ATSG - Earnings call transcript Q2 2024 | Air Transport Services Group, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Q2 2024 Air Transport Services Group, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Joe Payne, Chief Legal Officer.

Joe Payne;Chief Legal Officer

to quarter welcome call. earnings and morning, our XXXX second conference Good issued after yesterday earnings market We release the our closed. It's on atsginc.com. our website at

begin involve risks that you uncertainties. call, projections by course and other me and that this make we during statements forward-looking of will Let the advising

we results actual those future differ materially events Our here. may other from and describe

to statements forward-looking are based Services as reflect of date the Air underlying statements new on Transport estimates assumptions, forward-looking These information changes. this undertakes Group update changes in obligation or no of to information, plans, any call. factors, and other

price These limited services, control which general, to to ATSG's routes to perform today. filings our operating including market SEC, aircraft of a and the including time factors the conditions, lenders, from key and with current the competitive with inflation on-time instruments; changes; customers; cargo as but impact level costs; scheduled a conflicts other factors configuration; our be and on aircraft and XX-Q of human chain the for demand market; compliance impact customers; which time certain to including industry-specific and/or the service mark-to-market and economic the in or loss regulatory the include, we the we in filed financial supply charges are share or in timing constraints; government Form customers ability to of cost geopolitical are and impact in crises; modify the to: of changes and health in tensions the to our agencies; contained agreements to remain purchase timing maintain and our may services result customers, deployments with with of ability the changes current to and number, respect assets fluctuations in airline's interest rates, and reduction not for our able in in of traded labor

ATSG's financials. for cash you non-GAAP measures financial in flow. to GAAP adjusted believes These from advise not per to a free GAAP pretax non-GAAP adjusted earnings the and to assessing adjusted refer results. included also website. and investors share, our these position earnings, useful free including release cash continuing will measures to We flow, operations, adjusted measures, meant EBITDA, to We substitute reconciliations in are refer adjusted metrics Management be are financial and on our earnings which our to are earnings,

our to call Chairman, And now Hete, for Joe turn I'll the Executive over opening comments. his

Joe Hete;Executive Chairman

everyone. prior back role moment Mike from I spend earnings of transitions and CEO. on became already Many and the Mike we previously ATSG been appointed a as as you took and his meetings. experience, member, of Dominick, Chairman. know for well our while Berger, He's worked President, over I leadership calls throughout air a Mike's President, Thank career. you, express with to wealth want knowledge major Good was just Jeff companies having XXXX morning, investor since Executive brings Board the announced Joe. in a June. previously

and leasing investing Jeff financial the expands we in acumen equity space, commercial private in aerospace aircraft to background forward a With Jeff. meeting look markets, you and ATSG's

Mike quarter, the the on I still to and Q&A for be and formulation involved me the the role, Jeff will my development over strategy long-term available both be the call As now turn I'll session. heavily in I ATSG. you will in for new update objectives Mike? and during business of to

Mike Berger;Chief Executive Officer

the in his opportunity for CEO. CEO for ahead everyone thank today first to joining the to skills his excited I'm Joe about to I continuing conference Joe, to and the speaking lend you, here call and and November role. as thank and be Hete excited us earning well. my after the as us to you assuming leadership Thank of you last at experience ATSG. on as call I'm want guidance role new

unparalleled an have competitors. fleet differentiates going market freighters which midsized in-demand from We Lease to us of our Plus with strategy, our

quarter, our with flying a key milestone, and expanded agreement communicated extended we Last Amazon.

fly and aircraft additional they for We those we we provide to lease ramped XX peak fully to prior we will expectations XXX them. with on operate will up bring remain year, to XX us including Amazon, this XX on aircraft by XX be aircraft That track season.

