Textainer Group Holdings Limited (TGH+A) 2 Nov 222022 Q3 Earnings call transcript

Thank you, and welcome to Textainer's Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be provided at that time.

As a reminder, today's conference call is being recorded. At this time, I would like to turn the call over to Tamara Bakarian, Investor Relations for Textainer Group Holdings Limited.

you. Thank during U.S. may made in forward-looking conference with accordance this statements contain call statements Certain laws. securities statements These or and materially risks involve from may predictions actual differ and future events results. uncertainties, are only 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 ended statements. December year forward, XX-F for the and quarterly Form see Securities the filings the XXXX to that forward-looking company's information X-K annual report cause March Exchange subsequent any for differ Commission XXXX, actual any results going concerning Form filed XX, could on on from XX, factors additional

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

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

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

continuing positive quarter. deliver very quarter of industry. your over third performance record for today. the I us then our after go joining call followed yet will momentum perspective questions. to Good you from which reviewing pleased Tamara. results thank we you, the by detail, our results, the will for and our will Thank highlights everyone, morning, of financial by another Michael strong begin quarter the in on results, additional We're greater last open

For earlier grew the driven quarter, deployed rental lease CapEx in to the income billion, by $XXX year. third

slight million, and at new EBITDA quarter increase was containers. million. share income Additionally, a to diluted on continued program. lower disposals older net per of of result our income $XXX gains continue count a was from share record and we adjusted $X.XX exceptional a Adjusted $XX from reached buyback as strong our benefit from EPS last

container tempered anticipated, they as contracted year third opted rapidly players increase the their their the of shipping at placed new profitable. healthy factories anticipated the container spot In over to looking to three cargo lines levels, supply of as that two ship sign remains has manage orders up with holiday demand the an much-anticipated normalization, XX% lines rush ago. October are operate As container business, on and in fleet season the freight years for in market, orders In remain industry level to further that inventories which sufficient add many have following the focus capacity slowed the and to to new to absence years. overall retailers in highly capacity not a ship lowest the shipping traditional appears under we last to went now decreased In start chain of better reduced of was have congestion failing in to and concerns earlier have just years consumer of what now dropped muted global and due rates brand pre-pandemic to started seasonality, cargo and as above spending. some merchandise historical had to softening quarter capacity global be expansion bottlenecks port freight over volumes. volumes Contrary two robust despite ocean container summer

total remain and should container year. the traditional of for have until allow lines China the Golden Week fleet, shipping fact, This inventory decline is As plan to world of a end by million container factories remained matter level to about the not many level TEU. represents closed this the its after is of holiday of in about the inventory primarily current factories at which Whilst X% from owned X.X unheard high, of which shut of.

Textainer on holding back-to-back focusing has pursue approximately previously, remained to deals a level disciplined that continues low uncommitted investment stated a stable inventory CEU. As XX,XXX policy, and factory at of leasing

at all in active environment. existing fleet, containers, container Looking have mostly buoyant age have started redeliver our previously kept shipping to lines the sales they

currently stands average to capitalize in has As declined This for utilization uptick to continued XX.X% fleet our a quarter translated line on average favorable with redelivery allowed $XX at have result, in market slightly lower record sales last a us price disposal gain the XX.X%. conditions, and per at sales quarter figure. quarter's volumes, third unit on of higher albeit in resale million,

cargo we this changing terrain elevated normalize, than As a and and higher number containers months market optimistic as still see volumes of coming into Congestion required cope current spare such chain a normalizing we satisfy previous remains rates capacity. from fundamentals freight business objectives. the navigate pre-pandemic, ocean high well supply therefore, hikes industrial and action long-term XXXX, this and susceptible as remains remain even warrant disruption, of and remained we're external easing out but look to continuation for on demand. positioned Overall the are lockdowns is that that condition to and our focus to

than steaming expected taking slower less in impact they nevertheless higher and but environmental regulations overall result container will effect New have in XXXX, requirements.

impetus combined to reduction that history provide age, container of for could resale. lines our supply the be quarters, possible economic their to between in that generate factory in is as If any contribute helping Week, this supply pandemic. primarily cycle a in and containers previous the case in is six returning shipping current expect earlier and lasted different. closure the age to will profile rebalancing post If Golden are fleet plan we new young will substantial continue have normal new container anything, four from to allowing to the no other expect We container guide, retirement since past pickup This, focus with activity trades. and downturns stimulus maintain us us cash on supply intra-Asia China a

capacity aggressive our much higher more may to we past years. take and was to adjust case slightly, enjoy slot customers our significant secured the pre-pandemic. will be steps fleet greatly benefit overall portfolio of to expect from contracting also the our over profitability than profitable but continue importantly, Most We longer-term leases

