Good morning, my name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Wabash Fourth Quarter 2022 Earnings call. [Operator Instructions] I would now like to hand the conference over to Ryan Reed, Senior Director, Investor Relations. Please go ahead..

Thank you. Good morning, everyone. Thanks for joining us on the call. With me today are Brent Yeagy, President and Chief Executive Officer; and Mike Pettit, Chief Financial Officer. Couple of items before we get started.

First, 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 all available at ir.onewabash.com.

Please refer to Slide 2 in our earnings deck for the company's Safe Harbor disclosure addressing forward-looking statements. I hand it off now to Brent..

Thanks Ryan. Good morning, everyone, and thank you for joining us today.

Because we're wrapping up a record quarter on top of a record year, while starting another calendar year with very bright prospects, it feels like an ideal time to review our strategic choices and recall how we've arrived at this juncture where our company is performing very well in the midst of soft freight market conditions.

Rewinding the last several years, we've added critical new legs to the stool that have enabled 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 and transportation, logistics and distribution like the disruption to logistics models caused by e-commerce and home delivery, rapid growth in cold chain or trends in power only brokerage.

I am delighted that those who were part of that decisions still surround and support me in my current role as CEO. Our organizational journey has taken us from a siloed product-centric approach to a customer-centric model that prioritizes ease of doing business across our suite of products and services.

This model has brought us closer to our customers, evidenced by the commercial progress we've made over the last 18 months. The deployment of the Wabash Management System philosophy has given us the process driven and problem solving culture that was required to meet the challenges of a dynamic environment we find ourselves in today.

One of the key process improvements derived from the use of our management system tools has been our long-term agreement construct, a new vision of supply chain engagement and the rapid deployment of recurrent revenue generating initiatives.

The modification of our pricing construct to a pass-through model allows us to better serve our customers with transparent pricing. Our improved pricing construct also forms the groundwork for our longer-term agreements which would have been unworkable under a fixed price construct.

These longer-term agreements prioritize capacity for our customers to be able to forward conviction around their equipment needs to engage in collaborative multiyear demand planning.

Beyond removing these strategic customers from the annual game of musical chairs for 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.

We are very pleased to have an innovative organization like JB Hunt as our inaugural partner. As we demonstrate the visionary leadership required to structurally improve relationships with major customers, we have successfully attracted the attention of key industry suppliers.

As our 10-year supply agreements with both Hydro and Ryerson show, suppliers recognize the moves Wabash is making and are aligning with us to combine our respective strengths in order to support our customers.

As our organization continues to leverage its - more streamlined collaborative structure to create value for customers, shareholders and our communities, a major strategic focus is our parts and service initiative.

Quickly spinning up Wabash Parts, our parts distribution joint venture to developing innovative new offerings like trailers as a service for the power only brokerage space, we're excited for the potential to grow this more recurring revenue business that will act as a synergistic support mechanism for our transportation equipment.

Our Board of Directors has been incredibly supportive of the organization evolution and the Board has continued to keep pace with us by adding new directors with capabilities that will further support Wabash in strategic direction.

After the September edition of Trent Broberg, CEO of Acertus, an automotive logistics-as-a-service platform, our Board welcome Sudhanshu Priyadarshi as our newest Director. Mr.

Priyadarshi is a global finance and operations leader with extensive experience in the tech, logistics, e-commerce, retail, consumer packaged goods and pharmaceutical industries in the U.S., Asia and Australia.

He currently serves as Chief Financial Officer for Keurig Dr Pepper and previously served in roles at Vista Outdoor, Flexport, Walmart, Cipla and PepsiCo. We're excited to continue driving our strategy forward with the support and contributions of all of our Board of Directors.

Moving onto our fourth quarter financial performance, our team delivered record EPS of $0.84, which exceeded our expectations for the quarter. Between the increased volumes and improved pricing, revenue increased 37% from the same quarter last year to an all-time record of $657 million.

Profitability also continued to sequentially strengthen as we achieved 14.4% gross margin and 8.8% operating margin. I like to call out that our operating margins expanded by 680 basis points relative to the same quarter last year.

For 2022 as a whole, I believe we've demonstrated improvement across any indicator of financial performance you can look at. We're very encouraged as our strategic choices shine through to enhance financial performance capped by record revenue of $2.5 billion and record EPS of $2.25. Moving onto market conditions and our backlog.

