Q4 2022 GATX Corp Earnings Call
Good morning, My name is Chris and I'll be your conference operator today.
At this time I'd like to welcome everyone to the G. H T X 2022 fourths quarter and full year earnings call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there'll be a question and answer session.
If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad.
To withdraw your question. Please press star one again.
Thank you Shari Hellerman head of Investor Relations you may begin.
Thank you Chris.
Everyone and thank you for joining Gatx's fourth quarter, and 2022 year end earnings conference call.
I'm joined today by Bob Lyons, President and CEO .
Tom Ellman Executive Vice President and CFO , and Paul Tudor Jones, Executive Vice President and President of rail North America.
Please note that some of the information you'll hear during our discussion today will consist of forward looking statements.
Actual results or trends could differ materially from those statements or forecast.
For more information please refer to the risk factors included in our earnings release and those discussed in Gatx's Form 10-K for 2021 and in our other filings with the SEC.
G. A T X assumes no obligation to update or revise any forward looking statements to reflect subsequent events or circumstances.
I'll provide a quick overview of our 2022 fourth quarter and full year results.
And then I'll turn it over to Bob for additional commentary on 2022 as well as our outlook for 2023.
After that well open the call up for questions.
Earlier today G.
Gatx's reported 2022 fourth quarter net income of $48 4 million or $1 36 per diluted share.
This compares to 2021 fourth quarter net income of 61 million or $1 69 per diluted share.
The 2022 fourth quarter results include a net negative impact from tax adjustments and other items of 18 cents per diluted share.
The 2021 fourth quarter results include a net positive impact from tax adjustments and other items of 11 cents per diluted share.
For the full year of 2022 G. ATX reported net income of $155 9 million or $4 35 per diluted share.
This compares to net income of $143 1 million or $3.98 per diluted share in 2021.
The 2022, and 2021 full year results, including that negative impacts from tax adjustments and other items of $1 72 per diluted share and a dollar and eight cents per diluted share respectively.
Details related to tax adjustments and other items can be found on page 13 of our earnings release.
As noted in the release, we currently expect 2023 earnings to be in the range of $6 50 to $6 90 per diluted share.
With that I will now turn the call over to Bob.
Thank you Sherry and thank you all for joining the call today.
I'll provide some brief comments on 2022 performance versus the outlook, we had coming into the year.
And then try to provide some additional color around the 'twenty two 'twenty three guidance. We gave this in this morning's press release.
Before jumping in I want to thank our employees.
For their continued focus and the effort they put forth over the past year.
Across the a T X and all of our businesses.
Rail North America, Gatx's rail Europe .
Gatx's rail India <unk>.
Wait.
And our engine leasing business in partnership with roles right.
Everyone performed at a very high level.
I fully expect we'll carry that momentum into 2023.
All with the goal of continuing to generate attractive risk adjusted returns for our shareholders.
So let's start by looking back first in 2022 and I'll try to do so briefly.
We outperformed our initial expectations for two key reasons, one rail North America performed better than planned.
And two portfolio management did the same.
So, let's look a little bit more specifically at each one of those.
And rail North America.
In the middle of the year in the Middle of 2022, we updated our earnings guidance guidance based on strong secondary market activity.
That continued in the back half of the year. So for the full year, we came in higher than planned.
We took full advantage of the opportunity to continue to optimize our fleet.
Second the lease rate environment for existing railcars was very favorable.
There were a host of factors that led to this.
But what are the key things was is that customers were very focused on retaining holding onto the cars. They had in their existing fleet.
Therefore lease rates increase throughout the year.
And lease revenue came in stronger than plan, our commercial team did an excellent job.
Third when demand for existing railcars is as high as it was.
You end up with a very high renewal success rate, which we indicated in the press release and when Theres less churn in the fleet.
There are fewer service events and that as a positive impact unexpected maintenance expense.
So in summary at rail North America versus the expectations, we had coming into the year.
We ended up with higher remarketing gains higher revenue and lower net maintenance expense and that's a very good recipe for a solid year.
All of those factors led to rail North America reporting a substantial increase in segment profit for the year.
Within portfolio management at our engine leasing joint venture and the story is pretty straightforward.
We entered the year mired in the pandemic so our outlook was.
It was fairly muted potentially even negative.
But during the course of the year International Air travel recovered.
And while it's still well below pre pandemic levels.
The trend was helpful.
And that led to Rolls Royce and partners finance, our joint venture.
Posted higher operating income and having to deal with fewer customer credit issues.
