Trinity Industries, Inc. · NYSE:TRN
Trinity Industries — Investor Day (June 2024)
44 slides from Trinity Industries's investor day presentation, Jun 25, 2024
Slide 1: Investor Day 2024
Investor Day 2024 J une 25, 2024
Slide 2: Welcome
Welcome Leigh Anne Mann VP Investor R elations 2024 T R N Investor Day 1
Slide 3: Safe Harbor
Safe Harbor Forward Looking Statements and Other References Some statements in this presentation, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation R eform Act of 1995. Forward-looking statements include statements about Trinity's estima
Slide 4: Investor Day – June 2024
Investor Day – June 2024 I. Welcome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leigh Anne Mann - VP Investor R elations II. What We Believe Matters Most for Value . . . J ean Savage - CE O & President Charley Moore - Chief Commercial Officer Gregg Mitchell - E VP, Leasing & Servic
Slide 5: What We Believe Matters Most for Value
What We Believe Matters Most for Value Jean Savage CE O & President with Charley Moore Gregg Mitchell Kevin Poet Chief Commercial E VP, Leasing and E VP, Operations and Officer Services Support Services 2024 T R N Investor Day 4
Slide 6: Trinity's Operating Model and Company Purpose
Trinity’s Operating Model and Company Purpose Purpose Strategy Business Values 2024 T R N Investor Day 5
Slide 7: Key Takeaways for Today
Key Takeaways for Today Rail Partner of Choice We are a premier railcar leasing company with a platform of integrated rail capabilities to support our lease fleet and serve our customers. T his includes manufacturing, maintenance, and growing parts and services businesses Durable Cash Flow Growth Ba
Slide 8: What KPIs Matter Most for Value Creation?
What KPIs Matter Most for Value Creation? Measurable performance indicators over the time period 2024 - 2026 Net Fleet Investment(1) CFFO + Gains on Lease Adjusted Return on Portfolio Sales*(2) Equity*(3) $750M - $1B over 3 year period $1.2B - $1.4B 12% -15% over 3 year period over 3 year period *No
Slide 9: Trinity's Platform Built for Superior Performance
Trinity’s Platform Built for Superior Performance Create an unmatched rail platform that provides a full suite of customer solutions to make a Trinity leased railcar the “railcar of choice” for our shipper customers for higher fleet utilization, more value streams per railcar, and higher shareholder
Slide 10: Platform Capabilities Support Optimized Lease Fleet Returns
Platform Capabilities Support Optimized Lease Fleet Returns Fee income from R ail Lease origination capabilities Investment Vehicle give customer flexibility and partnerships worth an average Asset Management / unlock multiple monetization of 100bp to Adjusted R OE over RIV Lease Originations Partne
Slide 11: Trinity's Platform Is Broader Than Key Competitors
Trinity’s Platform Is Broader Than Key Competitors Manufacturing Leasing Aftermarket Services Freight Tank Freight Tank Maintenance Parts Management Digital Terminals ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Other Competitors Established ■■■■ Emerging ■■■■ 2024 T R N Investor Day 10
Slide 12: What Matters Most to Customers? Total Addressable Market
What Matters Most to Customers? Trinity’s end-to-end capabilities deliver cost, data, and efficiency advantages for lessees Secular shift to lease vs. own for railcar users Economics Safety 17.5 15.0 AGR 6.7% C 2021-2026 Total Addressable Market ($B) Sustainable Reliability 12.5 CAGR Total 10.0 5.4%
Slide 13: North American Railcar Market In Balance
North American Railcar Market In Balance North American Railcar Fleet and Railcars in Storage 30,000 35% Railcar Fleet Utilization in Narrow Range Change in North American Railcar Fleet (railcars Y/Y) 20,000 30% 2020 - 2023 Net North American Fleet Share of Railcars in Storage (Monthly %) reduction
Slide 14: The Railcar Industry Spans Five Commercial End Markets
The Railcar Industry Spans Five Commercial End Markets Trinity’s market-focused sales force feeds market insights and allows a better customer experience Refined Products Construction Consumer Energy Agriculture & Chemicals & Metals Products • Natural Gas Liquids • Coal • Grains • Construction • Aut
Slide 15: Voice of the Customer
Voice of the Customer “When we look forward to what are key items with Trinity Industries, number one is the relationship side of the business...we have great relationships and Trinity has really developed their intellectual portfolio there.” “We’re a growth company and when we look at growth, we lo
