CAI - Earnings call transcript Q1 2019 | CAI International, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the CAI 2019 Q1 Earnings Conference Call. [Operator Instructions].

As a reminder, today's call will be recorded. I would now like to turn the call over to Timothy Page, CFO. Sir, you may begin.

Timothy Page

for today. you thank afternoon, joining us Good Exchange and Certain forward-looking expectations, but demand, the and competition during uncertainties conditions, this that Securities Safe risks economic actual not and may materially be conference call results, from and the increased limited are of to provisions could Section to statements of and including customer of XXXX, involve made others. Harbor XXE Act results made differ cause pursuant expected to current our refer and its CAI its the on We X-K. Form the has International Form that XX-K, on on you documents Exchange to XX-Q, filed with reports and quarterly Form annual Securities reports filed including its Commission, report differ this expectations contained from forward-looking statements documents call. conference from current could These factors important to contain and in additional that results cause actual

any Finally, this the we results, change to and strategies views, company call If detailed Mr. views, statements Chief I'll work Officer, is or this and plans, no discussion. turn strategies or the during subsequent the company this outlook expected the now for might President made remind the plans, outlook in the its call estimates, under this that as to modify Executive regarding out company's discussion you Garcia. obligation update of happens, future.

Victor Garcia

CAI's presentation a view company and Good also section our posted have results we Quarter Tim. website Along welcome XXXX the the earnings our to investor of afternoon, today, release with of and First on Thanks, and Earnings industry. our state Conference Call. on under our our

remarks, any related but through this going the address to be call. slides questions on specific the not will prepared and We the presentation can

container for weakest typically is expect when seasonally The decline. we to first quarter the utilization year, quarter our our

Utilization XX.X% able this experience. to average to than remains of we quarter, quarter were at XX.X% the we fourth a as usually decline today XX.X%. compared maintain in lower utilization However, an

revenue in increase year. compared lease-related year. increase levels first of are XX% and revenue first to CAI to levels the first increase of the compared for million, During quarter last in revenue a of quarter a logistics an recorded quarter, reported revenue of These XX% $XXX.X we last overall in quarter. first as the record the We XX%

first of income net diluted million, compared XXXX. diluted $XX.X the $XX.X for $X.XX fully during per quarter million or was the Our share $X.XX or quarter first share to per fully

Our Research we for is experienced being for have utilization driven leasing new XXXX, the available. increase and to current in approaching of invest depot projecting is seasonally the quarter we stronger we are and expect X.X% growth by and Clarkson the is container be encouraging segment stability the trade our because year remainder in equipment to months. the performance and lease the we so as utilization

expected majority in expect to lease equipment than quarter seen those China, have have to been lower of demand and be first vast a the returns We returns where we strongest.

demand We uncertainties to negotiations. new despite observed year experienced last we have also trade what customer around similar

so We $XXX containers. this approximately invested to of million committed invest or have far year

at in is available our out expect coming the slight we China, availability strong Overall, companies. equivalent of approximately rising secondary equipment equipment, have to particularly currently lines limited gain approximately increase beginning $X,XXX by of container and demand and prices quarters certain a globe. due $X,XXX declined containers and sale prices to steel per quarter container New available average on while to firm the prices from in leasing And ongoing of XX-foot to customers. the remain shipping sale across rebounded leased sold as to due equipment to over markets the Chinese prices due units the in

this quarter. impacted strong winter weather negatively the in in sale the fewer resulted States units During being U.S., sold reported which in the quarter, United gain the on

of the However, prices, for and the we lease resale increase as depot are see values market. container encouraged equipment in we rates higher recent on catalyst by higher equipment which a secondary in

railcars During for the sell and quarter, additional we $XXX entered the X,XXX of second were which are quarter. X,XXX newly million be quarter first in during sold agreement an into XXX to to manufactured railcars, railcars the sold

part reported first the million. of quarter As pretax gain sale $X we of sale, on a approximately

released our of the We are to shares. $XX repurchase of and using in invest sale million the capital equity by investments higher-yielding the

for utilization the looking general lease today a and on are higher on of ago, quarter. increase railcar rates to rates We a are and our utilization increasing for are Lease fleet railcars year we our our than of fleet. in opportunities report XX% to compared rail

to continue portfolio Growth relates is opportunities it have a increase businesses priority in look our the will to returns truck where segment. success as customer and logistics intermodal to domestic on and had brokerage, our for particularly most We in we increasing the rail volume.

