Good day, and welcome to the Triton International Limited third quarter 2022 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 a touch-tone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to John Burns, CFO. Please go ahead, sir. Thank you. Good morning, and thank you for joining us on today's call. We are here to discuss Triton's third quarter 2022 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'd 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 slide two of that presentation and remind you that today's presentation includes forward-looking statements that reflect 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'll now turn the call over to Brian. Thanks, John, and welcome to Triton International's third quarter of 2022 earnings conference call. I'll start with slide three of our presentation. Triton continued to achieve outstanding results in the Q3 of 2022. We generated $2.88 of adjusted net income per share, up 18.5% from the third quarter of last year and down just slightly from our record results last quarter. We also achieved an annualized return on equity of 27.5%. Our market environment slowed during the Q3, following nearly two years of exceptional container demand. Peak season shipping volumes were muted this summer, and many of our customers have increased the pace of container drop-offs. New container orders have decreased across the market, and new container prices and market leasing rates have returned to historically normal levels. Used container sale prices have started to normalize more quickly, though they're still very high. While conditions have softened, we expect our strong performance will continue. We have significant operational and financial advantages in our market. Our utilization remains very high, and our container fleet is well protected by our strong long-term lease portfolio. The large number of containers we purchased over the last few years are locked away on long duration, high IRR leases. We've increased the share of our containers on lifecycle leases and increased the average remaining duration of our lease portfolio, and we have locked in low-cost financing with long-term fixed rate debt. We continue to aggressively use our strong cash flow to drive shareholder value. We have shifted our investment focus this year from fleet growth to share repurchases. We have purchased over 7.1 million shares year to date, representing nearly 11% of our outstanding shares at the beginning of the year, while also decreasing our leverage. We increased the pace of our buybacks in the third quarter and have just re-upped our repurchase authorization back to $200 million. We also announced an increase in our quarterly common dividend from $0.65 to $0.70 per share. We expect our financial performance will remain strong. We expect our adjusted earnings per share will decrease from Q3-Q4 as our utilization and gains on sale continue to normalize. We expect our utilization will remain high and expect share repurchases will remain highly accretive. Overall, we expect our cash flow, profitability, and return on equity will remain very high through the rest of this year and into the longer term. I will now hand the call over to John O'Callaghan, our Global Head of Marketing and Operations. Thank you, Brian. Page four. Page four shows Triton's operating metrics. In the lower left chart, you can see the shift in our pickup and drop-off activity. Net pickup activity was very strong from the second half of 2020 and throughout 2021. Pickup volumes decelerated in the first half of this year, though drop-offs remained low. Recently, we've seen drop-offs accelerate as our customers reacted to a muted peak season and some easing of logistical bottlenecks. However, our utilization, as shown in the upper left chart, remains very high, reflecting the durable protection provided by our long-term leases. A key part of our enhanced lease protection has been the increase in the percentage of our containers on Lifecycle leases, as shown in the upper right. In the chart, you can see that nearly 60% of our containers are on lifecycle leases, which are structured to keep containers on hire through their full remaining leasing life and so have little utilization risk. The lower right bubble chart details the pace of our new container transaction activity. New container activity has greatly reduced from last year, reflecting the changes in market conditions and our customers' shift in focus to operational efficiency. The chart also shows that new container leasing rates have dropped back into the historically normal range. Page five. Page five illustrates that the shipping market is quickly normalizing following two years of exceptional conditions, but some logistical challenges remain. In the upper left chart, you can see that freight rates for our customers have decreased steeply over the last few quarters in response to cooling activity and increased vessel capacity. In the upper right, you can see that new container prices are also normalizing quickly as container capacity is no longer in shortage and as production volumes decrease. The chart on the lower right looks at an index of used container sale prices. Used prices are also normalizing, but they remain very high. You can see on the lower left that while freight rates are normalizing, the market is still struggling with some operational inefficiency and a larger than normal level of vessel capacity is in port waiting to discharge, reflecting ongoing logistical bottlenecks. We expect it will take time for these bottlenecks to fully unwind, and we therefore do not expect container fleet efficiency to fully snap back to pre-pandemic performance in the near term and believe it will continue to lead to some incremental container capacity requirements in the market. Page six. Page six looks at new container production volumes decreasing in response to