We are mindful of freight rates that have been indicative of the ongoing correction in freight markets. For numerous reasons, we have not seen this reduction in rates impact underlying trailer demand. Between cyclical and structural influences, we agree with third-party forecasters that equipment demand is likely to remain strong.

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.

Adding structural influences like the demand from formation of trailer pools to support drop and hook activity or power only brokerage, and we believe substantial scarcity remains in the marketplace, that's before we consider what would be another significant tailwind for trailers coming from the ramp of autonomous as that technology continues to advance.

Turning to our backlog, total bookings ended the fourth quarter at approximately $3.4 billion, up sequentially by approximately $1.1 billion from the end of Q3 despite an outflow of record revenue. This implies net order inflow of $1.7 billion during Q4.

And for full transparency although not announced until January, our long-term agreement with JB Hunt and a to be announced additional agreement are reflected in this backlog figure. Given the addition of multiyear orders, we are adding disclosure on the portion of our backlog we expect to ship within the next 12 months.

Ending Q4, that subset of our backlog was $2.8 billion which implies somewhere in the range of $600 million worth of orders that reside beyond 2023. Given the excellent visibility provided by our backlog, we are initiating our 2023 financial outlook with a revenue range of $2.8 billion to $3 billion and an EPS range of $2.70 for $3.

I'd like to reiterate that we are looking at 2023 as a year where we can achieve significant revenue, operating income and EPS generation even if the supply chain shows no improvement. As our backlog indicates, we do have the upside to our outlook if supply chain conditions improve.

I'd like to conclude my comments by reiterating my excitement for the pace of strategic progress that we've been able to achieve.

This is a testament to abate and level of engagement of our Wabash team who has trusted in our organizational and strategic moves and is executing incredibly well on our day-to-day business while driving structural improvements in the fundamentals of the business.

With a record backlog and evidence throughout 2022 of great execution on margins, we are positioned to set a new bar for the financial performance during 2023. With that, I hand it over to Mike for his comments..

Thanks Brent. Starting off with a review of our fourth quarter financial results. On a consolidated basis, fourth quarter revenue was $657 million with new trailer and truck body shipments of 13,310 and 3,250, respectively. As Brent mentioned, this was yet another quarter of record revenue generation for the company.

Gross margin was 14.4% of sales during the quarter while operating margin came in at 8.8%. This represents year-over-year improvement of 550 and 680 basis points, respectively. We feel that our margin structure really hit its stride during the second half of 2022 as supply chain surprises reduced and cost inherently ramping facilities stabilized.

Operating EBITDA for the fourth quarter was $69.8 million or 10.6% of sales, which is a 580 basis point improvement versus the fourth quarter of the prior year. Finally for the quarter, net income was $41.5 million or $0.84 per diluted share.

From a segment perspective, Transportation Solutions generated revenue of $611 million and operating income of $57 million or 11% of sales. Parts & Services generated revenue of $49.6 million and operating income of $7.9 million or 15.9% of sales.

I'd like to call out the growth in our Parts & Services segment was about 20% year-over-year when adjusting for revenue from a business that was divested in mid-2021.

Year-to-date, operating cash flow was $124 million, a strong net income was supplemented by more efficient inventory in the fourth quarter as we are able to lead our inventory levels as the supply chain continues to strengthen.

Moving to capital expenditure, the timing on some payments from our dry van expansion disbursed from 2022 to 2023 and that CapEx underspend relative to our expectations for 2022 will be reflected in our 2023 CapEx spending.

As I've mentioned, relative to our meaningful cash flow generation in 2020 followed by a significant ramp in working capital during 2021, I think it's important to take a longer-term view on what continues to be strong free cash flow generation through the cycle.

That said, I believe that the measure of a healthy company is not simply maximizing annual free cash flow but purposely investing in the business when presented with the opportunity to generate significant returns that are in the best interest of long-term build.

Wabash is also committed to delivering ROIC over the cycle that both significantly exceed our cost of capital but also exceeds our historical performance.

We are now in a period where accretive organic investment opportunities exist, and as a result, we would expect to see CapEx as a percent of revenue in the range of 3% to 4% of revenue over the next couple of years.

With regard to our balance sheet, our liquidity which comprises both cash and available borrowings was $401 million as of the end of the quarter. Turning to capital allocation. During the fourth quarter, we invested $50 million in capital projects, utilized $10 million to repurchase shares and paid our quarterly dividend of $4 million.

