Thank you, Sarah. Good morning and thank you for joining GATX's 2023 second quarter earnings call. I'm joined today by Bob Lyons, President and CEO; Tom Ellman, Executive Vice President and CFO; and Paul Titterton, Executive Vice President and President of Rail North America. Please note that the information you'll hear during our discussion today will consist of forward-looking statements. Actual results or trends could differ materially from those statements or forecasts. For more information, please refer to the risk factors included in our earnings release and those discussed in GATX's Form 10-K for 2022 and in our other filings with the SEC. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. Earlier today, GATX reported 2023 second quarter net income of $63.3 million or $1.74 per diluted share. This compares to 2022 second quarter net income of $2.6 million or $0.07 per diluted share. The 2023 second quarter results include a net positive impact of $0.2 million or $0.01 per diluted share from tax adjustments and other items. The 2022 second quarter results implied a negative impact of $35.9 million or $1 per diluted share from tax adjustments and other items. Year-to-date 2023, net income was $140.7 million or $3.87 per diluted share. This compares to $78.4 million or $2.18 per diluted share for the same period in 2022. The 2023 year-to-date results include a net negative impact of $1.1 million or $0.03 per diluted share from tax adjustments and other items. The 2022 year-to-date results include a net negative impact of $44.4 million or $1.23 per diluted share from tax adjustments and other items. These items are detailed on Page 14 of our earnings release. Now, I'll briefly address each segment. Rail North America's fleet utilization remained high at 99.3% at quarter end and our renewal success rate was 85.3%, which is reflective of the continued strong demand for our existing fleet in North America. The renewal rate change of GATX's lease price index was positive 33.1% for the quarter with an average renewal term of 61 months. Earlier this month, we announced a modification to the LPI calculation. The announcement and historical LPI data on a comparable basis are available on the GATX Investor Relations website. We continue to successfully place new railcars from our committed supply agreements with a diverse customer base. We have placed our 4,800 railcars from our 2018 Trinity supply agreement and we've placed all 7,650 railcars from our 2018 Greenbrier supply agreement. In addition, we placed nearly 2,000 railcars from our 2022 Trinity supply agreement. Our earliest available scheduled delivery under our supply agreements is in the first quarter of 2024. The secondary market for railcars in North America remains active. We generated remarketing income of $30.8 million in the quarter and $75.6 million year-to-date. Consistent with our expectations, Rail International continues to perform well. Rail Europe's fleet utilization was 96.9% at the end of the second quarter. Despite some weakening in the intermodal sector in Europe, demand for the majority of railcar types in Europe and India remains strong and we continue to experience success at pushing up renewal lease rates for many car types. Additionally, we continue to take delivery of new cars in Europe and India, adding a combined total of nearly 1,000 cars during the second quarter. Year-to-date, Rail International's investment volume was over $158 million. Turning to portfolio management. Second quarter results were solid, primarily driven by the performance at the Rolls-Royce & Partners Finance affiliates. The operating environment for RRPF continues to improve due to a broad-based recovery in demand for international air travel. In addition, we capitalized on attractive opportunities during the quarter and added 9 aircraft spare engines for $239 million to our wholly owned engine leasing portfolio. Overall, GATX's total investment volume was over $486 million for the second quarter and over $873 million year-to-date. Finally, as we noted in the release, reflecting year-to-date performance and our outlook for the remainder of the year, we expect 2023 full year earnings to be in the upper end of or modestly exceed the previously announced guidance range of $6.50 to $6.90 per diluted share, excluding any impact from tax adjustments and other items. Variability around this guidance will be mostly driven by the timing of remarketing activities and also our prepared remarks. I'll hand it back to the operator so we can open it up for questions.

Your first question comes from the line of Allison Poliniak with Wells Fargo.

Could you share your thoughts on the lease fundamentals, which continue to be very strong? This seems to contrast with what we're hearing from the economic side. What insights can you provide regarding the customers? Do you think this is specific to your fleet? Is there a concern about not having capacity if there is a market change and conditions become softer? Any thoughts you have on this would be appreciated.

