Q1 2020 Earnings Call
2019 hosting the call today from the company's corporate offices in Pasadena, California are Mr., Jody Miller, President and Chief Executive Officer, Mr. Charles for on test.
Second device, President and Chief Financial Officer, today's call is being recorded and will be available for replay beginning at 230 PM Eastern time.
At this time all participants are in place any listen only mode and the floor will be opened for your questions. Following the presentation.
It's now my pleasure to turn the call over to Mr., Larry Clark Investor Relations for the company. Please go ahead Mr. Clark.
Thank you Hillary.
I'll begin today I'd like to remind you that this conference call may contain certain forward looking statements.
Such forward looking statements include but are not limited to our views with respect to future financial and operating results.
Below the pressure increases in interest rates for a variable rate debt.
Our ability to raise capital or borrow additional funds.
LDL de ups sufficiently qualified employees to staff for businesses.
Understood in the Australia, New Zealand or Canadian dollar relative to U.S. dollar.
Regulatory changes customer defaults or insolvencies litigation acquisition, the businesses that do not performance, we expect well they're difficult for us to integrate or control.
Our ability to secure adequate levels of products to meet customer demand are going to procure adequate supplies for manufacturing operations labor disruptions adverse resolution many contractor other disputes with customers.
Clients in demand for products.
And then services acute for arc industries, such as the Australian construction and transportation industries, where the U.S. construction and oil and gas industries or a write off of all or part of our goodwill or tangible assets.
These risks and uncertainties could cause actual outcomes are results to differ materially from those described in our forward looking statements.
We believed that the expectations represent about forward looking statements are reasonable, but there can be no assurance that such expectations will prove to be correct.
More details regarding these risks please see the risk factor section of our pure periodic reports filed with the FCC and posted.
On our website.
These forward looking statements represent the judgment of the company at this time in General Finance Corporation disclaims any intent or obligation to update forward looking statements.
This call, we will discuss certain non U.S. GAAP financial measures such as adjusted EBITDA reconciliation of how we define arrive at adjusted EBITDA is in our earnings release and will be included in our quarterly report on Form 10-Q .
And now I'll turn the call over to Jody Miller, President and Chief Executive Officer Jody. Please go ahead.
Thank you Larry Good morning, and we appreciate you joining us today for first quarter fiscal year 2020 conference call.
I will begin with a brief discussion of our operations than our CFO , Jeff brand. This will provide a financial overview our outlook for the remainder of the fiscal year.
Following his remarks, well open the call up for questions.
We're very pleased just started the fiscal year 2020 with strong performance from our core North American leasing operations.
Hi man generated exceptional results delivering an 18% year over year increase and leasing revenues driven by overall strength and growth and average lease rate.
In addition, our team at Pac Van continues do a great job executing on several key initiatives, especially our national account program and our recently introduced PB three safety containers.
I mean is it remains highly regarded by our customer base, achieving a world class net promoter score of 89 for the most recent quarter and 85 for the trailing 12 month.
As a company we reached a key milestone during the quarter, surpassing 100000 units on a rental fleet, mainly driven by growth Pac Van and North America, and Royal Wolf in Asia Pacific.
Over the last 10 years or combine rental fleet has grown by over two and half times, which represents an annual growth rate of over 10%.
Additionally, during that same period, our combined primary bank branch locations have more than doubled over 100 locations.
This branch expansion along with the growth in our rental fleet is a testament of the outstanding job scheme and all the great geographic been used by growing market share to your great organic expansion as well as through accretive acquisitions.
Our liquid containment business recorded lower results for the quarter due to moderation in the oil and gas activity in Texas.
Well in gas production, both based on generally remain healthy we've been impacted by slower activity year over year.
As we've mentioned in the past the vast majority of our work in this sector involves completion and production work and not the initial drilling in the well.
Given the large number of wells in both basins that have already been drilled and are now waiting completion. We believe this points to healthy activity down the road and therefore, we remain optimistic about this business.
