Good day, and welcome to the Triton International Limited first quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to John Burns. Please go ahead. Thank you, Jordan. Good morning, and thank you for joining us on today's call. We are here to discuss Triton's first quarter 2021 results, which were reported this morning. Joining me on this morning's call from Triton is Brian Sondey, our CEO, and John O'Callaghan, our Head of Global Marketing and Operations. Before I turn the call over to Brian, I would like to note that our prepared remarks will follow along with the presentation that can be found in the investors section of our website under investor presentations. I'd like to direct you to the slide two of that presentation and remind you that today's presentation includes forward-looking statements that reflects Triton's current view with respect to future events, financial performance, and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Triton has provided additional information in its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation, and we encourage you to review these factors. In addition, reconciliations of non-GAAP measures to the most directly comparable GAAP financial measures are included in our earnings release and the presentation. With these formalities out of the way, I will turn the call over to Brian. Thanks, John, and welcome to Triton International's first quarter 2021 earnings conference call. I'll start with slide three of our presentation. Triton achieved outstanding results in the first quarter of 2021. We generated $1.91 of adjusted net income per share, an increase of 12% from the fourth quarter of last year. We achieved an annualized return on equity of 25%. Our excellent results in the first quarter were supported by very strong market conditions. The balance of container supply and demand remains highly favorable for us, and all of our key operating metrics are at a high level. We are focused on locking in durable benefits from the current strong conditions. We are making large, high-value investments in our container fleet. We are placing our new and used containers on leases with very long durations, and we are further securing our position as the go-to supplier in the industry through our unique ability to meet even the largest and most urgent container needs of our customers. Triton's balance sheet is in great shape. Our leverage remains historically low despite our aggressive fleet investment. Our corporate credit rating was recently upgraded to BBB- by Standard & Poor's. We continue to raise substantial amounts of efficient capital to support our fleet investments, including our recent inaugural issuance of senior secured investment-grade bonds. We expect market conditions to remain strong as we move into the traditional summer peak season for dry containers. We expect to continue to achieve outstanding results. I will now hand the call over to John O'Callaghan, our Global Head of Marketing and Operations. Thank you, Brian. Turning to slide four and the current market overview. We continue to benefit from favorable market conditions and trade volumes remain exceptionally strong with ongoing demand for goods and retail inventories remaining below normal levels. The lines continue to face logistical challenges in accessing and repatriating equipment, empty containers, which is boosting demand even further. The container manufacturers have significantly ramped up production to meet demand, but the availability of containers remains limited. The lines have continued to rely heavily on the lease companies for their containers. Triton has again secured sizable bookings servicing those shipping line requirements due to our extensive supply capability. We have ordered $2.6 billion of containers so far in 2021 and already secured in excess of 35% of the lease market share and locked in 20% asset growth for 2021. $700 million of containers have been absorbed by our customers in the first quarter. This will rise further as deliveries accelerate through the second quarter. In addition to securing a sizable share, the average duration of new production business is over 12 years, with an expected lifetime ROE in the upper teens. A large percentage of the used depot containers have been locked into Lifecycle leases. The remaining sale inventory is very low. The continued strong demand for used containers is reflected in the steep incline in the sale price, which continues to strengthen. Slide five illustrates that strength. Trade cargo volumes have continued to remain above pre-pandemic levels since July 2020. Market forecasters expect solid trade growth in 2021. You can see monthly trade volumes are still very strong with significant improvements over last year and remain at record levels. There was a slight anomaly in February, which is normal for over the Chinese New Year period, but the year-on-year performance remains strong. Turning to slide six. Slide six helps illustrate why vessel space and container shortages are driving freight rates and container prices to record levels. Trade volumes continue to be restrained by the lack of container vessel and vessel capacity, pushing up freight rates, container, and disposal prices. You can see in the upper right chart that new container prices are in the range of $3,500. The bottom chart illustrates that