Q1 2022 Atlas Corp Earnings Call
[music].
Welcome to the App last Corp, first quarter 2020 earnings conference call I would like to remind everyone that this conference call is being recorded today May 12, 2022, I would now like to turn the call over to Wil <unk> head of Investor Relations App last quarter.
Thank you good morning, everyone and thank you for joining us today to discuss Apple's Corp's first quarter 2022 earnings report.
Our earnings release yesterday evening after market close we will refer to our quarterly earnings release accompanying earnings presentation and earnings supplemental workbook today in this conference, which all can be found on the investors tab of our website at Loews Corporation Dot com.
I'd like to remind you that our discussion today contains forward looking statements that draw your attention to the disclaimer on slide two and the <unk>.
<unk> earnings presentation.
Please note that we report non-GAAP measures, which we believe provide investors a clearer understanding of the performance of our businesses.
The earnings release contains supplemental financial tables and information pertaining to our quarterly earnings report and includes definitions of non-GAAP financial measures and reconciliations of such non-GAAP measures. The most closely comparable U S GAAP measures.
These definitions may also be found in the appendices at the back of the earnings presentation, which we may refer to in our call and can be found on our website. Please turn to slide three.
On the call with me are Bing Chen President and CEO of Atlas Corp, and grain Talbot, Chief Financial Officer of Atlas Corp.
Joining us on the call during the Q&A session <unk>, Chief Commercial officer, Peter Curtis and <unk>, Chief operational Officer Torsten Peterson.
Following our prepared remarks, we will open up the forum to a question and answer session.
With that I am pleased to now turn the call over to Atlas Corp, CEO <unk> Chen.
Thank you will and good morning, everyone and thank you for joining our call.
Today, My comments will focus on key developments at Seaspan and APR and then we'll hand over to Gwen towboat to present, our Q1 2022 results and financial update.
Please turn to slide four.
I would like to start by reviewing our major developments at Seaspan.
In the quarter, we continued to benefit from a robust market as up to 15% of our fleet is based on floating index rates and we continued to develop our long term strategic partnerships with our customers.
Leveraging our creative customer solutions, we forward fixed 18 vessels with a global line that customer contributed over $150 million to our gross contracted cash flow of $18 1 billion.
This leads to no charter wrote offs in 2022 only eight.
In 2023 and 16 in 2024.
Yes.
We continue to diligently execute our Newbuild program in April we deliberate the fourth vessel.
Our 40, Western Newbuild program, all of which have been delivered ahead of the schedule.
With our track record of successfully delivering 114, new boats since our IPO in 2005, we are confident in delivering this unprecedented program on schedule and on budget.
With possibilities of some early deliveries despite all the logistic challenges.
We also continued taking advantage of the current market to recycle capital through the divestment of non strategic assets.
We completed one vessel sale in Q1 and three additional vessel sales are in advanced stages of.
By investment as of the quarter end.
Going forward, we will continue to seek opportunities to optimize our fleet and recycle capital, which Graeme will share more about later.
During the first quarter, our vessel utilization rate was 98, 5% slightly below our average historical rates.
This is due to the unplanned off hire of one vessel and minor Covid cases three vessels.
We also achieved historical low lost time injury frequency of 0.26, as we continue to focus on the safety of our people.
Our team's seamless execution differentiated business model together with our consistent operational excellence and a strong container shipping fundamentals drove our strong performance in this quarter.
Please turn to slide five.
Now, let's review some key developments at APR.
In the first quarter API entered into three new deployments, which includes a renewal of API II contract in California of GE turbines for 74 megawatts.
A new market contract for eight turbines in Brazil for 226 megawatts.
And the dry leasing of five turbines for 120 megawatts for a total of 16 turbines deployed.
We continued to transform the business by strengthening the Aps business development focus on long term contracts.
The recent extension of the Aps, Brazil contract from 12 months to 44 months.
Evidence of the successful execution of our strategy to migrate to long term cash flow contracts.
As mentioned at our Investor Day, APR completed its five year contract in Argentina in January .
It's a brutal clients and as of today demobilization is materially completed.
Our other client in the sale will commence demobilization upon finishing its contracts in late may.
We expect successful demobilization and redeployment of all Argentina turbines by the second half of this year.
And similar to <unk> strong safety culture, API achieved a historically low.
Loss time injury frequency rate of 0.23.
With the increasing demand of our grid stability API continues to enhance the platform by expanding its customer base with turnkey solutions and remain disciplined in evaluating potential long term power opportunities across multiple geographies and industry sectors.
Thank you for your time today I will now turn the call over to our CFO Graham.
Thanks, <unk> and good morning, everyone. The hydro well and thank you for joining us today could.
Could you please turn to slide six.
So in Q1 2022, we continued to deliver strong results following on from our record year in 2021.
During the quarter Atlas achieved the following performance relative to Q1 2021.
Our revenue growth was nine 5% to $408 $1 million.
Adjusted EBITDA growth of 16, 5% to $277 1 million.
<unk> growth of 28, 1% to $204 million.
<unk> per share growth of 21, 7% to <unk> 73 per share.
And adjusted EPS growth of 56% to 39 cents per share.
At the end of the quarter, we had liquidity of 951 $3 million.
Yeah.
Performance continues to demonstrate the resilience of our fully integrated business model by delivering.
Very strong results alongside the operational challenges presented by both the pandemic and the ongoing supply chain disruption.
