Air Transport Services Group, Inc

Good day and thank you for standing by. Welcome to the Q4 2023 Air Transport Services Group, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Joe Payne, Chief Legal Officer.

Good morning and welcome to our fourth quarter and full year 2023 earnings conference call. We issued our earnings release yesterday after the market closed. It's on our website at ATSGINC.com. Let me begin by advising you that during the course of this call, we will make projections and other forward-looking statements that involve risks and uncertainties. Our actual results and other future events may differ materially from those we describe here. These forward-looking statements are based on information, plans, and estimates as of the date of this call. Air Transport Services Group undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions, factors, new information, or other changes. These factors include, but are not limited to, unplanned changes in the market demand for our assets and services, including the loss of customers or a reduction in the level of services we perform for customers, our operating airline's ability to maintain on-time service and control costs, the cost and timing with respect to which we are able to purchase and modify aircraft to a cargo configuration, Fluctuations in ATSGs traded share price and in interest rates, which may result in mark-to-market charges on certain financial instruments. The number, timing, and scheduled routes of our aircraft deployments to customers. Our ability to remain in compliance with key agreements with customers, lenders, and government agencies. The impact of current supply chain constraints, both within and outside the U.S., which may be more severe or persist longer than we currently expect. The impact of the current competitive labor market. Changes in general economic and or industry specific conditions, including inflation and regulatory changes. The impact of geopolitical tensions or conflicts, human health crises, and other factors as contained from time to time in our filings with the SEC, including the form 10 K for 2023, that we will file this week. We will also refer to non-GAAP financial measures from continuing operations, including adjusted earnings, adjusted earnings per share, adjusted pretax earnings, adjusted EBITDA, and adjusted free cash flow. Management believes these metrics are useful to investors in assessing ATSG's financial position and results. These non-GAAP measures are not meant to be a substitute for our GAAP financials. we advise you to refer to the Reconciliations to Gap measures, which are included in our earnings release and on our website. And now I'll turn the call over to Joe Headey, CEO, for his opening comments.

Thank you, Joe. Good morning, everyone. As you may recall from our third quarter call, we saw some significant changes to our market environment in the second half of the year, resulting in multiple headwinds that continue to impact our financial results in the fourth quarter. These include lower demand in our leasing segment and reduced block hours in our airline operations. The most significant factor was an acceleration in lease returns of our 767-200 freighters, which reduced adjusted EBITDA by approximately $33 million in our CAM leasing segment in 2023. These aircraft were in high demand as Amazon built its own air express network starting in 2015, and even more so during the pandemic. when customers kept the aircraft in service longer than originally planned. While we always envision the market transitioning to the 767-300s from the 200s, the market softness has accelerated that process. In addition to the lower lease revenue, we also lose power-by-cycle engine revenue as the 200s are removed from service and the aircraft remaining in service fly fewer cycles. Despite the macroeconomic and operating challenges weighing on our results in the second half of the year, we leased 13 aircraft, including our first three Airbus A321-200 freighters. By now, I'm sure most of you have seen our earnings release and the guidance we've given for 2024. Quint will review our 2023 financial results in a moment. Many of the challenges he will describe are expected to continue in 2024. As a result, we are taking a more conservative approach to how we provide our adjusted EBITDA guidance this year. Traditionally, our guidance has included upside potential from the expected signings of future leases and additional ACMI flying. Today, we are providing a forecast of $506 million in adjusted EBITDA for this year, which only includes existing and signed future leases, net of expected lease returns. We believe this approach gives a better indicator of our expectations. We will also outline drivers we believe could provide upside to that. Given our expectations for continued market challenges in 2024, we are aggressively reducing our capital spending outlook, and I am committed to generating positive free cash flow this year. I'll discuss the specifics of our capital plan for 2024 after Mike gives you some details on our adjusted EBITDA outlook. But the key is that we are budgeting $410 million, down $380 million, nearly half of the 2023 levels. With that, I will now turn the call over to Quint Turner to discuss our financial results for the fourth quarter. Quint?