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Wabash National Corp (WNC) Q1 2021 Earnings Call Transcript

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WNC earnings call for the period ending March 31, 2021.

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Wabash National Corp (WNC -2.63%)
Q1 2021 Earnings Call
Apr 28, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Wabash National Corporation Q1 2021 Earnings Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Ryan Reed, Director of Investor Relations. Please go ahead.

Ryan Reed -- Investor Relations

Thank you, Lindsay. Good morning, everyone. Thanks for joining us on this call. With me today are Brent Yeagy, President and Chief Executive Officer and Mike Pettit, Chief Financial Officer. A couple of items before we get started. First, please note that this call is being recorded. I'd also like to point out that our earnings release, the slide presentation supplementing today's call and any non-GAAP reconciliations are all available at IR.Wabashnational.com. Please refer to Slide two in our earnings deck for the company's Safe Harbor disclosure addressing forward-looking statements.

I'll now hand it off to Brent for his highlights.

Brent Yeagy -- President and Chief Executive Officer

Thanks, Ryan. Good morning, everyone, and thank you for joining us today. I'd like to start by mentioning how pleased we were with our first quarter results. The broader operating environment has been unusual to say the least. But we'll touch more on that in a minute. I'd like to highlight the dedication and intense focus our team demonstrated in delivering solid quarterly performance. First quarter operating profit and earnings per share came in above our expectations as we executed on the manufacturing side, while continuing to tightly manage our overall cost structure. Indicators for our core transportation, logistics and distribution markets continue to be remarkably strong. Record spot rates and expectations for continued increases in contract rates are indicative of a robust consumer demand and capital spending paired with already strained industry capacity. All types of transportation solutions are in high demand as we begin 2021, and I'll call it our final mile truck body business because of core correction in FMP's markets during 2020 was more severe than we would have expected during non-pandemic circumstances, and we're optimistic that the bounce back is going to be summerly strong. Indications from our large leasing customers is that demand has returned from small and medium-sized business segments of the market that they serve so effectively. Their rental businesses have also benefited as fleets scramble for equipment as well.

We believe these trends have staying power as the pandemic has clearly accelerated changes that were already under way in transportation, logistics and distribution, and we feel good about the demand environment as we look forward to this year and beyond. We'll now talk about the labor and supply chain situation. Robust industrial and consumer demand across the broader manufacturing landscape has created imbalances throughout an array of manufacturing supply chains, leading to aggressive increases in the price of materials as well as further compounding labor availability across the country. I'm not aware of any manufacturer that's been immune to these issues. And although we have introduced effective countermeasures to mitigate the impact within Wabash, we also feel the result in headwinds rising from those labor availability and material cost increases. Hiring remains a challenge. And after a relatively successful fourth quarter, our intake of new team members was less than desired during the first quarter and reflected of the general reality of the U.S., labor market.

We will continue to pursue additional manufacturing talent throughout 2021 as we work to meet our 2021 customer demand and prepare for our 2022 market reality. And our guidance is the reality that integrating additional manufacturing talent impacts overall productivity in the near term. This is just a simple reality of the situation. The other reality is that the bulk of this impact will not carry over into 2022. It is fair to say that supply chains were already stressed heading into this year, and we had some unique Quarter one weather events to say the least, that compounded supply chain issues and heavy winter storms impacted production; both with ourselves and our suppliers. This did impact our final mile manufacturing in Texas, disrupted basic flow of commerce for an extended period of time and significantly impacted chemical related production across many industries; all adding to the stressed supply chain, which we feel in terms of increased disruption and further increases in material costs.

The cost of commodities and semi-finish components has reacted strongly to the current manufacturing environment, constraints in basic feedstock and lack of labor availability, already elevating -- already elevated heading into the year, cost of un-hedged inputs have continued to rise which is why despite our EPS beat in Q1, we have maintained our prior EPS guidance. As I mentioned when referencing market conditions, our products remain high in demand with our customers. In particular, our molded structural composite technology is entering a new phase of market adoption, and we're moving into our next phase of modest MSC, molded structural composite technology capacity additions for 2022. As we mentioned on a prior call, continued high demand for our current dry and refrigerated products, coupled with product innovation opportunities being brought forward by the structural changes made to our product innovation and technology team means that we are in need of manufacturing capacity to capture the full value of innovation in these traditional product markets.

