Hey, good afternoon, everyone. My name is Isaac Sellhausen. I work with Ian Zaffino on the Special Situations Team here at Oppenheimer. Thank you for joining Oppenheimer's Industrial Conference, and we're happy to have Air Transport Services Group with us today. We have an outperform rating on the stock and a $27 price target. Representing the company is Quint Turner, the Chief Financial Officer; Paul Chase, Chief Commercial Officer; and Matt Fedders, the Vice President and Controller. Just one quick housekeeping note before we begin: if you do have questions, please submit them in the Q&A section of the webcast, or you can email me at isaac.sellhausen@opco.com, and we'll make sure to get those answered. So thank you so much, guys, for joining us today. It's certainly an opportune time, given your first quarter earnings report the other day and the Amazon announcement as well. You know, I'll let you take it away with a quick overview of the business, and then we'll get into some Q&A as well. Thanks, Isaac, and everybody joining the webinar today. As Isaac said, I'm Quint Turner. I'm the Chief Financial Officer. Been with the company for going on 36 years, so a long time. Air Transport Services Group is, hopefully you already know, is, you know, the leading provider of medium wide-body freighter aircraft, leasing, contracted air transportation, and sort of related value-added services. And, you know, we have sort of a differentiated business model. As we like to say, it starts with the lease, and we are the largest cargo, you know, pure cargo lessor with specializing, as I said, in the medium wide-body category, specifically the 767. And the most predominant aircraft type in our 135, you know, in-service aircraft is the 767-300 freighter. And those aircraft, as many of you know, end up predominantly as the asset of choice in integrated regional air networks around the world that specialize in e-commerce and that type of, you know, freight that has to be available on a time-definite basis. You know, we're about a $2 billion revenue company in size. You know, our Adjusted EBITDA guidances, we'll talk more about later, for 2024 is around $516 million with some upside. You know, we have an excellent balance sheet. Our assets are almost entirely on balance sheet. We don't lease in aircraft. We lease them out. And in fact, we had, at the end of the first quarter, 90 aircraft, you know, cargo aircraft externally leased, you know, as of the end of March. In terms of the revenue base, we have some large customers. About almost 80% of our revenue, I think just a little shy of that, is from our largest customer, Amazon, our next largest customer, the Department of Defense, and our third largest customer, DHL. Amazon and DHL, you know, from the cargo, their cargo business and the regional networks that they operate. The Department of Defense is predominantly from service we one of our airlines, and we own three of them, does for the Department of Defense, specifically moving the U.S. military around the globe. And it's a carrier called Omni Air. And they also operate 767s and some 777s. So again, [audio distortion]sort of in that mainly in the midsize category. We also and this differentiates us from other just pure leasing companies offer, you know, adjacent services, ancillary services that add value for our leasing customers. And those can include all the way up to full operation of the aircraft. For example, for Amazon, we currently operate about 40 767s in their network. As we'll talk about in a minute, yesterday announced some expansion of that relationship with plans to add 10 more by December of this year, bringing us to 50 and a potential to add an additional 10 after this year. Similar for DHL. I think we're leasing them, what, 14 767s at the end of the quarter, Paul. We operate, I don't know, somewhere around 20, 21 airplanes in their network. Again, customers may utilize the aircraft we lease, or they may provide aircraft that our airlines operate. We also have maintenance services that so we can, you know, for a lessee, if they don't need us to fly the airplane on their behalf through one of our airlines, we may do the maintenance or help them with, you know, support, technical support. So it is a differentiated model. We've been around; our origins go all the way back to 1980. So we've got a lot of experience. And, you know, I think that the adjacent services have made the leases and those relationships pretty sticky with our customers. And as I'll turn the call over to Paul in a moment, but, you know, we're dealing with a little bit of a challenging market in the cargo space right now. We've also had some of our aircraft that were the first ones we converted, the first 767s, reaching the end of their useful lives or close to it. So we've had some airline aircraft retirements to deal with at the same time we were growing our fleet. The company has a lot of cash flow visibility. One of our objectives this year is to produce free cash flow, and we intend to expand on that in 2025 and beyond. We have a lot of long-duration customer contracts so that provide that visibility. I think next I'll turn it to Paul and let him sort of give you an update on the current market environment. Sure. Thanks, Quint. It's a pleasure to speak to everyone today. As Quint said, you know, the primary service that we provide is leasing the aircraft, and that's where the majority of our investment takes place. It produces, you know, the majority of the EBITDA in the business. Just to give everyone some perspective, you know, I think where we add value as an organization is that, you know, as a lessor, we serve a niche market, and we convert aircraft