Macquarie Infrastructure (MIC)

Jay Davis VP & Head, IR
Christopher Frost CEO & Director
Liam Stewart CFO
Tristan Richardson SunTrust Robinson Humphrey
Torrey Schultz RBC Capital Markets
Thomas Shen GoldenTree
Call transcript
Due to licensing restrictions, you must log in to view earnings call transcripts.

Ladies and gentlemen, thank you for standing by, and welcome to the Macquarie Infrastructure Corporation First Quarter 2020 Earnings Conference Call. [Operator Instructions].

I'd now like to hand the conference over to your speaker today, Jay Davis, Managing Director, Investor Relations. Please go ahead.

Jay Davis

Thank you, and welcome to Macquarie Infrastructure Corporation's earnings conference call, this covering the first quarter of 2020.

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

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

remind or Christopher you over to Macquarie Corporation's Frost, Before without proprietary, let of written Officer, all in Any me of the this turning are proceedings the consent part, presentation, Macquarie and that Chief Infrastructure or is other presentation reserved. Executive Corporation in Infrastructure this prohibited. prior whole rights recording, use rebroadcast is

based and an information buy the solely nonpublic on any any material for to available not security does of or offer is The and contain a is presentation been public information. generally solicitation information to This has prepared sell not presentation or instrument. purposes

contains these forward-looking specific COVID-XX. identify words future to outcomes We cases, overall those anticipated to of events and or describe uncertainty use impacts in that used the convey some statements, of presentation including forward-looking This may, statements.

number this Forward-looking subject statements of presentation risks to in uncertainties. a and are

cause of known Risk risks XX-K actual A caption description differ that our under Forms to XX-Q. and the could appears results Factors our in

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

we to not in which may of currently this could results discussed differ. risks Additional events actual not occur. cause forward-looking aware also are The our presentation

by or completion this future a of no We date the statements presentation, whether required of otherwise, after obligation law. information, the as presentation. of forward-looking These made forward-looking statements new or to as update publicly any are except undertake as events result revise of this

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

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

is it Executive Chief MIC's Frost. that, my to Officer, With pleasure welcome Christopher

Christopher Frost

Jay, you, remained call morning. joining this and that period. well you this families hope I of those your our to you and and safe Thank thanks have through

The the go as year. modern first of in we us imagined most periods history. economic this has in ways of quarter have been Each associated XXXX start of will of the by down surely could one affected pandemic not recently as extraordinary and slowdown as COVID-XX the

will forthcoming pandemic don't we know our respect play how While we what of its and know with today. to and about will recovery, any we be the effects timing assumptions out, the particularly

has company businesses response effects positioned pandemic with weather its been the associated and on its to focused ensuring and our MIC, immediate both At the slowdown. and dealing economic are

enable comment and We reductions; current a protecting environment. our our over have undertaken operating and our through the alternatives of consistent the handing discuss of will to strategic strategic safety to before on call Liam before shareholders. maximizing three the first have part businesses, pursuit I your financial priorities our pursuit alternatives address customers; X cost the manner will key opening enhancing in second, to our address businesses will value liquidity, to third, proceed the employees priorities: with first, of results operating us our to and efficiently; and protecting the safely measures of health up for I which value questions. fourth, the keeping then in we and with

of our our work where have disinfecting maintaining protective changes equipment. be in distancing operate. communities implemented the To we which to physical possible, of employees operations remote for appropriate can whose frequency the and they personal services their members the off-site to in are we and important those field is have increased working employees and and not jobs And businesses enable MIC's essential our physical providers made protect of of cleaning while customers, conducted distance. and do use

Atlantic extraordinary remained this storing Our Gas businesses have continues delivering support services medical provided to on employees Aviation execution and publicly liquid the of would delivering like responsibilities. and safe And focused as service to the selfless valuable Hawaii our gas period. as remained and handling of well opportunity and to take this aviation our focused flights, by opened businesses. IMTT and have operational. to cargo their for Hawaii the thank on have efficient I their been during commodities. general essential is They residents is and They

