The Greenbrier Companies, Inc. 2026 Q4 Earnings Call

Thank you, operator. Good afternoon, everyone, and welcome to our fourth quarter fiscal 2026 conference call. Today, I am joined by Lorie Tekorius, Greenbrier's CEO and President, Brian Comstock, Executive Vice President and President of the Americas, and Michael Donfris, Senior Vice President and CFO. Following their prepared remarks today, we will open the call for questions. Our earnings release and supplemental slide presentation can be found on the IR section of our website. Matters discussed on today's conference call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Throughout our discussion today, we will describe some of the important factors that could cause Greenbrier's actual results in 2026 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier. With that, I will turn it over to Lorie.

Thank you, Travis, and good afternoon, everyone. We appreciate you joining us today. Fiscal 2026 was a year marked by significant macroeconomic factors, including geopolitical uncertainty, wars, shifting tariff and trade policies, and higher interest costs, leading many of our customers to extend the timing of investment decisions in long-lived freight railcars. In that environment, Greenbrier delivered 15,400 railcars, generated revenue of $2.5 billion, and earned core earnings per share of $2.60, with aggregate gross margin of 13.6%. While these results were below what we expected at the start of the year and fourth quarter, given the market conditions, our performance remained quite resilient. The last period of similarly low industry activity was four years ago during our fiscal 2022. Comparing fiscal 2026 to 2022, Greenbrier delivered about 4,500 fewer units but delivered aggregate gross margin 330 basis points higher.

Core EBITDA was 30% higher, and core net earnings were 76% higher. The changes that we have made over the last several years to our manufacturing footprint, our cost structure, and our lease strategy have raised Greenbrier's performance at a low point in our cycle. We remain focused on actively managing the business to ensure stronger through-cycle performance. Shifting over to manufacturing, we adjusted production rates and headcount to match demand while continuing to complete new railcar designs for customers. Our insourcing investments to produce key components continue to lower costs across our North American network. In Europe, market conditions remain soft, and we continue to align our footprint and cost structure with demand as we drive for improved operational efficiency. Our leasing and fleet management team had a strong year. During fiscal 2026, we grew our own lease fleet to approximately 21,000 railcars.

With high fleet utilization and stable lease renewals, this business continues to deliver strong performance. A larger fleet adds recurring revenue opportunities for Greenbrier that make us less dependent on new railcar demand. I would like to take a minute to discuss how trade policy continues to affect our industry, particularly for tank cars. Earlier this month, a competitor filed petitions seeking duties on certain tank cars. In September, U.S. Customs and Border Protection affirmed its determination regarding certain freight rail couplers on finished railcars. We are vigorously defending our position in both of these matters, including appealing the freight rail coupler case to the Court of International Trade. On the tank car matter, to be perfectly clear, we proudly build tank cars in Arkansas today and employ more than 2,000 individuals in the U.S., including our amazing teams of engineers and procurement professionals.

The USMCA continues to benefit most of our products and will work with policymakers to ensure greater understanding and reestablish consistent trade treatment of railcars in the North American market. We are starting to see customer interest that was initially stymied beginning to return. Customer inquiries have increased across most railcar types, supported by growth in rail traffic and the cost advantages of freight movement by rail compared to trucks, particularly at current fuel prices. Brian will provide more detail on the market and our commercial activity in just a few minutes. I did want to mention that our balance sheet continues to support our leasing growth strategy. We ended the year with liquidity of nearly $1 billion. Michael will dive into the capital allocation details in his remarks.

As I reflect on the long-term targets we established at our April 2023 Investor Day, I am pleased with the progress we have made. We are on track to double recurring revenue within five years, growing 55% to $175 million in fiscal 2026. Our aggregate gross margin reached the mid-teens in fiscal 2024 and 2025 and remained solid at 13.6% in fiscal 2026. While ROIC fell below our targeted range in 2026, reflecting challenging manufacturing conditions coupled with significant investment in our growing lease fleet, it has actually averaged approximately 9% over the last three years. These results demonstrate the resilience of our business model and the benefits of our strategic transformation, positioning Greenbrier for stronger returns as market conditions improve. Looking ahead, our priorities remain employee safety, operational execution, cost discipline, strategic growth of the lease fleet, and improved through-cycle performance.