to provide on lease to our end customers. That's important for a few reasons. One is, you know, by providing a converted asset, we can do it at a unit cost for the customer that's much lower than it would be a production asset off the line from a Boeing or an Airbus. The way that their networks are structured in the markets we serve, the express and the e-commerce customers, you know, they don't get the same network utilization that, you know, other folks would need if they're buying production assets. So what we do is we look for feedstock aircraft in the market that are typically, you know, operated by airlines such as the Deltas of the world, the American Airlines of the world, and we buy those. And then we put those through a heavy modification process, which includes cutting a big door in the aircraft, removing all the passenger convenience items, reinforcing the floor, and essentially refurbishing the aircraft to a point where we get, you know, 20+ years of service life after modification and then redeploy that asset to the new lessee. And we serve markets around the world. As Quint mentioned, we're the largest lessor of freighter aircraft in the world. We primarily focus on the 767, but we most recently have started to deploy A321. We deployed our first Airbus A321 freighter last year. Then this year we'll deploy our first Airbus A330 freighter, which we're positioning as the natural replacement to the 767 as feedstock becomes more challenging to come by over time. We do that globally. Whether we're leasing directly to an Amazon or a DHL of the world or indirectly, many of our customers are operating networks around the world on their behalf. Now, we also serve combination carriers as well, but our primary focus is the express and e-commerce customer. There's certain markets around the world that we have initiative around more so than others based on their growth prospects. For example, we have a heavy focus this year on growing in Southeast Asia, where we're seeing strong e-commerce growth year-over-year. We're seeing double-digit growth year-over-year in places like the Philippines and Malaysia. And of course, we're seeing strong, as many of you may know, we're seeing strong cross-border e-commerce growth, especially with the likes of the Temus and the Sheins and the Temus of the world, excuse me, who we've seen reports of moving up to 5,000 tons a day out of China, which has a trickle-down effect to many of our customers. So the majority of our leases this year will go globally. So outside of the U.S., we spent many of the past several years growing in the North American market, which still has an opportunity to grow. But we see strong growth outside the U.S. currently. You may have seen our guidance. We guided the market that we'd lease four aircraft this year. We have done that in the first quarter. If you listen to our earnings call, we have the opportunity to deploy more assets this year, but that's not included in our guidance. We're having advanced discussions with many customers on a global basis to deploy additional assets. So 2023, from a cargo perspective, was a challenging year. You know, at the macro level, if you look at cargo ton kilometers, you know, January, we feel was probably the bottom of the market. It's gotten progressively better since then, and the first quarter of this year showed strong growth relative to the first quarter of last year. As I mentioned before, cross-border e-commerce is pretty strong. And so we're seeing demand return, especially on the if you look at the product segments, you'll see demand return for the 767-300 freighter. So I'm encouraged by what we're seeing there, and I'm encouraged by what we're seeing on the deployment of the A330. The A321, which is our narrow-body product, although we deployed a few last year, demand for that aircraft is facing some challenges due to an oversupply of the 737-800 freighters in the market. We do not offer that product, but many lessors do, and it's caused some overcapacity issues. Now, that's a short-term issue. We expect that to work itself out over the next year, probably a year and a half. But we also have opportunities on the engine side to lease the motors off those assets. I feel pretty good about where we are and appreciate the opportunity to answer any questions anyone may have today. Okay, great. Yeah, thanks, Paul. That was a great overview just of the leasing and flying portion of it. You know, I guess just turning to maybe the Amazon agreement to start, you know, could you give us some highlights on that agreement announced the other day in terms of the 10 additional planes you believe flying for them? You know, what does it mean for the ACMI segment and ABX Air? And then how should we think about, you know, the incremental growth opportunity for 10 additional aircraft that could potentially fly with them? Sure. I'll lead off. Paul, you can jump in, Matt. But the 10 aircraft, as I said, will be additive to 40 that we currently operate for Amazon. 