Wabash National : Q4 2019 Earnings Release Presentation

WABASH NATIONAL CORPORATION 2019 Q4 EARNING RELEASE

SAFE HARBOR STATEMENT &NON-GAAPFINANCIAL MEASURES

This presentation contains certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements convey Wabash National Corporation's (the "Company") current expectations or forecasts of future events. All statements contained in this presentation other than statements of historical fact are forward-looking statements. These forward-looking statements include, among other things, all statements regarding the Company's outlook for trailer and truck body shipments, backlog, expectations regarding demand levels for trailers, truck bodies, non-trailer equipment and our other diversified product offerings, pricing, profitability and earnings, cash flow and liquidity, opportunity to capture higher margin sales, new product innovations, our growth and diversification strategies, our expectations for improved financial performance during the course of the year and our expectations with regards to capital allocation. These and the Company's other forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those implied by the forward-looking statements. Without limitation, these risks and uncertainties include the continued integration of Supreme into the Company's business, adverse reactions to the transaction by customers, suppliers or strategic partners, uncertain economic conditions including the possibility that customer demand may not meet our expectations, increased competition, reliance on certain customers and corporate partnerships, risks of customer pick-up delays, shortages and costs of raw materials including the impact of tariffs or other international trade developments, risks in implementing and sustaining improvements in the Company's manufacturing operations and cost containment, dependence on industry trends and timing, supplier constraints, labor costs and availability, customer acceptance of and reactions to pricing changes and costs of indebtedness. Readers should review and consider the various disclosures made by the Company in this presentation and in the Company's reports to its stockholders and periodic reports on Forms 10-K and 10-Q.

We cannot give assurance that the expectations reflected in our forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated in these forward-looking statements. All written and oral forward-looking statements attributable to us are expressly qualified in their entirety by the factors we disclose that could cause our actual results to differ materially from our expectations.

In addition to disclosing financial results calculated in accordance with United States generally accepted accounting principles (GAAP), the financial information included in this presentation contains non-GAAP financial measures, including free cash flow, operating EBITDA, operating EBITDA margin, adjusted operating income, adjusted net income and adjusted earnings per diluted share. These non-GAAP measures should not be considered a substitute for, or superior to, financial measures and results calculated in accordance with GAAP, including net income, and reconciliations to GAAP financial statements should be carefully evaluated.

Operating EBITDA is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, acquisition expenses and related charges, impairments, and other non-operating income and expense. Management believes providing operating EBITDA is useful for investors to understand the Company's performance and results of operations period to period with the exclusion of the items identified above. Management believes the presentation of operating EBITDA, when combined with the GAAP presentations of operating income and net income, is beneficial to an investor's understanding of the Company's operating performance. A reconciliation of operating EBITDA to net income is included in the appendix to this presentation.

Free cash flow is defined as net cash provided by operating activities minus capital expenditures. Management believes providing free cash flow is useful for investors to understand the Company's performance and results of cash generation period to period with the exclusion of the item identified above. Management believes the presentation of free cash flow, when combined with the GAAP presentations of cash provided by operating activities, is beneficial to an investor's understanding of the Company's operating performance. A reconciliation of free cash flow to cash provided by operating activities is included in the appendix to this presentation.

Adjusted operating income, a non-GAAP financial measure, excludes certain costs, expenses, other charges, gains or income that are included in the determination of operating income under GAAP, but that management would not consider important in evaluating the quality of the Company's operating results as they are not indicative of the Company's core operating results or may obscure trends useful in evaluating the Company's continuing activities. Accordingly, the Company presents adjusted operating income excluding these special items to help investors evaluate our operating performance and trends in our business consistent with how management evaluates such performance and trends. Further, the Company presents adjusted operating income to provide investors with a better understanding of the Company's view of our results as compared to prior periods. A reconciliation of adjusted operating income to operating income, the most comparable GAAP financial measure, is included in the tables following this presentation.

Adjusted net income and adjusted earnings per diluted share, each reflect adjustments for acquisition expenses, the losses attributable to the Company's extinguishment of debt and income or losses recognized on the sale and/or closure of former Company locations. Management believes providing adjusted measures and excluding certain items facilitates comparisons to the Company's prior year periods and, when combined with the GAAP presentation of net income and diluted net income per share, is beneficial to an investor's understanding of the Company's performance. A reconciliation of each of adjusted net income and adjusted earnings per diluted share to net income and net income per diluted share is included in the tables following this presentation.