the sale price of used containers increased steadily throughout the quarter. The shortage of available sale containers led to prices increasing week-on-week as the inventory has been depleted. The chart on the left illustrates the Transpacific and East-West spot freight rates relative to bunker costs. This also perfectly encapsulates where we are at this point in time, with container shortages as well as a lack of ship capacity, pushing container prices and freight rates to unprecedented levels. Slide seven. Slide seven shows that Triton's key operating metrics reflect the strong market and are pushing up even further than we predicted. This can clearly be seen in the top left chart, with utilization at near maximum levels. We have accepted and placed on order 890,000 TEUs so far in 2021. The majority of which have been locked into durable long-term leases and will be absorbed by our customers' fleets over the next two quarters as they become available at the factories. Over 75% of the used containers have gone into Lifecycle leases, and the average in-fleet rate has increased. Lease outs of used containers are now slowing as we bump up against full utilization and the last depot units go on lease. The bottom charts demonstrate the significant bookings of new and used dry containers over the last nine months. On the bottom right chart, looking to the extreme right bar under what's current, we only have limited dry depot units remaining uncommitted around the world. The lower left is a chart showing new leasing transactions by quarter. The bubbles represent a significant amount of new production at the time the leases were negotiated. The leases negotiated in 2021 have an average duration of 12 years, and the bubbles also illustrate the increase in market lease rates as container prices jumped to meet demand. Turning to slide eight. Slide eight shows container production and the evolution of new container inventory, as well as the overall container fleet over the last 10 years. On the upper right, you can see new production inventory, and despite the factories ramping up container production activity at the end of last and the beginning of this year, inventories of new containers remain very low. What's sitting on the ground roughly represents two to three weeks of supply only. The chart on the left shows annual production also broken out in percentages between leasing companies and shipping lines. There are a couple of observations on this chart. First quarter production is half of last year's, and we show on the dotted line that we expect a substantial amount of new production to be built over the remainder of 2021. This would represent over 6%-8% growth in the container fleet. This may be higher than anticipated trade growth, but container production was not much above replacement value in 2019 and 2020. To some extent, we're still playing catch up. While not shown on here, we believe most of the containers scheduled for delivery in the first half of the year are already fully committed to lease. Finally, as you can see by the percentages in the orange box at the bottom, the leasing share has been strong in this current surge. I'll now hand you over to John Burns, our CFO. Thank you, John. Turning to page nine. On this page, we have presented our consolidated financial results. Adjusted net income for the first quarter was $128.7 million, or $1.91 per share, an increase of 12.4% from the fourth quarter, and over 100% from the prior year's first quarter. These exceptional results represent a return on equity of 25%. Turning to page 10. Our results from the first quarter reflect the benefits of the continued surge in container demand that started in the second half of last year and continues to generate strong leasing demand and exceptional disposal gains. We added $700 million of new containers in the first quarter, growing our fleet by 6.1% in just one quarter. Lease revenue was up 2.8% over the fourth quarter. Normalizing for the two fewer days in the first quarter, leasing revenue would have been up 5%. Average utilization increased 1% from the fourth quarter to average 99.1%, and utilization is currently 99.4%. These near maximum utilization levels drove down direct operating expenses by $5.5 million from the fourth quarter, largely due to lower container storage and repair expenses. The container shortage and high new container prices continue to drive disposal gains to record levels, resulting in $30.1 million of gains on sale and trading margins in the first quarter, a jump of $4.7 million over the fourth quarter. This increase was in spite of a roughly 50% decrease in disposal volumes, as our available sale inventory has shrunk to exceptionally low levels due to limited container redeliveries. The current strong market conditions are also significantly enhancing the credit profile of our shipping line customers. Turning to page 11. On this page, we highlight our strong balance sheet, significant liquidity, and our well-structured debt portfolio. Our key leverage metric is net debt as a percentage of revenue-earning assets, this metric was approximately 70%, which is at the low end of our historical levels. Our current strong cash flows will enable us to maintain our leverage at the low end of these historic levels, despite the $2.6 billion of new container investment. We have