affected to prior our of fewer expected. the Comparisons freighters results for principally by XXX-XXX leased year financial quarter second were as

made come we've lease Our to XXX leased available first e-commerce report deliver of further freighters quarter of freighters. quarter expected did an additional CAM demonstrating encouraged our X Airbus other Since as commitments for on fourth the headed are these the trade, we Also, customers. has the ATSG we've XXX and results above international to facilitate leasing for of leases the is to end also our aircraft year enabler about in converted expectation. external in growth. X optimistic available progress All internal will are markets where aircraft the they global of aircraft. future for June,

our the for we expectation focus satisfaction control. $XXX I flow their cost customer of for cash our Importantly, generated of and the dedication June and cash track goal team want free rest million for ATSG the to on for to exceed out an to execute safety, we We're year with positive year. laid the on flow additional of in striving plans our continue goals. free thank stated a XXXX through towards with

raising again our capital have our EBITDA lowered and expenditure outlook XXXX. are We for outlook adjusted

the results the place. business turn the right will strategy now We for to discuss model in our focused have right benefits Quint call the Turner over to of remain financial quarter. I second on realizing and Quint? our team, right assets the the and

Quint Turner;Chief Financial Officer

Slide quarter, was Revenues joining and reductions ACMI driven $XX Mike, our quarter. X, us This million. This diluted diluted a morning. million, Thanks, GAAP of million $XX.X XXXX. earnings saw prior on in in of the results earnings or $XX.X a per earnings per both pretax which down and this share segments. from welcome in summarizes CAM versus second ago quarter the year I'll we by Services of the to $XXX $X.XX share financial earnings X% to resulted versus start of pretax down second were year for $X.XX the of million in everyone the our In period.

last In fell $X.XX On aircraft the $X.XX by revenues. related to $XX EPS new an XX over pretax the did the down adjusted Leasing our $X.XX. basis, leases fleet months engine improve first leased X% million, $XX Aircraft XX as by revenues incremental earnings expanded That aircraft Adjusted EPS segment, decreased million CAM's and sequentially XX was from includes and quarter. by PBC since less came of off-lease the XXXX. externally June X that to

year. our Total prior reported flown our of gain CAM-owned in the XX loss $X block with from segment, quarter. prior the revenue leased were were Services pretax pretax customers. $X million depreciation, last a engine of down million aircraft quarter in million At were the versus compared $X In expense earnings end $XX decline million by fewer for the a a CAM's $X reflecting hours we down X second XX% more of of airlines to year. million ACMI the external million versus and year interest cycles, the quarter, XXX-XXX quarter, more second $XX

delivery Our networks. cargo airlines flew our across XX% customers' fewer hours

ACMI noncash travel, ago. expense amortization affected as also were results expenses for a also shorter was warrants. experienced in million for flight ground than service the $X increase Services Services a Amazon rates by average and the ACMI increased maintenance, segment year

of to and in expanded executed additional a now training we with largely fourth reminder, we and Air May behind quarter all year. the transition these under ABX at and season aircraft announced time certain second flying of have agreement benefits an half separately, scheduled are begin expect increases contracts. the The Amazon pricing of will quarter flying seasonal to Three in also in them us. costs XX be additional As pilot flying for flying when peak of flying include fourth peak the will in opportunities

next the slide. to Turning

decreased prior ACMI driven $X second decreased remaining and by power CAM's was cycle and million. million down by Our adjusted returns and maintenance, and the million, ACMI XXX-XXX revenues. million, EBITDA by by service, by from travel, was engine services. period. The again Services was in decline quarter adjusted lease $XXX year and CAM's EBITDA operated by $XX cycles XXXs $XX ground fewer Services block lower expenses in driven for as as hours engine fewer resulting other in decrease increased the well other

quarter capital a CapEx. X XX-month was $XX spending CapEx Slide details $XX growth million of in sustaining the and for consisting in million, $XX our basis. million Total trailing on

