Thank you for standing by. My name is Jeanine and I will be your conference operator for today. At this time, I would like to welcome everyone to the GATX 2024 Fourth Quarter Earnings Call. [Operator Instructions] I will now turn the call over to Ms. Shari, Head of Investor Relations. Please go ahead.

Thank you, Jeanine. Good morning, and thank you for joining GATX's fourth quarter and 2024 year-end earnings conference call. I'm joined today by Bob Lyons, President and Chief Executive Officer; Tom Ellman, Executive Vice President and Chief Financial Officer; and Paul Titterton, Executive Vice President and President of Rail North America. As a reminder, some of the information you'll hear during our discussion today will consist of forward-looking statements. Actual results or trends could differ materially from those statements or forecasts. For more information, please refer to the risk factors included in our earnings release and those discussed in GATX's Form 10-K for 2023 and our other filings with the SEC. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. I'll provide a quick overview of our 2024 fourth quarter and full year results and then I'll turn it over to Bob for additional commentary on 2024 as well as our outlook for 2025. After that, we'll open the call up for questions. Earlier today, GATX reported 2024 fourth quarter net income of $76.5 million, or $2.10 per diluted share. This compares to 2023 fourth quarter net income of $66 million, or $1.81 per diluted share. The 2024 and 2023 fourth quarter results include net positive impacts of $0.17 per diluted share and $0.07 per diluted share, respectively, from tax adjustments and other items. For the full year 2024, GATX reported net income of $284.2 million, or $7.78 per diluted share. This compares to net income of $259.2 million, or $7.12 per diluted share in 2023. The 2024 full year results include a net negative impact of $0.11 per diluted share from tax adjustments and other items. The 2023 full year results include a net positive impact of $0.05 per diluted share from tax adjustments and other items. These items are detailed in the supplemental information pages of our earnings release. For the second year in a row, full year investment volume was over $1.6 billion as we continue to find attractive opportunities to invest in our businesses globally. It should also be noted that RRPF, our Engine Leasing joint venture, invested over $900 million as we continue to grow the asset base and platform. Lastly, as we noted in the earnings release, we expect 2025 earnings to be in the range of $8.30 to $8.70 per diluted share, which will mark another exceptional year of performance for GATX. With that quick overview, I will now turn the call over to Bob.

Thank you, Shari, and thank you all for joining the call today. I'll provide some brief comments on 2024 and then we'll look ahead to the coming year. I'd like to open my comments first by thanking all the employees of GATX, those here in Chicago and around the world for their outstanding effort and contributions this past year. We're fortunate to have an experienced team across the board and while each year they do face new challenges, they find opportunities to put capital to work at very attractive returns. One of the key performance measures we look at is our safety record. I usually mention this at the year-end call, but I should probably do so more often given its importance to us. Our financial results are of no matter unless our employees are safe and that's all employees, but very important for those who work on the shop floor in an industrial environment. By all safety measures, 2024 was an outstanding year and we'll continue to strive for better. We had record production in our maintenance facilities this past year, and we coupled that with record-level safety achievements at our shops in North America and Europe. So thank you to all the employees who made that happen. Regarding 2024 results, we came into the year expecting EPS in the $7.30 to $7.70 range. We exceeded the high end of that range with the results announced today. Importantly, as Shari mentioned, we identified and closed on investment opportunities that will continue to strengthen our global platform and position us really well for the years ahead. Rail North America's results were the main driver to our better-than-expected EPS results in 2024. We came into the year expecting segment profit at Rail North America to be up between $10 million and…

[Operator Instructions] Our first question comes from the line of Andrzej Tomczyk from Goldman Sachs. Please go ahead.

Hi, everybody. Thanks for taking my question. Your lease renewal success rate in North America jumped up nicely this quarter, up to 89% from 82% renewals in the third quarter after broadly trending down to flat since the end of 2023. Can you talk about what's driving the higher customer renewals and if there's anything to read into that going into 2025? Thanks.

Sure. Thanks for the question. This is Paul Titterton speaking. And yes, really what I would say is, I'll kind of echo the themes that Bob is hitting on in his remarks, which is to say that we really see a market that is nicely balanced between supply and demand where the builders are not adding more assets into the market than demand would otherwise indicate and what that basically means that as long as we price to the market, we can keep our assets in place. And as Bob mentioned, in general, with the level of service that we provide, we find that our customers would all else being equal, prefer to retain our assets and so this is just a good market in which to be able to capitalize on that and generate those high renewal success rates.

