Triton International Ltd (TRTN) 2020 Q3 法說會逐字稿

Good day, and welcome to the Triton International Limited Third Quarter 2020 Earnings Release Conference Call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to John Burns. Please go ahead.

Thank you. Good morning, and thank you for joining us on today's call. We are here to discuss Triton's Third Quarter 2020 results, which were reported this morning. Joining me on this morning's call from Triton is Brian Sondey, our CEO; and John O'Callaghan, our Head of Global Marketing and Operations.

Before I turn the call over to Brian, I would like to note that our prepared remarks will follow along a presentation that can be found in the Investors section of our website under Investor Presentations.

I'd like to direct you to Slide 2 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 report 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 those factors.

In addition, reconciliations of non-GAAP measures to the most directly comparable GAAP financial measures are included in the earnings release and the presentation.

With these formalities out of the way, I will now turn the call over to Brian.

Thanks, John, and welcome to Triton International's Third Quarter 2020 Earnings Conference Call. I'll start with Slide 3 of our presentation. Triton had an extraordinary third quarter. We generated $1.14 of adjusted net income per share, an increase of 33% from the second quarter. And we achieved an annualized return on equity of 15.8%. The strong upward inflection in our performance was supported by a sharp rebound in global trade. The magnitude of this rebound was generally not anticipated, and our customers have needed to quickly add large numbers of containers to their fleets. We have provided sizable, immediate solutions for our customers by drawing on our deep container supply capacity and extensive operating capabilities.

And we are very proud to be playing an important role, helping our customers keep the global supply chain functioning.

The strong support we provided during this surge will further solidify our position as the go-to container leasing company for most of the world's largest shipping lines, in addition to leading to a durable increase in Triton's profitability. We were also able to take advantage of low interest rates and strong demand for high-quality, long duration debt to issue $2.3 billion of ABS notes at an average interest rate of 2.2%. Most of the proceeds, we used to call $1.8 billion of ABS notes with higher rates, and we expect $25 million of annual savings.

We're heading toward the end of the year with substantial operating and financial momentum. Our customers expect container shortages to last at least through early next year. And we expect our profitability will increase in the range of 25% from the third to the fourth quarter of 2020. As announced in our press release, we are increasing our dividend almost 10% this quarter from $0.52 to $0.57 per share. This reflects the expected durability of our increased cash flow and profitability due to the very large number of containers placed on attractive long-term leases.

I will now hand the call over to John O'Callaghan, our Global Head of Marketing and Operations.

Thank you, Brian. I'm turning to Slide 4. As Brian mentioned, trade volumes rebounded in the third quarter as lockdown eased in Europe and the Americas. Our customers that have earlier reduced vessel capacity on the Transpacific and East-West trade suddenly faced significant shortages. Triton secured sizable bookings, servicing those shipping line requirements due to our extensive supply capability and have booked over 500,000 TEU of new production on to attractive long-term leases. 200,000 TEU of these will be absorbed through the fourth quarter. Our utilization has rebounded to 97.6% as of the 16th of October.

New container prices increased $2,500 due in part to actions taken by the container manufacturers to rationalize production capacity but also due to the recent surge in demand absorbing that factory capacity. The pace and magnitude of the volumes required fleet demand has also increased sale volumes to record levels, and this continues to strengthen.

Our customers' profitability is expected to be strong in the third quarter, due in part to the changes we have seen in the shipping industry. Vessel reductions in the second quarter stabilized rates, while at the same time, fuel prices dropped. Due to the rebound in trade volumes and the increase in freight rates through the third quarter, the shipping line performance is expected to remain strong in the second half of 2020.

Our near-term credit risk is mitigated by our customers stronger financial performance. The major rating agencies have upgraded a number of the world's largest shipping lines, and we are optimistic this will be a longer-term improvement in the credit profile of the industry. Triton's performance has been solid through the tougher times of 2019 and early 2020, and we were able to meet our customers' demands through the third quarter as the market rebounded.

Our ability to respond so quickly to the market highlights the strength of our business model, the advantages of our leading market position and how beneficial this is to our customers.

Turning to Slide 5. Slide 5 shows the way trade volumes rebounded very quickly in the third quarter and have now exceeded pre-pandemic levels for 4 months running.