For the year, we invested $57 million in CapEx, $31 million for share repurchases at an average price of $17.55 a share and returned $60 million to shareholders via our dividend.

As stated earlier, our capital allocation focus continues to prioritize organic growth via capital spending, while also maintaining our dividend and opportunities for share repurchases alongside of M&A. Moving onto our financial guidance for 2023, we expect revenue of $2.8 billion to $3 billion with a midpoint of $2.9 billion.

This outlook is supported by our significant backlog fill while remaining reasonable in our expectations for the production activity ongoing supply chain constraints will allow. We are on track in Q1 to complete equipment installation and begin system sale of dry van capacity addition.

Like all significant capacity additions, this will come with a volume ramp that will see lower production rates in the first half of the year and then greater volume later in 2023 as we become more efficient and our expanded production benefits from the support of our recently announced supply agreements with Ryerson and also Hydro.

From an operating income perspective, we expect to generate $218 million at the midpoint or 7.5%. This resulted in an EPS outlook of $2.70 to $3 per share with a midpoint of $2.85 per share. I like to reiterate that our guidance continues to assume that supply chain constraints continue to persist.

As Brent mentioned, we believe our backlog enforce that there is clear upside opportunity to our 2023 financial outlook, should supply chain and conditions improve. We also look forward to another year of strong growth within our Parts & Services segment which generated accretive operating margins.

We expect capital spending to be between $90 million and $100 million in 2023 as a result of planned expenditures from our dry van expansion, EcoNex capacity expansion as well as the previously mentioned dry van expansion payments that pushed from Q4 to Q1.

We also expect to invest in CapEx that will be immediately revenue generating through our trailers service program. Our evaluation of the best way to finance the expansion of trailers as a service is ongoing and not included in our traditional CapEx guide, but we expect to take small bites at using our balance sheet in the short-term.

With less than $10 million earmarked for the first half of 2023, we will continue to call this out separately for transparency. I would like to remind everyone that it is typical for Q1 to be our lowest quarter in terms of revenue and EPS generation. In 2023, this seasonality will be compounded by the cost to ramp our new dry van capacity.

Our expectation is for the first quarter revenue to come in between $600 million and $640 million and for EPS to be between $0.40 and $0.50 per share. I like to sincerely thank our Wabash team for their remarkable efforts in generating record revenue and EPS in 2022.

This year was a major pivot point as we accomplished our 2022 financial goals laid out at our 2019 Investor Day, and we also took a meaningful step achieving our 2025 target of $3 billion in revenue, 11% EBITDA margins and $3.50 a share of EPS. We're excited to take another significant step for those financial targets in 2023.

More importantly, the Wabash team took a giant leap in our cultural transformation that will enable us to move even faster in 2023 and beyond.

We entered 2023 as a transformed and rebranded company, representing the first to final mile portfolio that is unmatched in our industry and powered by a team that is inspired and driven by our purpose to change how the world reaches you. I'll now turn the call back to the operator, and we'll open it up for questions..

[Operator Instructions] Our first question is from Justin Long with Stephens. Your line is open..

So Brent, maybe to start with the comment you made about the long-term agreements. Obviously, you've announced the agreement with JB Hunt, it sounds like there was another one that was reflected in the backlog and we might hear more about that customer at some point.

But if you were to look at those two agreements collectively, is there a way to help us think about how much of a contribution that had to the backlog this quarter and maybe you could talk about additional momentum with some of the LTAs beyond these first two?.

Yes, thanks Justin. When we think about long-term agreements, we're looking in general in 2023 and somewhat growing in 2024 and have that be about 20% of our overall backlog.

And with the capacity gains, and if you go through the full vision, possibly being as far as 30% of our backlog in 2024 that gives you a ballpark of what we're shooting for, and that still gives us enough room within our supply plan to meet other customers' requirements.

In terms of thinking about it in our Q4 reported backlog, I would just frame it as a substantial add and is generally reflective of what you see in the '04 backlog and you can extrapolate that into '03..

Okay, that's helpful. And to get to that 20% of the backlog, are these first two LTAs getting close to that or do you need additional LTAs in order to do that. I guess going back to the comment on additional momentum with other customers on this front? I'd love to get more color..

We'd love to pick up and have an ongoing conversations at least two more that we would like to be coming to conclusion with in the first half of 2023.

And then 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..

Very helpful.

And maybe I'll shift my next one for Mike, when I look at the revenue guidance at the midpoint, it's up about $300 million relative to last year, any additional color you can give us on the key components of that growth and maybe what you're expecting for revenue growth for trailers versus truck bodies versus parts and service?.

