now organized to accelerate product development. Our parts and service business provides an excellent complement to our equipment portfolio, and we are positioned well to grow in the world of parts and service. We are adhering to WMS, and we will have a lean mindset in everything we do. Our strategy prioritizes growth and recurring revenue with higher margins. I'll now turn it over to Mike.
Thank you, Kevin. I'd like to start with a couple of key messages. First, financial performance in 2020 and 2021 was better than ever in our history during times of an economic pullback. Secondly, we are really starting to see the power of the One Wabash first-to-final-mile approach. We are one team with one brand, all going to market together with a customer-centric methodology. This common approach has really proven its effectiveness as we ramp the business in 2022. The wonderful thing about our first-to-final-mile go-to-market strategy is that not only is it effective, but it is also more efficient. At record levels of revenue in 2022, our SG&A spending will be at levels below 2019 prior to our reorganization. Next, recurring revenue is going to be a theme you'll hear more and more about from Wabash in the quarters and years ahead.
Historically, we have under prioritized this stream of revenue as we focus on best-in-class equipment deliveries. We now realize that we can accomplish both objectives together, and not only will it help our financial performance, but it also helps us deliver on our mission of enabling our customers to succeed with breakthrough ideas and solutions from first- to- final- mile. Our unique first-to-final-mile approach, combined with an increasing focus on recurring revenue, will grow both revenue and EBITDA margins as we deliver on our three-year plan. Lastly, Wabash has a great track record on delivering a balanced capital allocation strategy that maintains a healthy balance sheet as we grow and transform the business. Let's take a look at the last couple of years of financial performance in a bit more detail.
2022 will produce a record revenue year with almost 40% top line growth after achieving over 20% top line growth in 2021. More importantly, we are starting to see growth in our operating EBITDA margins and have guided to 6% full year operating margin in 2022. I want to reconfirm we are well on our way to achieving 8% operating margins by 2023. Between 2020 and 2021, during a downturn that saw revenue drop 36% from the $2.3 billion recorded in 2019, we were still able to be solidly profitable. Critically, we produced approximately $50 million in free cash flow between these two years. This is a very important financial proof point in our business model resiliency.
We have a highly variable cost base and are able to quickly maneuver to changing market conditions. I want to take a minute to discuss our parts and services reporting segment and how we believe we can drive recurring revenue for Wabash through this newly created segment. Wabash has always had some of the industry's best customer and supplier relationships, combined with the best dealer channel in our space. What we lack to support growth in parts and services was a strong distribution platform or e-commerce presence. As announced earlier this month, we have now identified an industry leader in parts distribution that will partner with Wabash as we accelerate this journey. We have now developed a corporate branded parts distribution capability using a network of distribution facilities to improve overall parts delivery performance to our industry-leading dealer channel.
This establishes a first of its kind parts operations partnership, connecting our brand and customers with market-leading parts distribution, thus creating value with the Wabash brand as a unifying factor. It is important to remember this initiative is more than traditional parts or maintenance, but we believe the world of digitally enabled power-only brokers can benefit from a full service trailer solution that we are referring to as Trailer as a Service. These customers, combined with our OE products and our new after-sales parts, service, and distribution support, will bring a unique offering to a market space being disrupted by e-commerce and digital brokerage. We are also rapidly growing our upfit solutions within our truck body and trailer product lines, including kits for grocery home delivery.
Taken together, we believe we can grow this business by 2/3 over the next four years to $300 million revenue at mid-teens EBITDA margins, creating sticky, resilient revenue with plenty of additional growth in the second half of the decade. Lastly, I want to emphasize this is a synergistic revenue relationship between parts and services and transportation solutions that powerfully combines to support our first to final mile approach to the industry. Let's take a moment to look at the balance sheet. Our debt structure is streamlined, patient, and low cost. This is highlighted by our senior notes at an attractive 4.5% interest rate that we raised in October of last year. We are very proud of how we managed the balance sheet over the past few years, and we are now in a great position to leverage it as needed for future growth.
We'll be looking to refinance the ABL over the next six months, at which time we'll have no debt maturities for the next five years. Lastly, our net debt leverage ratio will quickly move down to the low two's and below as we move through 2022 and get back to mid-cycle EBITDA levels. With a strong balance sheet, let's discuss our capital allocation priorities during the plan period. The chart on the left does a good job of highlighting how we have invested capital over the past three years, and it shows, again, we have a disciplined approach to how we deploy capital. Looking ahead to future priorities, let's start with capital spending. We are looking at spending around 3%-4% of revenue in 2022 and 2023 as we continue our organic growth trajectory.
As this level is a bit elevated, I want to focus on a couple of our near-term priorities. First, our Lafayette South Plant capacity shift from reefer to dry van production is the single biggest investment over this time period and is still targeted for a January 2023 launch. Next, our EcoNex technology has reached the point in its maturity where it's time to take the next step by investing in assembly capacity for use in trailer and truck body products. We are targeting additional spending in our Little Falls manufacturing facility for assembly of up to 2000 units, as well as beginning to explore an additional location where we will begin to scale assembly output back to levels that were produced by our Lafayette refrigerator facility before the capacity conversion.
In terms of returning capital to shareholders, we intend to keep our dividend with a competitive yield to the S&P 600 industrial index. At today's share count, this represents about $16 million in capital outlay. We would be buyers of Wabash stock at current pricing levels. For those following Wabash, you know we have been purchasing stock consistently since 2016 and have repurchased approximately 30% of outstanding shares in that time period. Lastly, M&A. We will continue our stance that we are looking for bolt-on or tuck-in M&A opportunities that will bolster our new and growing parts and service revenue stream. It is important to keep in mind that our strategy has partnerships at its core, like the recently announced joint venture. We will be able to successfully grow our reach and expand our capabilities without significant M&A investments in the short run.
Shifting now to discuss some demand and pricing dynamics. Our backlog remains at record levels as it finished the year at $2.5 billion and was at $2.3 billion in our most recently announced quarter. Importantly, pricing in that backlog is now better aligned to cost after the rapid inflation of 2021. We now have an opportunity to continue to grow margins with a more stable pricing construct. We have spoken about our variable pricing process, and while it doesn't take away the need to work with customers in times of market turbulence, what it does fundamentally do is help more systemically align the market commodity cost to trailer pricing. This is something that should benefit our ability to maintain a more consistent margin profile over the cycle.