Thanks to the diligent efforts of our operation team MLC, Paris, we continue to navigate the ongoing supply chain disruptions with minimal impact.
Our service to our customers and operational efficiency remains at a high level with asset utilization of 98, 5% in the quarter.
Please turn to slide seven.
So we continue to focus on strengthening and optimizing our balance sheet throughout the quarter.
Turns about asset composition and our capital structure.
As we monitor the industry and how our fleet composition is the position, we look to enhance our fleet to align with our long term strategy.
As we communicated at Investor Day, we're actively recycling capital through the sale of about 4250 Teu vessels.
Vessels are non core to our long term strategy due to the age design and predicted future demand.
We sold one vessel in Q4 2021.
We sold another one in Q2 2022.
In addition at the end of Q1, we had an additional three vessels contracted and pending handover.
Scheduled to close in two.
2022.
These four vessels are forecast to generate approximately $80 million in proceeds.
We have a further six vessels on the contracts, but subject to closing conditions, which we expect to close in Q2 Q3 of 2022.
As the market continues to evolve we'll continue to look for opportunities optimize our fleet and recycle capital into higher risk adjusted return opportunities.
As previously communicated we continue to be working to optimize our capital structure.
Q1, we closed our new $250 million unsecured revolving credit facility.
Was upsized by $100 million from a 150 and its tenor extended from two to three years.
The facility includes several new lenders and improvements driven by <unk>, improving credit quality greater liquidity longer term debt profile and improving cost of capital.
Yes.
We continually monitor our interest rate exposure with the aim of aligning our fixed revenue and interest rate exposure.
We of course locked in a significant amount of long term fixed rate contract size of the last year and in parallel we have locked in a significant amount of fixed rate debt.
One 8 billion of fixed rate debt secured and.
Secured notes in 2021 line.
Given the acceleration of inflationary pressure on rates, we entered into an additional $500 million long term flooding fixed interest rates swap.
At the end of January in 2022.
In addition, we are closely monitoring our residual floating to fixed rate position and we will continue to proactively manage our exposures.
We're pleased to say a strong vote of confidence from our strategic shareholder Fairfax financial who exercised warrants to purchase 25 million common shares of Atlas in April .
This resulted in proceeds to buy the $200 million.
Which will be used to repay outstanding debt and for other general corporate purposes.
This is yet another demonstration of our shareholders' continued confidence in our capital allocation platform.
And their commitment to our long term growth strategy.
We place a high importance on quality growth and strengthening our financial profile.
We will continue to actively manage our balance sheet has remained focused on our goal of achieving an investment grade credit rating.
Please turn to slide eight.
I'd like to summarize our strong quarterly performance by leaving you with four key takeaways.
Number one Atlas continued to deliver strong financial results and quality growth in the first quarter.
With strong performance across all metrics with I think $1 billion of high quality long term gross contracted cash flows.
Yes.
Number two.
Insistently delivered operational excellence across our businesses. Despite the challenges presented by the pandemic and supply chain congestion.
Number three and Giggled.
Graham is fully financed through innovative structures with favorable terms and we continue to diligently execute construction and delivery of vessels to our customers.
To date, we've delivered four vessels under our Newbuild program.
A schedule.
Remaining 66 vessels are progressing as planned with seven more delivery scheduled for 2022.
And then before we're continuing to optimize our capital structure and strengthen our balance sheet in line with our target of achieving an investment grade credit rating and further improving our cost of capital.
So thank you once again for your interest today and operator, we'd now like to open the line to questions. Thank you.
Ladies and gentlemen, as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Until the generic question press the pound key.
Your first question comes from the line of Liam Burke with B Riley. Your line is now open. Thank you Ben Graham how are you today.
Thank you Mr. Barry Thank you.
The $42 50, Teu vessel classes, you announced the sale of about roughly 10, you have more to go.
This is not a strategic asset anymore, what is the demand for that particular vessel in the market.
Yes.
I answered this question.
In General I think it's as we expected.
People are looking at what the.
The remaining contract of the charter that with the vessels. So one thing that we want to highlight is that all the vessels that we sell in or we are going to sell they all have long term contracts attached to it. So these are not the spot vessel and secondly, we are looking at.
Opportunistically to sell these vessels with those.
Future owners, who will be able to provide that kind of service to our customer that meets their requirements.
We have currently about 11 vessels in the process to be concluded.
In terms of the sale process for the remaining so we're looking at them on a case by case basis.
We actually.
We evaluate that.
Just on the situation and what happens if we will continue to operate these vessels because one of the key strengths of <unk> spend is our ability to be able to continue to deploy these vessels on the also come stances.
Just why we have a <unk>.
Average, 99% of historical utilization rates through all the market cycles.
And again.
That's.
The baseline that we're looking at.
In terms of the continuing operating on the demand side the current market I think.
Roughly about the same with slight.
Slide.
Yes.
Less interest than before which is.
Which is.
Correlated to the freight rates in general, but overall I think that there is still demand, but we are very selective you make sure that we maximize the value.
Great. Thank you and on the APR you announced.
Some new projects and deployments are those.
What are the term of those contracts with a longer more in line with trying to do or more of the existing type of arrangement.
Yes.
For the.
The threep.
The deployment that we have secured over the past quarter is one as we said, it's <unk>, which is a repeat of what we have done last year because of the strong customer trust and relationships being built.
With their demand.
Meet their requirement to have this repeat of that.
Sweet three months.