slower demand. The chart in the upper left shows that the inventory of new containers awaiting deployment was increased in response to normalizing conditions. We now see the inventory returning back into the normal range of about 2% of the operated container fleet. You can see in the lower left that Triton's depot inventory of used containers has started to increase as well, reflecting the increased pace of off-hires. Again, this remains very low and our utilization remains very high. We expect our inventory will remain well under control due to the durable enhancements we have made to our lease portfolio. In the meantime, we have a natural balance of new container production slowing considerably, as shown in the chart on the right. New container production was exceptionally high in 2021 as our customers rushed to add container capacity. New container production started to trend down in the first half of this year as the market started to normalize, and we have seen lower levels of production as customers sought to regain more container fleet efficiency through the third quarter. Q4 production orders, as shown by the dotted line on the end bar of the graph, has effectively tailed off in response to our customers' shift from adding containers back to fleet efficiency. We have talked in the past about the short order cycle for containers, which is just a few months, and the natural order of how container production, as well as the overall container fleet, adjusts quickly to changes in the global container supply and demand balance. I'll now hand you over to John Burns, our CFO. Thank you, John. On page seven, we have presented our consolidated financial results. Adjusted net income from the third quarter was $176.5 million or $2.88 per share, an increase of 18.5% from the prior year quarter and a decrease of 1.4% from the Q2. These strong results represent an annualized return on equity of 27.5%. On page eight, I'll discuss the drivers of our strong profitability. Our Q3 performance reflects the durable enhancements we have made to our business over the last two years. Due to the limited investment in new containers this year, our Revenue Earning Assets declined slightly from the Q2-Q3. However, average remaining revenue earning assets are up nearly 6% over the prior year's Q3, reflecting last year's strong investment in the Q4. Average utilization declined 0.3% in the Q3, but remained very high, averaging 99.1%. We expect utilization to decline further in the Q4, but to remain at a very high level. Interest expense in the Q3 increased slightly, but our overall effective interest rate for the Q3 remained very low at 2.7%. The impact of rising interest rates has largely been mitigated by our well-structured debt portfolio, which is 86% fixed or hedged to fixed. In the Q3, we recorded an $8.1 million reserve for a small customer who ran into significant challenges as the freight market normalized. We do not expect further notable credit provisions. We supplied the vast majority of our significant container investment over the last two years to the top shipping lines, all of whom are very strong credits today. Offsetting that credit item, we received $8.2 million during the quarter from the estate of a small shipping line that defaulted and ceased operations nearly a decade ago. We continue to generate very high levels of trading and disposal gains, totaling $30.1 million for the Q3. The decrease from the exceptional levels in the Q2 is primarily due to moderating disposal sale prices. We expect disposal gains to remain high in the Q4, though we expect them to trend lower as disposal prices decrease. Since the end of the peak season last year, we have shifted our strong cash flows away from aggressive container investment toward active share repurchases. Year-to-date, we have repurchased 7.1 million shares, or 11% of our shares outstanding at year-end, all while reducing our leverage. In support of the share repurchase activity, we have once again increased our share repurchase authorization back to $200 million. Page nine highlights the durable enhancements we have made to our business over the last two years. On the left, we show how we have leveraged the strong market conditions since the second half of 2020 to rapidly expand our leasing margin. On the right, we show why this high level of performance is durable. The top right graph shows the average remaining lease duration for our long-term and finance lease portfolio on a net book value basis. You can see the remaining lease duration is nearly 80 months to the expiration of the contract. If we include the usual time it takes for a customer to redeliver containers after a lease expires, the average duration increases to nearly 90 months. In addition to the long duration, 87% of our container fleet on a book value basis is on these long-term and finance leases. On the bottom right, we show that we fund this long-term lease portfolio with long duration, fixed rate, or hedge-to-fixed rate debt at very attractive interest rate levels as a result of our refinancing activities over the last several years. This combination of attractive long-term lease and debt portfolios has locked in a high level of leasing margin for years to come. I will now return you to Brian for some additional comments. Thanks, John. Slide 10 summarizes the cash flow power of our business. In the third quarter of 2022, we generated over $1.6 billion of cash flow on an annualized basis. We need to allocate a little more than half of this cash flow for replacement capital spending in order to maintain our fleet size as containers age out of service. This leaves us around $725 million of steady state cash flow. Our new 70-cent quarterly dividend represents about $165 million in annual dividends. As a result, we have about $560 million of steady-state cash flow after our substantial regular dividend. The