access to a wide range of funding sources to support our new container investment and have raised $1.8 billion of new debt this year at an average yield of 1.9%. In addition to our low leverage, we have significant liquidity, as shown in the table on the right. Turning to page 12. We are very excited by S&P's recent upgrade of our corporate credit rating to BBB-minus. We believe this investment-grade rating reflects our industry leadership, strong long-term earnings, and a conservative balance sheet, and it further differentiates us from our peers. In April, we issued an inaugural senior secured investment-grade bond, which was well-received. We issued $600 million of five-year notes at a spread of 120 basis points over Treasuries for a yield of 2.07%. This inaugural deal introduced Triton to the investment-grade bond market, and it gives us access to the deeper pool of debt capital and tighter spreads provided by that market. The S&P upgrade and the success of our inaugural secured offering provide a path for us to transition our key debt capital funding sources to the more traditional unsecured investment-grade bonds. This transition is currently constrained by the high portion of our assets that are pledged to secured financings. As part of the transition process, our recent secured bond issuance included a collateral fallaway provision, which is a structure that will help us create the necessary pool of unencumbered assets in the future. If we are successful in transitioning to being an unsecured investment-grade bond issuer, we would expect further benefits, accordingly, intend to actively pursue this transition. Turning to page 13. The graph on the top left shows our cash flow before capital spending, you can see the resiliency of our cash flows across market cycles, you can see the strength of our current cash flows in the annualized first quarter figure. The graph on the bottom left shows our stable cash flows together with short order cycle for containers enables us to maintain our leverage in a steady range over the long term. As I noted earlier, our strong cash flows and profitability supports our high current growth rate with limited impact on our leverage. The graph on the right demonstrates how these strong cash flows and our financial stability have enabled us to create significant shareholder value by steadily growing the book value of the business while paying a substantial dividend. I will now return you to Brian for some additional comments. Thanks, John. Slide 14 shows that Triton is building long-term value and locking in durable benefits through our aggressive fleet investment and our focus on long-duration leases. The chart on the left shows the expected growth of our revenue-earning assets through the second quarter. We've ordered over $2.6 billion of containers for delivery in 2021, and most of these containers are scheduled to be delivered by the end of July. The chart on the upper right puts our expected new container leaseouts and average new container lease durations into recent historical context. Based on our existing lease commitments, the pace of new container leaseouts in the first half of 2021 should significantly exceed the pace we achieved during the strong markets in 2017 and 2018. Our average new container lease durations have also increased substantially. The average lease duration for committed lease transactions is now over 12 years in 2021. These long leases lock in the current favorable economics for most of the container's life, which boosts our investment returns and reduces our exposure to weak market conditions in the future. The chart on the lower right illustrates how we're using Lifecycle leases to further protect our lease portfolio. Lifecycle leases are primarily used for used container pickups. Under a Lifecycle lease, our customers agree to keep all containers on hire until the end of their useful life, which eliminates the utilization risk for these containers and usually leads to extra revenue years. In return, we offer customers advantage pricing and maximum logistical flexibility at all times. Since last July, roughly 75% of our used dry container pickups were placed on Lifecycle leases. Now about half of our total dry container fleet is covered by Lifecycle leases. I'll finish the presentation with slide 15. Triton is off to a great start in 2021, and we expect market conditions to remain highly favorable. We expect our performance will remain strong. Our disposal gains may be increasingly constrained by very low disposal volumes, but we expect strong growth in leasing revenue and expect our adjusted earnings per share will remain near the record level we achieved in the first quarter. Triton is also extending our leadership advantages. Our aggressive fleet investment is extending our scale and cost advantages, while also further securing our position as the go-to supplier in our industry. The opportunity to transition our debt issuance toward investment-grade bonds should provide a meaningful boost to our capital efficiency. We are highly focused on locking in long-term benefits for our profitability and cash flow. Our substantial new container investments are being placed onto long-duration, high-value leases. The large number of used containers on Lifecycle leases will underpin our utilization for years to come. We'll now