Our forward-looking innovation team has done excellent work to identify interesting new technologies that we can leverage across our integrated portfolio of transportation solutions and into other logistics and distribution markets. In support, we will be committing new and additional resources into our product development and launch team to further scale and accelerate the introduction of new engineered solutions and our entry into new product and customer markets. As we have now organized our commercial organization around our dynamic customer base, we're in the early stages of creating the appropriate conditions to leverage new technologies across our industry, leading first the final mile product portfolio to extend our competitive advantage with key customers. With this evolving landscape, we see real opportunity to grow in our markets and grow the shared value created with our employees, our customers and our shareholders.

Given the opportunity ahead of us, being facilitated by strategic changes to our organizational structure and the ability to leverage flexible manufacturing across product lines, I can think of few opportunities more beneficial to our long-term shareholders than reinvesting in our business to support our future organic growth. Case in point is our backlog through the first quarter. It's typical for Q1 backlog to decline sequentially after we booked large deals in the fourth quarter of the previous year.

This year, new orders get paced with our shipment activity during the quarter as we saw strong demand for our non van business, which, again, is sold out for 2021 and obviously unable to book new orders for the year. This level of demand for diversified products and final mile was expected given our customer conversations heading into the year. But it's always nice to see the committed customer orders come through. As we look to the future, demand for Wabash engineered solutions continues to grow in a manner that requires us to act on our ability to satisfy them. As I previously mentioned, we are maintaining our prior guidance. We are very pleased with how our demand environment has taken shape in 2021 and its extension into 2022 and beyond. We expected labor to be a challenge, and we were not disappointed on that. We remain on track to ramp our total man capacity to enter 2022 in a very strong manner.

However, I would say the rise of material cost has been greater than anything we could have reasonably expected, given that we are in uncharted territory with all-time highs in a number of commodities. What I'm pleased to see is that we have taken immediate decisive action to recover a large portion of those costs and manage in other ways to mitigate the impact far beyond Wabash's performance of the past. As the world begins to return to something that resembles normalcy, we are optimistic that the labor and supply chain challenges of 2021 will normalize over time and leave us with a less challenging operating environment in 2022, while freight growth remains strong and customer demand continues to be robust. We are, therefore, excited about what the future holds as many of the structural and process-based changes that we've made to our organization and having the intended outcome of synergistically furthering our ability to execute on our strategy. Our improved ability to operate and the growing reality of the established vision of enabling our customers to succeed with breakthrough ideas and solutions that help them move everything in the first to final mile is now an active play. We are executing the plan.

And with that, I'll hand it over to Mike for his comments.

Mike Pettit -- Senior Vice President and Chief Financial Officer

Thanks, Brent. I'd like to start off by giving some color on our first quarter financial results. On a consolidated basis, first quarter revenue was $392 million, with consolidated new trailer shipments of 9670 units during the quarter. Gross margin was 12% of sales during the quarter, while operating margin came in at nine -- at 2.9%. As Brent mentioned, these margins were somewhat above our expectations for the quarter as a result of continued strong cost control.

Additionally, I'd like to reference the 2020 initiatives to lower our cost structure by $20 million, of which $15 million was SG&A. Because after the first quarter, we lose clean SG&A comparisons from last year as furloughs and other temporary cost control measures were implemented beginning in the second quarter of 2020. SG&A was lower year-over-year in Q1 by $4.7 million. Additionally, about 25% of our savings initiatives are being realized as reductions in cost of goods sold. So we are pleased that these structural savings are more than holding driving a significant ramp in volumes.

Operating EBITDA for the first quarter was $26 million or 6.7% of sales. Finally, for the quarter, net income was $3.2 million or $0.06 per diluted share. From a segment perspective, commercial trailer products generated revenue of $248 million and operating income of $20.9 million. Average selling price for new trailers within CTP was roughly $26,000, which represents a 7.5% decrease versus Q1 of 2020 as a result of meaningfully higher mix of pump trailers, where prices tend to be significantly lower than 53-foot driving trailers. Diversified Products Group generated $74 million of revenue in the quarter with operating income of $6.1 million and segment EBITDA margin that hit 14.3%; which was the best level since 2016.