Slide 6 goes some way to illustrate the impact the market has had on Triton's metrics. On the top right graph, the spike in on hire is considerable even compared to 2 previous upstreams in 2010 and 2017. Both upstreams had a buildup of over a couple of quarters, where at this time, it's been over a much more contracted time period. You can see utilization increase in the third quarter, driven by our factory and depo stock with combined bookings of over 800,000 TEU. All the deals have a good spread of durations with robust logistics.

And in addition, a large percentage of the depot units have been placed on life cycle leases until the end of the containers' life. The bottom chart demonstrates the significant bookings of dry containers through the third quarter. The lower left is a chart showing each of these transactions by quarter over the last few years. There was strong activities through 2017 and 2018. And finally, a resurgence of the electric activity at the beginning of the third quarter in 2020. This bubble represents most new dry bank containers we had available. The lower right shows our depot inventory of containers in Asia and illustrates the sharp drop in depot inventory over just this quarter.

It took 3 quarters in 2017 to get to this point, and the majority of the remaining equipment is 20 for us, which lines are now also starting to inquire about. We had very few 40s remaining in our depots.

Slide 7 also helps visualize the pace and magnitude of this recovery. The graph on the left shows new container production inventory has decreased dramatically over the third quarter. What availability is showing as remaining is fully blocked by our customers. Container production will continue through the fourth quarter with battery capacity fully booked, which helped to explain why box prices have increased rapidly over a relatively short amount of time. This is traditionally the slower part of the year for our business. The graph on the right shows the progression of container prices as well as the margin that manufacturers make over the input cost of the steel. Container prices are up strongly over the last few months, due to the increases both in steel prices and the manufacturer's margins. The margins reflect the business strength and the demand for containers.

Slide 8 helps demonstrate why our customers' financial performance is going to be better than expected. The upper 2 lines are the spot freight rates on the Asia-Europe and Transpacific trade lanes, you can see rates are significantly up. The bottom dotted line shows fuel prices. After initially jumping because of demand for low sulfur fuel earlier in the year, prices have come back down or are below where they had been. The gap between higher freight rates and low fuel prices is expected to drive a strong line of profitability for our customers through the second half of 2020.

I'll now hand you over back to John Burns, our CFO.

Thank you, John. Turning to Page 9. On this page, we've presented our consolidated financial results. Adjusted net income for the third quarter was $78.1 million or $1.14 per share, up 32.6% from the second quarter. The strong results represent a return on equity of 15.8%.

Turning to Page 10. Our results in the third quarter reflect the container demand -- a surge in container demand and trade volumes. Revenue earning assets declined slightly from the prior quarter as the acceleration of new container orders was more than offset by a jump in container disposal volumes. Our average utilization climbed 1.1% during the quarter to 96.1%, driving a 2% increase in leasing revenue from the prior quarter. However, our quarter ending utilization jumped 2.6% to 97.4% at September 30. And the full benefit of this increase in utilization will be reflected in the fourth quarter financial results. The increase in utilization also reduced direct operating expenses by $3.6 million, as container storage and repair expenses dropped as more containers went on higher and less were redelivered and repaired. The strong container demand also drove a large increase in container disposal volumes and prices, which pushed our combined gain on sale and trading margins up by $8 million over the second quarter to over $14 million.

Our customer payment performance has remained strong during the quarter, and we expect that to continue. As John noted, our shipping line customers' financial performance held up much better than expected, with most lines reporting solid profitability in the second quarter and several guiding to exceptional performance for the second half of the year. Our share repurchases were limited to 400,000 shares in the third quarter, but our average diluted share count declined by 1.4% from the prior quarter, reflecting the significant share repurchases in the second quarter. And compared to the third quarter last year, our average outstanding shares are down by 6.4%.

Turning to Page 11. We have continued to strengthen our financial position. Our leverage, which we measure as net debt to revenue earning assets remains at all-time lows at the end of the third quarter and well below historical levels that were in the range of 75%. In addition to our low leverage, you can see on the table on the right that we have significant liquidity. Our strong cash flow, current cash balances and additional availability on our credit facilities gives us liquidity of $2.8 billion, well in excess of our major cash obligations over the next 12 months.

On the bottom right graph, we show that we have a well-structured debt portfolio with no significant maturity cliffs, enabling us to meet our debt obligations from cash flow, which is shown by the blue line, without the need for refinancing for several years. On the bottom left, we show the recent ABS financings completed in -- late in the third quarter. These financings include the largest ever container ABS issuance at the lowest yields. We issued 3 deals totaling $2.3 billion in less than 1 month's time and an average yield of 2.2% and used the majority of those proceeds to prepay 3 existing ABS deals, at an average interest rate of 3.8%.

