Q2 2024 GATX Corp Earnings Call

Operator: Thank you for standing by. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the GATX 2024 second quarter earnings call. All lines have been placed on mute to prevent any background noise.

Operator: Thank you for standing by.

Angela: My name is Angela, and I will be your conference operator today.

Angela: Thank you for standing by. My name is Angela and I will be your conference operator today. At this time, I would like to welcome everyone to the GATX 2024 Second Quarter Earnings Call.

Angela: At this time, I would like to welcome everyone to the GATX 2022 second quarter earnings call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by beta number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the call over to Shari Hellerman, Head of Investor Relations at GATX. Please go ahead.

Angela: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, follow bit number one on your telephone keypad. If you would like to withdraw your question, press star one again.

All lines have been placed on mute to prevent any background noise.

Speaker Change: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.

Shari Hellerman: I would now like to turn the call over to Shari Hellerman, head of Investor Relations at GATX. Please go ahead.

Shari Hellerman: If you would like to withdraw your question, press star 1 again. I would now like to turn the call over to Shari Hellerman, Head of Investor Relations at GATX. Please go ahead. Thank you.

Shari Hellerman: Thank you, Angela.

Shari Hellerman: Good morning. And thank you for joining GATX's 2024 second quarter earnings call. I'm joined today by Bob Lyons, President and Chief Executive Officer, Tom Elman, Executive Vice President and Chief Financial Officer, and Paul Titterton, Executive Vice President and President of Real North America. As a reminder, some of the information you're hearing during our discussion today will consider for looking statements. After results or trends could differ, materially from those statements or forecasts. For more information, please refer to the risk factors, including an earnings release. And those discussed in GATX's Form 10-K for 2023 and are other filings for the SEC.

Shari Hellerman: Thank you for joining G-A-T-X Corp. for the second quarter. I'm joined today by Bob Lyons.

Shari Hellerman: Thank you, Angela. Good morning, and thank you for joining GATX's 2024 second quarter earnings call.

Shari Hellerman: President and Chief Executive Officer. Tom Ellman, Executive Vice President and Chief Financial Officer, and Paul Titterton, Executive Vice President and President of Rail North America. As a reminder, some of the information you'll hear during our discussion today will consist of forward-looking statements or forecasts. However, actual results or trends could differ materially from those statements or forecasts. For more information, please refer to the risk factors included in our earnings release and those discussed in GATX's Form 10-K for 2023 and our other filings with the SEC.

Shari Hellerman: I'm joined today by Bob Lyons, President and Chief Executive Officer.

Shari Hellerman: GATX assumes no obligation to update or revise any forward-looking statement to reflect subsequent events or circumstances. Earlier today, GATX reported 2024 second quarter net income of $44.4 million, or $1.21 per dealer's share. This compares to 2023 second quarter net income of $63.3 million, or $1.74 per dilutive share. The 2024 second quarter results include a net negative impact of $8 million, or $0.22 per diluted share, from tax adjustments and other items. The 2023 second quarter results include a net positive impact of $0.2 million, or $0.01 per dollar, from tax adjustments and other items.

Shari Hellerman: Tom Ellman, Executive Vice President and Chief Financial Officer

Speaker Change: and Paul Titterton, Executive Vice President and President of Rail North America.

Speaker Change: As a reminder, some of the information you'll hear during our discussion today will consist of four looking statements.

Speaker Change: Actual results or trends could differ materially from those statements or forecasts.

Speaker Change: For more information, please refer to the risk factors included in our earnings release and those discussed in GATX's Form 10-K for 2023 and our other filings for the SEC.

Shari Hellerman: GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. Earlier today, GATX reported 2024 second quarter net income of 44.4 million for a dollar 21 per duly share. This compares to 2023 second quarter net income of 63.3 million for a dollar 74 per duly to share. The 2024 Second Quarter results include a net negative impact of 8 million for 22 cents per duly to share from tax adjustments and other items. The 2023 Second Quarter results include a net positive impact of 0.2 million for one cent per duly to share from tax adjustments and other items. Here today, 2024 net income was $118.7 million for $3.25 per duly to share.

Speaker Change: GATX assumes no obligation to update or revise any forelooking statements to reflect subsequent events or circumstances.

Speaker Change: earlier today.

Speaker Change: GATX reported 2024 second quarter net income of $44.4 million or $1.21 per dealer's share.

Speaker Change: This compares to 2023 second quarter net income of $63.3 million, or $1.74 per dollar to share.

Speaker Change: The 2024 second quarter results include a net negative impact of $8 million or $0.22 per diluted share from tax adjustments and other items.

Speaker Change: The 2023 second quarter results include a net positive impact of $0.2 million, or one cent, per doula to share, from tax adjustments and other items.

Shari Hellerman: Year-to-date 2024 net income was $118.7 million, or $3.25 per diluted share. This compares to $140.7 million, or $3.87 per diluted share, for the same period in 2023. The 2024 year-to-date results include a net negative impact of $7.4 million, or $0.20 per diluted share, from tax adjustments and other items. The 2023 year-to-date results include a net negative impact of $1.1 million, or $0.03 per dollar per share, from tax adjustments and other items.

Speaker Change: Year-to-date 2024, net income was $118.7 million or $3.25 per dollar to share.

Shari Hellerman: This compares to $140.7 million for $3.87 per duly to share for the same period in 2023. The 2024 year-to-date results include a net negative impact of 7.4 million for 20 cents per duly to share from tax adjustments and other items. The 2023 year-to-date results include a net negative impact of 1.1 million for 3 cents per duly to share from tax adjustments and other items. These items are detailed in the supplemental information section of our news release.

Speaker Change: This compares to $140.7 million, or $3.87 per diluted share, for the same period in 2023.

Speaker Change: The 2024 year-to-date results include a net negative impact of $7.4 million, or $0.20 per diluted share, from tax adjustments and other items.

Speaker Change: The 2023 year-to-date results include a net negative impact of $1.1 million, or $0.03 per dollar to share, from tax adjustments and other items.

Shari Hellerman: These items are detailed in the supplemental information section of our newsroom. I will provide a quick overview of our second quarter results, and then I'll turn it over to Bob for additional commentary on our year-to-date performance. After that, we'll open the call up for questions.

Speaker Change: These items are detailed in the supplemental information section of our news release.

Shari Hellerman: I will provide a quick overview of our second quarter results, and then I will turn it over to Bob for additional commentary on a year-to-date performance. After that, we'll open a call-up for questions. GATX Rail North America continues to experience stable demand for rail cars. Our fleet utilization was 99.3% at quarter-end, and our renewal success rate was strong at 84.1%. We continue to achieve strong renewal rates, rate increases, while successfully extending term. The renewal rate change of GATX's recent rights index was positive 29.4% for the quarter, and the average renewal term was 61 months. Additionally, we continue to successfully place new rail cars from our committed supply agreement with a diverse customer base.

Shari Hellerman: GATX Rail North America continues to experience stable demand for rail cars. Our fleet utilization was 99.3% at quarter end, and our renewal success rate was strong at 84.1%. We continue to achieve strong renewal lease rate increases while successfully extending terms. The renewal rate change of GATX's lease price index was positive 29.4% for the quarter, and the average renewal term was 61 months.

Speaker Change: I will provide a quick overview of our second quarter results and then I'll turn it over to Bob for additional commentary on our year-to-date performance.

Speaker Change: After that, we'll open the call up for questions.

Speaker Change: GATX Rail North America continues to experience stable demand for rail cars.

Robert C. Lyons: Our fleet utilization was 99.3% at quarter end, and our renewal success rate was strong at 84.1%.

Robert C. Lyons: We continue to achieve strong renewal lease rate increases while successfully extending terms.

