THIRD QUARTER 2019 INVESTOR CONFERENCE CALL October 24, 2019 1
DISCLAIMER Forward-Looking Statements Certain statements in this presentation, other than statements of historical facts, including statements regarding our strategy, future operations, future financial position, future revenues, future costs, prospects, plans and objectives of management are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that include the words ”expect,” “estimate,” “anticipate,” “predict,” "believe," “think,” “plan,” “will,” “should,” “intend,” “seek,” “potential” and similar expressions and variations are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. All forward-looking statements address matters that involve risks and uncertainties, many of which are beyond our control. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements. These factors include, without limitation, economic, business, competitive, market and regulatory conditions and the following: decreases in the demand for leased containers; decreases in market leasing rates for containers; difficulties in re-leasing containers after their initial fixed-term leases; customers' decisions to buy rather than lease containers; dependence on a limited number of customers for a substantial portion of our revenues; customer defaults; decreases in the selling prices of used containers; extensive competition in the container leasing industry; difficulties stemming from the international nature of Triton’s businesses; decreases in the demand for international trade; disruption to our oper ations resulting from political and economic policies of the United States and other countries, particularly China, including but not limited to the impact of trade wars and tariffs; disruption to our operations from failure of or attacks on our information technology systems; disruption to our operations as a result of natural disasters, compliance with laws and regulations related to economic and trade sanctions, security, anti-terrorism, environmental protection and corruption; ability to obtain sufficient capital to support growth; restrictions imposed by the terms of our debt agreements; changes in the tax laws in Bermuda, the United States and other countries; and other risks and uncertainties, including those listed und er the caption “Risk Factors” in our Annual Report on Form 10 - K for the year ended December 31, 2018 (the “Form 10 - K”) or other reports we file with the United States Securities and Exchange Commission. The foregoing list of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the risk factors in our Form 10-K. Any forward-looking statements made herein are qualified in their entirety by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our businesses or operations. Except to the extent required by applicable law, we undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. Certain financial measures presented in this presentation are identified as not being prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Please refer to the Appendix hereto for a reconciliation of such non-GAAP measures to their most comparable GAAP measures. 2
HIGHLIGHTS Triton reported third quarter Adjusted net income of $85.0 million, or $1.16 per share » Q3 annualized return on equity of 16.1% Leasing demand remained slow in Q3, during traditional peak quarter » Though container supply / demand generally balanced, and new production volumes down Using our strong cash flow to drive shareholder value in ways other than fleet growth » Repurchased 8.7 million shares since August 2018, leading to a 10.8% reduction » Repurchased remaining partnership interests in Triton Container Investments in 1H 2019 » Declared quarterly dividend of $0.52 per common share Expect leasing activity to remain slow for next several quarters, but should set stage for recovery 3