Segment EBITDA, a non-GAAP financial measure, is calculated by adding back segment depreciation and amortization expense to segment operating income, and excluding certain costs, expenses, other charges, gains or income that are included in the determination of operating income under GAAP, but that management would not consider important in evaluating the quality of the Company's segment operating results as they are not indicative of the Company's core operating results or may obscure trends useful in evaluating the Company's continuing activities. Segment EBITDA Margin is calculated by dividing Segment EBITDA by segment total net sales.

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HIGHLIGHTS OF QUARTER & YEAR

Strong Full Year 2019

Key Q4

Financial

Results

Balanced

Capital

Allocation

Going Forward

▪ All-time record revenue of $2.3B

▪ Increased operating income, net income and EPS vs prior year

▪ Major strides made in transforming Wabash in line with strategic vision

▪ Strong revenue of $579M ▪ Operating Margin of 5.5% ▪ Earnings per share of $0.34

▪ $109M of Free Cash Flow generated FY2019

▪ $35M of capital deployed among debt reduction, share buyback, CapEx & dividend in Q4 ▪ Primary capital allocation focus remains debt reduction

• Backlog of $1.1B ending 2019 Q4; up sequentially

• 2020 revenue outlook of $2.05B - $2.15B

• 2020 EPS outlook of $1.10 to $1.30; EPS midpoint of $1.20

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Refreshed Purpose, Vision, Mission & Values

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4

Q4 2019 CONSOLIDATED FINANCIAL PERFORMANCE

Strong Customer Demand

Operating Result Lower than Expected

YoY Gross Margin Improvement on Price Recovery

Operating Income Modestly Lower YoY

Operating Margin Lower YoY by 50bps

5

Actual

$579M

Net Sales

$0.34

Earnings Per Share

12.5%

Gross Margin

$32M

Operating Income

5.5%

Operating Margin

4Q18 Results

11.3%

Gross Margin

$36M

Adjusted Non-GAAP Operating

Income

6.0%

Adjusted Non-GAAP Operating

Income

5

COMMERCIAL TRAILER PRODUCTS

Revenue	Operating Margin
-9.0%	+190 bps

$438.7	10.8%
$399.3	8.9%

Q4 2018

Q4 2019

Q4 2018

Q4 2019

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DIVERSIFIED PRODUCTS GROUP

Revenue

-7.5%

$102.3

$94.7

Q4 2018

Q4 2019

Adjusted Operating

Margin*

-80 bps

6.7%

5.9%

Q4 2018

Q4 2019

7	*Q4 2018 DPG operating margin adjusted for asset impairment related to the sale of Aviation and Truck Equipment business	7

FINAL MILE PRODUCTS

Revenue

+24.4%

$92.7

$74.5

Q4 2018

Q4 2019

Operating Margin

-440 bps

(2.0)%

(6.4)%

Q4 2018

Q4 2019

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CASH GENERATION

	Full year	Full year
	2019	2018
Net Income	$89.6M	$69.4M
Operating Cash Flow	$146.3M	$112.5M
Capital Expenditure	$37.6M	$34.0M
Free Cash Flow	$108.6M	$78.5M
Free Cash Flow Conversion1	121%	113%

9	1Free cash flow conversion defined as free cash flow divided by net income	9

2020 GUIDANCE

Expected Trends

• CTP demand levels to moderate in 2020
• Tank Trailer market volumes to soften in 2020
• Truck Body market to continue secular growth trends, at a slower pace in 2020
• Margins in 2020 expected to step back in 2020
• Cash generation anticipated to remain strong in 2020