Robert C. Lyons: The renewal rate change of GATX's lease price index was positive 29.4% for the quarter.

Robert C. Lyons: and the average renewal term was 61 months.

Shari Hellerman: Additionally, we continue to successfully place new railcars from our committed supply agreement with a diverse customer base. We've placed over 4,300 railcars from our 2022 Trinity supply agreement. Our earliest available scheduled delivery under this supply agreement is in the second quarter of 2025.

Robert C. Lyons: Additionally, we continue to successfully place new railcars from our committed supply agreement with a diverse customer base.

Shari Hellerman: We have placed over 4,300 rail cars from our 2022 Trinity supply agreement. Our earliest available schedule delivery under this supply agreement is in the second quarter of 2025. The second-year market in North America remains robust. We generate approximately $20 million in remarketing income during the quarter, bringing you to date remarketing income to approximately $53 million. Rail International is performing well, and Rail Europe continues to experience success in pushing up renewal rates for most car types. We continue to grow our lease rates in Europe and India. In July, Rail India received the delivery of the 10,000 wagon.

Robert C. Lyons: We've placed over 4,300 railcars from our 2022 Trinity Supply Agreement.

Robert C. Lyons: Our earliest available scheduled delivery under this supply agreement is in the second quarter of 2025.

Shari Hellerman: The secondary market in North America remains robust. We generated approximately $20 million in remarketing income during the quarter, bringing year-to-date remarketing income to approximately $53 million. Roehl International is performing well, and Rail Europe continues to experience success in pushing up renewal lease rates for most car types. We continue to grow our lead fleets in Europe and India. In July, Rail India received the delivery of their 10,000 wagon.

Robert C. Lyons: The secondary market in North America remains robust.

Robert C. Lyons: We generated approximately $20 million in remarketing income during the quarter.

Robert C. Lyons: bringing year-to-date remarketing income to approximately $53 million.

Roehl International: Roehl International is performing well and Roehl Europe continues to experience success in pushing up renewal lease rates for most car types.

Roehl International: We continue to grow our lead suites in Europe and India.

Speaker Change: In July , Rail India received the delivery of their 10,000 wagon.

Shari Hellerman: With an engine leasing, the world choice and partners finance affiliate produce strong operating results due to continuing high demand for aircraft's barringing. As we have mentioned in the past, timing of remarketing events at RPS can be very lumpy from quarter to quarter. Year to date, operating income makes up approximately 75% of RPS earnings, while we marketing income makes up approximately 25%.

Shari Hellerman: With engine leasing, the Rolls-Royce and Partners Finance Affiliate produced strong operating results due to continuing high demand for aircraft spare engines, as we have mentioned in the past. However, timing of remarketing events at RPS can be very lumpy from quarter to quarter. Year-to-date, operating income makes up approximately 75% of our RPF earnings. Well, our marketing income makes up approximately 25%. Turning to GATX Engine Leasing, our wholly owned portfolio, we continue to increase our direct investment in aircraft spare engines.

Speaker Change: With an engine leasing, the Rolls-Royce and Partners finance affiliates produced strong operating results due to continuing high demand for aircraft spare engines.

Speaker Change: as we have mentioned in the past.

Speaker Change: Timing of remarketing events at RRPS can be very lumpy from quarter to quarter.

Speaker Change: Year-to-date, operating income makes up approximately 75% of our RPF earnings.

Speaker Change: Well, we're marketing income makes up approximately 25%.

Shari Hellerman: Turning to GATX engine leasing are wholly owned portfolio. We continue to increase our direct investment in aircraft's barringing. We added three engines during the second quarter, bringing the total engine count in our wholly owned portfolio to 32 engines. With a total net book value of over $750 million. The investment pipeline for engines is expected to remain robust for the remainder of this year.

Shari Hellerman: We added three engines during the second quarter, bringing the total engine count in our wholly owned portfolio to 32 engines, with a total net book value of over $750 million. The investment pipeline for entrants is expected to remain robust for the remainder of this year.

Speaker Change: Turning to GATX engine leasing, our wholly owned portfolio. We continue to increase our direct investment in aircraft spare engines.

Speaker Change: We added three engines during the second quarter, bringing the total engine count in our wholly owned portfolio to 32 engines.

Speaker Change: with a total net book value of over $750 million.

Speaker Change: The investment pipeline for entrants is expected to remain robust for the remainder of this year.

Shari Hellerman: With that quick overview, I will now turn the call over to Bob.

Shari Hellerman: With that quick overview, I will now turn the call over to Bob.

Speaker Change: With that quick overview, I will now turn the call over to Bob.

Bob Lyons: Thank you, Sherry.

Robert C. Lyons: Thank you, Shari. Good morning, everybody.

Bob Lyons: Good morning, everybody. Given that we're now past the halfway point of the year, I thought I'd add some comments. The compliments, Sherry's introduction, and I'll focus on the overall environment versus the expectations we had coming into the year. In the fact is, I can keep these comments brief because the first half of the year is largely played out as expected. It doesn't always occur this way. Rarely occurs this way. But the first half of 2024 track very much in line with what we thought coming into the year and what we discussed with you when we gave our outlook back in January.

Robert C. Lyons: Given that we're now past the halfway point of the year, I thought I'd add some comments. To compliment Shari's introduction, and I'll focus on the overall environment versus the expectations we had coming into the year. And the fact is, I can keep these comments brief because the first half of the year has largely played out as expected. It doesn't always occur this way. It rarely occurs this way.

Robert C. Lyons: Thank you, Shari, and good morning, everybody.

Robert C. Lyons: Given that we're now past the halfway point of the year, I thought I'd add some comments.

Robert C. Lyons: To compliment Shari's introduction, and I'll focus on the overall environment versus the expectations we had coming into the year.

Robert C. Lyons: And the fact is, I can keep these comments brief because the first half of the year has largely played out as expected.

Speaker Change: It doesn't always occur this way.

Robert C. Lyons: But the first half of 2024 tracked very much in line with what we thought. Coming into the year, and what we discussed with you when we gave our outlook for Roehl North America back in January, we stated that the recovery was largely a supply-side driven recovery, and we expected very little in the way of growth in carload traffic.

Speaker Change: Rarely occurs this way.

Speaker Change: But the first half of 2024 tracked very much in line with what we thought coming into the year and what we discussed with you when we gave our outlook back in January .

Bob Lyons: A rail North America. We stated that the recovery was largely a supply-side driven recovery, and we expected very little in the way of growth in carload traffic. That's what we plan for, and that is what has occurred. Demand for existing rail cars is very stable, and we've been able to realize appropriate rating increases and extend term. The commercial organization continues to do an outstanding job. As a result, our financial performance at Rail North America is consistently what's where we thought we would be at this point of the year. And that's whether you're talking about revenue growth, which has been very strong, and that maintenance or interest expense, both of which are in line with where we thought, remarketing and come the same as well as segment profits.

Speaker Change: at Rail North America.

Speaker Change: We stated that the recovery was largely a supply-side driven recovery.

Speaker Change: And we expected very little in the way of growth in carload traffic.

Robert C. Lyons: That's what we plan for, and that is what has occurred. Demand for existing railcars is very stable. And we've been able to realize appropriate rate increases and extend terms. The commercial organization continues to do an outstanding job. As a result, our financial performance at Rail North America is consistent with where we thought we would be at this point in the year. And that's whether you're talking about revenue growth, which has been very strong. Net maintenance or interest expense, both of which are in line with where we thought. Remarketing income is the same, as well as segment profit.

Speaker Change: That's what we plan for, and that is what has occurred.

Speaker Change: Demand for existing railcars is very stable.