open up the call for questions. We will now begin the question and answer session. To ask a question, you may press star, then one on your phone. If you are using a speakerphone, please pick up your headset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Ken Hoexter with Bank of America Merrill Lynch. Please go ahead. Hey. Good morning, Brian, John, and John. This is obviously a great quarter. You talked about it last quarter in terms of how things were improving, and utilization obviously can't get much higher. What gets better from here, and how do you look out and continue to grow? Brian, we've been at this, following you for more than a decade now, and it just seems everything has come together right now post the acquisition, given the environment, given the upgrade. Where's the risk to the model here? Is it just returning to the cycle and things that are on long-term lease become shorter going forward? I guess, what is the outlook for you from here? Yeah. Thanks, Ken. We are very pleased with where things are and think we continue to be really well-positioned to benefit from what's happening in the world. In terms of where we go from here, the first thing is we have a lot of runway to go on the containers that we've purchased and the deals that we've done. We've probably said a few times that we've bought $2.6 billion of containers, and I think John Burns mentioned that something like $700 million of that was delivered and accepted in the first quarter. The vast majority is still to come in terms of delivery and pickup, and the vast majority of those containers are already committed to lease. There's certainly a long way to go in terms of leasing revenue growth and profitability growth just from the deals that we've already done and containers that are in the process of being produced. I'd say when we talk with our customers about where the market goes from here, I think, obviously the market's very strong for a number of reasons, and it's because of that, probably harder to predict than usual. I think the conventional wisdom and what we hear from customers and what you read, what they're saying about their results is that there's an expectation that very strong conditions last deep into the year, certainly through the summer, likely into the fall, and maybe through the year. There's definitely room to play, I think, in this current environment. The thing that we keep trying to hopefully get across is that what we're doing right now in this current environment is going to create benefits that last for many years. Even if inevitably the market comes back down to a normal balance of container supply and demand, in the meantime, we've locked away billions of dollars of containers on very high value, very long duration leases which as we see it, has shifted our likely performance range in the future, both shifted it upwards and narrowed the likely range between sort of good outcomes and less attractive outcomes in terms of the future state of the world. We feel very excited about all that. We're again, very excited about the upgrade to our corporate ratings, the BBB-, and the path that that gives us to be hopefully a more regular issuer investment-grade bonds, hopefully also eventually unsecured investment-grade bonds. That certainly further differentiates us in this industry, gives us a capital advantage to go on top of our operating and customer advantages. Yeah, we feel that obviously the world doesn't always stay in a way that's just perfect for us. Again, we think we're making improvements in the business that will last for quite some time. Also really further separating ourselves from the pack when it comes to our capabilities and cost structure and customer positions and so on. Just flipping to the bubble chart on page seven, if you can for a second, which showed the trend of leasing transactions that John O'Callaghan talked about. If I look at the big bubbles kind of in a year ago, you were at 0.8% pricing. Would those be on shorter-term leases that you have a chance to reprice and improve further? Or would those at the start of this cycle also have been on longer-term leases? Certainly on long-term leases, I think, virtually all the deals that we've done since July were on kind of minimum five years. If you look at the chart we included back in my section, I think it's page 14 which looks at the evolution of the lease terms over the last couple of years. You see that the lease terms were still pretty long in the fourth quarter of last year, I think probably averaged eight or nine years, what we were doing in the third and fourth quarter. The one thing I'd say about that bubble chart is the size of the bubbles is a little bit confusing in the sense that because we wanted to track market conditions when it comes to leasing rates, we kind of located the deals from a size standpoint based upon when the deal was negotiated, rather than when the containers are picked up. You see the bubbles look bigger in the third and fourth quarters in 2020 than they do in 2021. In fact, the pickups will be bigger in 2021. Okay. Lastly from me, I mean, just phenomenal seeing these still at 3,500 for new boxes. Are we seeing a surge in leasing, do you think, Brian? Is that a suggestion from the liner companies that they're seeing the end to the-- I mean, it's conflicting question because are they