Q2 2026 GATX Corp Earnings Call

July 30, 2026

Operator 3: Hello, everyone. Thank you for joining us, welcome to the GATX 2026 Q2 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference call over to Shari Hellerman, Head of Investor Relations. Shari, please go ahead.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference call over to Shari Hellerman, Head of Investor Relations.

Speaker #1: Shari, please go ahead.

Speaker #2: Thank you, Jillian. Good morning, and thank you for joining GATX Corporation's 2026 second quarter earnings conference call. I'm joined today by Bob Lyons. President and Chief Executive Officer.

Shari Hellerman: Thank you, Jillian. Good morning and thank you for joining GATX Corporation's 2026 Q2 earnings conference call. I am joined today by Bob Lyons, 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 will hear during our discussion today will consist of forward-looking statements. 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 2025 and our other filings with the SEC. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. Earlier today, GATX reported 2026 Q2 diluted earnings per share of $2.84.

Speaker #2: Tom Ellman, Executive Vice President and Chief Financial Officer, and Paul Tetterton, 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.

Speaker #2: 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.

Speaker #2: And those discussed in GATX's Form 10-K for 2025 and our other filings with the SEC. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.

Speaker #2: Earlier today, GATX reported 2026 second quarter diluted earnings per share of $2.84. This compares to 2025 second quarter diluted earnings per share of $2.06.

Shari Hellerman: This compares to 2025 Q2 diluted earnings per share of $2.06. Year to date 2026, GATX delivered diluted earnings per share of $5.19 compared to $4.21 for the same period in 2025. I will briefly touch on each of our business segments, and then we will open the line for questions. In Rail North America, market conditions remain constructive. Fleet utilization remained high at 98%, and our renewal success rate was strong at 82.6%. The renewal rate change of GATX's lease price index was 16.8% with an average renewal term of 54 months. Leasing fundamentals driven by favorable supply-demand dynamics continue to support attractive renewal economics across most car types. We also continue to realize benefits from the Wells Fargo Rail acquisition as innovation efforts progress and the combined fleet continue to perform well.

Speaker #2: Year-to-date 2026, GATX delivered diluted earnings per share of $5.19, compared to $4.21 for the same period in 2025. I'll briefly touch on each of our business segments, and then we'll open the line for questions.

Speaker #2: In Rail North America, market conditions remain constructive. Fleet utilization remains high at 98%, and our renewal success rate was strong at 82.6%. The renewal rate change of GATX's lease price index was 16.8%, with an average renewal term of 54 months.

Speaker #2: Leasing fundamentals driven by favorable supply-demand dynamics continued to support attractive renewal economics across most car types. We also continued to realize benefits from the Wells Fargo Rail acquisition, as innovation efforts progressed and the combined fleet continued to perform well.

Speaker #2: Additionally, we continued to successfully place new rail cars from our committed supply agreement with a diverse customer base. We've placed about 9,500 rail cars from our 2022 Trinity supply agreement.

Shari Hellerman: Additionally, we continue to successfully place new rail cars from our committed supply agreement with a diverse customer base. We have placed around 9,500 rail cars from our 2022 Trinity supply agreement. Our earliest available scheduled delivery under this supply agreement is in the Q1 of 2027. We capitalized on strong demand for rail cars in the secondary market during the quarter, resulting in meaningful asset remarketing activity. Our gains on asset dispositions was $67.7 million in the quarter and totaled $117.5 million year to date. Outside North America, GATX Rail Europe delivered a solid performance, achieving 95.3% fleet utilization at quarter end despite challenging economic conditions. At GATX Rail India, demand for railcars remained robust and the fleet was fully utilized.

Speaker #2: Our earliest available scheduled delivery under this supply agreement is in the first quarter of 2027. Recapitalized on strong demand for rail cars in the secondary market during the quarter, resulting in meaningful asset remarketing activity.

Speaker #2: Our gains on asset dispositions were $67.7 million in the quarter, and totaled $117.5 million year-to-date. Outside North America, GATX Rail Europe delivered a solid performance, achieving 95.3% fleet utilization at quarter-end despite challenging economic conditions.

Speaker #2: At GATX Rail India, demand for rail cars remained robust, and the fleet was fully utilized. Rail International's investment volume was approximately $46 million during the quarter.

Shari Hellerman: Rail International's investment volume was approximately $46 million during the quarter, reflecting continuous fleet growth as we took delivery of new cars in Europe and India to meet customer needs. Turning to engine leasing, the segment delivered excellent results in the Q2, supported by favorable market fundamentals and continual air travel trends, which drove strong demand for aircraft spare engines. We also identified attractive investment opportunities through our 50/50 joint venture with Rolls-Royce. Finally, as we noted in the earnings release, we are raising our 2026 earnings guidance to a range of $9.90 to $10.30, reflecting our strong year-to-date performance, healthy leasing fundamentals in the North American rail and engine leasing markets, the benefits from the Wells Fargo Rail acquisition, and the positive outlook for our businesses. With that overview, Jillian, let us open the line for questions.

Speaker #2: Reflecting continued fleet growth, as we took delivery of new cars in Europe and India to meet customer needs. Turning to engine leasing, the segment delivered excellent results in the second quarter.

Speaker #2: Supported by favorable market fundamentals and continued air travel trends, which drove strong demand for aircraft spare engines, we also identified attractive investment opportunities through our 50/50 joint venture with Rolls-Royce.

Speaker #2: Finally, as we noted in the earnings release, we are raising our 2026 earnings guidance to a range of $9.90 to $10.30. This reflects our strong year-to-date performance, healthy leasing fundamentals in the North American rail and engine leasing markets, the benefits from the Wells Fargo Rail acquisition, and the positive outlook for our businesses.

Speaker #2: And with that overview, Jillian, let's open the line for questions.

Speaker #1: We will now begin the question-and-answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again.

Operator 3: We will now begin the question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ben Moore with Citigroup. Ben, your line is open. Please go ahead.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ben Moore with Citigroup. Ben, your line is open. Please go ahead.

Speaker #1: We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device.

Speaker #1: Please stand by while we compile the Q&A roster. Your first question comes from the line of Ben Moore with Citigroup. Ben, your line is open.

Speaker #1: Please go ahead.

Speaker #3: Hi, good morning. Hope you're all doing well. Thanks for taking my questions, and congrats on the beat and raise. The first one I've got is, along with your EPS guide raise, do you plan to give corresponding full-year targets updating from what you gave at the beginning of the year for revenue, remarketing, segment profit, and SG&A?

Ben Moore: Hi, good morning. Hope you're all doing well. Thanks for taking my questions. Congrats on the beat and raise. The first one I've got is, along with your EPS guide raise, do you plan to give corresponding full year targets updating from what you gave at the beginning of the year for revenue remarketing, segment profit, and SG&A?

Speaker #4: Ben, it's Bob Lyons. We don't plan to go through line-by-line like we did at the beginning of the year. What I can tell you is that mid-year, we're essentially very close or slightly above the guidance that we provided almost across the board on line-by-line.

Robert C. Lyons: Ben, it's Bob Lyons. We don't plan to go through line by line like we did at the beginning of the year. What I can tell you is at mid-year, we're essentially very close or slightly above the guidance that we provided almost across the board on line by line. Slightly ahead on remarketing income, slightly ahead on segment profit at Rail North America and at Engine Leasing, and those are really driving the guidance change. If I look whether it's revenue, SG&A, some of the key line items, we're still right where we thought we'd be. The $200 million of remarketing income split $130 between GATX and $70 at the joint venture still is in line with our expectations.

Bob Lyons: Ben, it's Bob Lyons. We don't plan to go through line by line like we did at the beginning of the year. What I can tell you is at mid-year, we're essentially very close or slightly above the guidance that we provided almost across the board on line by line. Slightly ahead on remarketing income, slightly ahead on segment profit at Rail North America and at Engine Leasing, and those are really driving the guidance change. If I look whether it's revenue, SG&A, some of the key line items, we're still right where we thought we'd be. The $200 million of remarketing income split $130 between GATX and $70 at the joint venture still is in line with our expectations.

Speaker #4: Slightly ahead on remarketing income, slightly ahead on segment profit at North American Rail, and at engine leasing. And those are really driving the guidance change.

Speaker #4: But if I look whether it's revenue, SG&A, some of the key line items, we're still right where we thought we'd be. The 200 million of remarketing income split 130 between GATX and 70 at the joint venture still is in line with our expectations.

Speaker #3: Great. Really appreciate that. And regarding your LPI, the 16.8, looks like it's driven by some SAND mix in the quarter. Maybe kind of a two-parter: can you share what LPI would have been without this extra SAND mix?

Ben Moore: Great. Really appreciate that. Regarding your LPI, the 16.8, looks like it's driven by some sand mix in the quarter. Maybe kind of a two-parter. Can you share what LPI would have been without this extra sand mix? Maybe a rough estimate. Then the other is, do you still see high teens, low 20s for the full year?

Speaker #3: Maybe just a rough estimate. And then, the other question is: do you still see high teens or low 20s for the full year?

Speaker #4: So Ben, this is Paul speaking. I'm going to comment just qualitatively on that. As you know, we don't do car-type-specific breakouts in terms of the components of LPI, just as a matter of policy.

Paul F. Titterton: Ben, this is Paul speaking. I'm going to comment just qualitatively on that. As you know, we don't do car type specific breakouts in terms of the components of LPI, just as a matter of policy. Qualitatively, what I'll say is this, when we took on the Wells Fargo portfolio, we knew what the portfolio was. We knew we were getting sand exposure. Really everything going on in sand, first of all, is consistent with our expectations. Beyond that, we did have an outsized remarketing quarter for sand, which explains the impact for that. We will have more sand exposure for the remainder of the year, it's consistent with our expectations, and we valued those sand cars appropriately. While obviously the rates are low, they're not concerning from that standpoint.

Paul Titterton: Ben, this is Paul speaking. I'm going to comment just qualitatively on that. As you know, we don't do car type specific breakouts in terms of the components of LPI, just as a matter of policy. Qualitatively, what I'll say is this, when we took on the Wells Fargo portfolio, we knew what the portfolio was. We knew we were getting sand exposure. Really everything going on in sand, first of all, is consistent with our expectations. Beyond that, we did have an outsized remarketing quarter for sand, which explains the impact for that. We will have more sand exposure for the remainder of the year, it's consistent with our expectations, and we valued those sand cars appropriately. While obviously the rates are low, they're not concerning from that standpoint.

Speaker #4: But qualitatively, what I'll say is this: when we took on the Wells Fargo portfolio, we knew what the portfolio was. We knew we were getting SAND exposure.

Speaker #4: So really, everything going on in SAND, first of all, is consistent with our expectations. But beyond that, we did have an outsized remarketing quarter for SAND, which explains the impact for that.

Speaker #4: We will have more SAND exposure for the remainder of the year. But again, overall, what I'll say is it's consistent with our expectations. And consistent, we valued those SAND cars appropriately.

Speaker #4: So while obviously the rates are low, they're not concerning from that standpoint.

Speaker #5: Yeah. And Ben, it's Bob. I'd add too that there's a bit of an anomaly there because the actual level of renewals, just the pure level of renewals was higher than we anticipated.

Robert C. Lyons: Yeah. Ben, it's Bob. I'd add too that there's a bit of an anomaly there because the actual level of renewals, just the pure level of renewals, was higher than we anticipated. We actually expected to get some of those cars back. When you get them back, they come out of the LPI entirely. We actually renewed more than anticipated, which is a good thing economically for the shareholder, a good thing for P&L long term, but a negative on LPI. A bit of an unusual element to the number this quarter.