Got it. Thanks. And is the outlook for railcar leasing better or changed at all with the new U.S. administration? Just trying to understand the puts and takes you and the customers have been thinking through relative to a potentially less regulated business environment, albeit with the potential for tariffs. How are you guys are - game-planning that?

I'll start answering for North America. This is Paul again speaking and just saying it's really too early to know what the effects are going to be. Certainly, we're not hearing anything either particularly negative or positive from our customer base for our customer base right now. I would say it's business as usual. I will commend a couple of administration decisions, Dave Fink heading the FRA and then Patrick Fuchs heading the STB. Those are both people the GATX knows very well and respects. So certainly, those early decisions from the administration are positive. But broadly speaking, I would say it's early days.

Yes. And I'll just add too. The Rail team here in North America has done a very good job of looking at a lot of different potential tariff scenarios and looking at all of the ways in which we source assets, whole railcars down - all the way down to the component level and we have certainly rank ordered areas of risk and alternatives we can pursue depending on how tariffs do play out. So I think we're well prepared.

Got it. Thanks. And maybe just switching gears. Talking about the secondary market activity, nice to see that still robust. Just in the fourth quarter relative to the third quarter earlier in 2024, can you talk about if there are any notable changes in the types or value of the cars being sold or acquired? And then how can we expect that mix to develop into 2025? What could put the gains relative to your targets either above or below what could we be looking for there? Thanks.

Sure. And I'd say there was really nothing unusual in the fourth quarter. We do very programmatic sales in a given year, we're in the market frequently and the portfolio that we put together in each of those sales is done with a lot of work analysis here internally on what are the right assets to be selling. These are high-quality assets and we'll look at things like customer exposure to a particular car type. Those are some of the things we'll think about when we identify what's potentially going to be in a sale package. With a fleet as diverse as ours, that gives us a lot of alternatives to populate those packages. So we're not loading them up with any one particular car type. It's really a more holistic portfolio view. So I don't see that changing at all in 2025. The packages we put out for sale will have a lot of high-quality customers, high-quality assets, great cash flows, and really diverse pools of assets for sellers to consider.

Got it. Thanks, Bob and team. I'll hop back in the queue.

Thank you. Our next question comes from the line of Bascome Majors from Susquehanna. Please go ahead.

Hi, good morning. Can you talk a little bit about the sequential development in lease rates and any trends that seem to be emerging in particular car types of the overall market?

Yes, sure. Bascome, this is Paul speaking, again. And broadly speaking, what I would say is the themes we've talked about in past quarters continue. Absolute rates for most car types in our fleet remain very strong and I would say that in general, the market conditions in terms of pricing for the various different types of assets in the North American fleet are pretty similar to what we saw last quarter. So on a sort of sequential basis quarter-to-quarter, the rates for a lot of car types are relatively flat, but flat at strong and attractive levels for us. So really nothing new to report versus last quarter, but continues to be a favorable environment from a pricing standpoint for the most part.

And the LPI, Bascome, as I mentioned, we expect to be in the mid-to-high 20% range in 2025, which is - that's a good thing. It's a very, very strong level and as Paul said, rates are holding in at very good levels and we're going to renew somewhere in the range of 20,000 railcars in the year ahead. So we'll have a lot of advanced opportunities to capitalize on that rate environment.

And to that 20,000 cars in the year ahead, can you remind us after this year how much of the fleet will be left to renew that hasn't been touched in the stronger environment, call it 2021 or 2022?

Yes. Go ahead, Tom.

Yes. Hi, Bascome. This is Tom. So it's not a totally precise measurement because we're constantly repricing. But overall, we're at about the halfway point.

As of today or after the 20,000 renewals? Just to clarify there.

Yes, that's as of today.

Okay. And just one more from me. In the Engine Leasing business, how do you feel about the balance of JV investment versus direct investment going forward? And any other more detail on the relationship with Rolls as their financial outlook has improved? Thank you.

Well, I would say in terms of our relationship with Rolls, we're in year '27 of the joint venture and that relationship remains very strong. Rolls has been a great partner all those years, very communicative, never a surprise, very open about what their strategies and plans are, and those are fully shared with us. And in terms of the direct investment balance, this year, we did $260 million roughly in 10 engines and the joint venture did $900 million. So the bulk of the investment will continue to come through the joint venture and selectively will add assets on a direct basis.

Thank you.

Thank you. Our next question comes from the line of Justin Bergner from Gabelli Funds. Please go ahead.

Good morning, Bob. Good morning, Paul. Good morning, Tom. Good morning, Shari.