We are starting to see some of that stability come through in our financials, and that is certainly included in our most recent guidance. We believe the next step is to begin providing customers with a bill commitment that is longer than one year. This will provide our customer surety of supply and will enable Wabash a more predictive level of future financial performance. While these discussions are just beginning, we would expect to be able to provide updates on our progress before the end of 2022. Today, we are reiterating our recently announced short-term guidance of $2.5 billion of revenue at 6% operating margins, bringing EPS to $1.90 per share for 2022.
While we feel really good about these metrics coming off of 2020 and 2021, it is important to note that operating margins continue to accelerate throughout 2022, and we'll be operating much closer to 8% operating margins by the second half of the year. When you combine that margin level with our capacity expansion that raises 2023 unit counts to record levels, it gives us great confidence as we accelerate into next year. That was the short term. Let's now turn our attention to a little longer time horizon and see what we believe 2025 will bring. I will get into some bridges here in a second to unpack this growth in a little bit more detail.
Generally, as we hit $2.5 billion of revenue in 2022 and add to our dry van capacity at our Lafayette South Campus, it gives us a pretty clear line of sight to our $3 billion revenue target in 2025. We are also excited to grow our recurring revenue base to $300 million and begin to create a very resilient higher margin revenue stream within Wabash. A capital goods manufacturer like Wabash should expect parts and service revenue at a much higher percentage of total revenue than 10%. We believe this is just the beginning. Operating EBITDA will be trending closer to 10% than 8% by year-end, and we are confident we can hit 11% by 2025.
This results in $3.50 EPS by 2025 or close to doubling our near term guidance. All told, we will hit all the financial goals we laid out in 2019 by 2023, and we'll have a running start to our new 2025 objectives. Unlike a typical financial plan that resembles a hockey stick, we expect to see very significant progress to these 2025 goals in the first half of the upcoming plan period. Now, let's get into some specifics on how we go from $2.5 billion- $3 billion of revenue, as well as growing our EBITDA margins from 8%- 11%. First, cold chain. There are more and more goods moving through the temperature-controlled cold chain, and our EcoNex technology is perfectly positioned to capture this market growth.
Let's not forget that we are winding down our conventional refrigerated capacity with a capacity flip-out at year-end. That essentially brings us off a bit lower base, but investment in assembly capacity of EcoNex technology in both truck bodies and trailers will allow us to add $125 million of revenue with differentiated solutions that create customer value at a higher margin profile from what we see in the legacy product. The key to cold chain growth by 2025 is essentially increasing refrigerated van manufacturing capacity. That is highlighted as a big part of our capital spending plans, as well as continuing to invest in our Little Falls, Minnesota manufacturing facility for additional EcoNex component capacity.
The introduction of additional home delivery products in the truck body space to complement the early success we have seen with Kroger is another growth driver that will round out our cold chain product growth. I've already walked through some of the growth drivers for parts and services, but our newly developed distribution capability allows us to move much faster in the space. We now possess a connected ecosystem that brings the long-lived relationships we enjoy with our suppliers and customers to our dealers with a new digitally connected distribution solution. Again, this revenue stream provides a more consistent and higher margin profile. We regularly deliver mid-teens EBITDA margins in this revenue stream, and parts and services will provide a tailwind to corporate margins for years to come as we continue to grow in this space. The last growth item I want to hit is e-commerce and logistics.
This is really a nod to how the logistics landscape is changing and impacting Wabash's growth trajectory over this time horizon. This changing landscape is largely driven by e-commerce that is requiring multiple moves and frequent cross-docking of freight, which is creating a durable demand driver for our trailer and large truck body products. Additionally, e-commerce-enabled home delivery is also a demand driver to many of our smaller truck body products. To account for this demand, we will convert Lafayette capacity from reefers to dry vans, and this will add a net 5,000 units in 2023 and perhaps more by 2025 as we continue to generate efficiencies in that facility. The other main driver is return to a more normalized level of truck body volume during this plan period as chassis supply returns to a level that supports our demand.
Additionally, our focus to streamline the truck body portfolio to establish a profitable group of products and customers that fit our first to final mile portfolio strategy will allow us to bring a healthier mix of products to market at higher margin levels. As this product sees revenue levels return to what we would have seen pre-pandemic and is now supported by a healthier margin profile, we will see a strong contribution from truck bodies to our three-year plan revenue and margin goals. Our three-year plan financial story in summary. Financial performance in 2020 and 2021 set a new floor for our financial performance in market pullbacks. While we will still see cyclicality, we would expect to see much more consistent returns as we go forward. The effectiveness and efficiency of our One Wabash first- to- final- mile approach is becoming more visible in our results.
A customer-centric team with one brand and one approach is delivering record revenues with a greatly reduced cost structure. We are in the early innings of recurring revenue growth. We will deliver both improving margins and growing customer satisfaction as we scale our parts and service offerings during this plan period. We have an established track record of delivering on a balanced capital allocation strategy. Organic capital spending will lead our capital allocation priorities over the next several years as we scale to capture the existing market opportunities available to Wabash. With that, I will now turn the presentation back over to Brent to give us some closing remarks before we take questions.
Thank you, Mike. Why invest in Wabash National? Well, we're a purpose-led organization executing One Wabash strategy that continues to increase customer centricity and create new capabilities. We're the leader in Transportation Solutions with the only true first-to-final mile portfolio. We have clear strategic initiatives to drive higher margin, more recurring revenue with exciting product innovations, as well as enhanced focus on services. We're well positioned in a dynamic environment by leveraging the Wabash Management System for greater efficiency and sustainability of profitable growth. We have proven financial resiliency, supported by a strong balance sheet and disciplined capital allocation priorities driving long-term shareholder value. I thank you again, and I appreciate your ongoing support.
We hope you found these presentations helpful in understanding our new strategy, growth initiatives, and financial targets. I'm joined by our presenters, and we're ready to take your questions about what you heard today. We'll plan to take calls from our sell-side analysts over the phone while we collect questions from other participants through the chat function in the webcast platform. With that, operator, we're ready to take questions from the phone.
Thank you. As a reminder, to ask a question, please press star one on your telephone keypad. To withdraw your question, press the pound key. Your first question comes from Justin Long from Stephens. Your line is open.
Thanks. Good morning, and appreciate all the presentations as well.
Thanks, Justin.
Maybe to start on the financial targets for 2025, is there any color you can provide in terms of the trailer deliveries that are getting baked in for the industry and/or Wabash within that forecast? Maybe some color on trailer ASPs as well.