Than we assumed.
Those factors drove higher than planned segment profit at portfolio management.
The performance at those two segments enabled us to overcome lower than expected segment profit at rail international.
While demand was very strong.
Rail international had to contend with significant market disruption.
In Europe , and India. The teams had to deal with the fact that the war in Ukraine.
The significant supply chain issues.
That led to railcar deliveries in Europe , and India being delayed.
Our plan.
We also had FX rates quite volatile and serving as a headwind.
But I'd like to note in the face of these challenges our teams did an outstanding job managing their business day to day.
And we are very positive on our prospects internationally.
My last comment on 2022 is that we invested over $1 2 billion in our core markets.
So despite rising asset prices, we continue to find opportunities to put capital to work at attractive returns that's a testament to our team.
To our customers.
And to the reach we have into the markets in which we participate.
Much like railcar renewals.
Part of our investment volume it comes in very small lots.
That is a hallmark of what we do at Gtx and one that enables us to continue to drive returns.
Let's turn to 2023.
As Sherry noted.
We expect EPS to be in the range of $6 50 to $6 90 per diluted share.
The midpoint of that range implies another year of double digit EPS growth off the adjusted 2022 results.
This would represent another very strong year, especially following the exceptional EPS growth of approximately 20% posted in 2022.
So let's move on to some of the main drivers for the year ahead.
Within rail North America, we expect another very good year in terms of lease rates.
And we're looking at the LTI rate coming in above the 23% we achieved for the full year of 2022.
With the full year impact of last year's rate increase is flowing into this year and continued increases in rates.
We see lease revenue up 30% to $45 million in the year ahead.
We have reduced net maintenance expense sequentially in each of the last few years our team our operations team has done a truly outstanding job.
We are fully maximizing the investments in the efficiency and efficiency improvements we made in our shop network.
However, we will feel some inflationary pressure in 2023.
And that along with slightly higher service events and railroad repairs leads us to our expectation that net maintenance expense will increase $5 million to $10 million in.
In 2023.
As interest rates continue to rise over the course of the last year. It did not have a significant impact.
In our financial results last year, but it's more meaningful in 2023.
We are not economists, we don't play in the bond market, we don't try to predict where interest rates will go because we will certainly be Ron.
But theyre going to be higher in 2023, and we will feel more of that impacted rail North America, So where we sit right now we see total interest expense.
Rail North America, increasing 15% to $30 million in the year ahead.
We've had very very strong performance in the secondary market demand for our assets remains very high it's one of the benefits of having a highly diversified portfolio is that we can bring assets to market that are of interest to people other investors, regardless of the cycle or interest rates.
<unk> or other macro events we.
We see that continuing in 2022, and we expect re marketing to come in at the same heightened levels that we saw this past year.
So incorporating these factors we expect segment profit at North American rail to increase up to $15 million over 2020 twos.
Already strong results.
At rail international.
We anticipate seeing positive contributions to segment profit growth from both Gatx's rail Europe <unk>, India.
In Europe as I mentioned demand for wagons is very strong and we're looking to add 1300 to our fleet in 2023, a level similar to the past year.
Hopefully that turns out to be a cautious expectation.
But it's the correct one to take right now given the supply chain issues.
Then continue in Europe .
Importantly.
Our team in Europe has done an outstanding job of moving lease rates higher many of you know rates are stickier in Europe and.
And moving them up as a challenge, but the team there is delivering.
In India. The overall rail market continues to develop and we're seeing demand strong demand across every wagon type.
Quite frankly, the only issue for us in India right now is whether we can get access to the wagons to keep pace with demand.
There's a more limited manufacturing base in India, and we're working closely with all of our suppliers to shared to ensure that we have access.
We're looking to add over 1800 wagons in the year ahead. Following the addition of roughly a 1000 in 2022.
Based on strong demand internationally.
We see segment profit at rail international increasing 10% to $15 million in.
In 2023.
At portfolio management, the biggest driver obviously is our engine leasing activities.
Both at Rolls Royce and partners finance and through our direct investments.
As we noted in the press release, we added a $150 million worth of engines to our directly owned portfolio in the fourth quarter.
We will see the impact of that in 2023.
And along with our along with continued contributions from the existing directly owned engines.
Also at the joint venture level.
We expect to see continued.
And gradual improvement in air travel and the steady improvement in the health of International Airlines.
As a result, we anticipate continued growth in operating income and.