Sure. Yes. This is Paul Titterton speaking. I'll answer that, Allison. Thanks for the question. What we would say right now is that for our customers, they continue to be interested in holding on to the cars that they have. I think that's the result of the fact that the fleet, despite perhaps some of the macro trends you're alluding to, has generally speaking remained relatively tight. We've talked about the reasons for that tightness that include things like, for example, rail velocity, includes the more limited new car production that we've seen, and it's also included some of the higher scrapping that we've seen. So the supply side of the equation has continued to be fairly tight in the North American railcar fleet. As a result of that, we have seen customers, even though they may have some degree of macro uncertainty about their businesses, want to hold on to cars. And so that's been a big factor in the performance of the existing fleet.

Great, that's helpful. And then maintenance seems a little bit elevated still, at least from Q1 and even into Q2. Anything unusual going there in terms of the mix? Is it programmatic? Just any color on that maintenance expense so far for the fleet.

Sure. There are a few drivers there. So one is just we're seeing a higher volume of repair events than we saw last year. And that's due to a variety of reasons: some pull-forward of compliance, some additional assignment work. There's sort of no one driver but more events as well as the impact of inflation. And the inflation really has come in two forms. There's a higher cost of AAR railroad repairs, and then there's also some of the higher costs internally. And as well, some of that increased volume that we're seeing has driven more use of our contract shop network, which is generally speaking, a higher cost option than going internal. What I will say, though, is none of that should offset the fact that the structural gains we made in our maintenance cost structure over the last four to five years remain. So really, this is just a phenomenon involving the volume we're seeing in this year. We continue to be very confident about our long-term advantage in terms of our structural maintenance costs.

Your next question comes from the line of Justin Long with Stephens.

I was wondering if you could share the trend in absolute lease rates that you saw on a sequential basis in the second quarter? And then any color on what you're expecting for the progression of rates as we move into the back half?

Okay. Yes, this is Paul again. And what I will say is, right now, rates remain across the fleet very, very strong. The sequential production progression, generally speaking, was in the low single digits. So I would say a lot of the acceleration that we've seen has moderated. But on an absolute basis right now, we continue to see rates for most car types at or near all-time highs. And again, as I alluded earlier to when I answered Allison's question, the fleet remains tight. So at this point, I would have to say more of the same story is the most likely outcome in the short to medium term.

Got it. And especially given the investment volume that we saw in the portfolio management segment in the quarter, I was wondering if you could talk about your longer-term strategy in terms of investing in wholly owned aircraft engines outside of the Rolls-Royce joint venture. And maybe you could just get us up to speed on how many wholly owned engines you have today and just the pace and magnitude of growth we could be thinking about going forward?

Yes, Justin, this is Bob. I can share that regarding investment volume and portfolio management, we acquired wholly owned engines in the second quarter and closed on another one in the third quarter. So far this year, we have ten engines for approximately $270 million. For 2023, that's the majority of our investment. Based on delivery schedules, we expect that our investment for this year in directly owned engines is mostly finished. The flexibility we appreciate is our ability to invest directly, which we have the capacity for, and we are fond of this asset class. We have a strong history in it for over 25 years. We can make direct investments as well as invest through RRPF via the joint venture, which has completed about $100 million in investments this year. We anticipate they will reach between $200 million and $250 million this year. Therefore, our decision is more opportunistic, depending on the needs in terms of engine production and whether to invest through the joint venture or directly. We have the flexibility to choose either route. We aim to continue growing the portfolio, and for GATX's direct investments, we can comfortably invest between $200 million and $300 million annually.

And Justin, just for sizing where we are today, as of June 30, we had 28 engines that we wholly owned. And as Bob mentioned, one more early in July. So 29 but 28 at the end of the quarter.

I think, yes, in total dollar amount, that's just north of $700 million, direct.

Your next question comes from the line of Matt Elkott with TD Cowen.

Paul, just a quick follow-up first. You mentioned several railcar type lease rates are near all-time highs; that's in part, obviously related to inflation. We're not saying underlying demand conditions are near all-time highs.

Yes, we have mentioned that this is a supply-led recovery in the railcar market. Previous up cycles were primarily driven by demand, such as the ethanol boom, the crude boom, and the frac sand boom. However, the current tight railcar market differs from recent cycles because it is largely due to supply constraints. The key factors contributing to this situation include rail velocity, the prices and availability of new cars, and elevated scrap rates, particularly when steel prices were higher. These elements have resulted in a constrained supply market, which is the basis for the lease risk we are currently observing. That is our perspective.

Yes. And to your point, too, as we've mentioned in the past, we really haven't seen carload growth supporting demand here and certainly look forward to that being the case. But that has not been a driver today.