Contract that is with <unk> four.
The the Brazil contract. This is the new market and this is the 44 months.
Initially we signed for 12 months and our team was able to.
Demonstrate our ability and as a result of our turnkey solution.
Our customer actually demanded for longer.
Our service so as a result.
12 months contract has been extended to 44 months and the other five turbines, which is thought at the beginning of the year those out of 12 months contract for now.
Great. Thank you bank.
Youre welcome.
And your next question comes from the line of Chris with Herbie wed Simeon Your line is open.
Hey, Thanks, guys and Eli Wednesday on for Chris So maybe just clarification on the on the Containership side did you have any deliveries this quarter, maybe I missed that just just quickly clarify that there.
You had talked with one of the other night.
You're talking about the new Newbuild delivery right, yes, yes.
Okay.
There was one.
Thats when the blood in April in the month of June we actually will have.
No.
Delivery is supposed to be three but some one or two of the vessels might be the early deliberate.
So for this year <unk> 22.
We have.
Three to be deliberate in June and then.
Manny.
Three to be deliberate throughout the year.
Okay got it and then so the cadence of early deliveries, obviously, it's harder to look out when you get to 2023 and beyond but cannot extend into the out years as well where everything gets pushed forward just a little bit.
This is a good question, what we would like to highlight is that so far.
We have.
Taken for deliveries since last year until this April all of these vessels has been.
Between two to four months ahead of the schedule looking at the rest of the delivery for this year as I say just now we still expect possible possible early deliveries.
<unk> from.
Initially was for example, one of the vessels supposed to be delivered in October of this year and because our team and yachts.
Corporation that we were able to advance them to June and we see potentially that will be further advanced than to me. So these are the possible early delivery to answer your question for the future down into 2023 and 2024.
So far do not do not anticipate the early <unk>.
Delivery business your question.
Looking at the track record that we have and the ability of our team that is where the experience and expertise and also the partnership that we have with the shipyard, where they will be able to allocate their resources to prioritize the deliveries as I said before we are very confident that we will.
Be able to deliver the rest of the <unk>.
Newbuild program on target and on schedule if not earlier.
Got it thanks paying in brand, new and I've talked about this before but you said that the rate environment is maybe not as important for Atlas as maybe some of your competitors, but I am just curious when you guys look out are you seeing some normalization right now in the market for.
The rate the rate environment, and if there is normalization and how does that change the way you think about your business.
Maybe if I can chime in here it's Peter.
Look.
Volatility in the.
The first part of this year and rates.
They are still very high I'm talking about.
Freight rates, which then trickles down to charter.
So we've seen some volatility but again, it's on a very high level.
Almost anything that floats and can carry a container is employed.
And we see that.
Remaining strong.
Through the rest of the year.
The.
Covid Lockdowns in China are not helping unlock anything.
The.
Deployment of tonnage.
<unk>.
<unk> orders.
Also not helping unlock anything right now.
Phil until we start getting the supply chain.
Lots of moving again, I think we're going to see continued.
High demand for tonnage.
It will happen.
And I expect that probably is also something that we will start seeing coming into into 2023.
Got it. Thank you one more from me liquidity of $951 million asset value is still high.
Does it look like there from from that cash I know you guys wanted just be sitting on cash being opportunistic any.
Any other plans anyway, we should be thinking about that that extra liquidity right now.
Yes.
You touched on this we always sort of carrying fairly high liquidity to be able to be agile in the market and respond.
The 70 Newbuild program wasn't a lot of water I mean, I don't think were going to be doing.
Developments of that scale.
Theres still quite a bit of activity in the market.
The customers are still got the challenges in terms of.
Transitioning their fleets both to newer more modern vessels, but also meeting.
The upcoming compliance requirements, so theres still.
A lot of opportunities in the marketplace and I think so.
Together with management more comfortable carrying more liquidity than required rather than less.
Given.
Financial volatility in the market alignment as well so I just think it's prudent and I would like us to be in a position to be able to move fast should the right opportunities present themselves.
Of course, thank you all.
Again, ladies and gentlemen, if you have a question at this time. Please press Star then the number one key on your Touchtone telephone. If your question has been answered or you'll be starting from the queue. Please press. The pound key. Your next question comes from the line of Ken <unk> with Bank of America.
Your line is open.
Good morning thing and Graham.
So just following up on the on the Newbuild question Theyre coming in ahead of schedule or are you just want to understand are you, saying the yards now have excess capacity or are they moving up Atlas within their order book just given your scale and if it is a per your build process could we see supply then hit what are a bit faster than we all expect.
And does that put more pressure on market rates I think that you were just getting asked about Graham or I know that doesn't affect you in terms of the market rates I'm just wondering in terms of what backdrop, we could be looking at here.
Yes.
Okay.
Okay.
Everyone was.
Okay.
I'll chime in here again.
Ken.
Hope you're doing well.
So look shipyards essentially at the sausage machine.
One of the things that you may or may not recognize seaspan is when we ultimately do the contract with the yard.
<unk> done a very mature specification.
Outline design with the yards. So we don't have a lot of changes.
What happens in the yards.
Things being equal it would actually be tough to to accelerate.
Production, but what we see during these times of.
Somewhat volatility.
A few others doing speculative orders as they are subject to many changes that actually presents opportunities for us to jump ahead.
So generally speaking.
How that would.
Lay out.
So you look at where we are building.
And yards that typically we've done a lot with them before.
