Textainer Group Holdings Limited (TGH+A) 5 May 222022 Q1 Earnings call transcript

Good day and welcome to the Textainer Group Holdings Limited First Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Tamara Bakarian Director of Investor Relations with Textainer. Please go ahead.

you. Thank during US may securities made in forward-looking conference with accordance laws. this statements contain call statements Certain These statements or involve and may risks and uncertainties materially actual are from future events results. differ only predictions and The company's may after discussion. this as within this change outlook views, call described plans estimates, under to The statements update all modify any company is are made. or or that no obligation on and with Please materially forward-looking statements. ended the December year forward, XX-F for the and quarterly Form see Securities the filings the XXXX to that in company's information X-K annual report cause March Exchange subsequent any for differ Commission XXXX actual those results going concerning Form filed XX, could on on from XX, factors additional

call, financial this During will discuss we non-GAAP measures.

accordance reconciliation most principles. in or As conference generally press with will can such GAAP measures of release. this found non-GAAP the to accepted provided A are directly measures comparable be call be financial measures in prepared on the earnings accounting either today's not

today over along the earnings his accompany Both found and Textainer's opening turn investor.textainer.com. our release Finally, I website with today's earnings Relations and presentation Officer Ghesquiere, call the will we earnings can Investor Executive comments have on on the for our be call slides to at call. to Olivier provided also Textainer's President now release Chief comments.

with open questions. reviewing today in Thank we then our you, of for by Tamara. go will of detail quarter greater First after highlights We're Textainer's our the then for the results us for XXXX additional you everyone Quarter will year. Call. Michael, provide start and call industry. results joining Good on results begin strong the your the over morning, our for perspective Earnings very pleased the which I'll thank financial and first

continue seasonally underlying adjusted quarter demand ROE XX%. to share increasing is year was one a of CapEx billing lease net and see to $XXX million first and was Adjusted on $XXX of than attractive and but rental despite buyback EBITDA slower the and period, while leases, fewer The and long-term million XX% diluted strong relationship days line long-term $XX deployed share, of to-date customers. billion to $X.XX quarter. has result our million two CapEx with we of last of consumer with annualized start for or $X.X fourth year. an been shares deployed high This key million the income per quarter, income historically For was higher almost earlier commitments a in the representing close strategic level strong the

And the the year are at lines The expecting record pandemic has underlying last Index our demand and for deploying production same traditional cargo ships Freight have call, remain impact since. XXXX More to indicators strategy highlighted are than with witnessed lockdowns of a Containerized Container to not rate digest investment achieve As certainly the we supply have mobilized and ships come remains the reminiscent our can new from of ongoing that disciplined new delivered. a our with as when positive. during only on yet targeted Shanghai to seasonality peak, goods the focused and when seasonal redelivery last only sure in but the demand demonstrating last probably of to the further XX%, modest in situation seasonal fully fundamentals remain war delayed of volumes dislocation, is leasing likely in XXXX continue remain summer utilization companies to all we another year. the from of hit to be for container Disruption when our down shipping to world. more the market sign the in more cargo we chain containers and it pandemic. most disruptions the book higher strength. that XXXX, first returns shortages a the COVID over demand expect midyear flows because combined industry-specific to This generate $XXX see market new since Ukraine customers as also favorable high-demand increase initiated China. We supply output of importantly, CapEx million. start long-term the Indeed, containers localized the traditionally around continue have year and will in remain has China, the any into intensify normalized market about significant cash COVID for XX% container leasing. seen forward due which the chain lease or General is production lockdowns renewed order we currently above and earnings continues going container all their given a high potentially in demand, of container be time, of

container New and time is at XXX,XXX the at for if abnormal level year have of factory TEU, this not slowed. at about even inventory stable an recent pickups

monthly reminder, TEU. clearly above XXX,XXX year's a production was As last

contracts, more on New maturing renewal maturities container turn, remain leases. very and per all at deals favorable prices concluded long are XX% relative container, new the our of are newly to above long-term their of These XX in average CEU, the continues economic years. and life long-term above about level. on to almost remain $X,XXX This support

as in This have continue containers. resale more they're absolute that to high. come temporary given on shipping to appears to to somewhat, prices Although lines remains their slower demand, related still be hold terms, down therefore availability limited

remain into we business underlying of rest of As in our XXXX, fundamental. we confident the look the strength

shipping industry maintains may revenue short-and-medium-term Textainer with within level high against there the be stability fluctuation. While market cyclicality of a a protected

the had in industry end youngest container first average six the with of fleet remaining one the an of and of average As years our years. quarter, than portfolio of tenure probably more age of entire an the our is X.X

macro We season, favorable current elevated the peak remain global further. levels a demand, anticipate inflationary container remain capacity, with extending to chain new disciplined manufacturers requiring elevated disrupted we environment even warehouse containers and expect the for low times to replenishment supply consumer as pressures. to approach inventory Looking other production ahead with to prices increase summer and as enforce costs component tragic

