Press release·08/02/2024 16:14:09

Financial Performance Highlights for Triton International

Triton International, a leading global provider of intermodal freight containers, has reported its financial results for the second quarter of 2024. The company’s performance during this period showcases its resilience and adaptability in the face of ongoing supply chain disruptions.

Strong Demand and Utilization The demand for Triton’s containers remained elevated in the second quarter, driven by supply chain challenges caused by shipping diversions in the Red Sea region and increased cargo volumes. This led to an increase in container pick-ups, a decrease in container drop-offs, and a rise in fleet utilization. The average utilization rate for the second quarter was 98.8%, up from 97.0% in the same period last year, with the ending utilization rate reaching 99.1%.

Revenue and Profit Trends Triton’s total leasing revenues for the second quarter were $379.0 million, a decrease of $7.5 million compared to the same period in 2023. This was primarily due to a $6.4 million decrease in per diem revenues, reflecting a slight decline in the average number of containers on-hire and lower average lease rates. Finance lease revenues, however, increased by $1.5 million, driven by the addition of a large finance lease transaction.

The company’s net gain (loss) on the sale of leasing equipment showed a significant decrease, from a $21.6 million gain in the second quarter of 2023 to a $38.1 million loss in the current quarter. This was largely due to a $57.1 million up-front loss on a finance lease transaction that included containers purchased during the COVID-19 pandemic with carrying values higher than current market values.

Operating expenses, including depreciation and amortization, direct operating expenses, and administrative expenses, decreased by $6.2 million compared to the same period last year. This was primarily driven by lower depreciation and direct operating costs, partially offset by an increase in transaction and other costs related to the Merger.

Overall, Triton’s net income for the second quarter of 2024 was $77.4 million, a decrease of $64.3 million compared to the same period in 2023. This decline was primarily attributable to the $59.7 million decrease in net gain on the sale of leasing equipment and the $13.6 million increase in transaction and other costs.

Liquidity and Capital Resources Triton’s principal sources of liquidity include cash flows from operating activities, proceeds from the sale of leasing equipment, and borrowings under its debt facilities. As of June 30, 2024, the company had $42.1 million in unrestricted cash and cash equivalents and $1,850.0 million in remaining borrowing capacity under its existing credit facilities.

During the first half of 2024, Triton’s net cash provided by operating activities decreased by $82.4 million to $525.3 million, primarily due to lower profitability and a decrease in cash collections on finance leases. Net cash used in investing activities increased by $228.3 million, mainly due to higher purchases of leasing equipment. Net cash used in financing activities decreased by $276.8 million, driven by lower net debt repayments compared to the same period in 2023.

Triton’s outstanding indebtedness as of June 30, 2024, was $7,338.2 million, with a maximum borrowing capacity of $9,188.2 million across its various debt facilities. Approximately 88.6% of the company’s total debt is either fixed-rate or synthetically fixed through interest rate swap contracts, helping to mitigate the impact of changes in short-term interest rates.

Debt Activity and Credit Ratings During the second quarter of 2024, Triton took several actions to manage its debt portfolio:

• Amended and restated its $2,000.0 million revolving credit facility, extending the maturity to July 2029 and increasing the accordion feature to $1,000.0 million.
• Issued $351.9 million in ABS fixed-rate notes at a weighted average interest rate of 5.63% and an expected maturity of February 2035.
• Issued $450.0 million in ABS fixed-rate notes at a weighted average interest rate of 5.55% and an expected maturity of May 2034.
• Repaid its $500.0 million 1.15% senior notes that matured in June 2024.

Triton’s investment-grade corporate and long-term debt credit ratings from Fitch Ratings (BBB-) and S&P Global Ratings (BBB) remained unchanged during the second quarter of 2024. These ratings enable the company to access attractively priced capital and maintain a low cost of funds.

Strengths and Weaknesses

Strengths:

• Strong demand for containers and high fleet utilization, reflecting the resilience of Triton’s business model
• Diversified lease portfolio with a mix of long-term, finance, and service leases, providing stable and predictable cash flows
• Prudent financial management, with a majority of debt either fixed-rate or synthetically fixed through interest rate swaps
• Investment-grade credit ratings, allowing access to competitively priced capital

Weaknesses:

• Decline in per diem revenues due to lower average lease rates and a slight decrease in the number of containers on-hire
• Significant up-front loss on a finance lease transaction, negatively impacting net gain on sale of leasing equipment
• Increase in transaction and other costs related to the Merger, putting pressure on profitability in the short term

Outlook and Future Prospects

Triton’s performance in the second quarter of 2024 demonstrates its ability to navigate the challenges posed by ongoing supply chain disruptions. The company’s strong demand, high utilization rates, and diversified lease portfolio suggest that it is well-positioned to weather any near-term volatility in the container leasing market.

However, the company’s profitability was impacted by the up-front loss on a finance lease transaction and the increase in transaction and other costs related to the Merger. These one-time events may continue to weigh on Triton’s financial results in the short term.

Looking ahead, Triton’s focus on prudent financial management, including its efforts to maintain a majority of fixed-rate or synthetically fixed debt, should help mitigate the impact of rising interest rates. Additionally, the company’s investment-grade credit ratings and ample liquidity provide a solid foundation for future growth and expansion opportunities.

Overall, Triton’s financial performance in the second quarter of 2024 reflects the resilience of its business model and the company’s ability to adapt to changing market conditions. While facing some near-term challenges, Triton’s long-term prospects remain promising, as it continues to leverage its industry-leading position and strong financial profile to capitalize on the growing demand for intermodal freight containers.