Regarding our decisive liquidity. taken to our have steps increase third priority, we

we MIC First, order and Atlantic revolving in facilities available our Aviation cash on credit drew our increase to balance. down

should balance decision the through difficult Second, remain suspend prudent the our retaining dividend, we our place in result but of year. made capital in to the which cash suspension substantial will the quarterly

and Third, credit Atlantic amended facility. simultaneously we repaid Aviation the revolving

is moved As by meaningfully debt any facility. there costs. reduce Atlantic swiftly greatly risk a to result, reduces This And the Aviation. maintenance covenant in no default leverage-based fourth, we

also from would we any note that benefits do not I receive the CARES to Act. expect material

resources, capital persists be on the activity our As level additional steps, forecast holding facility. of we our using we funds a the based revolving credit without current of company year, drawn contractual believe result and operations and able will financial without the on and balance fund commitments the seen April these that for of if to even in our

spread reduced Hawaii businesses. by provided of in mid-March, services the Aviation for implemented the by and products Atlantic and Starting on MIC have our curb travel limitations demand to governments COVID-XX the

year. is services gross income associated circumstances. source de-icing as providing hangar flight catering. of with Fuel even about activity, persist by The gross to such linked is remaining Atlantic flight cleaning, the or last has XX% the are Aviation's activity, time likely this XX% that Approximately to of generated is fuel declined sales margin services primary flight sales. from is of result Atlantic's XX%, margin profit, in and versus activity gross rental, aircraft current approximately

gas and tourist the products linked XX%. to of reliable performance islands' the to the business the residents. is like Hawaii for Atlantic need the in Hawaii's offsetting basic XX% used applications have The decline the improved nearly cooking and resulted water business of hot has safe, continues contribution Although of Hawaii gas aggregate visits and across from Hawaii and an between of of portion X, MIC is meet is dropped to sizable tourism, Partially in downturns Aviation MIC This needs its serving everyday sales IMTT. a heating. in business to broadly

essentially as demand new brought are in for increase XX% both achieved and supply result year. throughput, of IMTT's I heating. the balance the petroleum availability. large ancillary dates, contract in rates a over thereby imbalance fully reducing expectations, IMTT's in Storage mid-May of note global renewal risk the been to average and leased. some renewal have products to blending customers of lease terminals leases in percent renewing Partially have such is full for year. from storage on benefited have demand with been utilization storage increase services increased low has XXs and over by and offsetting reductions Storage as forward expected and consistent the the that the to demand IMTT and range

I the is travel related recovery fits we of COVID-XX agree extent restrictions and although our to on can any and and confident achieve But our management in starts. cost the that shareholders. can ability be remain to of impact from deliver term think uncertain, and in in our unlocking timing likely and is The for all of initiatives medium-term we preparedness value the short objective it

At quarter. the call performance this point, to turn of Liam financial for I'll our the during over first details

Liam Stewart

good Thank you, Chris, everyone. and morning,

versus quarter XX%. EBITDA period, comparable the prior first the adjusted declined of XXXX For by

of by XXXX, would impact the refinery Excluding fee in termination March received X%. declined the have EBITDA of

declined Free cash flow by XX%.

by relative comparable termination flow fee, free expense Free cash interest the have flow to prior EBITDA, expenditures lower would period. capital refinery Excluding cash and declined the higher by reduced higher maintenance was the XX%.

the increase and in credit expenditures offset interest interest a repayment of increase revolving in capital year. drawdowns The facility of The maintenance by timing. net notes lower convertible the largely expense last was in of reflects July function the income,

quarter of magnitude and weeks commodity felt of during of of The both March for that COVID-XX. I two in effects the last throughout quarter. but Hawaii. have reduced across Atlantic wholesale approximately were consolidated the the million MIC's only impact the reflect EBITDA decline fully by the MIC results $X the note prices April of activity don't continued reduced rapid

want and in costs operating reduction about cost efforts, we our current businesses our address liquidity enhancement to explain think environment. I I how the and Before

also Aviation fuel, costs nearly Atlantic XXXX. approximately Aviation be $XX variable. at SG&A Atlantic's the sold. The goods of items of cost annualized that is Atlantic cost These million reduction implemented XXXX, recorded of represent approximately These million primarily cost million exclusively $XXX almost an totaled were on costs jet staff $XXX that costs SG&A. deferred. and basis. all of approximately Staff half and in can of In initiatives of recorded Atlantic comprise