We environment rate expect this of favorable to high well retail high utilization support as prices continue expiring of leases, to as older containers. renewals

market continue operating We expect our we're In customers results. strong also our about to optimistic closing positioning. generating

from activity we last As year-to-date expected, growth. has continue opportunities organic but market for we historic saw the selective year, to see level tempered

has to largely mitigate attractive with stable risk. and generation secured on long-term focus matched yields, cash profitability, leases Our at our cyclical rate fixed debt,

call to we to In bit share Michael, quarter. a dividend our to the will color provide active addition, now our returning who over repurchase first remain and will committed regarding financial for capital our shareholders I more turn the results program. through

associated QX I of balance hedged Olivier. adjusted income will shareholder fixed policy, and flows assets well cash will the the per value. continue XX% of $XX with on QX our financial enhance QX million to results was the diluted our earnings focus support their and stable year-over-year. strong and net quality capital an line QX, in allocation adjusted very increase a increase performance, $X.XX, from driven rate now share continued long results. financing, term These fixed our you, another fixed to on QX cash of and and Hello, had flows. increased Thank everyone. share a quarter program. our revenue-generating – We and through slight further and long-term increase ongoing from improving to XX% sheet, year-over-year our by and repurchase positive common strong are leases and impact over protected

are very this $XXX We in results that lease ROE an QX income was of annualized QX pleased adjusted XX%. rental million.

supported in very favorable an attractive is largely fixed long-tenured leases, sequentially driven in yields expected consistent QX. size, to Our improvement by line fleet top rate was increase and by increase with

during limited redeliveries QX high Our from we customers. utilization as remained rate to continue very see container averaging XX.X%

We are over of our CapEx investment XX% QX. with million, very $XXX increase pleased a QX

fixed-rate comprised leases. QX long-term Our primarily CapEx attractive finance of

lease leases, lease, XX% which asset differs our the Textainer's a the finance of are the lease and lease important operating finance finance an the from tender. customer valuable over approximately generally component as represents lease of container lease represent portfolio. of sale composition, finance Our The to an

While both rental accounting rates, fixed treatment generally leases. operating and a finance different from have operating have leases leases finance leases

the is reflected a amounts or P&L, rental operations shown statement in principal portion finance leases of in the interest rental Only lease amount income the are operating lease all The rental the lease income within lease While the appears line the income are our of our finance within comprised rental portion amounts balance line finance payment portion. parts, lease an sheet. income principal and payment P&L. two of rental of interest

to on take equipment of to depreciation with the Additionally, expense remain lease, Resale generally while of life have not at customer continue sale the volumes. but At the finance million. This depreciation in does contractual $XX by gain finance finance pursuant of title on container, container, containers operating higher line primarily in container expense. incur at a attractive equipment of end an have was over lease incurs paying the buyout was owned opportunity reduced sales amount to XXXX, levels. to fleet QX by lease. the QX will levels terms prices from the driven the peak lease

fewer constrained to down containers, inventory. sale have direct prices. $X inventory low by resulting were container we are reported flat lower pleased continue consistent against depot limited inventory. container high lower gains levels container we was been utilization remain somewhat on to very to expect high volumes expense utilization we While fleet opportunities with and continued to limited due gains quarter, expecting previous gains be resale the trading Trading our have purchase had of very and from off-hires. of very new to owned with QX as million we And attractive

opportunities. while with limited is additional G&A slightly in We due expense million high CapEx slightly average the QX, and flat the of QX, from expense to expected as QX, costs attractive we CapEx to depreciation from attractive start mostly was million QX a our decreased launched increased under was the $XX remain utilization expect balance to to direct of higher levels, year. expense increase interest expense of QX QX incur remains expected at finance funding to recent from compared is leases. off-hires. of step $XX at going as $XX of container as new forward, slightly most system but deployed remain very ERP it million the

X.XX%. at interest was Our average of the effective QX end rate

risk expect tenor of QX, consistent our We average of a with long-term fixed to rate only to positioned an we coverage our with hedged as increase forward XX% fixed interest tenor or with rate debt average well fixed mitigate nominal in the are very leases.

policy. Let's now share which is our program repurchase important allocation component to of capital an turn our

shares of XXX,XXX approximately purchased QX. during repurchased have XX% inception of approximately our Since September have in program XXXX, We we shares. the our outstanding