30 of those 40, we also lease to them. And the other 10, they have provided. These will be 10 additional that they will provide. With the first of those, we expect to come on board in June of this year. And we would anticipate having all 10 in service by December 1st. So kind of two a month for that, you know, that five-month period. You know, in terms of what it means for ABX Air and for our overall for ATSG, I mean, certainly it's good news from the standpoint of, you know, all airlines have some overhead structures, and we'll be able to hopefully more efficiently utilize our overhead with the revenues that come with this. There will be some startup costs that we will incur, you know, to onboard these aircraft and bring on, what, 50 or more pilots that we anticipate adding, you know, to operate these planes. Our guidance in the first quarter was revised upward by $10 million. You know, that's after netting in what we would anticipate would be, call it $7-$8 million of startup expenses that we anticipate to, you know, incur this year. Of course, it's a partial year contribution as the airplanes only start coming on in June. It'll be, you know, more impactful next year when we don't have those startup expenses. Certainly good news. As part of the contract amendment, we extended the flying agreement, which is a whole separate agreement than our leases. You know, our leases stand on their own with Amazon. We have their 10-year leases, and, you know, there are laddered terms on those. But we did extend the flying agreement under which we'll operate these aircraft by about three years. I think it was due to expire or come up for renewal, I should say, in 2026. And now it would be 2029 with potentially a mutually agreed additional, I think, five-year extension beyond that. So, you know, it cements, you know, for a long period of time, you know, our place as sort of the, I would say, you know, the largest provider of both capacity and operating services, airline operating services to Amazon. We're very pleased about that. You know, as for ABX, it gives them more scale, as I mentioned, helping them, you know, apply that overhead over a larger revenue base. ABX had some other good news along with the announcement of the Amazon amendment in that it was able to extend the agreement with its pilot workforce, you know, until 2030, which is really a good thing. I think the agreement they had was due to come up in 2026 otherwise. This gives labor stability and visibility, you know, into the next decade, which is really a valuable thing. I know ABX's pilots have been, you know, trying to work collaboratively to ensure good service for the customers. It's nice to see that come to fruition with an extended agreement here, you know, for both them and the customer. We had some good news on that front this quarter. We continue to work on our objective of producing free cash flow. In the first quarter, ATSG produced about $15 million of free cash flow. Our goal would be to, you know, have a full year where we produce some free cash flow and expand on that into next year. We continue to see upside potential in our, you know, guidance estimate of $516 million of Adjusted EBITDA for this year based on opportunities to deploy more aircraft under lease. Paul can talk about, you know, some of that and what, you know, assets we have available that, you know, we're out there marketing. We've made significant progress in reducing our capital spending. This year, we're projected to have been able to reduce CapEx from last year by over $380 million. We anticipate to make some further progress next year on that front. You know, as we look ahead, we see a lot of good developments on the cash flow front for ATSG. Okay, great. Yeah, on the last point, I was going to ask if Paul, if you want to handle this portion on the leasing side. You know, there has obviously been some 767-200s returning from service, and the fleet, you know, mix has changed a bit. But yeah, maybe if you could talk about sort of the leasing market demand trends, you know, the difference between any of the types of aircraft. And then maybe if you could speak about your expansion into Airbus with the A321s and the A330s as well. Yeah, sure. Thanks, Isaac. You know, I think with respect to the 767-200s, you know, the majority of those that came back were some of the original leases that Amazon had. So you saw several fall off in the past year. And so, but again, those were extended a few times by the customer and just naturally expired. So you won't see that level of 200 return going forward. And it's really, I mean, as those assets start to come to the end of life, it really helps us move forward with the recent deployments of newly converted 767-300s, then, of course, onto the next generation with the Airbus products. But when you think about the 767, though, we need to be really clear that that is still the flagship of ATSG. It's still, I mean, many of those assets are less than five years removed from the conversion cycle, which I said get added, you know, 20+ years of life to the asset itself. So we'll see multiple leases on many of those assets. Part of the reason that you won't see us convert many more 767-300s, and we still will over the next few years, just at a lower pace, our lower production schedule is that, you know, the feedstock candidates that we go out and buy are just the opportunities to make the right investments for that particular platform just aren't there anymore. You know, we just can't get the right buys, which is why we're making the transition towards Airbus products. And I'll get into that in a second. But we'll still have many aircraft that are fresh from conversion. We'll stay on lease for quite some time with respect to the 767-300. I mean, it's the most widely used medium-wide-body e-commerce platform aircraft in the world. And so it's going to be a mainstay for us for a long time. We're happy with that investment. But when you think about the Airbus product and your questions about some of the differences, I'll start with the A321. And the A321 is an interesting product because although I said earlier there's an overcapacity of the 737s in the market, and that's hurting demand for the A321, it's really that's a pricing issue because people are filling the market with some very low-priced 737 products. But really, then that's a