X/X Hawaii In million that recorded MIC nature. of XXXX, costs variable are were that approximately $XXX of Approximately COGS. fuel again in

efficient Aviation IMTT reduce focus to Hawaii ways is to business. the Hawaii nature the more to MIC levels Atlantic at ability SG&A Nonetheless, at be relative on we given Our of and we either limited IMTT each. continue or meaningfully MIC activity can at

to support increase expected savings the in noted. of as our COVID-XX-related the million costs Chris of offsetting safety Partially $X an approximately are employees,

We have MIC planned at Atlantic expenditures also Aviation deferred and Hawaii. maintenance capital

expenditures by the deferrals on for will maintenance capital regulatory incremental $XX spending XXXX, should compliance. expect in IMTT offset total approximately Consolidated these primarily million be year. We at

through IMTT. with amount our million are million expected average of backed projects XX of completed. $XXX call, projects are IMTT of the discussed earnings businesses, during characteristics years $XXX will are million by quarter expect million deployed As this deploy and particularly generate XXXX. $XXX reinforce we that an of growth contracts $XX These term infrastructure X/X during was Approximately underway annualized and incremental worth initial to fourth XXXX projects between The to into March. we approximately our at when of EBITDA an

to relevant these project and, We have relatively been has with reviewed counterparties of one delayed. each smaller only date, the

We benefit carryback with to also timing that the of Act, benefit. benefit payroll We a tax of this deferral simply may each allowed provided the losses. expect operating CARES the our is noting a of from businesses consolidation in net realize as for under taxes

balance the our ended of with quarter. our facilities on on first and drawdowns the approximately sheet, of the hand. approximately at cash This at million sheet revolving Regarding cash amount during the billion balance $XXX MIC $XXX credit on approximately million first Aviation plus the $X.XX Atlantic we year-end, quarter of includes

these observed the of the businesses speed down the driven decision on we face and The draw in revolvers of changes COVID-XX. by our liquidity was to maximize in

to fully revolving a credit agreement the amended cash to of Chris. We briefly the facility. the ratings million subsequently repay Atlantic the back the I have have agency simultaneously from of used leverage-based $XXX remove I'll facility on hand actions and before Aviation covenant maintenance to couple call touch

Aviation to each these in downgrade MIC As of None subsidiary any downgraded also also XX-Q, of permit noted & in not parent, a carry separate the rating. methodology the Moody's on MIC the its of Poor's lowered in S&P higher our rating facilities. in impact does a actions April. S&P our and a Because downgraded than Standard debt Atlantic have covenants IMTT's action. stand-alone

interest expense they $X.X annually. increase million approximately our collectively, will However, by

reductions the of we on we sufficient our trends operations XXXX to and initiated cost remainder have In of that fund continue testing done, observed with planning conclusion, for we the and the date to are in our year. stress through the April dividend, the the if have liquidity suspension confident that based

over With that, to I'll Chris. call back turn the

Christopher Frost

over quarter. spend couple past a at point period balance Thanks, we Liam. well uncertainty. taken two on of financial this I'll positioned on our significant second flexibility our improve and to the relative of to what navigating in minutes the The sheet have and are seeing steps strengthen for our market us years the this just outlook

Aviation have MIC and levels each at Atlantic to appears although historical low stabilized norms. to of relative Hawaii, Trading at

not take a has week, and slightly, in end May. and the in started past slowdown. restrictions that economic point current is bookings tourism the governor resilience note travel that who weather one. islands, Our on anxious that to improve general through the but Hawaii, extended the ability aviation back it gas get In of correlated we although team and business quarantine are to And is could for to for but at note the to are activity in the tourism, correlation improved. the one consumption flight rules with It conversations of with that of the confident is flying Atlantic of to rise. the customers to has while recover They