Slide 16: Diversified Portfolio of Railcar Equipment
Diversified Portfolio of Railcar Equipment ~ 900 Different Commodities ~ 270 Different R ailcar Designs Commercial End Markets / Commodities Refined Products & Energy Agriculture Construction & Metals Consumer Products Chemicals Aggregates, Steel and Open Open Hoppers Hoppers & & Gondolas Gondolas C
Slide 17: Optimization of Lease Fleet
Optimization of Lease Fleet Trinity has Deepened Customer Relationships through Optimized Fleet and Service Offerings.... • Optimized fleet profile through net fleet investment, utilizing both our manufacturing platform and the secondary market • Maintained high utilization rate while developing a d
Slide 18: Trinity's Digital Logistics Evolution
Trinity’s Digital Logistics Evolution Capabilities to manage the entire rail centric supply chain Shipment Procurement Order Shipment Loading & Freight Fleet & Railcar & Planning Management Execution Unloading Audit Maintenance Tracking • Trinity enhanced its Trinsight Logistics Platform offerings b
Slide 19: Roadmap to Logistics Solutions
Roadmap to Logistics Solutions Giving customers a reason to grow rail presence Manufacturing Shipment Terminal Shipment Terminals Logistics Operations Logistics Services Fleet Rate Leasing LOGISTICS Management Management SERVICES Digital, e-Commerce Freight Pay Maintenance and Audit Real-time Digita
Slide 20: Railcar Demand Supported by Retirement of Aging Equipment
Railcar Demand Supported by Retirement of Aging Equipment Estimated Age Distribution of North American Railcar Fleet (thousands of railcars) 350 300 High Replacement Potential R ailcars over 35 years old in stable/growing markets 250 ~250k railcars over 35 • Box Cars (33K) • Aggregate Hoppers/Gondol
Slide 21: Rail Products Segment Performance and Priorities
Rail Products Segment Performance and Priorities Near Term Opportunities to Drive Further Operating Margin Expansion Expected range of 9.0% - 11.0% Workforce Staffing, R etention, and Development Expected range of 7.0% - 9.0% Guidance of Standardizing Product Offerings and 6.0% - 8.0% Complexity R e
Slide 22: Trinity's Expanding Parts Opportunity
Trinity’s Expanding Parts Opportunity Focusing on high-wear, high-touch aftermarket components Trinity’s proprietary parts enhance customer service Late 2022 acquisition of Holden America scaled and help railcar owners optimize the total cost of Trinity’s manufacturing and aftermarket parts ownershi
Slide 23: Establishing New Value Streams Across Railcar Life Cycle
Establishing New Value Streams Across Railcar Life Cycle 2024 T R N Investor Day 22
Slide 24: Growth Strategies Beyond Core Are Significant
Growth Strategies Beyond Core Are Significant Synergistic revenue growth opportunities in Parts and Services Focused on improving the returns of each railcar in our fleet by creating Maintenance Railcar Telematics & customer value through increased Supply Chain Tech Parts service offerings Holistic
Slide 25: Trinity - Optimized Production Levels
Trinity - Optimized Production Levels Ceiling Benefits of Trinity’s strategy Ceiling • Stable railcar production reduces Conceptual production cycles cyclical volatility and maximizes operating leverage • Visibility and planning for production drives consistency of margins in a range of market envir
Slide 26: Business Drivers Scorecard from 2020
Scorecard from 2020 FY 2021 – 2023 Industry Deliveries ~120,000 railcars (over 3 years) Business Drivers Lease Portfolio Net Investment $500M to $600M (over 3 years) Actual of $558M Lease Fleet Utilization 95%+ 97.5% (as of 1Q24) Manufacturing OPM Mid to high single digits Pre-Tax ROE Mid-teens 16.2
Slide 27: Looking Beyond 2026
Looking Beyond 2026 Increased social demand for climate- Sustainability friendly supply chains to drive greater Demand use of rail Investment in diverse energy sources Energy expanding related supply chains Transition (e.g. food oils, acids, CO 2, etc.) R ailroads focusing on customer experience com
Slide 28: Financial Overview and Outlook
Financial Overview and Outlook Eric Marchetto E VP & CFO 2024 T R N Investor Day 27
Slide 29: Drivers of Pre-Tax ROE Since Investor Day 2020
Drivers of Pre-Tax ROE Since Investor Day 2020 PBT Initiatives • Mid-teen Pre-Tax R OE target achieved primarily through return of capital and balance sheet +370 bp optimization • Opportunity remains in continued business improvement and growth initiatives Balance S heet 16.2% Optimization LT M Pre-
