Hello, everyone. Thank you for joining us and welcome to Wabash first quarter 2026 earnings call. After today's prepared remarks, we will host a question- and- answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to John Cummings, Senior Director of FP&A and Investor Relations. Please go ahead.
Thank you, and good afternoon, everyone. We appreciate you joining us on this call. With me today are Brent Yeagy, President and Chief Executive Officer, and Pat Keslin, Chief Financial Officer. Before we get started, please note that this call is being recorded. I'd also like to point out that our earnings release, the slide presentation supplementing today's call, and any non-GAAP reconciliations are available at ir.onewabash.com. Please refer to slide two in our earnings deck for the company's safe harbor disclosure addressing forward-looking statements. I'll now hand it off to Brent.
Thanks, John. Before we begin, I want to recognize Mike Pettit, who as of April 8th is transitioning out of Wabash. Mike has been a meaningful contributor to Wabash for 14 years and played an important role in shaping our culture and our strategy. His impact on the organization is lasting, and we are grateful for his leadership and commitment to Wabash. We wish him all the best as he enters this new chapter of his life. As we entered the first quarter, we did so with a clear-eyed view of the environment in front of us. Freight markets were uncertain, and customers continued to act cautiously. Order patterns were uneven, asset utilization inconsistent, and capital decisions across the industry were being evaluated carefully. At the same time, we were encouraged by early signs of stabilization and improving fundamentals that typically precede a broader recovery.
As we move into the second quarter of 2026, both our customers and our visibility continues to improve. It shows an environment that is building to set up for a constructive 2027 as spot rates, contract rates, capacity, and demand all are coming together to drive back to replacement demands for equipment and possibly beyond as fleets begin to plan more confidently. Against that backdrop, our priorities have not changed. We are focused on controlling what we control, protecting margins through the cycle, and executing against our long-term strategy. That means aligning cost to demand, maintaining pricing discipline, and continuing to invest in areas that differentiate Wabash, particularly Parts and Services, digital enablement, and our manufacturing operations. The actions we have taken positions us favorably for the market's return versus prior down cycles.
We are deploying capital more effectively, more efficiently, and at levels above what has been historically possible, managing liquidity with discipline, and building a business that will emerge from this cycle stronger, more resilient, and better positioned to perform as market growth accelerates. Execution remained a focus in Q1. Key operating metrics, including on-time-to-promise, First Time Quality, and Total Recordable Incident Rates, continued to improve and set new benchmarks. That performance reflects the experience, commitment, and capability of our team, and I want to recognize our employees for their continued focus and discipline. Market conditions in the first quarter were largely consistent with what we saw exiting last year. We are encouraged by the progress beginning to take shape across several underlying indicators.
Improvements in spot rates and manufacturing activity, for example, are increasing visibility into recovery, as evidenced by the 19% increase in backlog versus prior quarter to $837 million. While geopolitical uncertainty continues to influence customer behavior at present, with fleets remaining conservative, extending asset lives, and prioritizing flexibility over expansion, the tone is shifting quickly, and customers are increasingly engaging to discuss their future needs. As expected, the early stages of this recovery continue to be supply-driven. Capacity continues to contract as enhanced driver eligibility enforcement, designed to improve safety across the industry, improves freight rates and begins to restore carrier profitability.
At the same time, key freight indicators are exhibiting some of the strongest year-over-year performance, including the ATA For-Hire Truck Tonnage Index having its largest year-over-year increase since October of 2022, and the Logistics Managers' Index increasing 4.2 points sequentially, the fastest rate of expansion since May of 2022. As this recovery builds, capital spending will follow. Wabash is well-positioned to respond with the capabilities, capacity, and customer relationships to support increased demand and increased market share. Looking ahead, our near-term demand outlook remains balanced as customers convert improving profitability into capital spending decisions. Beyond that, the outlook is increasingly constructive as we move into 2027. Multiple leading indicators continue to trend positively.