restriction. over depends we Our for of outlook a activity the at restrictions recovery see We to Atlantic. on continue IMTT MIC Once is travel the discussed start the expect given focus our structure for our And the Atlantic respect in for believe to travel for with storage. give be particularly relaxation repositioning petroleum businesses, to to market think confidence us constructive projects term, are we and to we medium IMTT. will short eased, outlook products Hawaii the at for the on continued outlook longer-term positive previously

remain have are management backed with by physical positioned respective markets. to in services, in downturn. their a and well preferred businesses providers through place They of and Our essential financially position this assets get capable teams

earlier to take Infrastructure with view our confident level market of interest our thus launched the ability remains it this we alternatives, far. long-term sales the value valuation, a for additional remain our strategic year. and in of pursuit our cycles shareholders generally to of unlock on processes intention based investors Regarding continue and expressed

Although sales even uncertainty This now. more processes have makes year, important. we the we positioned less taken timing in preserve engage of is were to these the certain liquidity this to actions well

we We value that shareholders. your this operator and that, lines have financial participation ask believe the have will ensure this morning. phone call action open resources I it for we questions. thank the in your maximize course this our time At pursue time, for will you to to that of for again will our I adequate With


our question from comes And Richardson Tristan Instructions]. SunTrust. [Operator first from

Tristan Richardson

I - you in those current really are Appreciate how on guys environment. appreciate the commentary all responding

question quick a Just on IMTT.

Just of resid face. think just and the heavy think that bit your Can a in We cetera. sort the tropical, of about each - just for X categories thinking products? it major products what about distillates, tanks kind et you categories. vegetable, of those of we also could and talk the as of of little mean the I and you're of then you gasoline other maybe if chemicals, seeing sort on touch markets X

Christopher Frost

Yes, certainly.

Just to from utilization XX% we've taken year, up over the mid-May. we of XX% as at the sort prepared last of recap, mean, up in end said to remarks, I from

one, available I think leased of X that is capacity. St. at points is leasable effectively, and all Rose to and note Bayonne all the effectively occupied, capacity we've

residual fee. from get And you respect fuel were heavy recall business were for product we with particularly But full and and contract. the to clearly, may to categories, had we crude in sort each that. you to terms terms market, recall, were storage We very we that Around in of our crude with of terms X/X refinery to quarter was with is under that what and the good of may seeing seeing the In able we're storage and oil. that of is for exposure those about of our of effectively that earnings fourth already I respect limited. tanks was demand mean, crude, of associated that as Shell available, only again, XXX,XXX tanks

with that particularly utilization respect to the see refined we up clean able And to gasoline of increased or demand Bayonne. sort side, products, distillate then are and on drove which for at products

as to well. So we're we're respect able for our demand good seeing storage, unleased also of or that similarly, And sort some utilization of contracts up sector there. with pick then, to chemical

Tristan Richardson


to a just meaningful the couple you tankage. environment have seeing seeing some strongest So you of period underwent where you're of your adapting in guys repositioning that Are obviously, the in current of a - seen any of terms you for demand? years

Christopher Frost

that was that. our historical the XX%, sort to think market, utilization current XX% I drive of up I do level we're of mean, that to that back given and Look, to able clearly, objective - that to Yes.

that consistent I would and recover contract enhance think we're of to business, we're return in that spend so any whether by backed the repurpose to wanting we that characteristics open-minded additional as a need to we think capacity. able not or I the on to see the But infrastructure capital capital. with would

we much price, to could focus maximize on capacity as is lease think often, there could. was But that those about that and I X we've talked lease to And the previous term really really to was and focus our as weeks think over as capacity on between calls and possibly here our much term before as last the tension I we contracts.

So to we're actually average capacity able for XX over contract we're pleased lease additional terms months. that that and drive

open we yes, would contract terms there repurposing is that want question, in think to I be storage. So I the But we backed. that be of think answering fundamental would the to point

Tristan Richardson

just last then for one And Chris. me. it, Appreciate

seeing comments the is prepared history. terms Is too perhaps your the this it to signs - very say, just commentary of activity just early flight any in in of trend? there recent lows. off some a indicative of noted You Or coming of perhaps but

Christopher Frost

Yes. of is that has XX%. to probably XX% week last Look, moved I seen think sort sort what we've step-down of over the

think caution some the But period saying for states we've time sufficient to relaxing that sort strongly of is it's I of of that I a partly would against trend. reopening. of enough or sort driven that by of a say seen