And we see overall segment profit at portfolio management, increasing 10% to $15 million.
In 2023.
Let me comment on a couple of consolidated line items.
We have held the line very well on SG&A in recent years.
But unfortunately inflationary pressures everyone is facing will manifest itself in higher SG&A expense at <unk>.
We plan to fill some long vacant positions and we will see higher wages across the board.
So SG&A is forecast to increase approximately $10 million in 2023.
But on the flip side.
On our other expense line, where we recognize our pension expense, we expect to see a decline of $10 million.
So those two as G&A and other expense are expected to largely offset.
So with our tax rate coming in at a similar level to 2022 the items I just mentioned drive our earnings guidance of $6 50 to $6 90 per share.
And looking at investment volume.
We again anticipate being north of $1 billion in 2023, which will be another excellent year, we're going to have to work really hard to find those opportunities just like we did this past year.
But with the team we have in place in our global footprint and franchise.
I'm confident we'll be successful in doing so.
And a final comment on the guidance and the assumptions that I just outlined.
This is one of the most unpredictable environments I've ever dealt with the <unk> in my 25 years here.
And Paul and Tom who are also here with me today are also 25 year people at Gatx's. They would say the same.
The war in Ukraine continues on interest rates.
And inflation.
Main at elevated levels.
And global supply chain issues, while they may not be as acute as they were over the last 12 months there is still an issue.
And in North America, and Europe , there is economic uncertainty.
While we lapsed into a recession, but we have a soft landing where we avoid a recession and so on.
I mentioned this because that adds variability to the assumption that I've outlined.
But to be perfectly clear.
We feel very good about the position we're in regardless of how these macro factors play out.
We will continue to communicate with you clearly on our outlook as the year progresses.
On this call we usually get a question about dividends. So let me address that now.
2023 marks our 125th year every 125th anniversary at Gatx's, something we are extremely proud of.
And we're equally.
Proud of the fact that we have paid dividends now consecutively for 104 years few companies can match that.
That mark.
We have a regularly scheduled board meeting this Friday during which time the board will consider the dividend policy going forward.
But of course, we understand how important the dividend is to our shareholders and we value our shareholders.
All of you and especially those that have been supportive of Gatx's.
For decades.
So please look for an announcement on the dividend at the end of the week.
And to close before we go onto questions.
Well I would say to our employees at the onset of the call.
I, especially want to thank our employees, who work in our maintenance network.
We have over a thousand people around the globe and our operations network and they have worked diligently efficiently and most importantly safely.
Right through the pandemic.
They're essential workers and.
And they've been in the shops, five or six days a week without fail.
And they have been instrumental to our success and we appreciate all they do so thank you.
And with that let's go to Q&A.
Thank you as a reminder, if you would like to ask a question. Please press Star then one on your telephone keypad.
Our first question is from Justin long with Stephens. Your line is open.
Thanks, and good morning.
Good morning, I wanted to start with a question on the trends youre seeing in absolute lease rates. It sounds like you saw another increase sequentially in the fourth quarter, but I was wondering if you could quantify that and then on the guidance for the LP I Okay.
Kris more than it did in 2022, what's the underlying assumption for how lease rates trend sequentially from here.
Just on a quarter to quarter basis going forward.
So this is Paul speaking, we're going to bifurcate that I'll take the first part and Tom will take the second part of your question. So with respect to absolute rates. When we think about sequential improvement from the previous quarter.
Broadly speaking for both tank and freight cars, we're seeing sequential improvement in the low teens and that's going to vary by car type, but certainly.
Substantial sequential improvement in lease rates.
So then for the LTI going forward, we would expect to see a level similar to what we've seen through the course of this year where quarter to quarter. It varies but a steady drumbeat of increasingly strict.
Okay very helpful. And then I wanted to ask about IRR PFS as well just because of the contribution went up pretty significantly in the fourth quarter relative to the third quarter. When you look at that $25 million contribution is there a way to help us understand.
How much of that is recurring earnings versus remarketing income and then any thoughts on remarketing expectations specific to our RPF this year.
Yes, Justin so you've been following us a long time and know that remarketing piece just like it does in the rail business can move around quite a bit quarter to quarter. So first of all just to give you the numbers for the fourth quarter. The operating piece was about $12 million in the remarketing piece was about $13 million that.
Boeing forward Bob mentioned in his opening comments that we expect increasing contribution on segment profit.
And we will see that on both sides again, calling the exact timing and magnitude of the remarketing is something thats pretty challenging.