coming trucking for truck The eased. the already rates new believe many customers have as quarter will to first market. of was supply and freight is contract the first rates customers are truck in quarter declined the in the spot for the outlook the where Many United quarter U.S. seasonally we in in as of the will capacity for usually that business have have strong has new over demand year. We result, XXXX be we freight and prevalent decline weakest States months, using the a added committed third the tight the trucking in the logistics current

XXXX, rates. and in revenue approximately to from interest continued business our fixed higher October additional funded double-digit to XXXX rates continue of we $XXX expect logistics expand We overall floating as refinanced rate lower In debt gain our we operation and million of in growth customers. September

levels, that future our interest resulting fixed have rates. our interest hikes percentage fixed our potential increased floating reduced higher rates the ongoing expense in While has rates exposure to greater of --

the of common at stock $XX.XX. XXX,XXX our average repurchased we approximately quarter, During an of price

we announced repurchase the quarter in have We share XXXX. of authorization remaining approximately under million million the X.X shares third $X

for and capital business expect creation that to shareholder part repurchase the or investment value is long-term attractive repurchasing our opportunities deploy to maximize view to strategy to returns. balancing shares our continue to every shares. as with order continue focused very remain XXXX. We redeploy in We common shareholder stock Central in of of an investment on our our

Officer, the company. to in of financial economic focused our All and will the our review are of results our turn continued attractive now long-term we Tim for for business, Chief on an our the backdrop development decisions call greater the believe the expansion XXXX of provide detail. Page, quarter Financial to over I'll

Timothy Page

QX, million revenue increase and Total record a year. million a lease Container versus of decrease was QX QX was or million, was Thank quarter of a revenue revenue the you, decrease $X.X for XX.X% QX, afternoon, and an versus Victor, $XXX X.X%. in in everyone. of X.X% good $XX.X million versus $XX.X of last was but

QX by However, revenue approximately had which fewer impacted million. X calendar days than $X.X billing QX,

versus of utilization modest in amount much we normally very March. container a than Our and decreased would actually this the the for increased QX, expect less month of year time

decrease was to of Rail our which approximately QX sale, fleet, container of a of comparable me revenue XXXX, Adjusting basis, of was XXXX approximately a -- week the QX increased our increased on million, million. container up XX% are million February. X.X% lease excuse sale in the XX%. Compared rail $X.X $X consequence, railcar revenue QX Xrd million. of QX. Those lease a cars in QX in a rail versus revenue lease the of year $XX.X railcars, on and year, QX railcar by our is fleet compared in the of last flat closed of versus XX% logistics reduced for $X.X As lease sale $X.X seasonality. of QX on last the Logistics like-to-like $X.X those basically was QX revenue line lease and of in versus revenue The revenue with with QX decrease versus was QX, to decrease approximately million XX.X%. logistics related costs QX represented lease million was normal QX revenue -- to

to million of an $X.X expect million Operating gain what Net the quarter the versus adjusted business. QX of income a QX QX in of double-digit approximately in normal About million of is quarter-over-quarter see or million is gain continue these believe year-over-year in million. container railcars QX. Operating result on we adjusted of $XX.X $XX.X most the operating container income the of on million business. $X was in $XX.X of or decrease business, year, gains sale last versus growth operating $X railcars. in We change, primarily operating XX% of related sale of in the sale, was the included XX%. $XX income difference seasonality QX income in to $X.X on a income of to million logistics included a million