Key Metrics

Sales

$2.05B-$2.15B

Midpoint: $2.1B

EPS

Range: $1.10-1.30

Midpoint: $1.20

Operating Margin

5.1% to 5.7%

Midpoint: 5.4%

Other

New Trailer Shipments: 49k-53k

SG&A: $145-150M

Intangibles Amortization: ~$22M

Interest Expense: ~$24M

CapEx: $35-40M

Tax Rate: 26-27%

APPENDIX

CONSOLIDATED BALANCE SHEETS

	Unaudited - dollars in thousands		December 31, 2019			December 31, 2018
	Assets
	Current assets:
	Cash and cash equivalents	$	140,516	$	132,690
	Accounts receivable, net		172,737			181,064
	Inventories		186,914			184,404
	Prepaid expenses and other		41,222			51,261
	Total current assets		541,389			549,419
	Property, plant, and equipment, net		221,346			206,991
	Deferred income taxes		-			-
	Goodwill		311,026			311,084
	Intangible assets		189,898			210,328
	Other assets		40,932			26,571
	Total assets	$	1,304,591	$	1,304,393
	Liabilities and Stockholders' Equity
	Current liabilities:
	Current portion of long-term debt	$	-	$	1,880
	Current portion of finance lease obligations		327			299
	Accounts payable		134,821			153,113
	Other accrued liabilities		124,230			116,384
	Total current liabilities		259,378			271,676
	Long-term debt		455,386			503,018
	Finance lease obligations		378			714
	Deferred income taxes		37,576			34,905
	Other non-current liabilities		30,885			20,231
	Total liabilities		783,603			830,544
	Total stockholders' equity		520,988			473,849
12	Total liabilities and stockholders' equity	$	1,304,591	$	1,304,393	12

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited - dollars in thousands	Three Months Ended December 31,		Twelve Months Ended December 31,
	2019		2018		2019		2018
Net sales	$579,001	$610,196	$2,319,136	$2,267,278
Cost of sales	506,694		541,140		2,012,754		1,983,627
Gross profit	72,307	69,056	306,382	283,651
General and administrative expenses	26,272	21,194	108,274	95,114
Selling expenses	9,136	7,455	34,851	33,046
Amortization of intangible assets	5,118	4,650	20,471	19,468
Acquisition expenses	-		-		-	68
Impairment	-		12,979		-		24,968
Income from operations	31,781	22,778	142,786	110,987
Other income (expense):
Interest expense	(6,517)	(7,110)	(27,340)	(28,759)
Other, net	40		1,290		2,285		13,776
Other expense, net	(6,477)	(5,820)	(25,055)	(14,983)
Income before income tax	25,304	16,958	117,731	96,004
Income tax expense	6,929		5,374		28,156		26,583
Net income	$18,375	$11,584	$89,575	$69,421
Net income per share:
Basic	$0.34	$0.21	$1.64	$1.22
Diluted	$0.34	$0.21	$1.62	$1.19
Weighted average common shares outstanding (in thousands):
Basic	53,917	55,543	54,695	56,996
Diluted	54,613	56,290	55,290	58,430
Dividends declared per share	$0.080	$0.080	$0.320	$0.305
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CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited - dollars in thousands	Year Ended December 31,
	2019		2018
Cash flows from operating activities:
Net income	$	89,575	$	69,421
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		21,886			21,215
Amortization of intangibles		20,471			19,468
Net (gain) loss on sale of property, plant and equipment		(109)			(10,148)
Loss on debt extinguishment		165			280
Deferred income taxes		2,671			(2,976)
Stock-based compensation		9,036			10,169
Non-cash interest expense		1,045			1,745
Impairment		-			24,968
Accounts receivable		8,327			(39,539)
Inventories		(2,510)			(18,713)
Prepaid expenses and other		(2,536)			4,548
Accounts payable and accrued liabilities		(2,887)			32,653
Other, net		1,150			(620)
Net cash provided by operating activities		146,284			112,471
Cash flows from investing activities:
Capital expenditures		(37,645)			(34,009)
Proceeds from sale of property, plant and equipment		785			17,776
Other, net		-			3,060
Net cash used in investing activities		(36,860)			(13,173)
Cash flows from financing activities:
Net cash (used in) provided by financing activities		(101,598)			(158,129)
Net (decrease) increase for the period	$	7,826	$	(58,831)
At beginning of period		132,690			191,521
At end of period	$	140,516		$	132,690
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Q4 QTD SEGMENT INFORMATION