We continue on of strategy operational and improving market to cycles. long-term performance be focused through our optimizing efficiency

dividend level rally that common capital a of shareholders deploy us an step to a business, on back on Following repurchase, incredible our ongoing happy CapEx to returning high we're allowed through profitable long-term and focus has to take programs. share

X.X shares of the and as shares repurchased share start end quarter, repurchases approximately our year quarter, the of third we the million X% the over total outstanding. of common of represented third During since

report liquidity. authorization, positioning efficient to as our $XXX cycle our million generation, use the its pleased in quarter and that of of share bringing share of a onwards. total million and further Given the line existing to management substantial fourth I'm Directors Board our see with $XXX our Board repurchase in cash has for a authorized increase to available this, very the the team repurchases business In and continue

and opportunistic in our We expect active share remain to both repurchases.

current give of basis continuation a the a financial of over call total quarter. its we'll Board our to share, a and of at reevaluate view this color per cash common to return. $X.XX optimizing regular will addition, the has continue In level dividend shareholders little turn will about for for the authorized I now a you who third shareholder results Michael, with more our on

quarters results. QX reflected volumes will Hello, on everyone. focus I you, results in and one financial date. in to our to investment the quarter, third still strong our was Standards CapEx higher turning market. rental now Thank revenue best and in We this continue year Tech on Earlier a very elevated resell we exceptional lease secondary from Olivier. experience had the gain sale quarter, prices of

which a operator provided period market conditions, quality of and Textainer, portfolio of the balance Following the long-term a the improve sheet. slice dramatically unprecedented

share adjusted primarily experiencing through net to current $X.XX year ROE million trade $X.XX QX and common performance as increases We're demand, program. new day Our income our QX $XX QX. benefit income impact of lease as of strong results the was reduced compared volumes period QX. was next more and will billing deployed annualized in QX compared $XXX with accretive quarters. adjusted per to quarter. an from driven the driven the our also normalization earlier compared was are to million repurchase This now XX%. line in as earnings in rental $XX of in million diluted shipping was pleased the QX continue QX, CapEx adjusted by by an within and QX anticipated to that in container one this share $XXX million which customers

QX. during XX.X% averaging high, remained rate utilization Our

returned forward, slight by line attrition as delivered containers of normalization. Going older or with we replaced another in rebalanced We some our fleets lines new as expect shipping quarter ones of not market gain their results. $XX in natural [indiscernible] volumes container sales sourced from on slightly in containers expired older, by with age was line mostly lease sales last redeliveries on record sales higher quarter's This strong million, at an the increase contracts. driven of being

at from While XXXX, in they peak level to thus continued levels prices a resell have remain far. reduce container favorable

due quarter higher resell optimize the with resulting to direct on $X which future maintenance our confident As project are the prices, is of while to expense previous we gain funding's slight strong we handling performance from QX the supported and in noted past, it best to in a fees, resell have increased million in and difficult uptick precision, in container QX. deliveries, ability storage from container presented opportunity. sales each

QX flat QX expense QX year-to-date $XX of from the expense increase gradually We the the from or million mostly lower end containing $XX decreased G&A and QX remaining IT CapEx and associated G&A remain $XX QX interest and expectations depreciation of million costs million frame. was our expense expect to with professional container year. system. We slightly tempered continued increased over expected million included with direct should continue approximate of lower time expense quarterly deliveries expenses G&A is activity expense this XXXX. during to by into QX. QX. resell to in in ERP average expense QX. $X QX

to swaps We impact or majority of debt. policy our we And to expect component the hedge maturing of line fix to the roll with over rates gradually interest as our as unhedged to continue expense our debt. outstanding higher interest continue in increase

debt. We and structure capital took enhance well under an increase of effective average in in X.XX%, earlier, our X.XX% this expect may noted and of to components minimize we the the higher near rates limited financing interest order in deliver debt elect from unhedged financial our of optimize further our QX from we to rate QX. our in at to CapEx control term, portion interest QX. remains we impact action opportunities As the flexibility

announced previously August, our terms As amendment of extend the renew an revolving completed and in facility. we credit to