next set of numbers shows a few of the things that we can do with this $560 million, and illustrates why we're able to create value across a wide range of market environments. If we focus on capital investment, like we did last year, we can self-fund the equity needed for nearly 20% asset growth while keeping our leverage ratio constant. Alternatively, if we focus on share repurchases, like we are now, we can repurchase over 15% of our shares at their current trading range. If we wanted instead to focus on dividends, we could pay over $9 per share on top of our regular dividend, bringing the total annual dividend into the range of $12 per share. We've included a table at the bottom of the slide that shows how we're able to use our strong cash flow to drive per share fleet growth almost regardless of market conditions, and again, while holding our leverage ratio steady. Revenue-earning assets per share have increased from $127 per share as of September 30th, 2020 to $193 per share as of September 30th, 2022, an increase of more than 50% across two very different kinds of investment years. This strong growth in our assets per share is another key reason we expect our higher level of financial performance will be durable. Slide 11 looks at how Triton has created long-term value. Triton is the scale, cost, and capability leader in a fundamentally attractive market, and we have a long history of delivering solid growth, strong profitability, and above-market shareholder returns. The chart on the upper left looks at the long-term growth of our container fleet. We have grown our fleet about 8% annually over the last 17 years. The chart on the upper right looks at our long-term cash flow before capital spending. You can see how our cash flow has increased as we've grown our fleet, and you can see the stability of our cash flow even in very challenging years for the global economy. The chart on the lower left shows how we've used our cash flow to both reinvest in our business and regularly return cash to shareholders. At the time of TAL's IPO in 2005, TAL had an adjusted net book value of around $12 per share. Our adjusted net book value has increased steadily, recently at an accelerated pace, and is now over $45 per share. We've also paid out over $30 per share in dividends. As you can see in the lower right, our total shareholder return since our 2005 IPO is over 14% per year, significantly outperforming the S&P 500. I'll talk about our outlook on slide 12. You can see in the chart that we expect our adjusted earnings per share will decrease in the range of 5%-10% from the third to the fourth quarter as our utilization and gains on sale continue to normalize. Most of the variability in this expected range is driven by uncertainty around how quickly used container sale prices will normalize. However, as mentioned earlier, we expect our cash flow, profitability, and return on equity will remain elevated due to the strength of our long-term lease portfolio and the very high return we're getting from aggressively repurchasing our shares. I'll finish the presentation with slide 13. Triton has an exceptional franchise, and we achieved outstanding performance again in the third quarter of 2022. Market conditions have softened, but we've made durable enhancements to our business and expect our performance will remain very strong through this year and into the longer term. Our strong cash flow gives us many levers to drive shareholder value across a wide range of market conditions. We believe our shift to aggressive share repurchases this year is building value quickly and offers a compelling opportunity for Triton and our investors. We'll now open up the call for questions. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Today's first question comes from Ken Hoexter with Bank of America. Please go ahead. Hey, good morning, Brian, John, and team. John, you know, maybe thoughts on the returning boxes in this market that you talked about. Maybe contrast that with the massive ship deliveries that are coming at the end of next year. I think you've said in the past that doesn't really matter. It's more just demand. Maybe just refresh us on how we should think about that into this market. Maybe just expand on the pause and peak, right? If the backlog at the West Coast ports is gone and East Coast is slimming down, is that accelerating velocity and therefore could speed up return of boxes? Maybe just walk through those two different cases. Sure. Thanks, Ken. Certainly, as you know, there's a large order book for vessels, the largest it's been, probably the largest it's ever been in terms of absolute order book size and the largest it's been in as a percentage of the operated fleet in a long time. You know, we always think that there's quite a difference between the supply and demand balance for vessels, you know, versus the supply and demand balance for containers. You know, the biggest challenge on the vessel side is just the length of time it takes to get a vessel delivered and also to some extent, the game theory about trying to lock in slots at the shipyards when the market is strong. Our customers in 2021, when vessels were short and, you know, capacity was tight, they put in a lot of orders, and that's gonna, you know, probably act as some kind of overhang on the freight markets, for a while, especially now that that growth has slowed and the bottlenecks have started to ease. You know, for containers, you know, one of the great things that makes our market resilient is just that the order cycle is very short, you know, typically a couple of months of lead time, even when the market's really strong like it was in 2021. As our, you know, we showed in one of our charts, the ordering volume for containers has already started to come down, quite significantly. Similarly, the life of the container is shorter than the life of a vessel. We