Speaker Change: And we've been able to realize appropriate rate increases and extend term. The commercial organization continues to do an outstanding job.

Speaker Change: As a result, our financial performance at Rail North America is consistent with where we thought we would be at this point of the year.

Speaker Change: And that's whether you're talking about revenue growth, which has been very strong.

Speaker Change: Net Maintenance or Interest Expense, both of which are in line with where we thought. Remarketing Income the same, as well as Segment Profit.

Robert C. Lyons: All of these are essentially coming in line with forecast, and the overall market environment from a commercial standpoint is really positive, that's reflected in our LPI, which was 33% in the first quarter, 29% in the second quarter, and again in line with our full year outlook of the plus 30% rate. Same for our renewal success rate, which is holding up really strong. Highlighting the fact that our customers want to hold on to their existing rolling stock and even a change in sequential lease rates, which were flat this quarter and have been for several quarters, is what we anticipated.

Bob Lyons: All of these are essentially coming in line with forecast, and the overall market environment from a commercial standpoint is really positive. That's reflected in our LPI, which was 33% in the first quarter, 29% of the second quarter, and again in line with our full year outlook of the plus 30% range. Same for our renewal success rate, which is holding up really strong, highlighting the fact that our customers want to hold on to the existing rolling stock. And even a change in sequential lease rates, which were flat this quarter and have been for several quarters, is what we anticipated.

Speaker Change: All of these are essentially coming in line with forecasts and the overall market environment from a commercial standpoint is really positive.

Speaker Change: That's reflected in our LPI, which was 33% in the first quarter, 29% in the second quarter, and again, in line with our full year outlook of the plus 30% range.

Speaker Change: Same for our renewal success rate, which is holding up really strong.

Speaker Change: Highlighting the fact that our customers want to hold on to their existing rolling stock.

Speaker Change: And even a change in sequential lease rates, which were flat this quarter and have been for several quarters, is what we anticipated.

Bob Lyons: So we see no major issues or changes on the horizon, which would lead us to a just whole year rail North America. And that's a positive situation given that we had such strong expectations coming into the year for our key performance measures.

Robert C. Lyons: So we see no major issues or changes on the horizon, which would lead us to a just a full year of Rail North America. And that's a positive situation, given that we had such high expectations coming into the year for our key performance measure. At Roehl International, we have a similar story, where, in general, market demand is really strong at GATX Rail Europe. I'd only point out one caveat, and that's as it relates to the intermodal sector, where we thought there was a reasonable chance for a recovery in this market in the second half of the year, but that appears to be getting pushed out a bit. Fortunately, intermodal is a small part of our overall fleet, so weakness there should be offset in other areas across GATX Rail Europe.

Speaker Change: So, we see no major issues or changes on the horizon, which would lead us to a just full year Rail North America.

Speaker Change: And that's a positive situation, given that we had such strong expectations coming into the year for our key performance measures.

Bob Lyons: A rail international, we have a similar story where, in general, market demand is really strong. At GATX Rail Europe, I'd only point out one caveat, and that says it relates to the intermodal sector, where we thought there was a reasonable chance for a recovery in this market in the second half of the year, but that appears to be getting pushed out of bed. Fortunately, in remodels, the small part of our overall fleet, so weakness there should be offset in other areas across GATX Rail Europe. And as Sherry mentioned, in India, we have high expectations coming into the air, and those appear to be warranted.

Roehl International: At Roehl International, we have a similar story, where in general, market demand is really strong.

Roehl International: at GATX Rail Europe .

Roehl International: I'd only point out one caveat, and that's as it relates to the intermodal sector.

Roehl International: Where we thought there was a reasonable chance for a recovery in this market in the second half of the year, but that appears to be getting pushed out a bit.

Roehl International: Fortunately, intermodal is a small part of our overall fleet.

Roehl International: So weakness there should be offset in other areas across GATX Rail Europe .

Robert C. Lyons: And as Shari mentioned, in India, we have high expectations coming into the year, and those appear to be warranted. We've had excellent growth and a sweet count across the 10,000 wagon mark. The country has completed its nationwide election process.

Roehl International: And as Shari mentioned, in India, we have high expectations coming into the year and those appear to be warranted. We've had excellent growth in fleet count.

Bob Lyons: We've had excellent growth and fleet count. We cross the 10,000 wagon mark. The country has completed their nationwide election process; we're seeing strong economic growth, and we continue to expand our customer base and the car type offerings. Within engine leasing, whether it's through our joint venture or in our home-owned portfolio, we see strong demand for our assets. The recovery in global air travel has occurred much faster than anticipated. It's continuing, and that's leading to very high utilization of our spare engines or those within our pool. And lastly, we continue to find attract ways to put up a little to work at attractive return.

Shari Hellerman: We crossed the 10,000 wagon mark.

Shari Hellerman: The country has completed their nationwide election process, we're seeing strong economic growth, and we continue to expand our customer base and the car type offerings.

Robert C. Lyons: We're seeing strong economic growth, and we continue to expand our customer base and the car type office. Within engine leasing, whether it's through our joint venture or in our wholly owned portfolio, we see strong demand for our assets. The recovery in global air travel has occurred much faster than anticipated.

Shari Hellerman: Within engine leasing, whether it's through our joint venture or in our wholly owned portfolio, we see strong demand for our assets.

Speaker Change: The recovery in global air travel has occurred much faster than anticipated, it's continuing, and that's leading to very high utilization of our spare engines or those within our pool.

Robert C. Lyons: It's continuing, and that's leading to very high utilization of our spare engines or those within our pool. And lastly, we continue to find ways to put capital to work at attractive returns. We came into the year expecting full-year volume in the $1.6 billion range, and at the halfway mark, we're just over $800 million, so very much on track. And on a positive note, we're seeing these opportunities essentially across business units.

Shari Hellerman: And lastly, we continue to find ways to put capital to work at attractive returns.

Bob Lyons: We came into the air expecting full-year volume in the $1.6 billion range, and at the halfway mark, we're just over 800 million, so very much on track. And on a positive note, we're seeing these opportunities essentially across business units. So overall, while there have been some twists and turns through the first half of the year, which always occur, our commercial and operational teams have navigated these extremely well both here in North America and internationally, and the year’s largely playing out as planned, and that’s a good thing.

Shari Hellerman: We came into the year expecting full-year volume in the $1.6 billion range, and at the halfway mark, we're just over $800 million, so very much on track.

Shari Hellerman: And on a positive note, we're seeing these opportunities essentially across business units.

Robert C. Lyons: So overall, while there have been some twists and turns through the first half of the year, which always occur, our commercial and operational teams have navigated these extremely well both here in North America and internationally, and the year is largely playing out as planned, and that's a good thing. So with that, we'll go to Q&A.

Shari Hellerman: So, overall, while there have been some twists and turns through the first half of the year, which always occur, our commercial and operational teams have navigated these extremely well, both here in North America and internationally, and the year is largely playing out as planned, and that's a good thing.

Operator: So, with that, we'll go to Q&A. Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one and your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Shari Hellerman: So with that, we'll go to Q&A.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening through a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And your first question comes from the line of Bascome Majors on Susquehanna. Please go ahead.

Speaker Change: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.

Operator: If you are called upon to ask your question and are listening by aloud speaker and your device, please pick up your hands and ensure that your phone is not on mute and asking your question.

Speaker Change: If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening by a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Bascome Majors: And your first question comes from the line of Bascome Majors with Suschiana. Please go ahead.

Speaker Change: And your first question comes from the line of Bascome Majors with Susquehanna. Please go ahead.

Bascome Majors: Hey, Bob, you opened up your prepared, sorry, your closing remarks with the discussion of the supply, siled recovery in North America. And as we look forward and, you know, we don't have a crystal ball, it does seem that both interest rates and steel price inflation have the capability to move in the other way, perhaps more durably over the next year, year and a half, two years.

