Wabash rewrote its earnings record books to wrap up 2022, and expects more of the same—and then some—for 2023.
“Although 2022 will go down as the most successful year of financial performance the company has achieved so far, the groundwork to enable this execution has been in progress since 2019,” said Brent Yeagy, president and CEO. “The changes to our strategy and the accompanying improvements to our organization that we've communicated in recent years have positioned us for this record performance, which we fully expect to expand upon in 2023.”
For the fourth quarter of 2022, net sales were $657.4 million. Operating income was $57.7 million, or 8.8% of sales. Sales and earnings per share (EPS) both reached record levels during the quarter. For the full year 2022, revenue totaled an annual record of $2.5 billion with operating income of $166.6 million, or 6.7% of sales. Full year 2022 achieved record levels for both sales and EPS.
Operating EBITDA, a non-GAAP measure that excludes the effects of certain items, for the fourth quarter of 2022 was $69.8 million, or 10.6% of net sales, and full year operating EBITDA was $224.0 million, or 9.0% of net sales.
“For 2022 as a whole, I believe we've demonstrated improvement across any indicator of financial performance you can look at,” Yeagy said in an earnings call with investment analysts.
Looking ahead to this year, Yeagy explained that reduced freight rates have yet to impact trailer demand from fleet customers.
“Between cyclical and structural influences, we agree with third-party forecasters that equipment demand is likely to remain strong,” he said. “With under-buys in prior years and supply chain remaining as a constraint into 2023, implied demand for this year is still very likely to outstrip supply just on those specific factors alone.”
The formation of trailer pools to support increasing drop-and-hook activity likewise will contribute to “substantial scarcity” in the marketplace for 2023.
Total company backlog as of December 31, 2022, increased to approximately $3.4 billion—which "blows away" the previous record by more than $1 billion, Yeagy noted—as sequential new order activity substantially outpaced shipments. Backlog rose 46% compared to September 2022 and was 34% above December 2021.
Indeed, in detailing the Wabash backlog figure, Yeagy suggested that recent multiyear orders mean the company already has booked roughly $600 million in orders for 2024.
For the coming year, Wabash has issued guidance in the range of $2.8 to $3 billion in sales.
“As our backlog indicates, we do have the upside to our outlook if supply chain conditions improve,” Yeagy said.
Yeagy credited the company’s success over the past 18 months to the “organizational journey” that has taken Wabash from a “siloed, product-centric approach” to a “customer-centric model” that prioritizes “ease of doing business” across the range of products and services.
He also pointed to an improved, “transparent” pricing model that forms the groundwork for longer-term agreements that prioritize capacity in “collaborative, multiyear demand planning.”
“Beyond removing these strategic customers from the annual game of musical chairs—where some customers are inevitably left without a seat at the table—these strategic relationships will be additive, as we collaborate on product development and R&D efforts to jointly address unmet equipment needs,” Yeagy said.
Among these “strategic relationships,” J.B. Hunt is an “inaugural partner” on the customer side, while Yeagy also noted recent 10-year aluminum and steel supply deals with Hydro and Ryerson.
Additionally, Yeagy hinted at several more long-term agreement announcements coming in the first half of this year.
“We're also looking at what we can do to expand the concept of long term demand fulfillment to our dealer body, especially around those dealers and their customers that are well positioned to take advantage of the market going forward,” he said.
While the truck body business has lagged somewhat, largely due to chassis delivery constraints, Yeagy called it one of the “critical new legs to the stool” enabling Wabash to grow in “capability and performance.”
“The addition of truck bodies to the Wabash portfolio has positioned the company to serve customers across product classes and also, maybe more importantly, broadened our perspective and allowed our team to get closer to trends in transportation, logistics and distribution,” he said, citing the “disruption” to logistics models caused by e-commerce and home delivery, rapid growth in the cold chain, or trends in power-only brokerage.
In breaking down the revenue numbers, Wabash Chief Financial Officer Mike Pettit emphasized the growth was “across the board,” but he noted that some “less talked about” value streams were performing very well.
“We believe 2023 can be the best year in tank trailer history for Wabash, which is an important point,” Pettit said. “We're going to see significant growth in our truck body business on the revenue side in 2023 as well. And we would expect parts and services to grow in generally the same magnitude that we saw from ’21 to ’22, which was 20%.”
Yeagy reiterated that the revamped management systems requires that all existing value streams have to show improvement in top-line and margin growth going forward.
“We’ve done the pruning of the portfolio to date to get us to where we have extreme focus—and the results show that,” Yeagy said. “And there's no area that we have more focus than parts and service right now.”
For the quarter, Wabash shipped 13,310 new trailers (up 14.2% from Q4 2021) and 3,250 new truck bodies (up 0.6%).
For the full year, Wabash shipped 52,035 new trailers in 2022 (up 14.7% from 2021) and 14,800 new truck bodies (down 10.6%).
For additional coverage of the earnings report and investor call, see the February print issue of Trailer/Body Builders.