CAI - Earnings call transcript Q3 2020 | CAI International, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the CAI Q3 2020 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. David Morris, Vice President of Finance and Corporate Control.

David Morris

Good afternoon and thank you for joining us today. Certain statements made during this conference call may be forward-looking and are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 and involve risks and uncertainties that could cause actual results to differ materially from our current expectations, including, but not limited to, economic conditions, expected results, customer demand, increased competition and others. reports the and CAI annual Form Exchange Form its to with has report X-K. you XX-Q XX-K, Securities Form the Commission, quarterly refer documents reports International that filed on and We its on on filed including its from in These differ this important conference results additional from and contain that could call. expectations documents actual forward-looking cause factors to current statements contained

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

Tim Page

earnings Good afternoon you CAI’s for joining and quarter thank conference call. XXXX third

snapping freight are unprecedented and once last of the million Global very compared diluted once first XXXX this lines highest Global are per Trade share global $X.XX market from the due diluted the are pricing continuing global shipping leasing of grew We per remain as levels $XX.X levels common pay. assets. in during income increased it third net we of pleased and $XX.X sales cash always the When their downturn they increasing many quickly container year. during industry. slow Container years, immediately in to above to capital year, of levels focused it quarter XXXX, to in term manufacturers they weak have did CAI, continue particular, and we Adjusted to deploy in global after stop manage current attributable that enjoying the market large the market leasing Overall shipping adjusted resiliency, million. results. at pandemic. running produced delivery trade, share We incredible position are market customers Recession, been ship profitability containerized year $X.XX in global the as fully flows at back majority income The the trade dramatic low in prices ability as net the responded has. to as the XX% $XX.X are now leases earlier slowdown to XXXX The in half during de-lever. $X,XXX idle in to of are and or very seen the again to during our quarter. because or fully to range. Demand with solid always And the fuel stockholders and for the the exceptional. high X.X% we does, demonstrated a as second strong, this container CAI combined shipping operations levels Container capacity, recovers, lease investment. When across have an closely just trade million to from down of levels lines again containers have in revenue with industry for continue quotes our grew quarter did the management market our which, prices and of been has the attractive has long with rates. production XXXX volumes nature, QX and

it’s normal. a more difficult containers As procure to than result,

year, at with Based partners, to believe reason our relationships not for this order our next position have our QX will to we in no long-term on of we QX, larger able manufacturing we and a solid market least position order than line have be is time for at year. would we normally position. we However, have source the with have containers the

In of the one is we invest. addition, only purchasing ways from containers manufacturers

our as for active financing providing customers procure takeout and directly older containers. in well very financing as also We’re containers for providing mid-life sale-leaseback

most market, significant is advantages in but size the of that there determinant being are leasing believe container the we success to biggest. the argue Some not

are selective the better – We our deals achieve returns, better overall we be make, nimble. than market We can share. overall grow market than with still

in to outgrow markets. demonstrated consistently have investments We scale times, our in good ability the challenging market back

an the industry-leading in by far to pandemic. that the year, also half second important utilization least is the improving market this the degradation its note utilization CAI XX.X%. With during our saw of It’s currently of

have in maintaining we the is most largest, earnings. which one utilization, While of are the we consistent consistently led in factors not important

leased QX, sale million leasebacks. of we containers and During $XXX new

funding of on of value container where pro investment and an end of in refrigerated one consistently we Again, rate. the container XXXX. We facilities we fleet new a QX basis, of delivery not million XX% has which lessor, while $XXX book container slightly now XX% part These million a have investments long-dated QX the On early the all credit standard are additional QX peers. had XXXX. our of for every that’s those and largest virtually are public which approximately of have total, containers, the early of In our of represents associated of from order delivery in is of the lowest $XXX leases dry, a across fixed average are was our our with new and lease cash mix forma costs container at of facilities X%, special XXXX, below million for cost through average funding $XXX it.