Bascome Majors: Hey, Bob, you opened up your prepared or, sorry, your closing remarks with the discussion of the supply-side led recovery in North America, and as we look forward, and we don't have a crystal ball, it does seem that both interest rates and steel price inflation have the capability to move in the other way, perhaps more durably. Over the next year, year and a half, two years, you know, how do you think about managing your business differently if those upward pressures on asset prices and lease rates start to moderate? Where do you think that the, Where do you think we should look across your business? as we think about that from our perspective, Thank you.

Bascome Majors: Hey, Bob, you opened up your prepared or sorry, your closing remarks with the discussion of

Bascome Majors: supply side lead recovery in North America. And as we look forward, and you know, we don't have a crystal ball, it does seem that both interest rates and steel price inflation

Speaker Change: have the capability to move in the other way, perhaps more durably.

Bascome Majors: How do you think about managing your business differently if those upward pressures on asset prices and lease rates start to moderate? And you know, where do you think that, you know, where do you think we should look across your business? You know, as we think about that from our perspective, thank you.

Speaker Change: over the next year, year and a half, two years. How do you think about managing your business differently if those upward pressures on asset prices and lease rates start to moderate and

Speaker Change: You know, where do you think that the, you know...

Speaker Change: Where do you think we should look across your business?

Robert C. Lyons: Sure, Bascome, and thank you for the question. And since we have Paul Titterton here today, who joins us, you know, mid-year and at year end as president of North American Rail, why don't I let Paul answer that question and give you his thoughts?

Bob Lyons: Sure, Bascome. And thank you for the question.

Speaker Change: Yes, we think about that from our perspective. Thank you.

Paul Titterton: And since we have Paul Timberton here today, who joins us mid-year and at year end as president of North American Rail, why not I let Paul answer that question and give you his thoughts?

Speaker Change: Sure, Bascome, and thank you for the question.

Paul F. Titterton: Since we have Paul Titterton here today, who joins us, you know, mid-year and at year-end as president of North American Rail, why don't I let Paul answer that question and give you his thoughts?

Paul F. Titterton: Sure, and I think it's a good question, and first of all, I think you're right. Certainly, the possibility of easing interest rates and easing steel prices could have some impact on the rail car market, but I would say that a couple of things are important to consider when we think about the North American rail car market. Capacity shifts certainly have resulted in what we think of as a likely long-term reduction in new car capacity.

Paul Titterton: Sure. And I think it's a good question. And first of all, I think you're right; certainly, the possibility of easing interest rates and easing field prices could have some impact on the real-car market.

Paul F. Titterton: And I think it's a good question. And I think it's a good question. And I think it's a good question.

Paul F. Titterton: Sure, and I think it's a good question, and first of all, I think you're right, certainly the possibility of easing interest rates and easing steel prices could have some impact on the rail car market, but I would say that a couple of things are important to consider when we think about the North American rail car market.

Paul Titterton: But I would say that a couple of things are important to consider when we think about the North American real-car market. Capacity shifts certainly have resulted in what we think of as likely a long-term reduction in new-car capacity. When we think back to say the crude boom or the ethanol boom, you know, those were periods when the aggregate production for North American rail cars got up into the 80,000-car a year range. And of course, right now the market is struggling to frankly even hit the 50 range and is probably going to continue to fall short of that.

Paul F. Titterton: Capacity shifts certainly have resulted in what we think of as likely a long-term reduction in new car capacity.

Paul F. Titterton: When we think back to the crude boom or the ethanol boom, those were periods when the aggregate production for North American rail cars got up into the 80,000 car per year range, and of course, right now, the market's struggling to frankly even hit the 50 range and is probably going to continue to fall short of that. We really think that even if some of the input costs to rail car purchasing and financing moderate, that fundamental capacity is not going to get anywhere near where it used to be and probably, frankly, given just labor availability, can't. So we don't see in North America the threat of extreme oversupply the way we saw in some of the past boom-bust cycles.

Paul F. Titterton: When we think back to, say, the crude boom or the ethanol boom, you know, those were periods when the aggregate production for North American rail cars got up into the 80,000 car a year range. And, of course, right now...

Paul F. Titterton: The market is struggling to frankly even hit the 50 range and is probably going to continue to fall short of that.

Paul Titterton: So, you know, we really think that even if some of the input costs to rail car purchasing and financing moderate, that fundamental capacity is not going to get anywhere near where it used to be and probably, frankly, given just labor availability, can't. So we don't see in North America, anyway, the threat of extreme oversupply the way we saw in some of the past boom-bust cycles.

Paul F. Titterton: You know, we really think that even if some of the input costs to rail car purchasing and financing moderate, that fundamental capacity is not going to get anywhere near where it used to be, and probably, frankly, given just labor availability, can't.

Paul F. Titterton: So we don't see, in North America anyway, the threat of extreme oversupply the way we saw in some of the past boom-bust cycles.

Unknown Executive: You know, Paul, to that, I know this is not something that you can quantify with precision, but when you think about your business, do you have a sense or just sort of internal thought process on how much of the least pricing power has been driven by new car cost inflation versus just, you know, traditional supply, demand tightness, cars and storage, utilization, however you want to frame it in more, you'll fund them in all versus asset price standpoint. Thank you. Well, the first thing I'll say is, you know, the North American rail car leasing market is and has always been a highly competitive market.

Paul F. Titterton: You know, Paul, to that, I know this is not something that you can quantify with precision, but when you think about your business, do you have a sense or just sort of internal thought process on how much of the lease pricing power has been driven by new car cost inflation versus just, you know, traditional supply-demand tightness, cars in storage, utilization, however you want to frame it in more fundamental terms versus asset price? Thank you.

Paul F. Titterton: You know, Paul, to that, I know this is not something that you can quantify with precision, but

Paul: When you think about your business,

Paul: How much of the lease pricing power has been driven?

Paul: by new car cost inflation versus just, you know, traditional supply demand tightness, cars and storage utilization, however you want to frame it in more, you know, fundamental versus asset price standpoint. Thank you.

Paul F. Titterton: Well, the first thing I'd say is that, you know, the North American rail car leasing market is and has always been a highly competitive market. So whatever the new car supply dynamics are, there are obviously a large number of operating lessors that compete to supply rail cars in the North American market, and that has been the case and is going to continue to be the case. I will say, though, if you look back at the two historical periods I was talking about, the ethanol boom and the crude boom, the dynamic that we saw was this fairly exaggerated cyclicality where the market would dramatically overshoot on production in response to a demand stimulus.

Paul: Well, the first thing I'll say is that, you know, the North American rail car leasing market is and has always been a highly competitive market. So whatever the whatever the new car supply dynamics are, there are obviously a large number of operating lessors that compete.

Unknown Executive: So whatever the, whatever the new car supply dynamics are, there are obviously a large number of operating less orders that compete to supply rail cars in the North American market, and that has been the case and is going to continue to be the case. I will say, though, I think if you look back at the two historical periods I was talking about, the ethanol boom and the crude boom, the dynamic that we saw was this fairly exaggerated difficulty, whereas the market would dramatically overshoot on production in response to a demand stimulus, and then when that demand stimulus went away and we saw the next economic downturn, you'd have this hangover excess supply of rail cars.

Speaker Change: to supply railcars in the North American market, and that has been the case and is going to continue to be the case. I will say, though...

