Copa Holdings (NYSE:CPA) Q3 2025 Earnings Call November 20, 2025 11:00 AM ET Company ParticipantsPedro Heilbron - CEOPeter Donkersloot - CFOSavanthi Syth - Managing DirectorMichael Linenberg - Managing DirectorDaniel Tapia - Director of Investor RelationsGuilherme Mendes - Executive DirectorConference Call ParticipantsAlberto Valerio - Equity AnalystFilipe Nielsen - Equity AnalystJake Gunning - AnalystMichael Linenberg - AnalystDaniel McKenzie - Senior AnalystThomas Fitzgerald - Vice President and Equity Re ...

Core Insights - L.B. Foster's Q3 results fell short of Wall Street expectations, with revenue at $138.3 million, missing estimates by 10.4% [1][6] - The company reported a GAAP EPS of $0.40, which was a 35% miss compared to analyst expectations of $0.62 [1][6] - Management attributed flat sales to timing-related deferrals in the Rail segment and ongoing downsizing in the U.K. business [1] Financial Performance - Revenue: $138.3 million vs analyst estimates of $154.4 million, flat year on year [6] - EPS (GAAP): $0.40 vs analyst expectations of $0.62, a 35% miss [6] - Adjusted EBITDA: $11.36 million vs analyst estimates of $14.55 million, representing an 8.2% margin and a 21.9% miss [6] - Operating Margin: 6%, consistent with the same quarter last year [6] - Market Capitalization: $281.7 million [6] Guidance and Backlog - The company lowered its full-year revenue guidance to $540 million from $545 million, a 0.9% decrease [6] - EBITDA guidance for the full year remains at $41 million, in line with analyst expectations [6] - Backlog increased to $247.4 million at quarter end, up 18.4% year on year [6] Analyst Insights - Concerns were raised about the company's ability to meet fourth-quarter sales and EBITDA guidance due to the ongoing government shutdown, but management expressed confidence in sufficient backlog [6] - Questions regarding the sustainability of total track monitoring sales growth were addressed, with management citing strong customer adoption of new products [6] - The impact of product mix and U.K. operations on profit margins was discussed, highlighting weaknesses in the U.K. business [6] - Management confirmed active pursuit of precast acquisitions while focusing on ramping up organic volumes in new facilities [6] - The rationale behind lowering full-year guidance was attributed to realistic assessments of delivery capacity rather than a lack of demand [6]

Financial Data and Key Metrics Changes - The company reported third quarter earnings per share of $1.65, a 6% increase year over year [5] - Total marine revenues decreased by $1.2 million compared to Q3 2024, with operating income down by 11% sequentially [12] - Operating margins for the inland marine transportation business were in the high teens for the fourth quarter, while coastal marine operating margins were around 20% [10][12] Business Line Data and Key Metrics Changes - In the inland marine transportation business, barge utilization averaged in the mid-80% range, down from previous quarters, with revenues declining 3% year over year [7][14] - Coastal revenues increased 13% year over year, supported by improved pricing and fewer planned shipyard activities [15] - Power generation revenues surged 56% year over year, driven by strong demand from data centers and industrial customers [9][17] Market Data and Key Metrics Changes - The inland market faced near-term softness due to favorable weather and lower demand, while coastal marine fundamentals remained strong with utilization in the mid to high 90% range [6][8] - Spot market rates for inland transportation declined in the low to mid-single digits both sequentially and year over year [7][14] - The company expects barge utilization to improve entering the fourth quarter, now running in the high 80% range [25] Company Strategy and Development Direction - The company aims to navigate near-term challenges while focusing on long-term growth, particularly in power generation and maintaining strong operational execution [5][24] - The management emphasizes a balanced capital allocation approach, planning to return capital to shareholders while pursuing strategic investments [22][23] - The company is committed to enhancing its service offerings in power generation, leveraging its capabilities in EFRAC technologies [72] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the inland barge cycle, anticipating years of growth despite current market challenges [24] - The company noted early signs of improvement in market conditions for the fourth quarter, with expectations for higher barge utilization and improved pricing [25][26] - Management remains cautious about potential softness in demand for refined products and chemicals but sees positive momentum in the inland market [25][26] Other Important Information - The company had $47 million in cash and total debt of around $1.05 billion as of September 30, 2025, with a debt to capital ratio of 23.8% [19] - Free cash flow improved to $160 million for the quarter, with expectations to unwind working capital in the fourth quarter [20][22] - The company plans capital expenditures between $260 and $290 million for the year, focusing on maintenance and growth capital [22] Q&A Session Summary Question: Insights on Power Generation Growth - Management acknowledged that while there will be some lumpiness in revenue, the backlog is at a record level, indicating robust demand [34][35] Question: Update on Inland Market Conditions - Management noted that the inland market faced challenges in Q3 but is seeing improvements in Q4, with barge utilization currently at 87.6% [36][40] Question: Spot Market Rates Trends - Management indicated that spot pricing has started to firm up, with expectations for a constructive pricing environment moving forward [46][48] Question: Guidance on Earnings - Management confirmed that they expect to be around the low end of their earnings guidance due to ongoing market conditions [51][52] Question: Fleet and Contract Renewals - Management stated that approximately 40% of the term contract portfolio renews in Q4, which is critical for revenue stability [88] Question: Strategic Opportunities in Inland Market - Management acknowledged that some operators may be reevaluating their positions, creating potential acquisition opportunities [96][97] Question: Coastal Market Sensitivity - Management clarified that the coastal market is less sensitive to crude slate changes compared to inland, with a stable supply-demand balance [98][99]

Financial Data and Key Metrics Changes - Revenues for Q1 2025 were $84 million, with operating income at $23.4 million and net income at $7.6 million. Adjusted EBITDA was £52.2 million [4] - The company closed Q1 with $101 million in available liquidity, consisting of £67 million in cash and cash equivalents, plus £34 million in undrawn capacity on credit facilities [4] - The company operated with a 99.5% utilization rate, accounting for the start of two drydockings, resulting in an overall utilization of 96.9% [4] Business Line Data and Key Metrics Changes - The partnership has a strong contracted revenue position of $854 million at the end of Q1, with fixed contracts averaging 2.3 years in duration [6] - The economic rationale for exercising transfer options has strengthened, with expectations for these options to be taken up due to market tightness [6] Market Data and Key Metrics Changes - Significant growth is anticipated in production fields relying on shuttle tankers, particularly in Brazil and the North Sea [5] - The company noted a continued shortage of shuttle tanker capacity projected in the coming years, necessitating newbuild orders [5] Company Strategy and Development Direction - The company aims to pursue long-term charter visibility and accretive dropdowns to support long-term cash flow generation [14] - The strategy includes increasing revenue backlog while lowering the average fleet age through dropdowns from the sponsor [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding industry dynamics and the partnership's positioning to benefit from market conditions [4] - The company is cautiously optimistic about securing additional coverage in the current tight market, either through extensions or new charters [12] Other Important Information - The company has a typical pattern of refinancing debt facilities on comparable terms, with a good track record of refinancing success [10] - The average maturity of interest rate hedges is one and a half years, with new hedges being put in place as suitable terms arise [29] Q&A Session Summary Question: Timing of potential dropdowns from the sponsor - Management stated that each potential transaction is reviewed individually, and there is no clear timing for dropdowns as it depends on when vessels are offered [22] Question: Anticipated refinancing terms - Management indicated they are working towards refinancing at similar or better terms, with ongoing discussions with lenders [24] Question: Impact of interest rate hedges expiring - Management noted that while interest rate hedges will expire, new hedges are put in place on a rolling basis when attractive terms are available [30] Question: Long-term debt increase explanation - The increase in long-term debt was primarily due to a vessel swap transaction that involved assuming $73 million of debt, but the net increase was only $47 million due to debt repayments [72] Question: Future charter rates and renewals - Management could not comment on specific charter rates but indicated that there is typically a small escalation in option terms at renewals [86] Question: Market conditions and demand for shuttle tankers - Management acknowledged that the market is currently tight, which positions the company favorably for future contracts [92] Question: Comparison of dropdowns versus share buybacks - Management emphasized that the board's focus is on fleet growth and capital value rather than share buybacks, although they consider both options [105]