had A QX had $X.X income lunar is decrease the billing of million container the revenue factor QX. of second $X.X QX to operating disposition impacting year in sales in in much containers a lower container earlier, new discussed a QX. fewer resulted on sales quarter. U.S., weather the sold Storage was increased decline a the XX% U.S. utilization than being throughout as and containers expense which resulted of QX. the all there an $X.X impact fewer QX that holidays days The due and I Asia on in of As used -- average of both in in lower gain lease in impacted which approximately versus million million was in X.X%

and March Those remained mentioned of historically However, that the utilization today. has quarter throughout weakest are higher up year. in being at related slightly factors as previously, all level to QX I picked the

of increase interest rates year. average in of higher pay in the QX as in occurred QX slightly tax debt would weighted see same to business will of in operating incremental the variance revenue that the by rate related increased the the We're QX range quarter down versus to average across primarily has in borrowing and interest slightly operating The remain which in proceeds in taxes, in Interest which in variances related the We the relatively driven in in of state average expense in a lesser result that million from X.XX%. rail to in expense G&A balance year expense the $X.X our would decline extent expense interest seasonal rate and our rate. in expense debt remain as expense income was million Given uptick offset quarter The in Income a debt and decrease versus saw result higher interest the in and and of million. was rates we had higher a interest quarter. decrease be was to total to million, slight in $X a last the expense funded borrowings, X%. container using QX expense to improve that increase a container in QX business, increased business QX related constant G&A $X.X expense tax railcars date, we rail the was container from QX a that increased changes change Beside going to expense quarter QX QX. QX from primarily end logistics million QX was that quarters. sale income in QX. of interest $X.X coming to average is $X.X a remaining utilization million, expect of our forward. a the comprised large by general March net than of credit between will expecting true-up savings the expect operating slight business the expected of average a $X $X.X the an Any billing next related balances. borrowing margins average resulted a tax addition million in

a expect Rates gain of Our QX QX was. to remain is large is by We and Federal Tax the the combined tax for sale, which XX.X%. subsequent level at tax around rate would as rate on U.S. impacted X.X%, quarters what of

available of it of the our the the to at as earning CEU increase by grew fleet million XX,XXX assets end QX, represent assets flat end approximately million had XX% XXXX, versus railcars quarter, container $XXX QX. the revenue quarter, of total Container end of revenue entities revolving year, restricted had million and compared of amount million now larger increased the to end The revenue billion QX $X $X.X XXXX. container of facilities approximately increase QX. of QX owned Rail the were XXXX, the dollar and the at us with was of XX% of end QX. variable approximately of net an of QX book XX%. last the $X.X our During of was at an we our a of in basis, from assets net credit held end end we debt as than funded to of undrawn total compared end $XXX assets compared our of value cash of of cash At billion. of On at billion, QX, XX%. QX interest At the as an to X% CEU a increase $XX XXX,XXX first of decrease is $XXX earning

we million end repurchased had of total when repurchased the shares the since outstanding of time. X.X program. shares quarter approximately end total, stock. repurchase X.X% have QX, represented or approximately the of In as the we repurchased XX.X% the During at shares, we shares approximately XXX,XXX In X.X the outstanding of million which of we commence that shares of XXXX,

our that Operator, for shareholders. the for call on based capital will questions. generate return open the please concludes to We best long-term comments. That allocate our continue investments

Operator

from Instructions]. William with question Napoli Blair. [Operator And first comes Bob our

Robert Napoli

is Do is obviously where on are move that point I railcar now, lower first know I would Or mean, your a the as rest running expect high return ROE. is midteens railcar you the be but target business up to through And target right to you sell is at -- than drive mid-teens. the, question your the of what on much that midteens My -- too XXXX? has ROE we to target? expect is you the equity or ROE? assets of lower

Victor Garcia

lot is questions There a of there.

through had is last return kind a be a it's couple seasonally quarters, weaker the target that mid-teens of We of on So -- equity. is our on quarter so this lower. to have cycle

Our XX.X%. quarter about this container segment was for

So we are moving towards there.