Paul F. Titterton: And then when that stimulus for demand went away, and we saw the next economic downturn, you'd have this hangover excess supply of rail cars. And so I think, and that would, of course, affect both pricing and utilization. Here, where we're not seeing the overshoot on the supply side, where production levels are at something closer to replacement levels, you're not likely to have that overshoot. And so you're likely to have, in terms of a pricing and utilization metric, you're likely to have a more stable fleet in this environment. So I think that's really the difference here versus some of the past cyclical peaks that we've seen.

Speaker Change: I think if you look back at the two historical periods I was talking about, the ethanol boom and the crude boom,

Speaker Change: The dynamic that we saw was this fairly exaggerated cyclicality where the market would dramatically overshoot on production in response to a demand stimulus.

Speaker Change: And then when that demand stimulus went away and we saw the next economic downturn, you'd have this hangover excess supply of rail cars. And so I think, and that would of course affect both pricing and utilization.

Paul Titterton: And so I think, and that would of course affect both pricing and utilization here, where we're not seeing the overshoot on the supply side, where production levels are at something closer to replacement level. You're not likely to have that overshoot, and so you're likely to have, in terms of pricing and utilization metric. You're likely to have a more stable fleet in this environment. So I think that's really the difference here versus some of the past cyclical peaks that we've seen.

Speaker Change: Here where we're not seeing the overshoot on the supply side where production levels are at something closer to replacement level

Speaker Change: You're not likely to have that overshoot, and so you're likely to have, in terms of a pricing and utilization metric, you're likely to have a more stable fleet in this environment. So I think that's really the difference here versus some of the past cyclical peaks that we've seen.

Robert C. Lyons: Hey Bascome, just to add to that, you pointed to the cost of a new car as one of the drivers. It's also worth noting that it's the length of time it takes to get that new car. So when Paul's talking about what we've seen in the past versus today, regardless of what the cost of that new car is, the fact that it's not immediately available versus an existing car, which is an important driver. Yeah.

Bob Lyons: Hey, Baskin, just to add to that, you pointed to the cost of a new car as being one of the drivers; it's also worth noting that it's the length of time it takes to get that new car.

Bascome Majors: Hey Bascome, just to add to that, you pointed to the cost of a new car as being one of the drivers. It's also worth noting that it's the length of time it takes to get that new car.

Bob Lyons: So when Paul's talking about what we've seen in the past versus today, regardless of what the cost of that new car is, the fact that it's not immediately available versus an existing car, which is an important driver. Yeah, I'll just round out the last point here with two things. One, in terms of the demand side of the equation, I point you to the renewal success rate. You know, the demand for the installed base of assets remains high. Customers are renewing with great frequency. We're north of 80%. That's a great indication that customers are, they have conviction around the assets they have in their fleet today, and they're going to hold on to those for sure.

Bascome Majors: So when Paul's talking about what we've seen in the past versus today, regardless of what the cost of that new car is, the fact that it's not immediately available versus an existing car, which is, is an important driver.

Robert C. Lyons: Yeah, I'll just round out the last point here, Bascom, on two things. One, in terms of the demand side of the equation, I point you to the renewal success rate. You know, the demand for the installed base of assets remains high. Customers are renewing with great frequency. We're north of 80%. That's a great indication that customers have conviction around the assets they have in their fleet today, and they're going to hold on to those, for sure. So you know, that's a key point.

Bascome Majors: Yeah, I'll just round out the last point here, Bascome, with two things. One, in terms of the demand side of the equation, I point you to the renewal success rate. You know, the demand for the installed base of assets remains high.

Baskin: Customers are renewing with great frequency. We're north of 80 percent.

Baskin: That's a great indication that customers, they have conviction around the assets they have in their fleet today and they're going to hold on to those.

Bob Lyons: So you know, that's a key point.

Baskin: for sure. So, you know, that's a key point.

Unknown Executive: I'll pass it on.

Robert C. Lyons: I'll pass it on. Thank you.

Unknown Executive: Thank you.

Speaker Change: I'll pass it on. Thank you.

Justin Bergner: Again, if you would like to ask a question, press star one on your telephone keypad, and your next question comes from the line of Justin Bergner with GATX. Please go ahead.

Operator: Again, if you would like to ask a question, press star 1 on your telephone keypad, and your next question comes from the line of Justin Bergner with GATX. Please go ahead.

Speaker Change: Again, if you would like to ask a question, press star 1 on your telephone keypad and your next question comes from the line of Justin Bergner with GATX. Please go ahead.

Justin Bergner: Sorry, Justin Bergner with Canbelli Funds. Good morning. Paul Tom, Shari. Morning. So a couple of questions. You mentioned, I think, that you're to date for the RPF joint venture, the ex or what you've seen is about 75% of the earnings or equity income is related to, you know, the operating assets and 25% related to the gain on sale. Well, I think in the past, you've mentioned that historically, over the long term, that's been closer to 50-50. Do you expect it to kind of end up that this year closer to 50-50? And if not, are you now kind of absorbing earnings, headwind in the guide that you're reiterating associated with, you know, slower asset sales from the JB this year?

Justin Laurence Bergner: Sorry, it's Justin Bergner with Compelli Funds. Good morning, Paul, Tom, Shari.

Speaker Change: Sorry, it's Justin Bergner with Compelli Funds. Good morning, Bob.

Unknown Executive: Morning. Morning. Morning.

Speaker Change: Paul, Tom, Shari?

Unknown Executive: So a couple of questions. You mentioned, I think, that year-to-date for the RPF joint venture, you've seen about 75% of the earnings or equity income related to the operating assets and 25% related to the gain on sale. I think in the past, you've mentioned that historically, over the long term, that's been closer to 50-50. Do you expect it to kind of end up that way this year? And if not, are you now kind of absorbing earnings headwinds in the guide that you're reiterating associated with slower asset sales from the JV this year? Yeah, Justin.

Speaker Change: Morning.

Justin Laurence Bergner: So a couple questions you mentioned I think that year-to-date for the RPF joint venture The X or what you've seen is about 75% of the earnings or equity income is

Speaker Change: Related to, you know, the operating assets and 25% related to the gain on sale. I think in the past you've mentioned that historically over the long term that's been closer to 50-50.

Speaker Change: Do you expect it to kind of end up that this year closer to 50-50, and if not, are you now kind of absorbing earnings headwind in the guide that you're reiterating associated with, you know, slower asset sales from the JV this year?

Tom Elman: Yeah, Justin, this is Tom.

Thomas A. Ellman: Yeah, Justin, this is Tom. It's absolutely true that the gain on remarketing is pretty lumpy, and we would expect the back half of the year for that piece to increase and to move much closer to the historical averages for the years on.

Tom Elman: It's absolutely true that the gain on remarketing is pretty lumpy.

Speaker Change: Yeah, Justin, this is Tom. It's absolutely true that that gain on remarketing is pretty lumpy and we would expect the back half of the year for that piece to increase and to move much closer to the historical averages for the year as a whole.

Tom Elman: And we would expect the back half of the year for that piece to increase and to move much closer to the historical averages for the years of whole. Great. In the historical averages, close to 50-50. Correct. Okay.

Thomas A. Ellman: Great, and the historical average is closer to 50-50? Correct. Okay. Thank you for that, and then. With respect to rail North America, it seems like you're pretty active in terms of adding cars at sort of a pace that goes beyond, you know, what's captured by the long-term agreement with Trinity. Can you maybe just, provide a little perspective as to the types of, you know, attractive opportunities you're seeing on the buy side. The secondary market.

Speaker Change: Great, and the historical average is closer to 50-50? Correct.

Paul Titterton: Thank you for that. And then with respect to rail North America, it seems like you're pretty active in terms of adding cars sort of a pace that goes beyond, you know, what's captured by the long-term agreement with Trinity. Can you maybe just provide a little perspective as to the types of, you know, attractive opportunities you're seeing on the buy side in the secondary market?