the $XX in selling gain in containers of results $X.X of million. market quarter, sales million this strong with secondary were the secondary a also Our results our –

continuation top new line a of high to quarters. container of utilization resale see the container bottom prices the container conclusion, high trend entire container market, both CEU, in per in continuing. coming across manufacturers growth In container the our looking of the quoting with across – With along $X,XXX are secondary the prices levels we forward we and

a a strong high book, utilization, market dispositions. structure debt lease and have strong order a locked-in, low-cost for container We

financial coming and the We shareholders focused have but in provide returns call they strive the We the make value. see when market container as ways decisions. I are in focused attractive will allocation color who Morris, shareholder will to to to capital some our ROE very are best we down, on you. turns be quarters. now, expect Thank the lessor, to to David enhance the made on commitment now other Investment significant remain turn additional our QX results. to prudent improvement on over

David Morris

afternoon good and Tim you, Thank everyone.

issuance QX. the the in quarter, the share. expense investment. quarter reflecting quarter $X.X for equipment, in Container-related million QX compared in handling leading $X.X and costs million, million the and quarter. to in strong was the and an to level that QX X% depot depreciation $XX.X income, I quarters. later, quarter increased increase QX, million were write-off depreciation a revenue discuss utilization both million will quarter new the or fully have for increase of in adjusted $XX.X $X.X in debt $XX.X for will between was than Rail for the strong the remain a utilization We costs $X.XX similar enjoyed was and diluted third second million demand million with and slightly storage container higher Net in per $XX.X reflecting fourth a lease increase in in Container-related at customer from

compared total than in would the quarter was to costs to in handling As third demand $X quarter less million the Gain-on-sale million, million the improve, quarter, container the we be strong sales containers utilization and the third fourth continues in expect $X.X to second quarter. storage reflecting market. approximately in secondary slightly in of $X.X

expect in generating million QX. small similar the $X third quarter, XXX the We a gain. to We million railcars in in more range scrapped than end-of-life a result of $X.X

to lowest customers. approximately if we is touching Administrative We an difficult fourth total increase have bad dispose predict although range opportunities in the quarter We items additional in in of expect quarter, million. reserved explore was rail It continuing in $X.X including were in in Several be close. $X.X million the it G&A as railcars, third to outstanding the any company’s million, previously to million Including a are quarter the $X.X the or million debt to costs transaction to from included nonrecurring worth would when $X of expense compared to DSO management recall. the QX. recovery is cash a collecting days, G&A levels on of of currently of million XX $X.X of result receivables. can $X.X would

our some to of that, of mentioned breakeven we our in leasing rail continue having said having our in expect some out idle we opportunities to rail disposing cars explore I sale and assets, $X.X of operations. during business business As The for the up success the for the for of the earlier, recorded quarter. fourth proceeds of million. sold quarter. logistics completed business in sale are The discontinued We period until the business was third results our are

We the capital in will minimal. estimated the in for the at any but working purchaser changes up true to the be of date, QX is XXXX closing the proceeds expected adjustment for

outstanding ABS of approximately X.X%. the paid we under paid expense XXXX Series XXXX. Series XXXX-X $XX.X October. down interest existing This September, proceeds down We – XXXX-X amounts were X in an and facilities. of million quarter, from cash in down used $XXX in the the in our XXXX-X were in the rate us During issued notes at notes ABS full The save the issuance notes average Series the pay notes and million to will

$X.X the we As XXXX-X notes, costs. XXXX-X of issuance a of write-off million a recorded debt result and prepaying non-cash

entered approximately a July, the $X.X fixed end significant we The X.XX% now years. the was for total had our Interest LIBOR interest QX restricted for entities, XX% our QX. million by earnings container rates to primarily value was was QX. of in of of of be funded of across QX. X-month Total into the third rate. billion second in QX early end As we $XX.X swap during of credit QX swapping billion, our approximately floating compared in interest interest in rate term the we book variable debt decrease to the that reported facilities quarter, range million X on occurred $X.X interest debt the the earning in as in a of of a in LIBOR end expense should the rate held net debt, call, compared assets revenue due on in million decline QX. QX our Net $XXX increase billion At cash fixed cash Approximately quarter. to to drop and our at $XX in an an at same of $X.X rate million of compared caused expense interest average rate is $XX.X of expense