These transactions will reduce our future interest expense by approximately $25 million annually and lock in these low rates for many years. Since we closed the prepayment of the existing ABS notes on September 21, the third quarter only includes 10 days of this interest expense benefit.

Turning to Page 12. This page highlights how we have been able to use our strong cash flow to create significant long-term value for shareholders. The graph on the top left shows our cash flow before capital spending. And you can see the resiliency of our cash flows across market cycles. The graph on the bottom left shows how our stable cash flows, together with the short order cycle for containers, enables us to maintain our leverage in a steady range over the long term. And the graph on the right demonstrates how these strong cash flows and our financial stability have enabled us to create significant shareholder value. By steadily growing the book value of the business while paying a substantial dividend.

I will now return you to Brian for some additional comments.

Thanks, John. Slide 13 shows the progression of our quarterly adjusted earnings per share and annualized return on equity over the last 3 years. You can see the steady growth in our EPS throughout 2018, as we took advantage of solid trade growth and increased reliance on leasing to grow our fleet and operate at a high level of utilization. You can also see our compelling investment returns reflected in our high-teen return on equity. You can see that our performance and returns held up well throughout 2019 and the first half of 2020, despite significant macro headwinds from the U.S.-China trade dispute and COVID lockdowns.

The resilience of our business through difficult conditions reflects the strength of our long-term lease portfolio, the rapid adjustment of container supply and demand due to the short order cycle for containers and the many advantages Triton enjoys as the scale, cost and capability leader in our industry.

On the far right of the chart, you can see that we expect our adjusted earnings per share to increase in the range of 25% from the third to the fourth quarter. In the fourth quarter, we will benefit from a full period of revenue on the large number of containers placed on higher in the third quarter as well as from a full period of interest savings from our ABS refinancing. We also have over well over 200,000 TEU of new containers awaiting for pickup. Most of these containers are just being produced.

I'll now finish the presentation with Slide 14. Triton had an exceptional third quarter, and we're looking forward to a very strong finish for the year. In the third quarter, we used strong market conditions to drive a significant increase in our performance. We provided our customers with large, critically needed container solutions to help them manage an unexpected surge in trade. We boosted our utilization to well over 97%, and locked in over 500,000 TEU of new containers on to attractive long-term leases, and we generated $1.14 of adjusted net income per share, a 33% increase from the second quarter.

Overall, we reinforced our position as the go-to leasing company for most of the world's largest shipping lines, while also moving our profitability to a new higher level. Market conditions are expected to remain strong at least through early next year, and we expect our operating and financial performance to improve further.

Our key operating metrics are still increasing. We continue to win a large share of leasing transactions, and we expect our adjusted net income per share to increase in the range of 25% from the third to the fourth quarter. We expect the benefits from our long-term lease activity and debt refinancings to be durable. We expect our profitability to remain at a high level in 2021, and we've increased our dividend nearly 10% to $0.57 per share.

I will now open up the call for questions.

(Operator Instructions) The first question comes from Ken Hoexter from Bank of America.

John, congrats on the ABS financings and the great rates and team, great outlook in details. Brian, maybe just talk a bit about the $350 million you talked about on your ordering into next year. Are you seeing peers ramp up? Maybe talk about the capacity at the yards? Are they increasing capacity? And should we expect kind of this run to end? Or do you see kind of visibility and sustainability given the constraints in the market?

Yes. Sure, Ken. Thanks for the question. So as we disclosed in the press release, we've already ordered $350 million of containers for delivery next year. And partly that reflects the fact that capacity for manufacturing has been so constrained this year. The container manufacturers at the end of 2019 reduced their ship capacity to bring in line the container production capacity of their factories with actual demand. And it's just those restrictions, or I shouldn't say those lower capacity levels remained in place as we headed into this surge in demand and surge in trade. And so what's happened, as we've shown in some of the charts, is that the container inventory at the factories has run down to very low levels. The container manufacturers have started to increase their production volumes by adding hours on the ships, and I think days to some of the ships. And the production capacity is getting back towards, let's say, a normal level of production in normal years. But just given the fact that our inventory and the market inventory is so low, we've been ordering more than we might typically for next year production at this point.