Sure, Justin. How I like to think about that is if you look at what Wabash delivered from 2014 to 2019 pre-pandemic, we were in a range of around 60,000 trailers across all of our trailer portfolio. This year in our implied guidance, we're something closer to 50,000 than 60,000. If you look forward over that, over a healthy kind of mid-cycle demand level, we believe that's a delta you could expect to see from Wabash in the 2023 to 2025 time period, and also aligns pretty well with the capacity that we are installing at our south plant from refrigerated to dry, where we would expect obviously expect our ASPs to normalize.
You noted a pretty significant increase over the last couple quarters as we have increased the ASP to align with the rapid material inflation that everyone saw in 2021. You'd expect that to normalize going forward through the plan period.
Okay. I guess to build on that a little bit more, if you look at trailer ASPs kind of pre-pandemic, I mean, we were somewhere in the low 20s. We're now in the high 30s, maybe even we could go a bit higher than that. You know, any kind of framework you can give us in terms of what that 2023 and beyond assumption is? Do you assume that, you know, we go back to the low 20s, or do we normalize somewhere?
Yeah.
in the middle, given some of the secular trends you outlined?
Yeah. It's obviously gonna be very much dependent on what happens in the global commodity markets. That's a big driver to some of that ASP growth. We would not expect a pullback. We would expect a leveling off from where we're at right now, and where we maintain the value for the products and we're able to hold the value and then vary the commodity cost through our variable pricing construct. It's difficult to predict, obviously, but we would not expect it to pull back to anywhere close to pre-pandemic levels. I would expect it to not go up a lot from this level either. We would think something closer to where we're at now, at what we reported in Q1.
Obviously, it's difficult to predict what commodities will do. I would think of it as a leveling off and a stabilization from where we're at right now.
Okay, that's very helpful. You know, it sounds like you know, you're assuming some pretty significant growth in the final- mile business. Is there any additional color you can give on what your expectations are for the progression of revenue and margins within legacy final- mile? Is that basically what's getting captured in that third component of the bridge when you talk about e-commerce and logistics?
Yeah. In the on that third bridge component, you've got both the increase in trailers that I've already addressed, but also the return of truck body volume. Just to think about the truck body, pre-pandemic, we were in the mid-$400 million revenue range in the final- mile space. It's not a pure apples to apples. There was some parts and service that are now in our Parts and Service segment. If you think about that general area of where final mile produced in 2019, we would expect to be able to get back to those revenue levels during this plan period at a much higher margin contribution. We're seeing some of that margin improvement today as we do our truck body simplification that Dustin hit on in his remarks.
If you combine that margin expansion with the pre-pandemic level of revenue, I think you can see a pretty nice contribution to the financial plan of Wabash through the truck body product line.
Yeah. I think another angle to that, not only is it looking at those 2019 levels to bridge from a, maybe a total volume standpoint, but the work we're doing through aligning our customer portfolio with our first to final mile strategy, you might be able to see a shift in the type of customer that we service. When you think about the materials, the advanced materials, leveraging the R&D activities that we have ongoing right now, you could see a change in, we'll call it value add relative to those products. You'll see us move closer to true final mile by the nature of the products that we produce as we serve customers in a different way. Kroger is a great example of doing that.
EV is gonna be another force that we're positioning that will also change the portfolio inside of 2019 revenue levels. There's lots of reasons as to why, how we bridge off 2019. While it may be similar volume levels, how we do it may be very different and advantageous from a value creation standpoint.
Okay. Very helpful. Just to quickly follow up, Mike, you mentioned getting back to the mid-400s, those pre-pandemic levels in final mile. Where are you expecting to be in 2022 within the guidance from a revenue perspective?
We didn't break out the guidance, but you can see where we were in Q1. Obviously, we're operating in an environment where there's some chassis constraints. We would expect to see an improvement from Q1 levels as we go through the second half of the year. That's, you know, probably below $300 million for this year. That's kind of a delta you can work with when you get to the plan period. We should begin to see the chassis constraints fade in the second half of this year and give us plenty of time to hit those higher level revenue numbers that we've talked about by the second half of the plan period.
Okay. Yeah, got it. I guess the last one from me is on the commentary around the Trailers as a Service. Could you expand a little bit more on kind of what exactly that will entail? Are you talking about, you know, leasing trailers to some of your customers? Is this just purely a parts and service offering? Is it a combination of both? You know, kind of what that market could look like within the 2025 outlook.
Yeah. It's really all of the above. I like to think of it more as the overall package of connected partners within our ecosystem. There could be a leasing component, but what really makes it exciting is how we can bring together customers, suppliers, and dealers with some of our new parts and service focus to create a one-stop shop for trailers, especially for customers that might not have asset management as a core part of their business model. It's something that we will look at. We'll look at other financing transactions within a normal sale beyond what we may do today, but it's so much more than just that.
It's the full partnership ecosystem that Wabash is creating that really makes our offering unique.
Yeah, I think you, as you think about the future and as we think about maybe how others have expressed this, I think John Roberts did just a great job through J.B. Hunt's look at the future. The way we look at logistics and the amount of change that's going to go on over the next decade, there is no one company that can solve that for the masses. It really is gonna take a combination of people and forces to be able to do that. I think that's how we approach it differently, is that we understand it's much more than just a financial product that we provide in terms of a lease.
We're at a point where we can bring people together to maybe offer it a little bit different than anybody else to give them that type of solution that puts Wabash in the most advantageous position, and that's the way we view Trailers as a Service going forward. We'll unpack that more as it comes more to life, but we see a really great opportunity here to think differently about how we serve the space.
Okay, great. I'll pass it on. I really appreciate the time.
Thank you.
Thank you. Your next question comes from Mike Shlisky from D.A. Davidson.
Hey, guys. Can you hear me okay?
Yeah. Morning. Yes.[crosstalk]
[crosstalk]
Good. Mike.
Great. Well, thanks for this great presentation. I really appreciate you taking the time out. A couple questions here. First, can you take us through what might happen in a potential recession that might take place between now and 2025? If we were to see one, I'd love to hear, you know, a little bit about how Wabash might perform during that period, and how your performance and your sector's performance may differ from the broader macro performance, given your backlog, given what you've mentioned were some ongoing shortages of logistics capacity, etc .