Okay, and just lastly to clarify on that portfolio management guidance for 2023, you talked about a 10% to $15 million increase in segment profit I know you've got the incremental contribution from the engine investments that will be wholly own so does that imply.
<unk> that Rps is relatively flat year over year.
No. It doesn't so that contribution is and portfolio management is in total and you would expect to see about somewhere on the order of two thirds, one third RPF contribution to gel contribution.
Great very helpful. Thanks, so much for your time.
The next question is from Matt Alcott with Cowen Your line is open.
Good morning, Thank you.
I had a question on the average term.
In the past when we have we've had a strong up cycle I think.
<unk> gotten as high as 70 months.
Although that was all the way back in <unk> seven.
Can you just give us.
Some color on why the average terms has not moved up.
As much as one would think and such.
A strong environment.
Yes, Matt.
<unk> for the quarter was about 34 months and as you noted it's been in the low thirties all year.
Last quarter, we noted that the LTI term is starting to get pretty disconnected from the actual renewal term on a fleet wide basis. So last quarter. We gave you that number we provided that average renewal term for all quarterly renewal activity and for Q3 that was 49 months for the fourth quarter. It's <unk>.
61 months and for the full year, it's 52 months.
As is the case with all of our statistics, we caution against an over reliance on any single quarter. So I would I would focus much more on that 52 months year to date number.
Much more so than the quarterly number I provided as we look forward, we would expect directionally that term to increase in 2023.
That's very helpful. Tom.
And then.
As you guys are expecting another strong year of circa.
Dairy market activity.
Any insights on where you see your lease fleet.
Can you maintain the same size of fleet I guess as you as you take advantage of a very strong secondary market.
And will that column.
Using your existing supply agreements manufacturing because I would imagine it's very challenging to add in the secondary market given how strong it is.
Yes. So this is Paul I'll start and I think Bob May chime in as well here, but yes.
Yes, I mean at the end of the day are first of all we're economic animals. So we are going to invest and divest based on what the economics tell us and so we will we will buy when we can generate a positive NPV from buying and will sell when we can get a higher price than our whole value. So with that Hasnt been said, we are conscious of the benefits of scale in our business and we.
Believe we can maintain those benefits of scale and I'll add actually that within the secondary markets. We are seeing some increasing ability for us to be successful, while sticking to our investment discipline and so I'm cautiously optimistic that we're going to see more success in the secondary markets certainly the indications are that we're seeing that right now.
Yes, Matt.
Just add to Paul's comment too I have been encouraged actually on both sides of the secondary market.
As 2022 unfolded and we're seeing I think similar.
Trends are in the early part of 2023 of our opportunities to sell but also to be.
A little bit more successful in in our bidding activity.
On the buy side.
Is this are these encouraging signs.
For potential acquisitions in the secondary market coming from larger fleets.
Bob and Paul or smaller privately held fleets.
It can be either.
Given our activity and our presence in the market, we see portfolios when we see the kind of the offering packages from both the big and the small.
So it's both.
We've seen I would say that the success rate has also been driven by the fact that we've seen some offerings of assets that are of particular interest to gtx.
And where we have a set view in a very potentially unique view.
Trends over the longer term, so we've been able to ferret out some pretty good buying opportunities.
Got it.
Bob are you are you surprised that secondary market evaluated.
<unk> strongly despite the interest rate increases.
Well at a high level I would say, yes, because I guess I wake up being pessimistic.
But you would think with rising interest rates that that would somehow.
Eventually kind of lead into less activity in the secondary market, but we haven't seen it.
And currently investors clearly there is still searching for hard assets with a very good yield attached.
We have high quality assets with high quality customers on long term lease.
Very strong high quality cash flow and so there is still a robust market for us and I'll just add to this is Paul speaking again, we've been very successful recently.
Attaching more cash flows to those assets in our portfolio. We've used this strong market to originate.
Tractive leases, which will allow us to sort of restock the portfolio of potential sales going forward. So thats one of the benefits of a strengthening market. Like this is it allows you to continue to reload your potential future secondary market offerings.
Got it. Thank you Paul Thanks, Bob Tom and Cherokee.
Thank you.
The next question is from Allison <unk> with Wells Fargo. Your line is open.
Hi, good morning.
We will go to that algorithm that you guys have historically provided in terms around velocity and cars needed online.
Sort of.
Come up broken last year, but as we sort of enter this year. How are you viewing that we could be in a situation as you know.
I would say accelerating velocity potentially.