Bob Lyons: Yeah. Ben, it's Bob. I'd add too that there's a bit of an anomaly there because the actual level of renewals, just the pure level of renewals, was higher than we anticipated. We actually expected to get some of those cars back. When you get them back, they come out of the LPI entirely. We actually renewed more than anticipated, which is a good thing economically for the shareholder, a good thing for P&L long term, but a negative on LPI. A bit of an unusual element to the number this quarter.

Speaker #5: We actually expected to get some of those cars back. And when you get them back, they come out of the LPI. Entirely. But we actually renewed more than anticipated, which is a good thing.

Speaker #5: Economically, for the shareholder, it's a good thing for P&L long term, but a negative on LPI. So, a bit of an unusual element to the number this quarter.

Speaker #3: Great, thank you for that. We noticed that engine leasing other income, at $13.7 million, stepped up. Can you share what's behind this, and then how we should model this—what the trend should be for this line going forward?

Ben Moore: Great. Thank you for that. We noticed engine leasing other income, that $13.7 million stepped up. Can you share what's behind this and then how we should model this, what the trend should be for this line going forward?

Speaker #4: Yeah. Ben, this is Tom. From time to time, we collect maintenance reserves from customers to ensure that funds are available for required maintenance when those events become necessary.

Thomas A. Ellman: Yeah, Ben, this is Tom. From time to time, we collect maintenance reserves from customers to ensure that funds are available for required maintenance when those events become necessary. If it ever becomes evident that these funds are no longer required for maintenance, they're taken into income. Typically, this happens as part of an end of lease activity. Given the nature of how maintenance reserves releases are recognized, they tend to be lumpy. Q2 happened to be a particularly significant quarter for this type of activity. We wouldn't expect that level to necessarily persist quarter to quarter. Over longer periods of time, it is fairly predictable. This kind of activity regularly happens within the JV portfolio, and we expect it to regularly happen within the wholly owned portfolio as well, but to be a bit lumpy in nature.

Tom Ellman: Yeah, Ben, this is Tom. From time to time, we collect maintenance reserves from customers to ensure that funds are available for required maintenance when those events become necessary. If it ever becomes evident that these funds are no longer required for maintenance, they're taken into income. Typically, this happens as part of an end of lease activity. Given the nature of how maintenance reserves releases are recognized, they tend to be lumpy. Q2 happened to be a particularly significant quarter for this type of activity. We wouldn't expect that level to necessarily persist quarter to quarter. Over longer periods of time, it is fairly predictable. This kind of activity regularly happens within the JV portfolio, and we expect it to regularly happen within the wholly owned portfolio as well, but to be a bit lumpy in nature.

Speaker #4: If it ever becomes evident that these funds are no longer required for maintenance, they're taken into income. Typically, this happens as part of an end-of-lease activity.

Speaker #4: Given the nature of how maintenance reserves releases are recognized, they tend to be lumpy. And Q2 happened to be a particularly significant quarter for this type of activity.

Speaker #4: So we wouldn't expect that level to necessarily persist quarter to quarter. But over longer periods of time, it is fairly predictable. And this kind of activity regularly happens within the JV portfolio.

Speaker #4: And we expect it to regularly happen within the wholly-owned portfolio as well. But to be a bit lumpy in nature.

Speaker #3: Great. Thanks for that, Tom. Last one from me, Rail North America Maintenance Expense. Looks like it stepped up to the 130 handle. Versus before, actually not that much.

Ben Moore: Great. Thanks for that, Tom. Last one from me. Rail North America maintenance expense looks like it stepped up to the 130 handle versus before, not that much, but about a couple of million there, or about $10 million, or $11 million. Can you share a view on how the qualification tests are coming along? What drove the step up? Should we still view it as a 120-ish run rate going forward, or is this the new run rate?

Speaker #3: But about a couple million there. Or about 10, 11 million. Can you share kind of a view on how the qualification tests are coming along?

Speaker #3: What drove the step-up? Should we still view it as a $120 million-ish run rate going forward, or is this the new run rate?

Speaker #4: So Ben, I'll start with some of the numbers, and then I'll let Paul add some color commentary on what he's seeing on the ground.

Thomas A. Ellman: Ben, I'll start with some of the numbers, I'll let Paul add some color commentary on what he's seeing on the ground. As far as the maintenance expense number, we're very much in line with what we expected coming into the year. Coming into the year, we thought it would be in the $500 million range. Year to date, we're at around $250 million, exactly on target. We expect that to be a bit lumpy quarter to quarter. I would look more at the total year type of numbers than I would at what happens in a given quarter.

Tom Ellman: Ben, I'll start with some of the numbers, I'll let Paul add some color commentary on what he's seeing on the ground. As far as the maintenance expense number, we're very much in line with what we expected coming into the year. Coming into the year, we thought it would be in the $500 million range. Year to date, we're at around $250 million, exactly on target. We expect that to be a bit lumpy quarter to quarter. I would look more at the total year type of numbers than I would at what happens in a given quarter.

Speaker #4: So as far as the maintenance expense number, we're very much in line with what we expected coming into the year. Coming into the year, we thought it would be in the 500 million dollar range.

Speaker #4: And year to date, we're at around 250. So exactly on target. We expect that to be a bit lumpy quarter to quarter. So I would look more at the total year type of numbers than I would at what happens in a given quarter.

Speaker #2: Yeah, and this is Paul speaking. I'll just add, from a maintenance demand standpoint and a compliance demand standpoint, the year is really unfolding more or less as we expected.

Paul F. Titterton: This is Paul speaking. I'll just add, from a maintenance demand standpoint and a compliance demand standpoint, the year is really unfolding more or less as we expected. No surprises there. The volume of repair is consistent with what we thought coming in.

Paul Titterton: This is Paul speaking. I'll just add, from a maintenance demand standpoint and a compliance demand standpoint, the year is really unfolding more or less as we expected. No surprises there. The volume of repair is consistent with what we thought coming in.

Speaker #2: So no surprises there. It's the volume of repairs consistent with what we thought coming in.

Speaker #3: Great. Really appreciate that. Thanks again for the time and insights.

Ben Moore: Great. Really appreciate that. Thanks again for the time and insights.

Speaker #1: Your next question comes from the line of Andre Tomchek with Goldman Sachs. Andre, your line is open. Please go ahead.

Operator 3: Your next question comes from the line of Andrzej Tomczyk with Goldman Sachs. Andre, your line is open. Please go ahead.

Operator: Your next question comes from the line of Andrzej Tomczyk with Goldman Sachs. Andre, your line is open. Please go ahead.

Speaker #6: Great. Thanks, operator. Morning, everyone. Thanks for taking my questions. We're just curious to start off on the gains on sale. In the second quarter, I know it hopped up.

Andrzej Tomczyk: Great. Thanks, operator. Morning, everyone. Thanks for taking my questions. Was just curious, to start off on the gains on sale in Q2. I know it hopped up. I'm curious though, because I remember, I think Q1, the JV only saw about $2 million of gains, relative to the $70 million full year target for the JV, I think it was. Any update on sort of what the JV experienced in terms of gains relative to your core business in Q2, and then on that full year target, how you would expect to trend for the JV versus the separate of the JV? Thanks.

Speaker #6: I'm curious, though, because I remember, I think last quarter, the JV only saw about 2 million of gains relative to the 70 million full-year target for the JV, I think it was.

Speaker #6: Any update on sort of what the JV experience in terms of gains relative to your core business in the second quarter? And then on that full-year target, how you would expect to trend for the JV versus the separate of the JV?

Speaker #6: Thanks.

Speaker #4: Yeah. Andre, so you might recall from last quarter, we noted that we expected the first quarter of gains from the JV portfolio to be pretty limited as we focused on integration.

Thomas A. Ellman: Yeah, Andre. You might recall from Q1, we noted that we expected the Q1 of gains from the JV portfolio to be pretty limited as we focused on integration. If you look at what happened in Q2, it's roughly a third of what we expect for the entire year, very much on pace. Our $70 million number, that expectation has not been changed. In contrast, if you look at what's going on in the legacy portfolio, we're definitely running ahead of where we originally anticipated we would, and it's likely that for the full year, we'll be a bit better than that $130 million, and that was one of the things that drove our decision to take up guidance.

Tom Ellman: Yeah, Andre. You might recall from Q1, we noted that we expected the Q1 of gains from the JV portfolio to be pretty limited as we focused on integration. If you look at what happened in Q2, it's roughly a third of what we expect for the entire year, very much on pace. Our $70 million number, that expectation has not been changed. In contrast, if you look at what's going on in the legacy portfolio, we're definitely running ahead of where we originally anticipated we would, and it's likely that for the full year, we'll be a bit better than that $130 million, and that was one of the things that drove our decision to take up guidance.

Speaker #4: So if you look at what happened in the second quarter, it's roughly a third of what we expect for the entire year. So very much on pace.

Speaker #4: And our 70 million dollar number has that expectation has not been changed. In contrast, if you look at what's going on in the legacy portfolio, we're definitely running ahead of where we originally anticipated we would.

Speaker #4: And it's likely that for the full year, we'll be a bit better than that 130 million. And that was one of the things that drove our decision to take up guidance.

Speaker #5: Yeah. And I'll just, to add a couple of numbers around that. If you look at the year-to-date, six-month numbers for net gain on disposition, we're at 118.

Robert C. Lyons: Yeah, I'll just add a couple of numbers around that. If you look at the year to date six-month numbers for net gain on disposition, we're at $118. You can call it $25 of that roughly is the JV. About $95 of that, roughly $94 of that is in the legacy versus the $130 we said coming into the year. Consistent with what Tom said, we're well ahead of where we thought we would be on the legacy portfolio through the first six months, and we'll probably exceed that a little, the $130 a little bit, and then with the JV right in line with what we thought in terms of timing and amount.

Bob Lyons: Yeah, I'll just add a couple of numbers around that. If you look at the year to date six-month numbers for net gain on disposition, we're at $118. You can call it $25 of that roughly is the JV. About $95 of that, roughly $94 of that is in the legacy versus the $130 we said coming into the year. Consistent with what Tom said, we're well ahead of where we thought we would be on the legacy portfolio through the first six months, and we'll probably exceed that a little, the $130 a little bit, and then with the JV right in line with what we thought in terms of timing and amount.

Speaker #5: You can call it $25 million of that, roughly, is the joint venture. And about $95 million of that—roughly $94 million—is in the legacy, versus the $130 million we said coming into the year.

Speaker #5: So, consistent with what Tom said, we're well ahead of where we thought we would be on the legacy portfolio through the first six months.

Speaker #5: We're and we'll probably exceed that a little to 130 a little bit. And then with the joint venture right in line with what we thought in terms of timing and amount.

Speaker #6: Understood. And on the Wells Fargo sort of benefits, the I think 30-cent benefit expectation is what you guys had previously talked about. Is that sort of still the expectation or the run rate you guys are on currently?

Thomas A. Ellman: Understood. On the Wells Fargo sort of benefits, I think $0.30 benefit expectation is what you guys had previously talked about. Is that sort of still the expectation or the run rate you guys are on currently? I just had a question on sort of as you integrate the Wells Fargo fleet into your own, the revenue per active carload, I think will be going down from a mix perspective. How do we think about that going forward and when that sort of normalizes?