There's so much to unpack there. That could be a whole day event itself, but we'll do our best here. What I would say is it comes down to a lot of the secular trends that are going on in logistics as a fundamental basis of how Wabash is positioning relative to any market downturn. Obviously, the levels of recession and what's really driving it will obviously alter some of this to a degree. As long as Wabash National continues to position itself around ongoing e-commerce logistics disruption, as we think about what's happening with dislocation inside, we understand how we're positioning our capacity relative to a significant underbuy or underserved market, you know, really over the last two years and probably for another year going forward, total industry.
There's just a lot of fundamental drivers as to why, as long as our customers are reasonably profitable, that they'll continue to buy, refresh their fleet, reduce their operating costs, and then try to solve for these seismic issues that they have to take on to make sure that they're viable in performing over the next decade. A recession isn't going to change those fundamental issues, and they can't step back for long in being able to position themselves. It's too dynamic. They run the risk of being too far behind and someone else being bolder than them. We're positioning our portfolio of customers to lean into that. We're positioning our R&D to lean into that. We're positioning our capacity to lean into that.
What we're trying to do is insulate ourselves and give us that advantageous position so that during any type of recessionary, you know, let's say other than, you know, we'll call it a calamity, no one prepares, you know, totally for that. We are so much better prepared to have less of an impact relative to our competitors, our peers, and others in the space because we're positioning differently. It goes to the how we do it and who we do it with allows us to be much more successful.
Great. That's very helpful. If I could turn to some of your strategies around the emerging EV models out there. You know, some of the Class eight models that introduced just in the last couple of weeks, and I saw some of your folks at the ACT Expo. You know, they actually have higher cargo capacity than regular ICE Class 8 trucks 'cause they have exemptions from certain laws about weight. I know that there's large batteries, and these are for now mostly short range and middle mile trucks, but can you give us a sense as to whether there's any major R&D that has to happen or a second product line on dry vans to meet any of your traditional 50-footer demands for EVs?
Yeah. Good morning. I'll take that question. I think generically speaking, you know, regardless of class size, you know, we have our R&D team is spending an incredible amount of time understanding all the various technologies out there. I think a number of us through the presentations, you know, kept referring back to an ecosystem of technology partners. What we're doing there really is spending as much time listening as we are doing anything else. As we understand whether it be advancements in battery technologies or whether it be various regulations across the country, to your point around weight exemptions, et cetera, you know, what our team continues to do is be at the center of all of these conversations.
I think if there's a couple common denominators that we're starting to center in on as it relates to technology and how that may influence our products ultimately that we offer the customers, it really centers around weight and thermals. Obviously, the thermals leads to a cold chain application. Again, with all the advancements in technology, all roads tend to end up with, batteries and ultimately weight. Whether there's an exemption or not, I think what makes Wabash in a great position for that is our strategy, certainly around R&D and product designs, continue to center around light-weighting of technology and truly superior thermal efficiency.
When you can have those two universal solutions with your customer, that really starts to attack the universal problem with EV, which tends to be battery, which either means I'm too heavy or I don't have the range I need. When you can offer some of the technologies that we're focused on, I can either offset your battery weight or I can give you a lighter asset, ultimately, if you have a payload challenge.
Yeah. I think when you think about the kind of near-term, mid-term, long-term about how we position ourselves around technology, we're really well positioned right now to solve the battery challenges at the moment. We're continuing to advance where we think light-weighting needs to be to meet those mid and long-term challenges with batteries. At the same time, we have to be where batteries are going, and we're spending a significant amount of time understanding the evolution of batteries. It's such a Wild West show in terms of what type of technology, at what rate of change. You know, it's chips of the eighties and nineties semiconductors and the way that works.
I think for what's very unique for Wabash, and it's something for our investors to understand, is that we're not solving today's problem per se. We are working to solve the next decade problem, where it needs to be in five years. I think that's what people need to take, is that everything we do with R&D, who we talk to today, is to position ourselves when we see that inflection point for EV adoption, you know, when real scale occurs. That's what we're shooting for right now and how we position ourselves. We may be a little light in the market right now, 'cause that's not really the problem to solve. The problem is, when this thing takes off, where does Wabash wanna be? That's where we're gonna be. We'll be ready for that.
Okay. Great. Just wanna throw two more out there for you real quick. Mike, if I looked at some of the margin expectations you've got for the business and for what you've mentioned about the parts and service segment, it sounds like that might be a relatively consistent margin performer between now and 2025. Should we expect most of the margin improvements to come from the core segment between now and 2025? Should that go up to the mid-teens between now and then?
Yeah. First of all, what I would expect to see is, like you mentioned, consistent margin performance from parts and services. What you'll get is a growing contribution from that business segment, which will help raise the overall margin profile of the company. You will see growth for sure in the transportation solutions segment. Right now, I would think about that more around low double digit type EBITDA margins. That combined with a consistent mid-teen EBITDA margins from parts and services will give us a sustainable level of margin at a level we haven't seen before.
Great. Then maybe lastly, one thing you talked about is kind of changing how the world gets to you. One topic we've touched on over the years is how does the trailer get to the customer? Historically, you've had most of your pickups have had to come from someone driving to Indiana to get the trailer, which makes a lot of sense. There have been issues over the years at various times where it's just been tough to get people to come pick up trailers.
I'm curious if you've made any thought as to whether you would consider a second area to pick up trucks, trailers elsewhere in the country to kind-a, if there's ever an issue with getting to Lafayette, they can get to somewhere else instead. I'm just curious if you've changed the way you face the customer and how and where you get them their product.
Yeah, that's a good question, Mike. We obviously build a product that's large and doesn't fit nicely in the back of anyone else's product. We have a unique challenge of how we deliver our product to customers. Some are picked up and some we arrange delivery. What I would say is our Wabash Management System, a lot of people think about that from an operations improvement, but really we use that system to think about how we lean out our whole value chain, and part of that would be the finished goods delivery.
While today we don't have necessarily a second location as your question implied, we are actively working on how we make that a more seamless process, both for our financials and for our customers. I would say that today we have more stability in that process. While it's still a challenge, given a 53 ft dry van to get that product delivered, we have made significant improvement over the last couple years, and I would expect to continue to make improvement and make that a more predictable revenue stream and something that creates less lumpiness than what you may have seen five years ago.
Yeah. The only thing I would add to that is more of a pitch for our Wabash Management System, is that most people, most companies think about it in managing the physical aspects, their operating shop floor, so on and so forth. We look at it differently. It's really about business innovation more than anything else and how we apply it. And where Mike is going is that we're actually using those tools today to create business innovation around this exact question. We understand it, and we think there's ways of addressing it beyond having to put hard assets in different places, to be able to do it. We're engaged in that.