Average selling price for new trailers within DPG was roughly $72,000, which represents a 4% increase versus Q1 of 2020. Final mile products generated $77 million of revenue as this business ramps to meet stronger market demand. FMP experienced an operating loss of $4 million, which was expected in our prior quarterly guidance. Because of FMP's heavy and increasing amortization burden, EBITDA provides a more stable measure of progress and more relevant measure of impact on operating cash generation. We are encouraged that FMP's EBITDA moved back to positive territory during the first quarter with a gain of $621,000 as improved volumes allowed us to better leverage our fixed cost during the quarter. We expect FMP EBITDA generation to improve in the second half of 2021 as the business installs additional capacity to continue meeting customer demand through the on-boarding of new employees.

Year-to-date operating cash flow was negative $22 million. We invested roughly $4 million via capital expenditures, leaving negative $27 million of free cash flow. Although our payables widened out considerably, receivables and inventory combined to have a meaningful impact on working capital as we expected during the quarter. We continued to show working capital efficiency in Q1 as part of our One Wabash transformation, and we are well on our way to achieving a capital-efficient ramp in 2021. We continue to target $35 million to $40 million in capital spending for 2021. With regard to our balance sheet, our liquidity or cash plus available borrowings as of March 31 was $337 million of $169 million of cash and $168 million of availability on our revolving credit facility; which is fully untapped.

For capital allocation during the first quarter, we utilized $18.2 million to repurchase shares, pay our quarterly dividend of $4.3 million and invested $4.2 million in capital projects. Furthermore, in April, we made a voluntary $15 million payment on our term loan. Our capital allocation focus continues to prioritize reinvestment in the business through growth capex while also maintaining our dividend and evaluating opportunities for debt reduction and share repurchases. Moving on to the outlook for 2021. We expect revenue of approximately $1.95 to $2.05 billion. CTP is right back to bumping up against capacity constraints, while FMP is fielding plenty of demand with labor being the primary gating factor. DPG's backlog is also building nicely, though I'd like to remind you that we do have a quarterly headwind of about $6 million per quarter versus 0 go levels as a result of the absence of divested revenue.

SG&A as a percent of revenue is expected to be in the lower six range for the full year, and we remain on track to sustain the reduction in our cost structure by $20 million relative to 2019, with around $15 million of that cost out, residing within SG&A. Operating margins are expected to be in the high 3% range at the midpoint. Turning to the second quarter. We expect revenue in the range of $450 million to $480 million, up 17% at the midpoint sequentially versus Q1, with new trailer shipments of 10,500 to 11,500 as we look to keep increasing production throughout the year. Given our expectations for operating margins in the low 3% range in Q2, this implies EPS in the range of $0.10 to $0.15 for the quarter.

In closing, I'm pleased with our results to start the year. Ramping manufacturing is never easy, and this year certainly comes with unique challenges for ourselves and other manufacturers. But we see it as a great opportunity to scale up and ensure that we're firing on all cylinders as customers increasingly become focused on 2022 and what we expect to be a smoother operating environment that will allow us to return the company revenues to levels approaching what was recorded in 2018 and 2019. The company is just beginning to enter into these exciting times as the structure of our organization is in the early days of achieving its intended purpose of advancing our strategy, which emphasizes organic growth, leveraging our industry-leading first to final mile portfolio.

With that, I'll turn the call back to Lindsay and open it up for question.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Justin Long of Stephens. Your line is open.

Justin Trennon Long -- Stephens Inc. -- Analyst

Thanks and good morning. I wanted to start with the question on margin. So if I think about your operating margin guidance, it seems like the slight reduction there was mainly a function of gross margins, SG&A actually came down a little bit versus the prior forecast. So can you give a little bit more color on gross margin expectations by segment today versus where they were at the start of the year? And where are you are seeing the biggest changes?

Brent Yeagy -- President and Chief Executive Officer

Yes. I don't think that segment level has changed that much. The headwinds that we're facing that would require that slight margin compression is similar across the businesses. So you've obviously got a commodity run-up and you've got labor. So those are the two things, obviously, that both would compress gross margins. So you're right. We would expect -- we were expecting actually a little bit better levels of SG&A. So it's all coming through the gross margin line. I would say for the most part, probably CTP and FMP has seen a little bit more acutely than DPG, just given their similar geographies and their input costs. But they're all feeling those basic input cost pressures.

Justin Trennon Long -- Stephens Inc. -- Analyst

Okay. Great. And the color on the second quarter was helpful. But any thoughts around the cadence of earnings and operating margins in the back half of the year. Mainly, just curious how you expect it to exit this year. You've made the point a couple of times that the setup for 2022 is pretty compelling, just given the demand environment and some of these cost pressures starting to fade. So curious if you could give us some color on that on the back half?