In terms of where we see the market going, as we said, we hear from customers that they expect a fairly significant container shortage to remain through the least Chinese New Year, which this year is late in the middle of February. As it relates to what happens after Chinese New Year as we get deeper into 2021, that's obviously harder to predict. There's a lot of macro uncertainties still out there with, of course, the COVID pandemic and what that's going to mean. But I'd say for us, as we said a few times, we believe the things that we've done during this time with a very strong demand and limited container supply that the benefits of those things are going to be durable. And so we're to some extent, it's hard to -- these days to have a crystal ball about what is economic growth going to be in 2021? What is trade growth going to be? Again, we haven't heard customers saying that they expect very -- anything negative. But it is, of course, hard to predict the macro right now. But that said, as it relates to Triton, we feel very good heading into next year.

Great. And then, Brian, maybe talk about given that tightness, what do you think happens with lease rates here? Are you seeing pricing starting to scale? I know we talked about this in the downturn you're protected because of some long-term rates. Maybe talk about what your exposure is to then what percent of your boxes start to roll over. Do you have any coming exposure that could benefit from rising rates? And do you see rising rates in the market at this point?

Yes. So for sure, lease rates are up significantly this -- over the last few months. And that reflects a combination of increased new container prices, together with just the strength of demand and the scarcity value for containers. And so I didn't do the calculation this morning, but I'd say market leasing rates for new containers are up well over 50% now compared to where they were, say, during the second quarter. It takes time for that to filter its way through our average lease rate for our existing containers that are in our depots. We've put a lot of them on hire onto multiyear, we call them life cycle leases. I think John O'Callaghan mentioned this that keeps the container on hire for the rest of its life, and they typically have very high NPVs, but they don't have -- usually, they don't follow the market rate all the way up.

In terms of the new containers we put on lease, we've seen, I think, as we show in our -- we call it the bubble chart, the rates we've been getting on our new container leases have been going out pretty quickly. And you can also see, I think we marked where the current market rate is on there, which is quite a bit up from where we had been doing deals even in the third quarter. And so clearly, that's all translating.

In terms of our exposure to container lease expirations, it's actually very small right now. We -- in the second quarter, when times weren't so good, we did a lot of deals where we locked in our containers, those that have been expiring, we agree with certain big customers to limit returns on those containers over the next year or 2.

We also typically are pretty aggressive about trying to renew most of our expired leases onto life cycle leases for our used equipment. And so we actually look forward and have not very much at risk of expiring and coming off higher for the next year or 2, which is also one of the key reasons why we feel very good about heading into next year almost outside of what the macro looks like.

But at the same time, as you pointed out, it does, to some extent, limit our ability to push the higher market rates that are out there for new containers into the portfolio of our used containers. But overall, I'd just say, we feel pretty good to have the protections that we do.

(Operator Instructions) Next question comes from Michael Brown from KBW.

I just wanted to -- yes, I just wanted to follow up on, I suppose, on Ken's question there about as you look about -- as you think about the opportunities going into next year, it sounds like production is kind of somewhat limited there, and that's going to probably kind of limit the ability to take advantage of the uptick in the market. And so as you think about capital allocation against that backdrop, you're clearly going to keep throwing off a lot of excess cash flow here. You raised the dividend, you're still buying back shares. Your leverage levels are at really historically low levels. So what -- how do you think about capital allocation against that backdrop?

Or is it just that the production levels are improving and, therefore, that will become less of a constraint for you and you can deploy more capital into CapEx as we move forward?

Yes. No, thanks, Michael. And I'd say a couple of things. So one, as I mentioned briefly with Ken, the manufacturing volumes have come back up. And the manufacturers are currently producing at a level that's consistent with, say, solid market growth. And given that we are starting from a shortage situation, we might need to see a little bit higher than that to get back into balance quickly. But we do see an opportunity for us to deploy a significant amount of capital in 2021 if market conditions remain strong. And especially given our position with customers and the fact that I mentioned a few times, a lot of them do see us as their go-to supplier. Again, we think if the market remains reasonably buoyant, we'll have a lot of opportunity to deploy capital in 2021. And we're starting with a running start given the orders that we placed already. But you're also right, on the capital management side. Our leverage is about as low as it's ever been at a time when debt costs are also about as low as they are. We're throwing off a lot of cash right now due to our profitability. And we have a lot of confidence in our cash flow going forward. For all the reasons we are talking about with our lease portfolio and all the containers put on to attractive longer term leases.