Yes. So I would say, first and foremost, it's across the board. We're seeing growth in the traditional dry van business that I talked about.

In some part from some of our long-term agreements, but we're also seeing growth in some of our less talked about value streams like tank trailers, we believe 2023 can be the best year in tank trailer history for Wabash, which is an important point, 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 of what we saw from '21 to '22 which was 20% as I mentioned in my remarks, we'll see similar growth in '22 and '23, so it really is across the board and we're really excited about all the value streams that are growing, but we're going to see it in parts and services and we are extra excited about.

We do believe that revenue provides a more recurring, repeatable profile and it is very synergistic to what we do on the Transportation Solutions front..

I just want to reiterate that our management system is based on the fact that all of the existing value streams have to provide continued improvement, top line and margin growth as we go forward. We've done the pruning of the portfolio to-date to get us to where we have extreme focus.

Results show that, and there is no area that we have more focus than parts and service right now. So that all aligns with what Mike said, but it is a very purposeful construct in the way we do business here now..

Got it. And I guess the last one for me, there are clearly secular demand drivers that are driving strength in your business and backlog right now.

I'm just curious if that's resulting in any change in the competitive landscape, are you hearing anything about competitors adding capacity, new entrants, et cetera or would you say that competitive landscape is essentially unchanged at this point?.

I'd say, based on what we see, we see it as unchanged, the same barriers existed six, nine, 12 months ago, it's still access to labor and a supply chain that is able to support overall capacity gains.

Remember that the capacity that we're adding specifically on dry vans and, I don't know, tank operation, we are redeploying existing labor for the most part or in case of Mexico in a place where labor is available.

And speaking to the two 10-year agreements plus others that we are - that are little bit more traditionally but yet still profound, our supply base is responding to our call for added capacity that we're really the only ones positioned to do this at scale right now..

The next question is from Mike Shlisky with D.A. Davidson. Your line is open..

Yes, hi. Good morning and thanks for taking my question. I'll start off with a question on the truck body business. They were down quarter-over-quarter in the number of units shipped, but we keep hearing that chassis supply from the OEM's got a bit better during the last two weeks of December.

So I was wondering if you could comment on how supply looks to start the year here at Wabash, and would you expect to see some good growth in the number of truck body that you get out the door to customers in the first half of 2023?.

Yes. Thanks, great question. We alluded to it on our last call when we talked about what did the supply of chassis look like and it's early signs of chassis flow improving. And that was, yes, they are improving but the actual flow in terms right chassis right time wasn't substantially improving.

So what we saw across that truck body industry was chassis flowing in and sitting on a lot and unable to match the entire supply chain to get finished product flow. So what that means is less chassis on the yard for our customers and not a great ability to get those to flow through the business in terms of shipments.

What we have seen through the fourth quarter as we come into the first quarter as we're starting to get back on track and we're seeing the actual improvement in the sequencing and the on-time delivery, where the right chassis are beginning to show up and that's why we're confident that we should see the targeted truck body growth that we expect in 2023..

That's great Brent. And then moving onto Parts & Service, I really liked how Parts & Service, the mix helped you in the fourth quarter here, you've got - so it sounds like you've got some pretty good expansion plans for 2023 as well.

So can you maybe comment on whether margins could expand in churn in that segment, if you see that's good constant growth there in the coming year?.

What we're really trying to target here Mike is profitable growth and get some scale. So we're not really guiding to improving margins, we think we can maintain those margins and add to the top line as you scale the business.

We've got some specific initiatives, we're really excited to be able to scale that business and maintain and we grew margins in '22, but we think we can maintain that profile in '23 and then add significant revenue on top.

We'll give some more guidance as we get through the year but that's really the mission for 2023, which will improve the overall corporation's margins because as you mentioned the Parts & Services margin is significantly higher at the base than the Transportation Solutions is..

Great. If I could just maybe my last question zoom out a bit on your answer there, Mike. About your 2025 targets, you've talked about getting to $3.50 and getting $3 billion of top line, you actually hit that in 2023 a couple of years early, the margins obviously might not be there yet.

Could you maybe outline for us a couple other moving parts that might get you either to a margin that works for the $3.50 EPS in 2025 or do you think maybe given what you know today and how things are playing out in some of your key initiatives whether there could be upside to a $3 billion top line number at that point?.