Mike Pettit -- Senior Vice President and Chief Financial Officer

Yes. I think for the most part, obviously, the math would tell you our Q1 actuals and Q2 guide is that we expect the second half to be meaningfully above the first half. And that's largely because of the ramp as we continue to ramp up, we would expect sequential improvement every quarter as we go into -- from Q1 to Q2, we guided to that, and we'd expect improvement into Q3 and then Q4. So our come out rates into 2022 are something that approach where we've been in the company's very recent history of 2018 and 2019 that I talked about in my comments. So you would expect that you would see that improvement throughout the year. We're doing that. Obviously, our guide for Q2 show that we did have a little bit of a slowdown in terms of the hiring that Brent mentioned that causes Q2 to maybe be a little bit more challenged than we had thought three months ago, but still well on our way to having a sequential improvement every quarter of 2021.

Justin Trennon Long -- Stephens Inc. -- Analyst

Great, and last quick question. On free cash flow, I think you talked about being positive for the full year. Is that still the expectation?

Brent Yeagy -- President and Chief Executive Officer

Yes. Right now, with our capital plans that we guided to and our EBITDA generation, we would expect positive free cash flow.

Justin Trennon Long -- Stephens Inc. -- Analyst

Okay. Great. I'll leave it at that. Thanks for the time.

Operator

Our next question comes from Joel Tiss with BMO. Your line is open.

Joel Gifford Tiss -- BMO Capital Markets Equity Research -- Analyst

Hi guys, how you doing? So can you talk a little bit about like peak gross margins? If we look out, maybe peak is the wrong word, but sort of normalize, like as we look out to 2023 or 2024, when we get through all these sort of shorter-term issues? And just to give us a sense of how things are coming together and what you guys are looking at? Thank you.

Mike Pettit -- Senior Vice President and Chief Financial Officer

Yes, so nothing has changed in our view of -- we discussed at the last call that we think in the next two to three years we can get back to an 8% operating margin, which is still our goal. We still think that's very doable. Nothing we're seeing today, at all, would preclude us from continue to hit that, whether that's 2022, 2023 or 2024; it's difficult to say right now. So I'm not giving guidance to what year. But what we're seeing as we ramp the facilities back up and the conversations we're having with our customers and the products that are coming to the market, really make us believe those are -- that's still a very realistic goal as we get some of the near-term pressures from commodities and labor behind us. We think 2022 and 2023 will really open up and be really positive years for us.

Brent Yeagy -- President and Chief Executive Officer

Yes. I guess I'd be just a slight more bold than that. Barring the, I'll call it, headwinds that we see right now, I would just say we are highly optimistic that 8% is a doable number. We obviously are putting in plans to work to exceed that. But it's very confident in saying 8% is a doable number. And I think the way the world is lining up, regardless of calling it year, I would say that the opportunity for that to be sooner than later is becoming more evident in the way the world is shaping up.

Joel Gifford Tiss -- BMO Capital Markets Equity Research -- Analyst

Yes. It's great. Yes, because I sense that sort of the -- some of the cost reductions and the structural changes, even on the mix and all that kind of stuff, seem a little bit more positive than how things were before. Can you also talk a little bit about your customers sort of like the conversations you're having in terms of pushing pricing through? And just any sense -- it seems like the customers really need the products badly, and they're not as worried about the cost side of it, but maybe that's not exactly right. Can you just give us a little sense of how the conversations are going?

Brent Yeagy -- President and Chief Executive Officer

Well, first off, let me say, this is strictly the cost price conversation. We can talk about the more interesting conversations that we're having in terms of growth and innovation in a separate question. When it comes to managing the cost realities that we have right now, what I would say what is different is that we have literally had this conversation with every customer within Wabash National. And it doesn't matter what product market or which segment you belong with at Wabash, we're having a conversation with you. That has not always been how Wabash handled it. And the level of success and the scale at which we are acting on the portfolio is much larger than what we've seen in the past. Why can we do that? Well, we have increasing confidence. And what I would call just empirical understanding that the implicit demand for our product exceeds our ability to deliver based on the world that we live in right now. We're creating our own reality because of the demand for our product. That gives us opportunities to be bolder, more confident in the way that we talk to our customers and that's the way we've approached it; not in an arrogant sort of way, but in a matter of fact, sort of way. And when you've got steel prices that have gone up, when you're bumping against the $1400 per ton spot market, those are just real and transparent conversations that you're going to have with the customer in order to maintain a viable business. And that's what we've done. And so far, no one likes it. Not anyone had said, thank you, may have another? We'll take another, I'll say, but that's the way we approach it.