Speaker Change: Okay.

Speaker Change: Thank you for that. And then.

Speaker Change: With respect to rail North America, it seems like you're pretty active in terms of adding cars at sort of a pace that goes beyond.

Speaker Change: You know what's captured by the the long-term agreement with Trinity. Can you maybe just provide a little perspective as to the types of you know, attractive opportunities you're seeing on the buy side

Paul Titterton: Sure, this is Paul Titterton speaking.

Paul F. Titterton: Sure, this is Paul Titterton speaking. And yeah, one of the nice features of this market has been that we've seen a number of attractive investment opportunities outside of our committed supply agreement. And that's both on the new car syndication side as well as the secondary market side. And, you know, really, there's not necessarily a particular theme.

Paul Titterton: And yeah, one of the nice features of this market has been actually that we've seen a number of attractive investment opportunities outside of our committed supply agreement. And that's both on the new car syndication side as well as the secondary market side. And, you know, really, there's not necessarily a particular theme. Those investments have been diverse in terms of car type and customer. I will say that I think in the, in the, with the dynamics of the current market right now, GATX is simply emerged as a, as a good and attractive buyer of a variety of types of operating lease deals.

Speaker Change: in the second.

Speaker Change: Dairy Market.

Speaker Change: Sure, this is Paul Titterton speaking and yeah, um

Paul F. Titterton: One of the nice features of this market has been, actually, that we've seen a number of attractive investment opportunities outside of our committed supply agreement.

Paul F. Titterton: and that's both on the new car syndication side as well as the secondary market side and, you know, really there's not necessarily a particular theme, those investments have been diverse in terms of car type and customer.

Paul F. Titterton: Those investments have been diverse in terms of car type and customer. I will say that, with the dynamics of the current market right now, GATX has simply emerged as a good and attractive buyer of a variety of types of operating lease deals. So it's been particularly nice because, as you know, we pride ourselves on being disciplined investors. We've been able to generate this additional volume without relaxing our standards at all. We're using the same pricing approach we always use, and this market just seems to be a good fit for us as an investor across a wide range of car types.

Paul F. Titterton: I will say that I think with the dynamics of the current market right now, GATX has simply emerged as a good and attractive buyer of a variety of types of operating lease deals. So it's been particularly nice because, as you know, we pride ourselves on being disciplined investors.

Paul Titterton: So it's been particularly nice because, as you know, we, we pride ourselves on being discipline investors. We've been able to generate this additional volume without relaxing our standards at all. We're using the same pricing approach we always use. And this market just seems to be a good fit for us as an investor across a wide range of car types.

Speaker Change: We've been able to generate this additional volume without relaxing our standards at all. We're using the same pricing approach we always use, and this market just seems to be a good fit for us as an investor across a wide range of car types.

Bob Lyons: Okay, great. And I'll throw in one more, which relates to the comment they came up on a prior question with the market dynamics of leasing. You seem to be suggesting that there's a narrowing price gap between, you know, the leases on, you know, the lease rates on existing cars. And, you know, the economics of buying a new car for lease, is that something that, you know, you've seen over the last couple of years, or is this more of like a one-quarter phenomenon? I think Bob mentioned the increasing weight to get a new car, helping demand for leases on existing cars.

Paul F. Titterton: Okay, great. And I'll throw in one more, which relates to the comment that came up on a prior question about the market dynamics of leasing. You seem to be suggesting that there's a narrowing price gap between, you know, the leases on, you know, existing or I guess the lease rates on, you know, existing cars and, you know, the economics of buying a new car for lease. Is that something that you know you've seen over the last couple of years, or is this more of like a one-quarter phenomenon? I think Bob mentioned the increasing weight of getting a new car to help demand for leases on existing cars.

Speaker Change: Okay, great. And I'll throw in one more.

Speaker Change: which relates to the comment that came up on a prior question with the market dynamics of leasing. You seem to be suggesting that there's

Speaker Change: a narrowing price gap between, you know, the leases on, you know, existing

Speaker Change: or I guess the lease rates on, you know, existing cars.

Speaker Change: and the economics of buying a new car for lease.

Speaker Change: Is that something that, you know, you've seen over the last couple of years, or is this more of like a one quarter phenomenon? I think Bob mentioned the increasing weight.

Robert C. Lyons: Get a new car helping demand for leases.

Robert C. Lyons: And Justin, I'll start and Paul will jump in, but, you know, we've said now for... you know, many quarters and a couple of years that there is a bifurcation in the market where you see demand for the existing rolling stock extremely strong, which is definitely a sign of that conviction that the customers have; they're not going to let go of the rail cars that they have in their fleet today. So we've seen very, very strong market-wide upward pressure on left and lease rates and the opportunity to raise rates.

Bob Lyons: It's just an I'll start. Paul will jump in, but you know, we've said now for. You know, many quarters a couple of years that it's there is a bifurcation in the market where you see demand for the existing rolling stock extremely strong, which is definitely a sign of that conviction that the customers have. They're not going to let go of the rail cars that they have in the fleet today. So we've seen very, very strong market wide upward left and least rates and the opportunity to raise rights. And the reason we're, you know, we are locking those rates in for very long periods of time as we do when we have that have that opportunity so that, you know, that's that's one key part of it.

Shari Hellerman: Nonexisting Cars

Speaker Change: Justin, I'll start and Paul will jump in but you know we've said now for

Justin Laurence Bergner: Yeah, many quarters, a couple years that it's, there is a bifurcation in the market where you see demand for the existing rolling stock.

Speaker Change: extremely strong, which is definitely a sign of that conviction that the customers have. They're not going to let go of the of the rail cars that they have in their fleet today.

Justin Laurence Bergner: So we've seen very, very strong

Justin Laurence Bergner: Market-wide upward lift in lease rates and the opportunity to raise rates and the reason we're you know we are locking those rates in for very long periods of time as we do when we have that have that opportunity.

Robert C. Lyons: And the reason we're, you know, locking those rates in for very long periods of time, as we do, when we have that, have that opportunity. So that, you know, that's one key part of it. The second, the second part is the new car place. Relative to the existing renewals have been a little bit more challenging, but that's not a new dynamic. We've been addressing that and really facing that over the course of the last couple of years, and our commercial team has done a really, really solid job, whether it's tank or freight, of getting new cars placed as well.

Justin Laurence Bergner: So that, you know, that's one key part of it. The second part is the new car placements.

Bob Lyons: The second, the second part is the new car placements relative to the existing renewals have been a little bit more challenging; that’s not a new dynamic. We've been addressing that and really facing that over the course of the left. A couple of years, and our commercial team has done a really, really solid job, whether it's tank or freight, of getting new cars placed as well.

Justin Laurence Bergner: Relative to the existing renewals have been a little bit more challenging but that's not a new dynamic. We've been addressing that and really facing that over the course of the last

Justin Laurence Bergner: A couple of years and our commercial team has done a really, really solid job, whether it's tank or freight, of getting new cars placed as well.

Paul Titterton: Paul, if you want to and I'll just I'll just add to that. I think, you know, to your question about the sort of the spread between new and existing, you know, anytime you see a highly utilized fleet, such as we have today, that spread is going to narrow, so you're absolutely correct that we are seeing a narrower spread between new car pricing and existing pricing now, than say, at a time when we utilization is weaker. And so that's really just exactly what we'd expect to see in a market like this.

Paul F. Titterton: Paul, if you want to, and I'll

Paul F. Titterton: Yeah, and I'll just add to that, I think, you know, to your question about this, the sort of the spread between new and existing cars, you know, anytime you see a highly utilized fleet such as we have today, that spread is going to narrow. So you're absolutely correct that we are seeing a narrower spread between new car pricing and existing pricing now than, say, at a time when fleet utilization is weaker. And so that's really just exactly what we'd expect to see in a market like this.