$XXX full is for Our year XXXX. XX% capital CapEx And expenditures for than million quarter. spending decline XXXX, the of second compared to year-over-year the we project in a down more

flow year. cash second net free measured sustaining cash adjusted in $XXX was of updates the million Operating The CapEx. next slide our this of operating as cash by flow, flow quarter

total $XX prior flow million was as This million million. $XXX down million in While of year-to-date $XX sale million growth the to $XXX as a we still brings the spending of $XX free asset we cash well result as quarter. flow. cash that of Furthermore, the adjusted proceeds, generated generated free year in versus reduced period, the

of you second $XXX million the reduced U.S. the debt X, abroad by bank quarter see the the and we that under can year. end as the On since $XXX credit in of revolver available Slide beginning was at total our million

our adjusted end ratio year. now at EBITDA end plan the for by last this of Our reduce to the leverage compared of us to X.Xx year with X.Xx calls around

unencumbered billion. We continue to maintain healthy liquidity $X.X assets of aircraft with

to Now to I'll turn over Mike back our outlook. call the updated discuss Mike?

Mike Berger;Chief Executive Officer

Quint. Thanks,

spend in adjusted provided the quarter. signed slide, in these $XXX XXXX, expects from of the included to EBITDA next Turning the June, some for outlook uncommitted increase we out adjusted now laid ATSG we additional the outlook was I'd to concentrated in XXXX. we original increase million in potential leases time our but in assumptions The our EBITDA from leases million of like an fourth Including approximately the February. with discussing additional $XX since of May contribution million $XX and

quarter the improvement fourth adjusted the similar EBITDA a be to quarter. third with the expect quarter, to We marked second in

from As EBITDA. a excludes any contribution currently additional adjusted also leases under additional not could reminder, which generate forecast contract, this

continue the utilizing finished their We interest lease that Amazon our from XXX-XXX maximizing flying. to support freighters to in This newly aircraft see additional spares value while converted X as terms. more includes

were the of total million aircraft $XXX includes our that versus additional reducing this gross This for are the includes the for X of including X year Airbus sustaining target outlook at we to CapEx later and million growth. we $XXX purchases, spending feedstock $XXX process completion million May. million spending capital AXXX of projected mentioned, conversion year. XX in The in start As $XXX and the

year. the generated earlier, million of we reduction from we expect of This million improvement cash stems CapEx and a free mentioned largely June, improvement $XXX our the I ago. during in through spending As $XXX the versus flow year continued rest

demand, more believe continue strategy assets Plus Lease unique our us midsized and leases We to freighter superior in freighter customer and remain high satisfaction. positions our for will

are and XXXX. on to We we safe, as operations focused our efficient an look forward XXXX better goals even deliver

I, President, Joe, Jeff questions. remarks. prepared May have to question? our ready Dominick, concludes Quint first That answer are and along the our with we

Operator

first Instructions] question comes Galanti Our Frank [Operator from with Stifel.

Frank Galanti

of demand for ask right? freighters, planes sort sort you out beginning But of of balance how coming are and do what you you the quarter. older want about class? the Obviously, service, I than the many given you're how freighter leased seeing, the of had midsized supply-demand year see that anticipated of for last more to

Mike Berger;Chief Executive Officer

Frank, Yes, XX-month aircraft. in period. Mike. for the We We've solid last wide-body the still XX it's delivered aircraft see demand mid

talked we've deliver know to going X we've delivered about. we X AXXXs the far so this I As as said, And we we're announced, as year.

deliver aircraft year fully to we by that into continuous this to hope double-digit end So and momentum expect of carry XXXX. the

Frank Galanti

-- helpful. Can then get or looked little what you earnings ACMI in bit the switching there segment, CapEx pilots pretax talk -- negative about that's is expect the the gears It there were of a And business. well, more on sort do And -- hours go-forward trained lower Amazon on you worse Okay, sort I Amazon the than up. OpEx a sorry, takes to And relative like to thought. between which more to then flying? on or puts basis? then quarter block the of and