Customer conversations are becoming more optimistic, and the very positive impact of the recent change in Section 232 tariffs and the forthcoming positive progression of the Antidumping and Countervailing Duties process further supports our confidence as we approach the Q3 and Q4 this season for 2027. While we prepare to exit this stage of the market cycle, operational discipline and cost management remains foundational to how we run the business for both near-term assuredness and long-term improved profitability. That means staying disciplined on costs, protecting liquidity, and remaining ready for multiple scenarios. The plant idling actions announced in our January 2026 call are progressing as planned, with $3 million of the costs referenced in our prior call recognized in Q1 2026 and in line with projections.
Beyond those actions, we continue to evaluate opportunities to rationalize our portfolio and right-size fixed costs while remaining committed to our strategy of delivering industry-leading supply chain solutions from first to final mile. Our objective is straightforward: reduce costs in a sustainable way that protects margins and liquidity today and creates leverage for improved profitability and cash generation as volumes recover. We remain agile and prepared to adjust spending, including capital expenditures, as conditions evolve. At this time, we have been deliberate about what we do not cut. Investments in safety, quality, and customer support remain non-negotiable. We continue to fund initiatives that expand recurring revenue and strengthen customer relationships, particularly within Parts and Services. The result is a cost structure that is more flexible, more resilient, and better aligned with current market realities while preserving our ability to scale efficiently as demand improves.
Recent developments related to Section 232 tariffs and the pending Antidumping and Countervailing Duties rulings are expected to provide meaningful relief for the domestic industry. Wabash is proud of its U.S. manufacturing footprint and workforce, and as these measures take effect and the playing field begins to level in late 2026 and into 2027, we are confident in our ability to compete, grow share, and benefit from greater pricing stability. We are also well-positioned operationally. The additional dry van capacity from our Lafayette South plant, completed in late 2023, provides scalable and efficient capability to produce approximately 10,000 incremental trailers versus prior up cycles. That flexibility allows us to support customers effectively as conditions normalize. As the market recovery continues to solidly take hold over the next few quarters, uncertainty across the industry will continue to subside.
Until then, we will continue to provide quarterly guidance only as we navigate this transitionary period. This approach allows us to deliver more accurate and relevant outlooks while acknowledging limited visibility on timing. Customer engagement is increasing, and our sales team remains active. As mentioned earlier, backlog improved 19% sequentially, which is a historic high rate of growth for the first quarter. For the second quarter, we expect revenue in the range of $380 million-$400 million and adjusted EPS in the range of -$0.40 per share to -$0.60 per share. This outlook is consistent with our expectation that Q1 2026 represented the low point for the year, with a sequential improvement expected in each subsequent quarter. We remain focused on execution, liquidity, and readiness to capture profitable growth as market conditions continue to improve.
I would now like to highlight some of our strategic initiatives. Digital enablement continues to be a key differentiator for Wabash. At the recent NTEA event, which showcased SpecSync, which significantly removes friction from the quoting and product configuration process for our customers, the response exceeded expectations, and we are focused on scaling these capabilities across our network as we create breakthrough advances in both speed and quality of the customer experience, key enablers to capturing additional market share in a forthcoming and expanding market. Across the organization, we are using digital tools to improve selling, tracking, and supporting our products, enhancing fleet visibility, enabling smarter maintenance decisions, improving inventory efficiency, and elevating the customer experience through data-driven AI insights. These capabilities are particularly critical within Parts and Services, where they support more predictable revenue streams and reinforce our shift from products to solutions.
What is coming into focus for Wabash are clear opportunities through the recent advancements in AI technology to leap forward in operations, supply chain, working capital efficiency, and customer experience. I am very excited to share in the future what we will look to accomplish over the next 36 months and beyond in terms of growth of profitability and customer satisfaction. The synergies from these initiatives lead us to target dry van share of more than 25% in the first half of the cycle. I also want to touch on upfit business, which remains an important component of our strategy and a clear example of how we are expanding beyond traditional equipment manufacturing. Demand for vocational body-based solutions remains attractive, particularly across utilities, telecom, landscaping, highway construction, and solid waste, where fleet complexity and uptime requirements create a strong need for local, fast turn customization.
New site openings are progressing in three of the largest U.S. metroplexes designed to serve the Chicago, Atlanta, and Phoenix areas. These markets sit within state concentration that drives many units, and the new locations are intended to improve proximity, reduce lead times, and increase win rates by bringing install and customization capability closer to where customers operate. We are already supporting major national accounts out of our Atlanta location, and we're confident the growth we have seen in our existing upfit locations will translate to the same new sites as volumes ramp and capacity utilization improves. At peak, we expect the additional upfit sites to generate incremental revenue in the range of $10 million-$20 million per site and gross margins approaching 20%. There is more we can do with these assets over time and into the future.
