Textainer Group Holdings Limited Common Shares

Thank you, and welcome to Texthena's third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be provided at that time. As a reminder, today's conference call is being recorded. I will now turn the call over to Ankit Hira, Investor Relations for Texthena Group Holdings Limited.

Thank you. Certain statements made during this conference call may contain forward-looking statements in accordance with U.S. securities laws. These statements involve risk and uncertainties, are only predictions, and may differ materially from actual future events or results. The company's views, estimates, plans, and outlook, as described within this call, may change after the discussion. The company is under no obligation to modify or update any or all statements that are made. Please see the company's annual report on Form 20F for the year ended December 31, 2020, filed with the Securities and Exchange Commission on March 18, 2021. and going forward, any subsequent quarterly filings on Form 6-K for additional information concerning factors that could cause actual results to differ materially from those in the forewarning statements. During this call, we will discuss non-GAAP financial measures. As such, measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures will be provided either on this conference call or can be found in today's earnings specialties. Finally, along with our earnings release today, we have also provided slides to accompany our comments on today's call. Both the earnings release and the earnings call presentation can be found on Textainer's Investor Relations website at investor.textainer.com. I would now like to turn the call over to Olivier Guiscard, Textainer's President and Chief Executive Officer, for his opening comments.

Thank you, Ankit. Good afternoon, everyone, and thank you for joining us today for Textainer's third quarter 2021 earnings call. I'll begin by reviewing the highlights of our third quarter results and then provide additional perspective on the industry. Michael will then go over our financial results in greater detail, after which we will open the call to your questions. I'm proud to deliver yet another quarter of very positive results. This reflects the consistent execution of our strategy to drive profitable organic growth with a focus on optimized long-term CAPEX as well as continued operational and financial efficiencies. In addition, we continue to prioritize efficient capital allocation through our active share repurchase program, and I'm also very pleased to announce the reinstatement of our common share dividend program, which is supported by our strong and growing cash flow generation outlook. For the third quarter, Rental revenue increased 8% sequentially when excluding non-recurring income from the second quarter, and 31% compared to the third quarter of 2020, driven by impressive fleet growth in a positive market environment. Adjusted EBITDA increased to $184 million, a 55% growth from the same quarter last year, and adjusted net income was $77 million. or $1.52 per diluted shares, which represents an annualized ROE of 22%. As we reach the end of the traditional peak season, our performance continues to be supported by elevated trade volumes and the historic level of CAPEX we deployed during the pandemic. The ongoing demand and logistical challenges causing supply chain bottlenecks remain the main factor driving capacity utilization for ships and containers. This, in turn, has allowed us to enjoy high lease-out volumes with favorable yields and long tenure, as well as strong gains on sales from disposed containers. During the third quarter, we leased out 210,000 cu of factory and depot containers under favorable terms, maintaining our average utilization rate at 99.8%. During the nine months ended September, we leased out almost 600,000 TU as our total fleet continued to expand significantly. We continue to successfully review and extend maturing leases into lifecycle leases with long maturities for the remaining useful life of the containers. This further secures stable future cash flows and mitigates market cyclicality. During the third quarter, we deployed $622 million in CAPEX for a total of approximately $1.7 billion through the first nine months of the year, which is in addition to the almost $900 million deployed in the second half of 2020. We remain a very active market participant and have placed additional orders for more than $250 million of containers for delivery in the fourth quarter. As of the end of the third quarter, our entire lease portfolio, including shorter leases, now has an average remaining contractual tenure in excess of six years, and our container fleet has a young average age of 4.5 years. As a reminder, the rental rates in our lease are locked in for long-term duration and typically for an additional six to 12 months given the restrictive schedule of permitted return locations. New container prices remain consistent at about $3,800 per cu, driven by sustained demand, capacity management, and increases in material costs. Production levels have ramped up significantly this year, and we expect container production to exceed 6 million tu in 2021. This is a record level, which must, however, be viewed in line with the low production level of the preceding years. Total factory inventory level remain reasonable at one month equivalent of current production. During the year, we've also further strengthened our financial position through the optimization of our debt financing. As of the end of the quarter, our effective interest rate now stands at 2.6%, with 89% of our debt at fixed rate, with an average remaining tenure in excess of six years. Over the next several years, we will continue to benefit from the de-risking achieved through the long-release tenor and optimized fixed-rate debt, which has effectively locked in attractive long-term economic gains. As we look to the balance of the year and into 2022, we expect the current favorable market macro environment to continue. Cargo volumes are expected to remain strong through the full year of 2022 due to the continued high consumer spending, the restocking of low-level inventory, and the worldwide port congestion. We expect new container prices to remain high as manufacturers maintain a disciplined approach to production capacity and as component costs have also increased. We expect this to continue to support high utilization rate as well as high resale prices further supported by the corresponding limited supply. Overall, we expect our customers to continue to benefit from very favorable ongoing market condition and strong ocean freight rates. While we expect the tailwinds driving the current market conditions to persist through 2022, we expect to see a return to a more normalized level of container CAPEX following several quarters of historical container production. Nonetheless, we anticipate continued growth of our balance sheet given the projected high container prices. We're focused on delivering a long-term balanced approach of driving organic growth through disciplined, accretive CAPEX investments while returning capital to common shareholders through our ongoing share repurchase and reinstate dividend programs. we have repurchased over 1.6 million shares through the first nine months of the year, including approximately 524,000 shares during the third quarter. This represents approximately 16% of shares which were outstanding when the program commenced in September 2019. The board and the management team continue to see your share repurchase as an efficient use of our liquidity. In line with this, Our board has authorized a further increase of $50 million to our existing share repurchase program, bringing its total to $200 million. Taking this into account, we have $78 million available for Q4 onwards under the share repurchase program. We remain highly confident in our business' future performance and expect to remain both active and opportunistic as it relates to share repurchase activities. In addition, as I had highlighted earlier, I'm very pleased to announce that the TechSaver board has decided to reinstate a quarterly dividend program for common shareholders. This is again supported by our confidence in the underlying long-term business fundamental and our reliable, stable cash generation capability. Efficiently managing shareholder capital with a focus on total shareholder return is key to our capital allocation strategy and the reinstatement of the dividend program demonstrating this, adding to our already strong share repurchase program. In summary, I'm extremely proud of both the financial and strategic performance of TechStainer. We plan to continue our approach towards fleet growth, investing selectively in the most attractive opportunities to deliver long-term value to our shareholders through strong operational and financial performance, book value growth, dividends, and share repurchases. I'll now turn the call over to Michael, who will provide a little bit more color regarding the financial results for the third quarter.