Additionally, billion us commitment increasing market Billy This the the aggregate $X.X in amount conditions powder when dry ideal and reducing ample $X.X an places to and billion the again. fast position, needed as improve Jack pricing. from its

QX. We during to increase over our last repurchased now X.X from This share Turning repurchase shares reflects million volumes the an approximately quarter. repurchase program. in XX%

the year. X% the of For shares of repurchased three beginning outstanding over we as ended with quarters QX, of the

has As of a announce end program, of of pleased our has on onward. existing QX basis, program-to-date to We're since inception million share QX, and further now the that also have repurchase million XXXX. a $XXX to authorized share of program for repurchase nearly which outstanding our shares in available increase we September Board repurchased the $XXX of our XX%

Our a future as our key active investors, and allocation it drive be component form and further significant to continues we to capital repurchase value shareholder of focus expect remain to to activity. our to relates repurchase share policy

a December common record Our dividend dividend of continued shares, and on cash It Series of for B our record Xnd. $X.XX payable as Board December holders December of quarterly approved Xnd. has also Series December our has declared payable preferred to A on XX both on XX perpetual to per preferred share cash holders

fleet cash, bank be provides liquidity provides attractive well-structured $XXX This rate platform long-term closing, very X.X our reserves, inclusive remaining liquidity, and to or XX% averaging in benefit a restricted financing quality to well to NBB years value. In cash produced year-to-date generation, for hedged strong structure. to at our long-term from million portfolio our basis. supported now sheet that an fixed This we continues by fixed retinal provide life QX strong of results the lease our addition will and cash has in with flows, remaining of long-term our Textainer. center balance ongoing significant that sheet our of lease facilities balance fixed sustainably contractual of with of and on Looking covering continue

intend execute we But liquidity economic do And generation in limited for evaluating you best expected expenditure near all continue opportunities. and concludes strong. remain questions. This open term. in Operator, we were shareholders. time the option, In potential disciplined prepared and CapEx the some expect we'll paying given capital optimize allocation to our our performance comes it this to to uncertainties normalized However, long-term our remarks. context, line your of for capital the today. Thank interest please when

and Ladies time, today with Please today's B. begin this Riley from gentlemen, comes question-and-answer Our Burke FBR. Instructions] question go [Operators from we'll at Liam your session. ahead first question.

pull XXXX as demand six terms curve in four the about the terms end four least that said quarters you online of quarters? new supply anything such six vessels to and move Do in half it cycle in typically would shorten second it or runs cycle containers. to the that you towards Olivier, at the of in in coming or the of see shorter

delivered, Because essentially two, really a supply question. directly fairly related. deliveries the longer, on It's bit they different supply not important containers shipping and world, the demand tend means demand for times ship gets which before good I I think for a that containers that capacity. situation game. it's two ship a for although from know, much, to times as think, new the that we're a related, And differentiate Liam, container where are is you lead are But lead short, be a rebalance are why years explains little to quickly whereas completely typically may in what's very here much three ball and demand in very

where normalization probably supply we situation year. container this a containers And years. of taking past to in the in seen shape have over of the supplied satisfy we're market a beginning to So, demand we lot two have the since terms of the

that a little X environment reducing that million orders inventory about Now for TEU it shows is be especially moment, at absorbed, to although takes at where an experience the factories drastically. there bit in quarters over are the four

for one be in slower, main to Now containers the will interesting if of the are means those in container slightly to give the the adding that the will some water for there slower be But more around slower that bit in environment operate is point, ship cost. sale think in And be an coming very, container you because the about will will capacity, create market more with shipping their is uplift that ships will comply opportunities And on a an essentially fuel also extent, and to regulation. probably getting awareness additional They to in to ship back use. lines that is that probably also some we with new environmental driver made will believe to and they ships world. a fleets sailing will because try lessors general. ships operate And save more demand flexibility decide try pricey. very of bunker more lot speed that to on to order this there here, little at I really the a fuel to for are where coincide

are be to say these is So is for in for the in year. demand coming shifts half container a next I demand additional that starting an fundamentally going by driven cargo, of because would second there although of nutshell, delivery impact that

anticipate surprising. times remain capacity to normalized is levels? And above utilization ticked your historic not a down more on utilization, bit, Would you it a the which rates

