Q4 2025 Trinity Industries Inc Earnings Call [BACKUP]

E. Jean Savage: over year, supported by the railcar partnership restructuring we completed with Napier Park in December, recording a $194 million non-cash gain in the segment. Additionally, we recorded $56 million in gains on railcar sales in Q4, resulting in a full-year gain of $91 million. Fleet utilization remained strong at 97.1%, with renewal success of 73% in Q4. While the future lease rate differential, or FLRD, moderated to 6% as renewal growth normalized, renewing rates were 27% higher than expiring rates. We believe there is still significant room for lease rate expansion and remain very positive about this business. Eric will walk through the financial impacts of our recently completed railcar partnership restructuring, but I did want to highlight the change in fleet composition.

E. Jean Savage: The transaction simplified our ownership structure, resulting in approximately 17,100 railcars removed from the partially owned railcar category. We assume full ownership of 6,235 railcars. The remaining railcars moved from partially owned to investor owned, which will reduce reported revenue and operating profit, but this impact is largely offset by a corresponding reduction in minority interest. The restructuring simplified our ownership structure, increased transparency, and improved earnings while maintaining economic value. Rail Products delivered a full-year operating margin of 5.2% within guidance, despite deliveries declining 46%. Cost discipline, automation, and workforce actions enabled profitability in a low-volume environment. Additionally, the headcount rationalization decisions we made in 2025 have right-sized the organization for the current reality and allow us to maintain profitability.

E. Jean Savage: With an aging fleet and continued net retirements, we expect demand to return over time, allowing meaningful margin expansion as volumes recover. In Q4, we recorded a one-time credit loss related to a customer receivable within Rail Products. This charge was included in SC&A and reduced the Rail Products group operating margin by 190 basis points for the quarter. This was an isolated incident and not reflective of ongoing performance. Before I hand it over to Eric to provide more details on our 2025 financial performance and 2026 guidance, I want to reiterate that Trinity is designed to perform in a wide range of demand environments. Our results and guidance clearly demonstrate the actions we have taken over the last several years have led to a more durable platform. This includes integrating new technologies to optimize our business and lower the break-even point.

E. Jean Savage: For example, we have been investing in AI as a core operating capability, not as a standalone technology initiative. Working with partners like Palantir and Databricks, we've embedded AI directly into our manufacturing, logistics, and financial workflows. Practically, that means we are using AI to identify and redeploy material that historically would have been scrapped, improving yield and protecting margin. We've also implemented an AI-enabled inquiry-to-delivery process, giving us end-to-end visibility and faster decision-making. In logistics, AI-driven agents enhance our advanced shipping notices, improving accuracy and timeliness. We've extended those same models into accounts receivable, reducing disputes and accelerating collections. The cumulative impact has been improved working capital, higher productivity, and more predictable execution across the enterprise. Importantly, these are not pilot programs. They are embedded in how we run the business today, and they continue to scale.

E. Jean Savage: We are excited at the impact these initiatives are having on our business now and in the future. I'll now turn the call over to Eric, who will talk through financial results and our guidance for 2026.

Eric R. Marchetto: Thank you, Gene, and good morning, everyone. Before I talk through our financial statements, I want to take a moment to walk through our recent strategic railcar partnership restructuring and what it means for Trinity. Prior to this transaction, approximately 23,000 railcars held in our TRIP and RIV port partnership vehicles were partially owned but fully consolidated on our balance sheet and carried at cost. As part of a new fund raised by Napier Park, we began simplifying the fleet structure. We took full ownership of the TRP 2021 fleet, approximately 6,235 railcars, and Napier Park assumed full ownership of the Triumph fleet, approximately 10,850 railcars. The transacted value of the Triumph fleet was significantly higher than our book value, which resulted in a $194 million non-cash gain on the disposition....

Eric R. Marchetto: Our railcar leasing fleet now consists of 101,000 railcars on our balance sheet and 45,000 railcars under management as part of our railcar investment vehicles or RIVs. Our RIV program provides servicing revenue of approximately $20 million per year, which is part of our leasing operations. The RIV program also provides scale to our platform, which enhances the unique view we have of the North American railcar market. Furthermore, this railcar partnership transaction underscores the embedded value in our assets. We have over 101,000 railcars on our balance sheet, carried at a cost of $6.3 billion.

Eric R. Marchetto: We estimate that the market value of these railcars will be approximately 35 to 45% higher than the carrying value, which demonstrates the estimated 3 to 4% annual appreciation we have seen in railcar values over the last 20 years. While lease rates have increased, they have not increased at the same pace as railcar asset appreciation. We can choose to generate value from our railcars over the long term by holding them in our fleet as lease rates continue to rise or by selling them. This gives us conviction in the long-term returns of the business. Moving to the income statement. We ended the year with Q4 revenue of $611 million and full year revenue of $2.2 billion. This is down year-over-year due to lower external railcar deliveries.

With Napier Park in December <unk>.

Recording a $194 million non cash gain in the segment.

Additionally, we recorded $56 million in gains on railcar sales in the fourth quarter, resulting in a full year gain of $91 million.

