Macquarie Infrastructure (MIC)

Jay Davis Managing Director, Investor Relations
Christopher Frost Chief Executive Officer
Liam Stewart Chief Financial Officer
Jeremy Tonet JPMorgan
Tristan Richardson SunTrust
TJ Schultz RBC Capital Markets
Call transcript
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Ladies and gentlemen, thank you for standing by and welcome to the Macquarie Infrastructure Corporation Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Jay Davis, Managing Director of Investor Relations. Please go ahead sir.

Jay Davis

to third Corporation’s quarter welcome this conference and the covering of you Macquarie earnings Infrastructure call, Thank XXXX.

Our and call is webcast open to today the media. is being

we financial In released results the last materials maybe Securities a Form copies on addition and our on filed a downloaded quarterly evening report website with to this release and discussing and www.macquarie.com/mic. call from were XX-Q have financial summarizing Exchange published press These performance our the Commission.

prohibited. Macquarie and Infrastructure of for let recording, on to of The Infrastructure is Chief are purposes Before Executive that the instrument. in any Frost, turning over This other available to not based this security any the solely Any and information. Christopher Corporation’s not material buy me solicitation or non-public consent whole an presentation or prepared Macquarie generally information this is public been part Officer, proceedings use offer reserved. in or information rebroadcast does presentation all to contain without you of presentation or written and remind sell the is a proprietary rights has prior Corporation presentation is

We convey some statements. or may forward-looking use words cases that This contains to identify presentation uncertainty statements. events future forward-looking of in outcomes these

under risks statements this could appears our Risk that caption known uncertainties. cause subject differ presentation description to are A a results Factors Forward-looking of in Form the XX-K. and number of in risks actual our to

by from expressed performance, Our in or materially or prospects implied forward-looking actual the those opportunities differ could statements. results,

revise discussed our statements required otherwise result as These The not any also future presentation. undertake may the are we or law. new differ. could are of this in publicly of whether events of as forward-looking by made or the statements except this to no obligation after as a results presentation completion occur. forward-looking of date presentation cause Additional risks not forward-looking actual aware We information, of which currently update this to events

times various and reference measures depreciation measures, cash be to and to our before During of earnings today’s or A earnings morning. EBITDA GAAP flow interest, found as the this most in us. non-GAAP the make non-GAAP measures to comparable free these will can the tables call, at taxes, defined by release reconciliation we press amortization published attached

in In today’s Liam Infrastructure Christopher call Chief Macquarie participating Corporation’s addition Frost, Financial is to Stewart. Officer,

At this Infrastructure time, Frost. is Executive Corporation’s it Officer, Macquarie introduce pleasure Christopher my to Chief

Christopher Frost

and those you thanks you, this Thank to of morning. Jay, our joining call

seen morning, publication have or selling and selling review thorough by our shareholders a its tax press along range pursue legal, a value of a to for businesses for financial, The release the alternatives actively reflects its each our announcing from second analysis additional board our fall. on MIC of to earnings in by confidence review other The advisers. of you’ll executing now, unlock alternatives of by significant annual strategic with transactions. or decision ability to retreat intention many industry pursue strategic strategic this This support follows our this As strategic and we MIC. included at distributed release decision

balance been: two, available the we For the capital resources. management These businesses; initiatives of prudent our investment sheet; in of priorities. support years, of three, executing one, been infrastructure X the on focused our and the strategic have past X in have strengthening of our and the

and to maturity their deployed that businesses into deploy improve six the debt resilience. from we our have the terms. and of our capital to a extended businesses competitiveness of these on or sheet and our balance remaining to sale proceeds Use As attractive successful non-core through and sales smaller portfolio result, each dramatically both our with streamlined their the of committed strengthen

also we recall alternatives. You believe would Therefore, performance actively many the number not available to time now that MIC is on I improve strategic pursue only strategic us. logical to for but alternatives quality these execution the the have us of priorities that the successful will increase occasions against and said of these

we Specifically, alternatives the MIC realize sale or for pursue to value greater intend or of businesses other sale its the strategic of to shareholders.