As money business. as gain get rail corporate our in businesses, we other results is the contribution. actually didn't lost lost the excluding logistics we far overall the being money down business We our that in and

we results. move for kind midteens So But we're of looking segments to a both those looking are the things on ROE. of at that to basis towards improve corporate

Robert Napoli

business? make a sell rail gain for the can in of near can rest value that to, does be you And earnings, your if is to sense assets right? You accretive it I that business? or mean, those book

Victor Garcia

value have. looking good at the that we aspects, we have are in mean, believe we fleet -- all We the I that

So a that's we It's recovering. value. have good market been

assets which we are but the of improve potentially some looking sales. trying all So at to includes ways business, to the additional result

of not We decision selling at business. the are point the

a looking think to at that still are We makes overall and strategic business of sense. there what are But -- we we the it lot can do results. improve the

Robert Napoli

question turn containers. last it then and I'll The And over.

of year. containers put being CapEx You to for And be of target ROEs year? million for this -- on for midteens? in mean, containers have are purchased is $XXX your reasonable million a $XXX target I committed What, lease this your total containers those at is

Victor Garcia

in later the I'll ROEs. answer to being our put The containers is, part yes. on are target

still it's early of As the tell. level far investment, as too to

back. will how coming be we think the know demand next I days XX would over strong

by their and numbers telling inquiries the customers what utilization this they're demand encouraged that are year. of us have we seen that the about from We have, for we

we looking So commit dollar that year, every will be But to say to I going a commit that growth return it and requirements at certainly can't are to specific opportunity a here we meets level. to we're that our encouraged are it.

Operator

comes question from next from the Webber Wells Michael Fargo. line of Our

Michael Webber

I a just But be up would can new and point. and considering today? vans helpful, can indication color probably start kind any follow see that. actually an to on the forgive is in of slow wanted rail on you dry I didn't touch bit I is again. pricing Presumably, But on give Victor, thin deck, me, on where us just seasonal this a it there

Victor Garcia

containers? on talking about pricing you Are new

Michael Webber

Yes.

Victor Garcia

I And am make new container I to costs, answering wanted sure just you.

Michael Webber

a per point the price seeing? the curious you price seems like what up Yes, bit just it's We TEU, TEU. guys to it -- the point year. start per I'm inched are

Victor Garcia

terms Chinese $X,XXX. we to the to they It's The other really discussions are manufacturers increase prices part the that at have they have various and had push is have. steel started of getting $X,XXX. costs year in inching in price of been up, that cost with cost because closer looking The

we're to I some see to have potentially in into to right but $XXXX. out plays will year I There somewhere get around competitiveness, going that this now which we're to more certainly maintain probably to price up. of level seems at year, seasonally a more that we so we be strong think at terms that at organized is are try consolidation would amongst going least the think prices and how manufacturers container

Michael Webber

else. slightly price you price in for point seen on step more you helps ways At follow-up, space? year have pay also have -- comments but view the both as you more that a positive point? of your for for that moved to yields lock kind Do certainly want the cuts are that this kind view -- and everything boxes guys. I Now, just do collateral with a value mean, you improvement it of being interesting. a pretty Do slightly organized certain

Victor Garcia

I firm mean, at to our release get equipment. container like levels. to resale rising slightly we for It because prices I to our see higher for be allows Yes. values to higher over us it assets think allows us time would

speaking, for sustainable is upward increase our price time over sloping So an generally good business.

seeing by that. So yes, we are encouraged

We investment have a significant containers. in

that's positive. So

Michael Webber

That's helpful.