I will describe how we will grow the addressable markets of each of these and future locations on additional calls. Over time, our work to deploy digital tools, AI insight, and upfit capabilities strengthens our Parts and Services platform, deepens customer relationships across their products. Creates a natural pull-through for additional offerings. They also strengthen our transportation products business. In addition to recurring revenue, together, they help reduce cyclicality and improve our margins. I'm going to end my comments discussing workplace safety. I wanna recognize the organization's continued drive for safety excellence. In Q1 2026, our overall injury rate improved 7% versus Q4 of 2025, and 19% versus Q1 of 2025. Total injuries declined 9% sequentially and 42% year-over-year. An injury rate of less than 1% is attainable, and Wabash is on a mission to achieve it.
It reflects the level of operational discipline we are driving today on our shop floor and the readiness we have to perform as the market moves upward. I am very proud of our people on the manufacturing floor, and I'm eager to have them show what they are truly capable of when they rise to meet the challenges and the opportunities contained within the acceleration of demand at the start of a new industry period of expansion. With that, I'll turn it over to Pat for his comments.
Thanks, Brent. I'll begin with the review of our first quarter results. For the first quarter of 2026, consolidated revenue was $303 million, coming in slightly below the low end of our prior guidance range. During the quarter, we shipped 5,378 new trailers and 1,527 truck bodies. As expected, challenging market conditions persisted throughout the quarter. While we did see sequential top-line growth in truck bodies from Q4 2025, that improvement was more modest than anticipated. The truck body business entered the down cycle later than traditional trailers. Based on current visibility, we now expect this segment to remain soft through the first half of 2026, with a recovery profile that trails dry vans by approximately 6 - 9 months. Lower production volumes continued to pressure operating efficiency.
As a result, adjusted non-GAAP gross margin was -2.6% of sales, and adjusted non-GAAP operating margin was -18.3%. As a reminder, these adjusted results exclude costs associated with the idling of our Little Falls and Goshen facilities, as well as favorable purchase accounting impact from the acquisition of our marketplace joint venture. Adjusted non-GAAP EBITDA for the quarter was -$38 million or -12.5% of sales. Adjusted non-GAAP net income attributable to common shareholders was -$47.5 million or -$1.17 per diluted share. These results were below expectations, driven primarily by lower than planned volumes. While results were below our prior guidance, our view that Q1 represents the low point of the year remains unchanged, and we continue to expect sequential improvement as we move forward.
Turning to our segments, Transportation Solutions generated $250 million in revenue and reported an operating loss of $34.5 million on a non-GAAP basis. Results reflect lower demand across core markets and the inefficiencies associated with reduced production levels. Parts and Services delivered $54 million in revenue and - $2 million of operating income on a non-GAAP basis. Segment profitability was adversely affected during the quarter as we incurred startup costs for newly established upfit sites that have not yet begun generating revenue, resulting in a heavier cost burden while volumes are still ramping. While upfit operations were break even in the quarter, we have clear line of sight to growth in the coming quarters and expect strong profitability as capacity utilization improves and we meet customers where they operate.
Turning to cash flow, operating cash flow for the quarter was -$33.7 million, resulting in negative free cash flow of -$37.3 million. As of March 31st, total liquidity, including cash and available borrowings, was $165 million. Throughout the ongoing market softness, we have remained focused on preserving liquidity and maintaining financial flexibility. This disciplined approach positions us to manage near-term headwinds while continuing to support our strategic priorities and longer-term initiatives. During the first quarter, we invested approximately $4 million in traditional capital expenditures and returned $3.5 million to shareholders through our quarterly dividend. As we navigate uncertain market conditions, we are maintaining a prudent and conservative approach to cash management in 2026. Preserving liquidity and strengthening balance sheet resiliency remain central priorities.