than to has past long be allowed incredible over bit. driven holding again, so been years two lights actually, us that being contract now at that to container has they're market so rally And money containers next today. we've that extend that think their past small very But they our on and of XX candidates But it's think prepared shipping utilization? a banged essentially returned years. I can't to life remain I rate the And in utilization prime resilient has long-term that going on the how are very way contracts it meant past be has that only to sign because leases. very rental has be in clear quarter we a above and income been the and existing from I essentially down do cycle or years. I Those a is see to allowed is for also or the have gone all a lot profitable lease potentially operated XX secondary into correct. to little And primarily us of forward. in the years is we've that and in on very, certainly be speak, very our the scrap.So And below have over sold more a will sales our of reached IRR. not going maturity coming big strong about leases work gone think locked going by two six this the that to utilization average over that or will. rally remarks that's to and the rate average long-term average into put what that had years to three Absolutely, age, retired absolutely past decline think also Yes, income are, at matured And

from question KBW. Our Michael Brown comes next from

and durability your earnings think of profile that. I about right to So kind wanted to here way with start of the the

just gain some moderate is over the put how I'm the about has element that assume some it I the the base ROE here of again, here. durable pretty quarters that sale that quarter. then kind annualized the up new durability right gain But XX% again, overearning an next that of is a mentioned, to there us on into think thinking as you EPS time. here? of you you through fair your for over what about this swing cash which visibility give flows, Textainer will is is the factor, we move but do on kind revenue, And will EPS your as coming cycle So And on suppose and durability sure sale ROE of

long-term reason ROE think we is the be new And always is containers have the that we region always said we've a We've we deal, various said lot target the the of because should fleet that take model a we the now that for make of our in is one into aimed always We for takes mid-teens. of use ROE. pricing that that been parameters. effectively the elements. a where main kind was mid-teen a like which interest actually IRR And rates. one we've whenever all account But leveraged right obviously

at So mean they're the ROE we moderate the you're it the that level. is we will sales experiencing And think of level exceptional gain what objectively, it that to we that ROE. And is also boosting around over quarters. the that on boosting are underlining that the achieving very essentially, our moment. expect coming that profit it correctly, normalize and I really such we're on ROE resale

remarks, containers is long-term said, our buybacks cash in can to provide leasing in that future. our and and generates is deploy continue we as And do the best I our return. will much right we thing we where below think And the flows. really environment we're capital an focused trading don't to fleet own for The that see at book. have that revenue buy own foreseeable stable XX% very is to currently on strong, very very So stable prepared the that mentioned opportunities

we're the when comes. to going business. in very market suddenly. our it's making going So, argument are turning, come capacity use cash and We our we're in ample we Michael that down are And that's continue as buy to XXXX. a move And and market always support things can of very maintaining saw phase to to come sure free flow the so investment when back definitely the the back a down be help in we're sonly conditions that know when EPS share to ready It into right move compelling thereby market are to also that the as can mentioned, up we very cycle.

this but to not to is in of a we really very future. normalization not-too-distant will be be that this definitely, again we're situation, kind phase So and ready through were going going long-term that investing the optimistic start

Actually, those and I all appreciate thoughts. that

On the and environment, the buybacks, impressive low certainly investment in activity the normalizing of it's If share you've mentioned, quarter. as opportunities amount currently. are this really

in is Or could probably it the level you So it be of third buying where to in term. the in And in open fair you're amount that is kind could the operate assume color here quarter shares did helpful. saw the is represent that come would you that of there that near actually we the possible Any higher? comfortable market?

we've over XX% probably our think, an As last our of And of Michael bit basis. pace at the annual to the the program, XX% of back been repurchasing the buy of quarter, buyback little year. the beginning equity pace on we're equity we since on mentioned, a since X% a I started

those have in. perhaps keep the the focus is a certainly I very, that with on guidance we should comfortable But the a rapidly. opportunities that for CapEx generating opportunities given with back would refrain we moderation It an lot limited quarter environment on buyback an reassessing time, or market to some level it Board too at same were -- much of we is of the are very that the liquidity. very say from to is deploy what the we deleverage spent share. on I are something we change and So, and makes environment we're topics. deploy our because lot are buying eye and third But CapEx. to information can certainly And a no We're lot continuous high I giving the interest of basis can exchanging that in on explained, in a where and sense comfortable sure very as rate management

are could where And some credit some How think could on those expectations are rates you and issues if in maybe potential the clearly, or spot should we those your lie and from What the sharply? seeing hearing sneak I down side. customers one and just credit more risks freight about this and you what be potential at there XX credit are when what you look be months next where so. over as or there are and seeing could your out time

I risk think has been so to fair. that never credit be our the industry low in

top mean lines so have think balance shipping profit the I definitely years have are continuing shipping profitable. And they're the most were actually ocean the I be over restructured dropped, lines And freight extremely raking of they them have profit. to still than rates higher XX world in to pre-pandemic. generated two but big much continue and past their sheet.

