TGH - Earnings call transcript Q2 2022 | Textainer Group Holdings Limited

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Operator

Thank you, and welcome to Textainer’s Second Quarter 2022 Earnings 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. I will now turn the call over to Tamara Bakarian Director of Investor Relations with Textainer. ahead. go Please

Tamara Bakarian

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

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

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

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

Olivier Ghesquiere

the quarter which will go joining in thank Michael followed greater after Tamara. then morning, we industry. will detail, open results, of begin second by for over Good our today. your I results call our questions. Thank and you perspective additional the will reviewing the highlights on by you, for everyone, us financial

are on buyback net EPS best report pleased and our exceptional ever adjusted and the further EPS back activity. very with the solid expense sales from to share benefiting revenue, quarterly of We impact management disciplined on increased our of continued adjusted income gain

we $XX long-term our quarter, net of consistent containers income benefit The adjusted of and of to $XXX $X.XX. adjusted model profit. demonstrates lease we of financial rental numbers improvement million, resilience million, $XX of the lease adjusted the adjusted substantial environment in as rental $X.XX. from the lease EPS of income our income For of first income net billion metrics and million delivered and a These business of compared to sell of contracts take quarter current $XXX normalizing at our older advantage opportunities the market EPS

is of their for have total this of XX% logistical line Shanghai is this global labor year’s four In our with currently new but units. ships causing Congestion pre-pandemic shipping higher have of rates year, decline of shipping environment, which now industry costs. spot demand bunker containers last driven times season, than down was As existing to which is The traditionally on lease of slow operate the are Container second to example healthy subdued the roughly the reduced inventories. we shortages in bottlenecks, an COVID container as remain the approximately of ocean by sufficient historically to containers shipping holding to container very world. the XX% follows fleet expansion in all higher Freight period quarter container a are customers opportunities and with throughout of lines This central freight peak with best focus TransPacific prolonged months. the as of recent and limited virtually the to rising spite but than result ship navigated mobilization the high, remain Overall out level, available up with rates continues a now of pre-COVID, the on disruptions. estimated the tied volumes capacity from intake shipping support remains levels. much which over Globally, of lines continues probably Index, performance come

and our at stands the stable utilization As for result, was a fleet currently average quarter XX.X%. at XX.X%

We achieve in old of million quarter. container, increase on redeliveries sales mostly sales seen of us which have a $XX for record have small the age only gain helped

over cheaper remain to substantially customers for new times. on as has our more position months, at month units placing XX% and inventory recent with units new reduced - themselves slightly new as of to per containers TEU to factory production summer in TEU with of factory containers factory Total about expensive orders As limited lead has lines orders. XXX,XXX increased moderated older resulting much choosing shipping of to hang the are XXX,XXX they Production

lead in relatively Textainer is level production up of demand Given inventory and minimal times, opportunities a the lease-out short container picks slowdown until maintaining again.

sell to being food their As market prices the units, performance, cost XX-years Even which than the the be redelivered. illustrated continues strong quarterly continued if by some standard in part original ago. more of may world XX eased they have for or shortage for strengthened we cube our XX-foot by of supported high have resale commonly for very XX containers, older containers

Our year. demand constraints supply sufficient part the congestion, many in on reduce depend the will for the of somewhat the the later given reducing remain optimistic older over place. prices unlikely remain before will in consumer be to peak that very much resale over drop to is that change scenario This season, whether supply towards summer elevated will are situation containers we materially any

efficient in restrictions Although China the flows. have COVID in Shanghai, several particular, may lockdowns some logistics been remain lifted fully of in that hinder other

currently or the of ongoing the to negotiation action by further the return German possibility strike events delayed though U.S. risk related as West XX-hours executive rail normalcy, strike on to recent U.S., by order the longsome New port may a industrial such warning delay the a presidential Coast. workers, of in the

in look with market likely we a out additional coming currently of months, the well-supported we of disruptions the As shipping. to world the see continuation