Financial Data and Key Metrics Changes - Revenues for Q1 2025 were $130.4 million, with EBITDAR at $20.2 million, maintaining operating margins consistent with Q1 of the previous year despite challenges [4][5] - The impact of weather, leap year, and lower sports betting revenue in Colorado was estimated to reduce EBITDAR by approximately $2 million compared to Q1 of last year [5][25] - Carded gaming revenue increased by 1%, while uncarded gaming revenue decreased by 2.5% across all U.S. properties [5] Business Line Data and Key Metrics Changes - In Missouri, the new Caradasil property saw carded gaming revenue grow by 12% and uncarded revenue increase by 23%, leading to a total gaming revenue increase of 17% or $2.1 million compared to Q1 of last year [6][7] - The Century Casino and Hotel in Cape Girardeau experienced a 5% increase in patrons and a 2% increase in trips, although gaming win was flat due to lower hold [10][11] - In Colorado, carded revenue grew by 7% in Central City, while uncarded revenue decreased by 36% [12][13] Market Data and Key Metrics Changes - Total visitor volume decreased by 3%, with a notable reduction in visits from the 50 age group, partially offset by a 1% increase from younger guests [6] - The number of patrons living more than 75 miles from the new Caradasil property increased by 34%, contributing to a 23% increase in total visitors [8] - In the East segment, gaming revenue from upper-tier customers increased by 10%, while lower-tier customers saw a decline [15][16] Company Strategy and Development Direction - The company is focusing on expanding its market presence, particularly in Missouri, by targeting customers living 75 miles or more from its properties [12][54] - There is an emphasis on operational discipline and cost management to improve profitability, with plans to enhance marketing initiatives to attract higher net worth guests [11][54] - The company is also finalizing partnership agreements for sports betting in Missouri, expected to provide high-margin EBITDAR [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving consumer behavior and spending patterns since mid-March, with April showing an estimated 5% increase in EBITDA compared to last year [25][26] - Despite economic uncertainties, management is confident in the long-term prospects of the company, noting no significant competitive supply issues anticipated for this year or next [26][27] - The company plans to balance its capital expenditures with shareholder returns, indicating a cautious approach to stock buybacks in light of market conditions [27] Other Important Information - The company reported a cash position of approximately $85 million and no debt maturities until 2029, with expectations for net debt to EBITDA ratios to decrease significantly by year-end [23][24] - The company is committed to divesting its operations in Poland, with ongoing discussions with interested parties [22] Q&A Session Summary Question: Have you noticed any softening in consumer behavior for your Canadian assets? - Management indicated that lower revenue is not significant and attributed it to weather and one less gaming day, expressing no concerns [31][33] Question: Can you provide an update on initiatives at Rocky Gap? - Management confirmed completed renovations and marketing initiatives targeting Baltimore and Washington DC areas to attract higher net worth guests [35] Question: What has changed regarding year-end leverage targets? - Management acknowledged a positive trend since mid-March but remained cautious about projecting this trend for the full year [41][43] Question: Are you looking to monetize your casino database in Alberta? - Management mentioned potential partnerships with the Alberta Gaming Commission for database sharing but did not foresee other opportunities [44][47] Question: Are you focusing on revenue growth or maintaining EBITDA levels in Missouri? - Management aims for both revenue growth and cost discipline, particularly targeting the 75-mile customer base [52][54] Question: What is the timeline for divesting Polish assets? - Management believes divestment could occur in 2025 but acknowledged previous misestimations [55][56] Question: What is the capacity for stock buybacks? - Management plans to initiate stock buybacks with a single-digit million dollar volume between now and the next earnings release [57][58]