Finally, before I turn the call over to Brian, I want to say a few words about our new board member, Manny Pearlman, who officially joins the board tomorrow. Manny brings extensive experience in investment management and capital markets, as well as deep financial expertise. We look forward to benefiting from his perspectives as we continue to execute our strategy and drive shareholder value. With that, I will turn the call over to Brian.

Thanks, Lori, and good afternoon, everyone. During the fourth quarter, commercial activity took a meaningful step forward. We received orders for 3,400 railcars valued at approximately $600 million, our highest order value of the year, spanning a range of railcar types and end markets. These orders resulted in a book-to-bill ratio of nearly one, the highest we've seen since Q3 fiscal 2024. For the full year, orders totaled 12,200 railcars valued at $1.9 billion. With many customers deferring purchasing decisions this year, I'm extremely proud of how our commercial team continued to win business. Greenbrier's backlog increased to 14,000 railcars valued at $2.1 billion, the first sequential increase since fiscal 2024, with deliveries extending into fiscal 2028. Lease originations represented about 40% of orders for the year, reflecting the value of an integrated commercial model that offers customers both direct sales and leasing solutions.

As a reminder, programmatic railcar restoration work is excluded from our orders, backlog, and deliveries. In fiscal 2026, we performed this work on approximately 2,200 railcars, making Greenbrier a clear market leader. Looking at the broader market, conditions are becoming more constructive. Rail traffic has grown across a broad range of commodities this year, and elevated fuel prices have improved rail's cost competitiveness relative to trucking. Recent operating results from the Class I railroads provide encouraging signs for the broader rail freight market. Several major railroads reported solid volume growth in the third quarter, while intermodal traffic has been particularly strong, reaching record levels and posting double-digit year-over-year growth in recent weeks. At the same time, railcar scrapping has outpaced new builds in North America over the past two years, reducing overall fleet size.

Railcars in storage have fallen for four consecutive months and now are at the lowest levels in over four years. We believe these trends point to strengthening underlying freight demand and support a more constructive outlook for railcar manufacturing as customer confidence and capital investment recover. Additionally, tighter fleet supply supports improved lease rates and secondary market values and increases demand for railcar conversions, tank re-qualifications, and rejacketing, as well as routine maintenance. FTR projects North American deliveries of 23,000 in 2026, growing to 31,400 in 2027, an increase of 37%, driven mostly by replacement demand. Our fiscal 2027 straddles these periods, and based on industry order level observed over the past few quarters, we expect deliveries to be stronger and back-half weighted. These dynamics are creating momentum for our commercial activity.

Over the past several weeks, inquiries have increased across railcar types, and we are converting more of them into orders. The tariff and trade matters Lori discussed are weighing on tank car demand, but we expect orders to resume as greater certainty emerges. Our leasing and fleet management business benefits directly from these fundamentals and delivered an outstanding year. We grew the owned lease fleet by roughly 4,000 railcars or 23% to approximately 21,000 railcar fleet, primarily through disciplined secondary market acquisitions while maintaining utilization at 98%. Renewal rates remain well above expiring rates, and recurring revenue reached $175 million for a year, up from $113 million when we established our goal of doubling recurring revenue. Turning to manufacturing, we optimized production rates in the fourth quarter to align with demand and adjusted headcount accordingly.

Our teams designed and produced several new railcar types, which will benefit and support our back half forecast. Our insourcing investments continue to lower costs across our North American network. In maintenance services, wheel shipments exceeded our expectations with strong forward demand. Outside North America, demand in Europe remains muted. Two years ago, freight wagon deliveries in the region were nearly 14,000 units. The industry will deliver fewer than 10,000 in 2026, and the 2027 outlook is similar. Our lease syndication capabilities have been important in supporting our European backlog, while large operating lessors have limited their purchases, and we continue to align our footprint and cost structure in the region with demand. In Brazil, Greenbrier-Maxion delivered another strong quarter, with more than 400 railcar deliveries, including export orders supported by a favorable product mix and continued manufacturing efficiency.

Across Greenbrier's businesses, our capital markets team played an important role this year. Its syndication and secondary market activity generated liquidity, supported the growth of our lease fleet, and expanded our relationship with investors and operating lessors. In summary, fourth quarter orders and backlog improved, our lease fleet grew significantly, and we kept production aligned with demand. We remain focused on order quality, disciplined fleet growth, and operating efficiency, and we enter fiscal 2027 encouraged by the activity we are seeing. With that, I'll turn the call over to Michael.