In our freight coming down the other side of that so I would just love your perspective on that that is a risk as we look out to the back half.
So I think with respect to velocity. This is Paul speaking again.
First of all what I want to say is it's going to be difficult to predict railroad velocity and so.
The railroads, obviously, you're trying to hire they're trying to improve service right now.
We're certainly not in a position to predict on behalf of the railroads, what's going to happen with velocity.
We do continue to have the view, though that there.
There is what we refer to as freight on the sidelines freight that is not moving right now that could move in the network. If service were improved so when we look out and look at the possibility of improved velocity improved network fluidity, we don't necessarily see that as a downside as we might have seen in the past because we think there is freight that wants to be on rail.
That will move on to rail once the service is available to take it so.
I would I would describe us as more optimistic in the face of potentially improving velocity than we might have seen in other cycles, yes, and Alex and I'll add to that I'll add to that too pulse.
Comment there.
As we said historically.
Yes.
Better higher velocity and more Apis.
Opportunities for the railroads is.
It is not something that we fear, we want our customers choosing rail.
As their mode of choice.
And so we don't want a situation where customers are frustrated because they can't move the product by rail and look elsewhere.
So we feel much better.
And as Paul said more optimistic about the fact that if they do improve velocity.
We know from talking with customers there is product they're ready to go on rail.
Great that's helpful.
Then just a question on boxcars.
Theres been a structural decline in terms of lot of scrap is not necessarily surprising. So I just want to understand how you view that fleet I think you're investing but maybe not at the level of the scrappage rate is there a size that maybe are too large right now just any thoughts on that fleet overall.
No actually I would say quite the opposite we have been investing in boxcars as has the industry. We're not alone in that we're going through a cycle because there were a huge number of boxcars built in the 1970 is really up to 981 and those are scrapping out. So what we're seeing here is is the aging out of the fleet.
And then the replacement investment and higher capacity newer cars too to address that and.
So we think that that replacement demand is attractive. We also think that to the extent, we see more modal shift to rail, particularly ESG driven modal shift in the future from.
Companies that want to reduce their carbon footprint, the boxcar could really be a beneficiary of that so I would say right now.
For us the boxcar portfolio has been a good portfolio for us and we are hoping and expecting it continues to be a good portfolio for us.
Okay. Thank you.
The next question is from Moscone, the majors with Susquehanna. Your line is open.
Looking at.
The portfolio can you talk a little bit about where lease rates are versus your assessments of the long term average.
So we are finally in a position now where we can report that.
For most of the portfolio for the significant majority of the portfolio lease rates are now generally over their long term averages it's higher for certain car types lower for other car types and I would say right now slightly higher across the board for tank than it is for freight but in both cases, we are generally at least a bit over our long term.
Averages across the portfolio.
And as you look forward and think about positioning the portfolio can you talk a little bit high level about your priority of rate versus term this year, and where you're really pushing harder.
So.
We are as we are in all rising rate environments, particularly when rates get above our long term averages we are going to work with our customers to incentivize them to choose longer term leases.
And so.
This is a playbook that we've repeated in every up cycle and we're going to continue to push on that now.
And lastly.
It certainly sounds at least with the tone that youre more enthusiastic about investing acquisitive flee and North American rail assets today than you have been.
Any recent quarter.
Can you talk a little bit.
Are we right in that assessment and regardless of whether we are not just anything that you can share about what has changed or what opportunities present themselves.
How assets are being kind of shaken out of of where they were or evaluations are being changed anything to just give us a little bit of more color on that would be helpful. Thanks.
Sure what I would say is up or down market gatx's always interest in adding assets to the portfolio, particularly rolling stock.
We've done so in up markets, we have done so in down markets. It comes down to us to the attractive attractiveness of the underlying asset and the economic return we can earn.
And so with a diversified fleet that we have there is no asset out there we're not familiar with.
And.
Absolutely we want to continue the portfolio is very Fran.
Franchise is very <unk>.
Scalable platform is very scalable we wanted to add assets.
We certainly won't chase them.
We will be continue to be very disciplined and selective.
But yes, we're always.
There probably isn't many portfolios are many assets that change hands out there that we don't get a look at and we buy when it makes sense on checks all the right boxes for us.
Okay.
But to follow up it certainly seems like your enthusiasm on something happening sooner rather than later is different than it has been in recent quarters I'm just trying to understand if there are new new assets that are presenting themselves or evaluations are coming down broadly across the board and it really just trying to square that with your enthusiasm for continuing to.
