Textainer Group Holdings Limited Common Shares

Good day and welcome to the Textainer Group's Holdings Limited First Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Tamara Bakarian, Director of Investor Relations with Textainer. Please go ahead.

Thank you. Certain statements made during this conference call may contain forward-looking statements in accordance with U.S. security laws. These statements involve risks and uncertainties or 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 this discussion. The company is under no obligation to modify or update any or all statements that are made. We see the company's annual report on Form 20F for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 17, 2022, and going forward, any subsequent quarterly filing on Form 6K for additional information concerning factors that could cause actual results to differ materially from those in the forward-looking 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 press release. Finally, along with our earnings release today, we have also provided slides to accompany your 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 will now turn the call over to Olivier Gascary, Textainer's President and Chief Executive Officer, for his opening comments.

Thank you, Tamara. Good morning, everyone, and thank you for joining us today for Textainer's first quarter 2022 earnings call. I'll begin by reviewing the highlights of our first 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 for your questions. We're very pleased with our strong results for the start of the year. For the first quarter, lease rental income was $199 million, in line with the fourth quarter despite two fewer billing days and 17% higher than last year. Adjusted EBITDA was $182 million, and adjusted net income was $73 million, or $1.48 per diluted share, representing an annualized ROE of 19%. The start of the year has historically been a seasonally slower period, but we continue to see strong underlying consumer demand and deployed close to half a billion dollars of CAPEX on long-term and attractive leases, while increasing our share buyback to almost a million shares for the quarter. This high level of capex deployed to date is a result of earlier commitments and strong long-term strategic relationship with key customers. As highlighted during our last earnings call, going forward, we see a more normalized demand for new containers in 2022 as the market continues to digest the high production volumes from last year. We certainly remain focused on our disciplined investment strategy, deploying CAPEX only when we can achieve our long-term targeted returns and cash flows, and currently have a more modest new container order book of about $150 million. General market fundamentals remain favorable to container leasing. Indeed, shipping lines are expecting another record year as their ships continue to be fully mobilized given the ongoing high demand for goods around the world. The Shanghai Container Freight Index has come down from the peak because of seasonality and the impact of the pandemic in China, but it remains 40% higher than last year at the same time, demonstrating the underlying market strength. Disruption to supply chain, which traditionally generate demand for leased containers due to localized shortages or container dislocation, are only likely to intensify with the war in Ukraine and renewed COVID lockdowns in China. And probably most importantly, the traditional seasonal mid-year increase in cargo has yet to hit in a situation that is reminiscent of the first COVID lockdowns of 2020, when delayed production output combined with seasonal cargo demand initiated the supply chain disruptions we have witnessed since. More industry-specific indicators also remain positive. Container utilization rate of all leading companies remain above 99% and we have not seen any significant re-delivery of all the containers since the start of the pandemic. This is a sure sign that our customers continue to expect demand over the summer and potentially further into 2023 when new ships will be delivered. New container inventory at factory is stable and not at an abnormal level for this time of the year at about 800,000 TU, even if recent pickups have slowed. As a reminder, last year's monthly production was routinely above 600,000 TU. New container prices are at about $3,000 per CU and remain almost 50% above their long-term average level. This in turn continues to support the renewal of maturing contracts on new and more favorable long-term leases. Lease maturities on newly concluded deals remain very long relative to the economic life of our container or above 10 years. Although resale prices have come down somewhat, they're still high. This therefore appears to be related more to temporary slower demand, given that availability remains limited in absolute terms as shipping lines continue to hold on to their containers. As we look into the rest of 2022, we remain confident in the strength of our underlying business fundamentals. While there may be cyclicality within the shipping industry, Textainer maintains a high level of stability with revenue protected against short and medium term market fluctuation. As of the end of the first quarter, our entire portfolio had an average remaining tenor of more than six years, and our container fleet is probably one of the youngest in the industry with an average age of four and a half years. Looking ahead to the summer peak season, we expect the current macro environment to remain favorable with elevated consumer demand low warehouse inventory levels requiring replenishment, and disrupted global supply chain, extending transit times for containers even further. We anticipate new container prices to remain elevated as manufacturers enforce a disciplined approach to production capacity and as component costs increase with other inflationary pressures. We expect this environment to continue to support favorable renewals of expiring leases, high utilization rates, as well as high retail prices of older containers. We also expect our customers to continue generating strong operating results. In closing, we're optimistic about our market positioning. As expected, market activity year-to-date has tempered from the historic level we saw last year, but we continue to see selective opportunities for organic growth. Our focus on long-term leases at attractive yields matched with fixed-rate debt have secured our profitability and stable cash generation to largely mitigate cyclical risk. In addition, we remain committed to returning capital to our shareholder through our active share repurchase and dividend program. I will now turn the call over to Michael, who will provide a bit more color regarding our financial results for the first quarter.