Andrzej Tomczyk: Understood. On the Wells Fargo sort of benefits, I think $0.30 benefit expectation is what you guys had previously talked about. Is that sort of still the expectation or the run rate you guys are on currently? I just had a question on sort of as you integrate the Wells Fargo fleet into your own, the revenue per active carload, I think will be going down from a mix perspective. How do we think about that going forward and when that sort of normalizes?

Speaker #6: And then I just had a question on sort of as you integrate the Wells Fargo fleet, into your own, the revenue per active car load, I think, will be going down from a mixed perspective.

Speaker #6: How should we think about that going forward, and when might that normalize?

Speaker #4: Yeah, so let me take the first part of that question. As far as what we expected coming into the year, we thought it would be between about $0.20 and $0.30 of EPS.

Thomas A. Ellman: Yeah. Let me take the first part of that question. As far as what we expected coming into the year, we thought it would be between about $0.20 and $0.30 of EPS. At this point, we definitely believe we will exceed that, and will probably be at least double that number. There's kind of 3 aspects to things driving that contribution. Management fees that we earn, the day-to-day performance of the portfolio, and the remarketing gains. We already talked about the remarketing gains and said that those are likely to come in about where we thought, but we think it's likely that the other 2 aspects of that will be better than anticipated. You may recall that Bob mentioned even before we one day start doing maintenance on our own facilities, we would see opportunities to enjoy

Tom Ellman: Yeah. Let me take the first part of that question. As far as what we expected coming into the year, we thought it would be between about $0.20 and $0.30 of EPS. At this point, we definitely believe we will exceed that, and will probably be at least double that number. There's kind of 3 aspects to things driving that contribution. Management fees that we earn, the day-to-day performance of the portfolio, and the remarketing gains. We already talked about the remarketing gains and said that those are likely to come in about where we thought, but we think it's likely that the other 2 aspects of that will be better than anticipated. You may recall that Bob mentioned even before we one day start doing maintenance on our own facilities, we would see opportunities to enjoy

Speaker #4: And at this point, we definitely believe we will exceed that. And we'll probably be at least double that number. There's kind of three aspects to things driving that contribution.

Speaker #4: Management fees that we earn, that the day-to-day performance of the portfolio and then the remarketing gains. We already talked about the remarketing gains and said that those are likely to come in about where we thought.

Speaker #4: But we think it's likely that the other two aspects of that will be better than anticipated. You may recall that Bob mentioned even before we one day start doing maintenance on our own facilities, we would see opportunities to enjoy benefits as we apply our rigor at looking at third-party maintenance performance.

Robert C. Lyons: benefits as we apply our rigor at looking at third-party maintenance performance. We're seeing that. We're seeing ourselves do a little bit better than anticipated on the day-to-day running of the portfolio. Also, on the potential upside, part of the way management fees are structured for the portfolio that is wholly owned by Brookfield is we have the potential to earn fees for asset sales. Just like the strong secondary market in our legacy portfolio and the JV portfolio, it's a strong market in that side as well. There's the potential to have some upside there. Again, when you translate all of that, we'll probably be at least double what we thought we'd be coming into the year.

Bob Lyons: benefits as we apply our rigor at looking at third-party maintenance performance. We're seeing that. We're seeing ourselves do a little bit better than anticipated on the day-to-day running of the portfolio. Also, on the potential upside, part of the way management fees are structured for the portfolio that is wholly owned by Brookfield is we have the potential to earn fees for asset sales. Just like the strong secondary market in our legacy portfolio and the JV portfolio, it's a strong market in that side as well. There's the potential to have some upside there. Again, when you translate all of that, we'll probably be at least double what we thought we'd be coming into the year.

Speaker #4: And we're seeing that. We're seeing ourselves do a little bit better than anticipated on the day-to-day running of the portfolio. Also, on the potential upside, part of the way management fees are structured for the portfolio that is wholly owned by Brookfield is we have the potential to earn fees for asset sales.

Speaker #4: And just like the strong secondary market and our legacy portfolio and the JV portfolio, it's a strong market in that side as well. And so there's the potential to have some upside there.

Speaker #4: So again, when you translate all of that, we'll probably be at least double what we thought we would be coming into the year.

Speaker #5: And on the your comment or question about revenue or revenue per car, that's one that the only comment I'll make there is a cautionary one, which is it's really difficult to try to glean any consistent trend out of that data point, given that we're selling assets and adding assets the portfolio is very dynamic.

Robert C. Lyons: On your comment or question about revenue or revenue per car, the only comment I'll make there is a cautionary one, which is it's really difficult to try to glean any consistent trend out of that data point, given that we're selling assets and adding assets. The portfolio is very dynamic, not static, so it's changing every single quarter. It also comes back to when assets are sold. If they're sold right at the end of the quarter, if they're sold at the beginning of the quarter, it can have a pretty meaningful impact if you're looking just at revenue per car. Understand the reason for the attention on that number, but I'll just add that note. It can be a little bit difficult to really dig into that one and draw any meaningful conclusion from it on a trend basis.

Bob Lyons: On your comment or question about revenue or revenue per car, the only comment I'll make there is a cautionary one, which is it's really difficult to try to glean any consistent trend out of that data point, given that we're selling assets and adding assets. The portfolio is very dynamic, not static, so it's changing every single quarter. It also comes back to when assets are sold. If they're sold right at the end of the quarter, if they're sold at the beginning of the quarter, it can have a pretty meaningful impact if you're looking just at revenue per car. Understand the reason for the attention on that number, but I'll just add that note. It can be a little bit difficult to really dig into that one and draw any meaningful conclusion from it on a trend basis.

Speaker #5: Not static. So it's changing every single quarter. And it also comes back to when assets are sold. If they're sold right at the end of the quarter, if they're sold at the beginning of the quarter, it can have a pretty meaningful impact if you're looking just at revenue per car.

Speaker #5: So, I understand the reason for the attention on that number, but I'll just add that note: it can be a little bit difficult to really dig into that one and draw any meaningful conclusion from it on a trend basis.

Speaker #3: And I'll just add mix as well affects that. The revenue on a rail car with an OEC of 100,000 dollars is very different than the revenue on a rail car with an OEC of 300,000 dollars.

Paul F. Titterton: I'll just add mix as well affects that. The revenue on a rail car with an OEC of $100,000 is very different than the revenue on a rail car with an OEC of $300,000. Our fleet has a diverse mix, so depending on what's coming in or out of the fleet, you can have a very different revenue per car profile.

Paul Titterton: I'll just add mix as well affects that. The revenue on a rail car with an OEC of $100,000 is very different than the revenue on a rail car with an OEC of $300,000. Our fleet has a diverse mix, so depending on what's coming in or out of the fleet, you can have a very different revenue per car profile.

Speaker #3: And our fleet has a diverse mix. So depending on what's coming in or out of the fleet, you can have a very different revenue per car profile.

Speaker #5: And Andre, finally, on that point, we've mentioned before that when we do asset sales, out of whatever portfolio, we're primarily selling for portfolio optimization purposes.

Robert C. Lyons: Andrzej, finally on that point, we've mentioned before that when we do asset sales out of whatever portfolio, we're primarily selling for portfolio optimization purposes. In other words, the quality of the portfolio that we have remaining is stronger after an asset sale than before. If you simply look at quarter-over-quarter revenue, you're missing the fact that when you sell assets, some of the costs go away as well. One obvious example is ownership costs like depreciation. When you look at the total impact on the portfolio, that's really the way to think about this rather than the revenue line in isolation.

Bob Lyons: Andrzej, finally on that point, we've mentioned before that when we do asset sales out of whatever portfolio, we're primarily selling for portfolio optimization purposes. In other words, the quality of the portfolio that we have remaining is stronger after an asset sale than before. If you simply look at quarter-over-quarter revenue, you're missing the fact that when you sell assets, some of the costs go away as well. One obvious example is ownership costs like depreciation. When you look at the total impact on the portfolio, that's really the way to think about this rather than the revenue line in isolation.

Speaker #5: In other words, the quality of the portfolio that we have remaining is stronger after an asset sale than before. So if you simply look at quarter-over-quarter revenue, you're missing the fact that when you sell assets, some of the costs go away as well.

Speaker #5: One obvious example is ownership costs like depreciation. So, when you look at the total impact on the portfolio, that's really the way to think about this, rather than the revenue line in isolation.

Speaker #6: Very helpful caller. Thanks, guys. Maybe just shifting gears a little bit to Terrace, trying to get some clarity here. From a high-level perspective, our understanding is that some of the Terrace on tank cars at least imported into the US have been reassessed and potentially there's a 25 or 10 to 25 percent tariff on the imported value of those tank cars I'm curious if you guys are hearing that at all from the manufacturers if that's factoring into any of your buying decisions.

Andrzej Tomczyk: Very helpful color. Thanks, guys. Maybe just shifting gears a little bit to tariffs, trying to get some clarity here. From a high level perspective, our understanding is that some of the tariffs on tank cars, at least imported into the US, have been reassessed and potentially there's a 10% to 25% tariff on the imported value of those tank cars. Curious if you guys are hearing that at all from the manufacturers, if that's factoring into any of your buying decisions, and just how to think about that dynamic going forward.

Speaker #6: And just how to think about that dynamic going forward.

Speaker #3: Yeah. So this is Paul speaking. And what I'll say is you're correct about the existence of the section 232 tariffs. What I will say is this.

Paul F. Titterton: Yeah. This is Paul speaking, and what I'll say is, you're correct about the existence of the Section 232 tariffs. What I will say is this, it's a very fluid situation. We, and we've disclosed this previously, contractually as the buyer of railcars, will ultimately be economically responsible to the extent tariffs will be assessed. Having said that, to date, we've had no material impact to GATX from any tariff assessments. Really at this point, because the situation is so fluid, that's all we can really say at this point. I will say this, it's not affecting our investment behavior. Most of the new railcars we're taking today are taken under the supply agreement, and really our investment behavior under the supply agreement has remained consistent.

Paul Titterton: Yeah. This is Paul speaking, and what I'll say is, you're correct about the existence of the Section 232 tariffs. What I will say is this, it's a very fluid situation. We, and we've disclosed this previously, contractually as the buyer of railcars, will ultimately be economically responsible to the extent tariffs will be assessed. Having said that, to date, we've had no material impact to GATX from any tariff assessments. Really at this point, because the situation is so fluid, that's all we can really say at this point. I will say this, it's not affecting our investment behavior. Most of the new railcars we're taking today are taken under the supply agreement, and really our investment behavior under the supply agreement has remained consistent.

Speaker #3: It's a very fluid situation. We and we've disclosed this previously contractually as the buyer of rail cars will ultimately be economically responsible to the extent tariffs will be assessed.

Speaker #3: Having said that, to date, we've had no material impact to GATX from any tariff assessments. And really, at this point, because the situation is so fluid, that's all we can really say at this point.

Speaker #3: I will say this. It's not affecting our investment behavior. Most of the new rail cars we're taking today are taken under the supply agreement.

Speaker #3: And really, our investment behavior under the supply agreement has remained consistent.

Speaker #6: Understood. So even at the margin, your behavior around tank car orders hasn't really been impacted by those changes.

Andrzej Tomczyk: Understood. Even at the margin, your behavior around tank car orders hasn't really been impacted by those changes.

Speaker #3: Not to date, no.

Paul F. Titterton: Not to date, no.

Paul Titterton: Not to date, no.