Our North American manufacturing operations posted a slight decline year over year adjusted EBITDA during the quarter sales to external customers were lower due to reduce reduce sales, especially tanks in chassis.
Intercompany sales of Pac man increased by higher demand for ground level offices.
Now turning to our Asia Pacific region.
Our Asia Pacific region. Once again delivered improved performance driven by 4% increase in leasing revenues in local currency with increased activity across most sectors, notably on the transportation construction <unk> industrial and retail sectors.
This is a 12 tell the last 13 quarters, where Royal Wolf is posted year over year growth and leasing revenues, mainly due to growth in average units on lease and principally utilization.
Our Royal Wolfs team remains focused on building upon its leading market position across both Australia, New Zealand through a combination of organic growth greenfield openings and to the extent they become available accretive acquisitions.
During the quarter, we opened one greenfield location in New Zealand complementing our acquisition last year in New Zealand.
To conclude we continue to have both organic growth and expansion opportunities in North America, as well as ability to strengthen our market leadership in Asia Pacific region.
Our first quarter performance was generally in line with expectation and lay the groundwork for another year solid financial results.
I'll now turn over the call a CHMP brand as for his financial review and our outlook for the remainder of the fiscal year.
Thank you Jody will be filing our annual report on Form 10-Q , shortly at which time to stocking only available on both the Fccs Edgar filing system on our website and I encourage investors and other interested parties to read it as it contains a substantial amount of information about our company some of which one will discuss today.
Turning to our financial results total revenues were 89.9 million in first quarter fiscal year 2020, compared to 97.8 million for the first quarter fiscal year 2019.
Leasing revenues were 58.9 million up slightly from 58.3 million prior smarter.
Rise of 67% of total non manufacturing revenues up from 62% in the first quarter.
Last fiscal year.
Non manufacturing sales revenues were 20.8 million in the quarter compared to 35.6 million in the prior year period.
In our North American leasing operations revenues for the first quarter fiscal 2020 totaled just under 61 million compared to 65.2 million for the first quarter fiscal 19, a decrease of 7%. However, leasing revenues increased by 2% down year over year basis. This increases across most sectors, but primarily in the construction commercial.
Retail industrial sectors substantially offset by decreases oil and gas sector.
Sales revenues decreased by 25%, 24% gives me primarily the industrial education and mining sectors fiscal year 2019 include 7.1 million sales to for customers that were not radically replicated in 2020.
Revenues for the North American manufacturing operations for the first quarter were 3.5 million and included intercompany sales of 1.3 million from products sold to our North American leasing operations.
This compares to 4.3 million of total sales, including intercompany sales and a half a million during the first quarter fiscal year 2019, as Johnny mentioned, our manufacturing operation saw reduced demand for specialty tags and chassis offset by increased demand for ground level off this is Phil for pack.
And our Asia Pacific leasing operate operations revenues for the first quarter totaled 27.1 million.
As compared to just under 29 million for the first quarter fiscal year 2019 decrease of 6%.
However, on a local currency basis total revenues were up slightly.
A slight increase in revenues in local dollars was different driven primarily by increased revenues in the mining government and education sectors and was essentially offset by decreases in the construction utility sectors.
Leasing revenues in Asia Pacific decreased by 2% of in year over year basis, but increased 4% local currency basis, driven primarily by increases in the transportation consumer industrial retail special events any education sectors, partially offset by decrease in the mining sector.
Consolidated adjusted EBITDA was 25.1, the first quarter 2020, compared to 27 million in the prior years quarter and adjusted EBITDA margin as a percentage of total revenues was 20% for both periods.
North America adjusted EBIT to part leasing operations was 19.4 million in first quarter compared to 20.7 million for the year go quarter.
Adjusted EBIT that tax rate increased by 18% to just under 60 million from 13 to happening on first quarter fiscal year 2019, and adjusted EBIDTA Lonestar decreased to 3.5 million from 7.2 main in a year ago quarter.