Working capital management continues to be an area of strong execution, and we are preparing the organization for an efficient working capital ramp as markets recover. In support of this effort, we are engaged in discussions with our banking partners, and we intend to address our existing ABL facility ahead of September 2026, when the ABL would turn current. Looking ahead to the second quarter, we expect revenue in the range of $380 million-$400 million, an operating margin of approximately - 5%.
Adjusted earnings per share in the range of -$0.40 to -$0.60. Capital expenditures remain under close review. While we are prepared to adjust timing based on market conditions, we currently expect modest sequential growth in Q2 spending following disciplined deferral actions in the first quarter. As we communicated on our prior call, Q1 was expected to be the weakest quarter of the year, and that expectation is reflected in our Q2 guidance. We anticipate continued improvement as we progress through the second half of 2026, with positive adjusted EBITDA expected in the second half of 2026. In summary, the first quarter reflected continued challenges and uneven demand conditions across the transportation industry. At the same time, it reinforced the resilience of our organization and our ability to actively manage liquidity and costs in real time.
We remain focused on disciplined execution, maintaining financial flexibility, and positioning the business to respond quickly and decisively as underlying market indicators continue to improve. Our priorities remain unchanged, and we are committed to building long-term value while navigating near-term uncertainty with clarity and control. I'll now turn the call back to the operator and will open it up for questions.
We will now begin the question-and-answer session. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Our first question comes from the line of Mike Shlisky with D.A. Davidson. Mike, your line is open. Please go ahead.
Hi. First, on the guidance you put out there for next quarter, do you have your backlogs, now that we're already past, well passed order season and well passed into March. Are your backlogs at this point, do you fully have that booked for the quarter, do you think?
Yeah, we have.
You know, or you still waiting on a few orders here?
Yeah, good question. We have complete visibility to the backlogs that went into our guidance.
Okay. Great, thank you for that. I also wanted to ask about the truck body business. I assume that some of the very largest truck bodies that you make are some of the weaker areas. If I'm wrong, correct me there. Kind of what are you looking for macro-wise in truck bodies to really feel good that things will in fact get better after the next quarter or two here?
Yeah. I would say that truck bodies are really being impacted both, I'd say, Class 2, Class 3, all the way up to predominantly Class 6. As we sit here today, that's the majority of truck bodies that we're gonna produce. I wouldn't say there's a tremendous difference in the classes at this point. It kind of goes to the second part of your question. You know, we really need to see some of the discretionary spending-related areas pick up, which is really gonna reflect in the overall sentiment of the consumer as we go forward.
I think the other parts of it is that the consumption and, well, I'll say the generation and consumption of some of the more consumable, discretionary products that we're starting to see some movement in manufacturing need to continue and hold as we move into 2027. Housing is a substantial part of the equation, especially when you think about some of the largest consumers of truck bodies to support their rental businesses, which is really predicated on the movement of people into those new homes. The housing market is a market that we're really paying attention to right now.
Got it. Maybe can you also update us on, maybe it's another two-part question. What is your current status and plans for reefers? Do you think you have to hire or, you know, get a wrap-up period to get that started again, get that rolling? I guess also the other part of it would be if you see improvement in demand generally, you know, dry vans too, you have the people that you need to ramp that up too, once that arrives.
We'll start with the with the dry van piece. As we approach, I'll say the first quarter of 2027, we're in a good place in terms of installed capacity sitting here midyear, approaching midyear of 2026, with the shifts that we have running and our ability to flex those to meet initial demand. Couple that with the efficiencies that we've gained with our South Plant, the relative hiring needs that we'll have on the early stages of the ramp are somewhat muted for us based on all those actions. Now, as the ramp continues into the later half of 2027, there will be additional hiring that'll have to be done to add additional shifts, which would be expected as we meet that demand.
Specifically, with refrigerated van. Refrigerated, we are still going down the process of development of a repositioned refrigerated van product. We've done low-level capital purchases in order to address long lead time areas, and we remain committed to working through a deployment schedule for that to be a material addition to Wabash as the cycle progresses.
Okay, appreciate that color, guys. I'll pass it along, thank you.
Thanks, Mike.
There are no further questions at this time. I will now turn the call back to John Cummings for closing remarks.
Thank you everyone for joining us today. We look forward to connecting with you throughout the quarter. Have a wonderful day.
This concludes today's call. Thank you for attending, you may now disconnect.