Speaker #6: Got it. Thank you for that. And then maybe just lastly for me, I'm curious on the ISM positivity of late. I know rail car loading growth has also seen some improvement, especially around X intermodal as well.

Andrzej Tomczyk: Got it. Thank you for that. Maybe just lastly from me, I'm curious on the ISM positivity of late. I know railcar loading growth has also seen some improvement, especially around ex-intermodal as well, maybe some broadening out of the volumes. Does that bode well for sort of lease rates from your perspective? Are there customers saying, Hey, rail volumes are growing again, we're going to start leasing more cars. Sort of what are you hearing from the customer perspective there? Thanks.

Speaker #6: Maybe some broadening out of the volumes. Does that bode well for sort of lease rates from your perspective? Are there customers saying, "Hey, rail volumes are growing again.

Speaker #6: We're going to start leasing more cars." Sort of what are you hearing from the customer perspective there? Thanks.

Speaker #3: Sure. This is Paul again. Yeah, I mean, obviously, we always like to see carloads rising, so certainly, the year-to-date metrics are positive. Really, the areas where we're seeing that are intermodal, agricultural, and chemical—those are kind of the three biggest segment drivers.

Paul F. Titterton: Sure. This is Paul again. Yeah. Obviously, we always like to see car loads rising. Certainly the year-to-date metrics are positive. Really, the areas where we're seeing that are intermodal, agricultural, and chemical. Those are kind of the three biggest segment drivers, and obviously we have a fleet that serves all three of those segments. That is certainly positive. I would say, though, to zoom out for us really, what we've been saying for quite some time now about the supply-led market is really what drives our positivity about the business. The fleet is shrinking, which is a positive for us. The North American fleet is shrinking. If you combine that with rising car loads, that's a fairly good story for us. Ultimately we see as car loads grow, more demand for our fleet, and as the North American fleet shrinks, less supply.

Paul Titterton: Sure. This is Paul again. Yeah. Obviously, we always like to see car loads rising. Certainly the year-to-date metrics are positive. Really, the areas where we're seeing that are intermodal, agricultural, and chemical. Those are kind of the three biggest segment drivers, and obviously we have a fleet that serves all three of those segments. That is certainly positive. I would say, though, to zoom out for us really, what we've been saying for quite some time now about the supply-led market is really what drives our positivity about the business. The fleet is shrinking, which is a positive for us. The North American fleet is shrinking. If you combine that with rising car loads, that's a fairly good story for us. Ultimately we see as car loads grow, more demand for our fleet, and as the North American fleet shrinks, less supply.

Speaker #3: And obviously, we have a fleet that serves all three of those segments. So that is certainly positive. I would say, though, to zoom out for us, really, what we've been saying for quite some time now about the supply-led market is really what drives our positivity about the business.

Speaker #3: The fleet is shrinking. Which is a positive for us, the North American fleet is shrinking. And if you combine that with rising carloads, that's a fairly good story for us.

Speaker #3: And so, ultimately, we see as carloads grow, more demand for our fleet. And as the North American fleet shrinks, there's less supply. So we certainly see that as a supportive dynamic.

Paul F. Titterton: We certainly see that as a supportive dynamic, and I think that's why our pricing and utilization have remained in a fairly attractive place from our standpoint.

Paul Titterton: We certainly see that as a supportive dynamic, and I think that's why our pricing and utilization have remained in a fairly attractive place from our standpoint.

Speaker #3: And I think that's why our pricing and utilization have remained in a fairly attractive place from our standpoint.

Speaker #6: Understood. Thanks for your time, everybody.

Andrzej Tomczyk: Understood. Thanks for the time, everybody.

Speaker #5: Thank you.

Robert C. Lyons: Thank you.

Bob Lyons: Thank you.

Speaker #1: Your next question comes from the line of Brendan McCarthy with Sadote. Brendan, your line is open. Please go ahead.

Operator 3: Your next question comes from the line of Brendan McCarthy with Sidoti. Brendan, your line is open. Please go ahead.

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

Speaker #7: Great. Good morning, everyone. I appreciate you taking my questions here. I just wanted to have a follow-up question on the guidance increase. It looks like you're taking up guidance by $0.30 at the midpoint.

Brendan McCarthy: Great. Good morning, everyone. Appreciate you taking my questions here. Just wanted to have a follow-up question on the guidance increase. It looks like you're taking up guidance $0.30 at the midpoint, but you just mentioned you're potentially expecting maybe double the EPS expectation from the Wells Fargo Rail portfolio, which I guess according to the math, would be roughly an incremental $0.25. Is it fair to think about that $0.30 midpoint increase, is it fair to think about that breakdown as $0.25 coming from the Wells Fargo portfolio and then maybe the remaining $0.05 coming from incremental legacy remarketing income?

Speaker #7: But you just mentioned you're potentially expecting maybe double the EPS expectation from the Wells Fargo rail portfolio, which I guess, according to the math, would be roughly an incremental $0.25.

Speaker #7: So is it fair to think about that 30 cent midpoint increase? Is it fair to think about that breakdown as 25 cents coming from the Wells portfolio and then maybe the remaining 5 cent coming from incremental legacy remarketing income?

Speaker #5: Yeah. So there's obviously a lot of different pieces that are moving here. In directionally, for sure, that is one of the pieces. We also mentioned the possibility for improved asset sales.

Robert C. Lyons: Yeah. There's obviously a lot of different pieces that are moving here, and directionally for sure, that is one of the pieces. We also mentioned the possibility for improved asset sales. Finally, I would note that the engine leasing business may do a bit better than we anticipated as strength continues in that market. We have a few different areas that we could see some benefits, and that's one of the key reasons that you get that range as opposed to a single point.

Bob Lyons: Yeah. There's obviously a lot of different pieces that are moving here, and directionally for sure, that is one of the pieces. We also mentioned the possibility for improved asset sales. Finally, I would note that the engine leasing business may do a bit better than we anticipated as strength continues in that market. We have a few different areas that we could see some benefits, and that's one of the key reasons that you get that range as opposed to a single point.

Speaker #5: And then finally, I would note that the engine leasing business may do a bit better than we anticipated as strength continues in that market.

Speaker #5: So we have a few different areas where we could see some benefits, and that's one of the key reasons you get that range as opposed to a single point.

Speaker #7: Got it. Okay. And on the engine leasing business, it looks like the second quarter saw a nice increase at the JV. What was the breakdown there between remarketing gains and operating gains?

Brendan McCarthy: Got it. Okay. On the engine leasing business, it looks like the Q2 saw a nice increase at the JV. What was the breakdown there between remarketing gains and operating gains?

Speaker #5: Yeah. For year-to-date, we're at about 70% from operating income and 30% from remarketing-type activity. So for the quarter, that mix was more 60/40 with 60 being the operating component.

Thomas A. Ellman: Yeah. For year to date, we're at about 70% from operating income and 30% from remarketing type activity. For the quarter, that mix was more 60/40, with 60% being the operating component. The Q1 we mentioned was very heavy on the operating income, and we expected that to normalize over the course of the year.

Tom Ellman: Yeah. For year to date, we're at about 70% from operating income and 30% from remarketing type activity. For the quarter, that mix was more 60/40, with 60% being the operating component. The Q1 we mentioned was very heavy on the operating income, and we expected that to normalize over the course of the year.

Speaker #5: So the first quarter, we mentioned was very heavy on the operating income. And we expected that to normalize over the course of the year.

Speaker #7: Okay. And how did the internal portfolio perform in the second quarter? And maybe you can touch on the CapEx outlook there. I don't think any engines have been added to the internal portfolio year-to-date.

Brendan McCarthy: Okay. How did the internal portfolio perform in Q2? Maybe you can touch on the CapEx outlook there. I don't think any engines have been added to the internal portfolio year to date. What are your thoughts there for the rest of the year in terms of CapEx?

Speaker #7: But what are your thoughts there for the rest of the year in terms of CapEx?

Speaker #5: Yeah. Brendan, it's Bob. I'll take that one. So yeah, the portfolio wholly owned engines is static. Currently, we have not put into our forecast or into our CapEx plan any addition to that.

Robert C. Lyons: Yeah, Brendan, it's Bob. I'll take that one. Yeah, the portfolio of wholly owned engines is static. Currently, we have not put into our forecast or into our CapEx plan any addition to that. When we did those investments originally, over the course of the prior few years, really going back to the pandemic era, we added those engines at a point in time where it was really an opportunistic purchase, opportunistic acquisition. It made sense for Rolls-Royce, it made sense for GATX, we didn't expect that that would be a steady supply of 10 or 15 engines a year because as things improved, there would be other alternatives for Rolls-Royce in terms of financing those engines with other parties or selling to third parties. We're well over USD 1 billion invested.

Bob Lyons: Yeah, Brendan, it's Bob. I'll take that one. Yeah, the portfolio of wholly owned engines is static. Currently, we have not put into our forecast or into our CapEx plan any addition to that. When we did those investments originally, over the course of the prior few years, really going back to the pandemic era, we added those engines at a point in time where it was really an opportunistic purchase, opportunistic acquisition. It made sense for Rolls-Royce, it made sense for GATX, we didn't expect that that would be a steady supply of 10 or 15 engines a year because as things improved, there would be other alternatives for Rolls-Royce in terms of financing those engines with other parties or selling to third parties. We're well over USD 1 billion invested.

Speaker #5: When we made those investments originally, over the course of the prior few years—really going back to the pandemic era—we added those engines at a point in time when it was really an opportunistic purchase, an opportunistic acquisition.

Speaker #5: It made sense for Rolls-Royce. It made sense for GATX. But we didn't expect that would be a steady supply of 10 or 15 engines a year, because as things improved, there would be other alternatives for Rolls-Royce in terms of financing those engines.

Speaker #5: With other parties or selling to third parties. So we're well over $1 billion invested. Those are going to be great, very strong, high-return assets for GATX for a long time.

Robert C. Lyons: Those are going to be great, very strong, high return assets for GATX for a long time. There may be opportunities, kind of spot opportunities to add to the portfolio, there's no programmatic outlook for that. We haven't factored any of that into our guidance or CapEx plans for the year.

Bob Lyons: Those are going to be great, very strong, high return assets for GATX for a long time. There may be opportunities, kind of spot opportunities to add to the portfolio, there's no programmatic outlook for that. We haven't factored any of that into our guidance or CapEx plans for the year.

Speaker #5: There may be opportunities. It's kind of spot opportunities to add to the portfolio. But there's no programmatic outlook for that. So I wouldn't we haven't factored that in any of that into our guidance or CapEx plan for the year.

Speaker #7: Understood. I appreciate the detail. This last question for me on the LPI. And I'm not sure if you're able to provide this level of detail, but just maybe under the assumption that you renew roughly 10,000 rail cars per quarter, can you give us an idea of the magnitude of the sand service rail car renewal during the quarter?

Brendan McCarthy: Understood. I appreciate the detail. Just last question from me on the LPI, I'm not sure if you're able to provide this level of detail, just maybe under the assumption that you renew roughly 10,000 railcars per quarter, can you give us an idea of the magnitude of the sand service railcar renewal during the quarter? Maybe how much of that total composition for the quarter was made up of the sand cars?

Speaker #7: And maybe how much of that total composition for the quarter was made up of the sand cars?