seeing an end and thus they're putting more on lease? Are they putting lease just because it's a way to get access to boxes? Is there anything that you view in change just given how tight it is? Is it just a land grab, it's just so tight I need to get boxes any way I can? Maybe just from your experience in looking through cycles, how do you view that now? Yes, I don't think there's a big connection between the price of containers right now and the amount that our customers are leasing. In fact, if you look back to what was happening in the second half of last year when this market took off, the leasing share was also very high back then, and container prices weren't really that high, at least not till the end of the year. I mean, I think a couple of things is going on. One, we've said before, and we believe that a lot of the shipping lines have just made the decision that leasing is probably the way they want to bring most containers into their fleet. That there's a lot of benefits they get from not having to plan so far in advance, especially to deal with surprising markets like this one. It's probably easier for us to maintain bigger inventories of available equipment because we can spread that risk across many customers. Where for an individual shipping line, they're taking all that speculative factory or certainly container additions on themselves. In addition, we talked about how the extra cost of leasing relative to the cost of the customers owning and financing their own containers has come down a lot as leasing companies have gotten bigger, as our financing has become very efficient. I think a lot of the lines have just decided leasing is just a sensible way to rely on adding containers. Then maybe just on top of that, what I mentioned earlier is just that at times of greater uncertainty and less predictability, that's where leasing is even more valuable because you can make decisions on short notice. I think that's what's happening. We're making big investments to make sure we have ready inventory because we see that valuable service to customers. It's how we're generating a lot of leasing share for ourselves. It's something we think continues. Well, wonderful. Appreciate the time and thoughts. A lot of things have certainly come together for you. Congrats. Thank you. Yeah. Thanks, Ken. Our next question comes from Michael Brown with KBW. Please go ahead. Thanks, operator. Hi, good morning, guys. Yeah, hi. Good morning. Brian, I just wanted to maybe start off with a question a little bit higher level here. I mean, obviously it seems like disruption just continues to be a very persistent trend and theme in the shipping market, whether it's Suez Canal being a major issue and all over the news or port congestion and just general supply chain disruption. What I'm trying to parse out is really, in your view, what does this really mean for the shipping lines? Is this kind of like a secular trend where they just need to really run with more equipment than they had historically just to be better prepared for these one-off events that just seem to be much more frequent than they've been in the past? I'm just curious what you're hearing from the shipping lines and what your thoughts are there. Yeah. You're right. I mean, certainly we hear a lot about a variety of operational disruptions. Starting, I think back when the lockdowns first started occurring with stranded containers, retailers and wholesalers holding onto containers as kind of almost like temporary warehousing. Probably that transitioning to then just the flood of containers overwhelming the ability of the ports to move containers in and out, and so that loaded containers coming in were getting prioritized, empty containers going out were not. Yeah, finally the icing on the cake, the blockage of the Suez Canal, just slowing the flow of containers and requiring more containers to be added in at the front end to handle the cargo that wanted to load. All that is slowing down the velocity of containers and meaning the shipping lines need to box up to handle even more than they would just based upon the growth in trade. What we hear is that most customers don't think these bottlenecks are going to evaporate quickly. They also don't think they're necessarily permanent. What we're all trying to figure out is just what does that transition process look like? I haven't seen any of our customers express confidence that they can say within this current strong period, unbottleneck their operations. I think our general view is it likely continues until trade slows and who knows exactly when that's going to be. I think probably the betting is sometime end of this year or early next year when maybe the trade world starts to get back towards normal. Again, that's just a guess. From our standpoint, what that means is we're always on lookout for not just what is container supply and demand now, but what's it likely to be in the future. No doubt as bottlenecks ease, that could free up container capacity effectively. Something that we need to think about for what container supply and demand might be in 2022. Overall, we're pretty optimistic about that in the sense that economic growth forecasts are right now quite optimistic for 2022. Trade forecasts are pretty optimistic. A lot of the container production that's happened this year, as John