Eric R. Marchetto: Our Q4 earnings per share of $2.31 reflects a strong end of the year and an impact of approximately $1.50 from the Q4 railcar partnership restructuring. Full-year EPS of $3.14 was up 73% year-over-year, in line with our guidance of $3.05 to $3.20. Before the impact of the railcar partnership restructuring, our 2025 performance was above the midpoint of our previous guidance. Moving to the cash flow statement. Our full-year cash flow from continuing operations was $367 million. Our full-year net lease fleet investment was $350 million at the top of our guidance range, reflecting our conviction in deploying capital in our own fleet.

Fleet utilization remained strong at 97, 1% with renewal success of 73% in the fourth quarter.

While the future lease rate differential for <unk> D moderated to a 6% as renewal growth normalized renewing rates were 27% higher than expiring rates.

We believe there is still significant room for lease rate expansion and remain very positive about this business.

Eric will walk through the financial impact of our recently completed railcar partnership restructuring, but I did want to highlight the change in fleet composition.

The transaction simplified our ownership structure, resulting in an approximately 17100 railcars removed from the partially owned railcar category.

Eric R. Marchetto: Additionally, we returned $170 million in 2025 to our shareholders through dividends paid and share repurchases. In December, we raised our quarterly dividend to $0.31 per share, marking seven consecutive years of dividend growth with an annualized growth rate of 9%. This reflects Trinity's commitment to returning capital to shareholders. We are ending the year with a strong balance sheet. We have liquidity of $1.1 billion through cash, revolver availability, and our warehouse. Our loan-to-value for the wholly owned lease fleet is 70.2%. The increase in our LTV was a result of the debt restructuring we completed in October, as well as the addition of the TRP 2021 fleet to our wholly owned fleet.

We assumed full ownership of 6235 railcars.

The remaining railcars move from partially own two investor owned.

Which will reduce reported revenue and operating profit, but this impact is largely offset by a corresponding reduction in minority interest.

The restructuring simplified our ownership structure increase transparency and improved earnings while maintaining economic value.

Rail products delivered a full year operating margin of five 2% within guidance despite deliveries declining 46%.

Cost discipline automation and workforce actions enabled profitability in a low volume environment.

Eric R. Marchetto: We are very comfortable with the leverage on our fleet and are regularly refinancing our railcars as our debt amortizes to keep our debt in an appropriate range. Our balance sheet gives us the flexibility we need to effectively deploy capital and run our business. Now I'd like to talk about our expectations for 2026. As Gene noted, we are expecting industry deliveries of about 25,000 railcars, and we expect to maintain our historical market share of those deliveries. Despite the lower level of new railcars, we expect to maintain a rail products segment operating margin of 5% to 6% for the full year. We expect the secondary market to remain active and anticipate gains of $120 to 140 million in 2026.

Additionally, the head count rationalization decisions, we made in 2025 have right size the organization for the current reality and allow us to maintain profitability.

With an aging fleet and continued net retirements, we expect demand to return over time, allowing meaningful margin expansion as volumes recover.

In the fourth quarter, we recorded a one time credit loss related to a customer receivable within rail products.

This charge was included in SG&A and reduce the rail products group operating margin by 190 basis points for the quarter.

This was an isolated incident and not reflective of ongoing performance.

Eric R. Marchetto: We see an opportunity to further simplify our fleet structure and contribute the remaining partially owned railcars to our managed Napier Park fleet in Q2. While this transaction is not complete, we have included the anticipated gains in our full year guidance. We expect leasing and services full year segment margins of 40% to 45%, including the impact of gains and any further railcar partnership restructuring activities. In addition to the gains, we expect higher lease rates to contribute to a higher operating margin, offset by higher fleet maintenance activity in 2026. We expect a full year net lease fleet investment of $450 to 550 million, reflecting new lease originations, secondary market sales and purchases, and fleet modifications and sustainable conversions.

Before I hand, it over to Eric to provide more details on our 2025 financial performance and 2026 guidance I want to reiterate that Trinity is designed to perform in a wide range of demand environments.

Our results and guidance clearly demonstrate the actions we've taken over the last several years have led to a more durable platform.

This includes integrating new technologies to optimize our business and lower the breakeven point.

For example, we have been investing in AI as a core operating capability not as a standalone technology initiatives.

Working with partners like Pelletier in data bricks, we've embedded AI directly into our manufacturing logistics and financial workflows.

Practically that means we are using AI to identify and redeploy material that historically would have been scrapped improving yield and protecting margin.

Eric R. Marchetto: We expect operating and administrative CapEx of $55 to 65 million, which includes further investment in automation, technology, and modernization of facilities and processes. We expect slightly lower SC&A costs in 2026. We expect a full year tax rate of approximately 25% to 27% for the full year. And finally, we expect a full year EPS of $1.85 to $2.10. We have made structural changes to our business over the last few years that have improved our profitability and returns throughout the economic cycle. With our 2026 guidance, I would also like to close with an update on our 3-year targets we set at our 2024 Investor Day.

We've also implemented an AI enabled inquiry to delivery process.

<unk> end to end visibility and faster decision, making.

And logistics AI, driven agents enhance our advanced shipping notices improving accuracy and timeliness.