Okay. Well, thanks for the color, guys. Great event. Appreciate it.
Yeah.
Thank you.
Thanks a lot. Thanks, Mike.
Thank you. Your next question comes from Felix Boeschen from Raymond James.
Hey, good morning, everybody.
Morning, Felix.
Morning, Felix.
Hey, thanks for putting this on. You know, I wanted to start on the dry van capacity expansion. I think, Mike, you're guiding to $0.30 accretion by 2023. I wanted to better understand that. It was a bit higher, frankly, than what I had thought and modeled. Is that a net number, i.e., does that include the reefer coming down, or is that purely the dry van on the incremental 10,000 units? Just trying to understand the puts and takes there.
Yeah. That would be what we believe we can net in 2023. The reason why it's a little bit higher than maybe what you had modeled earlier is, as we get closer to the execution of that facility, we have more confidence around the flow, the efficiency. We've taken up a little bit what that can contribute. Don't forget, as we go forward, that would be the 2023, but when we think about the three-year plan, we will quickly start to facilitate our ability to produce EcoNex trailers at our Little Falls facility and maybe another facility.
That will, sometime by the end of the plan period, allow us to produce the same number of reefer units that we do today in our south plant. That's those two things are going on simultaneously. For 2023, that $0.30 accretion is a net number.
Okay. Awesome. Very helpful. That actually goes into my second question. The $125 million you guys bucketed as cold chain revenue, can we break apart that just a little bit, you know, in terms of the actual products? It sounds like there's gonna be a last mile component from a grocery delivery side, but it also seems as though the new refrigerated capacity is a part of that. Any way you can sort of break up how, you know, the contribution between those products?
Yeah, sure. You're right. It includes both a refrigerated trailer and a refrigerated truck body. It would also include any growth we would get in a more middle mile or medium duty refrigerated truck body application. But by far, the biggest driver of the $125 million is the trailer. We're coming off today. We will balance out our south plant facility somewhere towards the end of the year, so we don't even get a full year of refrigerated production there. We think by middle of the plan period, we'll be able to exceed what we're building today, from a refrigerated trailer perspective, while we continue to grow our home delivery solution that Kevin mentioned in his pitch.
We will then be able to continue to expand the technology through our other truck body products. Based on where we're coming today from a capacity switch out at our Lafayette campus, you would expect most of that 125 to be the refrigerated trailer product.
Okay. That's basically getting to above the 5,000 that you're winding down or somewhere in that range?
Correct. Yes. We'll exit the plan period with having as much or more trailer capacity, assembly capacity as what we have today at our south plant.
One of the something we didn't necessarily touch on, but the same market drivers that are affecting primarily dry vans, and that's what people tend to equate these market drivers with. They're affecting food service and grocery and general food transport, grocery cold chain transport, similarly. We have a great market backdrop. At the same time, we're bringing disruptive ESG leading sustainability technology, right? It's gonna be a situation where we're gonna be chasing demand throughout this period, which is a great place to be.
Yep.
Got it. Very helpful. I wanted to turn to the free cash flow profile of the business a little bit. Mike, really appreciate the color on maintenance CapEx and sort of the outlook from a growth CapEx perspective. I think we understand 2022 and 2023 from a CapEx perspective is gonna be elevated as you go through the expansion and getting some of the assembly capacity going. Curious if you could talk to net income to free cash flow conversion in a more steady run rate, say, 2025. I think historically you've talked about close to 100%. Is that still sort of the ballpark we should be thinking about? Any framework there I think would be helpful.
Yeah. I believe after we get through the 2022, 2023 period, as you mentioned, with a little bit of elevated growth CapEx, I like to mention those years will still be solidly free cash flow positive. I would expect us to come back to a more normal 2% of revenue, sort of CapEx range in the 2024, 2025 and beyond period, which would allow us to get back close to that 100% cash conversion number. Whether we exceed it like we did in years past, we do have a little less amortization today than we had five years ago, so you know, it'll be back in that range from what we've seen historically.
Okay. Very helpful. I think Brent made this comment, and I don't know if this is a good question for Brent or maybe for Dustin, but I think you guys mentioned locking in some trailer capacity on a multi-year basis for some strategic customers. I'm curious if you could talk about that initiative maybe in a bit more detail and sort of what's driving that change today.
Yeah. Let Kevin
If any of it, frankly, is already in the backlog today.
Yeah.
Nothing in the backlog today, but we're talking to some of our larger customers, and we're taking a look at the logistics disruption, and we're taking a look at supply chain getting even more complex. Our customers are engaging with us about maybe doing business a little bit different, looking a little bit longer in view, maybe three to five years, sharing strategy and tactics over that three to five-year plan, really looking at the problems of the industry, the opportunities of the industry, the opportunities of both of our companies. Setting then objectives over a three-year period with metrics, and then wrapping all that up with a higher level of transparency and trust. It's really a recognition that in today's environment, even the shippers and the carriers are talking in a different language than they were a year ago.
In the environment that we're in today, the premise is that you can go farther and better working together and collaboratively as opposed to transactionally. Some of our customers are excited about this, and you can expect Wabash to lead on it. The final thing I'll say, and maybe Brent, you can elaborate, but we're looking to the supply side really with the same kind of intent that we're looking to the customer side. It's really the full supply chain.
Yeah, I think the unique position, partly created and partly market-driven, is that we have the ability now of bringing more than just capacity to the equation. If it was just the capacity, that's not as interesting as we would have liked it to be. When you think about what we're doing with innovative materials, you think about how we've repositioned the R&D aspects of the business, you think about how we've went to a One Wabash approach, restructured the company, driven around customer centricity. You've created an opportunity where our customers are coming to us and saying, "You are different, you interact with us differently. Your trust is at a higher level. You have performed over the last couple of years as compared to others.
You're different, and you are strategic to us on a longer-term basis." They're pulling us into this as much as we are pushing. I think that's the unique piece to it. We have to be smart. We aren't doing long-term agreements or even thinking about them in a traditional sense. These are strategic long-term agreements that go back to how do you manage through any market environment that are long-term, more structural, sticky, and add additional value to both companies. It is truly a different way of thinking about it. Not everyone can, and that's what makes us unique.
Got it. I appreciate the time today. I'll pass it on.
Thanks.
Thanks, Felix.
Thank you. Your next question comes from John Joyner from BMO Capital Markets.