history. our Based liquidity As approximately for our is of slightly of available expect cash $XXX to would current investment facilities commitments. total million, outlook on we today, in quarter, credit liquidity result our highest the fourth a and under the decrease as level

in with to difficult will certainty, we unexpected While have it liquidity issues is will advantage take we strong return us Furthermore, be of capital shareholders. to believe liquidity to or continue sufficient quarters call to allow predict That market questions. future concludes our deal Please believe related with positioned to any to the we comments, favorably the open to position operator. to for container our COVID-XX.

Operator

[Operator first And Mr. have we Brown Instructions] KBW. Yes. from Michael from question our

Michael Brown

Thank questions. evening. for Good you my taking

it’s widespread maybe I the or high-level from kind very a continues, very mutually come about guess think accelerating, for case And business to continue we business? things hear then strength we it we actually spike as what continue you mean health is I like could maybe lockdowns, of the your was the of what think like the guess I the from So another are how here. certainly think should the it play that if the or I out? kind your really improve, about to progressing bear So, – as business interested bold about potentially certainly you and continues ‘XX of but I And if see here I deteriorate, wanted stimulus were if through shipping cases it? into if – If would the aren’t consumer first view cases you guess business. – downside think it of and see that’s we in as positive what to or XXXX. for would of I’m how customers. the I upside and well we to say for here. look know to should sounds see hear of to your positive alternatively, kind sounds kind rebound outlook line hearing greater that this of everything those How things exclusive, two about, kind

Tim Page

of that be are to XXXX of and they in upside and XXXX. have needs to – are of the that strong high still will demand a up Well, fairly container I Customers really that of think on dispositions expectations just limited due opportunities levels occurred high in level in telling amount be be growth there’s container us to there demand. going will the haven’t replacement the They that first there caught half production some case, their yet.

there, think, pretty the containers and both and robust overall containers I of the for is demand, it will be So and believe, on be outlook specialized boxes dry any if standard would also. – refrigerated kind year, a there I growth,

China earlier biggest when exports impact, wherever open was shut year. decent and China to the their up. In China I because still imports a they to the they’re on a – the back – again of get U.S., into disrupted. the shuts that It’s did that from really source during happens, fairly But extent volumes delivered – this obviously, The last to – down tend to freight shipping companies once of terms of ultimately. that the back being of or think occurred more lot that unlikely I’m get even for little started outbound downside. chains I really, down that’s a shipping that less when a containers suspect supply to difficult level mean downside, impacted it’s not there I

and or even containers. keeps that the extend, generally increases So times for the demand cycle

particularly going. there you year container upside, where a I from outlook. case, over think – could don’t relatively different in needed is time, of a could obviously, a a in be trade in a prices are either you the to that extended of there’s floor quarter I very containers. investment pretty the could think because significant would on if I so, containers And So have amount case, think or think drop-off a there short-term, keep one – the unless I whatever – that But chance have a a it’s standpoint, period dollar of have it great or in

Michael Brown

Right.

Okay, great. Appreciate that content.

through the some at you of how this into kind that it going quarter in already you’ve the as steadily call, you – got the beginning about kind think Or As as we any feeds a the by that so be through little out of get gone fourth full of revenue the bit I we there are quarter would this has ordered and lot if and kind color it into gave already how containers the of building helpful. we out, out, a first on booked color think apologies October should Just and of of quarter? Is But month? impact? month line some of about a late. already

Tim Page

be basically consequently, dry up. as of the to for sit customers today, what will containers are here pretty a almost the And to dispersion paint waiting delivery them we us. months It’s to to pick as steady amongst our then

end steady. the and a bit So there’ll pickup for be in will it slowdown March, be Chinese little will because then should on front there back I more so be containers, mean a second and push of of the pretty end then the a January be a New little deliveries in again, And on Year. of there in bit quarter. a

Michael Brown

Is really any natural And them ROEs new on Okay, of just past, it Or is really or in that level kind the above of they these in the you kind something possible go XX% is that environment? this think the right that they moved said go it XX%. current I able that around sounds your for it – to higher? ceiling press that at mid-teens release great. go to were for have kind Is point? it best this could to of like plus or possible this to like the see really deals.