Financial Data and Key Metrics Changes - The company reported Q1 sales of $50.7 million, an increase from $41.9 million in the same quarter last year, representing a year-over-year growth of 21% [10][12] - Operating income for Q1 was $3.4 million, down from $4.1 million in the previous year, leading to a decrease in operating margin to 6.7% from 9.7% [15] - Net income was $1.9 million or $0.11 per share on a GAAP basis, compared to $2.9 million or $0.18 per share for the same quarter last year [15][16] - Adjusted EBITDA was $5.4 million, or 10.7% of sales, compared to $5.2 million or 12.5% for the prior year quarter [16] Business Line Data and Key Metrics Changes - Revenues from the Battery and Energy Products segment were $46.3 million, up from $35 million last year, with a 10.6% organic growth excluding Electrochem sales [10][11] - Government defense sales in the Battery segment increased by 53.6%, while medical battery sales decreased by 12.3% [11] - The Communications Systems segment saw revenues decline by 36.2% to $4.4 million, primarily due to large shipments in the prior year [12][14] Market Data and Key Metrics Changes - The sales split between commercial and government defense for the battery business was 64% to 36%, with a domestic to international split of 78% to 22% [11] - The total backlog exiting Q1 was $95 million, representing 55% of trailing twelve-month sales, indicating a healthy demand outlook [12] Company Strategy and Development Direction - The company aims to complete the integration of the Electrochem acquisition by the end of Q2, focusing on ERP system setup and leveraging vertical integration opportunities [19][27] - There is a commitment to improve sales pipelines and stabilize gross margins through pricing adjustments and lean productivity projects [20][21] - The company is expanding its product offerings in both the Communications Systems and Battery segments, targeting military and medical markets [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in profitable growth despite macroeconomic uncertainties, noting that Q1 performance exceeded expectations [42][43] - The government defense sector is expected to remain strong, with potential increases in NATO spending anticipated over the next 18 to 24 months [54] - The medical battery segment is expected to stabilize as replacement cycles for COVID-related devices approach [52] Other Important Information - The company ended Q1 with working capital of $70 million and a current ratio of 3.2, indicating solid liquidity [17] - The company received $1.5 million from the employee retention credit, which was used to reduce acquisition debt [17] Q&A Session Summary Question: How have conversations with customers on tariff pass-throughs evolved? - Management noted that customers are concerned about cash flow impacts due to tariffs, which could affect their ability to invest in product development [32][34] Question: What are the major milestones left for the Electrochem integration? - The integration is on track for completion by Q2, with most systems set up and data transitioned [36][37] Question: What markets are targeted for the IVAS battery? - The focus is primarily on foreign military markets, with some commercial engagements anticipated [41] Question: Can you discuss trends across key end markets? - The medical market is steady with known replacement cycles, while government defense remains strong with a good backlog [52][54] Question: How is free cash flow expected to trend over 2025? - Free cash flow is expected to be consistent, with plans to continue paying down debt ahead of schedule [55][56]

Financial Data and Key Metrics Changes - Net revenue for Q1 2025 was $162 million, an increase of 10% year-over-year, marking the twentieth consecutive quarter of growth since the IPO in 2020 [6][18] - Gross profit rose to $62.5 million, representing 38.5% of net revenue, down from 39.8% the previous year due to increased investments and less efficient operations [19][20] - Net income decreased by 11.2% to $16.9 million, or $0.37 per diluted share, compared to $19 million, or $0.43 per diluted share in Q1 2024 [21] - Adjusted EBITDA for Q1 2025 was $27.5 million, or 16.9% of net revenue, down from 19.7% in the prior year [21] Business Line Data and Key Metrics Changes - The Butter business saw robust growth with net revenue up 41% year-over-year [7] - Egg product demand remains strong, but supply constraints have limited volume growth [8][16] - The company added approximately 25 new family farms in Q1 2025, increasing its network to over 450 farms [13] Market Data and Key Metrics Changes - Brand awareness reached 31% by the end of Q1 2025, a five-point increase since the beginning of the year [9] - The company is currently in 11.3% of U.S. households, indicating significant room for growth [11] Company Strategy and Development Direction - The company aims to achieve $1 billion in net revenue by 2027, with a gross margin target of about 35% and an adjusted EBITDA margin of 12% to 14% [14][28] - Investments in supply