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Hello, and welcome to The Greenbrier Companies' second quarter 2026 earnings conference call. Following today's presentation, we will conduct a question and answer session. Until that time, all lines will be in a listen-only mode. At the request of The Greenbrier Companies, this conference call is being recorded for instant replay purposes. At this time, I would like to turn the conference over to Mr. Travis Williams, Head of Investor Relations. Mr. Williams, you may begin.

Thank you, operator. Good afternoon, everyone, and welcome to our second quarter fiscal 2026 earnings call. Today, I'm 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 our update on Greenbrier's Q2 performance and outlook through fiscal 2026, we'll 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 call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Throughout our discussion, 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, on, or on behalf of Greenbrier. We'll refer to recurring revenue throughout our comments today.

Recurring revenue is defined as leasing and management services revenue, excluding the impact of syndication transactions. With that, I'll turn the call over to Lorie.

Thank you, Travis, and good afternoon, everyone. We appreciate you joining us today. Greenbrier delivered resilient second quarter results. Steady execution across our integrated business model and disciplined pricing supported our performance as our customers' needs continue to evolve and the expected production ramp-up shifts beyond the current fiscal year. Consistent with our expectations and production schedules as we exited Q1, deliveries and revenues were lower sequentially. Notably, though, aggregate gross margin and earnings exceeded prior periods with similar delivery levels. The structural improvements we've executed over the last several years drives our ability to deliver better financial performance on lower volumes and achieve what we like to call higher lows. Current FTR forecasts indicate approximately 24,000 new railcar deliveries for the North American market in calendar 2026. The last time the freight railcar industry generated annual deliveries at these levels, Greenbrier was a much different company.

Our cost structure was higher, our capital planning was less targeted, our market position was narrower, and our earnings profile was materially less dependable. That context matters because Greenbrier is fundamentally stronger today. We have structurally and systematically improved our operations and grown our market presence, resulting in a more balanced and durable business model. As a result, even in a more moderate railcar investment climate, we're generating solid profitability and positive cash flow while maintaining a high level of liquidity. Market conditions can be dynamic. Customers are deliberate with capital investments amid evolving freight conditions, changing trade policies, geopolitical developments, and a mixed macroeconomic backdrop. However, as we entered March, customer commitments increased, reinforcing our view that underlying demand remains intact over the long term. In North America and Europe, we're experiencing longer customer decision-making times, which has shifted the timing of production.

However, we remain confident in market fundamentals. We expect the constraints on order activity to begin to loosen in the near term. You'll hear more about the market from Brian in just a few minutes. In more limited order environments, execution and customer alignment are critical, and our commercial team remains closely engaged with customers as their timing requirements and other needs take shape. We continue to align our manufacturing footprint with current demand levels. Production rates moderated during the quarter, and we took targeted actions to rightsize our workforce while ensuring the flexibility to respond to evolving market conditions. These are thoughtful, proactive steps that protect profitability and preserve operational agility. In Europe, the operating environment is driving our footprint rationalization initiatives in Poland and Romania, and includes a full exit from Turkey.

Our leasing and fleet management business continues to perform at a high level and remains a vital source of stability and growth, supported by high railcar utilization and retention and strong renewal rates. We're optimizing the composition of Greenbrier's own railcar fleet and expanding it through thoughtful investments, including pursuing opportunities in the secondary railcar market. Our balance sheet remains strong. We ended the quarter with over $1 billion of available liquidity, providing us with the flexibility to continue investing in the business, pursue opportunities in the secondary market, and return capital to shareholders, including this quarter's 6% dividend increase to $0.34 a share. Looking ahead, our updated outlook for this fiscal year accounts for the near-term demand environment and a shift of some deliveries from the second half of fiscal 2026 to fiscal 2027.

Our attention is focused on the elements within our control, driving operational efficiency. Maintaining commercial discipline, aligning capacity with demand, and allocating capital to the highest return opportunities. In closing, I want to thank our employees for their continued focus and commitment. Their execution in a dynamic market environment demonstrates the strength of our culture and operating model. We have an experienced team, a robust platform, and the agility to navigate changing market conditions as we remain focused on delivering long-term shareholder value. With that, I'll turn the call over to Brian to discuss our operations in more detail.