Justin Laurence Bergner: Oh, Paul, if you want to, and I'll just I'll just add to that, I think, you know, to your question about this, the sort of the spread between new and existing.

Paul F. Titterton: You know, any time you see a highly utilized fleet such as we have today, that spread is going to narrow. So, you're absolutely correct.

Speaker Change: We are seeing a narrower spread between new car pricing and existing pricing now than, say, at a time when fleet utilization is weaker. And so that's really just exactly what we'd expect to see in a market like this.

Paul Titterton: Okay, thanks, but just one follow-on if I may. I mean, it seems like even if, you know, the utilization were to come down a bit as, you know, real operating metrics improve, it still seems like the, I guess, lower effective capacity in the industry is causing people to maybe reassess, you know, existing rolling stock versus new cars. And it's sort of a different frame than they have historically. Is that fair? Yeah, I think that is fair. I've been describing this as sort of a self-correcting market, which is to say that, you know, scrap prices are supportive of retiring obsolete equipment or under-utilized equipment.

Paul F. Titterton: Okay, thanks. But just one follow-on question, if I may. It seems like even if the utilization were to come down a bit, as you know, real operating metrics improve, it still seems like the, I guess, lower effective capacity in the industry is causing people to maybe reassess existing Rolling Stock versus new cars in sort of a different frame than they have historically. Is that fair?

Speaker Change: OK, thanks, but just one follow on. If I may. I mean, it seems like even if you know the utilization were to come down a bit as you know, real operating metrics improve, it still seems like the I guess lower effective capacity in the industry is causing people to maybe reassess.

Speaker Change: you know, existing.

Speaker Change: Rolling stock versus new cars in sort of a

Paul F. Titterton: Yeah, I think that is fair. I've been describing this as sort of a self-correcting market, which is to say that scrap prices are supportive of retiring obsolete equipment or underutilized equipment. The new car market isn't overproducing new cars. And so, as a result, small changes on the demand side aren't producing an excess supply of cars and aren't putting a lot of downward pressure on rates because we don't have that excess flow of new cars in, and we do have a fairly steady drumbeat of older cars leaving the fleet. So it's a pretty balanced situation, which I would describe as favorable for GATX.

Speaker Change: different frame than they have.

Speaker Change: Historically is that.

Speaker Change: share.

Speaker Change: Yeah, I think that is fair. I've been describing this as sort of a self-correcting market, which is to say that, you know, scrap prices are supportive of retiring obsolete equipment or underutilized equipment.

Bob Lyons: The new car market isn't over producing new cars. And so, as a result, you know, small changes on the demand side aren't producing an excess supply of cars and aren't putting a lot of downward pressure on rates because. We don't have that excess flow of new cars in, and we do have a fairly steady drumbeat of older cars leaving the fleet. So it's a, it's a pretty balanced situation, which I would describe as favorable for GATX. Good spot to be in as a given the size of our fleet and as a, you know, as a rail car owner, lessor it's a good spot to be in.

Speaker Change: The new car market isn't overproducing new cars, and so as a result...

Speaker Change: you know, small changes on the demand side aren't producing an excess supply of cars and aren't putting a lot of downward pressure on rates because...

Speaker Change: We don't have that excess flow of new cars in, and we do have a fairly steady drumbeat of older cars leaving the fleet. So, it's a pretty balanced situation, which I would describe as favorable for GATX. It's a good spot to be in, given the size of our fleet.

Paul F. Titterton: a good spot to be in as, given the size of our fleet and as a rail car owner or lessor, it's a good spot to be in.

Speaker Change: As a rail car owner or lessor, it's a good spot to be in.

Unknown Executive: Okay, great. Thanks so much.

Justin Laurence Bergner: Okay, great. Thanks so much.

Unknown Executive: Thank you.

Speaker Change: Okay, great. Thanks so much.

Bascome Majors: Your next question comes from the line of basketball majors.

Operator: Your next question comes from the line of Bascomajors with Susquehanna. Please go ahead.

Speaker Change: Thank you.

Bascome Majors: So, yeah, and please go ahead. Thanks for taking my follow up. Just to maybe close the loop on the new car versus at least renewal questions up.

Speaker Change: Your next question comes from the line of Bascomajors with Susquehanna. Please go ahead.

Bascome Majors: Thanks for taking my follow-up just to maybe close the loop on the new car versus lease renewal questions. Any framing of how much, if any, the price of a new car has fallen from quotes you're getting today versus say six or 12 months ago and really just trying to get at the core of the steel price impact on a new car replacement today. Thank you. Sure, yeah, I mean, I can't get into specifics, obviously, because our relationships, uh...

Bascome Majors: Thanks for taking my follow-up. Just to maybe close the loop on the new car versus lease renewal questions.

Bascome Majors: Any framing of how much, if any, the price of a new car has fallen from quotes you're getting today versus, say, six or twelve months ago. And really just trying to get to the core of the steel price impact on a new car replacement today. Thank you.

Bascome Majors: Any framing of how much, if any, the price of a new car has fallen from quotes you're getting today versus, say, 6 or 12 months ago, and really just trying to get at the core of the steel price impact on a new car replacement today. Thank you.

Paul Titterton: Sure. Yeah, I mean, I can't get into specifics, obviously, because our relationships from a procurement standpoint with the builders are confidential. But I can say, generally speaking, that prices for new cars remain relatively high as compared to history. So there's been some degree of moderation.

Paul F. Titterton: Sure, yeah, I mean, I can't get into specifics, obviously, because our relationships from a procurement standpoint with the builders are confidential, but I can say, generally speaking, that prices for new cars remain relatively high as compared to history. So there's been some degree of moderation, but relative to history, this is still a fairly expensive new rail car market.

Speaker Change: Sure, yeah, I mean, I can't get into specifics, obviously, because our relationships from a

Speaker Change: from a procurement standpoint with the builders are confidential, but I can say generally speaking that prices for new cars remain relatively high as compared to history. So there's been some degree of moderation, but relative to history, this is still a fairly expensive new rail car market.

Unknown Executive: But relative to history, this is still a fairly expensive new rail car market. Thank you.

Speaker Change: Thank you.

Brendan Mccarthy: The next question comes from the line of Brendan McCarthy. Please go ahead. Hey, good morning, everybody. Thanks for taking my question. I just wanted to ask you all from a previous question as it relates to the Rose Royce JV. Looking at remarking income there, I know on the real side that it's all about just optimizing the fleet. Can you talk about what are the demand drivers with that JV as it pertains to the remarketing income? Yeah, essentially it's the same. It's both for portfolio optimization and when the market might view the engine, having greater long-term value than a Rose Royce partner's finance finds the value of holding on to that themselves.

Operator: Your next question comes from the line of Brendan McCarthy with Sidoti. Please go ahead.

Speaker Change: Your next question comes from the line of Brendan McCarthy with Sidoti. Please go ahead.

Brendan Michael McCarthy: Hey, good morning, everybody. Thanks for taking my question.

Brendan Michael McCarthy: Hey, good morning everybody. Thanks for taking my question. I just wanted to ask a follow-up from a previous question as it relates to the

Brendan Michael McCarthy: Rolls-Royce JV. Looking at remarketing income there, I know on the rail side, it's all about, you know, just optimizing the fleet. Can you talk about what are the demand drivers with that JV as it pertains to the remarketing income?

Speaker Change: Yeah, essentially it's the same. It's both for portfolio optimization and when the market might view the engine having greater long-term value than Rolls-Royce Partners Finance finds the value of holding on to that themselves.