For our manufacturing operations on a standalone basis, adjusted EBITDA was 286000 for the quarter compared to just took to last year's first quarter adjusted EBITDA of just under 600000.
Asia Pacific's adjusted EBITDA for the quarter was 6.8 million comparable with the year ago quarter on a local currency basis, adjusted EBITDA increased by approximately 8% in the Asia Pacific.
Interest expense for the first quarter 2020 was 7.3 million.
Down significantly from 8.6 means for the fourth first quarter of last year. The decrease was primarily driven by lower interest expense in the Asia Pacific area due to lower average borrowings a lower weighted average interest of seven point, a lower average weighted average interest rate of 7.9% for the first quarter of 2020 versus 9.7%.
In the Euro Billboard.
And by a weaker Australian dollar between the periods in North America interest expense was also slightly lower mainly due to a lower weighted average interest rate of 6.1%.
In the first quarter 2020, compared to 6.6% in the prior years quarter.
Net income attributable common shareholders in the first quarter was 5 million or 16 cents per diluted share compared to net loss of 9.1 million for 33 cents per share in the year go quarter.
Included in these results were non cash benefit of a million dollars in a non cash charge of 12.4 million in fiscal year. Two fiscal years 2000 2019, respectively for the change in the valuation of the Standalone bifurcated derivatives. Both periods included $922000 for the dividends paid on preferred stock.
For the first quarter fiscal 2020, we generated net cash flow from operating activities of 13.6 million.
Up from 4 million in the prior year period and was the result, mainly of improved profitability in working capital management.
Turning to our balance sheet at September Thirtyth. The company had a net leverage of 3.7 times for the trailing 12 months, which is comparable to the net leverage ratio at the end of our fiscal year June 30.
Turning to our company wide outlook for fiscal year 2020.
On our fourth quarter earnings Conference call. We stated that we expect that the consolidated revenues for fiscal year 2020 would be in the range of 370 million through 390 million and that consolidated adjusted EBITDA would be in the range of plus or minus 4% in.
In fiscal year 20.
Fiscal year 2019 based on our first quarter results our revenue adjusted EBITDA expectations for fiscal year 2020 remain unchanged.
This outlook does not consider.
Into account the impact of any acquisitions that we incurred during the first during fiscal year 2020.
This now concludes our prepared comments and I would like to turn the call back to the operator for the question answer session.
Thank you at this time with your like Rascan Audio question Press Star followed by the number one on your telephone keypad again, let us start one for phone questions. Our first question comes from Scott.
Schneeberger with Oppenheimer.
Hi, guys its Daniel on for Scott Good morning.
Can we talk about the end markets in Pakistan, obviously, youre seeing strong trends there, but if you can give some perspective on what you expect a near term b on particularly on the retail side does as well, let's discuss how the the pricing opportunity in that business is shaping up.
Yeah. Thanks. This is Jody we're very optimistic retail season looks to be a stronger this year, a little stronger than than last year. So we're very pleased about that construction still very very strong.
Our quote and our pipelines look very bullish for the next foreseeable future and then from the industrial side, we feel like it's steady as well and then across all product lines on the back then core business.
Obviously, performing exceptionally well, 18% growth industry, leading and we're very proud of their performance, so far and don't see anything changing.
Got it. Thank you switching gears to Lonestar I mean, I would you categorize the visibility here at this point as we tried to model out the next couple of quarters.
Yeah, it's really really hard to forecast to be honest it dropped a little bit more than we anticipated.
While a lot of our larger customers backed off a little bit more.
More than they had indicated in the previous quarter, but what we're being told US is kind of going to hold steady here. The last these next six or seven weeks until a new budget money hits in January and then there don't be some level of pick up I don't think it will be back to the level.
Where where it was I think it'll be more gradual by Nick.
The oil companies are more cautious than they were last year.
And as far as just going to be steady.
