The Greenbrier Companies, Inc. (NYSE:GBX) Q1 2023 Earnings Call Transcript

Justin Long: Okay. That’s helpful. And then last thing I wanted to ask about was just the railcar order environment. Could you break down orders in the quarter between North America and international? And maybe, Brian, you could chime in on the sustainability of this kind of 5,000 to 6,000 orders per quarter flow going forward?

Brian Comstock: Yeah, Justin. It’s Brian. About 95% of the orders in the Q were for North America. So substantially in North America, we’re already — December was a stronger month than what we typically see because of the holidays. So we’re already off to a good start. I would say the cadence continues to be very similar to what we’ve seen in the last three, four quarters in North America. We’re not seeing any falloff at all at this stage.

Justin Long: Great. Very helpful. I appreciate the time.

Operator: Next question comes from Ken Hoexter with Bank of America. Please go ahead.

Ken Hoexter: Great. Good morning. Maybe you could talk a little bit about the manufacturing margins. Typically, we see a falloff in second quarter. I don’t know if given the closing of Portland, it sounds like that doesn’t occur until May or some of the other moves you’re making — are there going to be increased costs given the fabrication moves as well as still getting the supply chain online until that’s up and running in the fourth quarter? So do we see and even extended dip in 2Q on margins. Maybe just walk us through, Adrian, your thoughts or Lorie, on kind of seasonality and impact from the moves you’re making?

Lorie Leeson: And I’ll start, and then Adrian or Justin can chime in. But it’s a good point, Ken, that yes, seasonally, second — our second fiscal quarter, which includes a lot of holidays does sometimes have an impact on our margins. So there’s — it’s probably a mixed bag as you think about how we step through the year. We’re not going to get into quarter-by-quarter margin expectations. We do expect there to be, though, an overall improvement as we move across each of the quarters of this fiscal year. Regarding rail production at Gunderson, we had a full quarter of production in the first quarter at our Portland facility, and that will continue through May. So we will have those three quarters, which I would say is, it’s neutral to a bit of a drag on margins, but that’s where I would say that kind of shakes out.

And any additional costs that are associated with ceasing those productions or the transition of our workforce, we will make certain to capture those separately and communicate them separately.

Adrian Downes: And Ken also the investment in bringing the fabrication in-house is something that will be capitalized, that would be something that will provide long-term benefits. So you wouldn’t see necessarily a higher operating expense from that, you would see overall market — margin improvement.

Justin Roberts: And finally, Ken, one other piece on to that as we progress through the year, we will see the increased syndication activity, which is typically beneficial to overall company margins throughout the year.

Ken Hoexter: Great. Thanks for that everybody. And then I guess, in the past, you’ve given kind of the balance of production and what you expect, maybe it sounded like Lorie, you threw out at the end of your last answer that there was no slowdown in the orders. Maybe talk about how back-end loaded production will be and the move, I guess, away from Portland to Mexico. Is that — obviously, we had a huge surprise on cost this quarter given all the things you mentioned. Is that just determination that it’s just too costly in the U.S. and moving everything to Mexico? And does that mean anything for the U.S. assets from ARI that you acquired in the U.S. or was this Portland specific?