short-term issue. Really, when you think about the medium to long term, that aircraft is designed to be a replacement of the 757 aircraft. So it carries, you know, 95% of the cubic volume of the 757, but with roughly 18%-19% lower operating cost. So when you think about e-commerce and the medium-wide and express and the markets we target, our customers really are more interested in volume than weight. Because you think about things in a box. So if you get, you know, something you order online, typically there's more air in the package than there is product. And so that plays into the volume. And so, you know, it's really the 757s over the next five to eight years will start retiring at a very accelerated clip, and it'll start providing a great opportunity for the A321 to move into that market. So I'm really happy, and I think that's going to be a great seller for us long term. But when you think about the medium-wide-body product that are transitioning into the A330-300 freighter, it is the logical replacements of the 76. It's the right buy. You get newer aircraft, but you also get about 20% more volumetric capacity in that aircraft. And so although, you know, it's an Airbus product and excuse me, we've leased Boeing products, it's still in our DNA. We're still using the medium-wide-body space. We're still sticking to what's core to our DNA and offering products to our customers that fit that mold, right? But also what's interesting and what's important to remember is that many of our customers have already selected this platform. So we're not, you know, we're not going out about this without any sort of, you know, market support, right, from our customers. For example, DHL has brought this into their fleet, and Amazon has chosen to lease these aircraft as well. Not from us yet. But they've given their vote of approval by selecting this aircraft in their network. So we feel confident about, you know, our investment decisions on those platforms going forward. Okay, great. Yeah, that's very helpful. So I guess just flipping over to back to the ACMI side, you know, I guess there's been a little bit of disruption and headwinds at Omni, you know, just due to the conflicts in Israel and Middle East. But, you know, as we move out of that, maybe you could talk about your expectations for that to normalize over time and then just sort of the overall demand trends that you'll see. Yeah, I mean, we said, you know, in the fourth quarter when we had, you know, there were the October, you know, attack in Israel, that October typically is the single biggest month in terms of movement, troop movement. And that sort of put a, you know, put a freeze on that, so to speak, or at least slowed it down significantly. And we said on our earnings call after the quarter that the fourth quarter block hour volume we had for Department of Defense flying was, I think we hadn't seen it that low since the fourth quarter of 2017, which actually predates when we acquired Omni. And I think, you know, that while that did continue into the early part of first quarter, you know, we did see some improvement in utilization from that large customer as the quarter went on. You know, we think that, you know, but of course, baked into our guidance is year-over-year, very similar results. So we think there's upside potential if we see, you know, the demand pattern from that customer go back to something that's a little more normal. And there are some, certainly some signs of improving utilization that we've seen since January, I would say. Omni, since we acquired them, has actually exceeded our expectations in terms of, you know, the cash flow that we've produced. And they've actually performed very well. It's just they're not as predictable because they don't fly a set schedule the way our, you know, cargo network customers do, where they're serving, you know, specific geographies and cities on a scheduled basis. So that has, you know, usually that's meant we ended up with more utilization than we would have guessed because sometimes special situations arise geopolitically or what have you that drive us into higher utilization. This hasn't, you know, didn't work that way, at least to this point. But we do expect demand patterns to resume. And Omni has traditionally flown just a little over 50% of all the commercial moves for, you know, our troops around the world. So they remain, you know, a core carrier and they, you know, they provide excellent service to that customer. Okay. Yeah, that makes sense. I was going to ask on the cost and inflation side. You know, I know a lot of costs, it's just fuel and so forth are passed through an ACMI. But could you discuss a little bit about what you're seeing in terms of labor inflation, you know, and how you navigate that? You know, you mentioned the labor agreement with ABX recently, but you also have ATI and Omni labor discussions ongoing. So maybe just a discussion on that would be helpful. Well, we have seen, you know, one of the problems, and of course, it's been all over the airline industry, is, and we've all heard, you know, the pilot shortage, and we've seen some of the large majors, you know, agreeing to contracts with substantial increases. As a result, sort of the carriers, you know, regional carriers and carriers who aren't the big majors have seen pressure on, you know, staffing. They've had increased turnover, which drives additional training costs. We weren't immune to that. We certainly saw that at our carriers as well. It does seem, though, that, you know, as some of that demand has been filled and perhaps things have slowed down a bit from where they were at some of the passenger carriers and even some of the other