Atlas Corp. Common Shares

Welcome to the Atlas Corp fourth quarter 2020 earnings conference call. I would like to remind everyone that this call is being recorded today, March 9th, 2021. I would now like to turn the call over to Robert Weiner, head of investor relations of Atlas Corp.

Thank you and good morning, everyone. Thank you for joining us today to discuss Atlas Corp's fourth quarter 2020 earnings. We issued our earnings release last evening after market closed. We will refer to our quarterly earnings release, accompanying earnings presentation, and supplemental documents today in this conference, which all can be found on the Investor Relations tab on our website, www.atlascorporation.com. On the call with me today are David Sokol, Chairman of the Board of Atlas Corp. Bing Chen, President and Chief Executive Officer of Atlas Corp, and Graham Talbot, Chief Financial Officer of Atlas Corp. Joining us on the call during the Q&A session are C-SPAN's Chief Commercial Officer, Peter Curtis, and C-SPAN's Chief Operational Officer, Torsten Peterson. I would like to remind you that our discussion today contains forward-looking statements, which are noted on slide two in the accompanying earnings presentation. Actual results make different materials from those stated or implied due to risks and uncertainties associated with our business. Our known risk factors are discussed in our Form 20F and our reports on Form 6K filed from time to time and in connection with our quarterly financial results, which are all available on our website. With this quarterly report, you will note that we continue to report non-GAAP measures, which we believe provide investors a clearer understanding of the performance of our business The fourth quarter earnings release contains supplemental financial tables and information pertaining to our fourth quarter earnings report and includes definitions of non-GAAP financial measures and reconciliations of such non-GAAP measures to the most closely comparable U.S. GAAP numbers. These definitions may also be found in the appendices at the back of the earnings presentation, which we will refer to in our call discussion. It can also be found on our website. In addition, we have provided historical financial information through 2018, which are also available in the Q4 supplemental workbook on our website. Please turn to slide number four. I am now pleased to turn the call over to Atlas Corp's Chairman of the Board, David Sokol.