And so -- and I can tell you, we think a lot about what are the priorities for that capital and for the cash flow. We did increase the dividend 10% this quarter to reflect the improvements in our profitability and the durability of those improvements. But when it comes to other things we might do, there's a lot of options. And we look at them all the time, ranging from -- we've been buying back shares aggressively at various points over the last 18 months. We remain a believer in acquisition opportunities for the right deal at the right price, that's fair to our shareholders, too. And there's lots of other things we could consider. So I -- it's certainly a problem we ponder. What do we do with all this cash flow and all this balance sheet strength. But of course, that's a pretty good problem to have.

Yes. I appreciate that, Brian. That is certainly a high-quality problem to have. Just one follow-up. Utilization rate, obviously, it's really snap back here and great to see that it's already pushed well over 97%. Is there a natural ceiling here? I mean I understand that the 40-foot containers, those have had utilization rates running almost to 100% or so. But the 20-foot containers have been a little bit softer. Is there -- does that, therefore, give you kind of a natural ceiling? Is this kind of as high as it could go unless that market really rebound as strongly as well? Or what are some of the puts and takes we should consider there?

Yes, for sure. There certainly is a natural ceiling. And quite frankly, sometimes in past markets, we've pushed past it. I think one of the things we always say is if we get our utilization to 99%, it means we've underpriced our containers. And so we don't like to try to achieve some kind of theoretical maximum of utilization because, again, we -- it just means we've given away equipment cheaper than we should have. And then plus we also think our main value to customers is having standby capacity. And so we work pretty hard to try to make sure we have some. In addition, we've got a very diversified fleet of containers. We've got something like 60% of our revenue and assets or maybe slightly more than 60% coming from dry containers.

We also have a big position in reefers. And then we have a number of ancillary product lines like tank containers and special containers. And while all of our product lines are doing well, it's really the 40-foot high cube and 40-foot standard dry containers where we're seeing the extreme demand and then relative to suit available supply.

And so right now, that portion of our fleet is past our ideal utilization. And in fact, that's about as close to full utilization as you can get, and we actually wish we had more and could take back containers and have them be available for the customers that need them.

And we'll just have to see what happens with the other parts of the portfolio, which will then determine where the overall utilization goes.

Great. And actually let me sneak in one more here. So from everything that we're kind of reading and hearing from yourselves and others, is that the 40-foot -- the strength in the 40-foot containers and the high cubes and the standard containers is been led by the strength of the consumers here that have continued to kind of spend throughout the pandemic. A lot of that's supported by fiscal and, I guess, monetary stimulus as well.

How imperative do you think that the ongoing recovery here is tied to that strength of the consumer? And do you think that -- how do you think that potential another round of stimulus here in the U.S. could play out for your business? Do you think it's kind of necessary to keep this recovery going or just kind of too hard to discern the potential impact there? Just any commentary there would be very helpful.

Yes. Sure. I'll try to at least give you my thoughts. So you're right, as we mentioned, that the strong demand for the 40-foot and 40-foot high cube containers tend to be consumer-oriented, especially in the U.S. and Europe. And so the trades that have really led the trade recovery during 2020 are the main East-West trades, Asia to the U.S. primarily, and then Asia to Europe and reflects the fact that consumers started spending much more rapidly and then more aggressively than certainly, I think most people anticipated as the lockdowns eased.

And it's hard for us to really discern what's driving that behavior? I wouldn't say we've got better insight into that than anyone else. And just talking with our customers and thinking about what's going on, I'd say a lot of our customers and us are pointing to perhaps changes in consumer behavior, where the portion of people's wallets that they were spending on travel and eating out and other types of experiences and services have the -- have gone way down because of the COVID restrictions and fears, where that's been shifted to buying things.

You certainly hear that and you see in the data on consumption that people are buying a lot of electronics. There's a lot of home-improvement work going on, goods for the households and things like that. And those things come in containers. Of course, the hotel stays down. And I think that -- from what we hear is a lot of it. I think, of course, anything that drives economic growth tends to benefit our business because certainly, global trade is highly correlated with economic growth. Now in this current cycle, interestingly, if they're not running hand-in-hand that, of course, economic activity in most of the world is not yet back to where it was before the pandemic, where trade volumes are well above.

So I don't really know. I mean, I wouldn't say I'm more qualified than anyone else to judge the -- how essential this round of stimulus is to the 2021 level of economic growth or consumption in the west. But again, I think the thing I'd say is that the level of economic growth and trade growth will drive how much investments and how much growth we have opportunities to participate in next year. But in terms of the profitability and cash flow improvements of the business, a lot of that's been locked in.