All I of are some has debt. that the XX, line the only there's others top negative. still shipping one think

those small shipping small with compete they those Asia-Europe have are busy territory, because routes lines. can't down, associated situation with the away think been smaller But no risk their traditional gone really the that future. And our small that ventured So, will now was There the for territory the we that that, with trades pretty with a has of with is aware ships. see -- was foreseeable lines retreating transpacific we exposure as not some very portfolio. are They and on rates shipping right personally from that much ships. we risk coming

So, we done have with not actually business them.

at much that the that not exposed very all mentioned, large I But never limited. So, money. situation we're is have think shipping I made to lines so as

secure very, point So, feeling of view. very that we're from

Edge. comes from Value our And Clement Mullins question Investors next from

overall priorities remain do in you allocation to current share on deleveraging. expected about repurchases, potential plan CapEx at balancing environment. the and foreseeable want to very the I is the dividend Considering by which increases how with future, start for accretive moment seem capital asking low

as question. imagine, It balance buybacks. and and as at the where CapEx of company. well. carefully with sense. capital We the share in are the for Clement, trading certainly limited sheet have Great primary policy opportunities, It's approach and question. focus very confident on makes We investing shares invest quality our we've a in can company, at are certainly of we allocation that quality in you to perfect the sense been makes looked the

focus. So that of will also be important The dividends are the well. part as

that. Board which important evaluates that evaluate see that it when The it And basis continue sustainable, that. quarterly adjust look it's we think make an on may certainly And to ongoing rate it's to that sure a basis. We on is. we'll we to at

In is of There doing There is others. that, certain de-levering, unhedged. some that too. stack in we at terms more that. expensive look of are of than value are portion portions debt the that The

look on that, I an we accretive. return down shareholders there, as offers you where deleveraging -- we that's look point to actually. It's it So going just makes at make do what some opportunistic we Until going certainly policy, allocation the at interest may sense, new buybacks very the well. one's the opportunities in see to road, reduce clear at very target could whereby overall CapEx CapEx priority. expense. absence a will And looking that benefit certainly But capital we of wanted the to very, overall

see have remained us strong some pricing you Meanwhile, secondhand exceptionally the sales you despite volumes higher due where on forward, stabilizing? could prices commentary to going but lower the give

little dream not realized from sustainable. situation income. were something situation sustainable. a that always a situation bring a Yes, higher It's where coming our of volatile is are we very we it's the to be a price obviously We've said a is bit than probably that at is good but a their like a on up, that, Clement. gain very part the that OEC, which XX-year-old point has one container sales selling most is is obviously, And rational that you and long-term not

resale the shipping and the the observed we as lines. to started that have moderate from second prices with in So have and predicted, prices redeliveries of line increase

is But far, progressive fairly in a there. So doing happened the has way. trend definitely it

the achieved price. same You with a gain can a mean lower average see and it for on higher yourself. much volume we but sales, I

going to of pricing we of use that today fact a that to indicator estimate container probably which container. Now $X,XXX. would One And we secondhand new of about of we trend region expect the stabilized a always the the the XX% kind continue. of at in has that new like be forward, price is price

those would or is current and provide give that probably X,XXX, more modest taking the of that XX% us that over secondhand will towards move lot sales So take, with past consideration, containers but we substantially level be a which some into gain average four of on would prices definitely our X,XXX, on what than sales, of we than should on residuals probably seen that that three, that gain have on estimate higher to so still continue quarters.

session. like And floor Instructions] back closing question-and-answer we'll for no questions, turn in to over [Operator end Olivier any remarks. additional showing today's I'd to the

Thank next earnings forward you, on you for we you. everyone, full to call, this year our part and results in all Thank taking certainly quarter. look updating

today's do with gentlemen, we'll and conclude conference thank you call. We that, attending. Ladies for

disconnect now You your lines. may