Speaker #5: Yeah. This is Paul speaking. Unfortunately,

Paul F. Titterton: Yeah. This is Paul speaking. Unfortunately, we don't, as a matter of policy, disclose car type specific breakdowns. What we can tell you was Q2 was a significantly outsized quarter for sand car renewals. To reiterate the point that Bob made, that was actually a positive thing from our standpoint because we achieved higher renewal success than we thought. As you know, it is generally optimal for us to keep cars in service with the same customer versus to take them back. We sort of deliberately did something that was in the short run harmful to LPI, but in the long term favorable to economics. When we took over the Wells fleet, and again, this was all priced in, we knew what we were getting.

Paul Titterton: Yeah. This is Paul speaking. Unfortunately, we don't, as a matter of policy, disclose car type specific breakdowns. What we can tell you was Q2 was a significantly outsized quarter for sand car renewals. To reiterate the point that Bob made, that was actually a positive thing from our standpoint because we achieved higher renewal success than we thought. As you know, it is generally optimal for us to keep cars in service with the same customer versus to take them back. We sort of deliberately did something that was in the short run harmful to LPI, but in the long term favorable to economics. When we took over the Wells fleet, and again, this was all priced in, we knew what we were getting.

Speaker #3: we don't as a matter of policy disclose car-type specific breakdowns. What we can tell you was second quarter was a significantly outsized quarter for sand car renewals.

Speaker #3: And to reiterate the point that Bob made, that was actually a positive thing from our standpoint because we achieved higher renewal success than we thought.

Speaker #3: And as you know, it is generally optimal for us to keep cars in service with the same customer, rather than take them back. So we deliberately did something that was, in the short run, harmful to LPI, but in the long term, favorable to economics.

Speaker #3: When we took over the Wells fleet and again, this was all priced in. We knew what we were getting. We knew we were taking a large sand car fleet.

Paul F. Titterton: We knew we were taking a large sand car fleet. We also knew that the exposure in 2026 was going to be significant. All of this is expected, it certainly has the effect that it has on the LPI.

Paul Titterton: We knew we were taking a large sand car fleet. We also knew that the exposure in 2026 was going to be significant. All of this is expected, it certainly has the effect that it has on the LPI.

Speaker #3: And we also knew that the exposure in 2026 was going to be significant, so all of this is expected. But it certainly has the effect that it has on the LPI.

Speaker #5: Yeah, Brendan, it's Bob. Totally understand your question, and trying to get as granular as you possibly can. I would just note we're in a very competitive marketplace.

Robert C. Lyons: Yeah, Brendan, it's Bob. Totally understand your question, trying to get as granular as you possibly can. I would just note, we're in a very competitive marketplace. I can guarantee you our competitors are all listening to this call right now. They would be thrilled to know what our renewal schedule looks like over the course of the next few quarters by car type, as we would to know what theirs is. There is some limit on what we're kind of willing to provide publicly.

Bob Lyons: Yeah, Brendan, it's Bob. Totally understand your question, trying to get as granular as you possibly can. I would just note, we're in a very competitive marketplace. I can guarantee you our competitors are all listening to this call right now. They would be thrilled to know what our renewal schedule looks like over the course of the next few quarters by car type, as we would to know what theirs is. There is some limit on what we're kind of willing to provide publicly.

Speaker #5: And I can guarantee you our competitors are all listening to this call right now. And they would be thrilled to know what our renewal schedule looks like over the course of the next few quarters by car type.

Speaker #5: As we would want to know what theirs is. But there is some limit on what we're kind of willing to provide publicly.

Speaker #7: Understood there. Thanks, Bob. Thanks, Paul. That's all from me.

Brendan McCarthy: Understood there. Thanks, Bob. That's all from me.

Speaker #5: Yep. Thank you, Brendan.

Robert C. Lyons: Yep. Thank you, Brendan.

Bob Lyons: Yep. Thank you, Brendan.

Speaker #1: Your next question comes from the line of Harrison Bauer with Susquehanna. Harrison, your line is open. Please go ahead.

Operator 3: Your next question comes from the line of Harrison Bauer with Susquehanna. Harrison, your line is open. Please go ahead.

Operator: Your next question comes from the line of Harrison Bauer with Susquehanna. Harrison, your line is open. Please go ahead.

Speaker #2: Great. Thank you for taking my questions today. Some follow-ups first on some of the renewals. Any color that you're able to provide on LPI in terms of legacy Verswells, if you can't provide anything specific to sand?

Harrison Bauer: Great. Thank you for taking my questions today. Some follow-ups first on some of the renewals. Any color that you're able to provide on LPI in terms of legacy versus Wells, if you can't provide anything specific to sand? Any color around the average renewal term has continued to inch down really throughout the last two years or so. Anything to read on that or how you're approaching length of term in some of your contract renewals?

Speaker #2: And then any color around the average renewal term has continued to inch down, really throughout the last two years or so? Anything to read on that or how you're approaching length of term and some of your contract renewals?

Speaker #5: Yeah, I'll start with the length of term. Anything up in that 50- to 60-month range is a very good spot for GATX to be in.

Robert C. Lyons: Well, I'll start with the length of term. Anything up in that 50, 60 month range is a very good spot for GATX to be in. Again, that number can move around quarter to quarter quite a bit based on, or somewhat based on the types of cars that are getting renewed and where things are from a competitive standpoint, dialogue with our customers, what have you. While it has trended down a little bit, that's certainly not anything of great concern to me or to our team. From a commercial perspective, we're still lacking in term and lacking in very good long-term cash flow.

Bob Lyons: Well, I'll start with the length of term. Anything up in that 50, 60 month range is a very good spot for GATX to be in. Again, that number can move around quarter to quarter quite a bit based on, or somewhat based on the types of cars that are getting renewed and where things are from a competitive standpoint, dialogue with our customers, what have you. While it has trended down a little bit, that's certainly not anything of great concern to me or to our team. From a commercial perspective, we're still lacking in term and lacking in very good long-term cash flow.

Speaker #5: Again, that number can move around quarter to quarter quite a bit based on or somewhat based on the types of cars that are getting renewed and where things are from a competitive standpoint.

Speaker #5: Dialogue with our customers, what have you. So while it has trended down a little bit, that's certainly not anything of great concern to me or to our team.

Speaker #5: And from a commercial perspective, we're still at a point where lease rates as we've talked about in prior quarters, while they have leveled off, they've done so at a relatively attractive point.

Speaker #5: So we're still locking in term and locking in very good, long-term cash flow.

Speaker #3: And then in terms of the LPI breakdown between legacy and the Wells Fargo portfolio, we mentioned previously that we're running this as a single integrated portfolio.

Paul F. Titterton: In terms of the LPI breakdown between legacy and the Wells Fargo portfolio, we mentioned previously that we're running this as a single integrated portfolio. That's what our customers expect. That's what our JV partner expects. No, we're not breaking out the LPI between those two.

Paul Titterton: In terms of the LPI breakdown between legacy and the Wells Fargo portfolio, we mentioned previously that we're running this as a single integrated portfolio. That's what our customers expect. That's what our JV partner expects. No, we're not breaking out the LPI between those two.

Speaker #3: That's what our customers expect. That's what our JV partner expects. So no, we're not breaking out the LPI between those two.

Speaker #2: Understood on that. Maybe a little bit more thoughts I'd love to hear with regards to your approach on fleet growth over time. Obviously, the Wells fleet can't add any rail cars, but during the second quarter, it looks like you took out a little bit more than 4,000 rail cars to overall North American service.

Harrison Bauer: Understood on that. Maybe a little bit more thoughts I'd love to hear with regards to your approach on fleet growth over time. Obviously, the Wells fleet can't add any rail cars, but during Q2, looks like you took out a little bit more than 4,000 rail cars to overall North American service. What's the right level of attrition we should be expecting in that fleet over time into maybe next year? What would you need to see in the market in order to inflect and start actually regrowing your fleet again?

Speaker #2: What's the right level of attrition we should be expecting in that fleet over time into maybe next year? And what would you need to see in the market in order to inflect and start actually regrowing your fleet again?

Speaker #5: Yeah, it's Bob. I'll cover the first point of that question, which is kind of overall fleet size, and just share with you a little bit of our philosophy, which is we don't really focus intently on whether we have 200,000 cars one quarter, or 198,000 the next, or 201,000 the following quarter.

Robert C. Lyons: Yeah, it's Bob. I'll cover the first point of that question, which is kind of overall fleet size, and just share with you a little bit of our philosophy, which is we don't really focus intently on whether we have 200,000 cars one quarter or 198,000 the next, or 201,000 a following quarter. We have massive scale in this business. We had it before Wells, we have it after Wells, 2x. You need scale in this business for sure to run our maintenance facilities efficiently, to have very good commercial presence in the market. Having the size fleet we have gives us all of that. Whether we have 200 or 198 in a given quarter, it's not a focal point of ours. What is a focal point of ours is optimizing the portfolio, through remarketing, through smart, disciplined investment in adding cars of very specific types.

Bob Lyons: Yeah, it's Bob. I'll cover the first point of that question, which is kind of overall fleet size, and just share with you a little bit of our philosophy, which is we don't really focus intently on whether we have 200,000 cars one quarter or 198,000 the next, or 201,000 a following quarter. We have massive scale in this business. We had it before Wells, we have it after Wells, 2x. You need scale in this business for sure to run our maintenance facilities efficiently, to have very good commercial presence in the market. Having the size fleet we have gives us all of that. Whether we have 200 or 198 in a given quarter, it's not a focal point of ours. What is a focal point of ours is optimizing the portfolio, through remarketing, through smart, disciplined investment in adding cars of very specific types.

Speaker #5: We have massive scale in this business. We had it before Wells. We have it after Wells 2X. And you need scale in this business for sure.

Speaker #5: To run our maintenance facilities efficiently, to have very good commercial presence in the market. So having the size fleet we have gives us all of that.

Speaker #5: So, whether we have 200 or 198 in a given quarter, it's not a focal point of ours. What is a focal point of ours is optimizing the portfolio.

Speaker #5: Through remarketing, through smart disciplined investment, and adding cars of very specific types so if it makes sense for us in a given quarter like it did this quarter, where we had really robust remarketing activity, incredible demand from a lot of different potential buyers in the secondary market, we'll sell down more.

Robert C. Lyons: If it makes sense for us in a given quarter, like it did this quarter, where we had really robust remarketing activity, incredible demand from a lot of different potential buyers in the secondary market, we'll sell down more. That's perfectly fine. It's the right thing to do for the shareholder. It's the right thing to do for the business. I'll let Paul comment a little bit more about what we would need to see for us to really kind of turn up the North American rail investment volume.

Bob Lyons: If it makes sense for us in a given quarter, like it did this quarter, where we had really robust remarketing activity, incredible demand from a lot of different potential buyers in the secondary market, we'll sell down more. That's perfectly fine. It's the right thing to do for the shareholder. It's the right thing to do for the business. I'll let Paul comment a little bit more about what we would need to see for us to really kind of turn up the North American rail investment volume.

Speaker #5: That's perfectly fine. It's the right thing to do for the shareholder. It's the right thing to do for the business. And I'll let Paul comment a little bit more about what we would need to see for us to really kind of turn up the North American rail investment volume.

Speaker #3: Yeah. Thanks, Bob. And really, ultimately, as Bob said, we're economic actors. And so we will add to our investments if and when pricing, whether that's in the secondary market as a buyer or in the new car market as a buyer, when pricing makes sense.