We that up remain performance by will demand following optimistic container our going cargo Overall U.S. resilient consumption, well for given above was the and are business will business drivers. remains elevated continue level the underlined for that demonstrate to unexpectedly forward, we as pre-COVID June. which for utilization

of for smaller prices a of book net most our now long higher-priced portion not limited. has Furthermore, about reduced, as continue and remain Exposure our high for X% fleet economic of Our the been supply remaining which cash lease than our continues life, older reached containers. versus maturity of Resale to customers flows. six-years be excess average providing maturing to locked-in portfolio given their on historically expired is have considerably three-years leases, end less substantial based as the the much today represents new historically will of at leases containers alternative value. renew to of in

chain remain to to the worldwide. We with action and pressure disruption risks increasing industrial expect further subject of under supply

debt. us by Additionally, global retail the term current longer fleet as and and hedged lease benefit cost owner fixed minimal us existing prices with inflationary an our large given to supporting environment and rates should asset

an the outstanding Directors shares quarter, X% our $XXX during of Board common of our X.X with authorization additional shares our increasing million. we share Finally, million repurchased by further or over repurchase

optimistic with some continues pleased to share metrics. of our Given of our improvement the with performance while capital significant closing, cash allocation our and for we current rest of repurchases climate in future situation be for cycle use market second has of an In outlook low economic we our allocating flow continue the growth for preparing are market and capital and creates the in opportunities. slower enabled Textainer the CapEx, to earnings financial year. but quarter. per to uncertainty and share further remain current attractive this continues The challenges, period other optimize

fixed liquidity healthy financing with results and will a Michael, our you I efficient hedged strong control and call expense for little rate about the and the more remains who turn sheet give to financial balance will quarter. efficiency. second capital demonstrated and now color and over structure Our

Michael Chan

and now I two-years had our incredibly performance, long-term resiliency. to and cash combined strong enhancements focus generation and QX flow Hello, results. everyone. significant last financing expense Olivier. financial second have over CapEx strategic overall you, strong Thank our provide high-quality management on an quarter the as will We investments,

to We X% million, have also exceptional been gain QX the market sales of QX. generate $XX on adjusted for able the quarter. resale to excellent take was advantage income higher net than

earnings As highest strong this mentioned, per diluted net to-date. of Textainer’s QX, and increase a was increases by repurchase our to adjusted from our QX share XX% from common impact share accretive QX $X.XX, adjusted Olivier performance driven income program. level was

our $XXX was to long-term annualized an of driven pleased continue growth than rental primarily this size, be ROE which very Textainer’s income important level million, leases, lease that in also of XX%. particularly are fleet a from We by in lease an QX portfolio. QX, QX component adjusted higher results finance

utilization demand Our XX.X% during lease QX, our reflecting high, strong remained for continued averaging rate fleet. on

We be level versus QX. to stable at rental a expect QX lease income

investment XXXX containers and noted, As year. level as new of customers demand the in this absorb moderated previously given has tremendous the CapEx our supply, for

to and see our continue at strategic key from our relationships customer stemming locations. Although we placements

in deployed $XXX in we the with In demand a but current half to Our decrease the XXXX. expectations million, through QX from totaled have quarter, CapEx our investment environment. due last line total, of first million CapEx $XXX

QX have anticipate well to redeliveries year CapEx at at With new levels. was slightly CEU, limited than enough equipment, the by containers their continue mostly prior resale very to the operations. demand in increase year QX. age million for as about vessel opportunities was on continue for contracts. primarily box driven from averages new support peak per expired prices support and container of prices. sales sales customers from volume utilization to reduce higher sourced However, This our still prices our gain and lower inventory we have from Current sales currently $X,XXX rest lease higher container an above significantly quoted new high are $XX to continued of this historical

more handling beat. during increased quarter fees, attractive turn-ins million resulting expect that with continued and the environment. results from price to the expense container slightly due strong to We, container on outlay of will slightly we resell of prices direct $X in the performance have While be therefore, gain current QX. continuation QX reduced remained this a container gain supported maintenance, while quarter’s box year, storage from hard to expect sales the on new which prices sales, favorable higher and previous