The next question comes from Larry Solow from CJS Securities.

And I too pass on congrats on managing the business really well during the -- certainly initial downturn on the pandemic. I'm just trying to -- obviously, with the going forward '21 and beyond and trade growth, there's still a lot of uncertainties there and I know you guys don't guide to '21. I'm just trying to set some goalposts, like you've guided to sort of $1.40, $1.45 exiting this year. I think you said $350 million of containers were delivered in the first few months of '21. Let's just say, even in a worst-case scenario, COVID lingers, even we come out of COVID, but -- so obviously, some of this rebound in trade growth was because of the big slowdown in the first few months of the year. So let's say trade growth is or even contracts a little bit or even over the next couple of years. Is it fair to say you've sort of set a floor that at $1 or whatever that may be, plus or minus $1.50 a quarter for the next 6, 8 quarters, even in a -- not a nuclear war scenario, but a negative or flat-to-down trade environment?

Yes. So not surprisingly, we don't want to get pinned down to specific forecasts for...

Absolutely, I mean from a high level, without specifics. Yes, yes.

We typically give -- yes, we typically give sort of numerical guidance one quarter out. What we did say in the press release and certainly tried to allude in our comments too, is that we have, I'd say, more confidence than usual heading from this year into next year. And that's despite the fact that there's probably less confidence than usual in just the macro picture because of the COVID uncertainties and stimulus uncertainties and all other kinds of things.

In terms of the trajectory of earnings, we typically find is one of the nice things about this business is when the market is strong and kind of the tide comes in, you can do a lot of things that have long-term benefits. And most importantly, are taking all the containers that were sitting in depot and we're paying for storage, putting them on hire, not just putting them on hire, while the market is good, but we're putting them onto multiyear, long-term leases, in many cases, life cycle leases, so that even if the times get worse and the tide recedes, we kind of hang on, we put a post in the ground and hang on to that.

And that's not to say we can -- if the market really weakens, we can hold our performance exactly flat. We -- I'd say our profitability and utilization do move in the direction of market conditions. And -- but it can move quite slowly. And typically, what you find is that as market conditions change, yes, we start to drift upwards or down. But again, it's -- when you have opportunities like we've had over the past couple of quarters, the changes you make are durable. And the drift down would be slow. And then usually in our business, because the order cycle for containers is so short that, that negative period doesn't last that long, outside of something really unusual.

And so all that being said, we do look forward to 2021 and say, again, it's not -- we can't predict exactly how it's going to compare to the fourth quarter run rate, but we think it's going to be on an absolute level. High level of profitability and very attractive return on equity.

Right. And clearly, you prove -- you've proven that multiple times in downturns and specifically even in this pandemic downturn that you felt relatively slow over the -- even before the pandemic when the economy and trade volumes weren't good for the last couple of years, you guys kind of slowly came down and like you said, you're going to position yourself for the long term. Okay. And just as we look out, even '22, '23, usually, you guys have a charge and see it in this deck about -- are there more containers coming off-lease as we look out or not the next 1 year, but over the next 2, 3 years? Or...

Yes. So we do have a charge still in the deck about it. And...

Okay. Let's see that chart.

Yes. So the current expirations, if -- when you look at the chart, look like they're a little high, but we've got a shaded part of the bar that shows -- I mentioned briefly that we've done a lot of deals that really severely limit how many containers can be returned even for expired leases. And so the -- even the exposure on expired leases right now is pretty small and it remains small for the next few years. And I think we show too, the percentage of our fleet that is at repricing risk in any given year. And typically, you face repricing risk for containers that are expiring off of lease before the end of their useful life because you have to lease them again. And it's a pretty small portion of our fleet that's at risk for repricing in any of the years over the next 4 or 5 years.

And then we also show how the average rates on those leases that are expiring compared to the current market rate. And not surprisingly, the current market rate because it's high right now it's above those expiration rates. But even I'd say at more kind of cycle average levels of lease rates, we don't face a tremendous level of repricing risk on these expirations. Again, they're relatively small compared to our fleet and the lease rates on those expiring containers are not extraordinarily high.

There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Brian Sondey for any closing remarks.

Yes. Thank you. Well, first, I would just like to thank all of our employees for really truly outstanding efforts this year and in this quarter in particular, and then thank all of our shareholders for your ongoing support of Triton. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.