Paul F. Titterton: Yeah, thanks, Bob. Really ultimately, as Bob said, we're economic actors, we will add to our investments if and when pricing, whether that's in the secondary market as a buyer or in the new car market as a buyer, when pricing makes sense. That's going to be a combination of what we're paying for the assets, what it costs us to finance them, but also what the market will offer from a demand standpoint. Right now, it's been attractive to us to sell into the market on a net basis. Again, we're going to continue to be economic actors and we'll turn up the investment side of things as and when we see demand characteristics that support investment at current prices.

Paul Titterton: Yeah, thanks, Bob. Really ultimately, as Bob said, we're economic actors, we will add to our investments if and when pricing, whether that's in the secondary market as a buyer or in the new car market as a buyer, when pricing makes sense. That's going to be a combination of what we're paying for the assets, what it costs us to finance them, but also what the market will offer from a demand standpoint. Right now, it's been attractive to us to sell into the market on a net basis. Again, we're going to continue to be economic actors and we'll turn up the investment side of things as and when we see demand characteristics that support investment at current prices.

Speaker #3: And so that's going to be a combination of what we're paying for the assets, what it costs us to finance them, but also what the market will offer from a demand standpoint.

Speaker #3: And so right now, it's been attractive to us to sell into the market on a net basis. And again, we're going to continue to be economic actors and we'll turn up the investment side of things as and when we see demand characteristics that support investment at current prices.

Speaker #2: Great. Thank you all for all the color there. Maybe just a quick point of clarification. Has there been any transaction between the legacy fleet and the JV fleet?

Harrison Bauer: Great. Thank you all for all the color there. Maybe just a quick point of clarification. Has there been any transactions between the legacy fleet and the JV fleet? If that's something that we should expect the possibility of going forward, if it makes sense, I know you're approaching managing as a whole portfolio, but curious if that's something we could see.

Speaker #2: And if that's something that we should expect the possibility of going forward, if it makes sense to be—and I know you're approaching managing as a whole portfolio—but I'm curious if that's something we could see.

Speaker #5: No. There's no purchasing of cars from GATX at 100% level from the joint venture. And wouldn't anticipate that to be the case. If there is opportunities in the future where that might make sense, we'll certainly call that out for you all.

Robert C. Lyons: No, there's no purchasing of cars from GATX at 100% level from the joint venture, wouldn't anticipate that to be the case. If there is opportunities in the future where that might make sense, we'll certainly call that out for you all. Nothing today, nothing expected.

Bob Lyons: No, there's no purchasing of cars from GATX at 100% level from the joint venture, wouldn't anticipate that to be the case. If there is opportunities in the future where that might make sense, we'll certainly call that out for you all. Nothing today, nothing expected.

Speaker #5: But nothing to date, and nothing expected.

Speaker #2: Okay, thank you. And last one from me. I'm just curious if you have—or when investors would have—visibility on re-upping your long-term supply agreement, and if there's any color you're able to give about how you're thinking about that in terms of the long-term context of your fleet management.

Harrison Bauer: Okay, thank you. Last one for me. I'm just curious if you have, or when investors would have visibility on re-upping your long-term supply agreement, any color you're able to give about how you're thinking about that in terms of the long-term context of your fleet management. Thank you.

Speaker #2: Thank you.

Speaker #3: Sure. This is Paul speaking. What I'll say is that, for obvious reasons, we can't comment specifically on what our plans will be to re-up or not.

Paul F. Titterton: Sure. This is Paul speaking, what I'll say is, for obvious reasons, we can't comment specifically on what our plans will be to re-up or not. What I can say is, as we've said for many years, having a long-term supply agreement in place is a key pillar of our sourcing strategy. It's how we meet the needs of our core customers year after year. You can expect over the long run, we're going to continue to, in one form or another, have a long-term sourcing agreement or agreements in place. Really, the timing of those will depend on a number of different factors. Certainly, it remains a core pillar of what we do.

Paul Titterton: Sure. This is Paul speaking, what I'll say is, for obvious reasons, we can't comment specifically on what our plans will be to re-up or not. What I can say is, as we've said for many years, having a long-term supply agreement in place is a key pillar of our sourcing strategy. It's how we meet the needs of our core customers year after year. You can expect over the long run, we're going to continue to, in one form or another, have a long-term sourcing agreement or agreements in place. Really, the timing of those will depend on a number of different factors. Certainly, it remains a core pillar of what we do.

Speaker #3: But what I can say is, as we've said for many, many years, having a long-term supply agreement in place is a key pillar of our sourcing strategy.

Speaker #3: It's how we meet the needs of our core customers year after year. And so you can expect, over the long run, we're going to continue to, in one form or another, have a long-term sourcing agreement or agreements in place.

Speaker #3: And really, the timing of those will depend on a number of different factors. But certainly, it remains a core pillar of what we do.

Speaker #2: Okay. Great. Thank you all for the time today.

Harrison Bauer: Okay, great. Thank you all for the time today.

Speaker #5: Thank you.

Robert C. Lyons: Thank you.

Bob Lyons: Thank you.

Speaker #1: Your next question comes from the line of Justin Bergner with Gabelli Funds. Justin, your line is open. Please go ahead.

Operator 3: Your next question comes from the line of Justin Bergner with Gabelli Funds. Justin, your line is open. Please go ahead.

Operator: Your next question comes from the line of Justin Bergner with Gabelli Funds. Justin, your line is open. Please go ahead.

Speaker #4: Oh, good morning, Bob, Tom, Paul, and Sherry.

Justin Bergner: Good morning, Bob, Tom, Paul, and Shari.

Speaker #5: Morning.

Robert C. Lyons: Morning.

Bob Lyons: Morning.

Speaker #3: Morning.

Robert C. Lyons: Morning.

Tom Ellman: Morning.

Speaker #4: It looks like a pretty good second quarter on top of a pretty good first quarter, so nice work. First question would be, as it relates to the guidance, is there anything that's a headwind to where you started the year?

Justin Bergner: Looks like a pretty good Q2 on top of pretty good Q1. Nice work. First question would be, as it relates to the guidance, is there anything that's a headwind to where you started the year? I know you mentioned you're satisfied with how you're performing in Europe in a tough environment, is the tough environment a potential headwind to your revised guide?

Speaker #4: I know you mentioned your satisfied with how you're performing in Europe in a tough environment, but is the tough environment a potential headwind to your revised guide?

Speaker #5: No. On the international side, yeah, we came into the year and we had expected our total segment profit on the international side to be somewhere in the range of $130 million or so.

Robert C. Lyons: No, on the international side, we came into the year, we had expected our total segment profit on the international side to be somewhere in the range of $130 or so. We may run a little light of that. Even if we do, from a magnitude standpoint, it's not enough to really change our view on the guidance. It is a challenging market in Europe. It has been for the last few years, really since the war in Ukraine started. There's been more economic headwinds there than tailwinds, the team is performing extremely well. They've done really well in terms of keeping cars on lease, moving utilization up, getting price increases, albeit not at the level seen in North America, still, given the environment, that's an excellent performance. Not an issue in terms of the guidance that we gave for the year.

Bob Lyons: No, on the international side, we came into the year, we had expected our total segment profit on the international side to be somewhere in the range of $130 or so. We may run a little light of that. Even if we do, from a magnitude standpoint, it's not enough to really change our view on the guidance. It is a challenging market in Europe. It has been for the last few years, really since the war in Ukraine started. There's been more economic headwinds there than tailwinds, the team is performing extremely well. They've done really well in terms of keeping cars on lease, moving utilization up, getting price increases, albeit not at the level seen in North America, still, given the environment, that's an excellent performance. Not an issue in terms of the guidance that we gave for the year.

Speaker #5: We may run a little light on that, but even if we do, from a magnitude standpoint, it's not enough to really change our view on the guidance.

Speaker #5: It is a challenging market in Europe. It has been for the last few years, really, since the war in Ukraine started. There have been more economic headwinds there than tailwinds, but the team is performing extremely well.

Speaker #5: They've done really well in terms of keeping cars on lease, moving utilization up, getting price increases albeit not at the level seen in North America, but still given the environment, that's an excellent performance.

Speaker #5: So, not an issue in terms of the guidance that we gave for the year.

Speaker #6: Hey, Justin, if you changed your question slightly and instead of talking about headwinds, you talked about areas of uncertainty or variability, we would just reiterate what we said at the beginning of the year, which is, first and foremost, obviously, the situation in the world is a little bit uncertain.

Paul F. Titterton: Hey, Justin, if you changed your question slightly, instead of talking about headwind, you talked about areas of uncertainty or variability, we just reiterate what we said at the beginning of the year, which is, first and foremost, obviously, the situation in the world is a little bit uncertain. One of the areas that we look at for sure is how that impacts us broadly, specifically the global aviation market. We also note repeatedly the timing of closing remarketing gains, whether it's in the rail portfolio or the engine leasing portfolio, is not always certain. We're very certain on the strength of it, calling the exact quarter can be a bit challenging.

Paul Titterton: Hey, Justin, if you changed your question slightly, instead of talking about headwind, you talked about areas of uncertainty or variability, we just reiterate what we said at the beginning of the year, which is, first and foremost, obviously, the situation in the world is a little bit uncertain. One of the areas that we look at for sure is how that impacts us broadly, specifically the global aviation market. We also note repeatedly the timing of closing remarketing gains, whether it's in the rail portfolio or the engine leasing portfolio, is not always certain. We're very certain on the strength of it, calling the exact quarter can be a bit challenging.

Speaker #6: And one of the areas that we look at, for sure, is how that impacts us broadly, but specifically the global aviation market. We also note repeatedly that the timing of closing remarketing gains, whether it's in the rail portfolio or the engine leasing portfolio, is not always certain.

Speaker #6: We're very certain of the strength of it, but calling the exact quarter can be a bit challenging.

Speaker #4: Okay. That's helpful color. Thank you. With respect to the other income in the engine leasing business of 13.7 million, which I think followed 3.1 million in the first quarter, I mean, you mentioned that's normal in the course of ordinary course of business.

Justin Bergner: Okay, that's helpful color. Thank you. With respect to the other income in the engine leasing business of $13.7 million, which I think followed $3.1 million in Q1, you mentioned that's normal in the ordinary course of business. Should I think of these income as sort of reflecting multiple years of service-related work that's kind of releasing in one or two quarters? Or should I think of the H1 rate as being somewhat indicative of what could be achieved annually going forward in that part of the financials?

Speaker #4: But should I think of these income as sort of reflecting multiple years of service-related reserve service-related work that's kind of releasing in one or two quarters?

Speaker #4: Or should I think of the first half rate as being somewhat indicative of what could be achieved annually going forward in that part of the financials?

Speaker #6: Yeah. So I'll start in let Bob add on if he'd like to. But what I would tell you is you should not think of what happened in the quarter as a run rate, just because it's very difficult to predict.

Thomas A. Ellman: Yeah. I'll start and let Bob add on if he'd like to. What I would tell you is you should not think of what happened in the quarter as a run rate, just because it's very difficult to predict exactly the timing of those events. It is absolutely true that the idea behind those maintenance reserves is that the cash is available if needed for maintenance. It's difficult to precisely say what that means in terms of the long-term life of the engine, because as noted, that primarily happens at the end of lease activity. The degree to which that influences or does not influence the profitability of the engine over its whole life is somewhat dependent on the next lease you put it on, which likely will also have maintenance reserves.

Tom Ellman: Yeah. I'll start and let Bob add on if he'd like to. What I would tell you is you should not think of what happened in the quarter as a run rate, just because it's very difficult to predict exactly the timing of those events. It is absolutely true that the idea behind those maintenance reserves is that the cash is available if needed for maintenance. It's difficult to precisely say what that means in terms of the long-term life of the engine, because as noted, that primarily happens at the end of lease activity. The degree to which that influences or does not influence the profitability of the engine over its whole life is somewhat dependent on the next lease you put it on, which likely will also have maintenance reserves.