In for more joint involve of our alternatives strategic a sales businesses, spin-off addition to merger venture. could cash, of or or the one

on value be for maximizing will focus shareholders. Our

be objective, will sales limit for sets the MIC just is We our of process. company. It Along possible that our not morning. Consistent the efficiently other for into and set those as not us with sold this noted will Macquarie out the entered done announcement, or with and quickly with well advisers agreement external financial will smaller we have morning, press disposition the arrangement divested made to but be with are the advance the terminated terms non-core has public as this to which effort these USA, the filed assist and and manager. which time Management the manager release with agreement as to we manager have a Infrastructure otherwise with as appointed the this under as as businesses, any a of businesses. payment in activities, SEC and The have in was

storage based Agreement. our independent threshold businesses. manager the over of the for have IMTT in generated proceeds barrels paying is of the increases manager XX taxes, of with storage holding confident above sliding remain briefly and would for bulk more the is providers consideration U.S. The our markets merits. a those interest costs, level of the of investment transaction four Management the payment the scale in the With deducting after the based long-term company the the thereby, closely and paid aligning terminals proceeds storage in realized, or for realigned amount and be reserving U.S. general equity increases chemical handling XX will the in payment Services debt and the earnings manager on It worth payment the existing to level The payment. on services prospects off along the To and The million is of under reminding we of clear, future disposition in in each be two the positions It from shareholders. largest premier ourselves liquid major capacity, benefits of liquid one petroleum of unique the

XX over its services is Aviation and growing the capitalize products. Given flight gas performance, remains and as of and market. the the preeminent And provider the increases IMTT Atlantic With placed troughed U.S. chemical general of fundamental of bulk activity fence utilization IMTT its for position line. benefit of outside storage in on IMO to the of and We of demand fuel level well well markets, and development of handling the in products liquid includes This petroleum U.S., development handling based storage in utilization has U.S. continues operations driver robust. evidenced from believe both Aviation’s support related of to within pipeline the across of is The by XXXX in storage these the implementation storage course of products Atlantic as to a key XXXX. to ground strong aviation opportunities, as handling fixed IMTT of the general to related aviation natural consistent demand

the expansion operations of a of Aviation also to at pipeline enjoys and new the opportunities its of for Atlantic addition bases significant existing Importantly, bases network.

front in a full comprises Hawaii. our propane operations and business at gas of of develop these cleaner, are solar more production stable power energy Hawaii. market-leading and in Hawaii complex the business, to a regulated MIC Together, distribution sustainable distribution largest some facilities efforts

also steps over in We the have past resilient. we cash our have taken firmly remain of the each our presently X businesses health in years the generating capacity as and of the We made of believe configured businesses sheet. balance more confident our

of reaffirming As for dividend quarter per for XXXX. a our fourth the payment we of result, share $X guidance are the

In our per pay quarter $X XXXX. of view the performance dividend intend of per a addition, in businesses, based share our to on we of

at assumes sale business. of this dividend assume are operations any businesses and our not a ever, that support As and does the performing levels

it general and market. in In broader economic stability is subject addition, to conditions the

I stable Liam overlook I want in third you. I will businesses the point, in our color don’t a few highlights some of provide continued this to our to steps share ask will of on next At additional the with performances quarter. moments, but the

Liam Stewart

for year. aviation at trends the positive half be and sold lower Utilization XX.X% XXXX contracting present I the Hawaii, the rates. in utilization, MIC’s averaged business the our expectations performance of and Chris. quarter of good driven average for quarter the you, in quarter, of in for in general partially activity improvement board. by brief. growth from the prior storage at will and continued results MIC by increase third consistent XX.X% of were management the from the year-on-year. Aviation, ongoing business the period. mechanical average and second comparable up results in contribution quarter of in an financial were sale Thank first in They the continuation reflecting reflect An the XX.X% the reflect that late the flight IMTT the of offset effective are Atlantic IMTT’s the operational with XXXX across

as improved Lower utilization to driven percent feedstocks secondary in for high products Mississippi residual oil refining be Demand to at are mid- in expect heavy and Heavy We performance. has to used the continue on range the year-end. the XXs processes. storage River