seeing quick It think kind but to that rail. then it go business there on in much a of Just container around I'm dynamics. people I'll Any this change sidelines pretty any curious were out maybe of evened like so terms toe maybe seems doesn't competitive of have the not. or their in the I stayed together, lot runs think seems last of It you're be last was things lot just out of like one that kind that around dipping middle have to But year, I competitors QX terms time on may changes last it of conversation seasonally there's do -- a on year one of back a market? from year, in? the that more there's some out. just of of

Victor Garcia

a think quarter. first like last has year's I felt year this Well, lot

number not -- at demand peak I the the during participant. amongst looking participants over we of we we I wouldn't of so participants. see think level transactions, expect see a see have say it's limited or we every the to what aggressiveness more three There's kind more seen been although, and months. we would transactions at would the have next

So lower a people same competing more lot of have bought people the opportunities. some lease box try advantage to having for there's taken prices to I rates. current And maintain think probably

would but not so say And irrational. been it's competitive, is that I something

Michael Webber

helpful. exploring just helpful? else And embedded and in rail some kind be kind line there of ROE, potential to in What for in of to strokes though it of other did like what Tangential a integration? terms broad whether and on then sales of I kind that's would what figure and in maybe know, in some there's finally trying it's else sketching be alternatives, maybe just Great. -- you sectors? rail there's quarter. context out out just deck areas all on of other do that kind your I And raising whether -- on alternatives we can that you terms this. on all rail improve think can where don't line you of in you the anything ROE, deck, alternatives But already touched know in last lease because the focused punt

Victor Garcia

from looking looking Sure. We're additional potentially renewals. Well are rate comment comes I at some lease sales. we at asset the think

of cars We storage are are that have we experiencing cost getting. where hire, significant number and still not off a

get at So we quickly the back remaining can lease. are of units out looking we how

magic So invested, is the execute. focused to we no We're have are we new those at going with we capital what all provide. wand, to on looking service do no There's options. there that we're more

Michael Webber

All right.

that no think? is layered more into It's we there statement. kind alternative So of what option kind that like of just exotic would

Victor Garcia

Yes. Nothing new.

Operator

Cowen and comes question Becker Helane Company. from next from Our

Unidentified Analyst

question about Hi the guys, logistics Helane. on is actually this segment. have Tyler I a

line obviously wondering you as meaningfully full guys of that XXXX, top You growth tougher the XX% it like 'XX, intact? progresses, than year year growth seems for and XX% But quarter. targeted if comps I'm the and were get rate I that higher is first in full year mean, still guys XXXX the

Victor Garcia

gave do domestic particularly have the we an do But we that -- we primarily, trucking. sure number. think not on that transactions intermodal which well, a our and that I'm with domestic agreed our we number is have on side exact of customers on

over come So course the the we expect to second of those in quarter.

continued for. but this expect XX% a certainly do talk the year When to in in the I business. we reasonable, referred what growth the XX% trajectory more -- So not momentum growth, range And for something double-digit longer-term, we're we business. we've our for think only but that's striving about, to is

Unidentified Analyst

Just guys guys. within you to you potential on you outside any talked stronger you to similar more. call? about than Maybe everything last seeing is weakness are Are China the that expected. or one guys that what much notable regions are Asia pretty of Or any pockets of but

Victor Garcia

going back segment. the We're container to

been strong from the has So it Trans would European Pacific hear has pretty despite slowing steady. about Europe what fairly we been seem down. leg

good some we Asia, there. demand pick-up have seen Southeast

we've fairly overall, a that the by seen have and I overall. seen limited said, balanced, So redelivery we been like we've encouraged

Operator

not the turn any showing at like this now I'd further call closing And time. Garcia to back I'm remarks. questions to for Mr.

Victor Garcia

earnings reporting months. forward quarter look Thank quarter everybody a We call. few first getting on second in Appreciate our our just to you.

Operator

you you Ladies participating conclude today's all may for Everyone and disconnect. thank conference. and This great have a program, day. in the does gentlemen,

CAI International (CAI) 30 Apr 192019 Q1 Earnings call transcript