integrator airlines like FedEx and UPS, that there's been some slowdown to that. I think the growth, certainly adding additional aircraft at ABX, all of that combined, along with the new agreement that we to extend the ABX contract, we anticipate we'll have a, you know, a favorable impact on turnover. We should see a bit less of that. That'll help our cost pressures, you know, because there'll be less training and recruiting costs associated with dealing with that turnover. Inflation certainly has been a factor over the last several years. I think on the good side, it's forced us to, you know, sort of wring out efficiencies where we could find them. The growth that we're getting with the expansion of the Amazon relationship, as I said, helps you utilize your existing costs better, which can be helpful for margins. We do, as part of our contracts, we do receive annual escalations that are embedded in those contracts. So we expect profitability to improve in our ACMI services segment where our three airlines are summarized as we move forward. And, you know, it's just unfortunately, it's a fact of life. Everyone's dealing with these days is there is higher inflation than we had seen for a long time, that along with interest rates. But it's just forcing us to, you know, do the right things to try to offset as much as that as possible at the same time that they work their way over time, hopefully, on the revenue side. Yeah. Okay. Yeah, makes sense. You know, you touched on capital allocation before. You know, the company has obviously pulled back on both the sustaining maintenance CapEx side and the growth CapEx side as well. You know, could you just talk about, you know, the shift in terms of priorities towards generating free cash flow like you talked about? And then, you know, sort of change tack to that, maybe talk about your conversion strategy as well in terms of what 2024 looks like as far as remaining conversions and, you know, what 2025 would look like too. Yeah, we said last year, you know, with the slowdown in cargo that we saw late in the year and the fact that we are, you know, good news, bad news, we have aircraft available that much of our investment has already been put in. I think on our latest quarterly release, what it was about 18 aircraft that, you know, are in or awaiting, you know, available to be leased. You know, and Paul mentioned the 321s. There's also 767s later this year. The first of our A330s come out. And, you know, as Paul would tell you, there's ongoing discussions for much of those. Our guidance was predicated only on leasing four aircraft that were under contract. All four of those were leased in the first quarter. So any of these aircraft that are currently available for which we've pretty much made our CapEx and, you know, substantial CapEx investments already, as we deploy those in a lease, that's going to be upside to our guidance. And so, you know, that's the good news. And it won't take a lot of incremental CapEx investment to complete them. Last year, we suspended, other than the 767s that were in conversion lines, and I think there was, what, about six or so of those, we suspended putting any more in, you know, until we've cleared the available aircraft pipeline we have now. We will have some that are in passenger configuration that we have not inducted in conversion. And as we said, we'll look to generate cash flow from perhaps leasing engines or something else in the interim. You know, as a result, that's why our CapEx dropped so substantially. We're doing the rational thing in this market and based on our inventory of aircraft, we're pulling back on the CapEx side and just going to concentrate on executing, you know, additional leases whenever we can to improve the cash flows. Okay. Got it. You know, and just a final question here. We just have about a minute left, but more higher level. Have you seen any changes to the competitive landscape or environment? You know, there's obviously been some M&A activity in the space last year. But yeah, anything that you could add there would be great. Yeah, I don't know. You know, as you know, M&A, when the interest rates went up, it got a little bit, you know, it wasn't as robust as what we'd seen, right, in prior periods. So I, you know, I wouldn't say we really, in terms of competition, you know, a lot of folks compared us with Atlas Air, you know, when they were public. And there were some similarities, but there were some real differences. You know, they had different equipment types, you know, the large, they concentrated more on the ACMI long haul than the network flying. We were more of a leasing entity in terms of our focus than they were. They were more of the ACMI focus. So it's hard to find a perfect comp, which makes it a little difficult in terms of, you know, gauging us versus others because we are different than a pure leasing company. But we believe that, you know, when you look at the cash flows, the lower leverage we have versus other leasing companies, the, you know, the customer relationships, the blue chip credits, which make up the majority of our revenue stream, and the engine of e-commerce, which really drives demand for both our leasing and operating services, you know, we think there's a lot to like about our business model. M&A-wise, I wouldn't say that it's been a major impact on the competitive landscape for us. Yeah, that makes sense. Well, great. I think that wraps up our fireside chat. Thank you so much, Quint, Paul, and Matt for joining us. It was a great conversation and look forward to seeing you soon. Thank you for having us. Thanks, Isaac. Thanks a lot. Thanks so much, guys. Have a good day. Have a good day.