IMTT’s a other As July. Mississippi the refinery is crude oil storage on purchased to largely that tanks River residual the IMTT than full and in the heavy result, related capacity Lower oil

capacity. As such, efforts storage repurpose IMTT paused has large-scale to

IMTT the fee full refinery generate year. or and quarter of between million $XXX We and million received will that termination continue of million, EBITDA the the million excluding $XXX this to $XXX between expect in $XXX first for year

benefited that services increased XXXX. Atlantic the on a by delivered for airports revenue X%. and movement X.X% overall. activity has up operates result about same Based fees flight quarter data, increased the from FAA-reported Atlantic flight aviation third at were Aviation which also good general in throughput increased on FAA the industry-wide ancillary Aviation IMTT against

business. this EBITDA. second its an last the also reduced through amount increase $X in and EBITDA maintenance hanger the expenses Atlantic’s more improved of to in to gross from rentals, primarily reflects million result more jet Aviation and generated adjustments, sold As benefits, quarter, fuel particularly than Atlantic approximately negative revenue margin salaries related year flowing of

be Atlantic results third full the for the quarter course. Aviation’s third The adjustments the improvement will this also the results quarter in will year XXXX. modest year, this, of a Excluding on for impact

we the However, reaffirming are million $XXX in business guidance $XXX million. of to EBITDA for a range

more compared generated with in EBITDA last. the of third Hawaii quarter substantially this MIC year

weather mechanical quarter of fourth write-down the That this sold performed You year the contracting recall costs modestly MIC in and business that increased. XXXX for included warm in demands last that expectations. will Hawaii labor the gas reduced of results line was with year. Unseasonably subsequently the aside,

this We deliver Corporate with the MIC associated expect of ago. with well. discontinued reflects compared consistent to re-categorization the the with operations and that in guidance costs, The businesses $X a of been segment year Hawaii those renewables the in year transactions $X quarter costs transaction result Other The our of million to have a caused of year third for of sales million now recorded million operations $X of results first approximately half year. the cost recorded our as ongoing prior have full

sales existing of I the would In of am the balance Available anticipate growth of and cash million, to a million majority total, year-end and renewable quarter as projects was We approximately the our of at sale fund transaction various $XXX of balances closing portion in which taxes. a we interest dividends approximately the be costs our report billion business XXXX. September. operating renewables remaining in end. liquidity our after at facilities principally available credit support generated pleased proceeds net anticipated $XXX to businesses having to on in of of from $X approximately our or

various the As and in Lower region conference our proceed. of foreshadowed subsided maintenance products River the to last permitted Mississippi growth during on call, work to levels

expectations. approximately to As spending $XXX sequentially a quarter $XX by million million expect and the increased projects our now growth projects growth million. $XXX lower original in to We the about $XX year, between deploy our for result, on third million on versus

Our a largely of reduced into expectations XXXX. XXXX deferral projects for represent

or either our liability of service Importantly, EBITDA delayed the the impact consolidated XXXX, expected XXXX be most beyond. in on deferral scheduled to placed an was to is projects or not tax given in in have our

With over for call that, few observations. back a the I’ll additional hand Chris to

Christopher Frost

Liam. of Thanks, now analysis early the Between will and alternatives. strategic refine we our with of various support XXXX, our advisers,

one of generating these ago, could few MIC, more or or any merger of moments of or sale venture spin-offs, a a include joint means mentioned value for I the as of of As sales shareholders. businesses our a

has specific market has or otherwise necessary course the update of further appropriate. is approved disclosure Board the will determined or when We action a that

will path customer We ability remain While on to we will current focus investing are setting the infrastructure forward, the projects on and continue extending in our from a in businesses. Gas to specific our and priorities, to confident life the diversify average In we will further remaining add also of reliability provides renewed Hawaii. business the capability Aviation’s Atlantic product and sustainability expand in our of lease general, development and complex IMTT it the positions particularly energy to the in development significant Aviation, and to continue medium Hawaii the weighted Atlantic over of by opportunities that value services long at new portfolio. the MIC and mix well capacity, investment of form business customers. and connectivity ongoing the term. to pursue acquisitions And the already footprint acquisition of delivering the we benefit will At both in Hawaii