OPERATING PERFORMANCE Leasing demand has been weak since Q4 2018, but Triton’s operating performance remains solid » Utilization averaged 96.7% in Q3 » Used container sale prices have drifted lower but remain well above accounting residuals New leasing activity remained unseasonably slow in Q3 » Pick-ups and lease transaction activity slow despite Q3 being traditional peak season » Drop-offs increased from Q2, though still well controlled » New container investment opportunities limited – Number and size of new lease transactions materially lower than 2017 and 2018 – Several leasing companies competing aggressively for limited deals – Triton allocating equity cash flow to higher yielding investments Customers and market forecasters downgrading expectations for 2019 » Now generally projecting containerized trade growth to be just slightly positive in 2019 » Reflects lack of peak season surge and softening economic conditions New container inventory starting to decrease in response to reduced production 4
TRITON’S KEY OPERATING METRICS Ending Quarterly Utilization (CEU) Dry Lease Rate Index (CEU) Ending Quarterly Utilization (CEU) Overall Lease Rate Index (CEU) 100% 120% 98% 100% 96% 80% 94% 60% 92% 40% 90% Dry Container Pick-up / Drop-off Activity (Units) (1) Used Dry Container Sales Price Index Dry Container Pick-up / Drop-off Activity (Units) Used Dry Container Sales Price Index ( 1) (excluding Sale Leaseback) 150% 250,000 140% 200,000 130% 150,000 120% 110% 100,000 100% 50,000 90% 80% 0 70% (50,000) 60% (100,000) 50% Pick-Ups Drop-Offs Net 20' Price Index 40'HC Price Index (1) Excludes Sale-leaseback units. 5
MARKET CONDITIONS Global GDP and Container Trade Growth World Container Fleet and Leasing Share 8% 50 60% 50% 6% 40 Leasing Company (%) Growth Rate 40% TEU (MM) 30 4% 30% Demand 20 2% 20% 10 0% 10% 0 0% Container Trade Growth Global GDP Growth Sources: Container Trade Growth 2014-2016: Alphaliner Monthly Monitor – October 2019. Container Trade Growth 2017-2020E: average of estimates from Alphaliner Monthly Monitor – Leasing Company Owned Shipping Line Owned Leasing (%) October 2019 and Clarksons Container Intelligence Monthly – September 2019. GDP Growth: International Monetary Fund, October 2019 World Economic Outlook Update. Source : Drewry Container Census & Lease Industry Annual Report 2019/20. New Dry Factory Inventory Triton’s Dry Depot Lease Inventory in Asia 1,200,000 250,000 China Dry Van New Production Triton’s Asia Inventory (TEU) 1,000,000 200,000 Inventory (TEU) 800,000 150,000 600,000 Supply 100,000 400,000 50,000 200,000 0 - Unbooked Asia Dry Inventory Booked Asia Dry Inventory Shipping Inventory Leasing Inventory Sources: Shipping and Leasing Factory Inventory estimates provided by commonly used informal Source: Internal container management reports. surveys by factory inspectors. 6
CONSOLIDATED STATEMENTS OF ADJUSTED NET INCOME (*) (In thousands, except earnings per share) Q3 '19 Q3 '18 % Change YTD 9/2019 YTD 9/2018 % Change Total leasing revenues $ 336,668 $ 350,078 (3.8%) $ 1,016,093 $ 994,946 2.1% Trading margin 4,150 5,810 (28.6%) 12,233 12,795 (4.4%) Net gain on sale of leasing equipment 6,196 7,055 (12.2%) 22,184 27,378 (19.0%) Depreciation and amortization 133,367 141,337 (5.6%) 403,324 405,664 (0.6%) Interest and debt expense 76,862 81,894 (6.1%) 241,269 235,279 2.5% Total ownership costs 210,229 223,231 (5.8%) 644,593 640,943 0.6% Direct operating expenses 20,457 11,489 78.1% 55,356 32,732 69.1% Administrative expenses 18,496 19,964 (7.4%) 56,671 60,318 (6.0%) Provision for doubtful accounts 126 677 (81.4%) 505 551 (8.3%) Other (income) expense, net (116) 492 (123.6%) (2,047) (752) 172.2% Income attributable to noncontrolling interest - 1,393 (100.0%) 592 5,249 (88.7%) Adjusted Pretax Income (1) $ 97,822 $ 105,697 (7.5%) $ 294,840 $ 296,078 (0.4%) (24.8%) (27.2%) Income tax expense 8,164 10,857 23,678 32,524 Adjusted Net Income (1)(2) $ 89,658 $ 94,840 (5.5%) $ 271,162 $ 263,554 2.9% Less: dividend on preferred shares 4,708 - N/A 7,038 - N/A Adjusted Net Income Attributable to Common Shareholders (1)(2) $ 84,950 $ 94,840 (10.4%) $ 264,124 $ 263,554 0.2% Adjusted net income per common share $ 1.16 $ 1.17 (0.9%) $ 3.50 $ 3.27 7.0% Weighted average number of common shares outstanding - diluted 73,249 80,728 (9.3%) 75,557 80,620 (6.3%) Return on equity 16.1% 16.9% 16.5% 16.3% (*) Adjusted net income is a non-GAAP financial measure. See Appendix. (1) Excludes transaction costs, gain on sale of building, debt termination expense, and net unrealized loss or gains on derivative instruments. (2) Excludes foreign income tax adjustment and tax benefit from vesting of restricted shares. 7
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