And therefore, our ability to work with them too to accelerate design and find opportunities for.
Essentially earlier slots.
To move off slots are hit.
Is advantageous to us.
If that gives you some color Ken.
No. It does and then and then Graham you want to throw and thoughts on <unk> in terms of what that means for the market I know again your fixed contracts I'm. Just wondering if that means we see the supply moving a little faster or if it really is just atlas jumping out of line.
I think the sulfides as Atlas that's what we are aware of what Peter explain that because the.
Experienced the work that the quality of the work experience of anticipation and also that the partnership with the shipyard allows us to be able to work. This as sausage machine very efficient effective and efficiently and that is why we have this confidence in terms of the implication to the market.
If we're looking at the total new build is it roughly about $6 5 million Teu and the delivery of these new build it's roughly about 1 million Teu in 2021 1 million <unk> 20 to $2 4 million Teu in 2023, and $2 6 million Teu in <unk>.
<unk> 2004, so with these new built coming into the market for sure that we'll be able to alleviate some of these.
Demand and supply.
So as the as the consequences will see we would anticipate the rate will be in terms of the charter rate that should be should be more likely.
Likely to return to a more normalized rate versus the current rate is historically high and as you correctly pointed out very importantly for Seaspan actually.
Sure.
Our our all of our Newbuild fixed into the long term charter and which is why I think our business model statement also you've been looking at our existing fleet.
As I said earlier, we have zero wrote off in terms of the existing charter expire for 2022, we only have eight.
Re charter in 2023 and 16 in 2024. So this is exactly what we anticipate the demand supply going forward in the market and that is why we have been able to forward fixing 86 of our <unk>.
Our vessel is from our existing fleet of a 130 vessels.
And Thats, what the exact as we anticipate the <unk>.
Development of the market and we are well positioned in.
Avoiding such a.
Peak of delivery.
And I think from a market perspective.
We've yet to see how the.
Right, it's going to evolve and gradually normalizes.
Great Peter.
Great insight and I appreciate the follow up.
So just maybe two more from me one for Graham there was again from currency swap.
Maybe talk about the hedging activities and how we should think about interest expense for the rest of the year.
And then I'll just throw in my second one which is just the long term utilization what's your target on the power Gen should I guess is it just once you get Argentina reset then it's at 100% or is there kind of a target utilization, we should think about for that business over a period of time.
It might be if I start with.
So the interest rate exposure, please ken the first bit.
We continually monitor.
Fixed positions that we have in terms of the charter agreements, which obviously give us fixed income coming in and we've got a mix of fixed and variable.
That.
We try to maintain that within a certain range generally around 50% to 70% of the fixed revenue range, depending on sort of market conditions.
So early in January I think everyone's thought it just sort of a guess.
A bit of a feel about inflation and the fact that the market and the fed would probably be tightened some action on rights. So we managed to get in fairly early on that.
You would have probably seen in the earnings release to base.
Around $46 million worth of.
Unrealized mark to market on our hedge positions at the moment.
We will continue to manage that.
I mean, we're not going to I don't want to get too aggressive data. The board is very focused on making sure that we balance our exposures here or we don't get over hedged.
But in terms of the outcomes.
In terms of the guidance, we gave back at Investor day on.
On our financials.
<unk> holds true and given it was RMB short period ago, I think thats, good but it does hold true.
Our guidance is still very much in line with what we presented there.
<unk> on rates narrow Holly.
We don't really have currency exposure, we have through Argentina, and that's indemnified on restructure with the FX side.
The currency issues there.
Got an impact on us.
And of course, they're winding up as we exit Argentina going forward.
Things being mentioned earlier, the portfolio and IP hours and we touched on Investor day is really going through a big transition this year with <unk>.
<unk>.
<unk> supporting turbulence coming out of Argentina.
And Thats a big the mob.
And then ray mobilization of those.
You might recall back in Investor Day, we provided.
Fairly detailed chart, which sort of demonstrated the deployment schedule for 2022.
Once again thats holding firm there might be some opportunities to accelerate some of that.
But clearly we're running at around 67% utilization I think forecast.
Currently.
We would expect that to get higher because it's still as we've touched on a few times candidates a fairly lumpy business and when you've got short term contracts still in the portfolio.
The mob and demob just means that you've got.
Material downtime.
That's what we are striving to change in the contract structure.
Yep, Great Scott Graham appreciate the insight as always thanks.
Just one other point I just want to make before next caller.
People should have in August in the earnings release that at the beginning of this year, we adopted the new accounting policy, which applies 12 convertible.
Notes under this accounting policy it means that we.
Now account for these inside that were all converted in terms of bell.
Issued shares and additional 15, and a half million shares that youll see in the share buildup.
The EPS calculation and FSIC calculation that.
That equates to approximately <unk> <unk> per share.
Lower as a result of that additional dilution.
And it's.
Conservative approach, but I just want to make it clear to people when you benchmark it against our previous.
EPS and also your consensus models, you need to take that into consideration.
Alright, again, ladies and gentlemen, if you have questions at this time. Please press. The Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Alright, I am showing no further questions at this time I would now like to turn the conference back to the company.
Well, thank you all for joining our call.
Particularly for those of you asked good questions.
Okay.
For any further questions. Please feel free to reach out to our IR team and also Grandma myself.
We look forward to our Q2s call and in the meantime.
Please stay safe and healthy and you have a great day. Thank you all very much.
Thank you everyone.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.