We will alternatives could to that to businesses intend they our customers continue support the efficiently, confident that businesses our managing service safely the employees of expect. and that do providing its and operating MIC In sale and nearly what Namely, on well. or we while strategic level include summary, come of have across of high to pursue are X,XXX our businesses. focus

in prospects, ability a deliver processes process have appropriate good we in path forward, be our we’re to with confident that should value in to-date. businesses most solid sales just like the our have We sale and

the a finally, asset pay our we previously quarter performance dividend We assume any does businesses as the share subject again, dividend the and our per guidance the with at and third XXXX. a of per to MIC’s of our the your in in conditions stability general quarter the of fourth over $X call With results businesses the levels economic in class. reflective our assumes morning. that guidance distribution were intend the the broader per you, support business respect of for performing This of inherent and to to consistent And provided balance operations are share participation I sale and in market. that this remains and reaffirm in not with dividend a of stability year $X the quarter. thank

open time, I the ask will for this operator phone lines questions. to At our


And Jeremy Instructions] line question coming our [Operator first the from of Tonet with JPMorgan.

Your line is open.

Christopher Frost

Jeremy. morning, Good

Jeremy Tonet

morning. good Hi,

want taking that the if with appetite you bit there? are you start the provide as as off your could been Just actions color any share to with active color buyers wondering have as businesses how as and conversations out you guys potential of far far today a strategic could more or

Christopher Frost

that. would you not are think that comment to I Jeremy, Yes. appreciate we on able

Jeremy Tonet

a how the disposition it, Got sponsor okay. that through a mechanics, you bit us works the And talk about walk the bit? and there agreement maybe could with

Christopher Frost

Yes, certainly.

is either think alternatives the any be note the manager out of will the terms disposition businesses operating company which the any sets the terminated other upon agreement or we I pursue. the to following of important that the sale may or strategic point

business mentioned to I disposition manage or the represent seeks the agreement manager a continue payment in operate my prepared had the company. earned potential manager, have As remarks, earnings it may the or which the includes to to the

to is proceeds taxes to along that corporate the threshold, will a also and both realized. the in disposition company. equity are debts. costs, of the payment off we It adjust the the on based for payment scale that Importantly, transaction increases the sliding on reserving estimates for and or on proceeds minimum subject the payment based the increases proceeds be realized paying level is payable any The of

Jeremy Tonet

Great. bit I something about of there and explain looking there? bit is was is anything here XXXX, date a just works could – the there the how to language you timeline January the about a more

Christopher Frost

X – strategic you years alternatives a on has to successfully have the referring the agreement period. course the it disposition sorry to the extent priorities or an manager additional and payment that executed time represents that of within The we term are on that to

Jeremy Tonet

between this at and the about how trade-off utilization one rates the guys Got and think utilization the that a see the point the you that your maybe year Where final it. do for together? of here. you how here, looking a exiting that then all IMTT bit on increasing prior do mixes you the tenor expectations And just of versus up wondering kind stepped are contracts,

Liam Stewart

Jeremy, Yes. Liam. it’s

So clearly, of year-over-year that step we note seen up step as then would up And sort this in seen quarter have utilization. it’s I we first have well. a

see signs do we continuing So improve. to utilization of

sort spot consistent mid that sort said the – with i.e., utilization for and we well previously. what that’s high of is to XXs end guidance, of as year sort Our have of range in

you I improvement this utilization, single-digit in see think sort average the storage the low quarter, as year-over-year. percentages sort of for of in in down results revenues the notwithstanding the

in clearly, we and taking we will So we the tenor. around follow What some see to improvement in sort as can recovery recover. thereafter. we rises, to utilization their of respect that in to come what the of have to that with then time And see terms needs well, to also but utilization as engage our sort as one, do anticipate utilization recovery two, late customers of to continue first said, extend seek, we will meeting