chain infrastructure and farm expansion initiatives are expected to support sustained growth [14][29] - The company plans to implement a modest price increase for shell egg products to offset anticipated cost impacts from tariffs [15][26] Management's Comments on Operating Environment and Future Outlook - Management expects volume growth headwinds to ease in Q2 2025, leading to reaccelerated net revenue growth [16] - The company remains confident in its ability to navigate macroeconomic uncertainties and consumer behavior changes due to its strong brand loyalty [84] - Management reiterated its full-year guidance for net revenue of at least $740 million, representing at least 22% growth compared to 2024 [24][25] Other Important Information - The company is on track with its digital transformation initiative, with the launch of a new ERP system updated to early fall 2025 [27] - The company is addressing a material weakness in internal controls related to revenue recognition, with no revenue inconsistencies found [23] Q&A Session Summary Question: Impact of price increase on retailer pricing - Management indicated that pricing is primarily aimed at protecting gross margins and maintaining strong relationships with retail partners [39] Question: Current egg supply and retailer orders - Management noted that while the category is improving, supply constraints still exist, and elevated orders from retailers reflect ongoing demand [41] Question: Volume growth expectations for the year - Management expects volume growth to accelerate as new farms come online, with Q2 serving as a transition point [48] Question: Impact of tariffs on pricing and costs - Management confirmed that while tariffs could impact costs, the price increase is expected to cover these impacts [62] Question: Retail distribution increase clarification - The increase in reported distribution from 24,000 to 26,000 stores was due to a change in data providers rather than a significant increase in new retailers [67] Question: Consumer behavior amidst macro uncertainty - Management observed that brand loyalty remains strong, with consumers less likely to trade down even in challenging economic conditions [84]

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $56.5 million for Q1 2025, marking a 4% sequential increase and a 6% year-over-year increase, driven by record volumes in produced water handling and water solutions [12] - Adjusted operating margin was $0.44 per barrel, reflecting the durability of operating improvements over the last 24 months [12] - Capital expenditures (CapEx) for the quarter were $21 million, down 44% compared to Q1 2024 [12] Business Line Data and Key Metrics Changes - Produced water volumes and water solution volumes grew by 7% sequentially compared to Q4 2024 [8] - The integration of McNeil Ranch into operations is ongoing, with several inbound opportunities being evaluated for additional revenue streams [9] Market Data and Key Metrics Changes - The company expects produced water volumes for Q2 2025 to be between 1.2 million and 1.25 million barrels per day, with water solutions volumes expected to be around 1 million barrels per day [13] - Adjusted operating margin for Q2 is projected to be between $0.41 and $0.43 per barrel, slightly down from Q1 due to well maintenance expenses and lower skim oil price realizations [14] Company Strategy and Development Direction - The company is focused on managing capital investments to align with customer activity levels and has a strong position due to long-term contracts in the Northern Delaware Basin [6][7] - Strategic efforts include beneficial reuse of water, industrial water treatment, and mineral extraction, with plans for a new iodine facility expected to be operational by early 2026 [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate volatility and uncertainty, citing strong customer relationships and a robust balance sheet [16] - There is ongoing dialogue with customers regarding the potential impact of commodity prices on their operations, but no immediate changes to the outlook have been observed [11] Other Important Information - The company successfully refinanced its senior notes, upsizing the offering to $500 million, and ended the quarter with net debt of $480 million and a liquidity of $372 million [15] - A quarterly dividend of $0.14 per share was declared, to be paid on June 18 to shareholders of record on June 5 [15] Q&A Session Summary Question: Expectations for water cuts and volumes if producers move to maintenance mode - Management indicated that they can flex capital expenditures down by 25% to 30% if customer volumes decrease, and water cuts will remain the same, impacting only volume [20][21][22] Question: Update on M&A activity - Management noted that while there is some discomfort in the market due to volatility, the bid-ask