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Welcome to the App last Corp, first quarter 2022 earnings conference call I would like to remind everyone that this conference call is being recorded today May 12, 2022, I would now like to turn the call over to will cost Levine <unk> head of Investor Relations App last quarter.
Thank you good morning, everyone and thank you for joining us today to discuss Atlas Corp, first quarter 2022 earnings report.
We issued our earnings Yes, released yesterday evening after market close.
We will refer to our quarterly earnings release accompanying earnings presentation and earnings supplemental workbook today in this conference, which all can be found on the investors tab of our website Atlas Corporation Dot com.
I would like to remind you that our discussion today contains forward looking statements that draw your attention to the disclaimer on slide two and the accompanying earnings presentation.
Please note that we report non-GAAP measures, which we believe provide investors a clearer understanding of the performance of our businesses.
The earnings release contains supplemental financial tables and information pertaining to our quarterly earnings report. It includes definitions of non-GAAP financial measures and reconciliations of such non-GAAP measures to the most closely comparable U S GAAP measures.
These definitions may also be found in the appendices at the back of the earnings presentation, which we may refer to in our call.
It can be found on our website, please turn to slide three.
On the call with me are Bing Chen President and CEO of Atlas Corp, and Graham Talbot, Chief Financial Officer of Atlas Corp.
Joining us on the call during the Q&A session <unk>, Chief Commercial Officer, Peter Curtis <unk>, Chief operational Officer <unk> Peterson.
Following our prepared remarks, we will open up the forum to a question and answer session.
With that I am pleased to now turn the call over to Atlas Corp, CEO <unk> Chen.
Thank you will and good morning, everyone and thank you for joining our call.
Today, My comments will focus on key developments at Seaspan and APR, and then I will hand over to Graham Towboat to present, our Q1 2022 results and financial update.
Please turn to slide four.
I would like to start by reviewing our major developments at Seaspan.
In the quarter, we continued to benefit from a robust market as up to 15% of our fleet is based on floating index rates and we continued to develop our long term strategic partnerships with our customers.
Leveraging our creative customer solutions, we forward it fixed 18 vessels with a global line that customer contributed over $150 million to our gross contracted cash flow of $18 1 billion.
This leads to no charter wrote offs in 2022 only eight.
In 2023, and 16 in 2024 as of quarter end.
We continue to diligently execute our Newbuild program in April we deliberate the fourth vessel.
Our 40, Western Newbuild program, all of which have been delivered ahead of the schedule.
With our track record of successfully delivering 114, new boats since our IPO in 2005, we are confident in delivering this unprecedented program on schedule and on budget.
Possibilities of some early deliveries despite all the logistic challenges.
We also continued taking advantage of the current market to recycle capital through the divestment of non strategic assets.
We completed one vessel sale in Q1 and three additional vessel sales are in advanced stages of.
By investment as of the quarter end.
Going forward, we will continue to seek opportunities to optimize our fleet and recycle capital, which Graeme will share more about later.
During the first quarter, our vessel utilization rate was 98, 5% slightly below our average historical rates.
This is due to the unplanned off hire of one vessel and minor Colgate cases three vessels.
We also achieved historical low lost time injury frequency of 0.26, as we continue to focus on the safety of our people.
Our team's seamless execution differentiated business model together with our consistent operational excellence and a strong container shipping fundamentals drove our strong performance in this quarter.
Please turn to slide five.
Now, let's review some key developments at APR.
In the first quarter APR entered into three new deployments, which includes a renewal of API II contract in California.
<unk> turbines for 74 megawatts.
A new market contract for eight turbines in Brazil for 226 megawatts.
And the dry leasing of five turbines for 120 megawatts for a total of 16 turbines deployed.
We continued to transform the business by strengthening the Aps business development focus on long term contracts.
The recent extension of Aps, Brazil contract from 12 months to 44 months.
Evidence of the successful execution of its strategy to migrate to long term cash flow contracts.
As mentioned at our Investor Day, APR completed its five year contract in Argentina in January .
The <unk> plant and as of today demobilization is materially completed.
Our other client in the sale will commence demobilization upon finishing its contracts in late may.
We expect successful demobilization and redeployment of all Argentina turbines by the second half of this year.
And similar to <unk> strong safety culture, API achieved a historically low.
Loss time injury frequency rate of 0.23.
With the increasing demand of our grid stability API continues to enhance its platform by expanding its customer base with turnkey solutions and remain disciplined in evaluating potential long term power opportunities across multiple geographies and industry sectors.
Thank you for your time today I will now turn the call over to our CFO Grant.
Thanks, <unk> and good morning, everyone and hydro well and thank you for joining us today could.
Could you please turn to slide six.
So in Q1 2022, we continue to deliver strong results following on from our record year in 2021.
During the quarter.
The following performance relative to Q1 2021.
Our revenue growth was nine 5% to $408 $1 million.
Adjusted EBITDA growth of 16, 5% to $277 1 million.
<unk> growth of 28, 1% to $204 million.
<unk> per share growth of 21, 7% to <unk> 73 per share.
And adjusted EPS growth of 56% to 39 per share.
At the end of the quarter, we had liquidity of 951 $3 million.
Yeah.
Our performance continues to demonstrate the resilience of our fully integrated business model by delivering.
These strong results alongside the operational challenges presented by both the pandemic and the ongoing supply chain disruption.