	Unaudited - dollars in thousands			Commercial			Diversified			Final Mile			Corporate and
	Three Months Ended December 31,		Trailer Products			Products			Products			Eliminations			Consolidated
2019
	New trailers shipped			14,300			650			0			0			14,950
	Used trailers shipped			25			15			0			0			40
	New Trailers	$	386,037	$	51,222	$	-	$	-	$	437,259
	Used Trailers			199			301			-			-			500
	Components, parts and service			9,350			24,343			2,858			(7,447)			29,104
	Equipment and other			3,702			18,795			89,882			(241)			112,138
	Total net external sales		$	399,288		$	94,661		$	92,740		$	(7,688)		$	579,001
	Gross profit	$	50,384	$	16,324	$	6,239	$	(640)	$	72,307
	Income (Loss) from operations	$	43,135	$	5,610	$	(5,914)	$	(11,050)	$	31,781
2018
	New trailers shipped			16,750			750			0			0			17,500
	Used trailers shipped			100			50			0			0			150
	New Trailers	$	424,131	$	48,950	$	-	$	-	$	473,081
	Used Trailers			824			1,025			-			-			1,849
	Components, parts and service			9,214			27,141			2,628			(5,282)			33,701
	Equipment and other			4,498			25,206			71,904			(43)			101,565
	Total net external sales		$	438,667		$	102,322		$	74,532		$	(5,325)		$	610,196
	Gross profit	$	45,170	$	17,420	$	7,362	$	(896)	$	69,056
	Income (Loss) from operations	$	39,075	$	(6,111)	$	(1,463)	$	(8,723)	$	22,778
15																15

Q4 YTD SEGMENT INFORMATION

Unaudited - dollars in thousands

				Commercial			Diversified			Final Mile			Corporate and
	Twelve Months Ended December 31,		Trailer Products			Products			Products			Eliminations			Consolidated
2019
	New trailers shipped			54,650			2,850			0			0			57,500
	Used trailers shipped			75			75			0			0			150
	New Trailers	$	1,464,636	$	198,043	$	-	$	-	$	1,662,679
	Used Trailers			435			2,044			-			-			2,479
	Components, parts and service			40,344			113,024			15,023			(27,902)			140,489
	Equipment and other			16,126			71,405			426,887			(929)			513,489
	Total net external sales		$	1,521,541		$	384,516		$	441,910		$	(28,831)		$	2,319,136
	Gross profit	$	177,190	$	74,588	$	57,815	$	(3,211)	$	306,382
	Income (Loss) from operations	$	145,877	$	29,748	$	9,804	$	(42,643)	$	142,786
2018
	New trailers shipped			59,500			2,650			0			0			62,150
	Used trailers shipped			950			150			0			0			1,100
	New Trailers	$	1,473,583	$	164,790	$	-	$	-	$	1,638,373
	Used Trailers			9,618			3,514			-			-			13,132
	Components, parts and service			34,994			122,099			9,968			(21,811)			145,250
	Equipment and other			18,743			103,568			348,281			(69)			470,523
	Total net external sales		$	1,536,938		$	393,971		$	358,249		$	(21,880)		$	2,267,278
	Gross profit	$	168,343	$	68,428	$	48,771	$	(1,891)	$	283,651
	Income (Loss) from operations	$	141,793	$	(3,033)	$	7,909	$	(35,682)	$	110,987
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RECONCILIATION OF ADJUSTED SEGMENT OPERATING INCOME

Unaudited - dollars in thousands		Three Months Ended December 31,			Twelve Months Ended December 31,
		2019			2018			2019			2018
Commercial Trailer Products
Income from operations	$	43,135	$	39,077	$	145,877	$	141,795
Diversified Products
Income from operations		5,610			(6,111)			29,748			(3,033)
Adjustments:
Impairment		-			12,979			-			24,968
Adjusted operating income		5,610			6,868			29,748			21,935
Final Mile Products
Income from operations		(5,914)			(1,465)			9,804			7,907
Adjustments:
Acquisition expenses and related charges		-			-			-			751
Adjusted operating income		(5,914)			(1,465)			9,804			8,658
Corporate
Income from operations		(11,050)			(8,723)			(42,643)			(35,682)
Adjustments:
Acquisition expenses and related charges		-			-			-			68
Executive severance		-			180			-			180
Facility transactions		-			413			-			413
Adjusted operating income		(11,050)			(8,130)			(42,643)			(35,021)
Consolidated
Income from operations		31,781			22,778			142,786			110,987
Adjustments:
Impairment		-			12,979			-			24,968
Acquisition expenses and related charges		-			-			-			819
Executive severance		-			180			-			180
Facility transactions		-			413			-			413
Adjusted operating income	$	31,781		$	36,350		$	142,786		$	137,367
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RECONCILIATION OF ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE

Unaudited - dollars in thousands

Adjusted Net Income (1):		Three Months Ended December 31,			Twelve Months Ended December 31,
		2019			2018			2019			2018
Net income	$	18,375	$	11,584	$	89,575	$	69,421
Adjustments:
Facility transactions (2)		-			194			-			(10,585)
Loss on debt extinguishment		-			106			-			280
Impairment		-			12,979			-			24,968
Acquisition expenses and related charges		-			-			-			819
Executive severance expense		-			180			-			180
Tax effect of aforementioned items		-			(3,499)			-			(4,072)
Tax reform and other discrete tax adjustments		-			-			-			3,084
Adjusted net income	$	18,375		$	21,544		$	89,575		$	84,095
Adjusted Diluted EPS (1):		Three Months Ended December 31,			Twelve Months Ended December 31,
		2019			2018			2019			2018
Diluted earnings per share	$	0.34	$	0.21	$	1.62	$	1.19
Adjustments:
Facility transactions (2)		-			-			-			(0.18)
Loss on debt extinguishment		-			-			-			0.01
Impairment		-			0.23			-			0.43
Acquisition expenses and related charges		-			-			-			0.01
Executive severance expense		-			-			-			-
Tax effect of aforementioned items		-			(0.06)			-			(0.07)
Tax reform and other discrete tax adjustments		-			-			-			0.05
Adjusted earnings per share	$	0.34	$	0.38	$	1.62	$	1.44
Weighted average diluted shares outstanding		54,613			56,290			55,290			58,430

• Adjusted net income and adjusted earnings per diluted share, each reflect adjustments for acquisition expenses, the losses attributable to the Company's extinguishment of debt and income or losses recognized on the sale and/or closure of former Company locations.

• Facility transactions in 2018 relate to gains and/or losses incurred for the sale or closure of former Company locations.

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RECONCILIATION OF OPERATING EBITDAAND FREE CASH FLOW

Unaudited - dollars in thousands

Operating EBITDA (1)		Three Months Ended December 31,			Twelve Months Ended December 31,
		2019			2018			2019			2018
Net income	$	18,375	$	11,584	$	89,575	$	69,421
Income tax expense		6,929			5,374			28,156			26,583
Interest expense		6,517			7,110			27,340			28,759
Depreciation and amortization		10,746			10,164			42,357			40,683
Stock-based compensation		1,674			1,690			9,036			10,169
Facility transactions		-			-			-			-
Impairment		-			12,979			-			24,968
Acquisition expenses		-			-			-			68
Other non-operating income		(40)			(1,290)			(2,285)			(13,776)
Operating EBITDA	$	44,201		$	47,611		$	194,179		$	186,875
Free Cash Flow (2):								Twelve Months Ended December 31,
								2019			2018
Net cash provided by operating activities						$	146,284	$	112,471
Capital expenditures							$	(37,645)		$	(34,009)
Free cash flow						$	108,639	$	78,462

• Operating EBITDA is defined as earnings before interest, taxes, depreciation, amortization,stock-based compensation, acquisition expenses and related charges, impairments, and other non-operating income and expense.

• Free cash flow is defined as net cash provided by (used in) operating activities minus capital expenditures.

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RECONCILIATION OF ADJUSTED SEGMENT EBITDA1AND ADJUSTED SEGMENT EBITDA MARGIN1

Unaudited - dollars in thousands		Commercial Trailer
	Products				Diversified Products			Final Mile Products
Twelve Months Ended December 31,		2019			2018			2019			2018			2019			2018
Income (Loss) from operations	$	145,877	$	141,795	$	29,748	$	(3,033)	$	9,804	$	7,907
Depreciation and amortization		10,667			9,631			18,621			21,177			11,361			8,314
Impairment		-			-			-			24,968			-			-
Acquisition expenses and related charges		-			-			-			-			-			751
Adjusted Segment EBITDA	$	156,544	$	151,426	$	48,369	$	43,112	$	21,165	$	16,972
Adjusted Segment EBITDA Margin		10.3 %			9.9 %			12.6 %			10.9 %			4.8 %			4.7 %

• Adjusted Segment EBITDA, anon-GAAP financial measure, is calculated by adding back segment depreciation and amortization expense to segment operating income (loss), and excludes certain costs, expenses, other charges, gains or income that are included in the determination of operating income under GAAP, but that management would not consider important in evaluating the quality of the Company's segment operating results as they are not indicative of each segment's core operating results or may obscure trends useful in evaluating the segment's continuing activities. Adjusted Segment EBITDA Margin is calculated by dividing Adjusted Segment EBITDA by segment total net sales.

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