Yes, so as we outlined at the Investor Day when we launched those targets in May of 2022, we said several of the drivers would be front-loaded in the three-year plan and one would be our expansion of our dry van capacity which will be a driver of revenue.

So, first and foremost, what could have us hit that number quicker would be the supply chain allowing us to ramp our overall facility so rather than a little bit quicker. We're not expecting that to happen in 2023 but certainly it could lead to us achieving those targets maybe before 2025.

But as of right now, we're focused on the guide that we've given and also scaling the Parts & Services, as I mentioned, at a consistent margin profile which we believe we can maintain the growth to get to $300 million that we guided to back in May of 2022 in that 2025 time period.

So had to summarize, what I think could happen, if we were to get to $3 billion quicker than the planned period, it would be our ability to get the supply for dry van components and get more volume out the door and that maybe could come quicker than 2025, but I don't foresee that right now happen in 2023..

Yes, one thing I would add to that is when Mike talked about your earlier first question about getting the initial scale on the parts business, and really what that is, is the scale is part and parcel with adding additional capability inside our four walls in 2023.

As we execute on both ends of that, I think that is one of the areas that we'll be able to, as Mike said, throughout 2023 give additional feedback on how that really propels us into 2024, that would be another opportunity for us to pull those targets forward, but it all comes down to growing that capability was why we're so focused on it..

At this point, do you feel like the reefer capacity coming online in Minnesota in '24 and '25 would also be a positive driver towards your margin goals and your own goal?.

I would count it as narrow as in Minnesota. But I would say, overall, the opportunity for us to grow top line relative to taking advantage of what's going on in cold chain is absolutely another way, that is absolutely a '24-'25 more targeted timeframe for us to get that scale, but it is something that could be very positive.

At a minimum is core part hitting '25 targets has the potential to pull that forward..

Yes, I would say, I like to add to that, of our three key strategic initiatives, that's one that's going to be more back-end loaded in the planned period.

So we will see some of that more in the '24-'25 time period, where you can see some of the real nice growth in the logistics disruption through dry vans and Parts & Services in that earlier periods of the plan..

The next question is from Jeff Kauffman with Vertical Research Partners. Your line is open..

Thank you very much. First of all, congratulations, it's been a long time in coming and it's nice when everything you've been investing for starts to come together. So that's fantastic.

Just a couple follow-up questions, in terms of getting to the $2.8 billion to $3 billion revenue number, I'm tinkering with the model here, but basically there is a $300 million increase in the revenue guidance at the midpoint.

And if I assume we ramp slowly on the new trailer capacity and I assume ASP's up slightly, I get about halfway there, maybe a little two-thirds of the way there.

So is the jump in outlook based on the idea that we could be producing close to 60,000 units for the year or is the jump outlook that our ASP continues to move even higher than expected because of the nature of these long-term contracts and the pricing that's in the backlog, I'm just trying to get to that $2.8 billion to $3 billion?.

I believe maybe a piece that you could be missing in there as I mentioned earlier, we do have some nice growth coming through our tank trailer business which probably wasn't called out in your model. And also we expect a significant increase in truck bodies as well, which would drive some of that growth.

I wouldn't expect significant ASP growth year-over-year, as we've mentioned, we feel pretty good that we've got the price cost aligned with some of the inflation that we saw.

So while we'll always look at opportunities that wouldn't be a huge driver, you maybe get second half revenue coming out of our dry van capacity expansion plus some tailwinds from truck bodies and trailers in Parts & Services..

Okay.

So your point is ASP could be up but that could be a mix issue based on just more tank trailers?.

Correct. At a much higher ASP than they're driving..

All right. Well, as we choogle on through '23 and we head into '24 and you ramp up the new dry van capacity, what are your thoughts about the production capacity that you have. I know - and then secondly, we saw 52,000 units I think this year, you're bringing in 10,000 units of new capacity, obviously we won't use all that.

But where do you think we can go in '23 and '24 on a unit capacity basis and can you hire enough of the right kinds of employees to get you there or is that going to be a bit of a governor on that growth?.

Yes, great question.

When we talked to baseline number of adding approximately 10,000 units with the surge initiative, which is the conversion of South plant into which was primarily a refrigerated plant now producing dry vans, you take that, but then on top of the 52, and then we have additional productivity gains and very simple and straightforward capacity gains on the rest of our dry van manufacturing here in Lafayette.