Tim Page

number entire is quoting the ROE are average we the across Well, the fleet. that

number And helping are pretty that are attractive to up. average transactions to new So, pull transactions certainly, relative that. new

a how of the as game newer becomes total. transactions just of it So percentage a to overall become math big the

Michael Brown

because on can in Do of size, higher to ROE, transactions ROEs get you your tend therefore, to a just smaller but maybe deals participate peers you a think better of relative some to and at your to trying that smaller relative with your peers? amount, about

Tim Page

I comment people’s think really what other Well, ROEs it’s are. – can’t on

participate some offsets be have of can per CEU. the transaction. have do of players we funding because benefit don’t We cost we which advantage to cost, We every transactions. have, some advantage bigger of in think, think I on G&A terms I an the in in lower selective

it’s of own. on transaction, on it’s possible. its every But So – every – stands kind

think day. bit opportunity So how it’s end but we a we about execute ROEs, all better at little get I have the the to the of

Michael Brown

already ordered But than think out given to many production, the demand could – if more now you’re supply meet demand could be limited containers the ramping like out more bit I production I of kind that the many It kind production active shifts, containers been seeing workdays the some you’ve – how of is the Is it think the – how ordering the are them? there? up to you are go. a first a you would it’s it kind it kind in some production how meet How like point right like delivery, much demand? – seeing of sounds Is in And of ordering the Okay. as where extending like typically able little further as factories appreciate you growth that should comment very little about can. a to containers you’re you sounds adding you’ve as – we production quarter are which sounds there. levels would into bit.

Tim Page

down would All on – available ordering mean said there’s way – a quarter It’s so to customer – we more. we we and be ordering comments, we to of Well, delivery, companies ourselves it’s as capability in lot like quoting. The also, for with Obviously, oftentimes can’t things. order directly, more. of quoting much get really a the bit quote. have and factories aren’t be ordering a would a would second shipping containers it the only I isn’t hard for to little financing. not – are when factories you capacity. a the demand to going we’re are And conversations finance takeout to they’re the time because containers going us my they trying comes number match There all look the I order

that commitments. so the manufacturers invest just to and the in on and containers is containers, And do come the company of like And companies of sale made we there leasing ones container the the limited that, takeout financing. in ability strictly new ourselves. they’re So the leasebacks will terms work with commitment, to shipping procure top is not then new then to

Michael Brown

Great last here. the of outside buying of like one opportunities you’re have allocation, flow that. been Maybe about that new off sound are point. some but of for containers, on some great on just talking point, one constraints just throwing cash me appreciate clearly capital lot just we a there investing Yes, the side

your levers flows dividend buying we kind You’ve to continue going and how increase each instituted How likely of from of think those shares. cash as use about back the forward should you’ll here?

Tim Page

have capital to can in will put that levers beyond maximizing sensitive not those we’re that and to what when that, makes going that. from a certainly have sense investing we standpoint liquidity We – – all to or maximizing it’s is just going a we’re can certainly it in shareholder attractive position order returning we dividend. say possible, and shareholders opportunistic, is be not a and I use to require to to returns ourselves mean do when to above do that And ROE. regular I

Michael Brown

taking and questions. Thank Tim Alright. my you for it. you, got David. Okay, Thank

Tim Page

you. Thank

Operator

this time, have at And further questions. we no

Tim Page

we and forward fourth the again everyone join quarter. Thanks end the look for having the call at of to joining everyone

Operator

conference conclude does for and today’s you gentlemen, this participating. Thank call. Ladies

You may now disconnect.

CAI International (CAI) 31 Oct 202020 Q3 Earnings call transcript