Quint Turner;Chief Financial Officer

terms ACMI just Thanks hours question. down. second were impact the hours, Frank, it's block block in Yes, biggest Yes, Quint. for quarter the and was the of

that As were final -- that talked the from the Amazon. those smaller the back the year about XXXs the you beginning right had back know, at of got all second last we we've quarter. coming quarter, We

hours network. so And flown had we in reduced their block

block with XXXs, block we're on prior Omni's And this course, on down, year. expected were X to our also said, the to passenger aircraft, the Mike hours adding half as course, then Of begin going of and larger second hours, the another come year. of versus X

impact. -- driving new previously And respect some arrangement. amortization also the a of been impact so that, And warrant Amazon, for the extended those had some of had about of we had biggest that. are warrants the million Amazon in to is we We with and terms the $X those to granted had amortization that

there's in said, our were that balance again, the the some year, And weighted release, a a few of saw And for reasons for Now that. terms to -- you what the we profitable in it's Services for segment do the year. the the ACMI of to expect quarter. expectations be as fourth commentary

There's contractual increases seasonal of some timing there. Of that opportunities, opportunities. charter there's season peak course, coming the peak. some always scheduled are There's price

we down for up some $XX.X which million, year. fleet full first in margins. the improved profitable expect 'XX by some momentum do for they'll and loss the that ACMI is half I into position so with And think carry larger to for a full the the Services, year, about end And

Joe Hete;Executive Chairman

costs This got maintenance you et we time that, trained gear-up in of training, the is the by getting for of technicians Joe. get of terms all cetera. to as elimination, on pilot business, top XQ, mentioned, the you up, Amazon Frank, the

get So November the time be it, that behind the, by frame. will call us we time to

Operator

comes question Christopher next Stathoulopoulos Our with from SIG.

Christopher Stathoulopoulos

last follow for pretax on point to the contribution this So just ACMI. up on here

XQ. So in Quint, profitable

around million. you understand that we And know better I there's that, about as a slightly of onetime But is 'XX, these just looking lot if contextualize did -- kind of $XX breakeven? off. to above Just going think million, costs Amazon are at additional the $XX other with around earnings given 'XX, these aircraft mix a and placed? pandemic TSA that should your pretax EBITDA we percentage pre as think and XXXX of How about for expanded being all ACMI

Quint Turner;Chief Financial Officer

early in to the it's see, going tad a for positive Chris, be improving for think, specific this But full remainder might 'XX quarter fourth guidance. profitability getting year, the you're again it Well, of the terms I its of really year. Services ACMI and where

is think, take will as quarter. them all onboarding quarterly we'll to third And factor. And timing still think be got that of we costs ACMI expect the I quarter transitional the really fourth guidance to for the is because of going we've make from mentioned the Services quarter, nice combined is to -- think those course, more on the of some next that we're going the the year. But headway on I the with fourth mean, next some aircraft third a that's in and speaking that, in Joe to Amazon adjustments board. as quarter to when full place just sort year, of these provide ACMI that I going have on annual Services I be for next will contracts, tailwind call a year. far

in Assuming to are as we today, it place improve. contracts and they business would volumes expect remain

they've some with CMI XXX-XXXs. aircraft on back absorb the had those are to now those And all As you back contracts. coming know,

basis. make So a I on progress think they're to set go-forward

Christopher Stathoulopoulos

somewhere As between, bottoms-up ACMI total EBITDA we about percentage XX% the of call up using could own of is our that think EBITDA, fleet year? 'XX say analysis and next that to come enterprise enterprise our you've as it XX% with given fall and fair here adjusted stats a for it, for all

Quint Turner;Chief Financial Officer

so. absolutely. think I Yes, Yes,

Christopher Stathoulopoulos

lease you with XXXX factors a lower I rates think And guess, want or rates, or should I the interest to, Okay. about, to outlook here as follow-up rate for lease into factors? if lease how we speak here, guess,

Mike Berger;Chief Executive Officer

of on for a seen, specifically, number XXX the rates, we've calls, very be several as to regards rates lease the the last I've over very, stable years. mentioned In