Thanks, Lorie, and good afternoon, everyone. I'll cover our second quarter operational performance, including commercial activity, manufacturing, leasing, and fleet management. Starting with commercial activity, we received broad-based orders for approximately 2,900 new railcars globally, with demand concentrated in North America and supported by leasing activity. As you know, our programmatic railcar restoration activity is not reported as part of our new railcar orders, deliveries, or backlog. Turning to backlog, we ended the quarter with approximately 15,200 railcars valued at $2.1 billion, providing solid visibility into production as we move through the year. Our backlog continues to provide a meaningful base of production support and our commercial team is focused on continuing to convert market opportunities into orders. Importantly, more than half of our orders in the quarter were driven by lease originations, underscoring our strong lease origination capabilities, key for our lease fleet growth and manufacturing stability.

Leasing and fleet management delivered another strong quarter. Fleet utilization remained above 98%, retention was strong, and renewal rates continue to be robust. These dynamics reflect both the quality of our fleet and the value of our customer relationships. The strength of our leasing platform was demonstrated by a recent $300 million ABS financing in February that saw incredibly strong demand from investors, resulting in favorable terms. We continue to optimize the portfolio through disciplined asset sales. The strong secondary market for railcar equipment has enabled us to refine the composition of our owned portfolio and allows us to recycle capital where we are seeing the strongest returns. While our lease fleet was modestly lower compared to the first quarter, this reflects timing related to asset sales and new additions.

As we move through the second half of the fiscal year, fleet growth will benefit from our recurring revenue profile and continue to strengthen the earnings contribution of the leasing platform. With asset purchases recently completed and a pipeline of additional near-term opportunities, we expect to finish fiscal 2026 with a lease fleet of over 20,000 railcars. As we deploy capital, we remain disciplined. We are focused on opportunities that meet our return thresholds and support long-term value creation. In addition, our asset management capabilities continue to scale. We expanded relationships with key partners and now manage a significantly larger railcar fleet on behalf of third parties, further reinforcing our position as a leading provider of fleet management services. Moving to manufacturing, our results were influenced by a planned two-week shutdown for maintenance over the holidays.

We will continue to scale our flexible manufacturing footprint as we have many times in the past, to align with production expectations. In Europe, we are continuing to execute footprint optimization actions designed to improve the competitiveness and profitability of our European operations over time. When completed, these actions are expected to generate about $20 million in annualized savings. Our actions are focused on maintaining efficiency, protecting profitability, and preserving the flexibility to respond as conditions evolve. At the same time, we continue to advance our manufacturing excellence initiatives. We are driving improvements in our cost structure, productivity, and process efficiency. These initiatives are structural and enhance through-cycle margin performance. Finally, our syndication team delivered solid execution in the quarter, supported by strong investor demand. These activities generate attractive recurring fee income, significant liquidity and risk management, and remain an important component of our integrated model.

In summary, we continue to align production with demand, maintain operational discipline, and advance key initiatives across the platform. These actions support margin resilience today and position us to respond to changing market conditions with flexibility. With that, I'll turn the call over to Michael Donfris to review our financial results.

Thanks, Brian. Revenue for the quarter came in at $588 million, reflecting the timing of deliveries in North America and Europe. Aggregate gross margin for the quarter was 11.8%. This performance demonstrates the resilience of our integrated business model as leasing and fleet management and syndication activity partially offset lower fixed overhead absorption and less favorable product mix in manufacturing. Earnings from operations were $25 million, or 4.3% of revenue. Results reflect the revenue timing dynamics I just mentioned, partially offset by resilient margin performance and disciplined execution across the business. Our effective tax rate for the quarter was 14.9%, driven primarily by discrete items related to foreign exchange impacts, particularly the strengthening of the Mexican peso. Diluted earnings per share were $0.47, and EBITDA for the quarter was $61 million, or 10.3% of revenue.