So, I think it's a mix as a factor easily 60 to 65 based on that and then you have the ability of pushing a little bit higher with the productivity gains we can get with existing operations. Based on that, labor would not be a significant barrier for us to be able to produce, we'll just call it, slightly above 65,000 units..

Jeff, just to dial it in a little bit closer for 2023, like you mentioned, we'll probably ramp up to full line rate throughout the year.

So for all of 2023 figuring that we're a little - running a little slower in the first half, a little faster in the second half, we're looking at about 7,500 units out of that facility this year and then like Brent said, longer term that goes to 10,000..

Okay that helps with my math there. That's fantastic. Well, I got to tell you this is awesome to see. I wish I had a buy rating on the stock. I don't but this is fantastic to see everything you've worked so hard for coming around your way. So congratulations..

Thanks Jeff..

[Operator Instructions] The next question is from Felix Boeschen with Raymond James. Your line is open..

I just wanted to quickly follow-up on the CapEx of, call it, close to $100 million.

I'm just curious if you're able to provide some context to maybe dissect that between, say, the dry van capacity spillover, maybe EcoNex, maintenance CapEx and then some other growth projects you have in there?.

Yes, the three main drivers by far are the capacity addition that's going to be somewhere in the 40% to 50% of that number, that - as I mentioned there's some flow through from '22, we've got EcoNex would be the next biggest driver of our Little Falls plant expansion.

And the next one would be some significant growth in our Parts & Services initiatives and with some technology spend in there that will help us ramp in '22, really that - those benefits will be in '24 and beyond.

And then there's always that $25 million-ish of cost of doing business to maintain 14 manufacturing facilities, but those are the big drivers of the growth initiatives within CapEx..

Got it. And then just on the parts and services.

I appreciate the bridge on the strong year-over-year EPS contribution coming out of that, and I'm just wondering is there much baked in from trailer as a service at this point or should we think about that as being more of a longer-term story?.

Yes, I'd view that more as a longer-term story Felix, it's interesting because we view trailers as a services because it does a product offering within our Parts & Services and what we're trying to - how we're trying to develop our ability to maintain trailers in the field.

And as I mentioned, a synergistic way that helps support our dealer network and our customers. But the actual big trailers as service growth you're going to see will probably be in '24 and beyond. We will talk about more in upcoming calls.

I did mentioned, we do - we'll do a few million this year first half of the year in the trailers, we say this from a leasing perspective as we then come on the balance sheet, but the big driver from a revenue and EPS generation will be 2024 and beyond..

Got it, okay. And then I don't know if this is maybe best for Brent, but I'm just curious if you can help us understand the, call it, direct versus dealer channel mix in the trailer business today and where you think that might go long-term just post the capacity expansion.

I'm just trying to understand that all these changes from a multiyear agreement perspective might change the mix over time?.

Yes. So today within Wabash in respect, specifically talking dry van now, it is approximately a 50-50 split between direct and indirect. And that number or that set of numbers is a direct result of purposely increasing the indirect channel or dealers from roughly about 30% to 50% of our dry van allocation.

And if you think about what we want to see, let's say, about 20% long-term agreements in the direct side and I'd love to see closer to 10% of that allocation or that capacity on the indirect side and that'd be a nice mix for us that we think would fit a real nice subgroup of customers that have a long-term vision, and we're going to be able to play this market really well..

Okay, got it. And then just my last one, these long-term agreements, are they mostly with existing customers today.

What I'm really trying to understand is to what degree, call it, the rise of power only brokers out there and just to build out of trailer pools, does that open up, just completely incrementally new customers to you, and would those type of customers be interest in long-term agreements.

I'm just trying to think through mix implications long-term Brent?.

Yes. So today when we think about long-term agreements, they are primarily predisposed to those customers that had a more traditional first to final mile view, they buy across our portfolio and they are well positioned from a leadership and a business model standpoint to outgrow the overall industry based on the structural changes we have going on.

That's how we look at it today. And when we think about trailers as a service, digital brokerage and power only, you are absolutely right that as a new subset of customers that will grow in scale that we're purposely cultivating today that we think become much more material '24 and beyond.

And as a core part of our commercial constructs today, the way we're not going to be allocating capacity in the future and the systems that we're bringing to bear and capabilities of the organization..

We have no further questions at this time. I'll turn it over to Mr. Reed for any closing remarks..

Thanks Chris, and thanks everyone for joining us today. We look forward to following up during the quarter..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..