Air Transport Services (ATSG) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2022, consolidated revenues grew by $311 million to reach $2 billion, marking an all-time high for the company [8] - Adjusted EPS increased by over 40% to $2.28 compared to $1.61 in 2021, exceeding the target of $2 set a year ago [8] - Adjusted pretax earnings rose by 51%, and adjusted EBITDA increased by 18% [8][9] - Adjusted free cash flow for 2022 was $285 million, down $115 million from the previous year [11] Business Line Data and Key Metrics Changes - Earnings from airline businesses and leasing returns from CAM contributed significantly to the EPS gain [8] - The company added 13 767 freighters in 2022, with 6 leased to third-party customers [16] - ACMI Services saw more than a doubling of earnings, contributing to the overall growth [9] Market Data and Key Metrics Changes - The company expects to generate between $650 million and $660 million in adjusted EBITDA for 2023, reflecting a record pace of 20 freighter lease deployments [22] - Over 80% of CAM's leased freighter deployments in the coming years will be to airlines operating outside North America [20] Company Strategy and Development Direction - The company plans to expand its leased 767 fleet and introduce other freighter types, including the Airbus A321 and A330 [12][23] - The strategy includes targeting international markets where e-commerce is growing rapidly [20] - The company aims to maintain a debt leverage ratio below 3 times through 2024 and begin deleveraging in 2025 [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term growth opportunities despite anticipated headwinds in 2023 [7][25] - The company is prepared for increased capital expenditures, projecting $850 million in CapEx for 2023 [12] - Management noted that the demand for cargo freighters is expected to remain strong due to a reduction in retirements during the pandemic [55] Other Important Information - The company repurchased 2 million shares, approximately 3% of outstanding shares, during the fourth quarter after pandemic-related restrictions expired [14] - The company has a strong balance sheet and has locked in favorable fixed rates for debt [13] Q&A Session Summary Question: Can you elaborate on the 2023 guidance for ACMI? - Management expects a year-over-year decrease in block hours for ACMI, with a potential recovery in the second half of the year [30] Question: What is the committed revenue for aircraft placements? - The company anticipates around $70 million of annualized revenue from 20 aircraft targeted for deployment in 2023 [36] Question: Are inflationary cost pressures reimbursable by customers? - Some costs are reimbursable, but inflation has outpaced contract escalators, affecting maintenance and travel costs [41] Question: Why will Boeing be faster for conversions than IAI? - Boeing has a more robust supply chain due to ongoing production lines, which supports their conversion capabilities [44] Question: How does the company view pilot availability and costs? - The company has successfully attracted pilots and does not anticipate issues with pilot availability, as costs are largely fixed under contracts [63]