Joel Gifford Tiss -- BMO Capital Markets Equity Research -- Analyst

And then can you spend another minute on your more interesting or two minutes or whatever? And then -- I don't want to take up too much time. Thank you.

Brent Yeagy -- President and Chief Executive Officer

Yes, I would just say the last 90 days have been some of the most interesting conversations and levels of output from some of the most interesting names in logistics, transportation and distribution that I have had the pleasure of dealing with in my career. And we're just -- and it feels like we're just touching the tip of the iceberg. And they all deal with problems that are just endemic within these -- how these customers want to act on their markets over the next two, three, four, five years and how Wabash could uniquely provide them solutions that no one else is talking to them about. And in many ways, we're having that in the context of innovation that's coming from, we'll call it, a widened ecosystem that we're pulling from that they've never been exposed to. And that creates a different type of conversation than I believe our competitors have the capability of doing. And this is why we talk about, as we have these, and we touch the tip of this iceberg, it gives us reason to invest accordingly in the ability of making that real and bringing that to the customer's doorstep in the near term. So we are -- we're pretty jazzed up with that type of conversation and what we're getting so far.

Joel Gifford Tiss -- BMO Capital Markets Equity Research -- Analyst

Thats great. Thank you very much.

Operator

Our next question comes from Ryan Sigdahl with Craig-Hallum Capital. Your line is open.

Ryan Ronald Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Good morning guys. I just want to start, and you touched on it some, but just the confidence and visibility to the ramp in the second half. I guess, revenue came in weaker Q1, expectations for Q2 also weaker. So it's pushing more to the back half here despite some labor issues or challenges, etc. So I guess, what's giving you that confidence given all of the headwinds out there that you can make that up in the back half? I know demand is there, but on the production side primarily?

Brent Yeagy -- President and Chief Executive Officer

Yes. I would just say the remainder of the, what I'll call, labor ramp that we have, the -- I'll call it, we're over the basic comp of what that looks like and the time span at which we need to fill out the labor is extended, right? We have a, we'll call it, less steep of a ramp over the course of the year. We also have a set of actions, which I will not get into, that also begin to impact that labor availability in terms of, I'll just say, internal things that we're doing to attract and retain employees that we're seeing a level of traction on. The other thing that we'll see is just basic productivity gains with the labor that we've installed that we're just now starting to see that will, I will call, very straightforwardly materialize in Q3 and Q4. That's on the labor side of it. On the material cost standpoint, it's a couple of things. First off, for most -- in most cases, the backlog is set. And that allows us to have very straightforward and clean visibility as to what the material cost challenges are on a customer-by-customer basis. Most, if not all, the actions that we've taken to-date and will still take, are Q3 and Q4 materializing, just based on where the backlog, how early you can act and when those mitigation factors come into play. And so that's primarily three and four. And that's pretty straightforward calculable things that we can bake into our guidance and our sequential margin improvement. And then the other thing, where we do have open backlog, we've already priced, which is primarily Q3 and Q4, primarily Q4, in a few of the product markets that we serve, those price increases have already been put in place in real time, and those backlog slots are being filled effectively putting in the full impact of materials. That's a level of risk. So that's why we are confident in why we can continue to improve throughout the year.

Mike Pettit -- Senior Vice President and Chief Financial Officer

Yes. I'll just add one thing that's always a nuance for Wabash National, and that is in the first quarter, we actually produced significantly more trailers than what we shipped and the ship numbers is what shows up in revenue. So there's always that timing nuance. So the actual manufacturing throughput would be a little bit greater than what the revenue line would show a point. And that gives us confidence for Q2. And just to add a little more color to Brent's commentary, there is going to be some material margin hit in the second half of the year, but it's implied in our guidance, and we can see it at this point because it's in the backlog, and it will be somewhat offset by our fixed cost absorption that we'll have as we ramp up the facility going the second half of the year.

Brent Yeagy -- President and Chief Executive Officer

Yes. And I wouldn't worry too much about some implied where did CTP fall in terms of shipment. The order -- everything that was produced as in Day four are ready to ship, as Mike talked about. The other piece of it, just from a revenue recognition standpoint, the winter storm that we had was almost a week of literally a seven-day period of disruption in outbound shipment tailed off somewhat at the end of that week, but that was something that really impacted that specific business segment's ability to ship product and recognize revenue in the period.

