Air Transport Services Group (NASDAQ:ATSG), a leading provider of aircraft leasing and air cargo transportation, reported a robust second quarter in 2024 and provided a positive outlook for the rest of the year in their earnings conference call. CEO Mike Berger highlighted the expansion of their agreement with Amazon (NASDAQ:AMZN), which will see 10 additional aircraft added to the fleet by peak season, and the company's success in leasing out additional freighters.
ATSG raised its adjusted EBITDA forecast to approximately $526 million and reduced its capital expenditure outlook to $390 million for the year. The company remains committed to safety, customer satisfaction, and cost control and is on track to exceed its free cash flow goals.
Key Takeaways
- Expanded agreement with Amazon to include 10 more aircraft, totaling 51 767s operated for Amazon by peak season.
- Leased 4 additional 767 freighters to external customers since the end of June.
- Raised adjusted EBITDA outlook for 2024 to approximately $526 million, a $10 million increase from previous estimates.
- Reduced total capital expenditure outlook for 2024 to $390 million, including $165 million for sustaining CapEx and $225 million for growth.
- Generated $107 million in free cash flow through June, with further improvement expected.
- Anticipates solid demand for mid-sized freighters and plans to deliver double-digit aircraft by year-end.
- Expects ACMI business to be profitable for the entire year, with significant improvement in Q4.
- Long-term deal with ABX Air extended through 2030, and no disruptions in crew operations reported.
- Sold five aircraft, including unmodified 300s and three 767-200s.
- Ongoing demand for 767 conversions, which are central to the company's operations.
Company Outlook
- ATSG expects to continue seeing strong demand for mid-sized freighters, driven by e-commerce growth.
- The company plans to deliver double-digit aircraft by the end of the year.
- Lease Plus strategy and global growth opportunities are central to ATSG's plans for 2025 and beyond.
Bearish Highlights
- The cost to convert aircraft has increased since the previous Investor Day, impacting fleet production costs.
- Depreciation of the aircraft fleet may be affected as planes age.
Bullish Highlights
- ATSG has successfully expanded its leasing activities, adding four additional freighters leased to external customers.
- The company has raised its full-year guidance based on current performance and growth opportunities.
Misses
- No specific misses were discussed in the earnings call summary.
Q&A Highlights
- In response to questions about repurchasing bonds due in 2029, Jeffrey Dominick indicated that it would involve negotiations and willingness from both parties.
- The company reassured its focus on executing the 2024 plan and delivering on commitments.
ATSG, under the ticker ATSG, has demonstrated resilience and growth in a dynamic market environment. With an expanded partnership with Amazon and a strong leasing strategy, the company is well-positioned to capitalize on the growing demand for air cargo services. Despite increased costs for aircraft conversion and potential depreciation concerns, ATSG's raised EBITDA outlook and commitment to free cash flow generation signal confidence in its operational and financial strategy. The company's focus on safety, customer satisfaction, and cost control, paired with its strategic initiatives, suggest a trajectory of sustained success in the years to come.
InvestingPro Insights
Air Transport Services Group (ATSG) has shown a commendable performance in the recent quarter, and the company's strategic moves have been reflected in its financial metrics. According to InvestingPro data, ATSG has a market capitalization of approximately $1.01 billion, indicating its significant presence in the air cargo industry. Despite a slight decrease in revenue over the last twelve months as of Q1 2024, with a -0.28% change, the company has maintained a gross profit margin of 35.26%, showcasing its ability to manage costs effectively.
InvestingPro Tips highlight that ATSG operates with a significant debt burden, which is an essential consideration for investors looking at the company's financial health. However, management's strategy to aggressively buy back shares could be a sign of confidence in the company's future prospects and a potential upside for shareholders. Additionally, while ATSG does not pay a dividend, its focus on share repurchases and profitability, confirmed by analysts' predictions and recent profitability over the last twelve months, suggests a reinvestment strategy aimed at enhancing shareholder value.