To generate quite a bit of remarketing income in the North American rail business. Thanks.
Well I don't think our view has changed materially over the course of the last few quarters or last few years for that matter.
There is often more portfolio has talked about that actually come to market.
That proves true up or down markets.
Would we be in interested in <unk>.
Arrested buyer always.
Are we going to be extremely disciplined always.
I think the earlier kind of the comment earlier on this call really referred to smaller opportunities that we've seen.
One off asset type acquisitions that we've been able to execute because we like a particular asset.
But as far as bigger portfolios are concerned I don't really have any other comment to add on that.
Would we be interested of course, but.
I have no insight or a thought on anything taking place in the market.
Thank you both.
Thank you.
Again, Please press star one to ask a question. The next question is from Justin Bergner with Gabelli funds. Your line is open.
Good morning, Bob Good morning, Tom Good morning Sherri.
Good morning.
Paul defend adjusted net.
Good morning, Paul I haven't met yet.
I'm wondering as well good morning, Justin.
Yes.
First question would just be on some of the market dynamics. So you talked about I think sequential low double digit lease rates in tank and freight which would have been an acceleration from I guess, the 5% or less last quarter. So what's going on to drive that acceleration from your vantage point.
So it's really more of the same phenomenon, we've talked about in recent calls which is to say you have an existing railcar market that is relatively tight and thats been driven by.
A fair bit of Scrappage.
Been driven by relatively low velocity on the part of the railroads and it's been driven by the fact that.
Thanks to higher new car prices and labor availability that new car production that we're seeing is not consistent with past upswings in the market. So you have less new capacity coming in you've had older capacity going out and <unk> had relatively low velocity coupled with what we think is a continued relatively robust underlying demand to move freight.
By rail so it's really all of those things that have created tightness in the fleet and that have allowed us to to.
To increase prices.
Gotcha, alright, so the new car production constraints or maybe not something that.
Whereas highlight before but a part of the equation I guess.
Yes that is correct I mean, if you look back to the crude Bloom you had an industry that produced new cars at a rate of up to 80000, a year and at current production levels. The industry is going to be nowhere near that level. So.
That's one of the key differences in this market.
Okay. That's helpful. And then the Scrappage rate I guess at least on your books of about 500 cars per quarter.
That's still a healthy scrappage rate and I assume it's reflective of whats going on industry wide is that sort of a reasonable run rate going forward or are we going to sort of go below normal scrappage given how many cars were scrapped.
2021.
Given the size of our fleet, just and that's a that's a pretty reasonable number on a quarterly basis in our annualized.
Just based on the eight cars that'll be aging out of the fleet naturally.
About the right number.
Okay, and then just a couple of nuance questions.
What is the marketable security account on your balance sheet to $148 five or the short term investments.
Number relate to the $148 5 million.
Yes, just in those or treasuries.
Okay.
And on the tax rate you mentioned sort of it's similar going forward in that.
25% ish range.
So nothing unusual there or is there anything as it relates to your ability to I guess postpone cash taxes that gets harder as accelerated depreciation.
Comes down.
Yes, Justin we don't anticipate anything materially changing as far as cash taxes, and our ability to utilize our investments.
Okay, Great and then lastly.
Just you mentioned.
The breakdown of the increase in expected segment profit portfolio manager between our RPF and I guess.
The non JV part of the book Me, you just sort of.
Clarify that I think I missed that and then is this direct investment or that you think.
Introducing more opportunities there or is this more of a one off.
Yes, so the direct investment originally was the engines that we purchased.
A couple of years ago, and then we added to it this quarter with.
An additional $150 million of investment in the.
The combination of those two is what were referring to with <unk> equipment leasing which is the wholly owned aircraft engines.
And just and we'll continue to look for opportunities there as well too.
Kind of methodically and systematically add to that portfolio.
We like the asset a lot its been a great return.
Managed by our joint venture partnership those are a very good fit for.
What Gatx's does does well, so and with our partner managing Amit. It's a good equation. So yes, we will continue to look for opportunities there.
Okay. You said two thirds of the increase in portfolio management profits is likely to come from the JV and one third outside the JV.
Correct, Okay got it thank you.
Thank you.
We have no further questions at this time I will turn it over to Shari hellerman for any closing comments.
I'd like to thank everyone for their participation on the call. This morning. Please contact me with any follow up questions. Thank you.
This concludes today's conference call you may now disconnect. Thank you.
Okay.
Yes.