Hey, good morning, and thank you for taking my questions.
Morning.
I would say it's impressive that you put out fairly bold objectives. Maybe we can dig in a bit deeper into Parts & Services. What percentage of sales mix could recurring revenue ultimately account for of total company sales, do you think, longer term?
Beyond the plan period, we would expect, especially given the breadth, I wanna make sure everyone, we all said in our remarks, but this is not just an aftermarket parts and service play. That would be obviously a smaller number, but with our upfitting capabilities, a lot of our product is after-sale upfits that would be part of the parts and service, as well as our emerging Trailers as a Service initiative. I would think over a much longer time horizon, it could be double what we guided to in the 2025 perspective as far as contribution to the overall Wabash. From 10%-20% would be something I think could be achievable by, say, the end of the decade.
John?
I think that's fair. I think when you look at an industrial in the market space, you're somewhere in that 20%-25% just as a basic component of your revenue. We see a relatively clear way for Wabash to be there sooner than later in the terms of that evolution. If you know, turn your head sideways a little bit, you think about what's going on around us with a few other unique solutions. As you know, we have some ideas how maybe we can even pop above that if the world continues to align the way that we see it and, you know, execution meets intent.
Yeah. We wouldn't have broken it out and talked about it in this level if it was gonna stop at 10%. It's kind of the simplest way I think about it.
Yeah.
Okay. Got it. Thank you. I guess following up on Justin's earlier question, and maybe you answered this, I'm not exactly sure, but I guess you mentioned the Trailers as a Service, right? How do you see that scaling over time?
Yeah. It's going to be an emerging market space for us. One of the important things to think about in a lot of cases, it could be an existing sale that's made traditionally today that converts into more of a Trailers as a Service sale, which brings along with it the Parts and Service. It would be more of a later part of this plan period where you'd see meaningful contribution. To unpack that a little bit more, when I think about our bridge that we showed from $2.5 billion-$3 billion, there's a couple pieces that are gonna happen really early.
One is gonna be obviously the capacity that we do at our south campus that will happen next year, which is why a lot of the contribution improvements from that will hit early in the plan period and why we believe this plan period will be front-loaded, not back-loaded like a lot of financial plans. Also, the truck body recovery should happen early in the plan period, but some of them will be a little bit slower. Trailers as a Service and our scaling of EcoNex will be more in the second half of the plan period because those are just earlier in their growth trajectory, and that's what will propel us in the 2024, 2025 into 2026 timeframe.
Okay. Excellent. Thank you. On the distribution joint venture, I mean, parts and services have clearly been a focal area for many companies. Maybe, you know, how did this come together? What are the competitive advantages of this partner, and are there other ones out there that you're looking to partner with? Maybe just any other color that you can add on those efforts.
Yeah, sure. You know, as we mentioned in the presentation, and I think each of us hit it in a very similar manner, you know, when you think about an OEM like Wabash and our right to participate in this space, you know, the things that we saw that we already have in place clearly is a brand. Our brand carries through the marketplace, you know, it carries trust and quality. You know, we have tremendous customers, and we have great supplier relationships. You know, as we showed, we have a best-in-class dealer network that's, you know, like, that literally scales the whole country. You know, the obvious missing piece for us was a real distribution operation that can really connect all those dots.
You know, months in the making, we've been trying to figure out the best way to solve that problem or let's say, that missing link in that chain of events. You know, we went through the process of, you know, buy it, partner with it, or build it yourself. You know, I would say certainly a shift in our thinking is, and Kevin, I think, mentioned this previously, and we believe we can go faster, farther if we partner with the right people. That'll really allows us to focus on what we're good at, which is making sure we understand the customer and keeping the customer in mind. The partner we partner with is a leader in the industry. It allows us instant access to seven distribution centers across the country, over 1 million sq ft.
With, you know, next day delivery to almost all metro areas in the country. You know, instant scale that we were able to tap into because we share the right strategic vision, the right strategic goals.
Yeah.
Again, allow us to leverage what we understand best.
Yeah. I really think of the JV as a strategic enabler.
Yes.
It's not the strategy itself. The strategy is because we listen to our customers, we understood the gap in our revenue and the ways that we could not only create value for our employees, but for our shareholders and those customers. What we had, to Dustin's point, is a brand that people trusted, that was under-leveraged in the space around this revenue stream. We asked ourselves, what do we do here? Again, it was a very straightforward. When you look at where our rightful place should be of an OEM of our caliber, our parts business, our overall recurring revenue should be a bigger piece of what we do. That's a miss.
We're solving that, and we solved it in a way that allowed us to go faster and more capital efficient, in a more capital efficient way by partnering with the JV. It goes hand in hand. We believe ecosystems are how we're gonna solve the problems going forward. Now we're gonna go sooner, faster, by making this type of decision. We're gonna leverage the brand in ways that we haven't been able to for the last 25 years.
Okay. I appreciate the color, and if I can just get one more in. When looking at new products, you know you touched on the cold chain side, but can you discuss some of the other products that maybe are in the development pipeline, ones that you're excited about?
Yeah. I mean, I think rather than, you know, specific end market widgets that we're gonna unveil soon, you know, I think I wanna stress kinda back to a common theme. We've really centered on voice of customer. Rather than coming out with a new product that we unveil and see who's interested in buying it, our process with our R&D teams really starts with the customer. Some of the case studies that we showed you today and some of the press releases that you've seen in the past few months really center around that. Brent mentioned strategic conversations with fleets or Kevin, I'm sorry. You know, those conversations with our customers, we have R&D people in the room, so to speak, on those conversations. That really influences where we spend our time and energy.
I think we'll keep coming back to our technology continues to center around light-weighting, thermal efficiency, asset life ultimately as well. That energy is what's generating some of the product designs, or at least our pipeline. I think for now, a lot of our products are centered very acutely on home delivery, as you would see again in some of the press releases we've done. We've partnered with Purdue University for a five-year R&D agreement that has brought massive amounts of resources to our disposal, and it leverages Brent's comment again around our commitment to partnerships before we can move faster, farther. I think as you see the pipeline and see future releases coming out, I think you're gonna see light-weighting, thermal superior performance and centered at the home delivery space.
Yeah, much of what you're saying is we have a purpose-led organization. I would add that we're moving much more to a market-driven output, right? You're shifting. We're shifting away from this mindset of, you know, we build products, and we put them out there, and we see who buys them. You know, that's very traditional in our space.
Mm-hmm.