typically see, you know, on the container side, something between 4 or 5 or 6%, you know, of containers exiting the market each year as the containers age out of service, you know, where the, you know, I think vessels are operated on average, you know, 25 years or longer, and so a much, you know, slower adjustment in terms of supply leaving the market as well. You know, I think some people look at the vessels that are ordered in that large order book and say, you know, "Is that gonna be a driver for container demand?" You know, we don't think so on a say primary order effect that typically trade volumes are what you know drive the need for containers as opposed to, you know, vessel slots driving container need. That said, we do believe there's indirect effects of this large order book that are supportive for our demand. Just one is that, you know, ordering vessels uses a lot of capital for our customers, and so, you know, makes it, you know, incrementally more attractive to use leasing for containers. Again, you know, also it tends to weigh on freight rates when you have a large order book like that, you know, which we think again makes customers more careful, you know, about how you allocate their cash flow and profitability and tends to be supportive of leasing. Yeah, overall, you know, we do see our market adjusting pretty quickly to changes in supply and demand in the shipping market for our customers adjusting more slowly. You know, in terms of the logistics, we have seen some improvements as you noted and certainly on the West Coast and the, you know, the time it takes to discharge containers from ships that are arriving there. You know, I think bottlenecks though persist in other places. The East Coast is still quite a challenge that we hear from our customers, some places in Europe as well. I think, you know, John O'Callaghan showed in his chart that the vessels sort of tied up at discharge or waiting to discharge is still significantly higher than it was before pandemic. We do think that's driving some extra demand for containers likely into next year, who knows, maybe beyond that. Coupled with the fact that our customers are also very focused on how disruptive the last few years were. You know, we think even if the bottlenecks start to ease from the container standpoint, that our customers are likely to wanna operate fleets that were, you know, slightly larger relative to their volumes than they used to operate. Thanks. Brian, I guess just my follow-up. Just the percentage, maybe talk about that 5%-10% sequential decline on EPS. That was, to clarify, that was sequential decline, right? Correct. You know, maybe your exposure on, you know, what can make that move anymore, right? I mean, is that just used boxes? It seems like if we're down to $2,200 for a new box, you're kind of back to normal levels. Your amount that you've got tied in on lifetime leases and last year's kind of full life cycle leases, you know, but what percent of boxes come due for renewal, and what is the exposure that can make that either up or down worse, in the near term? Yeah. Sure. Maybe I'll hit a few of those things. First, yes, the 5%-10% was a sequential change from Q3 to our expected results in Q4. You know, most of that sort of difference between that 5% and 10% really is driven by uncertainty just around how quickly, you know, used container sale prices normalize. You know, we mentioned that new container prices, I'd say right around now, are pretty close to the historical long-term average. You know, same thing for used container, excuse me, for new container leasing rates. From, say, a rate effect in the portfolio, it's relatively neutral right now. You know, but we're still generating large gains. I think the main thing that it likely is pushing earnings down sequentially is just, you know, the normalizing of the disposal gains. There's again some question of how quickly that happens. You know, we typically think of our performance in two different buckets. We look at our leasing margin, you know, which is driven by, you know, the performance of our container leasing portfolio, and then we look at our disposal results. You know, what kind of gains we're getting on the disposals. The disposals is more, you know, adjusts more rapidly as market conditions change, and that's driving a lot of, we think, the expected sequential changes over the next few quarters. You know, our leasing margin moves very slowly, especially at a time like now, where we have such a large portion of our container fleet locked away on long-term and lifecycle leases. We've also locked in our financing, as we've referred to a few times. You know, we have a chart in the back of the presentation that looks at you know, how many containers are currently on long-term leases that are either expired or expiring soon. It's not a huge percentage of our lease portfolio. Again, which is what gives us confidence to sort of keep making the statements that we expect our utilization is gonna remain high, even if market conditions stay soft for a while. Thanks. That does it for me. Just a clarification, John, did you mention that the $8 million balanced out the $8 million? I just wanna make sure I got those two numbers right. It was $8.6 million. Yes, that's right. 