We've extended those same models into accounts receivable, reducing disputes and accelerating collections.

The cumulative impact has been improved working capital higher productivity and more predictable execution across the enterprise.

Importantly, these are not pilot programs. They are embedded in how we run the business today and they continue to scale.

We are excited at the impact these initiatives are having on our business now and in the future.

Eric R. Marchetto: As you recall, we introduced three enterprise KPIs with targets over the 2024 to 2026 timeframe: net lease fleet investment, cash flow from operations with net gains on lease portfolio sales, and adjusted return on equity. First, our three-year net lease fleet investment target was $750 million to $1 billion over the three years. To date, we have invested $531 million, and with our 2026 guidance, we'll be at the top end of this range. Second, our cash flow from operations with net gains on lease portfolio sales target was $1.2 billion to $1.4 billion over the period. To date, we have achieved $1.1 billion, and with our current guidance, we expect to exceed this range. It is important to note this excludes non-cash gains.

I'll now turn the call over to Eric to talk through financial results and our guidance for 2026.

Thank you gene and good morning, everyone.

Before I talk through our financial statements I want to take a moment to walk through our recent strategic broker partnership restructuring would it be.

These were truly.

Prior to this transaction approximately 23000 railcars.

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Partnership vehicles were partially or fully consolidated on our balance sheet repaired accruals.

As part of a new foundries for Napier Park, we began simplifying the fleet structure.

We took full ownership of its European 2021 fleet for approximately 6235 brokers and.

Pier Park assumed full ownership of the truck fleet, approximately 10000 feet or 50 ropers.

The transaction value of the <unk> fleet was significantly higher than our book value, which resulted in a $194 million non cash gain of disposition.

Eric R. Marchetto: Finally, we set an Adjusted ROE target of 12 to 15%. We ended 2024 with an Adjusted ROE of 14.6% and ended 2025 with an Adjusted ROE of 24.4%, averaging 19.5% over the first two years of the planning period. These targets were introduced with the overall guidance of approximately 120,000 industry railcar deliveries over the period. Our current outlook reflects deliveries of approximately 100,000 units. Importantly, this demonstrates the strength and flexibility of our operating model. We have proactively aligned our business to match the evolving market conditions while continuing to deliver on our financial commitments. As Gene noted, our 2025 results underscore the strength and resilience of our platform and our ability to deliver attractive returns in a more challenging operating environment.

Our railcar leasing fleet now consists of 101000 railcars in our balance sheet and 45000 brokers under management as part of their railcar investment vehicles.

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Rovs.

Our RV program provide servicing revenue of approximately $20 million per year, which is part of our leasing operations.

The RSV program also provide scale to our platform, which enhances the unique view, we have with the North American railcar market.

Furthermore, this broker partnership transaction underscores the embedded value in our assets.

We have over 101000 railcars in our balance sheet carried at a cost of $6 3 billion.

We estimate that the market value of these railcars will be approximately 35% to 45% higher than the carrying value.

Eric R. Marchetto: As we look ahead to 2026, we remain highly confident in our trajectory. With the disciplined execution, continued cost rationalization, and a flexible platform, we believe we are well positioned in the market. These strengths give us the foundation to navigate uncertainty, and more importantly, the capacity to generate meaningful, sustainable value for our shareholders over the long term. Operator, we are now ready to take our first question.

Which demonstrates the estimated 3% to 4% annual appreciation, we have seen a railcar values over the last 20 years.

While lease rates have increased they have not increased the same pace as railcar asset depreciation.

We can choose to generate value from our railcars over the long term by holding move in our fleet as lease rates continue to rise or by selling them.

This gives us conviction in the long term returns of the business.

Operator: We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you're 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. At this time, we will pause momentarily to assemble our roster. The first question comes from Harrison Bowers with Susquehanna. Please go ahead.

Moving to the income statement.

We ended the year with fourth quarter revenue of $611 million in full year revenue of $2 $2 billion.

This was down year over year due to lower external railcar deliveries.

Our fourth quarter earnings per share of $2 31.

Reflects a strong end of the year and an impact of approximately $1 50 from the fourth quarter Revpar partnership restructuring.

Full year EPS of $3 14.

Harrison Bowers: Hi, Gene, Eric, thanks for taking my question. Maybe just to start off high level on what you're seeing in demand, can you sort of talk about, you know, if you're seeing improving inquiry levels and if conversion times to actual firm orders are improving at all, beginning to uncompress? And just what's the latest you're hearing from customers broadly, you know, about tariffs, broader trade clarity, and some expectations for demand as the year progresses? Thank you.

It was up 73% year over year in.

In line with our guidance of $3 five to $3 20.

Before the impact of the Revpar partnership restructuring, our 2025 performance was above the midpoint of our previous guidance.

Moving to the cash flow statements.

Our full year cash flow from continuing operations was $367 million.

Our full year net lease fleet investment was $350 million.

E. Jean Savage: Good question, Harrison. So customers are engaged, but the decision cycles are still longer than they have been in the past. You know, it appears to be delaying orders. It's not destruction of the demand. When you look at the replacement demand fundamentals, they're still there. We have over 200,000 railcars that are over 40 years old, and when you look at current inquiry levels, they are increased, which is encouraging. But as you heard, our expectations for 2025, or excuse me, 2026, are only 25,000. So we are seeing inquiry pick up. We think that may lead to return to replacement level demand in 2027, but still expect 2026 to be a little bit lower.