As I it medical as cargo, we're the also a flight remarks, military, clearly that be seeing think watching activity we're a prepared related function also something of missions. it's a to It daily early said that, we including to too trend. basis, could but to additional on in call


question from Markets. from next Capital RBC Schultz our TJ And comes

Torrey Schultz

Just first, a follow-up on IMTT.

here, any in of into? storage away the goes there we dislocation, the given that contracts the to you should about extend level of entered a is for but year on recent you think year? some as crude longer there like just do Or capacity than likely expect things So capitalize you've market something

Christopher Frost

predict how is sort think I to we've I imbalance it's going last to this think what supply/demand long said, of for. difficult Look, No.

anticipate a a it think lot be I medium-term of phenomena. people will that

I in able contract able back renewal that drive because folks a it the to as tanks think tenor we're with better are lot utilization concerned for quite and to get couple rate have to puts is about negotiating as respect come we as to a average, up storage. past to respect up being clearly historical position years, talked not over then about if us of that

get said renewal, was now that we maximize to up I So utilization both objective going in drive look as time. contracts Tristan, think, which come to we're effectively are that our drive predominantly to with at of that as rate clearly full for actually is we able to be contracts to the term would term I the and XXXX,

Torrey Schultz

one Makes entire sense. of the as Okay. Are on you sale of And more one as a segments business just to pursuing the assume? Or the to focused then company us for asset buyer buyers different path? or separate a you and is on process. to then one reasonable of distinct of sale these a sale - more kind path are

Christopher Frost

our for shareholders. looked would at after-tax of in And clearly point that Look, we I the shareholders. a looking proceeds to was think as be maximize terms what to at - of value by objective principle,

value to intention before which to run was was present as to of based course preferred Our could a on parallel the decision as we of as those for action proceeds long shareholders. a making the process

of investors is businesses, is level of the who the through as that would What forward. at operating Atlantic we or value, committed to given the of we're there issues sophisticated sort value have the that these interest we still are of to a still experiencing Hawaii are that that Gas. to move the to logistical as to recovery that our sale expectation number capability both cycle and start all prepared like see long-term from setting each a infrastructure of remarks of But a large the the the businesses well are said I take sort prepared and company we fact in

pursue So for whatever I maximizes think our value will view think is we shareholders. we that path

want of to maximize in sort of see order the we current to would business, clearly of some take value. a Given the recovery performance trading place

the is I time the is place, of really remain maximize we can in table. ensure we'll that measures process think the designed and dividend to what timing process and the a suspension that that that we've and also particularly value a cost the the in and of ensure design saving, control said do we through and we've that that put


our And from Shen comes next Thomas from GoldenTree. question

Thomas Shen

Atlantic would of how kind kind for Aviation, Kind Any business? of be sense cash of XX%. the level down burn that of lowest activity monthly much at at that

Liam Stewart

Atlantic's cash that? Thomas, more There's it's rather XX% sales. XX% don't Liam. probably I said as profit one Because business. start-up appropriate than and gross from tenant then that's price derived revenue, XX% in the Why the we remarks, burn for from another remaining base rentals. And is the take infrastructure is an I prepared that's of is derived fuel activity-related a for think

think it the XXXX confident the I implemented X incremental with level, at over level the reduction initiatives Atlantic way with course liquidity an we've the about the implemented, for ability we in duration we've that MIC. from operations of our at last cost and minimal aggregate weeks, initiatives we then that support to the think that sustain our are of the


that question-and-answer Christopher session to today. to turn Frost And the our closing back I'd over remarks. any conference like for for concludes

Christopher Frost

focused for of continue call, We our effective participating remain have for safe and that with and you families you to good this today. if pursuit great driving with in I and look both day. next period. prior or for to that, our our management the call and value We through to the you conference shareholders, speaking on your Thank strategic on of a through and that, remain alternatives forward And growth our quarterly hope circumstances company. well warrant. morning, businesses


you may for disconnect. and Thank now Ladies conference and participating, concludes this today's gentlemen, call. you