8.1 on the reserve and 8.2 on the recovery from an old customer. Perfect. Thanks for the time, guys. Appreciate it. Yeah. Thanks, Ken. Our next question today comes from Larry Solow with CJS Securities. Please go ahead. Great. Good morning. Thanks for taking the questions. Just first off, John, I think this might be your last public call, so I wish you best of luck in future endeavors. Thanks, Larry. Yeah, absolutely. Just, I guess a follow-up just on the question on the direction of earnings for the quarter. I know you guys are not ready to give and don't normally give full year guidance anyhow, but you know, your commentary and a lot of your slides kind of do sort of support your pretty good cushion going into the next couple of years, it seems like. How do you view, you know. Again, just from a very high level, in my opinion, and maybe you can agree or disagree, it doesn't feel like there's a lot of downside to earnings, even as we look out over the next year or two with your pretty high, like you said, long duration leases. Very few, you know, a modest amount of containers coming off lease and a lot of them on for hire for the long term. In combination with several levers you have, including your share buybacks, right? You bought back 10% of your shares year to date. From a high level, do you expect us to, you know, even in a kind of go for the best case, worst case scenario, where things could shake out, you know, over the next couple of years, if you can, you know? Yeah. Sure. As you know, we don't like to give full year guidance, but Sure. Certainly understand, you know, that there's a need for some, you know, some direction. You know, just talking about, you know, to Ken's question, we do think that the leasing margin part of our financial performance that changes slowly. We believe we've locked that number in at a high level for a long time because of the structure of the lease portfolio, just the large number of containers that we have that are locked away. Again, the fact that we've you know locked away, you know, a lot, most of our debt, you know, on long duration fixed rate financings. To some extent, we've kind of mathematically locked in this high spread between our leasing revenue and our ownership costs, that we think will continue to drive, you know, very strong performance on the leasing margin. Again, the gain on sale element is more variable and I think still subject to some, you know, quicker adjustment. As we've mentioned a few times, the sale prices for used equipment. Mm-hmm. are still historically very high. You know, if they normalize towards, you know, long-term averages, there's some, you know, some further price compression and some further normalization on gains. You know, I think you've hit on a few of the major drivers for us in terms of, you know, where our earnings per share goes from here. You know. We talked a couple times about our utilization and sale prices normalizing. We do think that over the next few quarters, you know, those line items will, you know, push our earnings per share down. On the other hand, we've got very strong benefit coming from, you know, aggressive, you know, share repurchases, all of which are very accretive and supportive of EPS. You know, we think for the next couple of quarters, the combined effect of the normalizing utilization and gains will outweigh the beneficial effect of the share repurchases for a little while. There's a lot of tension there. As you know, that normalization, you know, if and when it starts to slow, the power of the EPS accretion from the share buyback starts to take back over. As we look at it, you know, we think it's a very nice financial picture, and it's something we've, you know, tried to hit on a number of times that we expect our long-term performance across all of our financial measures to remain, you know, really strong. You know, not just for the near term, but into the longer term. Okay. Great. Just to say, just a macro question, and, you know, again, you guys are, like you said, you have a lot of protection in your portfolio. You know, a question we get is there excess capacity in containers in the system? You know, obviously, there's a lot of inefficiencies the last couple years, half empty containers. Trade is certainly, you know, the economy certainly looks like we're gonna have a slowing, a slower period, recession, if you wanna call it. I don't think it really matters for at least, you know, next couple quarters, if not longer. You know, I realize there's also some offset, right? Shippers, your customers may wanna hold a little bigger fleets, and it also seems like there's also a shift maybe to be more efficient. Maybe they'd rather lease than own too. Do you feel like I remember, I think you showed a slide last year at your analyst day, like the last five years growth has only been a little bit above sort of the 15-year growth in the last five years of containers. Do you feel like there is a lot of excess capacity in the system or, you know, do you feel like we're, you know, there's been a lot of volatility and whatnot, but at the end of the day, in the last 10 years, it doesn't seem like we have a crazy amount of excess. Yeah. Yeah, definitely, you know, it's something we look at closely, and we're trying to figure out all the time. You know, a lot of containers were produced in 2021, and I think, you know, also a decent volume in the first half of 2022. You know, as best we can tell, you know, something like the container fleet grew something like 10% faster than container volumes during the 2020 to, say, mid-2022 period. It's a little bit hard to say exactly because you know, some of the big container buyers, especially in 2021, were non-traditional companies that were buying containers really for one use of you know, capturing a high freight rate coming from you know, Asia to the U.S. or Europe and then selling the container on arrival. Again, it's a little bit of a fuzzy number for us on just how many containers that were built in 2021 will remain in ocean service you know, for a longer period of time. That said, of that 10%, you know, say, rough guess of what the excess container fleet growth was, you know, we don't believe all of that is sort of, quote-unquote, "excess." You know, part of it is because we do think the bottlenecks that I was talking about earlier, you know, are likely to last, you know, for a while here, certainly into next year, and who knows how much beyond that. And then secondly, you know, as I