When you can back up from that and you say, "Look, we have a visionary thought process. We understand the intersection of these forces. We are positioning our R&D to jump ahead of it." You can talk to customers about how I can solve problems differently. Let's configure something together. You get a different type of R&D and new product development pipeline. Instead of saying, "I've got this one thing that we're gonna just scale, we'll see who buys it," this will be more of the Kroger story in how we think about where we link large anchor customers into very specific designs as they look to beat the rest of their competitors with that product.
We'll see how we scale that accordingly based on logistics models and solutions go. We're positioning for the front end. We're not chasing it. I think that's a unique way of explaining our story.
Okay, excellent. Yeah, that is a unique way of explaining it. Thank you very much for the time.
Thank you.
Thanks, John.
Thank you.
Thank you. Your next question comes from Jeff Kauffman from Vertical Research.
Hey, guys.
Morning, Jeff.
Morning, Jeff.
Hey, Jeff.
Morning. Hey, first of all, thank you. You guys laid this out beautifully. It was easy to understand. I think it's kind of clear, you know, where the puck's headed in your eyes, and very, very helpful today, so thank you. I do have a couple specific questions for Mike and then kind of some general questions for Brent. So Mike, if I take that $3.50 guidance and I work backwards to get the operating income, using the tax rate share count and assuming, you know, given your debt structure, interest expense stays pretty steady, I get about $250 million, give or take, in 2025 operating income. You've laid out a $330 million EBITDA number based on the 11%.
Is that implying that D&A rises to about $80 million?
There'd be two pieces to that. Obviously, it would be the D&A, but there's also a component, we break out stock-based comp as part of that operating EBITDA number. You'd have to adjust for that as well. You're definitely gonna see an increase in depreciation. I mentioned amortization has come down with some of the moves we've made from One Wabash. We've gotten rid of some brand names, but we would see depreciation increase. We also have to adjust for the stock-based comp in there.
Okay. If I think about the investment you're making in Lafayette and the investment that you're making in Minnesota, just kind of thinking through cash flow, how should I be thinking about D&A? It's $50 million estimated for 2022, give or take. Should I be thinking about that in a $60 million-$65 million range as we get to 2025?
Yeah, $60 million-$70 million would probably be it. It's obviously going to accelerate as we go through the plan period. It's a little different answer in 2025. Some of it would be dependent too on where we go for our next step in our EcoNex capacity. We're still evaluating how much opportunity we have in Little Falls to continue to extend that manufacturing capacity versus another location. There's a couple moving pieces, but clearly the $60 million-$70 million range would get you somewhere close.
Awesome. Just to kind of think about the 300 basis points of operating margin improvement a little differently, I think you laid it out nicely in terms of what the three new initiatives should be generating, but I want to think about it in terms of cost structure. I think you kind of answered it saying that your OPM was going to be up around 8% in the second half of the year from 6% the first half. If I look at that 300 basis points as being contributed by gross margin vs. SG&A, you know, and you mentioned the change in your pricing model, should I be thinking of that as about 2/3 of cost of goods sold and about 1/3 SG&A leverage?
Yeah, I think that's probably fair. We're obviously going to get a lot of operating leverage from our South plant. We've laid out the 5,000 incremental units. It's the same brick-and-mortar. We're obviously putting some facilities down there. But when you think about just the conversion cost leverage you get from that facility, it's a very efficient way to generate some additional capacity. You would definitely get more from the operating side. There's going to be a little bit of a headwind from obviously, as we're adding brick and mortar from EcoNex perspective or facilitizing some of the existing brick and mortar. But also the other piece that's very efficient from both a capital and conversion cost or operating margin perspective is parts and services.
As we've gone about it from a partnership model, it will really enable us to see that leverage in the bottom line. I think the way you laid it out, 2/3, 1/3 is probably fair.
Okay, thanks. Let me just switch gears to Brent. You know, I love the discussion around EVs and how technology is going to matter. You know, I've also been having some conversations with some of the autonomous guys, right? That technology is all going to debut around 2024, 2025. One of the things they highlight to me is we really kind of also need a smart trailer.
Mm-hmm.
For this to work, because if the truck's got all these sensors, the trailer needs to know if the door is open or something like that.
Yeah.
I guess the question is, rather than think about it as a weight perspective, is there a certain technology minimum that we're gonna need with the conversion to these new energy vehicles or these self-driving vehicles? As we get to the end of your forecast period, that you're gonna need a trailer with a certain level of its own intelligence involved.
Yeah, great question. I'll touch on it briefly, then I'll let Dustin maybe get into some more of the specific details. What I'll tell you is when we think about how we bring technology together to create the quintessential connected trailer, we do think about it in the context of that later plan period, you're absolutely right, to enable a reasonable enabled adoption of level three, level four autonomous vehicles, and we think about what that needs to be. Some of the ecosystem partners we're bringing together that Dustin will talk about is positioning for that. Simple, you know, simple operating parameters to service what we some think may be needed today is probably not the right place of putting technology thought and human capital. We think about it a little bit differently.
With that, I'll let Dustin go from there.
Yeah. Yeah. Similar, Jeff. I mean, we think of EV and autonomy similarly. You know, one, I think if we look at the time horizons, we think EV is something certainly that's gonna continue to grow, and let's say be meaningfully different at the end of our plan period versus today. Autonomy, I think at the end of our plan period is where we might start actually seeing and talking about a little more often. I think it's completely immaterial to our plan period. That doesn't mean that we don't have people looking out beyond the horizon and trying to understand what might need to change with autonomy and as it relates to trailers. I think, kind of to where Brent was going, we have a very good understanding of telematics and data collection requirements.
We have great partnerships with, you know, various suppliers that are really on the forefront of that technology. We continue to maintain the strategy of being as agnostic as possible to all the various technologies out there, again, because no one knows for certain, which exact item is gonna emerge as the clear leader. We continue to understand all of the technologies. Connectivity certainly is there. Where the trailer specifically connects to the truck, you know, we have a mindful eye, let's say, on that. Think, you know, the actual connection points, kingpins, landing gears, all the usual suspects. You know, we're really trying to understand what could be very, very different, you know, 10 years from now as it relates to that product design.
With the ecosystem of partners, rather than Wabash having its head down trying to design that perfect, let's say, autonomous trailer of 2030, instead we're in a room with some of the best and brightest in the industry, brokering conversations. I'm proud to say that Wabash tends to be at the center of all of those conversations.