Turning to the balance sheet, Greenbrier ended Q2 with total liquidity of over $1 billion, the highest level in Greenbrier history, consisting of approximately $520 million in cash and $560 million in available borrowing capacity. We generated approximately $159 million of operating cash flow during the quarter, supported by earnings and disciplined working capital management. Liquidity remains robust and reflects both the strength of our capital base and our disciplined approach to capital recycling in a healthy secondary market. In addition to investing in our lease fleet, we remain committed to returning capital to our shareholders through a combination of dividends and share repurchases. Greenbrier's Board of Directors declared a dividend of $0.34 per share. This represents our 48th consecutive quarterly dividend. The 6% increase reflects confidence in our business model, cash generation capability, and ability to deliver through cycle performance.

Through the first half of fiscal 2026, we repurchased $13 million of common stock under existing authorization. As of quarter end, approximately $65 million remain available for repurchases. We will continue to access this capacity opportunistically, consistent with market conditions and our broader capital allocation framework. Now turning to guidance. We are updating our fiscal 2026 outlook to reflect a more gradual production ramp-up, resulting from a shift of deliveries into early fiscal 2027. This is driven by order timing rather than changes in underlying demand. Our focus remains on driving profitability through operational efficiency, growth of our recurring revenue from leasing and fleet management, and disciplined capital use. Importantly, aggregate gross margin performance remains aligned with our long-term targets. Our guidance for fiscal 2026 is as follows: new railcar deliveries of 15,350-16,350 units, including approximately 1,500 units from Greenbrier-Maxion Brazil.

Total revenue of $2.4 billion-$2.5 billion. Aggregate gross margin between 14.8% and 15.2%, and operating margin between 7% and 7.8%. We continue to anticipate a reduction in SG&A of about $30 million versus prior year. We are now forecasting EPS between $3 and $3.50 per share. From a cadence perspective, we expect Q3 to be similar to Q2 in terms of deliveries, with modest sequential improvement in aggregate gross margin. We anticipate Q4 to see further sequential improvement in both deliveries and aggregate gross margin. Greenbrier's capital expenditures in manufacturing are unchanged at $80 million. I noted on our previous earnings call that we were opportunistically pursuing leased railcars in the secondary market and could end up with a higher level of investment in the lease fleet.

To that point, gross investment in leasing and fleet management is now projected to be roughly $300 million, up from $205 million. Proceeds from equipment sales are forecast to be $175 million as we take advantage of the strong secondary market to optimize our lease fleet. As Brian mentioned earlier, we will end fiscal 2026 with more than 20,000 railcars in our lease fleet. In summary, Greenbrier delivered solid financial performance in the second quarter, particularly in light of the current market backdrop. Our integrated business model, disciplined capital allocation, and focus on execution position us to deliver through-cycle profitability and continue creating long-term shareholder value. With that, we'll open it up for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. If you have additional questions, you can re-enter the queue. At this time, we will pause momentarily to assemble the roster. The first question will come from Harrison Bauer with Susquehanna. Please go ahead.

Hi. Great, thanks for taking my question. I just want to start off on maybe the large increase in your planned gross capital expenditures for the lease fleet. Can you provide a sense of how much you are building into the fleet from your own manufacturing capabilities versus your utilization of the active secondary market?

Yeah, Harrison, this is Brian. To give you an idea, I'd say it's a pretty even mix. We continue to have a strong lease origination profile in the back half of the year, so we'll see a number of new units go in, but we've also been very active in the secondary market in acquiring assets as well.

Great. Maybe as a follow-up on the secondary market, your equipment gains were substantially lower this quarter from last. I know maybe last quarter you were a little bit more opportunistic. Can you provide maybe, and you did increase your equipment sales, your proceeds target for the year. Can you give us maybe a sense of where you expect gains to be at for the year? How's the secondary market holding up? Just further color on that part of the leasing business. Thanks.

Sure, Harrison, this is Lorie. What I would say is, while we don't give quarterly guidance, we do expect the second half to be more of an investment in our lease fleet as opposed to secondary market sales. While we do expect to continue to have gains on sale because it's just a normal part of having a lease fleet, we do expect it to probably be less than in the first half.