included expense enhancement mostly these under We and CapEx small of million financings. expect our container depreciation due be at and portion if impacting QX increased environment QX new from primarily QX is with QX, system project redelivery expense container expense continue by IT to recent expected in the deployed QX QX incentive million financing million remain interest interest performance. to increases was the financing. costs volumes levels. compensation of from of $XX recent was of QX. G&A and additional system G&A $XX as $XX to flat higher resulting million expense QX and costs improved direct rate and rate ERP with consistent most $X associated our higher hedge debt a QX within CapEx increased expense from

increase interest expect gradually to rate rising due to interest We the environment. current expense

may a in However, liquidity. debt to in the repurchases, our with continuing policy degree, revolving some later our and we share with available delever with focus the limited our while capital on year greater investment options CapEx to near-term, unhedged allocation follow temporarily

X.XX%, Our QX X.XX% interest increase a rate QX. was in slight average effective from

fixed positioned with fixed consistent Even coverage debt mitigate XX% tenure risen, fixed relatively have with of leases. or as market well an have to rate we to our remained with long-term average interest hedged our rates this

QX, of our turn over investors. of share further a component shares to to XX% QX value during a focus million our repurchase capital policy. increase which be X.X We to versus now Let’s significant drive key shareholder allocation program, our continues and to repurchased an

we shares program of have of shares. nearly repurchased X% Since outstanding have the our XX% September in outstanding We of XXXX, the first XXXX. through our repurchased our inception half of

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

to million relates available for to QX active We remain with expect as future repurchase and it onwards activity under $XXX program. our

that holders XXth on announce Xnd. record and approved pleased cash a the to September payable of has are $X.XX per share We declared dividend Board of as September common to of also

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

now at sheet Looking liquidity. balance our and

depreciable and rate attractive This our on supported fleet contractual remaining an of hedged and of covering sheet XX% long-term with continue cash flows closing, of We provides well cash results that our very fixed NBV produced our $XXX resilient fixed enhance in to provides long-term tenor remaining to strong rate to bank the the financing long-term million by has provide generation structure. the years that of lease now reserves, balance cash This our in ongoing portfolio life of very is also first restricted X.X well-structured the stable facilities addition quality year and Textainer fixed In platform lease liquidity averaging operating basis. very of inclusive value. strong a will with Textainer. half and for significant

policy. are our our are and potential contracted long-term revenue as navigate protected rate hedged contracts market fixed financing We fluctuations to short lease and well positioned medium-term to due and profits well and

performance CapEx our has been core last remain the in several and Given improved the this to limited years strong stabilization some over generation climate. potential model economic liquidity in and remains expect opportunities, our we but do near-term, business uncertainties resilient expected

prioritize We strategically capital the the opportunities for questions. environment, please share we today. limited investment there and will shareholders dividend programs. our investing This are only continue will remarks. prepared towards opportunities, allocation time our concludes you container assess repurchase in Operator, in open if Thank with ongoing through your all And long-term objectives. for to profitability our again, line our line

Operator

KBW. Michael Thank you. Our [Operator question Instructions] go Brown comes ahead. first from of Please

Michael Brown

from a stick there come that year-end. there to made would alleviate to really congestion here the And around there shipping think congestion have probably pressure the for that likely prior interested to that is softening just Olivier, periods to Is consumer. a or hoping anything evolved? or see you your that ago how that is maybe a I you congestion view the from would year like up relief, that here? abates be about maybe demand an main how to of driver U.S. hear significant it I Great. was a related it to comment for compare is some XX% to of that else sounded while? tying XX% of relative really capacity. congestion could unless has interesting see will And would

Olivier Ghesquiere

Yes. Thank you, Mike.

your goes sorry. question view that very much and more likelihood than to away sticks around likely the part Our of is that - is congestion the the much that probability answer congestion the question, first first your