Till we see same some change in the oil price and that that obviously can trigger. So we're we're optimistic that will gradually build kind of the second back second half of the year, but for right now it doesn't look like anything's going to happen until after the new calendar year starts.
Got it thank you I'll turn it over thanks very much.
Okay. Thank you.
And our next question comes from Brent Thielman with D.A. Davidson.
Hey, Thank you good morning.
Good morning.
I just keep it on Lonestar, you did three and a half million this quarter and EBITDA I think if you go into the December quarter that business, usually take step down is that is that your expectation at this point.
Yeah, I mean it hits.
The normal seasonal trend and I would say, it's going to be very consistent this year as well the company's usually don't like to spend a lot of their budget capital in the month in November December when they know, they're not going to get any of that back right. The wells wouldn't be online until early in the next year. So I think.
Thats, probably a an accurate statement and would follow the same trends.
As previous years Yep.
Okay, and and I guess is you have in ongoing dialogue with the customers their Jody.
We feel for how much of that.
Impact is sort of a function of the environment versus some of the consolidation that's going on among the customer base any feedback there.
Yeah, I think honestly, it's a little bit at all.
We know there's still a lot of.
Sorting out through the consolidation some of our largest customers better part of that and they're still sorting out their processes because each company did things a little differently as far as the the fracking in completion and then the crews and infrastructure and then you've got the pipeline infrastructure that still it's getting better, but it's still better than.
An issue.
And I think reading most of the releases from from the larger oil companies I think they want to.
No I have stronger cash flows and as supply kind of dwindle down year over the next few months, that's going to raise oil prices up and make.
Make that sector, a little more appealing and profitable than it was in the past so I think as far as looking ahead.
We don't see much change until after the new calendar year as I stated earlier, but we're optimistic that things will kind of gradually build.
And as a new calendar year.
Okay, and then buffer on those I guess, if he has the competitive environment changed at all in the last three or six months and our quoted rate.
Showing any signs of stabilization.
Not really anything changed I think everybody kind of has their pieces just at a lower level than than it was we've seen a little bit a rate.
Pressures here and there were swear people are trying to find new business. Just like we are we've got a couple new MSC is.
In the last month.
We will help us out and it's not at the same rates, we saw six months ago, but it's still fine as far as rates go.
But as far as the competitive environment in general not really any material changes no.
Okay, and just on the outlook for the year on looks like you're holding pretty steady as it sort of your view, maybe maybe lonestar shakes out a little lower than maybe you previously thought but Pac man running a little better than previously thought that's been pretty cancel out is that that's kind of the way you're looking at it here.
Thats exactly right back vans doing exceptionally well and we see those contained as trends continuing and that'll probably offset of lone star doesn't pick up.
The second half a strong as we hope it will then then back then should offset it.
Okay. Thank you.
Yep. Thank you.
And once again, if you would like to ask your question. Please press star followed by the number one and your telephone keypad.
Your next question comes from Luis Fernandez private Investor.
Yes, Hello, good morning.
Good morning, ladies good morning.
Alright, well.
Well.
Basically my my question is more and Royal Wolf.
We all know it's been a flat for awhile and I was just wondering if you guys expect any growth there I mean, maybe not the very short term but.
No longer medium term longer term do you guys see opportunities where.
Royal Wolf could grow and.
You know.
As we saw.
We are waiting the past Delano 2016 2015.
Do you guys expect set at all from the.
Yes, I mean, they had a they had 4% growth in leasing revenues as we stated in the past. We really are are trying to focus on the leasing side.
Royal Wolf has always done a great job on the sale side. There. They started that business right that was what their end before we acquired them and there is a great steady pipeline. The sales. So we don't want to discourage those but we really try to focus on leasing which at 4% is over GDP their outgrowing the economy as far as.
You know growth there and we have a lot initiatives that.
We'll continue if you look at the whole as far as Royal Wolf, There's some really robust areas are doing very very well.
One area that smell, a little bit tough on us as New Zealand.