O'Callaghan pointed out, to some extent is making up for low production volumes in 2019 and the first part of 2020. Finally, we're never really that exposed to a sudden change in market conditions that the vast majority of our containers on long-term lease, the available inventory we have of unbooked new containers, it's meaningful in the sense of our ability to supply customers, but relative to our overall fleet size, it's not that big. There's a whole bunch of moving parts right now where we're trying to be mindful of all of them. Again, we feel we should be able to adapt pretty flexibly as the situation changes. Yeah, great. Thank you for all that color. Very comprehensive. If I change gears to a lot of the capital actions that you guys took on the balance sheet. Your interest expense is down over 20% year-over-year, so it's really great to see you're taking advantage of the rate environment here. As we start to look forward, just wanted to hear your thoughts about potential for any other actions that you guys can take here. One area that jumps out to me is some of your preferreds with the relatively high dividend rates. Is it possible for you to buy back some of those shares? I think that was part of your buyback authorization is to actually take out some of the preferreds if you find that economically attractive. That's just kind of one thought that came to mind, but just curious what other levers are at your disposal here? Maybe just a question for John. With all the moving pieces on the debt side, where's kind of the interest expense likely to land next quarter, just to make sure we're kind of in the right ballpark here? Well, Michael Brown, let me take a crack at that and Brian Sondey chime in, certainly. I think a number of things. We talked about we're excited about what the upgrade by S&P provides for us. There is a transition process that'll take a little bit of time, but we do think that over time, there will be meaningful benefits transitioning to, again, we need to be successful in doing it, but getting there will provide meaningful improvement in our efficiency of capital or debt capital. On the preferred side that you mentioned, would like to take out those if we could. Unfortunately, there's a five-year no call on the preferreds. We like that product. Again, we don't think of it as debt. We do think of it more as equity the way it's structured. It's fixed for life, and there's no put. We think it's more equity-based. Anyhow, overall, the ABS deals we did in the first quarter, the inaugural deal on the bond transaction, again, combined 1.9% really would be used funding a lot of the CapEx we talked about. That'll meaningfully bring down our effective interest rate for the first quarter is about 3.3% including the debt itself and amortization of fees. We expect that'll come down into the high 2%. Again, over time, hopefully as we transition to the investment grade bond market, that there's more opportunity there. I think as John pointed out, too, even though 3.3% probably is somewhat of a low point for us for an average effective interest rate over a while, it's quite a bit above where our marginal financing cost is. We've been for many years reliant on fixed rate financing, which we think is a very good match against our fixed rate leases. As interest rates have fallen really far, the balance sheet transitions slowly, but certainly the incremental debt we're putting on is at rates below our averages. Then maybe just one point on the preferred. John mentioned we'd love to call up the preferred, and that's really just because the rates on those are higher than we could issue for today. We actually, as John mentioned, we do like the preferred as a part of our capital structure that we think, again, we don't think of it relative to the cost of our debt. We think of it mostly relative to the cost of our common equity. Again, to us, it looks like it provides a nice mix of sort of risk protection and overall capital cost. Of course, yeah. I certainly agree, and it certainly should be in common. Maybe just one last one. What are kind of the cash on cash yields that you guys are getting on these transactions? Obviously, the high prices and the strong demand on containers certainly probably supports very strong cash on cash yields and ROEs. The fact that you're getting such long terms maybe is a bit of an offset there. Just kind of curious, are they low double digits? Just what's the current market? First thing I'd say is we typically don't focus that much on cash on cash returns. When we model our leases, it's much more on lifetime levered equity returns, and those remain stronger than usual in the upper teens in terms of a modeled lifetime equity return. In terms of the cash on cash, I mean, you're right that we are focusing on long-duration leases, which does have the effect of bringing the cash on cash yields down because of those durations. Most of the, I guess, if we're doing 10, 11, 12-year leases, the cash on cash is in low double digits. Again, we think just given those durations, that translates to quite attractive equity IRRs. Great. Okay, thank you for taking my questions. Our next question comes from Larry Solow with CJS Securities. Please go ahead. Hi, good morning. It is actually Lee Jagoda for Larry. Great quarter. Great, thanks, Lee. Just a couple questions for me. I