Atlas Corp. Common Shares

Welcome to the Atlas Corp. Third Quarter 2021 Earnings Conference Call. I would like to remind everyone that this conference call is being recorded today, November 9th, 2021. I would now like to turn the call over to Robert Weiner, Head of Investor Relations at Atlas Corp. Please go ahead, sir.

Thank you, Boina. Good morning, everyone. Thank you for joining us today to discuss Atlas Corp's Third Quarter 2021 Earnings. We issued our earnings release yesterday evening after market closed. We will refer to our quarterly earnings release, company earnings presentation, and earnings supplemental workbook today in this conference, which all can be found on the Investors tab on our website, atlascorporation.com. I would like to remind you that our discussion today contains forward-looking statements, and I draw your attention to the disclaimer on slide number two of the company earnings presentation. Please note that we report non-GAAP measures, which we believe provide investors a clearer understanding of the performance of our businesses. The earnings release contains supplemental financial tables and information pertaining to our quarterly 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 measures. These definitions may also be found in the appendices at the back of the earnings presentation, which we may refer to in our call discussion and can also be found on our website. Please turn to slide number three. On the call with me today are 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 is C-SPAN's Chief Commercial Officer, Peter Curtis, and C-SPAN's Chief Operational Officer, Torsten Pedersen. We are also pleased that David Sokol will join us on the Q&A session as well, our Chairman of the Board. Following our prepared remarks, we will open up the forum to a question and answer session. I am now pleased to turn the call over to Atlas Corp CEO, Bing Chen.