Good morning.

Good morning.

Good morning.

First question would be just on capital allocation. So you said about $800 million of investment volume in Rail North America, which is, I guess, about $360 million lower, but your overall kind of rail investment volume would be about $270 million lower at the $1.4 billion level. So, where do you expect to ratchet up the investment outside of Rail North America?

Yes. So as you mentioned, Justin, Bob already commented on Rail North America. The other segments are pretty similar to what we're seeing this year. We expect something similar in Engine Leasing, expect something similar at Trifleet. The offset is we expect Rail International to be up a bit, maybe in the $50 million to $100 million range more. And as you'll recall, that business had experienced some supplier challenges getting cars produced and we do not expect to face the same degree of challenges going forward, which is why that number has gone up.

Got you. All right. That's great. And then to the extent you're spending $270 million less or laying out $270 million less on investment volume. Does that just mean that your net debt sort of creeps up a little bit more slowly or are you thinking any increased capital return?

Yes. So overall, what I would tell you is we expect our leverage to remain relatively consistent over the year.

Okay. And leverage defined on what metric?

Debt-to-equity.

Okay. Got you. Last question would be, I guess with respect to the maintenance expense being higher on tank car qualifications. When does that bolus of spend finish? And how much would you come down from there on a normalized maintenance expense basis once it finishes?

So this is Paul speaking and really '25 is our last high compliance event year for a little while. So we would expect it to begin to come down in 2026. I don't necessarily want to get into a specific range, but I would just say there is a reasonable opportunity for improvement there in net maintenance expense as we see the compliance calendar moderate in 2026.

Got you. All right. Thank you.

Thank you. Our next question or last question comes from the line of Brendan McCarthy from Sidoti. Please go ahead.

Great. Good morning, everybody. Thanks for taking my questions. I just wanted to start off on remarketing income, the favorable outlook there for 2025. I think at the start of last year, there was a thought that perhaps higher interest rates might lead to a maybe softer demand environment as investors look for yield elsewhere. I just want to get your thoughts on what you think the interest environment might look like for 2025? And how that will play into secondary market demand?

Well, we are anticipating that the interest rate environment we're in right now will continue in 2025, so at higher levels than what we experienced really over the course of the prior 10 years as they ramped up in '23 and '24. We did anticipate that, that might slow some secondary market activity really towards the back half of '23 and into throughout 2024, but we just didn't see it, and I think that is a reflection of the fact that railcars are great stores of value. They have high-quality leases and cash flows attached to them and even in a higher interest rate environment, we've continued to see the breadth and depth of buyers hold in very well. Interest levels are high, multiple bidders on all different components of a portfolio and a fairly long list of potential buyers to go out to. So that's why we're comfortable in that 100 to 110 range - $100 million to $110 million range for this year is really based on the feedback we're getting real-time from the market.

I'll just add too. This is another benefit of the fact that we're seeing more disciplined new car production because the universe investors that want to invest in railcars really have to focus more on the secondary market. So as a seller, that benefits us as well.

Great. That's helpful. That's helpful. And then I think on the Rail North America side, you mentioned for 2025 segment profit higher there based off more cars on lease. I guess as far as additions to the Rail North American fleet, do you kind of look at that as being from some of the supply agreements in place, or do you think that you might be going out to the secondary market more frequently in 2025?

Well, we'll definitely continue under our supply agreement that we have in place. So we'll be taking a delivery of 3,000 cars under that program alone in 2025. The secondary market activity that we undertook in 2024 was - as I mentioned in my opening comments, kind of alluded to, was particularly robust at levels we had not experienced before. So we're not assuming we'll duplicate that again in 2025. But we absolutely will be active as a buyer in the secondary market again and in the hundreds of millions range, we anticipate in 2025. So definitely, we'll be in the market and look at - attracting assets that fit well with our portfolio.

Yes. And just to comment on your statement about the driver of the range that Bob provided. So, Bob noted that the gains on asset sales are expected to be a little bit lower than this year's $120 million. That offset is largely coming from that repricing that we talked about from the fleet. So the fact that those lease rates are going up, we're getting the mid-to-upper 20% more on each of those leases is really a key driver to the increased financial performance.

Great. That's very helpful. Thank you. That's all from me.

Thank you.

Thank you. That concludes our Q&A session. I'll turn the call back to Shari Hellerman for her final closing comments.

I'd like to thank everyone for their participation on the call this morning. Please contact me with any follow-up questions. Thank you.

That concludes our conference call for today. You may now disconnect.