Ryan Ronald Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Great. Maybe just on final mile specifically. It sounds like some more upbeat kind of commentary from the fleet customers, etc., or the rental fleet, I should say. Curious, operating margin, I guess, is negative again this quarter, some labor challenges there. But I guess, any way to frame up kind of timeline on when we can expect that to inflect back to profitability? Is it -- it can be Q2 or is it second half? Or is it 2022 or several years? Just any general kind of commentary on the path back to profitability there?

Mike Pettit -- Senior Vice President and Chief Financial Officer

Yes. So as I said in my remarks, we expect to generate pretty significant EBITDA in 2021. And that will give us our path to profitability on the operating income line. It won't be in Q2, most likely because we still have the ramp to do. Second half of the year will be meaningfully better than the first half of the year. As I kind of pointed to that. But by next year, I think 2022, that business should not only be generating significant EBITDA, but it should also be positive on the operating income line as well.

Ryan Ronald Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Great. Goodluck.

Operator

Our next question comes from Jeff Kauffman with Vertical Research. Your line is open.

Jeffrey Asher Kauffman -- Aegis Capital Corporation -- Analyst

Hi, Good morning everybody. Yes, terrific results in a real challenging quarter. Just a couple of quick hitters here. On the J.B. Hunt earnings call, they talked about an increase in the container order of 6000 units and their trailer order of 3000, and that incremental was going to go into their trailer pool. Which was kind of an innovative solution, as you might have mentioned, to conditions in the marketplace. I'm wondering if that kind of thing is what you're alluding to and just without naming customers, what types of solutions people are considering given the fundamentals in the trucking market right now?

Brent Yeagy -- President and Chief Executive Officer

You always ask these very interesting questions, Jeff. Absolutely what J.B. Hunt is doing and how it's acting on the overall logistics market is part of how Wabash Nationals views the future; things that are happening with brokerage/asset enabled brokerage solutions is something that we are very keyed into going forward. And J.B. Hunt is one of those customers that is acting on the market in a way that aligns with where Wabash National sees the world going and is an extension of our strategy as well.

Jeffrey Asher Kauffman -- Aegis Capital Corporation -- Analyst

Okay. Thank you. Yes. No -- we're seeing trailer pools and all kinds of interesting solutions that different companies are adopting out there. But when you use that terminology, I think of Hunt's commentary. Okay. Just a couple of quick hitters. Mike, working capital big drain this quarter. I think you alluded to a little bit of that, but I'd like to get a little more color. And also, the tax rate was a lot higher than I would have expected at 36%. Can you just address those two real quick?

Mike Pettit -- Senior Vice President and Chief Financial Officer

Absolutely. So working capital was a drain, but I did hit that commentary at the end of the year. We expected. In fact, it was less than we expected. We had some really nice working capital efficiency in Q1. We always use working capital in the first quarter as we ramp the business. But we were happy with where it came in. And I think I said it could be upwards of $50 million of working capital in the first half of the year. I see a little bit more in Q2, but we're on a good pace. We're better than we typically are in our ramp as far as being efficient with the working capital.

Brent Yeagy -- President and Chief Executive Officer

Let me just say one thing on that. I mean, obviously, that is not a, by chance, exercise with reorganization with the added kind of One Wabash approach to manufacturing, sinking up our NP&L group in our sourcing production procurement group. We are just doing a better job at managing inventories from a lean management perspective, and it's something that we are purposely looking for these results going forward and leveraging them year-over-year.

Mike Pettit -- Senior Vice President and Chief Financial Officer

Yes, which is one of the reasons we've been able to be aggressive with our capital deployment and things like paying $15 million on the term loan was because we feel really good about how we're using cash in this ramp and we're going to put some of that capital to work.

Brent Yeagy -- President and Chief Executive Officer

Yes, people -- just segue, people think lean manufacturing is all about just some operating results. We'll, no, it's about allocating resources in a more effective and value-added way. And that's where it goes. What we try to translate internally as we can work working capital, it allows us to do things for the shareholder that other companies may or may not be able to do.

Mike Pettit -- Senior Vice President and Chief Financial Officer

Yes, exactly. And then the tax rate, Jeff, was a onetime book to tax true-up for some incentive-based compensation that won't repeat throughout the rest of the year.