Thanks to the diligent efforts of our operation team MLC, Paris, we continue to navigate the ongoing supply chain disruptions with minimal impact.
Our service to our customers and operational efficiency remains at a high level with asset utilization of 98, 5% in the quarter.
Please turn to slide seven.
So we continue to focus on strengthening and optimizing our balance sheet throughout the quarter.
Turns about asset composition and our capital structure.
As we monitor the industry and how our fleet composition is the position, we look to enhance our fleet to align with our long term strategy.
Yeah.
As we communicated at Investor Day, we're actively recycling capital through the sale of about 4250 Teu vessels.
These vessels are non core to our long term strategy due to their age design and predicted future demand.
We saw one vessel in Q4 2021.
We sold another one in Q2 2022.
In addition at the end of Q1, we had an additional three vessels contracted and pending handover.
Scheduled to close in Q2 two.
2022.
These four vessels are forecast to generate approximately $8 million in proceeds.
We have a further six vessels on the contracts, but subject to closing conditions, which we expect to close in Q2 Q3 of 2022.
As the market continues to evolve we'll continue to look for opportunities optimize our fleet and recycle capital into higher risk adjusted return opportunities.
As previously communicated we're continually working to optimize our capital structure.
Q1, we closed a new $250 million unsecured revolving credit facility.
Was upsized by $100 million from a 150 and its tenor extended from two to three years.
The facility includes several new lenders and improvements driven by say spans improving credit quality greater liquidity longer term debt profile and improving cost of capital.
Yes.
We continually monitor our interest rate exposure with the aim of aligning our fixed revenue and interest rate exposure.
We have costs locked in a significant amount of long term fixed rate contracts over the last year and in parallel we have locked in a significant amount of fixed rate debt.
One 8 billion of fixed rate debt secured and.
Secured notes in 2021 line.
Given the acceleration of inflationary pressure in Reits, we entered into an additional $500 million long term flooding fixed interest rates swap at the end of January in 2022.
In addition, we are closely monitoring our residual floating to fixed rate position and we will continue to proactively manage our exposures.
We're pleased to say a strong vote of confidence from our strategic shareholder Fairfax financial who exercised warrants to purchase 25 million common shares of Atlas in April .
This resulted in proceeds of over $200 million.
Which will be used to repay outstanding debt.
Other general corporate purposes.
This is yet another demonstration of our shareholders' continued confidence in our capital allocation platform.
And their commitment to our long term growth strategy.
We place a high importance on quality growth and strengthening our financial profile.
We will continue to actively manage our balance sheet has remained focused on our goal of achieving an investment grade credit rating.
Please turn to slide eight.
I'd like to summarize our strong quarterly performance by leaving you with four key takeaways.
Number one Atlas continued to deliver strong financial results and quality growth in the first quarter.
With strong performance across all metrics with $18 $1 billion of high quality long term gross contracted cash flows.
Sure.
Number two.
We delivered operational excellence across our businesses. Despite the challenges presented by the pandemic and supply chain congestion.
Number three our new build program is fully financed through innovative structures with favorable terms and we continue to diligently execute construction and delivery of vessels to our customers.
To date, we've delivered four vessels under our Newbuild program all ahead of schedule.
The remaining 66 vessels are progressing as planned with seven more delivery scheduled for 2022.
And then before we're continuing to optimize our capital structure and strengthen our balance sheet in line with our target of achieving an investment grade credit rating and further improving our cost of capital.
So thank you once again for your interest today and operator wed now like to open the line to questions. Thank you.
Okay.
Ladies and gentlemen, as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
And to withdraw your question press the pound key.
Your first question comes from the line of Liam Burke with B Riley. Your line is now open.
Thank you Ben Graham how are you today.
Thank you Mr. Barry Thank you.
Yes.
The $42 50 Teu vessel classes.
You announced the sale of about roughly 10, you have more to go.
This is not a strategic asset anymore, what is the demand.
For that particular vessel in the market.
Okay.
Yes.
I answered this question.
In General I think it's as we expected.
People are looking at what the.
The remaining contract of the charter that with the vessel. So one thing that we want to highlight is that all the vessels that we sell in or we are going to sell they all have long term contracts attached to it. So these are not the spot vessel and secondly, we are looking at.
Opportunistically to sell these vessels with those.
Future owners, who will be able to provide that kind of service to our customer that meets their requirements.
We have currently about 11 vessel is in the process to be concluded.
In terms of the sale process for the remaining so we're looking at them on a case by case basis.
We actually always evaluate that based on the situation and what happens if we will continue to operate these vessels because one of the key strengths of <unk> spend is our ability to be able to continue to deploy these vessels on the also come stance.
Which is why we have a on average 99% of historical utilization rates to all the market cycles.
And that's.
That's the that's the.
The baseline that we're looking at.
In terms of the continuing operating on the demand side the current market I think.
It's roughly about the same with slight.
I think our slide deck.
Yes.
Less interest than before which is.
Which is.
Correlated to the freight rates in general, but overall I think that that there is still demand, but we are very selective you make sure that.
We maximize the value.
Great. Thank you and on the APR you announced.
Some new projects and deployments are those.
What is the term of those contracts with a longer more in line with trying to do or more of the existing type of arrangement.
Yes.
APR the Threep.
The deployment that we have secured over the past quarter is one as we said, it's <unk>, which is a repeat of what we have done last year because of the strong customer.
Just on relations Thats been built.
With their demand.
Meet their requirement to have this repeat.
