RAIL

Commercial Performance

• The company achieved one of its strongest commercial quarters in recent history, booking ~3,000 total units (2,600 new railcars) equal to 45% of total industry new railcar orders in the quarter, and 56% of the addressable market excluding tank cars, the highest quarterly market share in recent history.
• A milestone 1,900-unit multi-year order with deliveries through 2028 anchored the quarter's order activity, with orders coming from both repeat and first-time customers across all principal market segments, reflecting expanded customer reach and deepened existing relationships.
• The aftermarket platform continues to grow via both organic expansion and disciplined acquisitions; a second aftermarket acquisition (Southern Parts and Equipment) was completed post-quarter, broadening product offerings, customer relationships and engagement across the full railcar lifecycle.

Operational Performance

• A structural optimization of the Castaneos manufacturing operation was completed during Q2, locking in 50% cumulative manufacturing productivity gains achieved over the past two years. The restructuring generated $2.2 million in one-time Q2 costs, and is expected to deliver $12 million in annualized structural cost savings starting in Q3 2026.
• The optimization preserved full installed production capacity, core manufacturing lines and critical skilled labor to support future demand growth, resulting in a lower cost base that improves per-railcar economics while retaining the ability to scale output as demand recovers.
• Production ramp for the second half started later than originally planned, leading to a timing shift of some deliveries from 2026 to early 2027; all deferred demand remains, with no order cancellations.
• Cash generation remained strong: Q2 operating cash flow was $12.1 million, and free cash flow was $11.3 million, up 43% year-over-year. The company ended the quarter with $63 million in cash and reduced total debt by $7.3 million year-to-date.

Market Environment

• Overall industry new railcar demand remains in a cyclical trough, with 2026 full-year industry deliveries expected to stay below 25,000 units, well below the normalized long-term replacement demand of 35,000-40,000 units annually. However, railcar scrapping outpaces new ordering, the average fleet continues to age, and carload traffic growth has broadened across 16 of 20 tracked commodity segments, the widest breadth of growth in five years, building underlying fundamentals for a future demand recovery.

• Full-year 2026 guidance was revised downward to reflect the delayed production ramp and delivery shift of some units to early 2027: the company now expects 3,500-3,900 total railcar deliveries, $410-$460 million in total revenue, and adjusted EBITDA of $36-$44 million.
• The guidance revision only impacts delivery timing; aftermarket performance remains on track, and the vast majority of planned second half 2026 deliveries are already supported by the firm backlog.
• Capital expenditure guidance for full-year 2026 is maintained at $7-$10 million, including $4-$5 million in maintenance capital and completion of previously announced tank car manufacturing investments.
• Management expects Q2 2026 to be the low point of the year for adjusted EBITDA and margin, with profitability improving sequentially through the second half as production ramps and cost savings take effect.

1. New Railcar Manufacturing: Q2 2026 revenue was ~$97.3 million (representing ~86% of total Q2 revenue), with 927 railcars delivered in the quarter, down from 939 units and $118.6 million total revenue in Q2 2025. End-of-quarter backlog reached 3,972 units valued at $344 million, up 93% in units and 121% in value sequentially from Q1 2026. 2. Aftermarket: Q2 2026 revenue grew 13% year-over-year to ~$15.8 million, representing ~14% of total Q2 revenue. Organic growth in parts and components, plus contribution from the first aftermarket acquisition drove the increase, with a long-term expected gross margin of 32-33%. The segment is less cyclical and carries higher margins than new railcar manufacturing.

• Industry new railcar demand remains depressed well below long-term replacement levels, creating continued cyclical pressure on near-term volumes and profitability.
• U.S. Section 232 tariffs on Mexican-manufactured tank cars introduce uncertainty for the company's planned entry into the new tank car market, requiring additional evaluation of compliance and cost impacts before major capital commitments are made.
• Delivery timing shifts driven by customer scheduling preferences can create volatility in annual revenue and earnings results, even when underlying order demand remains solid.
• Future market share gains depend on continued successful execution of the company's value-focused, customer-centric strategy, which can be impacted by operational disruptions or competitive pricing pressure.

Q: What variables drive the range between the low and high end of the 2026 delivery guidance? / A: The main variable is how many new and existing backlog orders customers will accept for delivery before the end of 2026. The company has sufficient backlog to hit the upper end of guidance, but will not build railcars far ahead of customers' requested delivery dates to avoid excess inventory carrying costs and storage issues. Customer willingness to take delivery by year-end will determine where full-year results land in the guidance range.

Q: Will aftermarket gross margins remain near the current 32.6% level long-term, or will acquisitions and growth pull margins lower? / A: A long-term normalized gross margin of 32-33% is expected for the consolidated aftermarket segment. Quarterly margin will fluctuate based on product mix, as the segment has expanded beyond its historical focus on coal railcar replacement parts into new adjacent segments, but this range is expected to hold for 2027 and 2028.

Q: How do Section 232 tariffs on Mexican tank cars impact the company's plans to enter the tank car market? / A: Planned tank car retrofits starting in Q3 2026 are not subject to these tariffs and remain on schedule. For new tank car production, which is not planned for launch until late 2027/2028, the company has time to evaluate tariff implications and market dynamics before making major capital commitments. Tariffs do not change management's view that tank cars are an attractive market, but add a factor to evaluate before full commitment, which is still 12-13 months away.

Q: Is the 45% Q2 industry order share driven by one large order, or can sustained market share gains continue? / A: Market share growth has been consistent quarter-over-quarter for four years: the company held ~5% market share in 2022, and is now over 27% year-to-date in 2026. Sustained gains stem from the company's value-focused strategy, which prioritizes collaborative engineering, customized products, reliable on-time delivery, and responsiveness over lowest pricing, which has built long-term customer trust. Management expects to continue growing share through this approach even as overall industry demand recovers.