GATX Corporation

At this time, I would like to welcome everyone to the GATX 2025 second quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the call over to Sherry Hellerman, head of investor relations. Please go ahead.

Thank you, Eric. Good morning and thank you for joining GATX's 2025 second quarter earnings call. I'm joined today by Bob Lyons, president and chief executive officer. Tom Elman, executive vice president and chief financial officer. And Paul Titterton, executive vice president and president of Rail North America. As a reminder, some of the information you'll hear during our discussion today will consist of forward-looking statements. Actual results or trends could differ materially from those statements or forecasts. For more information, please refer to the risk factors included in our earnings release and those discussed in GATX's form 10K for 2024 and our other filings for the SEC. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. Earlier today, GATX reported 2025 second quarter net income of 75.5 million or $2.06 per diluted share. This compares to 2024 second quarter net income of 44.4 million or $1.21 per diluted share. The 2024 second quarter results include a net negative impact of 8 million or 22 cents per diluted share from tax adjustments and other items. -to-date 2025 net income was 154.1 million or $4.21 per diluted share. This compares to 118.7 million or $3.25 per diluted share for the same period in 2024. The 2024 -to-date results include a net negative impact of 7.4 million or 20 cents per diluted share from tax adjustments and other items. These items are detailed in the supplemental information section of earnings release. Now I'll briefly address each of our business segments and after that we'll open the call up for questions. At GATX Rail North America, we continue to experience stable demand for rail cars. Our fleet utilization was .2% at quarter end and our renewal success rate was strong at 84.2%. We continue to achieve strong renewal lease rate increases while successfully extending term. The renewal rate change of GATX's lease price index was positive .2% for the quarter and the average renewal term was 60 months. Additionally, we continue to successfully place new rail cars from our committed supply agreement with a diverse customer base. We have placed over 6,500 rail cars from our 2022 Trinity supply agreements. Our earliest available scheduled delivery under this supply agreement is in the first quarter of 2026. The secondary market in North America remains robust. We generated over $34 million in remarketing income during the quarter, bringing the year to date total to approximately $65 million. Turning to Rail International, GATX Rail Europe utilization was .3% at quarter end. As noted in the release, the business environment in Europe is challenging and uncertain relative to either North America or India. Given macro headwinds and slower GDP in Germany, some customers are delaying their fleet planning decisions, which is impacting fleet utilization. Despite current conditions, we maintain a positive long-term outlook on the European rail car leasing market and will continue to look for attractive investment opportunities there. In India, freight volume continues to benefit from the country's ongoing infrastructure investments. As such, we continue to see strong demand for rail cars in India. GATX Rail India's fleet utilization remained high at .6% at quarter end. Within engine leasing, our joint venture with Rolls Royce and our wholly owned engine portfolio produced excellent second quarter results. A strong global air passenger volume continues to drive robust demand for aircraft spare engines. We're seeing very strong demand across engine types from global air carriers and the secondary market for engine sales is healthy. Regarding the pending Wells Fargo rail transaction announced at the end of May, we're excited about the opportunities it offers. But due to the customary regulatory reviews, all of which are underway, at this stage we're limited in what we can say beyond what we've already disclosed. Finally, reflecting our year to day performance and outlook for the balance of the year, we are increasing our 2025 full year earnings guidance to a range of $8.50 to $8.90 per diluted share. This guidance excludes the impact of tax adjustments or other items and excludes any impacts from the Wells Fargo transaction. And those are our prepared remarks. I'll hand it back to the operators so we can open it up for Q&A.

At this time, I would like to remind everyone in order to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Andrzej Tomczyk with Goldman Sachs. Please go ahead.