At the top of our guidance range.

<unk>, our conviction in deploying capital in our own fleet.

Additionally, we returned $170 million in 2025 to our shareholders through dividends paid and share repurchases.

In December we raised our quarterly dividend to <unk> 31 per share.

Marking seven consecutive years of dividend growth with an annualized growth rate of 9%.

This reflects <unk> commitment to returning capital to shareholders.

We are ending the year with a strong balance sheet, we have liquidity of $1 1 billion.

Through cash revolver availability in our warehouse.

Our loan to value for the wholly owned lease fleet is 72%.

The increase in our LTV was the result of the debt restructuring we completed in October as well as the addition of the TRP 2021 fleet to our wholly owned fleet.

Harrison Bowers: Thanks. And could you maybe touch on what your expectations are for improving inquiry levels and, you know, and how many incremental orders you might need to see to maybe backfill some space, you know, embed in what your guidance is for the year?

We are very comfortable with the leverage on our fleet.

And our regular refinancing our railcars at our debt amortizing to keep our debt and an appropriate range.

E. Jean Savage: Sure. So when you look at what's going on in the marketplace right now with the lower demand, you're seeing some builders not being quite as disciplined, and so we are seeing some pressure on those margins and having to fight pretty hard on our typically the specialty cars; we do really well and some of the other ones. So all the work we've been doing to lower our breakeven is really playing through and what you're seeing in our rail product group margin. And then for 2026, we're still calling for the 5% to 6%, but it's aggressive out there. We're still being disciplined on what we're taking in and making sure that they're good orders that make sense for us to do.

Our balance sheet gives us the flexibility, we need to effectively deploy capital and run our business.

And now I'd like to talk about our expectations for 2026.

As Jim noted, we're expecting industry deliveries of about 25000 railcars and we expect to maintain our historical market share of those deliveries.

Despite the lower level of new railcars, we expect to maintain our rail products segment operating margin of 5% to 6% for the full year.

We expect the secondary market to remain active and anticipate gains of $120 million to $140 million in 2026.

We see an opportunity to further simplify our fleet structure and contribute the remaining partially owned railcars to our managed Napier Park fleet in the second quarter.

E. Jean Savage: When you look at what we have to fill, we still have room in the back half of the year, so we'll continue to see that progress as we go through the different quarters the first half of this year.

While this transaction is not complete we have included the anticipated gains and our full year guidance.

Harrison Bowers: Thanks. And could you maybe level set what you would expect margin cadence and, and maybe deliveries throughout the year, you know, even if directional, just to get a sense, you know, if there's anything, if any quarters are, you know, well above or below that 5% to 6% range that you called out?

We expect leasing and services full year segment margins of 40% to 45%, including the impact of gains and any further railcar partnership restructuring activities.

E. Jean Savage: ... Yeah, so you know we don't give quarterly guidance, but I would expect it to be fairly even throughout the year.

In addition to the gains we expect higher lease rates to contribute to a higher operating margin.

Offset by higher fleet maintenance activity in 2026.

Harrison Bowers: Great, thank you. Can you maybe speak a little bit more to the sort of, easing FLRD, but also seeing the really positive renewals, versus expiring, and just what maybe sequential lease rates are and how you expect, for those to perform throughout the year?

We expect a full year net lease fleet investment of $450 million to $550 million.

Reflecting new lease originations secondary market sales and purchases.

In fleet modifications and sustainable conversions.

We expect operating and administrative capex of $55 million to $65 million.

E. Jean Savage: Sure. So the FLRD remains positive for the 18th consecutive quarter. When you're looking at the renewal rates, like you talked about, they're materially above expiring rates at 28.6% for Q4, and utilization improved quarter-over-quarter. What you're seeing from the moderation on the FLRD is really lapping prior strong repricing that we've had. But when you look at the value of these assets, we think it supports continued lease rate upside. I think you ask about quarterly and, annually, our average lease rate continues to go up quarter-over-quarter and year-over-year. So we're still seeing positive results there and expect to still have some headroom.

Which includes further investment in automation technology, a modernization of facilities and processes.

We expect slightly lower SG&A costs from 2026.

We expect a full year tax rate of approximately 25% to 27% for the full year.

And finally, we expect a full year EPS of $1 85 to $2 10.

We have made structural changes to our business over the last few years that have improved our profitability and returns throughout the economic cycle.

With our 2026 guidance I would also like to close with an update on our three year targets, we set at our 2020 for Investor Day.

Harrison Bowers: Thanks. And maybe taking a step back on leasing, you know, so can you maybe speak to your expectations on the potential for additional leasing consolidation, whether, you know, in the form of some of the partnership or reorganization that you've talked about, or if you would expect, you know, further consolidation in the space, and maybe what the level of private capital in the space, just to maybe general overview on the competitive dynamics, you know, with regards to the leasing space.

As you recall, we have introduced three enterprise kpis with targets over the 2024 to 2026 timeframe.