The company's P/E ratio, standing at 55.68, is high, but when adjusted for the last twelve months as of Q1 2024, it comes down to a more reasonable 21.08. This adjusted P/E ratio could indicate that the market has positive expectations of the company's earnings potential moving forward. Moreover, ATSG's commitment to exceeding its free cash flow goals aligns with the optimistic outlook provided by management in their earnings call.
For investors seeking a more in-depth analysis of ATSG, there are additional InvestingPro Tips available at https://www.investing.com/pro/ATSG, which could provide further insights into the company's performance and potential investment opportunities.
Full transcript - Air Transport Services Group Inc (ATSG) Q2 2024:
Operator: Good day, and thank you for standing by. Welcome to the Q2 2024 Air Transport Services Group, Inc. Earnings Conference Call. At this time all participants are in a listen-only mode. Please be advised that today’s conference is being recorded. After the speakers’ presentation there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Joe Payne, Chief Legal Officer.
Joe Payne: Good morning, and welcome to our Second Quarter 2024 Earnings Conference Call. We issued our earnings release yesterday after the market-closed. It is on our website at atsginc.com. Let me begin by advising you that during the course of this call, we will make projections and other forward-looking statements that involve risks and uncertainties. Our actual results and other future events may differ materially from those we describe here. These forward-looking statements are based on information, plans, and estimates as of the date of this call. Air Transport Services Group undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions, factors, new information or other changes. These factors include, but are not limited to; changes in the market demand for our assets and services, including the loss of customers or a reduction in the level of services we perform for customers; our operating airline's ability to maintain on-time service and control costs; the cost and timing with respect to which we are able to purchase and modify aircraft to a cargo configuration. Fluctuations in ATSG's traded share price and in interest rates, which may result in mark-to-market charges on certain financial instruments; the number, timing and scheduled routes of our aircraft deployments to customers; our ability to remain in compliance with key agreements with customers, lenders, and government agencies; the impact of current supply chain constraints; the impact of the current competitive labor market; changes in general, economic and/or industry-specific conditions, including inflation and regulatory changes; the impact of geopolitical tensions or conflicts and human health crises; and other factors as contained from time-to-time in our filings with the SEC, including the Form 10-Q to be filed today. We will also refer to non-GAAP financial measures from continuing operations, including adjusted earnings, adjusted earnings per share, adjusted pre-tax earnings, adjusted EBITDA, free cash flow, and adjusted free cash flow. Management believes these metrics are useful to investors in assessing ATSG's financial position and results. These non-GAAP measures are not meant to be a substitute for our GAAP financials. We advise you to refer to the reconciliations to GAAP measures which are included in our earnings release and on our website. And now I will turn the call over to Joe Hete, our Executive Chairman, for his opening comments.
Joe Hete: Thank you, Joe. Good morning, everyone. I want to spend just a moment on the leadership transitions we announced back in June. Mike Berger, previously our President was appointed as CEO. Jeff Dominick, previously a Board member, took over Mike's role as President, while I became the Executive Chairman. Many of you already know Mike well from prior earnings calls and investor meetings. He's been with ATSG since 2018 and brings a wealth of knowledge and experience, having worked for major air express companies throughout his career. With a background in private equity investing and commercial aerospace markets, Jeff expands ATSG's financial acumen in the aircraft leasing space, and we look forward to you meeting Jeff. As for me in my new role, I will still be heavily involved in the strategy development and the formulation of long-term business objectives for ATSG. I will turn the call over now to Mike to update you on the quarter, and both Jeff and I will be available during the Q&A session. Mike?
