Textainer Group Holdings Limited Common Shares

Thank you, and welcome to Textainer's first quarter 2023 earnings 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, this conference is being recorded. I will now turn the call over to Tamara Bakarian, Investor Relations for Textainer Group Holdings Limited. Thank you. You may begin.

Thank you. Certain statements made during this conference call may contain forward-looking statements in accordance with U.S. securities laws. These statements involve risks and uncertainties and 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 this 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 31st, 2022 filed with the Securities and Exchange Commission on February 14th, 2023 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 statement. 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 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 Giscard, Textainer's president and chief executive officer, for his opening comments.

Olivier Giscard. Thank you, Tamara. Good morning, everyone, and thank you for joining us today. I will begin by reviewing the highlights of our first quarter results, followed by 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 happy with our first quarter 2023 earnings results. Our utilization continues to remain very strong, despite this being the traditional slower season of the year and the healthy consolidation phase taking place in the industry. For the quarter, adjusted net income was $54 million, or $1.22 per diluted share. The overall market has remained stable through the start of the year, despite lower cargo volumes. New container production and investment opportunities remain muted, but as mentioned, fleet utilization continues to be strong, container prices remain slightly above historical level, and turn-ins remain focused mostly on sales-age containers that were disposing in a profitable secondary market. The strong cash generation of the fleet continues to drive our ability to return capital to shareholders and de-level. Q1 lease rental income was $195 million in spite of two fewer billing days in the quarter and continues to demonstrate stability, a testament to the resilience of our utilization rate, which stands at an exceptional 98.8%. This, in turn, can be attributed to the successful proactive renewal of maturing leases thanks to our strong, longstanding customer relationships. We continue to expect utilization to remain elevated for the duration of this year. Q1 gain on sales was $10 million, a decrease from last quarter driven by lower volume and lower average prices. While resale prices normalized gradually throughout 2022, They have since remained stable at a more sustainable and still attractive margins. Further, we're pleased to report that even with rising interest rates, our effective average interest rate only incrementally increased to 3.1 percent from 3 percent last quarter. This increase were offsets by deleveraging, helping drive our total interest expense down versus the previous quarter. Its favorable outcome can largely be attributed to a long-term hedging policy which has been strategically implemented to mitigate the impact of interest volatility. Our strategy involves capitalizing on profitable investment opportunities whenever they arise with the aim of generating strong return and driving value creation. In the present climate where investment opportunities remain limited, Our attention remains towards the efficient allocation of our free cash flow to optimize shareholder value. To this end, we're pleased to report that we repurchased 1.3 million common shares this quarter, representing 3% of total shares outstanding as of the beginning of the year. We continue to view our buyback program as extremely accretive and beneficial to long-term value for our shareholders. Texana has strategically positioned itself as a long-term speciality finance business, navigating the cyclical nature of the shipping industry to deliver consistent performance to enhance long-term intrinsic value for shareholders. By understanding and adapting to the market situation, we're able to provide much needed liquidity when opportunity arise, ensuring that we remain financially nimble and responsive to our customers. This opportunistic approach enables us to capitalize on favorable market trends by also demonstrating resilience during slower markets. Our current market outlooks reflect signs of continued stability and optimism for the second half of the year. While the shipping industry experienced continued normalization with lowered cargo and ocean freight rates in recent months, we're now witnessing the first increase in ocean freight rates in more than a year. As the summer season approaches, shipping lines are positioning themselves to accommodate the traditional inventory stocking that occurs during that time of the year. Utilization rates are in turn supported as shipping lines opt to retain sufficient containers in preparation for this expected increase in cargo. Liners are also opting to hold onto containers as returning expired containers or leaving new ones present more expensive alternatives. As a result, shipping lines are primarily returning old sales-age containers. Meanwhile, the resurgence of the Chinese economy has added to the resilient secondary container market, reinforcing the stability of resale demand and pricing as well as offering possible opportunity for lead-outs from our available depot inventory, 80% of which resides in Asia. Container factories remain mostly closed given the absence of sufficient orders for new production. This very welcome discipline provides essential support for container supply to readjust following two years of elevated production levels. This further helps maintain prices for new container at the level above $2,200 per CU, and by comparison, reinforces the attractiveness of our existing fleet. Current factory inventory has remained stable from last quarter at about 1 million TU, the majority of which are owned by shipping lines and represents about 2% of the world fleet. Our strategy remains to avoid speculative container purchases focusing on opportunistic back-to-back orders and ensuring our inventory of new containers remains minimal and optimally managed. Looking ahead, we anticipate the market will maintain stability during the second quarter, followed by gradual rise in shipping volumes and potential prospect for on-hiring additional containers in the summer months. In the meantime, we intend to continue focusing our strong cash generation onto shareholders' return and opportunistic deleveraging. In conclusion, we're confident that 2023 will showcase the resilience of our business model, including our durable committed revenue and fixed-rate financing. We anticipate stable operating performance, even as market conditions transition past the pandemic-driven cycle. And our primary focus continues to be on capital allocation, maintaining a robust balance sheet, and making prudent investment aimed at delivering long-term intrinsic value growth for our shareholders. I will now turn the call over to Michael, who will give you a little more color about our financial results for the quarter. Thank you, Olivier.