We to our of to a increase million also share has program. that announce existing our Board repurchase are pleased authorized further $XX

active both June $XX remain declared also XX We're to under ongoing and Board X. opportunistic of a pleased our expect million $X.XX June of and record and to announce our relates as with program. We per QX available has for to as dividend activity that common approved share to it on repurchase onwards of purchase holders cash share payable

payable A X. addition, of XX a preferred of quarterly has our as holders June to dividend Series shares, perpetual June also declared Series approved Board B and for preferred and our In record both cash on

strong enhance equipment a for fix to to well-structured and ongoing An ongoing impact and the our by the year. extremely ability pleased remains stable CapEx, Looking organic enhancing through well to a addition This capital us through to concludes class Textainer by portfolio $XXX interest flows controlling environment in shareholders in Textainer structure. accretive of last Thank this been our please ongoing all long-term and container today. dividend our successfully and continue of related growth through questions. is at restricted manage long-term remarks. prepared strong lease start our cash, market returning cash inclusive reserves with to compelling positive addressed rate hedged financing you we our rates repurchase facilities generation balance Limiting inflationary efforts operating now asset rate repricing and cash while the disciplined increasing market prices. the our and debt bank our and provides to share programs. liquidity closing, support largely quality lease sheet by million fixed improving attractive open refinancing with positioned very our or of values, and couple financing are matching for time with very asset the This we platform. your for of our management our supported well resell over structure. net of line sheet renewals stronger fixed and balance to liquidity through Textainer Operator, our supporting significant and In years has through and

you. Thank

now begin from Riley. come the first will Please question-and-answer will with the session. [Operator B. question We Liam Instructions] go ahead. And Burke

Thank you. morning, Olivier. morning, Michael. Good Good

Liam. Hi,

do but Could higher you give you you the us -- cycle through Are talked renewals are And some getting how rates? about sense the renewals, the asset? of look? remaining life durations

Can you hear me now?

you Yes can you I now. hear hear yes. can I

Good Sorry. everybody. a - There Good alluded to Actually, problem was the I bit morning, morning, Liam. we it question, here. alluded Good a technical in little script. Liam. to

to lease prevailing very container environment have new historical are function price are renew a expensive paid the for we to leases. favorable relative And container than to in prices. see prices much rate. more rental continue we market to because this maturing all containers new directly continue And those and really is rates the that We

So revenue. what but have And have about big is and essentially below on very very the three $X.XX about we our picture maturities. $X. much a long also region a improve doing And difference years we maturing is And contracts years. are the rate, a to that's And we're the market has not be partly been average that have we new substantial the on the past container we rental continued that to And it to that's essentially why the probably meaning of maturity that maturities of doing. on cost months where what would only where historically gone improve in extend $X.XX. the today a the at to achieve up XX to we have successfully for was very position good X.X in contract

CapEx? in or how the to look in that it going year going identified it out? on -- maintenance is you terms do a shakes for Are How growth. growth, CapEx And you plus Great. CapEx of opportunities full the little that does be to does think you --

of see CapEx very previous over Total had year. we year. We TEU, industry was much essentially intense billion way X.X normalization activity very the is a double last situation. a excess The the which has what production the in producing is been

are continue we of issue most we year an lower is demand. were plenty So full. really expect there. because issue demand The numbers of and There's of not this expecting to simply out the ships pent-up

substantial ships capacity of I think ship but there's level expect that work, more a a shipping lines would enough take love a essentially to number. isn't and but bit take CapEx care That in of little more container than tempered more kind where much and all demand put to to CapEx, on we why replacement much to a a more not level of is that there that. hence

cash to And, we coming purchase the essentially course, and year. but the opportunities much have deploy more fact lines to level that flush of with are this containers essentially other that always focusing have for CapEx lower than last think year. But because on and opportunities here I and of means there's fewer a than last leasing. now have slightly right what we bit the is there of localized that always to shipping did said, definitely that's shortages are now that been they little factor a what that plays try there much, are tendency is dislocation seen

and balance Okay. finance one much more you or between same, are lease pretty still the of is actual ratios seeing the other? And Michael versus quickly those purchase the very

in of finance lease is It's Liam. CapEx, our There still pretty large a component similar.

you said the very happy probably expect term. during with that yes, that but certainly we're well near could probably So of that as Having type lease Liam.

Michael. Great. Thank you, you, Thank Olivier.