Mike Berger: Thank you, Joe and thank you to everyone joining the call today as well. I'm excited to be speaking to you on my first earning conference call as CEO. I want to thank Joe Hete, for his leadership and guidance as CEO after assuming the role last November and for continuing to lend us the skills and experience in his new role. I'm excited about the opportunity ahead of us here at ATSG. We have an unparalleled fleet of in-demand midsized freighters going to market with our Lease Plus strategy, which differentiates us from our competitors. Last quarter, we communicated a key milestone, our expanded and extended flying agreement with Amazon. We will fly 10 additional aircraft they provide this year, and we remain on track with prior expectations to be fully ramped up on those 10 aircraft by peak season. That will bring us to 51 767 aircraft, we operate for Amazon, including 30 we lease to them. Comparisons of our financial results for the second quarter to prior year were principally affected by fewer leased 767-200 freighters as expected. Our results for the quarter did come in above our internal expectation. Also, we are encouraged to report the progress we've made on leasing available freighters. Since the end of June, we've leased 4 additional 767 freighters to external customers. CAM also has lease commitments for our first two converted Airbus 330 aircraft expected to deliver in the fourth quarter of the year and is optimistic about future leases of other available aircraft. All these aircraft are headed for international markets where they will facilitate global trade, further demonstrating ATSG as an enabler of e-commerce growth. Importantly, we continue to execute the plans we laid out for 2024 with a focus on safety, customer satisfaction and cost control. I want to thank our ATSG team for their dedication in striving towards our goals. We are on track to exceed our stated goal of positive free cash flow for the year with $107 million generated through June and an expectation of additional free cash flow for the rest of the year. We are again raising our adjusted EBITDA outlook and have lowered our capital expenditure outlook for 2024. We remain focused on realizing the benefits of our business model and have the right team, the right assets and the right strategy in place. I will now turn the call over to Quint Turner to discuss our financial results for the second quarter. Quint?
Quint Turner: Thanks, Mike and welcome to everyone joining us this morning. I'll start on Slide 4, which summarizes our financial results for the quarter. Revenues were down $41 million or 8% versus a year ago to $488 million. This was driven by reductions in both our CAM and the ACMI Services segments. In the second quarter, we saw GAAP pretax earnings of $10.7 million, down from pretax earnings of $49.7 million in the prior year period. This resulted in a diluted earnings per share of $0.11 versus diluted earnings per share of $0.49 in the second quarter of 2023. On an adjusted basis, pretax earnings fell $41 million to $17 million, and EPS was down by $0.38 to $0.19. Adjusted EPS did improve sequentially by $0.03 from the first quarter. In our Aircraft Leasing segment, revenues decreased 7% as CAM's fleet of externally leased aircraft expanded by 1 since June 2023. That includes 14 incremental new leases less the 13 aircraft that came off-lease over the last 12 months and the related engine PBC revenues. At the end of the second quarter, 87 CAM owned aircraft were leased to external customers. CAM's pretax earnings were down $16 million for the quarter, reflecting $9 million more in depreciation, a $6 million revenue decline from fewer 767-200 engine cycles, and $4 million more interest expense versus the prior year. In our ACMI Services segment we reported a pretax loss of $7 million compared with a gain of $24 million in the second quarter of last year. Total block hours flown by our three airlines were down 10% versus the prior year quarter. Our cargo airlines flew 11% fewer hours across our customers' delivery networks. ACMI Services results were also affected by a $3 million increase in non-cash amortization expense for the Amazon warrants. ACMI Services also experienced increased expenses for maintenance, travel, and ground service rates, as the average flight segment was shorter than a year ago. As a reminder, we executed an expanded agreement with Amazon announced in May to begin flying 10 additional aircraft at ABX Air, in the second half of the year. Three of these are flying now and we expect to have all of them flying in time for peak season in the fourth quarter when additional pilot training and transition costs will be largely behind us. The fourth quarter will also include benefits of seasonal peak flying opportunities and separately, scheduled pricing increases under certain flying contracts. Turning to the next slide. Our second quarter adjusted EBITDA was $130 million, down $27 million from the prior year period. CAM's adjusted EBITDA decreased by $4 million, and ACMI Services and other decreased by $23 million. CAM's decline was again driven by 767-200 lease returns and fewer engine cycles operated by the 200s remaining in service, resulting in lower power by cycle engine revenues. The decrease in ACMI Services and other was driven by fewer block hours as well as increased expenses for maintenance, travel, and ground services. Slide 6 details our capital spending on a trailing 12-month basis. Total CapEx for the quarter was $70 million consisting of $43 million in growth and $27 million in sustaining CapEx. Our CapEx spending is down 64% year-over-year for the second quarter. And for the full year 2024, we project a decline of more than $400 million in capital expenditures compared to 2023. The next slide updates adjusted free cash flow as measured by our operating cash flow, net of sustaining CapEx. Operating cash flow was $137 million in the second quarter of this year. While that was down $55 million versus the prior year period, we still generated $110 million of adjusted free cash flow. Furthermore, as a result of the reduced growth spending as well as $25 million in asset sale proceeds, we generated $92 million of free cash flow in the quarter. This brings the year-to-date total to $107 million. On Slide 8, you can see that available credit under our bank revolver in the US and abroad was $489 million at the end of the second quarter, as we reduced total debt by $131 million since the beginning of the year. Our plan now calls for us to reduce our adjusted EBITDA leverage ratio to around 2.9 times by the end of this year compared with 3.2 times at the end of last year. We continue to maintain healthy liquidity with unencumbered aircraft assets of $1.4 billion. Now I'll turn the call back over to Mike to discuss our updated outlook. Mike?