Three three months Contra.
Contract that is what I E for the the Brazil contract. This is the new market and this is the 44 months.
Initially we signed for 12 months and our team was able to.
Demonstrate our ability and as a result of our turnkey solution.
Our customer actually demanded for longer of our survey so as a result.
12 months contract has been extended to 44 months.
And the other five turbines, which has started at the beginning of the year those out of 12 months contract for now.
Great. Thank you bank.
Youre welcome.
And your next question comes from the line of Chris <unk> with Citi. Your line is open.
Hey, Thanks, guys and Eli Wednesday on for Chris So maybe just clarification on the on the Containership side did you have any deliveries this quarter, maybe I missed that just just quickly clarify that there.
You had talked with one the other day and night.
You're talking about the new Newbuild delivery right.
Yes, okay.
Okay.
There was one.
Thats when the blood in April in the month of June we actually will have.
No.
Delivery is supposed to be three but some one or two of the vessels might be the early deliberate.
So for this year 2022 that we have.
Three to be deliberate in June and then <unk>.
<unk>.
Three to be deliberate throughout the year.
Okay got it and then so the cadence of early deliveries, obviously, it's harder to look out when you get to 2023 and beyond but cannot extend into the out years as well where everything gets pushed forward just a little bit.
This is a good question, what we would like to highlight is that so far.
We have.
Taken for deliveries since last year until April .
April all of these vessels has been.
Between two to four months ahead of the schedule looking at the rest of the delivery for this year as I said, just now we still expect possible possible early deliveries.
Arranging from this.
Initially was for example, one of the vessels supposed to be delivered in October this year, and because our team and yachts.
Our operation that we will able to advance them to June and we see potentially that will be further advanced than to me. So these are the possible early delivery to answer your question for the future down into 2023 and 2024.
So far do not do not anticipate the early <unk>.
Delivery business for your question.
Looking at the track record that we have and the ability of our team that is where the experience and expertise and also the partnership that we have with the shipyard, where they will be able to allocate their resources to prioritize the deliveries as I stated before we are very confident that we will.
Be able to deliver the rest of the <unk>.
New build program on target and on schedule if not earlier.
Got it thanks paying in brand, new and I've talked about this before but you said that the rate environment is maybe not as important for Atlas as maybe some of your competitors, but I am just curious when you guys look out are you seeing some normalization right now in the market for.
The rate environment.
If there is normalization and how does that change the way you think about your business.
Maybe if I can chime in here it says Peter Hi, Eli.
Look.
Volatility in the first part of this year and rates.
They are still very high I'm talking about.
Great rates, which then trickles down to charter.
So we've seen some volatility but again, it's on a very high level.
Almost anything that floats and can carry a container is employed.
And we see that.
Remaining strong.
Through the rest of the year.
The.
The Covid Lockdowns in China are not helping unlock anything.
The.
<unk> tonnage.
Back orders.
Also not helping unlock anything right now.
Until until we start getting the supply chain.
Unlocked moving again.
We're going to see continued.
High demand for tonnage.
It will happen.
And I expect that.
Probably this is something that we'll start seeing coming into into 2023.
Got it. Thank you one more from me liquidity of $951 million asset value is still high.
What does it look like there from that cash I know you guys wanted just be sitting on cash being opportunistic.
Any other plans anyway, we should be thinking about that extra liquidity right now.
Yes.
You touched on this.
Always sort of carry fairly high liquidity to be able to be agile in the market and respond.
The 70 Newbuild program wasn't a lot of work I mean, I don't think were going to be doing.
Developments of that scale.
But theres still quite a bit of activity in the market.
The customers are still got the challenges in terms of.
Transitioning their fleets both to newer more modern vessels, but also meeting.
The upcoming compliance requirements. So there's still.
A lot of opportunities in the marketplace.
And I think certainly together with management more comfortable carrying more liquidity than required rather than less given the.
Financial volatility in the market alignment as well so I just think it's prudent and I would like us to be in a position to be able to move fast should the right opportunities present themselves.
Of course, thank you all.
Again, ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one key on your Touchtone telephone. If your question has been answered or you'll be starting from the queue. Please press. The pound key. Your next question comes from the line of Ken <unk> with Bank of America.
Your line is open.
Good morning thing and Graham.
Just following up on the on the Newbuild question Theyre coming in ahead of schedule.
Or are you just want to understand are you, saying the yards now have excess capacity or are they moving up Atlas within their order book just given your scale and if it is a per your build process could we see supply then hit what are a bit faster than we all expect.
And does that put more pressure on market rates I think that you were just getting asked about gram ore.
No that doesn't affect you in terms of the market rates I'm just wondering in terms of what backdrop, we could be looking at here.
Yes.
Okay.
Okay.
Everyone was.
Okay.
Okay.
Bill.
Simon here again.
Ken.
Youre doing well.
So look shipyards essentially at the sausage machine.
One of the things that you may or may not recognize seaspan is when we ultimately do the contract with the yard.
We've done a very mature specification.
Outline design with the yards. So we don't have a lot of changes.
What happens in the yards.
Everything being equal it would actually be tough to to accelerate.
Production, but what we see during these times of.
Somewhat volatility too.
A few others doing speculative orders.
They are subject to many changes that actually presents opportunities for us to jump ahead.
So generally speaking.
How that would.
Lay out.
So you look at where we are building.
And yards that typically we've done a lot with them before.