We had all the rebuild from earthquakes natural disasters.
Really what generated a tremendous amount of revenue and growth for many years all that all that business is kind of back now and then return so that economy has been a little bit tougher than Australian economy, but if you look at certain parts.
The Australia, they're growing exceptionally well and we definitely have plans in place to continue that growth and accelerated.
Right so.
This is Chuck I, just want to up I guess clarifying on your on your first point about grow will be flattish. It's sometimes the are there.
Their operations good clouded by the FX change so I just want to point out and all too interested parties out there that we do put together investor presentation that we put on our website and one of these kind of leases in the back we surely.
Basically six years of Royal Wolf in Australian dollars and Bakken fiscal years 2014, 15, we had as you well know in that area.
National amount of profitability for the mining camps that that subsided flattened out but in the last few years. The adjusted EBITDA locally for Royal Wolf in fiscal year 2017 was 36 more in 17 and was 41, two and last fiscal year's 45 to in local Australian dollars first quarter.
Adjusted EBITDA Royal Wolf was 10 million compared to 9.3. So it has not been flat it's actually been over the last recent years has been growing, albeit it's not the same level of growth is Pac van which is certainly.
Our core business in North America, and doing an outstanding but it has it had been growing I just thought I can point that out.
[laughter].
Yes, definitely good point, the FX definitely cloud the numbers.
Given the Australian though has been weak we tried to learn by that but obviously we are at the end of the day a U.S. reporting companies. We have to report you must on but the how they're doing locally is obviously significant right.
Okay, and then on Pac Van we all know is growing very nicely you guys.
He does a long term sustainable trend I mean are no five years six years, you guys see that continue.
Thank you.
Trinity there.
Segment to be able to continue to compound as it has been.
Over the last five.
Yes. So this is Jody I think we're very optimistic on unpack vans growth. If you look at the geographic opportunities, we still can double in size geographically.
Without any any problem.
We also.
Are doing very well with the National account program that now that we have a full national footprint. That's an area. We think has huge opportunities and then our innovation and product has been a great boost for us as well with the Pvthree safety containers. So when you look at the long term on Pac van.
Obviously, we need.
Good economy and things to happen there, but we see no reason why the trends can you continue their they've done an outstanding job and we're very optimistic about the future.
Right and then construction the how do you I mean, how sensitive.
Would would pac van be to a slowdown in construction overall, the controller or certain segment.
How do you see that this construction area specifically.
Yes, I mean, obviously, we would feel a pain there like other companies than the nice thing about our product as we are very very diverse and our customer base. So although 30 some percent of our businesses.
During the construction sector. There is always going to be a certain amount of that is that we will continue.
All the big Big box chains have to do Remodels every few years and so things like that.
Can fill the gaps if new starts kind of slowdown.
Just like apartments, they are very robust for several years, they slowed a bit on multifamily but.
Other areas have picked up so we would hope that would happen.
With.
With the construction sector as well and we just offset it with other growth areas.
And there is always going to be a certain amount right, you remodels and everything else and and even if you look at our product. It's so inexpensive.
Impaired hard structure storage or any other solutions that that's a great alternative when things get tight and cash flows get tied to use for storage. So.
Theres a lot of pros our product across other segments when economy gets tight as well.
Right.
Okay and the last one for me Chuck do you have the the last 12 month free cash flow. The number you reported in the last page in the presentation.
Uh huh.
Our free cash flow for the last 12 months.
Just under $48 million.
Okay, Alright, alright, thanks, a lot and.
Thanks for the question from.
Sure.
Thank you.
There are no other questions at this time I would now like to turn the call over to Mr., Jody Miller, President and CEO for closing remarks. Please go ahead Mr. Miller.
Thank you operator like to thank you for joining our call today. We appreciate your continued interest in General Finance Corporation to look forward to speaking to you next quarter. Thank you.
[noise]. Thank you. This does conclude today's conference call you may now disconnect.