We different haven't over years. that seen much undertaken cycles few the fluctuation last we've at all through the

of In specifically go. on Aircraft as that depending factors, bit we very new terms very, on based a availability, getting stayed XXX, product the of the Airbus higher feedstock can little general, But rate been issues types generally have in lease XXX have constant. the the the overall has vary on had aircraft different into that some their around costs, rates based service. on

Christopher Stathoulopoulos

in if slip could And I one Okay. just here. more

X have Omni. ATI deals, open I the labor pilots, X think between and the X FAs on you on

sort any we Just on of we for? where lines look are should negotiations of sort and time

Jeffrey Dominick;President

as agreements think XXXX. in until a don't under said to Mediation I've get progress Board. to now, I calls, primary any pilots the continue on we Negotiations National the -- previous are have right standpoint the expect from auspices of to the sometime cost drivers

We'll settling into having those baked look as anticipate of agreements. that's a any our where costs So labor any don't the additional we fourth of quarter numbers. into up result

Operator

with Our Michael Securities. next Ciarmoli question Truth comes from

Michael Ciarmoli

Just there or any turnover are But to crew from the with front stay from any you I mean, is of there that increased kind you factor on is pilots? that out any just I on on pilots, headwind or the think expenses costs. there a seeing that overhang? disruption labor called training

Jeffrey Dominick;President

No.

has about attrition ago, Amazon the with almost was In our baked since probably year costs. there. from gear-up last reduces a markedly which off do fact, tables turnover But associated we it dropped down the additional have year, costs the in where XX%

moving disruptions, as our a the the customers. to I job to everybody a day do no airplanes on mean, they're supposed day disruptions basis on is out As far doing in, timely relative basis crews. for and

Mike Berger;Chief Executive Officer

to deal forward. establishing deal going reiterate XXXX. I it's expectations amended We're that just as proud are well And through as really with of Air got that we think the worthwhile ABX our what

Michael Ciarmoli

seeing underbelly continued storage? any passenger just of it, hours. Got and cargo you pressure then the ACMI that about mean, just I planes generally you And talked on increase it. the the with market, okay. Are Got block and

Mike Berger;Chief Executive Officer

mind, main a our of specifically networks. major Keep don't majority our belly see the customers any in integrator customers standpoint, we from and fly pressure. within the Not

the and when capacity a flying they standpoint to standpoint. piece So it don't they're networks, available tendency a have from variability get seasonality of

very seen stability much in we've So business. of that the side

Michael Ciarmoli

for $XX should in year? Okay. equipment I of don't me, stem and any it. the The that of from? what And second know of proceeds, Last we if million property one the half more those missed I did expect

Quint Turner;Chief Financial Officer

sold airframes XXX-XXXs of in There then monetizing. the that XXXs those X We made that And keep up. Yes. aircraft, we like unmodified. mind, Quint. XXXs, it's and X that Michael, were were are couple

in had we awaiting know, not sort As you were that assets some that conversion. of conversion were

So to customers of that buying we've as those. And in saying, back. were opportunity move these we've opportunistic of took that we XXX-XXXs been some some came and had interested ] [

And some us, those course, customers, is procure of continue from engine which of will to good. power

And don't far So assets. often typically as we we'll know, in do. as we future, it's the some as something opportunistic, but monetized be you that

Operator

question next from Ian with Our comes Oppenheimer. Zaffino

Isaac Sellhausen

expected to the of as for Isaac you is the converted those move the think XXXs we on how the I status Ian. But with and of just This line conversions the additional for also of leases? know to you be mentioned are just respect you provide and touch timing the demand on Sellhausen through fourth overview brief Could in on X and the the can year? maybe about rest time a you AXXXs potential quarter. outlook

Mike Berger;Chief Executive Officer

Yes. Thanks for the question.

said that into XXX go-forward we deliver, demand the will see to the Aviv. we often our to And earlier, demand. we're XXX they're basis company, firmly still convert is expect From said We've more a as aircraft. I for heartbeat in actively XXXX. still the and XXXs on converting we more of continuous believe continue a XXXs a in aircraft and standpoint, Tel II as with conversion few We

Isaac Sellhausen

for little block you there you quick on passenger as you Maybe understand the or just then us as a things just military And a flying I remarks Omni. hours in understood. Could at Okay, bit on flying help mentioned could prepared the activity as -- and think where far ACMI. follow-up are them.