And therefore, our ability to work with them too to accelerate design and final opportunities for.
Essentially earlier slots.
To move our slots are hit.
Is advantageous to us.
So that gives you some color Ken.
No. It does and then and then Graham you want to throw and thoughts on <unk> in terms of what that means for the market I know again your fixed contracts I'm. Just wondering if that means we see the supply moving a little faster or if it really is just atlas jumping out of line.
I think the sulfides as outlets that's what we are aware of what Peter explain that because the.
Experienced the work that the quality of the work that experience of anticipation and also that the partnership with the shipyard allows us to be able to work. This as sausage machine very efficient effective and efficiently and that is why we have this confidence in terms of the implication to the market.
If we're looking at the total new build is it roughly about $6 5 million Teu and the delivery of these new build it's roughly about 1 million Teu in 2021, one <unk> to $2 4 million Teu in 2023, and $2 6 million Teu in <unk>.
<unk> 2004, so with these new built coming into the market for sure that we'll be able to alleviate some of these.
Demand is supply.
So as the as the consequences will see we would anticipate the rate will be in terms of the charter rate that should be should be more likely.
Likely to return to a more normalized rate versus the current rate is historically high and as you correctly pointed out very importantly for seaspan actually out.
Sure.
Our our all of our Newbuild fixed into the long term charter and which is why I think our business model different also you've been looking at our existing fleet.
As I said earlier, we have zero wrote off in terms of the existing charter expire for 2022, we only have eight.
Re charter in 2023 and 16 in 2024. So this is exactly what we anticipate the demand supply going forward in the market and that is why we have been able to forward fixing 86 of our <unk>.
Our vessel is from our existing fleet of a 130 vessels.
And Thats, what the exact as we anticipate the <unk>.
Development of the market and we are well positioned in.
Avoiding such a.
Peak of delivery.
And I think from a market perspective.
We've yet to see how the.
Right, it's going to evolve and gradually normalizes.
Great Peter.
Great insight and I appreciate the follow up.
So just maybe two more from me.
One for Graham there was again from currency swap.
Maybe talk about the hedging activities and how we should think about interest expense for the rest of the year.
And then I'll just throw in my second one which is just the long term utilization what's your target on the power Gen should I guess is it just once you get Argentina.
Reset then it's at 100% or is there a kind of a target utilization, we should think about for that business over a period of time.
It might be if I start that.
The interest rate exposure place, Ken the first bit.
We continually monitor.
Fixed positions that we have in terms of our charter agreements, which obviously give us fixed income coming in and we've got a <unk>.
Mix of fixed and variable.
Debt.
We try to maintain that within a certain range generally around 50% to 70% of the fixed revenue range, depending on sort of market conditions.
Early in January I think everyone's started just sort of a guess.
A bit of a feel about inflation and the fact that the market and the fed would probably be tightened some action on rights. So we managed to get in fairly early on that.
You would have probably seen in the earnings release of this.
Around $46 million worth of unrealized mark to market on our hedge positions at the moment.
We will continue to manage that.
As these I mean, we're not going to I don't want to get too aggressive data.
<unk> is very focused on making sure that we balance that exposures here or we don't get the hedged.
In terms of the outcomes.
In terms of the guidance, we gave back in Investor day.
On our financials that still holds true and given it was a short period ago I think thats good but it does hold true.
Our guidance is still very much in line with what we presented there.
<unk> on rates narrow Holly.
We don't really have currency exposure, we have through.
Argentina, and Thats indemnified on restructure with the FX.
Currency issues there.
<unk> done an impact on us.
And of course, Theyre winding up as we exited Argentina going forward.
Things being mentioned earlier, the portfolio and IP hours and we touched on Investor day is really going through a big transition this year with <unk>.
<unk>.
<unk> supporting timelines coming out of Argentina.
And Thats, a big the mall and then re mobilization of those.
So you might recall back in Investor Day, we provided.
Fairly detailed chart, which sort of demonstrated the deployment schedule for 2022.
Once again, thats holding firm and there might be some opportunities to accelerate some of that.
But clearly we're running at around 67% utilization I think forecast.
Currently.
We would expect that to get higher but it's still as we've touched on a few times candidates a fairly lumpy business and when you've got short term contracts still in the portfolio.
The mob and demob just means that you've got.
Material downtime.
That's what we are striving to change in the contract structure.
Yep, Great Scott Graham appreciate the insight as always thanks.
Just one other point I just wanted to make before our next caller.
People should have noticed in the earnings release that at the beginning of this year, we adopted a new accounting policy, which applies 12 convertible.
Notes under this accounting policy it means that we.
Now account for these inside that were all converted in terms of bell.
Issued shares so there's an additional 15 and a half million shares that youll see in the share buildup.
The EPS calculation and the <unk> calculation.
<unk> to approximately <unk> <unk> per share.
Lower as a result of that additional dilution.
It's.
Conservative approach, but I just want to make it clear to people when you benchmark it against our previous.
Aps and also your consensus models, you need to take that into consideration.
Alright, again, ladies and gentlemen, if you have questions at this time. Please press. The Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Alright, I am showing no further questions at this time I would now like to turn the conference back to the company.
Well, thank you all for joining our call.
Particularly for those of you asked good questions.
For any further questions. Please feel free to reach out to our IR team and also Grandma myself.
We look forward to our Q2s call and in the meantime.
Please stay safe and healthy and have a great day. Thank you all very much.
Thank you everyone.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.