Net lease fleet investment cash flow from operations with net gains on lease portfolio sales and adjusted return on equity.

First our three year net lease fleet investment target was $750 million to $1 billion over the three years.

To date, we have invested $531 million and with our 2026 guidance will be at the top end of this range.

Eric R. Marchetto: Sure. Hey, Harrison, it's Eric. I'll, I'll take that one. We have seen some consolidation in the leasing space over the last few years. And so, and that, and that just speaks to the attractiveness of the asset class. We have seen capital looking to come in to the space. As you get out and speculate on what could happen in the future, yeah, I know there's capital there that would like to do things, but, you know, it, it takes two, and so I'm not anticipating anything in the near term. But there, you know, there is still very active trading at more at the portfolio level and the asset level, and we would expect that to continue.

Second our cash flow from operations with net gains on lease portfolio sales target was one 2 billion to $1 4 billion.

Over the period.

To date, we have achieved $1 1 billion.

And with our current guidance, we expect to exceed this range is.

It is important to note this excludes noncash gates.

Finally, we set a adjusted ROE target of 12% to 15%.

We ended 2024 with an adjusted ROE of 14, 6% and ended 2025 with an adjusted ROE of 24, 4%.

Eric R. Marchetto: When you talk about the partnerships, some of the private capital, you know, there's always possibility with that, but it seems like there's still an appetite to grow from that private capital, from the private capital standpoint.

Averaging 19, 5% over the first two years of the planning period.

These targets were introduced with the overall guidance of approximately 120000.

Industry railcar deliveries over the period.

Harrison Bowers: Great, thanks. You know, I'll hop back. I'll, you know, pass it over and hop back in the queue if I have other questions.

Our current outlook reflects deliveries of approximately 100000 units.

Eric R. Marchetto: Yep.

Harrison Bowers: Thank you.

Eric R. Marchetto: All right. Thank you.

Importantly, this demonstrates the strength and flexibility of our operating model we.

E. Jean Savage: Thank you.

Operator: The next question comes from Andre Tomchek with Goldman Sachs. Please go ahead.

We have proactively aligned our business to match the evolving market conditions, while continuing to deliver on our financial commitments.

Andre Tomchek: Hey, good morning, Gene, Eric, and Leanne. I appreciate you taking my questions. I just wanted to start a bigger picture as well. We could just talk a little bit more about the guidance range that you laid out. Could you help translate sort of the low end versus the high end of the range relative to your expectations for customer demand through 2026? It might have been asked a little bit earlier, but I guess specific to the manufacturing deliveries, maybe what it means in terms of absolute levels of deliveries throughout the year, and then what you're expecting for ordering activity in the first half of this year in order to get to your full year targets? Thanks.

As gene noted our 2025 results underscore the strength and resilience of our platform and our ability to deliver attractive returns in a more challenging operating environment.

As we look ahead to 2026, we remain highly confident in our trajectory.

With the disciplined execution continued cost rationalization and a flexible platform. We believe we are well positioned in the market.

These strengths give us the foundation to navigate uncertainty and more importantly, the capacity to generate meaningful sustainable value for our shareholders over the long term.

Eric R. Marchetto: Yeah. So Andre, thanks for, thanks for the call. Let me see if I can help you through that. When you look at, you know, we talked about 25,000 deliveries for the industry. We haven't given any more detail on our deliveries other than it being our normal range of 30 to 40%. So that would imply, you know, you can imply what you get from that, from the math. When you look at just the guidance range, so that's what you're gonna get from rail products, and also we gave you the margin of 5 to 6%, there. And so that's kind of the big piece of it.

Operator, we're now ready to take our first question.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.

Anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

The first question comes from Paris, <unk> borrowers with Susquehanna. Please go ahead.

Hi gene Eric Thanks for taking my question, maybe just to start off high level on what you're seeing in demand can you just sort of talk about <unk>.

Eric R. Marchetto: You know, when you look at the range that we give, that we provided, you know, there's a pretty big range on the gains of $120 to 140 billion. So that's also gonna provide some of the spacing between the low end and the high end.

Seeing improving inquiry levels and conversion times to actual firm orders.

Our improving at all beginning to compress and just what the latest you're hearing from customers broadly.

Andre Tomchek: Got it. That's helpful. I think you called out 190 basis point margin headwind in manufacturing in Q4, if I had that right. I just wanted to clarify that point first, and then just what we should expect sort of off of that run rate, if that's sort of an adjusted number. I think it would be closer to, like, 6.5%, if I have that right for Q4 for manufacturing. How do we think about... is it still just the 5% to 6% through the year, but maybe Q1 starting off closer to the low end of that range? Or how do we think relative to that adjusted number?

Tara broader trade clarity.

Expectations for demand as the year progresses. Thank you.

Good question Harrison So customers are engaged Bob said decision cycles are still longer than they have been in the past.

It appears to be delaying orders, it's not destruction of the demand.

When you look at the replacement demand fundamentals. They are still there we have over 200000 railcars that are over 40 years old.