I think about congestion the the think much stable a very XX% congestion I that reach peak to of probably current to XX% is XX%. is that a of look has but issue. level it way at supply XX%, at at reasonably been the it present we And the level

U.S., like in workers not drivers, And those events is the is other China overall on lockdown and reason we remaining supply is to another increasing major limited to big and some part shortage some we As shortage COVID delaying ships. we congestion are so of continue remain railway those slowly. role worldwide the suddenly very to is truck where logistics in ports in the a of are why very have there and they even are storms of situation really see if congestion economy warehouses, unexpected we of very, that and tension the some with that and supply the problems of on or constraints place see actually, only main inflation, demand to again probability inland really for particular, the in due easing operations supply very, only so see see in congestion the what a the in case, with to in is and continue easing, elements place. And impacting if our really And plays chain. really various

All and very of still big congestion away play that could that role means our is the a unlikely in view go it soon. to

Michael Brown

here Great. was Okay. going get from I helpful. you fundamentals about of forward. of hoping additional guys trajectory the And some thoughts the Very some to

third here. evolve from some resale I’m line to kind turn the then on could you pressure lease for and trajectory market. of lot it will things comments like think on ball the on don’t seeing flatter to obviously, up, the today, guess income there could here. appreciate as certainly based And I certainly have from more But is rental you beyond pick here the upper But maybe expenses, that. you seems like it but how I demand suppose the know about a much I what start Michael, see sound in containers crystal and be guys are So trying of quarter what direct does a guys

more and maybe high. about see containers selling impact, utilization it keeps really and of rate So an is doesn’t that much those that

there but how what So could beyond a from pieces bit like play think I know those as guess thoughts you hear and there, is to maybe XQ today? a lines lot I out your you just would of about I little ultimately know here

Olivier Ghesquiere

grow as Yes. the clearly, is first you to are and are are say, top in reaching situation more not a if obviously buying pieces. a limiting are revenue from putting But have where that kind moving fewer revenue not is very go and working service. so No. are which CapEx are situation capital where we we to we or going a of try the And we we piece, the in plateau being in placed work, more many there our because are line, containers not opportunities, to line we

the are get normal are And and containers, was the much that an what at end depends always sell. attrition. Michael life, that of we have we I very mentioning, they the containers say, those really older on would as the because So redelivered of element

are containers we very revenue back a a that and profit where sell And can probably is to unlikely for we positive grow, have that here get way few the see situation few element. a old when the for are we new we of the we shipping take a certainly lines of lot quarters, So nice that absorb ships. the market to see the a quarters probably of volume supplied containers it been deliveries But XXXX, industry. will is to that taking is but remember, a have

most slower, emission are containers them overall the where ships meaning scenario have at in that this importantly, for probably the to see in kind we alleviating we what lending operate. the But But up obviously same start is force And and those will call line. will the again maybe new shipping more start slowing arising new new towards slower. more that with of in will essentially of XXXX. container essentially require much demand likely COX of we opportunity probably sell XXXX, lines to some middle congestion. to that container will regulation, the to seeing which comply we going top very Now is is time, growing to our environment. soft this And have for I mainline, But think lessors ships

Michael Chan

Yes, before may while where the lease to is as Mike, cash know, standpoint, income And stable, it interrupt rental here. the be - more in. coming sorry you Mike, Michael will it from continue flows

do as hold way future. shareholders of that amount for the a and the probably of opportunities And we dictates buybacks. the dry of actually uptick liquidity you the we not well, of happen lot messaging, CapEx certainly which handy to as for robust, cash a can in with policy, a you towards that on imagine, as our it’s allocation by will hear course, certainly in So what certain will issue direct are our do an we cash, capital wait powder capital we them, of and if return the dividends

Michael Brown

on just allocation. on guess capital that I And point

opportunities share in a buybacks CapEx. invest had You of amount quarter. some actually with this to record

an to if bit dividend. is pace there the actually And So here I opportunity didn’t outlook hear the on touch CapEx for softer. a increase the one guess element guys is of you buybacks. the Is I

of of contemplating when dividend, the the is on also about implementation capital the of You guys dividend are are raising allocation? or you anniversary kind so something the you that think one-year