Great. Thanks. I'll hop back in the queue.

The next question will come from Ken Hoexter with Bank of America Merrill Lynch. Please go ahead.

Hey, good afternoon. Lorie, we were both at the Rail Equipment Finance Conference, and the industry was talking about manufacturing down 27% last year and 23% this year. At the midpoint, it looks like your number is down about 26% in production year-over-year versus the market. Are you now underperforming or losing share? Or maybe in that, if you want to talk about what is getting pushed out to next year, maybe it's mixed, maybe something else. I don't know how you want to phrase it, but all in on what's going on with the numbers pushing out.

Sure. I'll start and Brian may want to come back with a little bit more on what he is seeing in the market. Yes, it was lovely to see you in Palm Springs as always. I would say that what we've really seen is with more recent economic uncertainty, we're seeing our customers just take a little bit more of a pause. While we're excited about the activity that we've seen in March, and are continuing to work from a demand perspective, it required us to be a little bit more moderate in our ramp-up expectations that we had planned to do towards the back half of this fiscal year.

We're still seeing having the same conversations. We're not seeing any fall away in underlying demand for rail cars. We're not seeing any substantial adjustments to our share. What we're just seeing is a timing shift out of the back half of our fiscal 2026 and into 2027.

Yeah. Maybe I'll add a little bit on. This is Brian. Ken, I think what Lorie said is absolutely accurate. At the end of the day, we're not seeing any share decline at all. What really happened is there was a conflict that kind of popped up in the middle here in the last few weeks, and that has put some of these projects behind by, I would say, about 4-6 weeks. What we had anticipated ramping up on, and these are projects that are imminent. They're not projects that might happen. These are projects that we have a high degree of confidence have just simply gotten pushed back by probably about 1.5-2 months. It's going to put it more into the late August timeframe into kind of the early September.

Okay. I don't know how to phrase the next one, but I guess the last time we saw the backlog this low, I think was back in the second quarter of 2014. I've got a model that-- I've been doing this too long, right? The model goes back pretty far. The last time we were at 15,200, it's over a decade ago. How should we think about that and kind of a normal cycle, right? I guess if I look at timing of 40-year rail assets, it seems like we could have a few years of relatively weak carload orders. Although Lorie, at the conference, I guess somebody was thinking that we might see a rebound in 2027 on some cars. Is this just a normal car low point in the cycle? Or I guess, how do you think about the backlog?

I guess just one other statement outside of the question would be just, I'm surprised on Turkey. I don't even think you've ever talked about Turkey, and I know it's in the queue that you have assets in Turkey, Poland and Romania, but I'm surprised you're seeing it closing. I'd love some thoughts on the timing of the cost savings.

Maybe I'll start with the end of yours first, and then we can go back around. I think we've been talking about some of our footprint optimization that we've had going on in Europe, and I guess we've just been remiss in calling out Turkey. Specifically, that's one of the things, as we looked at what our capabilities are in our existing footprint, that was just an area that was not necessary and the logistics transportation distance just made it not be feasible anymore in support of our operations in Romania and Poland. I think that's kind of the gist of it there, and I'll turn it over to Brian because I can't remember the second question there.

Yeah, no. The backlog. Yeah.

Yeah. I think you're really talking about the backlog and quarter cadence and kind of where we're at in the cycle. If you look at the orders over the last few quarters, it's been fairly consistent in kind of that 3,000, somewhere between the high 2,000s to the mid-3,000s. We continue to project that we'll be fairly consistent, almost a one-to-one, kind of. If you look at our current build rate, we're kind of at a one-to-one ratio at this point. We've already seen a significant uptick in March. For example, we're on a cadence to significantly improve backlog this next quarter with just even a little bit of help. We're off to a pretty good start, and we're starting to see some of that come in that we thought was going to come in a little bit sooner.

Again, I think some of the delay's really been around what's happening in the world today and a little bit more uncertainty that was thrown at us. Now as people kind of look at their supply chains and they rethink about where things are, we're in the planting season for crops. There's a lot of things that are starting to happen. Storage is down, by the way, 36,000 cars from January. The fleet's tight. People are starting to move forward. I tend to subscribe to the 2027 that you talked about, that you talked to one individual down in Palm Springs, thought 2027 was going to be a stronger year. I think for sure it's going to be a stronger year. We're already seeing some of the big buyers come to the plate.