Eric R. Marchetto: Well, we didn't adjust, so it, we just, we called out the, the difference in, in, the, the reserve that we took. But, when you think about it, as Gene mentioned, it should be relatively smooth. We did have, as we talked about in the third quarter, on some of the specialty mix that we had, on the tank car side, in the third quarter. Some of that carried through in the fourth quarter, so you got a little bit of benefit there. As we get to more of a traditional mix going forward, that's where we're in the five to six. You know, the five to six also with, with the volume that we're talking about, we're happy with that, especially with, as you mentioned, the, the amount of unsold space that we have....

And when you look at current inquiry levels, they are increase which is encouraging.

As you heard.

Our expectations for 2025 or excuse me 2026.

Our only 25000. So we are seeing inquiry pick off we think that may lead to REIT.

Return to replacement level demand in 2007, but still expect 2006 to be a little bit lower.

Thanks, and could you maybe touch on what your expectations are for improving inquiry levels.

And how many incremental orders you might need to see to maybe backfill some space.

And what your guidance is for the year.

Eric R. Marchetto: You talked about order cadence, I guess. I didn't answer that previously. But you know, last quarter, their industry orders were about 5,800 units, and so, you know, that's kind of what we'd expect going forward, in the near term, to get to that 25,000 units for the year.

Sure. So when you look at what's going on in the marketplace right now with a lower demand youre seeing some builders not being quite as disciplined and so we are seeing some pressure on those margins and having too.

Fight pretty hard on our typically.

Andre Tomchek: Understood. It seems like we have a firm grasp on sort of the volume picture for manufacturing this next year. Curious if you could help out on the sort of revenue per unit in manufacturing. Are there any sort of notes to consider around mix in 2026 from a revenue per delivery perspective?

The specialty cars, we do really well in some of the other one so all the work we've been doing to lower our breakeven is really playing through and what youre seeing in our rail products group margin and then 426, we're still calling 25% to 6%.

But its aggressive out there we're still being disciplined on what we're taking in and making sure that there <unk>.

Eric R. Marchetto: You'll get a. I mean, at the lower levels, there's a little more tank car mix than freight car mix. Generally, those are a little higher unit pricing. As Gene mentioned, it's a competitive environment out there, so you, you got, you got a little bit of pricing pressure on the top end. And then we're trying to take, we've got our initiatives to take the cost out to preserve as much of the margin as we can at these lower volume levels. You know, these are, these are low volume levels that we're operating in, so every bit helps.

Good orders that makes sense for us to do.

When you look at what we have to fill we still have room in the back half of the year. So we'll continue to see that progress as we go through the different quarters. The first half of this year.

Thanks, and could you maybe level set what you would expect margin cadence and maybe deliveries throughout the year, even as correctional just to get a sense.

If theres anything if any quarters are well above or below that 5% to 6% range that you called out.

Andre Tomchek: Yep, that makes sense. Maybe just shifting to leasing. Just curious if you could dig in a little more on the initial feedback of the partnership restructuring deal that you completed in Q4, and then just the moving parts of that into 2026, regarding the level of your owned lease fleet, through the year, and then revenue per unit and leasing would be helpful as well. And then just on that, the moving parts, sort of the minority interest that you mentioned in 2026, maybe what level we should be thinking there, or what you're baking in? Appreciate it.

Yes. So you know, we don't give quarterly guidance, but I would expect it to be fairly even throughout the year.

Great. Thank you.

Can you maybe speak a little bit more too.

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Easing at all R&D.

<unk> also seen the really positive renewals.

<unk> expiring.

What may be sequential lease rates are and how you would expect for those to perform throughout the year.

Eric R. Marchetto: Yeah. Okay. I'll start there. Let me just reset. At Napier Park, they've been a partner of ours since 2013. They're our longest RIV partner, Railcar Investment Vehicle partner. And as part of a new fundraise that they did, we divided these assets up in December. What we really like about it is we think it really demonstrates the value of the fleet. And recall, when you look at our fleet, our fleet's at, for the most part, most of our assets is at manufacturing costs. And so when you apply a market value against a manufacturing cost basis, you get the types of gains that we saw in the fourth quarter. This increases our RIV program to about 45,000 railcars, so a significant piece of our fleet.

Sure. So the srd remains positive for the 18th consecutive quarter and when Youre looking at the renewal rates like you talked about there are materially above expiring rates at 28, 6% for the fourth quarter and utilization improved quarter over quarter, what youre seeing from the moderation.

The <unk> is really lapping prior strong re pricing that we've had.

But when you look at the value of these assets. We think it supports continued lease rate upside.

Thank you ask about quarterly and annually our average lease rate continues to go up quarter over quarter and year over year. So we're still seeing positive results there and expect to still have some headroom.

Thanks, and maybe taking a step back on leasing.

Can you maybe speak to your expectations on the potential for additional leasing consolidation whether in the form of some of the partnerships or reorganization that you talked about or if you would expect.

Eric R. Marchetto: As I mentioned in my script, that provides about $20 million a year in fee income, which we really like that. It also provides a lot of scale for our business. You know, 45,000 railcars that we are the lessor on, that we run through our shops, it just provides a lot of scale, for our business. Also, you mentioned the minority interest. This will help simplify our balance sheet when less partially owned, and less minority interest that comes out, so it'll be simpler from an outside perspective. As we look ahead in 2026, we see an opportunity to do something similar with the remaining partially owned assets. We're including that in our gains guidance of $120 to $140 million.