Mike Berger: Thanks, Quint. Turning to the next slide, I'd like to spend some time discussing our outlook and assumptions for 2024. Including the additional leases we signed since June, ATSG now expects adjusted EBITDA of approximately $526 million in 2024, an increase of $10 million from the outlook we provided in May with the increase concentrated in the fourth quarter. The contribution from these leases was included in our original $30 million of potential but uncommitted additional adjusted EBITDA we laid out in February. We expect the third quarter adjusted EBITDA to be similar to the second quarter, with a marked improvement in the fourth quarter. As a reminder, this forecast also excludes any contribution from additional leases not currently under contract which could generate additional adjusted EBITDA. We continue to see more interest in our newly converted freighters while maximizing value from the 767-200 aircraft that finished their lease terms. This includes utilizing three, as spares to support additional Amazon flying. As mentioned, we are reducing our total capital spending target to $390 million versus $410 million we projected in May. This includes $165 million for sustaining CapEx and $225 million for growth. The gross spending outlook includes the completion of 17 aircraft that were in the process of conversion at the start of the year and seven feedstock purchases, including one additional Airbus A330 later this year. As I mentioned earlier, we generated $107 million of free cash flow through June, and we expect continued improvement during the rest of the year. This improvement stems largely from the $400 million reduction in our CapEx spending versus a year ago. We continue to believe our midsized freighter assets will remain in high demand, and our unique Lease Plus strategy positions us for more freighter leases and superior customer satisfaction. We are focused on safe, efficient operations as we deliver our 2024 goals and look forward to an even better 2025. That concludes our prepared remarks. Joe, Quint and I, along with Jeff Dominick, our President, are ready to answer questions. May we have the first question?
Operator: Thank you. [Operator Instructions] Our first question comes from Frank Galanti with Stifel. You may proceed.
Frank Galanti: Yeah, great. Appreciate you taking my question. I want to ask sort of about demand for the midsized freighters, what you are seeing, right? Obviously, you had more leased than you anticipated beginning of the year and last quarter. But sort of given how many of the older planes are coming out of service, how do you see the supply demand balance for that freighter class?
Mike Berger: Yes, Frank, it is Mike. We still see solid demand for the mid wide-body aircraft. We delivered 14 aircraft in the last 12 month period. As we've announced, we have delivered eight so far this year. And as I said, we know we are going to deliver the two A330s, as we talked about. So we fully expect to deliver double-digit aircraft by the end of this year and hope to carry that continuous momentum into 2025.
Frank Galanti: Okay, that's helpful. And then sort of switching gears a little bit to the ACMI business. It looked like there -- well, there were negative pre-tax earnings on the segment, which is worse than I thought. Can you sort of talk about the puts and takes in the quarter on between lower block hours or more Amazon flying? And then -- sorry, more Amazon CapEx or OpEx to get the pilots trained up. And then relative to -- what do you expect on a go-forward basis?