Olivier Ghesquiere

Yes.

we that we and the that is Board than As that intention think being our is that of the it extremely performance the a very must you actually in given capital is the definitely basis. a sure the year-ago ago now solid by than have our of dividend I And two-years our buy mentioned, be And shareholder we was allocate when we something that stated We to almost quarterly we the sustainable how a pointed review we to opinion fair my intention is the see where as more really have the it and was are that and here. as lot out, are reviewed main the on if to to we Michael it returning performance is will containers, stable that, compelling, I long-term to for dividend don’t personal the buyback would best ago. now dividend stated a restated is And make target year certainly more that that opportunities the to say say, think which dividend evolves I was is company solid to right and make company. more situation with the decision capital. is And remain a here trading. at definitely level

Actually, now, not right ROE. book value. We trading XX% we generating are even at are

buyback remains million, by So is it allocation that our the certainly that that a of good great increase our I cash certainly, we in buyback flows. authorization investment. prove a being And consider allocation $XXX think

Michael Brown

you leave I Thank Michael. and Olivier Understood. said. Yes there. well it will

Olivier Ghesquiere

you. Thank

Michael Chan

Thanks Mike.

Operator

question Riley. Burke Please of go comes next Our from Liam B. ahead.

Liam Burke

those agreements? now the to you for charters look what activity re-leasing at in has been re-leasing on you is expiring both are terms of rates How duration Olivier, getting here. and priority a

Olivier Ghesquiere

has activity strong. The actually very re-leasing been

you Slide XX. our it we I If think wrong, not a investor on slide in I’m presentation. have compare, if is

containers. are more Actually, of have the on they renewed that XX meaning we containers the we life tremendously of on we sales because quarter, You lot can of the they until age has as age been lease, reduced last probably expired XXX,XXX number than remain on cycle lease have over or not renewed what depending that will leases actually renewed see contract. that whole reach the XX-years CEU. All those call a

that So very also in a with positive, rental that improvement rate. is the done and was slight

much level, that matters really what fleet. on elevated shipping the at think it taking means an and us more cheaper is leases new historically which are going sense I a for existing to existing very simply for containers into that their container fact line, because new forward makes containers they than lot remain renew

sell been remain continue allow to been environment. where again, a I not the issue sales situation quite current word here. we we time, seeing think So very retail have There have two optimistic in quarters, a think supply very that compared sell are about whenever them is example. sales you of continue we them same container containers those get means little historically And them the can which the those market the elevated. huge trying containers a But secondhand on extremely get we situation that are sales what for start to back. containers I a been remain substantial renewing similar has me of the if back There back we we slight actually last age gain think could a were market, realize happy to those in price are so at to the those the and get secondhand I containers where container is And that we so was that favorably. it not last age move will to And sales supply, at containers. them can supply quarter, increase that remains the

Liam Burke

even sales gain come that net of I touch the I there well. up. as continuing the move just that a to scarcity is resale that wanted to are point containers would up was sequentially - mean way mean on on though prices to

Olivier Ghesquiere

come has that they don’t I If up come declining or what very stable volume. are up much. the with anything, slightly have they think

adamant We customer where few we that did been that containers from back sell we in want more to lease and those contract take we the of have wanted have received we wanted not particular the extend one containers to them. with to because a those

is over helped really has us what So quarter. that last the

Liam Burke

Olivier. Great. Thank you

Olivier Ghesquiere

Thank you Liam.

Operator

session. the I over remarks. back closing conference concludes question-and-answer any for Olivier like This Instructions] to would [Operator turn to the

Olivier Ghesquiere

looking joining Well, during very us today. progress updating on thank Good-bye. you forward the next much I’m our to for call. everyone

Operator

This concludes call. today’s conference

day. lines. your Thank disconnect participating and pleasant may for you a You have

Textainer Group Holdings Limited (TGH+A) 2 Aug 222022 Q2 Earnings call transcript