Some for further consolidation in the space.

And maybe what the level of private capital in the space, just maybe general overview on the competitive dynamics.

With regards to leasing space.

Sure, Hey, Harrisons, Eric I'll take that one we have seen some consolidation.

In the leasing space over the last few years.

And so and that just speaks to the attractiveness of the asset class we have seen capital.

Looking to come in to this space as you get out and speculate on what could happen in the future.

No there is capital there that we'd like to do things.

Eric R. Marchetto: We would expect that to close in Q2. We don't have any of this, you know, this is, we don't have a price yet agreed to, we don't have a transaction structure agreed, but we do see, have line of sight to that happening. You know, Napier Park, while they haven't been a buyer of assets for the last several years, with this new fund, we would see them as a potential buyer in the future of assets and kind of revive them as a buyer of assets. More to come on that.

But it takes two and so im not anticipating moving thing.

In the near term, but.

There is still a very active trading at more at the portfolio level the asset level, we would expect that to continue.

When you talk about the partnerships some of the private capital.

There is always possibility with that but it seems like there's still an appetite to grow from that private capital from the private capital standpoint.

Eric R. Marchetto: But, you know, I said a lot there, so just to kind of sum it up, it demonstrates the value of our fleet, especially when you compare it to market value to cost, and it's going to create opportunities for us going forward, both in terms of fee income and then potential transactions down the road.

Great. Thanks.

Ill pass it over and hop back in the queue. If I have another question alright. Thank you.

The next question comes from Andre Tom check with Goldman Sachs. Please go ahead.

Andre Tomchek: It's very helpful color. Just maybe to clarify on the one point then, is it fair to say in the second quarter, we should expect more of the gains to occur relative to the full year target, or is that still sort of-

Hey, Good morning Gene, Eric Lee Ann I appreciate you taking my questions.

Just wanted to start a bigger picture as well.

If we could just talk a little bit more about the guidance range that you laid out could you help translate sort of the low end versus the high end of the range relative to your expectations for customer demand through 2026. It was it might have been asked a little bit earlier, but I guess specific to the manufacturing deliveries maybe what it means in terms of apps.

Eric R. Marchetto: That's what I'm saying, yes.

Andre Tomchek: Got it.

Eric R. Marchetto: That is, what I'm saying.

Andre Tomchek: And then just one more broad question for Mayan to close out. Not sure how far you guys want to venture out, but, you know, however you can talk about this would be helpful. Just curious, sort of your level of confidence on 2026, marking a bottom for customer ordering activity or maybe industry delivery activity, maybe if your customers are giving any indication that that could be true. And I guess the question is, what could, you know, what could cause the prolonged downturn to linger into 2027 from a risk perspective? Or is it just tough to envision that at this point, just given how long in the tooth it feels we are in this industrial slowdown or freight recession? Thanks again for the time.

Levels of deliveries throughout the year.

And then what youre expecting for ordering activity in the first half of this year in order to get to your full year targets. Thanks.

Yes, so andrea thanks for thanks for the call.

Let me see if I can help you through that when you look at.

<unk>.

We talked about 25000 deliveries.

For the industry, we haven't given any more detail on our deliveries.

E. Jean Savage: Yep. Thank you, Andre. So when you look at what we're seeing in 2026, the rail traffic had improved besides the weather that we saw. So if car loads were improving, that's a good thing. We just heard the manufacturing hiring, the jobs report was up. So even though we're not calling victory, we're saying we're starting to see signs that it's stabilized or bottomed out and starting to improve from there. The timing of that, your guess is as good as mine, but we really think that 2026 may be that bottom and start to come out from there for 2027.

Would be in our normal range of 30% to 40%.

So that would imply.

You can imply what you get from that from the map.

When you look at just the guidance range, So that's where you're going to get from rail products and also we gave you the margin of 5% to 6%.

There.

And so thats kind of a big piece of it when you look at the range that we gave that we provided.

It was a pretty big range on the gains of $120 billion to $140 billion. So thats also going to provide.

Some of the.

Andre Tomchek: Thanks for all the time this morning. Appreciate it.

The spacing between the low end or the higher.

Eric R. Marchetto: Yep, thank you.

E. Jean Savage: Thank you.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Gene Savage for any closing remarks.

Got it that's helpful and I think you called out 190 basis point margin headwind in manufacturing in the fourth quarter. If I had that right. So I just wanted to clarify that 0.1st and then just what we should expect sort of off of that run rate if that sort of an adjusted number I think it would be closer to.

E. Jean Savage: Thank you. So Trinity is structurally stronger, more resilient, and better positioned today than in prior cycles. We'll remain disciplined and focused on continuing to drive improvements in our business. We are intentionally structured to generate resilient earnings and strong cash flow through disciplined lease pricing, active portfolio management, and balanced capital deployment. Thank you for joining us today on today's earnings call.

Six 5% if.