Jeremy Tonet

for all for taking me. That’s questions. Thanks Great. my


SunTrust. line question from Richardson next the coming of And from our Tristan

open. Your line is

Tristan Richardson

good morning gents. Hey,

just kind business the is terms past talk of asset revision, of it or Just, restatement write-down, of curious a little because... Liam, you a a of could results kind about more that in bit an maintenance is

Liam Stewart

and write-down the of lease revenue and does FBOs. Atlantic some agreements reversal obliged to some prior little on maintenance maintenance has a of really few it’s a just it bit a with a of period it’s No, not it’s

results So, activity a anticipate we going wouldn’t The and the that slightly it’s in really forward. FAA had the a the it we volume quarter this non-core industry to Atlantic I good was see to and and very perspective. FBOs business would overall was from across stronger

Tristan Richardson

was just ownership creation Helpful. as sponsor? the any of of we but decision in Thank you. shareholder traditionally and/or sponsor any generally sort just shares the disposition and beneficiary And to the this the then guess lastly be you is ownership MIC board would, I of of just offered proportionate its just talk aligned to as think board’s its agreement just value on would agreement, the it could what about sort weighing of

Christopher Frost

Yes. note Tristan, important and I quite that we services disposition is be XX% see deals obligations agreement. how and termination that The with about company think Macquarie’s them important or to rights shareholding on management is and under as I it’s distinct the should from talked The quite manager treating businesses, it the two separate the agreements separated. really sort following the operating of of the to sale we so think are distinct. its separate

Tristan Richardson

Helpful. you guys Thank very much.


from our line with Schultz Capital of RBC next question coming TJ the And Markets.

open. is line Your

TJ Schultz

good you sell be separately to band is or IMTT and Rose sold Hey, in Would IMTT morning. St. its entirety?

Christopher Frost

TJ, speculate are think, this I we to stage going on would at appreciate that you not hypotheticals.

the a and once of update board And will we we possible. of said to will action, support of my early the remarks prepared then. decision I a timely year and with the and this to preferred our the efficiently market advisers, to in the of of that made analysis different as refine use are the part on next the As course year we in strategic alternatives look our balance do way has going that

TJ Schultz

a a to the Okay. In company it or if whole buyers? is an assets way is different transaction agreement, same there to either company transaction incentive or the disposition undertake it’s whole

Christopher Frost

no alternatives the with is There to respect being strategic differentiation pursued.

TJ Schultz

a but that you thing, forward? are the then agreement still forward or through clarify base recouped last of haven’t can the gotten going going you qualifying or announced a And in caps the lot fee waived they moving year event waivers Okay. parts just occurs if whole management

Christopher Frost

manager fee you then part portion disposition to that waiver as agreement, period agreed of undertaken the not will the base management manager reverse that has waive the in the see recall to will during of the of You The agreement. agreement. the a

TJ Schultz

the growth into in the IMTT much as do how just capital you for next to year deploy how projects? And Okay. – interim you IMTT at operate business, here expect much

Liam Stewart

TJ. you Yes. I Rob, sort give the of by going am to breakdown, segment segment

into of So sort this have the revised guidance be projects well. million and IMTT, $XXX largely to we that down sort reflects at over as will XXXX we which norm, verticals million roughly to IMTT. year million with our of $XXX then consistent historical And a $XXX today and year next at all of of capital with across that large for proportion committed MIC growth of the have is fall

TJ Schultz

you. thank Okay,

Christopher Frost

you. Thank


Mr. I am not questions this Frost over I showing And the to at call for further Christopher time. any conference turn would like to closing back remarks.

Christopher Frost

in We be With participating during for strategic analysts meeting of road great today. with ahead. to We day. look continuing forward priorities conference to on you in on you that the execute time. a on many our again that, call focused our weeks have and and remain Thank the will investors with speaking


gentlemen, conference Ladies you Thank for call. and participating. concludes today’s this

disconnect. may You Good all day.