Thank you, Rob, and good morning, everyone. Thank you for joining our call. Today, I will focus on the differentiation of our business model, market dynamics, and recent achievements of C-SPAN and APR Energy. Then I'll hand over to Grant Talbot to present our Q3 2021 results and financial update. Please turn to slide four. Now let's turn to Atlas third quarter performance highlights. I'm very pleased to report continued strong performance in the third quarter of 2021. We continue to benefit from a robust container shipping market and a deployed APR assets in new contracts and regions. In Q3, Atlas delivered robust revenue growth of 17%, adjusted EBITDA growth of 29%, and adjusted earnings per share growth of 107.4% compared to the same quarter last year. All of C-SPAN's vessels were chartered for the full quarter, achieving a utilization rate of 99%. As up to 15% of our fleet is exposed to floating index rates, we were able to benefit from the current market high. This, together with our continued strong cost control, drove our strong Q3 performance. APR executed two grid stabilization projects and achieved a Q3 utilization of 92%. It is also in progress of building a pipeline of quality long-term growth opportunities. During the quarter, we continued to deliver quality growth through our customer partnerships. Driven by our customers' demand, C-SPAN strategically added 25 new builds to its fleet in Q3. We have now invested in total of 70 new build vessels in the past year, backed by 11.5 years of average charter term and generating 11.3 billion U.S. dollars of gross contracted cash flows. We also continued creating consistent value for stakeholders across all aspects of our business. We paid our 65th consecutive dividend, advanced our ESG goals by issuing our inaugural sustainability report, executed ongoing improvements to our capital structure, and continue to add new talent to our team, including board member Katie Waite and APR CEO Benjamin Church. I would now like to talk about some of the operational drivers of our third quarter performance. Please turn to slide five. As one of our key competencies and differentiators, Consistent operational excellence continues to drive our organization's performance. C-SPAN achieved an asset utilization rate of 99% in both Q3 and since its IPO in 2005. This is evidence of consistently delivered industry-leading excellence, especially as it has been maintained throughout the unprecedented global pandemic. Despite the difficult operating environment, C-SPAN also successfully managed the fleet of 132 vessels with best-in-class operating safety with a historically low average monthly LTIF of 0.37 over the last 12 months and over 5,800, I repeat, 5,800 crew changes made year-to-date despite all logistic restrictions. Our excellence in vessel operation and chartering is indeed a competitive differentiator. We partner with our customers to understand their needs and overcome their challenges through creative win-win solutions. For example, we analyze their vessel size needs, fuel adoption plans, and supply demand forecasts to craft our solutions and foster deeper partnerships. Another example of this partnership is C-SPAN's forward fixing of 60 charters year-to-date with our customers. This has resulted in zero charter roll-off in 2021 with just six in 2022 and 19 in 2023. I'm proud of our team's execution on our new build program and power project deployment. We recently took delivery of the MSC Carol, the first of five 12,200 TU new builds, about two months ahead of the schedule. This marks C-SPAN's successful delivery of a total of 110 new builds in its 20-year history. We anticipate the remaining four sister vessels to follow the same ahead of the scheduled delivery. with two vessels, the MSC Elena and MSC Rashimi, expected to be delivered in November. Our team's fierce execution and decades of expertise ensure the long-term consistent delivery of best-in-class vessels. APR successfully completed two mobile turbine deployments in Q3, including APR's third consecutive annual project in Mexicali. Please turn to slide six. The container shipping market continues to experience favorable conditions thanks to a strong recovery in the trade volumes combined with ongoing supply chain disruption, which has absolutely no impact to our business. Global trade has rebounded and surpassed pre-COVID level across all trade lanes, attributed to stronger than expected improvements in global economics, pent-up purchasing demand, economic stimulus, and changes in consumer spending patterns. The charter market is also thriving. The charter rates are at historical highs due to a lack of tonnage across all vessel classes. Port congestions around the world, particularly in the U.S. and China, which is a large contributor to the historically low of 0.7 idle fleet. Land freight is also experiencing its own challenges with logistics difficulties limiting container distribution from the ports. C-SPAN continues to take advantage of this market upswing, working with our customers to develop long-term solutions through strategically these new builds which all backed by long-term charters and forward fixing of charters at improved rates for long duration. Please turn to slide seven. Market consensus does not expect these conditions to persist. As supply chain issues are resolved and new build order book is delivered over the next four years, rates are expected to normalize to a more balanced equilibrium. While many of our peers take advantage of the current high rates through the short-term chartering at the expenses for long-term cash flow certainty, C-SPAN continues to focus on building long-term customer partnership with the focus on creating sustainable value and quality growth. We prioritize predictability over the short-term gain through long-term charters with quality counterparties. which is why our business model is resilient in all market conditions, such as the trade war and current pandemic. Our 70-vessel new build program is a perfect example, contributing $11.3 billion of gross contracted cash flow over a weighted average charter duration of 11.5 years. The Atlas business model is showcased by a set of industry-leading metrics, such as our $17.9 billion of gross contracted cash flow, nearly 2 million TEU fleet, average charter duration of 7.5 years, and average age of fleet of 4.7 years. These are unique. in the market and insulates us from market volatility and provides long-term predictable performance. Please turn to slide eight. Our competitive differentiation in the market is clearly demonstrated when analyzing C-SPAN's history of being a trusted partner to the world's leading liners. C-SPAN has partnered with its customer for over 20 years defining the industry's future pathway. We've built a reputation based on our operating excellence and new build expertise, supported by our track record of developing the most fuel-efficient designs and new vessel classes. We continue leveraging our expertise in the third quarter with the addition of 25 new builds of 7,000 TU vessels. They are all backed by a weighted average charter duration of 11.2 years, producing over $4 billion of gross contracted cash flow. We've seen strong demand in the 7,000 TU segment as they are well positioned to replace and redefine the aging 4,000 to 9,000 TU segments. This segment currently makes up approximately 40% of the existing global capacity, but represents less than 8% of the new-built order book. Please turn to slide nine. We continue to focus on optimizing our best-in-class fleet composition and portfolio of top customers. Year-to-date, while we continue to develop our fleet in the high-demand 10,000 TEU and larger segments, More recently, we strategically expanded our presence in the 7,000 TU segments. We also continue to deepen and diversify our customer base amongst the top 10 liner companies. We partnered with Zim through numerous new builds and deepened our relationships with our existing customers. C-SPAN is pleased to partner with industry-leading customers who have proven their credit quality through record earnings and ample liquidity, with several also recently receiving rating upgrades. While the industry has financially strengthened, we have reduced concentration of our top three customers by 19% over the past three years. This results in further increasing our credit quality profile. Please turn to slide 10. I would like to summarize with this slide, which illustrates the progress and transformation Atlas has achieved under the leadership of this management and their dedicated teams. Recapping on our year-to-date progress through Q3 2021, growth contracted cash flow increased by $12.8 billion These are long-term, predictable cash flows secured by quality customers. Fully delivered fleet grew by 58%, adding 70 new built and four second-hand vessels. Increased the TEU capacity by 83% to nearly 2 million TEUs on a fully delivered fleet basis. This is approximately 4.5 times larger than the industry average. Decreased our fleet average age by 2.9 years to 4.7 years, less than half the average age of our competitors. And increased our fleet's remaining charter duration to 7.5 years, more than double the average duration of our competitors. These metrics are truly unique and substantially exceed our nearest competitors. No other company has delivered performance with the consistency and transparency as Atlas has. These results are continuous evidence of Atlas' unique and highly differentiated business model within our markets. We are confident to extend our leading position and return increasing value to all stakeholders. I will now turn it over the call to our CFO, Grant Talbot.