The other thing that the 15,200 cars does not include is any multi-year opportunities. That's one of the things, if you look backwards, can kind of skew what the actual buildable backlog is because some of that was going to be built over a period of years. All in all, I feel like we're in a pretty strong position. Again, you kind of look at a one-to-one book to build is kind of where we're at, and we see that building this quarter.

Just maybe a couple things to say as well is we do have a really experienced team here at Greenbrier, and for better or for worse, we've been through a few cycles, and this is why we take the deliberate actions we take around production rates and making certain that we're moderating those rates because it benefits our workforce and our financial results to keep things on a steady pace as opposed to having pops and drops. The other thing that I'll comment on is part of what we've been doing over the last few years, which is to utilize our footprint in North America for more than just new rail cars. Right? We're doing some of this large program work that Brian Comstock has a really fancy long-term for.

That's where our commercial team and our folks, men and women on the shop floor, have made adjustments, thinking about the environment that we're operating in and being responsive to our customers' needs, not just for new rail cars, but how can we take care of their broader business. That's part of what you're seeing in our financial results, and it's not part of deliveries, it's not part of orders, it's not part of backlog.

Great stuff. Appreciate the time. Thoughts. Thanks, guys.

The next question will come from Andrzej Tomczyk with Goldman Sachs. Please go ahead.

Hey, good evening, everyone. Thanks for taking my questions. Just wanted to follow up quickly on the manufacturing. Wanted to dig in on this quarter's margin performance, specifically the gross profit margin was down 600 basis points year-over-year. I'm curious if you could share what you think that margin drag would have been had you not taken the cost-out actions that you did last year. That's sort of the first part of that. Then separately, just the confidence, the degree of confidence on 2Q marking a bottom for the margins. I think you mentioned it would, but the confidence there into the back half as well. Thanks.

The first thing I'll start with, and I won't get into specific details, I'll let Michael decide if he wants to go there, but the big difference between this year and a whole year ago, it feels like there's so many things that are different from 12 months ago, but it's really mixed. I think Michael might have mentioned in his remarks that we've had a shift in the mix of what we're currently manufacturing. These are more general purpose car types as opposed to some more specialized cars that we were doing last year. That's not to say that those specialized car types aren't going to come back.

I would say that looking at Brian and knowing what our operating group is doing, we're very confident about where we see margins going in the near term and I'm knocking on this wood conference table that yes, this marks the low spot. I think all of us know that you can't anticipate everything that might happen tomorrow or next week.

Yeah. Maybe I'll jump in and then Mike, you can add as well. From the operating perspective, I think one of the questions, Andrzej, you were asking is what kind of efficiencies have we been able to manage over the years that has improved the higher end of the low cycles. When we look at it, we look at what we've done with our insourcing projects and with our efficiency projects. I figure we've added two or three basis points to the bottom line, just through manufacturing efficiencies and focus.

200, 300.

Yeah, 200, 300. Sorry.

Yeah, I would agree with that. Also, if you look back to last year, Andrzej, it was at a higher volume number versus this quarter. We do have fixed cost absorption, as we mentioned in the prepared remarks, that are impacting this quarter. Given where we are in the cycle, we're pretty happy with where we are. We do think that it's potentially at an inflection point, and we'll see a better third quarter and a better fourth quarter as we move forward from a margin percent standpoint.

Just one more thing, just to say, I think the last time, if my numbers in my spreadsheet, and it's probably not as good as Hoexter's spreadsheet, but if I'm looking at my spreadsheet correctly, the last time we had deliveries in this neighborhood, our aggregate gross margin was around 8.6%. With the changes that we've made over the last few years, we have substantially improved how we're able to convert activity into gross margin and bottom line.