think you mentioned a bunch of times that you've ordered $2.6 billion of new containers so far this year, and obviously $700 million got absorbed in Q1. That being said, looking at your guidance for Q2 and then trying to understand the visibility for the balance of the year, if all of these new containers are going to be absorbed over the next couple of quarters and you've got committed leases for them, why would Q2 only be sort of consistent with the Q1 levels, and why shouldn't we see more of a sequential uptick as we go through the year in terms of earnings? Yeah, certainly a good question. We really think of it maybe in two pieces. Most of our revenue and profitability is from leasing containers. The leasing revenue and leasing margin, we do expect to go up strongly sequentially through 2021 for the reasons you mentioned, that we have lots of containers committed to leases that are going to be building up that lease revenue base and leasing margin base. On the other hand, we've been making extraordinary gains on selling our used containers. We've got some charts, the graphs that we showed, where you see the price for used containers has, I think, more than doubled on an absolute basis, which maybe means the margin has probably gone up by a factor of three or four, given that the gain is over a fixed residual value. It just so happens that we had enough containers and inventory to carry us through the end of 2020 and into 2021. We show a chart on page seven of the presentation that looks at container pickups and drop-offs, which is in the upper-right chart on that slide. If you look at the container drop-off volume, like you can't even see the color on the picture. It's that I shouldn't say no, we're getting very few containers returned by customers because the containers they have are at a very big discount to the market leasing rates. Typically, our leases don't require containers to be returned immediately when the lease expires. So we're getting almost no containers back, which means we have very few containers that we can sell. So we expect those large disposal gains to come down. We said price probably going to continue to go up, and the per unit gains are going to go up, but our volume is coming down very quickly. What's happening is we see this growth in this recurring leasing revenue and recurring leasing margin, which is great, but that's going to be offset at least for a little while, by a headwind of decreasing disposal gains. Got it. Then just thinking about your visibility in total, you guys have done a phenomenal job since the middle of 2019, extending your lease durations from five years to what's going to be closer to 12 years here. How should we think about your earnings run rate in terms of a lag when and if demand ultimately falls and utilization falls? How long can you hold on to sort of the positive performance we're seeing now? Any way to kind of project out three, four years in the face of a 12-year lease duration, like what a kind of normalized level of earnings might look like? Yeah. Of course, we do a lot of that internally. We've got a forecast model for the business that's built up on a lease level basis, which allows us to do a lot of exploring on what do these very long leases mean in terms of likely outcomes in the future for profitability. We typically do forecast our business five, six years out to see what may happen given different states of the world. What we find is that if you were to look back at 12 months ago at the sort of likely scenarios that we ran based upon future market conditions and look at the scenarios we're running today, that two things have happened. One, our expected profitability has meaningfully shifted upwards. Not because we're so much more confident what the world might look like in 2025, but just because we've locked in so much value and so much profitability and cash flow from all these leases that we're doing, and from extending even our existing containers on very long-term leases. The other thing that's happened is the gap between our more optimistic and more conservative cases in terms of what the world might look like, that while our assumptions haven't changed, the impact on us has narrowed because, again, of that very large block of business that's locked in one way or the other. We don't give long-term guidance to the public. Basically, you could think of it as our view of the future has become more optimistic, and the gap between the good outcomes and more sort of challenging outcomes has narrowed quite a bit. One last one for me. I think one of the things you mentioned was, as a result of being able to extend these customers in a favorable rate environment, you've sort of given the customers more flexibility on the back end of the lease. I think as I remember it, one of your big competitive advantages was the ability to have customers return units to favorable locations to be easily leased out. Has any of that changed as a result of the more favorable lease terms you're getting on your side? No. That's still a very key part of our leasing structures, and that's why I think I was trying to differentiate, and sorry if it wasn't very clear, between normal leasing structures and Lifecycle leases. For regular leasing structures where containers could be returned prior to their sale age, we're highly focused on making