Jeffrey Asher Kauffman -- Aegis Capital Corporation -- Analyst

Okay. Thank you. Last follow-up. And Brent, this is going to be another one of those interesting questions. MSC, I think it sounds like a real game changer. I think it's unique. Maybe in the way DuraPlate might have been unique at the time to the dry business. We're now a few years into it. You've made a large investment in it. Kind of what's come out better than you thought, what's been a little frustrating about it? And how is your view on the role of MSC changing within the company?

Brent Yeagy -- President and Chief Executive Officer

Well, first off, I'd say we are at a very unique point in time where the, I'll just call it, assembly of factors have increased the adoption potentially talked about it in the context of refer vans We now talk about it in the context of acting within not only refrigerated van space, the refrigerated truck body space. We think it is being actively researched and prototyped in spaces outside of our, call it, current portfolio, transportation-related solutions in an active and very scalable way. That's all in, what I would call, early prototype phase. And so the amount of activity that we have around the idea of MSC technology at a scale that's significantly above how we thought about it 24 months ago. When you think about the value proposition, when you think about that this product is not tied to material costs like steel and aluminum. You start to understand that the material cost delta can begin to be -- would be a value-added feature itself. You start to go away -- wait a minute, sustainability and the active value of that for publicly traded companies is growing at an extensive rate. So there's value that is being created that wasn't in existence 24 months ago, tangible, calculable, meaningful value that goes right into executive compensation programs makes it a different sale. Those are some of the things that have come to bear. And as a result, the amount of door knocking to us, right, to explain how this could impact their business has gone up, I would just say, significantly just in the last six months. So that leaves us in a place where not only from the manufacturing standpoint, but from a total business standpoint, we are now entering into a phase where everything from how we sell it, how do we engineer it, how do we turn it into, we'll call it a scalable bill of material so that we can produce this at scale, we've entered into that phase as we look forward to the next three to five years.

Jeffrey Asher Kauffman -- Aegis Capital Corporation -- Analyst

Okay. Thats awesome.

Brent Yeagy -- President and Chief Executive Officer

Thanks Jeff

Operator

Our next question comes from Felix Boeschen with Raymond James. Your line is open.

Felix Boeschen -- Raymond James & Associates, Inc. -- Analyst

Good morning everybody. Maybe just a bigger picture question on final mile. But if we go back to the 4Q 2017 acquisition, I'm just curious, have you guys seen any changes to the customer mix within the business? Or put another way, if there are certain type of customers, whether that's more on the lightweight body side or on the larger side that you're increasingly targeting within that business?

Brent Yeagy -- President and Chief Executive Officer

Yes. There's a -- I'll call it a short and long-term component to that answer. What we've got in the near term, we saw it somewhat in 2020. We're seeing it in 2021. We're trying to understand what it looks like in 2022. The larger product, we'll just call it, 18-feet longer, it doesn't have the exact same demand characteristics, primarily based on the pandemic and kind of economic reality. That also tends to come through the leasing arm of our product channels. We don't see that as strong as we what we've historically seen, going all the way back to 2017. And that seems to be, we believe, a more near-term economic reality. Now what we are wanting to understand is how that manifests itself going forward in the 2022 to 2023 and 2024 and how that shifts back and the speed at which it does it. We believe it will. The understanding is this going to be a, what I would call a rubber band snapback is a gradual. What is it going to be? Right now, it feels more like a river band snapback. That's one side of it. I think on the longer term, we obviously see a growth in, what I'll call the class for us, Class one through IV solution set within the space as we see -- we'll say, final mile, but bigger than just what do I deliver to the home. We want to get past -- and probably we need to talk better about positioning this that the e-commerce reality effects so much more than just, do I have a product that can carry cardboard boxes to the home? And that is affecting products all the way up the FMP portfolio or even potential portfolio. So we see change happening there in that space. That is generally smaller products compared to an 18-footer or greater. So we are dedicating -- we'll call it product development mind share in that space as a result. So short answer is we think lease is going to come back, which is going to pressure us on the longer, more traditional. At the same time, we've got ample opportunity for where the market is going and more solutions being required in that smaller e-com commerce disrupted space.