Jeffrey Dominick;President

Yes.

passenger the ago year versus In hours of as so. a the said, -- I the block were we X% hours, up by Omni terms or about think

being first not they're basis, sequential quarter. a anything a that. a sequential than on a like doing basis, better sequential on basis up actually the that on versus bit They're However,

know, visibility little flying. I bit think -- as the on the always that's that Omni the a tougher exercises, you is

tend However, busiest that. typically it quarter is -- third them. not then to for exercises, is Their quarter October month bad for is they but of the timing fall after in a off usually

that in it's increase the We're contractual point more the going there's October, a be so year where And a normal year beginning pattern. government's of helpful. fiscal to to with and getting that's

relatively So half I similar stable think the second half. of the we're be expecting the to year, first to it in

Operator

Our Rubenstein & Instructions] from Company. next Robotti [Operator with question Ben comes

Ben Rubenstein

the that I'm less slide year, about talked planes -- value stands market being you your the at So you had curious showed million the where value. last $XXX Day estimated Investor than carrying a of that today. just

Jeffrey Dominick;President

the convert cost post to is, XX useful was about inflation And average That then. Like years-plus. account convert the conversion, the up conversion, things, based what since actually, to since taking age which has aircraft that. adjusted a upon life gone into cost and for affected has lot is of the

of fleet only So Investor aircraft that up, Day. today gone up since has produce gone to

Mike so in is deployed. network flying e-commerce ago, minute big the still as where freighter as stated for that the demand are is and those midsized growth, aircraft driver And is a

that's So really think changed. I don't

changed. that will we But if don't depreciation have today, Of little has be September, again and aged I think since ran impacted. course, that also a the aircraft calculation that

Ben Rubenstein

Okay. And then just quick.

in XXXX, due repurchase converts or is the those? there ability to any On willingness

Jeffrey Dominick;President

are after in you... I buying of buying the converts guess terms what I back -- mean, stock or

Ben Rubenstein

back that could if if why you I'm thought you curious a discount, mean, I guys that? something not about. buy just them at do that's

Jeffrey Dominick;President

and it -- those I is that's possible want obviously. that to negotiation be -- aren't something Yes. would a that but would to have I mean, parties guess be both do would anything

Operator

call I Mike closing over Berger the to turn to like any would for back now remarks.

Mike Berger;Chief Executive Officer

to our also to my every customers. the want the all of do a companies across our shout to all work to give for want they express I ATSG you. Thank of employees company. for great I out appreciation day all our

the we're day. Since have we what focused emphasized do, and on shareholders. must our every we we simply, say XXXX going delivering Very to and trust start plan regain of customer we super on must are execute our satisfaction excuses. the no the of year, investors teams Our do

We have free further drive incremental flow. to for full year continue look growth cash opportunities guidance raised to and

while We our are executing still on growing leasing this core in business.

delivered year far As an newly and optimistic the converted the this X by so provided year. freighters view more have you heard, for of deliveries we end

Our unique Lease brings powerful market. to Plus is a solution strategy and the

continue We pleased made improvements In by global our and will so to far indicators. I is the economic closing, grow have connecting market capitalize in key that underpinned and have presence we're we on. will say more with XXXX, that to we

Let me great and be by means. you, clear: We're day. a done any not Thank have

Operator

conference. This you Thank your concludes for the participation.

disconnect. may You now

Air Transport Services (ATSG) 9 Aug 242024 Q2 Earnings call transcript