Slide 30: Return of Capital Drives Improvement to ROE
Return of Capital Drives Improvement to ROE 2020 Investor Day initiatives $2,500 ~30 125 80% 20.0% %d ecr eas e in $2,000 s ha res 100 16.2% Stockholders' Equity Shares Outstanding OE Pre-Tax ROE (LTM) xR 70% 15.0% Loan to Value Ta $1,500 75 e- Pr in se $1,000 50 a re 60% 10.0% nc xi $500 25 ~3 5.5%
Slide 31: Higher Gross Investment Offset by Higher Portfolio Sales
Higher Gross Investment Offset by Higher Portfolio Sales Monetization Options for a Railcar $929 $669 $547 FY 2021 FY 2022 FY 2023 Gross Fleet Investment At time of production S econdary $751 market and R IV E xternal sale to Deliver to lease sales decrease customer, no fleet and earn net fleet $454
Slide 32: Managing to a Net Fleet Investment Goal
Managing to a Net Fleet Investment Goal FY 2021 We hit our 3-year net fleet investment target of $500 - $600M $454 • Gross investment varied $547 Three Year Period (2021-2023) based on customer $93 preference, backlog, and order volumes FY 2022 $1,587 $2,145 • Gross investment includes new builds, s
Slide 33: Capital Allocation Strategy Focused on Returns
Capital Allocation Strategy Focused on Returns Fleet investment generates highest returns for Trinity HIGHER RETURNS Fleet Capital Investment Investments Return of and M&A Debt Capital Hold Repayment LOWER Cash RETURNS Committed to Current debt Committed to R equires Strong FLR D maintaining profile
Slide 34: Drivers of ROE through 2026
Drivers of ROE through 2026 After-Tax Impact 12% -15% Adjusted R OE * Target 16.2% 13.3% Normalized Pre-Tax Adjusted Tax R ate 11.8% R OE * 2024 - 2026 LT M Adjusted R OE * LT M R OE * LT M @ 25% tax rate Adjusted ROE* range of 12% to 15% implies operating margin improvement in both segments offset
Slide 35: Trinity's Financial Targets
Trinity’s Financial Targets FY 2024 – 2026 Net Fleet Investment $750M - $1B (over 3 years) Business Drivers Lease Fleet Utilization >95% Leasing and Services S egment OPM 38% - 41% Industry Deliveries ~120,000 railcars (over 3 years) R ail Products Segment OPM 6% - 11% Adjusted R OE * 12% -15% CF fr
Slide 36: Trinity's Valuation as Compared to Peers
Trinity’s Valuation as Compared to Peers ROE and Cash Generation Should Drive a Higher Valuation Equipment Leasing & Warehouse REITs Finance Average Average Factset E stimates 2YR 2025E EBITDA CAGR 9.7% ~5.9% ~10.1% Dividend Yield 3.5% ~1.5% ~3.2% 2024E ROE 13.7% ~11.6% ~8.8% 2025E EV / EBITDA 10.1x
Slide 37: What KPIs Matter Most for Value Creation?
What KPIs Matter Most for Value Creation? Measurable performance indicators over the time period 2024 - 2026 Net Fleet Investment(1) CFFO + Gains on Lease Adjusted Return on Portfolio Sales*(2) Equity*(3) $750M - $1B over 3 year period $1.2B - $1.4B 12% -15% over 3 year period over 3 year period *No
Slide 38: Key Takeaways for Today
Key Takeaways for Today Rail Partner of Choice We are a premier railcar leasing company with a platform of integrated rail capabilities to support our lease fleet and serve our customers. T his includes manufacturing, maintenance, and growing parts and services businesses Durable Cash Flow Growth Ba
Slide 39: Q&A
Q&A TRINITY INDUSTRIES 2024TRN Investor Day 38 ~ _
Slide 40: Appendix
Appendix 2024 T R N Investor Day 39
Slide 41: Reconciliation: Total Company Pre-Tax ROE
Reconciliation: Total Company Pre-Tax ROE LTM December 31, LTM December 31, LTM December 31, ($ in millions) March 31, 2024 2023 September 30, 2020 2019 September 30, 2020 2019 (including highway products business) (excluding highway products business) Numerator: Income (loss) from continuing operat
Slide 42: Reconciliation: Total Company Adjusted ROE
Reconciliation: Total Company Adjusted ROE LTM LTM ($ in millions) March 31, 2023 March 31, 2023 March 31, 2024 March 31, 2024 (as reported) (Hypothetical normalized tax rate of 25%) Numerator: Income from continuing operations $ 154.9 $ 139.8 Net income attributable to noncontrolling interest (15.0
Slide 43: Presentation Footnotes
Presentation Footnotes Slide 2 – Safe Harbor 1. LT M is calculated as the year ended December 31, 2023, less the three months ended March 31, 2023, plus the three months ended March 31, 2024, representing the financial information from April 1, 2023 to March 31, 2024. Slide 7 & Slide 36 – What KPIs
Slide 44: Contact Information
Contact Information Leigh Anne Mann, Vice President of Investor R elations 214-631-4420 TrinityInvestorR elations@ trin.net Investor Website: www.trin.net/investor-relations 2024 T R N Investor Day 43