General Finance Corporation (GFN)

GFN 
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Exchange: NASDAQ
Industry: Consumer Services
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General Finance Corporation (GFN)

F2Q2014 Earnings Call

February 10, 2014 11:30 AM ET

Executives

Chris Wilson - VP, General Counsel and Secretary

Ronald Valenta - President and CEO

Charles Barrantes - EVP and CFO

Analyst

Ian Corydon - B. Riley & Company

Brent Thielman - D.A. Davidson

Brian Hollenden - Sidoti

Brian Gagnon - Gagnon Securities

Presentation

Operator

Welcome to General Finance Corporation’s Earnings Conference call for the Second Quarter ended December 31, 2013. Hosting the call today from the Company’s corporate offices in Pasadena, California are Mr. Ronald Valenta, President and Chief Executive Officer of General Finance Corporation and Mr. Charles Barrantes, Executive Vice President and Chief Financial Officer. Today’s call is being recorded and will be available for replay beginning at 1.30 PM Eastern Time. At this time all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. [Operator Instructions].

It is now my pleasure to turn the call over to Mr. Chris Wilson, Vice President, General Counsel and Secretary of General Finance Corporation. Please go ahead Mr. Wilson.

Chris Wilson

Thank you, operator. Before we begin today, I would like to remind you that this conference call may contain certain forward looking statements. Such forward-looking statements include, but are not limited to, our views with respect to future financial and operating results, competitive pressures, market interest rates for our variable rate indebtedness, our ability to raise capital or borrow additional funds, changes in the Australian, New Zealand or Canadian dollar relative to the U.S. dollar, regulatory changes, customer defaults or insolvencies, litigation, acquisition of businesses that do not perform as we expect or that are difficult for us to integrate or control, our ability to secure adequate levels of products to meet customer demand, our ability to procure adequate supplies for our manufacturing operations, labor disruptions, adverse resolution of any contract or other disputes with customers, declines in demand for our products and services from key industries such as the Australian mining industry or the U.S. construction or oil and gas industries or a write-off of all or a part of our goodwill and intangible assets.

These involve risks and uncertainties that could cause actual outcomes or results to differ materially from those described in our forward-looking statements. We believe that the expectations represented by our forward-looking statements are reasonable, that there can be no assurance that such expectations will prove to be correct. For more details regarding these risks, please see the risk factor section of our prior periodic reports filed with the SEC and posted to our website at generalfinance.com. These forward-looking statements represent the judgment of the Company at this time and General Finance Corporation disclaims any intent or obligation to update forward-looking statements.

In this conference call we will also discuss certain non-U.S. GAAP financial measures such as adjusted EBITDA, a reconciliation of how we -- define and arrive at with these non-U.S. GAAP measures are in our earnings release. They will be included in our quarterly report on Form 10-Q.

And now we will turn the call over to Ronald Valenta, President and CEO. Ron, please go ahead.

Ronald Valenta

Thank you Chris. Good morning and thanks for joining us to discuss General Finance’s results for the second quarter of our fiscal year 2014. I’ll begin with a brief discussion of our operations and then discuss the outlook for our companies. Then our CFO, Chuck Barrantes will provide a financial overview and following his remarks we will open the call to your questions.

Our second quarter of fiscal year 2014 was another quarter of continued positive results where we delivered year-over-year growth in total revenues and adjusted EBITDA for the 15th consecutive quarter. We continue to significantly invest in our container fleet and also completed three accretive acquisitions to a North America and one in the Asia Pacific region. Our growth during the second quarter was led by another quarter of very strong performance in North America were at Pac-Van revenues and adjusted EBITDA grew 18% and 56% respectively. The increase in revenues at Pac-Van was primarily the result of the 28% year-over-year increase in leasing revenues as demand improved across most sectors. But particularly in construction, retail and commercial which also includes oil and gas customers. Pac-Van’s lease grew by 32% year-over-year to nearly 18,600 units with all of the growth occurring in our storage, office and portable liquid storage tank container product lines. This is consistent with our status strategy to increase our investment in the container asset class.

Average fleet utilization was 80% during the quarter driven by continued strong utilization across most product lines particularly in storage containers where we experienced an 87% average utilization rate. We are very pleased with the broad based growth that we continue to see in this product line across both our end markets and geographies. We continue to experience solid results for our portable liquid storage tank container product line, we have responded to strong customer demand particularly in the oil and gas sector by expanding our leased fleet which is more than quadruple in the last 12 months to over 1,000 units at the end of the quarter.

We are also continuing to expand our portable liquid tank business to include non-oil and gas customers. And while this still represents a small portion of our current business, 10 out of the 20 branches that lease portable liquid tanks serve only non-oil and gas customers and we believe that we can continue to diversify into other end markets for the container product over time.

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