mentioned, I think our customers are not gonna wanna operate so close to the, you know, so close to the line, as they used to, you know, operate with their container fleets. You know, more focused on resiliency, a little less focused on efficiency. You know, at some portion of that, you know, that's likely needs to be worked out over time to get back to, you know, say more balanced container supply and demand. You know, our market, as I said, you know, usually adjusts quickly because of that short order cycle. You know, we do think container production is likely to be quite low the next few quarters. Certainly from our standpoint, we're waiting to see what happens in the market. You know, usually is like, again, something in the range of 4%-6% of the fleet is sold every year as containers age out of service. Even when the economy is weak, you know, usually there's some trade growth, you know, which sort of helps, you know, you grow into supply as well. You know, our view of all that and putting it together is, you know, we think that it's likely the next few quarters, you know, are relatively soft for container activity. We expect more off-hires than on-hires from now, you know, through the rest of the year, through the Q1. It's the slow season, you know, for container shipping. I think also there's a lot of economic uncertainty that's keeping ordering levels for retailers and manufacturers tight. I think we'll just have to wait and see, you know, what happens in the Q2. It's gonna be driven by, again, what we see next year will be driven by what happens with container production. Again, our guess is it stays pretty low. It's gonna be driven by what happens to trade growth, which will depend on the economy, of course. you know, we'll just have to see what our customers, you know, how they see the market shaping up too. again, it's a pretty quick adjustment process normally for us. you know, across the variety of ups and downs in the economy we faced over the last 20-25 years, usually, you know, it's something between a couple of quarters and, you know, 5-6 quarters, you know, where we see it takes containers to adjust to an oversupply period. Great. I appreciate all the color. Thanks a lot. Yeah. Thank you. Our next question today comes from Liam Burke at B. Riley Securities. Please go ahead. Yeah. Hi, this is actually Nick Giles calling in to ask a question on behalf of Liam. I believe you touched a little bit on this earlier, but could you give a little more color just on why operating expenses were kind of notably higher year-over-year, despite the utilization of over 90%? Sure. It just depends on where you're coming from. The biggest operating expense we typically have is container storage expenses. Although we do have some repair expenses and some positioning, and handling, and so on. You know, for all of 2021, we were operating at, you know, nearly, I don't know, nearly 100% utilization, and we had very low container sale inventory as well, that anything we had was getting sold very quickly. The storage component of the operating expenses was, you know, as close to zero as you can get. You know, the expenses were driven by other things, the transactional ones like repairs and handling fees. Even though, you know, utilization is still very high, just the change in utilization is what drives the change in storage expense, and so therefore the change in operating expense. Similarly, some of the other operating expenses also are related to drop-off volumes, in particular repair expenses. You know, just, even though, again, activity is well under control, the change from, you know, very few container drop-offs because customers just needed all the containers they had, and then very few containers in storage for the same reason, the sort of more, you know, normal levels of activity is what's driving the change there. Got it. Super helpful. Just a thought there, as you know, kind of as container demand starts to normalize, do you expect future contracts to potentially have a shorter duration? Yeah. We look at, I guess, two different types of leasing that we do. You know, one is what's the sort of typical structure for our new containers that we're buying and leasing out the first time, and then what's happening with our lease extension discussions as those kind of first leases expire and what's happening with the, you know, the depot containers we're getting picked up by customers. You know, maybe I'll just start with the second piece first. You know, the increase in the life cycle portion of our portfolio really isn't driven by new container leases. It's driven by the fact that it's almost become the industry standard for what we do with containers, when leases are expiring, you know, or when we get customers to pick up used equipment from our depot. There's a lot of reasons why it makes sense to do that for us. Obviously, it reduces utilization risk and volatility in our performance. Also for our customers, we can give them great logistical flexibility at the end of those leases because we have actually quite good sale markets all over the world, you know, where leasing markets are very location specific. It's sort of a nice win-win with customers to focus on, you know, for middle-aged equipment already, you know, to focus on life cycle leases. For newer containers, we do think we'll see a kind of normalization of that part of the business like we've seen, you know, other parts of the market normalizing. You know, I think if you look back, we had very strong investment markets in 2017 and 2018, although container prices were, you know, in a normal place at that time. I think the average duration of leases we were doing for new containers was probably in the range of 7 years. That gapped out to 11 and 12 years in 2020 and 2021, you know, partially due to the strength of the market, and just partially due to the very high cost