spread remains wide, and they are well-positioned to take advantage of opportunities [23][24][25] Question: Volume growth cadence and one-time impacts - Management confirmed that Q1 volumes were strong due to better-than-expected well performance and increased interruptible volumes, but future growth will depend on customer activity [28][29][30] Question: Capital allocation in a downside environment - The company remains committed to maintaining balance sheet strength and plans to continue dividend growth while having the flexibility to reduce capital expenditures if necessary [32][34] Question: Commercialization of McNeil Ranch - Management reported that McNeil Ranch is exceeding expectations with multiple inbound opportunities for monetization, including solar and battery projects [37][38][39] Question: Competitive landscape and impact of new pipelines - Management believes that their long-term contracts and large acreage dedication provide a competitive advantage, despite new pipeline announcements from competitors [50][51][52] Question: Update on beneficial reuse and industrial water treatment - Management confirmed ongoing progress in reducing costs for desalination and expanding applications for treated water, including potential data center uses [52][53][54] Question: Cost recovery for desalination - Management indicated that operational costs could potentially be below $1 per barrel, depending on the scale of operations [83] Question: Future M&A preferences - The company remains focused on core acquisitions but is also exploring smaller bolt-on opportunities, emphasizing discipline in evaluating potential targets [76][77][78]

Financial Data and Key Metrics Changes - The first quarter of 2025 saw comparable diluted earnings per share increase to $0.76 from $0.68 in the first quarter of 2024, representing a 12% increase [13] - Comparable net earnings for the first quarter were $216 million, driven by higher volumes, lower interest expenses, and cost management initiatives [13][15] - The company anticipates a net debt to comparable EBITDA ratio of 2.75 times by the end of 2025 and plans to repurchase at least $1.3 billion worth of shares [16][17] Business Line Data and Key Metrics Changes - In North and Central America, comparable operating earnings increased by 2% due to stronger-than-expected volume performance [13][14] - EMEA segment comparable operating earnings increased by 13%, supported by robust demand trends [14] - South America saw a 25% increase in segment comparable operating earnings, driven by strong volume performance across all markets [15] Market Data and Key Metrics Changes - Global shipments increased by 2.6% year-over-year in the first quarter of 2025, with volume growth in North America returning despite economic pressures [10] - The company expects global volume growth in the 2% to 3% range for 2025, with mid-single-digit growth anticipated in EMEA [11] - In South America, volume growth is expected to exceed the long-term range of 4% to 6% in 2025 due to recovery in Argentina and Chile [11] Company Strategy and Development Direction - The company is focused on achieving 11% to 14% comparable diluted earnings per share growth in 2025 and is confident in its ability to navigate external uncertainties [9][19] - A strategic partnership was formed with Oasis Venture Holdings for the aluminum cup business, indicating a focus on long-term growth potential [12] - The company emphasizes operational excellence, disciplined cost management, and efficiency improvements across its operations [17][20] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the ability to manage uncertainties related to tariffs and consumer pressures, particularly in the U.S. [9][19] - The company is optimistic about the demand for aluminum packaging, which continues to outperform other substrates globally [9] - Management highlighted the resilience of the business model, stating that the company typically performs well during economic slowdowns [75] Other Important Information - The company plans to maintain a full-year effective tax rate on comparable earnings slightly above 22% due to lower year-over-year tax credits [17] - Capital expenditures for 2025 are expected to be slightly below depreciation and amortization, in the range of $600 million [16][102] - The company has repurchased $651 million worth of shares year-to-date [16] Q&A Session Summary Question: Can you frame your supply position in Europe and where the next leg of incremental growth will come from? - Management indicated that they have made significant investments in Europe, which allows for scaling up production, and they expect continued growth into 2026 and 2027 [26][28] Question: How are self-improvement initiatives tracking in North America? - Management noted that while they do not expect margin expansion, they are seeing