sure the containers come back to good demand locations, which these days, primarily Asia, mainly China. That tight logistical focus of ours is one of the reasons why we can maintain high utilization across different kinds of market cycles and across the container life. For Lifecycle leases, all the containers by definition, will come back at the time the container is sale age. It just so happens that the sale market for containers is much more even globally. We can sell containers very effectively all over the world. In fact, given our significant infrastructure, we can sell containers in far more locations than anybody else can in the world. That allows us to give customers the opportunity to return containers in the middle of Europe, in the middle of the U.S., in South America and Africa, which could provide significant backhaul savings for the customers. Part of the deal is, okay, we say to the customers, "Hey, you take these containers and rather put it on a five-year lease, we'll put them on a lease that's flexible based upon the container age." They all come back, at the time the container is ready to sell. In return for that, we're going to give you probably a little bit better of a rate. We're going to allow all the containers, when you're ready, to bring them back where you want to bring them back, rather than requiring you to bring them back where we want them to come back. It's because we can sell them effectively anywhere. That sounds great. Thanks very much, guys. Thank you. Our next question comes from Dan Day with B. Riley Securities. Please go ahead. Yeah, guys. Thanks for taking my questions. Just a quick one first. The direct operating expenses came down a lot, $9 million-ish for the quarter. Just as long as we're above the sort of 99% utilization rate, is that sort of the right number to think about, or is there anything one-timing in the first quarter that it was particularly low? No. Thanks, Dan. No, that's right. The big expenses included in direct op is storage. Where utilization is, to your point, and also, as we've mentioned a couple of times, that the sales deck, which is not calculated in utilization, is also at extraordinarily low levels. Repairs is the other item. Again, as Brian pointed out on that chart, very limited number of units coming back. Again, we don't anticipate that low level staying forever. At this current state, I'd say you're probably getting to the bottom on the direct operating expenses and nothing unusual was in there in the quarter. Got it. Thank you. Just kind of capital allocation. Obviously, you're putting on a ton of CapEx the next few months. On the other side of this, say, next year, you guys were really well set up to generate a ton of cash. Just can you remind us how you think about sort of maybe raising the dividend, buying back shares? Just kind of once we're on the other side of the CapEx, what the plan is to do with all of it? Thanks. Yeah. No, good question. I can tell you, it's the very thing we talk about at our board meetings. Right now we see this opportunity continuing. So we are mostly focused on investing right down the middle. Buying containers to support our key customers and putting them on great leases and that's been our main focus for our capital, in addition to paying our regular dividends, of course. Yeah, to the extent we get to a market where growth is no longer at the current level and where CapEx is more normal, you're correct. At our current level of profitability, we're going to have a lot of extra cash flow at normal levels of investment. We would all at that time think about what's the right use for that capital. We tend to be very flexible and very, I think, disciplined and thoughtful in how we allocate cash. We've shifted from high CapEx to lower CapEx from aggressive share buybacks to shifting back to CapEx. Again, I think we'll continue to make decisions that make sense given the circumstances that we're in. We'll be looking at that for sure, when we get to the point where CapEx is coming down. Awesome. Thank you. Just last one. Any update on maybe M&A? Do you see any sort of acquisition targets out there, or has this sort of strong market kind of killed off any appetite for M&A for the foreseeable future? Sure. I mean, we can't talk, of course, about any particular M&A opportunities. We've said in the past that M&A is something that we are interested in doing, that we got many benefits when we merged TAL and Triton. We expect if we did M&A in the future, that we would get benefits again. Of course, it depends on having opportunities that are available. Again, we tend to be pretty disciplined on how we use our capital, and we'd want to make sure that using capital, whether it's cash or our stock for an M&A deal, that it was a valuable use for our shareholders. Again, in general, we're interested but of course, very hard to predict when and if something might come available. Awesome. Thank you for taking my questions, and keep doing what you're doing. Yep. Thank you very much. This concludes the question and answer session. I would now like to turn the conference back over to Brian Sondey for any closing remarks. I want to say thank you for joining our call, and thank you for your continued interest in Triton International. Thanks, and goodbye. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.