Speaker #6: Exactly—the timing of those events. It is absolutely true that the idea behind those maintenance reserves is that the cash is available if needed for maintenance.

Speaker #6: It's difficult to say precisely what that means in terms of the long-term life of the engine, because, as noted, that primarily happens at the end-of-lease activity.

Speaker #6: And the degree to which that influences or does not influence the profitability of the engine over its whole life is somewhat dependent on the next lease you put it on, which likely will also have maintenance reserves.

Speaker #5: And Justin, I just had—part of this relates to the size of the portfolio you have. In the joint venture, we have 450-plus engines.

Robert C. Lyons: Justin, I'd just add, part of this relates to the size of the portfolio you have. In the joint venture, we have 450-plus engines. Maintenance reserves happen all the time, every single quarter. With a portfolio that size, it does tend to smooth out. Our portfolio of wholly owned engines is much smaller, things, when they occur, they'll likely be a little lumpier. We've been in, whether it's aircraft or aircraft engines, the leasing business since 1968. Maintenance reserves have been part of that program, part of those businesses ever since. They're the norm in the industry.

Bob Lyons: Justin, I'd just add, part of this relates to the size of the portfolio you have. In the joint venture, we have 450-plus engines. Maintenance reserves happen all the time, every single quarter. With a portfolio that size, it does tend to smooth out. Our portfolio of wholly owned engines is much smaller, things, when they occur, they'll likely be a little lumpier. We've been in, whether it's aircraft or aircraft engines, the leasing business since 1968. Maintenance reserves have been part of that program, part of those businesses ever since. They're the norm in the industry.

Speaker #5: Maintenance reserves happen all the time every single quarter. And with a portfolio that size, it does tend to smooth out. Our portfolio of wholly owned engines is much smaller.

Speaker #5: So, when things occur, they'll likely be a little lumpier. But we've been in, whether it's aircraft or aircraft engines, the leasing business since 1968.

Speaker #5: And maintenance reserves have been part of that program ever part of those businesses ever since. They're the norm in the industry.

Speaker #4: Sure. Great. It seems like that was part of the anticipated guidance, so nothing is changing there materially, right?

Justin Bergner: Sure. Great. It seems like that was part of the anticipated guidance, nothing changing there materially, right?

Speaker #5: Correct. Right.

Robert C. Lyons: Correct. Right.

Bob Lyons: Correct. Right.

Speaker #4: Okay. And then lastly, your renewal rate for the second quarter stands out, and obviously, that's great for the business. How does that tie into any sort of further tightening you may be seeing in the industry, potential modest inflection in sequential spot lease rates, or any other dynamics as the truck tightness filters through to railcar loads and potentially the lease business?

Justin Bergner: Okay. Lastly, your renewal rate for the Q2 stands out, and obviously that's great for the business. How does that tie into any sort of further tightening you may be seeing in the industry, potential modest inflection in sequential spot lease rates or any other dynamics as the truck tightness filters through to railcar loads and potentially the lease business?

Speaker #6: Yeah, thanks, Justin. This is Paul. And yeah, I think you're correct to identify positive factors in the North American rail market. Obviously, carloads are up.

Paul F. Titterton: Yeah. Thanks, Justin. This is Paul. Yeah, I think you're correct to identify positive factors in the North American rail market. Obviously, railcar loads are up. Obviously, there are a number of reasons for tightening of trucking. Those are certainly tailwinds for us. Obviously, it's difficult to predict, particularly with both truck capacity and railcar loads, exactly what direction they take from here. There's certainly uncertainty, but we do view those favorably. As I also mentioned, we always look at the composition of the overall North American railcar fleet, for all owners, and that, as we've said, has continued to shrink. Really what I would say is the reason we feel positively about the leasing environment in North America generally is kind of the combination of those things.

Paul Titterton: Yeah. Thanks, Justin. This is Paul. Yeah, I think you're correct to identify positive factors in the North American rail market. Obviously, railcar loads are up. Obviously, there are a number of reasons for tightening of trucking. Those are certainly tailwinds for us. Obviously, it's difficult to predict, particularly with both truck capacity and railcar loads, exactly what direction they take from here. There's certainly uncertainty, but we do view those favorably. As I also mentioned, we always look at the composition of the overall North American railcar fleet, for all owners, and that, as we've said, has continued to shrink. Really what I would say is the reason we feel positively about the leasing environment in North America generally is kind of the combination of those things.

Speaker #6: Obviously, there are a number of reasons for tightening of trucking, so those are certainly tailwinds for us. Obviously, it's difficult to predict, particularly with both truck capacity and carloads, exactly what direction they take from here.

Speaker #6: There's certainly uncertainty. But we do view those favorably. As I also mentioned, we always look at the composition of the overall North American rail fleet.

Speaker #6: For all owners, and that, as we've said, has continued to shrink. And so really what I would say is the reason we feel positively about the leasing environment in North America generally is kind of the combination of those things.

Speaker #6: There are reasons to believe that car loads will car loads have risen. And as you pointed out, truck capacity has tightened. We've watched the overall North American fleet shrink.

Paul F. Titterton: There are reasons to believe that railcar loads have risen, and as you pointed out, truck capacity has tightened. We've watched the overall North American railcar fleet shrink. I would say overall, we see reasons to feel confident, certainly about a firm lease rate environment and a firm utilization environment, as we've been talking about. Again, there's economic uncertainty, so I hesitate to call an inflection point as you're describing. Certainly I would reiterate that we feel positively about the commercial environment which we're operating in North America.

Paul Titterton: There are reasons to believe that railcar loads have risen, and as you pointed out, truck capacity has tightened. We've watched the overall North American railcar fleet shrink. I would say overall, we see reasons to feel confident, certainly about a firm lease rate environment and a firm utilization environment, as we've been talking about. Again, there's economic uncertainty, so I hesitate to call an inflection point as you're describing. Certainly I would reiterate that we feel positively about the commercial environment which we're operating in North America.

Speaker #6: And so I would say overall, we see reasons to feel confident, certainly about a firm lease rate environment and a firm utilization environment as we've been talking about.

Speaker #6: Again, there's economic uncertainty. So I hesitate to call an inflection point as you're describing. But certainly, I would reiterate that we feel positively about the commercial environment, which we're operating in North America.

Speaker #4: Great. Thank you for taking my questions.

Justin Bergner: Great. Thank you for taking my questions.

Speaker #5: Thank you.

Robert C. Lyons: Thank you.

Bob Lyons: Thank you.

Speaker #1: Your next question comes from the line of Scott Scher with LMJ Capital. Scott, your line is open. Please go ahead.

Operator 3: Your next question comes from the line of Scott Sher with LMJ Capital. Scott, your line is open. Please go ahead.

Operator: Your next question comes from the line of Scott Sher with LMJ Capital. Scott, your line is open. Please go ahead.

Speaker #7: Hey, guys. A couple of questions. Can you comment on the fact that you pull forward your purchase of the incremental 10%, I guess it was, or 7%, whatever it was, your option?

Scott Sher: Hey, guys. A couple questions. Can you comment on the fact that you pulled forward your purchase of the incremental 10%, I guess it was, or 7%, whatever it was, your option, you exercised it early. Can you comment on that and the message that is sending with respect to your optimism about the Wells Fargo deal? Then I have one or two follow-ups. Thank you.

Speaker #7: You exercised it early. Can you comment on that in the message you're sending, with respect to your optimism about the Wells Fargo deal?

Speaker #7: And then I have one or two follow-ups. Thank you.

Speaker #5: So I'll just speak factually on it, and then let Bob add anything. We did not pull forward. The first option was set at June 30.

Paul F. Titterton: I'll just speak factually on it and then let Bob add on anything. We did not pull forward. The first option was set at 30 June. Typically what those options will be is to buy 10% of Brookfield's share or 7% of the JV. The first year is a half-year option, so that was 3.5% total, it was not a pull forward.

Paul Titterton: I'll just speak factually on it and then let Bob add on anything. We did not pull forward. The first option was set at 30 June. Typically what those options will be is to buy 10% of Brookfield's share or 7% of the JV. The first year is a half-year option, so that was 3.5% total, it was not a pull forward.

Speaker #5: And typically, what those options will be is to buy 10% of Brookfield's share or 7% of the JV. The first year is a half-year option.

Speaker #5: So that was three and a half percent total, but it was not a pull-forward.

Speaker #2: Yeah. And Scott, our expectation going forward is that we're going to exercise those options. But they are options, so we're not obligated. We'll review it every year.

Robert C. Lyons: Yeah.

Bob Lyons: Yeah.

Scott Sher: Got it.

Robert C. Lyons: Scott, our expectation going forward is that we're going to exercise those options. They are options, so we're not obligated. We'll review it every year. The expectation is that we'll exercise those as we did at 30 June this year.

Bob Lyons: Scott, our expectation going forward is that we're going to exercise those options. They are options, so we're not obligated. We'll review it every year. The expectation is that we'll exercise those as we did at 30 June this year.

Speaker #2: But the expectation is that we'll exercise those as we did at June 30 this year.

Speaker #7: Okay. So I think it's been.

Scott Sher: Okay. I think it's been.

Speaker #2: Tom, the total cap—the total cash outlay on that first option was...

Robert C. Lyons: The total cash outlay on that first option was.

Bob Lyons: The total cash outlay on that first option was.

Paul F. Titterton: Total cash outlay was $66 million.

Paul Titterton: Total cash outlay was $66 million.

Speaker #5: Total cash outlay was $66 million.

Speaker #7: Okay. So I think it's been about 18 months since the announcement of the deal. So I just want to refresh my memory. So we bought that portfolio.

Scott Sher: Okay. I think it's been about 18 months since the announcement of the deal, I just want to refresh my memory. We bought that portfolio, it was ostensibly book value. In our first year, we are increasing our remarketing gains and some of which are attributable to the portfolio that we bought just 18 months ago at book value. Is that factually correct?

Speaker #7: It was ostensibly book value. And in our first year, we are increasing our remarketing gains, some of which are attributable to the portfolio that we bought just 18 months ago.

Speaker #7: At book value. Is that factually correct?

Speaker #5: We actually bought it on January 1st. We closed on the transaction January.

Robert C. Lyons: We actually bought it on 1 January. We closed on the transaction 1 January.

Bob Lyons: We actually bought it on 1 January. We closed on the transaction 1 January.

Scott Sher: You're correct. Yeah.

Speaker #7: Yeah.

Speaker #5: Yeah. We announced on May 29th, which happens to be our Chief Financial Officer's birthday. We’ll just add that. But we announced on May 29th.

Robert C. Lyons: Yeah, we announced on 29 May, which happens to be our chief financial officer's birthday.

Bob Lyons: Yeah, we announced on 29 May, which happens to be our chief financial officer's birthday.

Scott Sher: Okay.

Robert C. Lyons: We'll just add that.

Bob Lyons: We'll just add that.

Scott Sher: Yeah.

Robert C. Lyons: We announced on 29 May, we closed on 1 January, and yes, we are selling assets out of the joint venture portfolio at above book value for assets that we bought on 1 January.

Bob Lyons: We announced on 29 May, we closed on 1 January, and yes, we are selling assets out of the joint venture portfolio at above book value for assets that we bought on 1 January.