Quint Turner: Yes, Frank, it is Quint. Thanks for the question. Yes, the biggest impact in terms of the second quarter ACMI was just block hours, and block hours were down. As you know, we had the final -- the smaller 762s that we've talked about last year that were coming back from Amazon. We got all those back right at the beginning of the quarter, the second quarter. And so we had reduced block hours flown in their network. Of course, as Mike said, we are going to begin adding aircraft, the larger 300s, with three on and another seven expected to come on the second half of this year. And then Omni's block hours, our passenger block hours were also down of course, versus the prior year. And so those are the biggest impact. And we also had -- in terms of that, we had some warrant amortization with respect to the new Amazon arrangement. We had extended some of the warrants that had been previously granted to Amazon, and the amortization of those is driving about a $3 million impact for that. Now that said, in terms of the -- what were our expectations for the balance of the year, we do expect ACMI Services as a segment to be profitable for the year. And again you saw some commentary in the release, it is weighted to the fourth quarter. And there is a few reasons for that. Of course, there's always peak. There's the timing of some scheduled contractual price increases that are coming there. There is some seasonal charter opportunities, peak season opportunities. And so we do expect that for the full year, ACMI Services which is down for the first half in the loss position by about $10.6 million, to end up profitable for the full year. And I think they will carry some momentum into '25 with a larger fleet and some improved margins.
Joe Hete: This is Joe. Frank, on top of that you got the elimination, by the time we get to 4Q of all the gear-up costs for the Amazon business, as you mentioned in terms of pilot training, getting maintenance technicians trained up, et cetera. So that will be behind us by the time we get to the, call it November time frame.
Frank Galanti: Perfect. Well appreciate it. Thank you.
Joe Hete: Thanks Frank.
Operator: Thank you. Our next question comes from Christopher Stathoulopoulos with SIG. You may proceed.
Christopher Stathoulopoulos: So just to follow up on this last point here on the pre-tax contribution for ACMI. So Quint, profitable in 4Q. Just to kind of better understand if you contextualize that, is that slightly above breakeven? And as we think about -- I know there's a lot of these one-time costs going off. But just looking at '23, did around $32 million, 2019 pre-pandemic around $32 million. How should we think about pre-tax earnings and ACMI as a percentage of your EBITDA mix for 2025, given the expanded TSA with Amazon and all these other additional aircraft that are being placed? Thanks.
Quint Turner: Well, it might be a tad early for specific '25 guidance. But in terms of the remainder of this year, Chris, it is really again the fourth quarter where you're going to see, I think, ACMI Services improving its profitability and getting positive for the full year. I think the third quarter is going to -- because we are still onboarding the aircraft from Amazon and we've got those transitional costs that Joe mentioned in the third quarter and that's going to be a factor. And the fourth quarter is when we expect to have them all on board. And that combined with just the timing of sort of some annual adjustments that will take place on some of these contracts, I think will really provide a nice tailwind for ACMI Services in the fourth quarter. I mean, as far as next year of course, we will be speaking to that guidance more on the next quarterly call for the full year. But I think ACMI Services is going to make headway next year. Assuming contracts and business volumes remain in place as they are today, we would expect it to improve. As you know, they've had to absorb some aircraft coming back with the 767-200s. And those are all back now on those CMI contracts. So I think they are set to make progress on a go-forward basis.
Christopher Stathoulopoulos: As we think about and come up with our own bottoms-up analysis using all the fleet stats that you've given here for our '25 enterprise EBITDA, is it fair to say that ACMI, as a percentage of enterprise could fall somewhere between, call it 25% and 30% of adjusted total EBITDA for next year?
Quint Turner: Yes, I think so. Yeah, absolutely.
Christopher Stathoulopoulos: Okay. And as a follow-up here, with the outlook here for lower interest rates, how should we think about, I guess lease rates or if you want to speak to, I guess, lease factors into 2025 or lease rate factors? Thank you.