If I have that right for the fourth quarter for manufacturing how do we think about is it still just the 5% to 6% through the year, but maybe the first quarter starting off closer to the low end of that range or how do we think Ralph is that adjusted number.

So we didn't adjust.

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

We've called out the difference.

And the reserve that we took.

When you think about it as gene mentioned is it should be relatively smooth we did have.

As we've talked about in the third quarter of some of the specialty mix that we've had.

On the tanker side.

In the third quarter some of that carried through in the fourth quarter. So you got a little bit of benefit there.

As we get some more of a traditional mix going forward.

Thats, where we are in the five to six 5% to six also with the volume that we're talking about we're happy with that.

Especially with US you mentioned.

I don't have unsold space that we have.

Yes.

Tom.

Order cadence I guess, except for previously.

In the last quarter industry orders were about 5800 units and so that's kind of what we'd expect going forward.

In the near term.

To get to that 25000 units for the year.

Understood and it seems like we have a firm grasp on sort of the volume picture for manufacturing. This next year curious if you could help out on the sort of revenue per unit and manufacturing are there any sort of.

No just to consider around mix in 2026 for from a revenue per delivery perspective.

Youll get.

At the lower levels, there's a little more tank car mix than freight car mix generally those are a little higher unit pricing.

As gene mentioned, it's a competitive environment out there. So you got to go a little bit of pricing pressure on the top end and then we're trying to take we've got our initiatives to take the cost out to preserve.

As much of the margin as we can with these lower volume levels. These are these are low volume levels that we're operating in so.

Every bit helps.

Okay that makes sense.

Maybe just shifting to leasing just curious if you could dig in a little more on the initial feedback of the partnership restructuring deal that you completed in the fourth quarter and then just the moving parts of that into 2026 regarding the level of your owned lease fleet through the year end and then revenue per unit and leasing would be helpful as well.

And then just on that the moving parts sort of the.

The minority interest that you mentioned in 2026, maybe what level, we should be thinking there or what youre baking in I appreciate it.

Okay.

I'll start there let me just reset.

Good day Pier Park, they've been a partner of ours since 2013, there are longest.

<unk> partner of railcar investment vehicle partner.

As part of a new fund raise if they did we divided these assets.

In December.

What we really like about it is we think it really demonstrates the value of the fleet and recall when you look at our fleet our fleets. It for the most part most of our assets is it manufacturing costs.

So when you apply a market value against the manufacturing cost basis.

Get the types of gains that we saw in the fourth quarter.

This increases our RSV program to about 45000 railcars, so a significant piece of our fleet.

As I mentioned in our script in my script.

That provides about $20 million a year in fee income, which we really like that it also provides a lot of scale for our business to 45000 railcars that we are the lessor on.

That we run through our shops. It just provides a lot of scale for.

For our business.

Also you mentioned the minority interest this will help simplify our balance sheet when you.

Yes, partially owned.

And less minority interest that comes out so it will be simpler from a from an outside perspective as we look ahead in 2026.

We see an opportunity to do something similar with the remaining partially owned assets.

We are including that in our gains guidance of $120 million to $140 million we.

We would expect that to close in the second quarter. We don't have any of this this is we don't have a price you had agreed to we don't have a tree structure agreed, but we do see won't have line of sight to that happening.

And.

Napier Park, while it hasn't been a buyer of assets for the last several years with this new fund, we would see them as a potential buyer of the future of assets and kind of revive.

Them as a buyer of assets more to come on that.

I said a lot there so just to kind of sum it up it demonstrates the value of our fleet, especially when you compare to market value to cost.

Create opportunities for us going forward both in terms of fee income and then potential transactions down the road.

All right very helpful color, just maybe to clarify on the one.

Is it fair to say in the second quarter, we should expect more of the gains to occur relative to the full year target or is that.

That's what I am saying, yes that is.

What I'm, saying.

And then just one more broad question from mining the closeout not sure how far you guys wanted to venture out.

However, you can talk about this would be helpful. Just curious sort of your level of confidence on 2026, marking a bottom for customer ordering activity or maybe industry delivery activity, maybe if your customers are giving any indication that that could be true.

And I guess the question is what.

What could cause the prolonged downturn to linger into 2027 from a risk perspective or is it just tough to envision that at this point just given how long in the tooth. It feels we are an industrial slowdown a freight recession. Thanks again for the time.

Thank you Andre so when you look at what we're seeing in 2026.

The rail traffic.

Had improve besides the weather that we saw solid carloads were improving that's a good thing we just heard the manufacturing hiring all the jobs report was off.

So even though we're not calling victory, we're saying, we're starting to see signs that it's stabilized or bottomed out and starting to improve from there.

The timing of that Youre guess is as good as mine that we really think that 26 may be that bottom and start to come out from there for 2007.

Thanks for all time this morning appreciate it yeah. Thank.

Alright, thank you.

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

Thank you.

Trinity is structurally stronger more resilient and better positioned today than in prior cycles, we will remain disciplined and focused on continuing to drive improvements in our business.

We are intentionally structured to generate resilient earnings and strong cash flow through disciplined lease pricing active portfolio management and balanced capital deployment. Thank.

Thank you for joining us today on today's earnings call.

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

Okay.

Yes.