Mike Pettit -- Senior Vice President and Chief Financial Officer

I think the other thing that we're seeing is that's important to note is from 2017, we're clearly seeing more pull across our whole portfolio from legacy CTP customers wanting to buy final mile product and vice versa; FMP customers want to buy CTP. It really is becoming innate. We talk about Omni channel, but it's become an Omni channel equipment by two, which is one of the reasons we've made the strategic organizational changes we've made because it really is pulling through the whole product. And MSC is the best --

Brent Yeagy -- President and Chief Executive Officer

Its cold chain [solutions] comes back to your question previous that dovetails into this. When we now talk about cold chain solutions for customers to be named at a later date. We're not talking to them about just the refrigerated van. We're talking about them -- to them about the two to three different types of, we'll call it, smaller vehicle solutions to solve a multi problem set of how you deliver and distribute, redistribute, and move within a full logistics chain, logistics cold chain. And we're asking what is the full technology solution set to be able to do that? And so that's a shift in not only how we sell, how we engineer, but it also is going to impact the mix of what we produce going forward.

Felix Boeschen -- Raymond James & Associates, Inc. -- Analyst

Right. No, that's super helpful. I appreciate all the color. I guess the follow-up to that is just on final mile margins. If we think about it from a higher level conceptually and just kind of looking at what Supreme used to run, I know we have to add back a couple of points of amortization. But then also looking at what you used to run in 2019, that was before some of the structural initiatives you guys have undertaken in the past couple of years or months, I should say, knowing or understanding that demand is on the upswing. Can you help us walk through some of the puts and takes of maybe 2022 operating margins for that business as you see it now? What are some of the key sort of KPI's that you guys are looking at?

Mike Pettit -- Senior Vice President and Chief Financial Officer

Yes. For 2022, obviously, on the margin side of FMP specifically, we really are looking to get back to a more stable position from a labor installed labor base. That will provide a significant tailwind from 2021 to 2022; which we feel very confident we'll have. And I would say that's one of our big KPI's and being able to see the labor that's coming on and stability in that. And we also think another part of that, that will help is we believe we'll have a better Q3, Q4 demand profile in that business, which is something that's over time, over decades, it's been a little weaker. We think we can -- that demand improvement in the second half of the year will propel us into 2022.

Brent Yeagy -- President and Chief Executive Officer

Yes. I think the other piece that will be a new set of KPI's for FMP, and it's somewhat leveraging what we did within commercial trailer products to change the portfolio to a better margin producing portfolio, is being able to have a more discriminate view of the relative margin potential, actual and realized by a different segmentation grouping than maybe how FMP has historically looked at its business to drive through our commercial reorganization, a different, we'll call it, quality of revenue within that business. So picture, second and third level KPI's that, we'll call it, inform and encourage different demand inputs as we go forward with this business.

Felix Boeschen -- Raymond James & Associates, Inc. -- Analyst

Right. Okay. No, that makes sense. And I just had a follow-up on the trailer pricing commentary. I know we talked about [ASP] being down, but I think it was quite a bit of mix driven. Is there any way to quantify sort of a core price metric you guys are getting out in the market right now? Or any way to just kind of normalize for the mix impact?

Brent Yeagy -- President and Chief Executive Officer

I would just say, I'll just put it this way, for a standard Wabash dry van refrigerated trailers, and primarily talking about CTP in the way and the way I think you framed that, I would just say that we are -- on that product, we are thousands of dollars higher on a standard 53-foot moderate option product, we are thousands of dollars higher in the way we price the product and realize that sale right now than where we were 120 days ago.

Felix Boeschen -- Raymond James & Associates, Inc. -- Analyst

Got it. Very helpful. I leave it there

Brent Yeagy -- President and Chief Executive Officer

Thanks Felix.

Operator

There are no further questions. Thank you, at this time I'll turn the call over to Ryan Reed for any closing comments.

Ryan Reed -- Investor Relations

Thank you, Lindsey. Thanks, everyone, for joining us today. We look forward to following up during the quarter. Have a great day.

Operator

[Operator Closing Remarks]

Duration: 47 minutes

Call participants:

Ryan Reed -- Investor Relations

Brent Yeagy -- President and Chief Executive Officer

Mike Pettit -- Senior Vice President and Chief Financial Officer

Justin Trennon Long -- Stephens Inc. -- Analyst

Joel Gifford Tiss -- BMO Capital Markets Equity Research -- Analyst

Ryan Ronald Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Jeffrey Asher Kauffman -- Aegis Capital Corporation -- Analyst

Felix Boeschen -- Raymond James & Associates, Inc. -- Analyst

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