Yeah. I think another thing, Jeff.
Okay.
That real quick.
Yeah.
When you think about this one, we do tend to think both externally and then I think historically, that's where Wabash solves the product attribute piece of this. The one thing which we'll unpack in time, when we position for these out years, is that as a visionary leader and for how we look at solving problems, where does Wabash, what is Wabash's role in this broader transportation, logistics, and distribution set of markets to enable the adoption of EV or autonomous or whatever the next breakthrough efficiency-based technology is beyond just a product attribute? I think what you'll find over time as we position this company is that we'll have a seat at the table with some more innovative ideas to help that, beyond, you know, what's the connected tech we put on one of our products.
We'll unpack that one later.
Okay, thank you. Last question. I wanna revisit the earlier question on the downturn scenario. I think the reason is, you know, I just talk to investors every day, and nobody's asking me right now about 2024, 2025. They're all asking me, you know, if we have a recession 'cause of inflation or the Fed or all these things, you know, what does the downside look like? That seems to be the number one question people are coming into us with. I liked your answer in that you're making a great point, which is, you know, this isn't different than normal cycle. We've got trailer pools out there. We've got customers needing product that haven't been able to get it because of supply chain challenges.
Let's just take a second and talk about that scenario because, 2009 was an unusual cycle. I don't think it gets that bad. In a normal true downturn, the industry might drop 50% top to bottom. I think you're making an argument that it won't be 50% this cycle for these reasons. You know, maybe it's 30%, maybe it's 35%, maybe it's 40%. Have you built a scenario plan or a thought plan? 'Cause you're gonna be coming to market with a lot of new capacity, and if CNBC is right, and we're potentially in a recession twelve months from now, you're bringing a lot of capacity to market at a time when maybe we're not looking at 280,000 units, maybe we're looking at 200,000 units. How does Wabash...
You know, I know that's not 200,000 long term, and eventually we're getting back to high numbers. But you know, how does Wabash think about managing that period if the naysayers are right?
I think the first thing we need to look at is when we just had a period where we saw Wabash revenue based on a market-driven or global pandemic-driven pullback, which was in 2020, and we were able to be profitable and generate $104 million of free cash flow. I think that's the first place I would point people. We have our One Wabash organization allows us to be very nimble, shift resources quickly and address the market. We're investing in areas that we think are more sustainable and more durable, so we don't think we're gonna have the market fluctuations that maybe we've seen in the past. Clearly, you'll always have some level of variability in the transportation space.
Our new structure, the markets, customers, and products we're focusing on, we believe will be more sustainable. If you're in that 30%-40% range on what will Wabash do, we got a really recent data point of 2020, and it was a pretty positive data point from what Wabash has been able to do in the past. That's where I'd point people to look first.
The world has even changed since 2020, Jeff. You've talked about it and others that the market projections that are out there relative to, you know, the markets that we play in probably underrepresent true demand, especially with the structural changes we have going on with logistics that are only gonna accelerate regardless of what happens with a any type of recessionary or market slowdown. Those are gonna continue to integrate and go forward. We're positioning for those. That is uniquely different than even where we were in 2020, let alone where we were, you know, mid-2015 to 2009. While we've done all that, you know, we have turned over half our dealer body to strengthen it. We've repositioned our portfolio. We have completely different materials we're bringing on board.
The organization is as lean and as structured as it's ever been. We have ongoing management system improvements, all have gained speed over the last two years on top of how we performed in 2020. We're making those decisions that make us uniquely different. Plus, the market is uniquely different. Replacement volume is closer to 240,000 units, not the 175, 180 it was in 2009. We're probably not looking at a financial-based recession. We're probably looking at more of a normal, if it were to occur, probably low to moderate and probably lower duration. It's a different world. I think people tend to look at us with, we'll call it M&A, much more historic bias, both the market and Wabash, and I think that's misplaced.
The other thing I wanna point out in your question, Jeff, was the capacity. If we speak specifically about our investment in Lafayette and our dry van capacity, I want everyone to recognize that it's going to be our most efficient and profitable dry van capacity. Today in our legacy installed capacity, we often run six days a week, 24 hours a day, and that is just not a way to sustainably run. If there was a pullback, what you'd see is a drastic reduction in overtime that would enable us to actually see some nice efficiency gains from this new installed capacity. This is a long overdue recapitalization of our bread and butter dry van product.
While we're adding capacity, there is a lot of ability to shift down on the edges of what we do today and a lot of high cost over time production that would actually benefit the overall efficiency of the organization.
Yeah. That was fantastic, guys. Thank you.
Thank you.
Thanks, Jeff. I think that does it for the phones. We're coming up against it on time, but maybe time for one question. We've got some great participation over the chat, so I'll pick a question here on the Parts and Services side. Maybe Dustin, can you give more color on the dealer network, and what does it look like, and how do dealers fit into the Parts and Services strategy?
Sure. Yeah. Again, as we outlined earlier in the presentation, you know, when you think about parts and services for Wabash, our dealer network is, you know, again, best in class network across the country of independent dealers. They're all exclusively serving Wabash in terms of the products it sells to the marketplace. You know, we can leverage that in a much more meaningful manner. When we think about our parts growth, and again, the recent announcement about the joint venture, that gives us instant access to get the Wabash parts into the hands of our dealer body. Our dealers that we're very proud of, they have the ability then to completely service the customer. If we continue improving that customer experience with a Wabash-led, Wabash-branded experience to the dealer base, they are critical to the success of this.
When I mentioned earlier, you know, we have the best customers in the industry and the best supplier relationships. You know, those don't do a lot of value for you unless you have a distribution arm, which we have today now, and then ultimately a dealer to service that customer wherever they may be. That's where the dealers become critical to the success of the project.
Yeah. You know, I'll take this opportunity to pander to our dealers that may be on the call. We're putting you first.
Yeah.
In how we deploy this strategy. If there's any prospective dealers out there, you need to listen because this is uniquely different in how we're gonna take this market, and drive this revenue and just build upon truly what is the best dealer network in the industry.
Yeah. It, I guess to that point, it's mutually valuable and beneficial to both Wabash and that independent dealer in the network, right? Both of us will grow as a result of it.
Yeah.
Hey, we're coming up on noon, so we'll go ahead and close it out so we can keep everybody on schedule. I'd like to thank all of our participants today. Please feel free to reach out if you'd like to follow up on anything you've heard today. You can find my contact info at ir.onewabash.com. With that, thank you again. Have a great day.