Unknown Executive: I just wanted to ask a follow-up question as it relates to the Rolls-Royce JV. Looking at remarketing income there, I know on the rail side, it's all about, you know, just optimizing the fleet. Can you talk about what the demand drivers are with that JV as it pertains to marketing income?

Unknown Executive: Yeah, and they tend to come given the cost-based, you know, the net portfolio of each asset. I think Tom mentioned the gains are even lumpy or RRPF, and they tend to be a realm of the American, given the size of each asset being sold. But yeah, I would really rate Tom's comment or support that comment. The philosophy is very much the same. What's the market value in the asset versus what we view it as a hold? And what's the rate mix of assets in the portfolio? And those two things will drive that activity. Yeah, and that decision is ultimately up to Rose Royce.

Speaker Change: Yeah, and they tend to come given the cost base, you know, the net book value of each asset. I think Tom has mentioned that the gains are lumpy, or even lumpier at RRPS than they tend to be at Royal North America given the

Thomas A. Ellman: the size of each asset being sold, but

Speaker Change: Yeah, I would reiterate Tom's comment or support that comment. The philosophy is very much the same.

Unknown Executive: Yeah, essentially, it's the same. It's both for portfolio optimization and when the market might view the engine as having greater long-term value than Rolls Royce. Partners Finance sees the value of holding on to that themselves.

Speaker Change: What's the market value in the asset versus what we view it as a whole? And what's the right mix of assets in the portfolio? And those two things will drive that activity.

Speaker Change: Yeah, and that decision is ultimately up to Rolls-Royce.

Unknown Executive: Yeah, but as a reminder, the JV is 50-50 owned, and decisions like that go to the board, both of which have a 50% representation.

Speaker Change: Yeah, but as a reminder, the JV is 50-50 owned, and decisions like that go to the board, both of which have 50% representation.

Unknown Executive: Okay, that's helpful. That's all for me. Thank you.

Speaker Change: Okay, got it. That's helpful. That's all for me. Thank you.

Tom Elman: And two of the four board members for G&TX are sitting here, which is Tom and myself, along with two of our colleagues, and Rose has four as well. So we've all worked together a very long time. And so there are lots of people in terms of portfolio management. It's very much aligned with ours. When we think about our overall pool of assets and certainly the way we manage the business here at Real North America.

Speaker Change: And two of the four board members for GATX are sitting here, which is Tom and myself, along with two of our colleagues and Rolls has four as well. So we've all worked together a very long time.

Unknown Executive: Yeah, and they tend to come given the cost base, you know, the net book value of each asset. I think Tom has mentioned the gains are lumpy, or even lumpier RRPS than they tend to be at Royal North America given the transcription by https://otter.ai. Yeah, I would reiterate Tom's comment or support that comment. The philosophy is very much the same. What's the market value of an asset versus what we view it as a whole? And what's the right mix of assets in the portfolio? And those two things will drive that activity.

Speaker Change: So their philosophy in terms of portfolio management is very much aligned with ours when we think about our overall pool of assets and certainly the way we manage the business here at Rail North America.

Unknown Executive: Yeah, and that decision is ultimately up to Rolls-Royce. But, as a reminder,

Unknown Executive: Yeah, but as a reminder, the JV is 50-50 owned, and decisions like that go to the board.

Justin Bergner: Your next question comes from the line of Justin Berner. Please go ahead.

Speaker Change: Your next question comes from the line of Justin Bergner. Please go ahead.

Unknown Executive: Okay, got it. That's helpful. That's all for me. Thank you, and two of the four.

Justin Bergner: Thanks for follow up. I just wanted to clarify any slowdown in the secondary market, or does it remain robust? I know it looks like it remains robust from, you know, the stuff you're buying and selling, but just from an overall industry perspective.

Justin Trennon Long: Thanks for the follow-up. Just wanted to clarify, any slowdown in the secondary market or does it remain robust? I know it looks like it remains robust from the stuff you're buying and selling, but just from an overall industry perspective.

Unknown Executive: And two of the four board members for GATX are sitting here, which is Tom and myself, along with two of our colleagues, and Roll has four as well. So we've all worked together for a very long time. Their philosophy in terms of portfolio management is very much aligned with ours when we think about our overall pool of assets and certainly the way we manage the business here at Rail North America.

Paul Titterton: Yeah, this is Paul speaking, and yes, that's correct. The secondary market from where we sit continues to be strong. We're continuing to see good breath and depth of buyers when we put packages out. Gotcha. And sequential lease rates, I know you kind of mentioned during your prepared remarks that they were flat. Is that, you know, the case for both tank and freight or their need, you know, variations to note out to note. And freight was a little bit stronger on a relative basis this quarter sequentially, but, you know, not by a significant amount. So that's still at that flat level.

Operator: Your next question comes from the line of Justin Bergner. Please go ahead.

Justin Trennon Long: Yeah, this is Paul speaking. And yes, that's correct. The secondary market from where we sit continues to be strong. We're continuing to see good breadth and depth of buyers when we put packages out.

Justin Laurence Bergner: Thanks for the follow-up. Just wanted to clarify, any slowdown in the secondary market, or does it remain robust? I know it looks like it remains robust from, you know, the stuff you're buying and selling, but just from an overall industry perspective.

Paul F. Titterton: Yeah, this is Paul speaking, and yes, that's correct. The secondary market from where we sit continues to be strong. We're continuing to see good breadth and depth of buyers when we put packages out.

Speaker Change: Gotcha. And sequential lease rates, I know you kind of mentioned during your prepared remarks that they were flat. Is that...

Paul F. Titterton: Gotcha. And sequential lease rates, I know you kind of mentioned during your prepared remarks that they were flat. Is that the case for both tank and freight? Are there any variations to note out?

Speaker Change: You know the case for both tank and freight. Are there any variations to note out to note?

Paul F. Titterton: I think freight was a little bit stronger on a relative basis this quarter sequentially, but not by a significant amount. So that's still at that flat level. By the way, those are sequential rates that remain very high, quite high, very attractive levels for us in terms of renewal. So Yeah, well, the rates generally, and we've said this before, you know, they have certainly started to flatten out over the course of the last few quarters. They're doing so at a very attractive price.

Speaker Change: I think freight was a little bit stronger on a relative basis this quarter sequentially, but not by a significant amount, so net still at that flat level.

Bob Lyons: by the way, those are sequential rates that have remained very high, quite high, very attractive levels for us in terms of renewals. So, yeah, well, the rates generally, and we've said this before, you know, they have certainly started to flatten out over the course of the last few quarters. They're doing so at a very attractive level.

Speaker Change: By the way, those...

Speaker Change: Those are sequential rates that remain very high, quite high, very attractive levels for us in terms of renewal.

Speaker Change: Yeah, well, the rates generally, and we've said this before, they have certainly started to flatten out over the course of the last few quarters. They're doing so at a very attractive level.

Unknown Executive: Great, thanks the follow-up.

Speaker Change: Great, thanks for the follow-up.

Operator: There are no further questions.

Shari Hellerman: There are no further questions. I will now turn the call back over to Shari Hellerman. Please go ahead.

Shari Hellerman: I will now turn the call back over to Shari Hellerman. Please go ahead.

Speaker Change: There are no further questions. I will now turn the call back over to Shari Hellerman. Please go ahead.

Shari Hellerman: I'd like to thank everyone for their participation on the call this morning. Please contact me with any follow-up questions. Thank you.

Shari Hellerman: I'd like to thank everyone for their participation on the call this morning. Please contact me with any follow-up questions. Thank you.

Shari Hellerman: I'd like to thank everyone for their participation on the call this morning. Please contact me with any follow-up questions. Thank you.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.

Speaker Change: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Operator: You may now disconnect.