Brent Yeagy: Thanks, Justin.
Operator: Our next question comes from the line of Mike Shlisky from D.A. Davidson. Please proceed.
Mike Shlisky: Good morning, and thanks for taking my question. Can you give us a sense maybe the last month or so, Brent, kind of what have the older trends been from your core customers? I guess, from two perspectives, have you gotten any additional large kind of multi orders that you’ve been talking about that you’ve already book with JB Hunt and a few others. And also just to kind of regular everyday orders? How has that been going? I’m kind of curious if anyone’s taken a real pause on even calling people back at this point.
Brent Yeagy: Yes. So from a long-term agreement perspective, we’re exactly where we expect it to be at this point in time. We have met kind of our initial tranche of long-term agreements. We’re working on our second call group for the 2024, 2025 period and we’ll be entering in to the 2025 extension. So people that signed up for 2023, 2024 will be adding the 2025 extension here in the next 90 to 120 days exactly for the plan. Our long-term customers are still remain extremely positive when you think about a 2024, 2025 period, especially those that are aligned with substantial growth on their part. So we see no, let back on that. When – and bluntly we have substantial – what’s the word, interest that we won’t necessarily take into account in signing up for long-term agreements, because we have a very tight strategic filter in which we use.
So we have more demand than we’re going to allocate capacity for that, great place to be. From a general demand standpoint, just like we said, it’s across the business. We have some really stable aspects, tank trailer, truck bodies. We see that actually being extremely stable, if not increasing as we look at outer quarters. When we think about refrigerator, that’s a market for us to make with the products that we’re bringing to bear. So we’re somewhat insulated from that. And then on the dry van side, I would say, we are – where we should be in a normal cycle. At this point, you’re not going to have a lot of order in intake because these are not for long-term agreements, it’s typically to a 12-month cycle and we’re full. So there’s not a lot of conversations that we’re having at this point, when we remain full.
So that order season will open up when we get into the late summer, early fall and then we’ll look at 2024 at that time.
Mike Shlisky: Okay. Okay. Another question has to do with margins and some of your comments there, Brent, actually was – you actually was Brent, yes. Looking at 10% margins, 10.5% margins this year, and you said that you’re basically not really at your full capacity. In other words, you could go higher where you could build more and of course lower if things were to go lower from here. I’m kind of curious if the 10.5%, a new kind of midpoint range going forward, you’d feel like in the future average year, the 10% plus margin level is kind of where you should be and we can adjust up or down from there based on the broader cycle. Or is there some aspects where you’ve gotten some temporary pricing for a couple of quarters here and that might be kind of pushing things a bit on the higher than the normal end?
Brent Yeagy: Yes, great question. So I’ll start it off. Mike can fill in the blanks. So when I think about operating margin potential going forward, let me just kind of start at the top. The performance that we see right now is truly based off of the changes that we’ve made at Wabash pulling through, right? So we have processed allegation in the work that we’ve done very clearly. It’s not just taking advantage of a moment in time, it is the purposeful output of a lot of things working together. And we’re – that’s one of the reasons we could – as we look forward, we can confidently say that we have accelerated the pace of change and output within the business. And as all of you know, we’re at levels now that basically are already at or above what we guided to in 2025.
So the – there is a step change improvement that we believe is solid. So if we look at the outer quarters, the qualitative answer is yes, we are making a step permanent change in the relative operating margin that we would experience at any point in a given cycle, substantially better than any past cycle that Wabash has performed with it. And then you can adjust that based off of where you’re at or where you believe we’re at in the cycle and the rebound, but wherever we’re at, we’re going to outperform any previous expectations that are on the books. And I would say that in a very measurable way. So that’d be my qualitative answer. And Mike, is there anything else you would add to that?
Mike Pettit: No. I think you hit on it pretty well, Brent. I would add and Brent said in his prepared remarks and you alluded to it, Mike, and that is that I think one of the things that people miss is we are still somewhat below relatively significantly below our peak output from pre-pandemic levels before you add in full capabilities of surge.
Brent Yeagy: Yes.
Mike Pettit: That will obviously give us some additional margin expansion and opportunity as well as tailwinds, we think we’ll get in truck body, as we mentioned, the chassis flow is improving. We’ll get sequential year-over-year improvement. So there’s obviously some operating performance, operating leverage that we can drive to the bottom line. There’s a lot more to it than just that obviously from pricing and cost that comes from materials. But we do believe that we have the setup to perform better at any point in the cycle than Wabash has ever done in this system.
Brent Yeagy: Yes. The entire strategic framework that we’re working under is purposely designed to not have this thing leaning on a one-legged stool called pricing. Because we know that is entirely two variable cycle to cycle, period to period. Everyone’s got to take into account that as we go through the next four to five quarters, we’re going to have other aspects of the business continue to grow in their collect revenue contribution. And they all effectively add to the operating margin of the business based off of how they perform today and expectations going forward. So we have a lot of things that are going to be additive at an increasing pace as we move into the next two years of performance.
Mike Shlisky: Outstanding. Brent, Mike, I’ll leave it there. I appreciate the discussion.
Brent Yeagy: Thanks, Mike.
Mike Pettit: Thanks, Mike.
Operator: Our next question comes from the line of John Joyner from BMO Capital Markets. Please proceed.
John Joyner: Thank you. Thank you for squeezing me in, which I guess is better than getting squeezed out. So first, how are you thinking, because Brent, you just kind of touched on this a little bit, right? In terms of the operating margins in your 2025 goal. So how are you thinking about those long-term targets now that 2023 EPS and profitability is comfortably above that those objectives for 2025?
Brent Yeagy: Well, pretty bluntly, I’m drawing up new ones at this point in time. And we’re socializing them across the company right now as partly, we have a rolling strategy process. And so we – I would say we have a pretty good eye on what we think those revisions will be. And what we’ll see probably I’ll say in the next couple quarters, or we’re probably going to come out with additional guidance relative to 2026 to make sure the Street is fully aware of what those are. And at that point, we’ll expand the contribution of those various elements that are going to lead into that. We’re going to give 2024 a little bit more time to settle, so we make sure we get a good starting point. But there was a question, a couple calls ago where someone said, how does 2024 fit into your strategic plan?
What if there’s a downturn? And the answer is even more – can be more strongly said today, regardless of what happens in 2024 based on what we see, we are in an outstanding position to beat our 2025 targets. You can look at that just where we’re standing right now and build upon it. So we’re in pretty good place right now.