Speaker #5: We closed on January 1st. And yes, we are selling assets out of the joint venture portfolio at above book value for assets that we bought on January 1st.

Speaker #7: Okay.

Speaker #6: And if I can just add, Bob, I mean, I was going to add that that's one of the things we liked about the Wells deal so much: most secondary market transactions in this business occur at a premium to book.

Scott Sher: Okay.

Paul F. Titterton: If I could just add, Bob.

Paul Titterton: If I could just add, Bob.

Scott Sher: Yeah.

Paul F. Titterton: I was going to add that that's one of the things we liked about the Wells deal so much is most secondary market transactions in this business occur at a premium to book. By buying at book, we thought we were buying value, and I think what's happened since has demonstrated that.

Paul Titterton: I was going to add that that's one of the things we liked about the Wells deal so much is most secondary market transactions in this business occur at a premium to book. By buying at book, we thought we were buying value, and I think what's happened since has demonstrated that.

Speaker #6: So by buying at book, we felt we were buying value. And I think what's happened since has demonstrated that.

Speaker #7: Yeah. I'm just reiterating that for the people that don't understand, who don't want to put a value on your remarketing gains. So if we continue doing...

Scott Sher: Yeah. I'm just reiterating that for the people that don't understand, who don't want to put a value on your remarketing gain.

Robert C. Lyons: Appreciate that

Bob Lyons: Appreciate that

Speaker #5: Appreciate that.

Scott Sher: I'm trying my best. If we do this each year, and we buy our options, and our options price is set at the time of the deal, which is ostensibly book value, then it's sort of a foregone conclusion that we will keep booking gains unless somehow these assets were to go down in value, right? If six months into it, if I bought something on 1 January, and six months into it I'm booking gains, and the price was set last time without any incremental ups, then I'm going to keep sort of booking gains and I control the timing by which I book the gains and I control the option. Correct?

Speaker #7: So I'm trying my best. If we do this each year, and we buy our options, and our options price is set at the time of the deal, which is ostensibly book value, then it's sort of a foregone conclusion that we will keep booking gains unless somehow these assets were to go down in value, right?

Speaker #7: If six months into it, if I bought something on January 1, and six months into it, I'm booking gains, and the price was set last time without any incremental ups, then I'm going to keep sort of booking gains.

Speaker #7: And I control the timing by which I book the gains, and I control the option. Correct?

Speaker #5: I would not argue with that assessment, Scott. That is correct.

Robert C. Lyons: I would not argue with that assessment, Scott. That is correct.

Bob Lyons: I would not argue with that assessment, Scott. That is correct.

Speaker #7: Okay. So we're going to control the size of our portfolio over the next number of years, but our SG&A shouldn't go up. So, the operating leverage in the business should be enhanced over time. As the portfolio goes up in size, we're not going to have to increase people to manage it.

Scott Sher: Okay. We're going to control the size of our portfolio over the next number of years, but our SG&A shouldn't go up. The operating leverage in the business should be enhanced over time, and that as the portfolio goes up in size, we're not going to have to increase people to manage it. That's always been one of the nice things of the company. That's still a factor, correct?

Speaker #7: That's always been one of the nice things about the company. That's still a factor, correct?

Speaker #5: Yeah. As we announced, as we said back in January—and I'll reiterate it again—we doubled the size of the fleet. Literally doubled the size of the fleet, plus added on the managed portfolio that we're undertaking for Brookfield, that they bought directly, which was north of $1 billion.

Robert C. Lyons: Yeah. As we said back in January, I'll reiterate it again, we doubled the size of the fleet. Literally doubled the size of the fleet, plus add on the managed portfolio that we're undertaking for Brookfield that they bought directly, which was north of $1 billion. By doing that, our SG&A this year will go up roughly 10%, and that includes standard inflation SG&A increase of 3% or so. We've been able to double the size of the fleet, add to our managed portfolio significantly, and we've added roughly 50 to 60 people and maybe 5% to our SG&A total. Yeah, lots of leverage in a positive way.

Bob Lyons: Yeah. As we said back in January, I'll reiterate it again, we doubled the size of the fleet. Literally doubled the size of the fleet, plus add on the managed portfolio that we're undertaking for Brookfield that they bought directly, which was north of $1 billion. By doing that, our SG&A this year will go up roughly 10%, and that includes standard inflation SG&A increase of 3% or so. We've been able to double the size of the fleet, add to our managed portfolio significantly, and we've added roughly 50 to 60 people and maybe 5% to our SG&A total. Yeah, lots of leverage in a positive way.

Speaker #5: And by doing that, our SG&A this year will go up roughly 10%. And that includes kind of standard inflation SG&A increases, 3% or so.

Speaker #5: So we've been able to double the size of the fleet add to our managed portfolio significantly. And we've added roughly 50 to 60 people and maybe 5% to our SG&A total.

Speaker #5: So yeah, lots of leverage in a positive way.

Speaker #7: Okay. I wanted to get you to say that. Last question as it relates to the deal: you said at the time of the deal that the savings that were attributable to the maintenance networks—bringing that in-house—would take time, probably one to two years.

Scott Sher: Okay. I wanted to get you to say that. Last question as it relates to the deal. You said at the time of the deal that the savings that were attributable to the maintenance network, bringing that in-house, would take time, probably one to two years. Can you just give us an update on the timeline for getting those savings that presumably are a little harder operationally to get, might take some time? Can you give us a little update on that if you would, then that'll let you guys go. Thank you so much.

Speaker #7: Can you just give us an update on the timeline for getting those savings that presumably are a little harder operationally to get? Might take some time.

Speaker #7: Can you give us a little update on that if you would? And then I'll let you guys go. Thank you so much.

Speaker #5: Yeah, thank you. I appreciate it. That timeline is still the same, where it would be probably a couple of years before, from a capacity standpoint, we have the room to move some of the Wells cars through our own shops.

Robert C. Lyons: Yeah. Thank you. Appreciate it. That timeline is still the same, where it would be probably a couple of years before, from a capacity standpoint, we have the room to move some of the Wells cars through our own shops. That's really driven by the fact that our wholly owned facilities today are in full capacity with the GATX legacy fleet. The Wells fleet is a little different because it's a freight car fleet. We can manage that very effectively through the third-party network. I also said back in January that despite the fact that we're not moving those cars in the next year or two into our network, we would still see benefit, we believed we would, by managing that third-party network as tightly as we manage our own.

Bob Lyons: Yeah. Thank you. Appreciate it. That timeline is still the same, where it would be probably a couple of years before, from a capacity standpoint, we have the room to move some of the Wells cars through our own shops. That's really driven by the fact that our wholly owned facilities today are in full capacity with the GATX legacy fleet. The Wells fleet is a little different because it's a freight car fleet. We can manage that very effectively through the third-party network. I also said back in January that despite the fact that we're not moving those cars in the next year or two into our network, we would still see benefit, we believed we would, by managing that third-party network as tightly as we manage our own.

Speaker #5: That's really driven by the fact that our wholly owned facilities today are at full capacity with the GATX legacy fleet. The Wells fleet's a little different because it's a freight car fleet.

Speaker #5: We can manage that very effectively through the third-party network. I also said back in January that despite the fact that we're not moving those cars in the next year or two into our network, we would still see benefit.

Speaker #5: We believed we would, by managing that third-party network as tightly as we manage our own. And as Tom alluded to earlier in the call, we're already seeing the benefit of that.

Robert C. Lyons: As Tom alluded to earlier in the call, we're already seeing benefit of that, a little more materially than we probably expected, that's part of the uptick in the guidance, is we felt very strongly that we could bring additional focus and attention on that third-party maintenance line, we're seeing it in a positive way.

Bob Lyons: As Tom alluded to earlier in the call, we're already seeing benefit of that, a little more materially than we probably expected, that's part of the uptick in the guidance, is we felt very strongly that we could bring additional focus and attention on that third-party maintenance line, we're seeing it in a positive way.

Speaker #5: A little more materially than we probably expected. And that's part of the uptick in the guidance is we felt very strongly that we could bring additional focus and attention on that third-party maintenance line.

Speaker #5: And we're seeing it—in a positive way.

Speaker #7: Okay. That's all good news. So the little metrics that are bouncing around as you bring in these portfolios, of cars that are disparate from the ones you own, and not cars and not cars that you historically have owned, sand cars and stuff like that, that's going to cause a little more volatility in some of the KPIs or some term that people created over the last number of years.

Scott Sher: That's all good news. The little metrics that are bouncing around as you bring in these portfolio of cars that are disparate from the ones you own and not cars that you historically have owned, sand cars and stuff like that's going to cause a little more volatility in some of the KPIs or some term that people created over the last number of years, that really are generally relevant to the story here, right? We bought 10 years' worth of purchases in one full swoop. We control the timing at which we buy them, we control the timing at which we sell them, and 6 months into it, we have complete evidence that we bought them at a good price, right? The KPIs month to month, 56 months versus 58 versus 42, is completely irrelevant to what we think we accomplished, correct?

Speaker #7: Those really are generally relevant to the story here, right? We bought 10 years' worth of purchases in one full swoop. We control the timing at which we buy them.

Speaker #7: We control the timing at which we sell them. And six months into it, we have complete evidence that we bought them at a good price, right?

Speaker #7: So the KPIs month to month, 56, 56 months versus 58 versus 42 is completely irrelevant to what we think we accomplished. Correct?

Speaker #5: Well, Scott, as you know, we tend to think in terms of decades. So, any performance metric on a quarterly basis or a monthly basis is not going to give us tremendous pause.

Robert C. Lyons: Well, Scott, as you know, we tend to think in terms of decades. Any performance metric on a quarterly basis or a monthly basis is not going to give us tremendous pause. What we are optimistic and feel very good about is that 6 months after the acquisition, the theories under which we took the investment are playing out and probably playing out a little faster and a little better than we thought. I don't see that changing over the next 10 years.

Bob Lyons: Well, Scott, as you know, we tend to think in terms of decades. Any performance metric on a quarterly basis or a monthly basis is not going to give us tremendous pause. What we are optimistic and feel very good about is that 6 months after the acquisition, the theories under which we took the investment are playing out and probably playing out a little faster and a little better than we thought. I don't see that changing over the next 10 years.

Speaker #5: What we are optimistic and feel very good about is that, six months after the acquisition, the theories under which we took the investment are playing out—and probably paying out—a little faster and a little better than we thought.

Speaker #5: And I don't see that changing over the next ten years.

Speaker #7: Thank you so much, Scott, for all your time. I appreciate it. The clarity in your answers to the questions was great, as always. Thank you so much, Scott.

Scott Sher: Thank you so much, guys, for all the time. I appreciate it. The clarity on the answers to the questions was great as always. Thank you so much, guys.

Speaker #5: Thank you.

Robert C. Lyons: Thank you.

Bob Lyons: Thank you.

Scott Sher: Thank you.

Speaker #1: We have reached the end of the Q&A session. I will now turn the call back to Sherry for closing remarks.

Operator 3: We have reached the end of the Q&A session. I will now turn the call back to Shari for closing remarks.

Operator: We have reached the end of the Q&A session. I will now turn the call back to Shari for closing remarks.

Speaker #3: I'd like to thank everyone for their participation on the call this morning. Please contact me with any follow-up questions. Have a great day. 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. Have a great day. Thank you.

Operator 3: That concludes today's call. Thank you for attending. You may now disconnect.

Shari Hellerman: That concludes today's call. Thank you for attending. You may now disconnect.

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