Wabash National seeing promise fulfilled in final-mile body business

“We believe these trends have staying power as the pandemic clearly accelerated changes that were already underway in transportation, logistics and distribution,” Wabash President and CEO Brent Yeagy said Wednesday on the company’s earnings call with analysts. “And we feel good about the demand environment as we look forward to this year and beyond.”

Long road

Wabash acquired Goshen, Indiana-based Supreme without a thought of what a pandemic might do. In the first quarter a year ago, Final Mile Products revenue slid to $60 million, 40.2% below the same period in 2019. Wabash wrote off $95.8 million against its purchase price, a so-called noncash impairment charge.

In Q1 2021, the unit generated $77 million in revenue. It booked a $4 million operating loss because of the acquisition expense. Earnings before interest, taxes, depreciation and amortization (EBITDA) is a more relevant way to look at the impact on operating cash generation, Wabash Chief Financial Officer Mike Pettit said on the call.

“Indications from our large leasing customers is that demand has returned from small and medium-sized business segments of the market that they serve so effectively,” Yeagy said. “Their rental businesses have also benefited as fleets scramble for equipment as well.”

The $621,000 of EBITDA should grow in the second half as new employees are hired and capacity expands.

“I think [in] 2022 that business should not only be generating significant EBITDA but it should also be positive on the operating income line as well,” Pettit said.

Smaller versus bigger

Historically, Class 4-5 trucks weighing up to 19,500 pounds with 18-foot and longer cabs were the standard in last-mile delivery. Now, orders for purpose-built last-mile vehicles from startups like Rivian, Arrival (NASDAQ: ARVL), Electric Last Mile Solutions and Workhorse Group (NASDAQ: WKHS) are skewing sizes smaller.

“We think [leasing customers are] going to come back, which is going to pressure us on the longer more traditional [trucks],” Yeagy said. “At the same time, we’ve got ample opportunity in that smaller e-commerce disrupted space.”

Pettit added, “The other thing that we’re seeing [is] more pull across our whole portfolio from legacy Commercial Trailer Products wanting to buy Final Mile Product and vice versa.” 

Cold chain changes

The cross-buying extends to refrigerated vans. Capitalizing on that factored into the third-quarter 2020 reorganization, which led to rethinking how final-mile products could be grouped to grow revenue.

“We’re not talking to [customers] about just the refrigerated van,” Yeagy said. “We’re talking to them about two to three different types of smaller vehicle solutions to solve a multiproblem set of how you deliver and distribute, redistribute and move within a full logistics cold chain.”

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Click for more FreightWaves articles by Alan Adler.