Mike Berger: In regards to the rates, as I've mentioned on a number of calls, we've seen, for the 767 specifically, lease rates be very, very stable over the last several years. We haven't seen much fluctuation at all through the different cycles that we've undertaken over the last few years. In terms of the lease rate factors, that can vary a little bit based on the feedstock costs, depending on different aircraft types as we go. Aircraft availability, specifically around the 330, have been generally higher based on some of the issues that Airbus has had getting their new product on the 350 into service. But overall in general, rates have stayed very, very constant.
Christopher Stathoulopoulos: Okay. And if I could just slip in one more here. I think you have four open labor deals, 2 on the pilots, 2 on the FAs between ATI and Omni. Just where are we on negotiations and sort of any sort of time lines we should look for? Thanks.
Jeffrey Dominick: I think as I've said on previous calls, right now, we don't expect to have -- the pilots are the primary drivers from a cost standpoint to get any agreements until sometime in 2025. Negotiations continue to progress under the auspices of the National Mediation Board. So that's baked into our numbers. We'll look into the fourth quarter where we don't anticipate having any additional costs as a result of settling up any of those labor agreements.
Operator: Our next question comes from Michael Ciarmoli with Truist Securities. You may proceed.
Michael Ciarmoli: Hi, good morning guys. Thanks for taking my question.
Jeffrey Dominick: Good morning.
Michael Ciarmoli: Just to stay on that on the labor front with the pilots, is there any increased disruption there or are you seeing any turnover from pilots? I mean, I think you called out crew training costs. But is that a factor or any kind of headwind on expenses there from that just overhang?
Jeffrey Dominick: No. In fact, the attrition has dropped off markedly since last year, almost down probably about 50% from where it was a year ago, which reduces our turnover costs. But we do have the gear-up costs associated with the additional Amazon tables baked in there. As far as disruptions, no disruptions relative to crews. I mean everybody is doing the job they are supposed to do on a day in, day out basis and moving the airplanes on a timely basis for our customers.
Mike Berger: And I think it is worthwhile just to reiterate, the amended deal that we got with ABX Air through 2030. We are really proud of that deal, as well as establishing what our expectations are going forward.
Michael Ciarmoli: Got it. Got it, okay. And then just generally on the cargo market, I mean you talked about ACMI and the block hours. Are you seeing any pressure just with the continued increase of passenger planes and that underbelly storage?
Mike Berger: Not from a belly standpoint, we don't see any pressure. Keep in mind, the majority of our customers and specifically our main customers fly within the major integrator networks. So when they are flying networks, they don't have a tendency to get the variability piece of it from a seasonality standpoint and available capacity standpoint. So we've seen very much stability in that side of the business.
Michael Ciarmoli: Okay. Last one for me, I don't know if I missed it. The $25 million of property and equipment proceeds, what did that stem from? And should we expect any more of those in the second half of the year?
Quint Turner: Yes. Michael, it's Quint. There were five airframes that we sold aircraft, couple of 300s and then three 767-200s that made that up. And keep in mind, like the 300s, those are unmodified. We were monetizing. As you know we had some assets that were not in conversion that were sort of awaiting conversion. So we were opportunistic and took that opportunity to move some of those. And as we've been saying, we have had customers interested in buying some of these 767-200s that came back. And some of those customers of course will continue to procure engine power from us which is good. So we monetized some assets. And as far as in the future, we will be opportunistic, but as you know it is something we don't typically that often do.
Michael Ciarmoli: Okay, perfect. Thanks guys. I will jump back in the queue.
Mike Berger: Thank you.
Operator: Thank you. Our next question comes from Ian Zaffino with Oppenheimer. You may proceed.
Isaac Sellhausen: Hi, good morning. This is Isaac Sellhausen on for Ian. Thanks for taking all the questions. Could you just provide a brief overview on the status and time-line of conversions as we move through the rest of the year? I know you mentioned the two A330s are expected to be converted in the fourth quarter. But can you also just touch on the 767s and maybe how you think about the timing of those with respect to the demand outlook and potential for additional leases? Thanks.