Liam. Thanks

The next Brown with KBW. Please ahead. question will from come go Michael

are Olivier morning, how Michael, Good guys? and you

Mike. morning Good

Hi Mike.

here. the So, booked with first I in the quarter start just wanted CapEx guys that you to

almost new in invested you the quarter. So, containers million first $XXX in

start start quarter when the up million investment of get for about first of revenues? through the booked million and $XXX So, come up? quarter. this strong to all the in that in to think has to Of now year been you've picked through the that really then an to Just picked $XXX million And pretty second could do to start trying then revenues. XQ expect you come and the how those $XXX the

up the $X.X Yes. for And to quarter Essentially been the second say would we is quarter that we book along. as in the all was I billion and up order very progressively be over of which much we delivered move that CapEx has expect And everything us. pre-committed. mentioned picked active good news is the as pretty balance out picked first CapEx is already

So, these pre-committed are all lease.

the start So, they're essentially actually date the fixed container not have require being or on-hire rental. the for to whether they regardless as a to customers bound invoiced

hear playing there. terms good disruption in Okay, to disruption? your ease? business to great. think the love bit your And hearing any your but seeing little and from that to out business. And what when on about over seeing in that related how for Olivier I expectations And China What is ports you and restrictions, is tend you're COVID-related customers I'd also a are the of just could

really in address that kind of is fleet. the just seem I like last the say clear seen think was that theme fact maybe related shortage weaning levels that benefit XXXX you lot of given pretty a XXXX production and benefit the not have global over years to it caught disruption is that the pickup in a but two -- does here to the had that that up or

well great. comments that situation element be would as on any So, the of

Sure.

in happening. to is a It's there's like As quarter surprise always what to our dull essentially business. never say we a as

and the today situation is with stock difference the two undersupplied ago situation very of that entered we think the cycle worldwide. big I container years the essentially between

to been Shanghai supplied containers industry. being in -- the with As to be in lies are operating now yet truckers you cargo issue now days. mentioned, to has the are the This lot have a China, of the main effect materialize. said Essentially to shortages. we to from And the there for situation lockdown lockdowns port. right recent of yet a really able normally. the are temporary not The XX The and ports move still

will of exports shipping factor a happened. the put kind expected out has be in rates lower not traditionally. have reported under are been lines I they a export but at which the But of there some Shanghai. the ocean main we initially indeed that So freight way of didn't that more slowdown, mean anticipate. the little And has much bit that we effect year pressure, this than has time

the adding the to accumulated example, ports. and in imports the port For congestion are have the in

not And as reporting are though in we surprise of Shanghai. containers our a some of their Shanghai unloaded to ships where are essentially have a exports that container have seeing down. empty Shanghai shortages bypassed and some in even And customers are our of result much situation

more a be positive -- the production cargo kind opportunities to the in and much their lease of cargo off as is potentially more happens still But and Europe a lockdowns is worldwide allowing Shanghai when and for are makes to create just to what the resumes all manage kind seasonal going and that we where more that they effects cargo back destination more see at North situation kind second progressive. think talk issue important same of think our was been those But is comes will that when are inventories really creates at a of disruption here I hitting. authorities, But bit very that ease congestion And general, probably of lot lot it our about of some America. customers of hard resume when smoothly. container personally, we arrive shortages the in there's much are to little But, to containers. and difficult I operations So the that definitely for that surges predict. will and time can that us and a more causing say it potentially

least repeat the that in on the the So we end and year. sense shipping a front expect very continued intense of until at activity

this Olivier for Okay, for over that will seen one quarters. year. your interesting. Maybe CapEx one we've me. buybacks very And you great. Thanks Obviously last as share all the touched last color the on two ramp moderate

the to you'd what's out fair If you it call, the first trying right grow of to buybacks opportunities expectations assuming this the about Just actually from count. the buybacks -- fall line with deploy be in the here assume CapEx in to run dollars level? terms laid for continue share rate share quarter that on to here or you've looking could that from think the either is

Yes.

because here I of that love it's a But think no We've main is buyback. the of think tool. mystery made the important that. one we is element flexible we reason very

very, the see therefore as the do the attractive cash alternatives our review looks above most but least quarter. very situation buyback more little being continue exact decision. the every quantity we with We continue say aggressive what Board have attractive We we would CapEx, at were will a the other we the either went plan. of will us. to on to share return it did in that in we And to a will this Ultimately we as quarter, regularly investment But unlikely moment depending investors. or certainly and quarter. the is we I And pretty continue which decided first at Board deploy an our more what by likely previous for be to price bit

great. questions. for Thank Okay, my you taking

Thank you Mike.

Mike. Thanks

conference over go Mr. remarks. Ghesquiere the any question-and-answer would to This to ahead. concludes Please our for like I closing session. Olivier turn

again time forward during And I'm call. the you. Thank to on listen our updating progress And today. to looking thanks taking for Yes. next us everyone your to

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

now You may disconnect.