improvements in operational efficiencies, particularly in Europe and South America [30] Question: What is the potential impact of tariffs on demand, particularly regarding beer exposure in Mexico? - Management stated that the impact of tariffs is minimal and that they have not seen significant changes in customer behavior or forecasts [39] Question: How is the promotional environment shaping up in major markets? - Management observed that there has been innovation in the energy segment and a more deliberate effort to price products to drive volume [48][50] Question: Can the company achieve 11% EPS growth if volume falls short due to tariffs? - Management expressed confidence in navigating uncertainties and highlighted the resilience of aluminum packaging during economic downturns [72][75] Question: What are the expectations for margin sustainability in North America? - Management acknowledged that maintaining current margins will be challenging due to affordability pressures from CPG customers [112][114] Question: How is the contracting process for the new Florida facility shaping up? - Management confirmed that the Florida facility has been integrated and is expected to contribute significantly during the peak season [53]

Financial Data and Key Metrics Changes - The company reported FFO per share of $0.64, which was a penny above the high end of guidance [6][10] - Same store revenue growth decreased by 0.4% year over year, an improvement from a decline of 1.6% in the previous quarter [8][10] - Average occupancy for the same store portfolio was down 50 basis points to 89.5%, narrowing from a decline of 120 basis points in the fourth quarter [9][10] - Same store operating expenses grew by only 0.6% year over year, better than expectations [10][12] Business Line Data and Key Metrics Changes - The company closed on the acquisition of the remaining 80% interest in a joint venture, acquiring a portfolio of 28 early-stage lease-up stores [11] - The third-party management platform added 33 stores, ending the quarter with 869 third-party stores under management [12] Market Data and Key Metrics Changes - Strong markets such as New York City boroughs, Chicago, and Washington D.C. continue to show strength, while supply-impacted markets like Northern New Jersey, Phoenix, and Atlanta are stabilizing [7][12] - In Texas markets, Dallas is facing challenges due to supply and pricing decisions, while Austin shows signs of recovery [34][35] Company Strategy and Development Direction - The company remains focused on optimizing its platform while maintaining high customer service standards [6][10] - The management expressed confidence in the long-term health of the self-storage industry due to the quality and geographic diversity of its portfolio [7][12] - The company is cautious about the economic environment, maintaining a conservative outlook for gradual improvement in operational metrics in 2025 [13] Management's Comments on Operating Environment and Future Outlook - Management noted uncertainty in the economy affecting consumer decisions, which could impact storage demand [13] - The company does not foresee improvement in the housing market and expects a gradual recovery without sharp reacceleration [13] - Management highlighted the resilience of the self-storage business, noting that demand drivers include everyday life events and business needs [18][19] Other Important Information - The balance sheet remains strong with a net debt to EBITDA ratio of 4.8 times [12] - The company is monitoring the impact of macroeconomic factors on its operations and is prepared to adjust strategies accordingly [13][54] Q&A Session Summary Question: What are the drivers of demand in the current environment? - Management indicated that demand is driven by everyday life events and business needs, despite a slow housing market [18] Question: What was occupancy in April? - Occupancy ended at 89.9% in April, showing a slight improvement [21] Question: How does the company view the leasing season? - Management expects a muted leasing season compared to pre-pandemic levels, with no significant growth anticipated [30] Question: What is the outlook for Texas markets? - Management noted that while Austin is recovering, Dallas faces challenges due to supply and competitive pricing [34][35] Question: How is the company managing expenses? - The company has been proactive in managing staffing and operational expenses, leading to better-than-expected results [50] Question: What is the strategy for acquisitions? - The company is open to acquisitions but faces challenges due to market volatility and seller expectations [53][54] Question: How does the company view potential recession impacts? - Management believes the self-storage business is resilient during economic downturns, with demand potentially increasing due to life changes [88][90]