Mike Berger: Yes. Thanks for the question. We expect to deliver as I said earlier, a few more aircraft. From a 767 conversion standpoint, we are still actively converting aircraft with II in Tel Aviv. And we see the continuous demand for more 767s on a go-forward basis into 2025. We have often said and we still firmly believe that the 767 is the heartbeat of our company, and we will continue to convert 767s, as they are in demand.
Isaac Sellhausen: Okay, understood. And then as a quick follow-up on the passenger block hours or just flying at ACMI. Could you -- I think you mentioned a little bit in the prepared remarks on Omni. Maybe you could just help us understand where things are there as far as military flying and activity for them. Thanks.
Jeffrey Dominick: Yes. In terms of the Omni hours, as we said I think the passenger block hours were up versus a year ago by about 4% or so. However, on a sequential basis, they are not anything like that. They are doing a bit better than that on a sequential basis, actually being up on a sequential basis versus the first quarter. I think that the exercises, as you know that's -- the visibility is always a little bit tougher on the Omni flying. However, it is -- third quarter is usually not a bad quarter for them. Their busiest month is in October typically for the timing of exercises, but then they tend to fall off after that. And so it's a more normal pattern. We are getting to that point of the year where there's a contractual increase with the government's fiscal year beginning in October, and that's going to be helpful. So I think we are expecting it to be relatively stable in the second half of the year, similar to the first half.
Isaac Sellhausen: Okay, great. Thank you very much.
Operator: Thank you. [Operator Instructions] Our next question comes from Ben Rubenstein with Robotti & Company. You may proceed.
Ben Rubenstein: Good morning. Thank you for taking my question. So at the Investor Day last year, you talked about -- you had a slide that showed the estimated carrying value of your planes being $350 million less than the market value. I am just curious where that stands today.
Jeffrey Dominick: That was based upon what the cost to convert aircraft is, adjusted for the average age since conversion, and taking into account the useful life post conversion, which is about 20 years-plus. And actually, the cost to convert has gone up since then. Like a lot of things, inflation has affected that. So to produce that fleet of aircraft today has gone up, only gone up since Investor Day. And so as Mike stated a minute ago, the midsized freighter is still in demand as the big driver for that is e-commerce growth, and network flying is where those aircraft are deployed. So I don't think that's really changed. Of course, the aircraft have aged a little since September, and that depreciation will also be impacted. But if we ran that calculation again today, I don't think that has changed.
Ben Rubenstein: Okay. Thanks. And then just quick. On the converts due in 2029, is there any willingness or ability to repurchase those?
Jeffrey Dominick: I guess in terms of buying the converts back or buying stock after -- I mean, what are you --.
Ben Rubenstein: I mean, if you could buy them back at a discount, why not do that? I'm just curious if that's something that you guys thought about.
Jeffrey Dominick: Yes. I mean, I guess anything is possible but those aren't -- that's -- that would have to be something that both parties would want to do and it would be a negotiation obviously.
Operator: Thank you. I would now like to turn the call back over to Mike Berger for any closing remarks.
Mike Berger: Thank you. I want to express my appreciation to all of our employees across the ATSG companies for all the work they do every day for our great company. I also want to give a shout out to all of our customers. Our teams are super focused on delivering customer satisfaction every day. Since the start of the year, we have emphasized we must execute on our 2024 plan and regain the trust of our investors and shareholders. Very simply, we must do what we say we are going to do, no excuses. We have raised full year guidance to continue to look for growth opportunities and drive further incremental free cash flow. We are executing on this while still growing in our core leasing business. As you heard, we have delivered eight newly converted freighters so far this year and provided an optimistic view for more deliveries by the end of the year. Our Lease Plus strategy is unique and brings a powerful solution to the market. We will continue to grow our global presence that is underpinned by connecting key economic and market indicators. In closing, I will say that we’re pleased with the improvements we have made so far in 2024, and we have more to capitalize on. Let me be clear, we are not done by any means. Thank you, and have a great day.
Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
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