of the containers. You know, containers, you know, went way outside of their normal historical range for prices. You know, we don't assume that that's going to be true 7 or 8 years from now. If we were going to do short-term leases for very expensive equipment, we'd have to capture the full premium on the first lease. There was, again, sort of a mutual interest of us and our customers of not having to drive lease rates to truly extraordinary levels. We sort of spread that premium, you know, over longer durations. You know, that was one of the primary drivers for that, as well as just, again, our interest in taking advantage of a strong leasing market to secure long duration. We do think we'll see, as container prices have come down, you know, the leasing market for new containers kind of get back to where it was, where a mix of lease durations, you know, not a compelling need for us to push out for the full useful life. You know, five-year deals out there, seven-year deals out there, eight years, ten years, you know, it'll be really dependent on what the customer, you know, customer prefers. Great. I appreciate all the detail. Maybe just one last one from me. You know, as utilization rates, you know, remain at historically high levels here, I guess put simply, do you expect them to settle in above past averages? We typically do. What we look at in our portfolio is the, you know, what's the portion of the fleet that's locked away on long-term or finance lease as sort of our, you know, that's the floor for utilization analysis. Then what's the utilization of the portion of the container fleet that's not locked in on long-term or finance lease, and how does that portion of the fleet perform across a sort of typical market cycle? As we've, you know, increased the portion locked away from, you know, high 60s to low 70s, you know, where it was, you know, over the last 5 or 10 years, you know, up to now, you know, mid- to upper, you know, 70s into the 80%, you know, that floor utilization has increased by that percentage change. As well as then, you know, we think the other portion of fleet will perform relatively similarly. We do see, you know, in our expectations, you know, that the normal range for, you know, utilization is higher now, because more of our equipment is locked away on long-term lease, and in particular, you know, more of it's locked away on lifecycle lease. Got it. Well, really appreciate all the detail, and congrats on the progress so far, and continued best of luck. Yep. Thank you. Our next question today comes from Michael Brown at KBW. Please go ahead. Great. Hi, good morning, everyone. John, congrats and best of luck to you. Thanks. I wanted to start with a question on, you know, your customer base here. 87% of the fleet is on long-term and finance leases. Brian, you just mentioned that a lot of your leases are on lifecycle leases now, so really just a transformation of the business. Post-COVID here. The financial strength of your customers is still very strong, but the market conditions are much, much tougher, and they could remain that way for some time. How should we think about your credit risks here if the market remains weak over the next, call it, 12-24 months or however long you wanna, you know, define that potential weakness here? You know, how could that impact your, you know, your approach to credit and what are you kind of monitoring today? Then I guess, finally, how bulletproof are the contracts? Is there any ability for customers to get out of those contracts or any situations where you would work with customers to help them work through some financial pressure if that were to arise? Yeah. Sure. Maybe just start with the credit piece, first. You know, in general, we've honestly never felt better about the credit profile of our customer base and our lease portfolio. The vast majority of our containers that we have on lease are on hire to the you know top ten shipping lines in the world, and even within that, you know, the large majority you know on hire to the top five, seven shipping lines. You know, as we've seen over the last few years, these companies you know had a level of profitability that was you know totally historically unprecedented. You know, effectively, just about every major shipping line has repaid all the debt they can repay. You know, last time we looked across the industry that the industry was in a net, you know, negative net debt position, so, you know, had more cash on the balance sheets than debt. Obviously, that's, you know, from a credit standpoint, you know, a good look for us. You know, one of the things that we've done, just to put it in context, is to think about, you know, what's been the excess profitability of the shipping lines, you know, say from Q4 2020 through Q2, Q3 2022, and how does that excess profitability compare to the, you know, the maximum amount of money that the shipping industry was losing, you know, in its most challenging, you know, years, the financial crisis, 2015, 2016. What we see, again, I haven't looked at this in a while, so don't quote me on it, you know, but the amount of excess profitability was something in the range of 10 times greater, you know, the cumulative excess profitability was something in the range of 10 times greater than the maximum annual losses the industry had ever taken. To some extent, you know, they're spending cash on some other things. You know, there can be a decade of extremely challenging results, and the balance sheets should just get into the same place where they were before the pandemic began. You know, that's not, of course, there's some cash leakage for other investments and so on, or for, you know, returns of capital. But generally speaking, just the magnitude, you know, of the excess profitability and the balance sheet improvement is just truly extraordinary. Has us, you know, feeling very