Understood. Very helpful color there. I did want to switch over just to the leasing, and focus really on the back half. The gains on sale you mentioned, I think could come down a little bit. Is there any way to think on a full year basis how you would look to manage gains into 2027 as an early look? Then separately, just as a clarification point, you had the leasing gross margins more recently close to the low to mid-60% range. I'm wondering if that should persist in the near term. I think last year was closer to the 71% range. That might be a function of mix, et cetera. Could you just talk about what's driving that gross margin within leasing, and if we should use that as a sort of run rate into the back half?

Yeah. I'll take this one. I think the margins in leasing will continue in that low 60% range. I think you can think about that as you go forward. In terms of how we think about secondary market activity and gains on sale, that's just part of our business model. We did see, as Lorie mentioned, a little bit of it benefiting the first half of the year, and it's really more of a build in the back half of the year. We'll continue to look at our lease fleet and determine from a concentration perspective what makes sense for us and how the market's reacting to secondary market activity, to determine what 2027 looks like. It's a little bit early for us to look at that.

I'll just say, and maybe this can come up on your follow-up calls, but if I heard you correctly saying that maybe last year, leasing and fleet management was in the 70% range, I think we should probably provide you some updated information because we adjusted where some of our syndication activity is now flowing through manufacturing. When I look back at history with that adjustment, our leasing and fleet management gross margins are in that low 60% range. I think maybe we just have some-

Yeah.

-cleanup we can help with.

Understood. Last one from me, on a more sort of a medium-term basis. Any updates to your thinking on the pending Class I rail merger, or any comments you want to make regarding how your customers are thinking about the merger? I appreciate the time today.

Sure. Thank you. I will just say, having been, I think at March, and that's before the application was turned back. They're resubmitting that, I think, this month. I think the point is for shippers and the users of freight rail to think about will a merger benefit them, will the efficiencies that are being touted, will they come to pass? I will continue to say anything that benefits our customers, the customers of Greenbrier, the customers of any of the railroads, should attract more shift of transportation onto the rails because it is a more fuel-efficient way to transport materials. Anything that grows modal share should mean it's a bigger pie for all of us. Even if our market share stays absolutely the same, if we can grow modal share in the North American market, then we're all going to enjoy more pie. I like pie.

Understood. Thanks for the time.

Again, if you have a question, please press star and then one. Please stand by as we poll for questions. Showing no further questions, this will conclude our question and answer session. Oh, pardon me. Looks like Harrison Bauer with Susquehanna has a follow-up. Please go ahead.

Hey, thanks for taking the late follow-up here. You guys had a comment earlier in the call regarding that a lot of your maybe more recent orders or demand activity was actually lessor driven. Can you just talk about a little bit of what's driving that? Is that more speculative? Is that underlying expectation for carload growth to resume? Just curious if you could dive a little bit more into that comment. Thank you.

Sure. I'll set it up for Brian, who'll probably understand better what's driving people to choosing to purchase versus choosing to lease. Just give a shout-out to our commercial teams, who are always right there next to our customers and willing to help them with whatever makes sense for their capital structure, right? If they need to commit spending dollars or they just want to lease, depending on what activities are going on. I will also emphasize that our team thinks about every single deal that we originate, whether it's a direct sale or a lease, with the expectation that those cars will stay active and not doing something that is speculative or short-term in nature to come back home or to go into storage.

Yeah. Harrison, I think the comment around if operating lessors are becoming more active in the market is true. I don't recall saying that, but it is true. We are seeing more operating lessor activity, and the reason is they're seeing the same things we are. They're hearing the same sounds from the same customers, the optimism. You got through the planting season. There's been a falloff of covered hopper cars, the 4,750 fleet. The fleets are tight, and so people are anticipating continued build-up in demand next year. We are seeing many of the operating lessors who have been sitting on the sidelines starting to dip their toes in the water a bit. I wouldn't say they're speculative buys. I would say they're strategic buys because they're very focused on specific opportunities.

Great. Thanks for the additional color.

This concludes our question and answer session. I would like to turn the conference back over to Lorie Tekorius for any closing remarks.

Thank you very much. I appreciate everyone's time and attention. Happy to take any follow-up calls. Travis is happy to take any follow-up calls later today if you'd like. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.