Thank you, Rob, and good morning, everyone. This is Dave Sokol speaking, Chairman of the Board of Atlas Corp, and I'd like to welcome all participants today and express my appreciation for your time and attention to our presentation. I've asked Bing to allow me to open today's call with a bit of a look back over the past three years, which encompasses the time since Bing joined us as CEO in January of 2018. What Bing and his team have accomplished is extraordinary and deserving of clear recognition. We have a wonderful company, a global multi-platform business that our team is very excited about. Atlas is uniquely positioned as a long-term capital allocation global multi-platform investment opportunity with key attributes. Three of those attributes are, first, a resilient business model, which ended 2020 with nearly $11 billion in total gross contracted cash flow, pro forma for $5.9 billion of gross contracted cash flow, added from recent vessel acquisitions, including 31 new builds and two second-hand vessel acquisitions. To create greater clarity for investors, we will be discussing total contracted cash flow today and in the future. Secondly, Atlas's core competencies are consistent operational excellence, creative customer partnerships, solid financial strength, quality growth, and disciplined capital allocation. This is what drives our execution and results. And thirdly, the team has been delivering quality growth, enhancing fleet and asset and creating greater diversification of our customers through the addition of quality assets with long-term quality margin contracted revenue. Our 2020 performance clearly depicts a divergence in Atlas' performance as compared to our peers, and even more broadly as benchmarked against other mid-cap investment opportunities. Being in the team's positioning of C-SPAN has allowed for Atlas to aggressively take advantage of current industry dynamics. growing the business dramatically with excellent margin long-term charters, and taking advantage of shipyard opportunities due to our team's industry relationships and design and construction oversight talents. The container shipping industry dynamics were not meaningfully set back by COVID, and in some ways, COVID shined light upon the importance of our world's global container shipping efficiency. Our other platform, APR Energy, was substantially more affected by COVID, as developing governments were virtually shut down and the resulting economic slowdowns materially reduced electricity demand. However, these delays should turn into opportunities when the global COVID pandemic is resolved. The three-year performance you see on this slide, which depicts the management team's performance since 2017, shows strong growth in revenues, cash flow, and earnings, yet with little contribution from APR as it was only closed in February of 2020. This performance is reflective of processes, programs, strategies, and leadership that Bing and his teams have built and developed over the past three years. A formula for success, leveraging the company's five key competencies to produce these results. We are confident that as we now begin to apply that formula to APR, we will drive similar progress in the future to that of C-SPAN. A closer look at the results illustrates the very impressive performance and execution of this team. From the 2017 results through 2020, the performance is quite extraordinary. Revenue increased by 70.9% from $831 million to $1.42 billion at the end of 2020, a 19.6% compounded growth rate. Adjusted EVA DA increased from $496 million to $924 million at the end of 2020, representing a 23% compounded growth rate. Funds from operation increased by 146% from $253 million to $622 million at the end of 2020, a 35% compounded growth rate. And cash flow from operations went from $391 million to $694 million in 2020. This represents a cumulative annual growth rate of 21.1%. And we also made significant progress with the balance sheet and the capital structure measurements. Now please turn to slide five. This slide depicts what I view as very impressive progress. In fact, I would say great results. This is the performance that growth stocks are made of, and we are doing this with significant identifiable and easily valued assets that are backed by long-term gross contracted cash flows and earnings performance. It may be difficult to find other companies with nearly $11 billion of future long-term gross contracted cash flow. Atlas is that company. Atlas has added long-term gross contracted cash flows by a whopping $5.9 billion in about the last three months. This is very impressive, and it may seem that it occurred surprisingly quickly. However, the foundation for this growth had been laid during the prior three years through disciplined execution and a total focus upon the customer's needs and expectations. Since 2017, we've added 71 new vessels and over 890,000 TEUs, an 80% increase in a little over three years, while at the same time strengthening the fleet with newer, larger vessels on longer tenure charters. This is exceptional performance, especially when you consider the myriad of challenges posed over the last year from COVID. The board of directors and I are very pleased with the team's commitment to high quality growth and high performance. Please turn now to slide six. On the left of this slide, You'll see C-SPAN's vessel categories when this team started on our path to high performance. Our vessels were more concentrated in smaller, less desirable categories and with a more spot oriented mix. Now in 2021, you see growth to 160 vessels from 89 at the end of 2017. And the depth and breadth of today's fleet is a far higher quality with enhanced environmental equipment, thereby developing a more desirable and attractive offering to the customers. C-SPAN's primary focus is on expanding the 10,000 to 15,000 TEU fleet category, as these are attractive vessels for major trade lanes and are expected to be the workhorses of the global fleet in the coming decades. These vessel sizes are preferred for major routes, given their operating scale and efficiency. 79% of our fleet on a TEU-weighted basis is greater than 10,000 TEUs. With an average age of 5.3 years, which we believe is unmatched in the industry, and significantly differentiate our value proposition with our customers. Please turn to slide seven. This slide importantly depicts the significant diversification of the company's credit risk profile, which has been a focal point for Bing and the board. We went from a very concentrated customer mix to a very balanced mix of customers and revenue sources, which drastically reduces our credit risk. This transformation is even more compelling when you evaluate over the same period, 2017 through 2020, the dramatic uptick in the health of the industry and the much improved credit ratings of our customers, which have been on a steady rise during this period. Atlas is now positioned more securely and dynamically than at any point in the past, with a diversified customer mix, a much strengthened and improved quality of our fleet, a strong market, and increasingly positive credit ratings within the industry. We begin 2021 with a strong tailwind and we're very well positioned to execute future quality growth and value creation for our shareholders. Now please turn to slide eight. We have a strong safety culture at Atlas. It is integrated in everything we do as a company. Our priority will always be the safety and wellbeing of our team and business partners through operational excellence in every aspect of our business. Torsen and his team walk this talk every day. We take this very seriously at the board level, and the teams have robust programs to ensure safe operations successfully executed in our daily work streams. We value our team members, and we want them to return home healthy and safely after every shift. We also have a strong commitment to social responsibility, investing in our team, providing the tools, training, and programs to be good corporate citizens. You will see on this slide that our safety record has dramatically improved and sits near an all-time record lows, and it's being maintained. This was a focus of ours when I came in as chairman, and again the team has delivered. We are optimizing the success formula at C-SPAN, which we are carrying over to APR, which is seeking ISO 14001 certification in 2021. Now if you would please turn to slide nine. As you can see from the graph on slide nine, The formula this management team is implementing is working and effectively increasing value for shareholders. The team is executed with a high level of performance, illustrated by the 90% total return delivered to shareholders of Atlas over the past three years, far outperforming competitive peers, and even more so, the broader equity markets. Before I turn over the forum to Bing, our Chief Executive, I want to conclude my remarks by pointing out the philosophy and practice of the Board of Directors and the management team. And that is simply that Atlas is clearly a shareholder-focused company, performing for all of our shareholders, small and large, and consistently delivering increasing value for the shareholders. We expect to continue to deliver exceptional value and returns, demonstrating Atlas' compelling investment opportunity. We remain optimistic, determined, and focused on achieving sustainable value and growth. Please turn to slide 11. And lastly, the Board and I are extremely pleased with the team's progress to date, and we look forward to more success. We're pleased, but we're never satisfied. Thank you again for your attention. I will now turn the forum over to Atlas CEO, Bing Chin.