comfortable, you know, about the vast majority of our containers on lease and the leases. You know, we do have, you know, a customer base that extends beyond, you know, the major shipping lines. It's important for us to have that. Those kind of smaller customers, they help offset the market cycles that are typically more pronounced for the bigger customers. They also tend to, you know, help us with container demand from second-tier and third-tier locations, and for older equipment or out-of-favor equipment types. You know, we have to support, you know, not just our best and strongest customers when the market's strong. We do have to provide some support to the whole range of customers we have. You know, we're very careful. Probably 95%-97% or so of our containers we purchased that were expensive in 2021, you know, went to the top shipping lines where we have, you know, very strong faith in the credit. Some small number went to other shipping lines, and that's what, you know, we've been, you know, looking through in the portfolio. Again, you know, we typically make very good credit choices. We underwrite accounts for reasons. Generally speaking, we feel, you know, really good, you know, about the credit place where we are. Again, it would take a heck of a lot more, in our opinion, you know, than a couple of challenging years to, you know, to undo the good work that the shipping lines have done with their credit profiles. You know, in terms of the lease structures themselves, typically there's no, or, you know, no opportunity outs for customers to say, "Hey, we don't need the containers anymore," or, you know, the market's changed or some act of God or something. The leases are very simple. You know, customers keep containers for a certain amount of time. They pay us, you know, certain dollars for those containers, and there's really nothing to talk about until it's time for the containers to expire off of lease. Generally speaking, again, we think we've got a great, you know, credit in the portfolio. The contracts themselves are very well written. You know, so we, again, feel very secure in the duration of our lease portfolio and revenue. Okay. Thanks, Brian. That's a lot of really great color. Can you just share with us your latest view on the capital allocation front, I guess specifically the capital return here? Clearly an impressive amount of share buybacks this quarter, and it sounds like the CapEx opportunities will continue to be, you know, relatively soft. Is this a decent expectation for a pace of share buybacks, and is there any other levers that you might consider here? It seems like you're quite mindful of the leverage levels, but I guess the other major opportunity could be on the M&A front. Is there anything in this space right now that could be interesting for inorganic growth at this time? Yeah. Maybe I'll just take it in pieces. I think right now, you know, and as we saw last quarter, you know, right now our focus remains on share buybacks. You know, we think a great investment opportunity for Triton and our investors to buy back shares at the current price. You know, there's very low multiples of earnings and cash flow, and it's. We always think of it as just a way we're investing in our container fleet, you know. Last year we bought lots of new containers, and we put them on leases, and we think those leases were great. This year, in some ways, we've bought lots of containers too, but to the existing containers we have that are already locked away on leases, already on deals we underwrote and liked. It's actually a really nice way to invest back into the business. It's one reason I pointed out in the charts, you know, just the very strong growth in our net revenue earning assets per share, because it really reflects from a shareholder standpoint a lot of container growth this year too. You know, in terms of other opportunities, you know, we're always looking. You know, it's a very dynamic process that we have, you know, thinking about, you know, where we allocate our cash flow, and we are mindful. It's one of the core things that we find attractive about our business, that we always have opportunities to redeploy the capital effectively, even if it's just returning it to our shareholders in the form of our very, you know, significant, you know, dividend. In terms of M&A activity, you know, we're a believer in the sort of just the basic industrial benefits of M&A in our space. We got a lot of advantages, you know, from our 2016 merger between TAL and Triton. It drove cost efficiency. It drove higher quality of our operations and our team. We think our customers like it, because the thing they care about most is just access to large volumes of equipment when they need them. Having a super supplier, we think was beneficial for them and one reason why we've been growing share organically since. You know, that said, of course, from the M&A standpoint, it's always, you know, limited by what's available, and, you know, we tend to be pretty disciplined buyers, you know, in the M&A market, just like we are in the new container market. Partly, you know, part of that discipline I think comes from our, you know, hardheadedness and good analysis, and part frankly comes from just the attractive opportunity we have to buy back our stock, which is a pretty low risk, high reward activity for us. That, you know, it's a high bar sometimes to meet, but we certainly do believe in M&A and would look, you know, as things come available. Yeah. Great. Thank you for all the thoughts there, Brian. Yep, thank you. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn it back over to the management team for any final remarks. Well, thank you very much. Just wanna, again, thank our investors and others for the support of Triton, and we'll look forward to talking with you soon. Thank you. Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.