Yes. And you guys would be happy to know that GM complained about railcar shortages on their call this morning. I don't know if they've ever mentioned railcars before on their calls. We'll have to go back and check the resilient transcript. Can you talk about your auto rack exposure as well as tightness in any other car types that you're seeing firsthand or hearing from your customers?

In general, we don't discuss specific car types. However, we have been actively investing in new multilevel auto carriers due to the significant demand and our diversified fleet. In a market with considerable demand, we will participate as investors. Many parties are investing to meet the demand for multilevel auto carriers. Beyond that, we prefer not to delve into specific fleets regarding the supply and demand balance, except to note that we have ample resources to sell when we identify attractive opportunities.

Got it. And then just one last one on the secondary market. Are there the same forces, same supply forces in shippers' desire to hold on to assets that are contributing to lease rates being so strong? Are they also continuing to hold up secondary market valuations? Or have you seen any easing there as interest rates are high?

So I'll say this, I'm not going to speculate on why because ultimately, I can't tell you why buyers buy or sellers sell. But what I will tell you is that valuations and demand in the secondary market have remained quite strong. So in spite of interest rates, in spite of other headwinds, we continue to see a ready market in terms of buyers in the secondary market.

Yes. And Matt, I think if you recall, as we came into the year, we actually thought with rising interest rates, there was a possibility we would see some paring back at least among the buyer universe. That has not been the case.

Yes, fascinating. But even though the strength has continued, I would imagine that your opportunities to take advantage of that in the secondary market naturally diminish as you've taken nearly full advantage of it over the past one and a half years or so.

Through the first six months of the year, we've experienced one of our best years for purchasing cars in the secondary market. We have had to be very selective in our approach, but we are discovering channels and methods that allow us to continue executing in that area.

And I'll add too, this is Paul speaking again. On the sell side, we have continued to originate a great deal of high-quality business. So in terms of exhausting opportunities on the sell side, that's not the case at all. We ultimately still have, I would say, quite a bit of dry powder to continue to sell as and when we see the opportunity to do so attractively.

Your next question comes from the line of Bascome Majors with Susquehanna.

Just to clarify on that last question on the secondary market in North America. Do you have any sense of the timing and magnitude of the books you print in the market and when we might see the P&L impact from that, the second half of the year between 3Q and 4Q?

It's always difficult to tell, Bascome. We do normally go to market with a book in the second half of the year. We'll do that this year. But as you may know, the book itself is comprised of a lot of different transactions, a lot of different car types, a lot of different lease riders. And so the potential buyer universe, they can bid on all of that or they can selectively bid on individual transactions. And that's how we go through and evaluate to hold versus sell. It takes a little bit of time. And then you get into the whole closing process and the timing of that and the lease approval in terms of selling the car. So it takes a little bit of time; it's hard to predict. What I can tell you is, based on everything we see, the market remains pretty robust. And we'll see what the package brings here in the second half of the year.

On the buy side from some of the larger portfolios that may or may not trade, has this environment seemed to change that, particularly from a large fleet perspective? I'm just curious if you see opportunities coming up over the next one or two years as a buyer that just haven't been present over the last three or four years?

Well, I think we're perpetually saying, it always seems like there should be some activity on the larger portfolio side over the coming year or two and then time passes and it doesn't happen. And even with, for example, the beginning part of this year with all of the turmoil in the banking industry, we thought, well, maybe there's an opportunity there with some of the mid- to smaller sized rail portfolio is embedded in some of the banks might come loose. We haven't seen that. So should they happen? Probably; will they? History would say it takes a lot more time than one might anticipate.

And last for me, maybe just a bigger picture question but just looking at the quarterly stats you put out your average renewal terms over 5 years now. It's the first time it's been there since 2016. I mean you're locking that in with an LPI over 30%. And one of the earlier questions, you talked about absolute lease rates still rising sequentially. They're not as fast as they were earlier this cycle. But if I look back the last time GATX was in this position in North America rail, and that was a really favorable four-year period from the early to mid-2010s. And I realize that analogous period bookends the crude by rail bonanza and that's unlikely to repeat for the tank car world today. But as you step back, what feels similar to that type of backdrop for GATX? And what feels different as you look out to your opportunities over the next two to three years?

I would say that we are very confident and excited about our platforms and positions in North America, Europe, and India. Our rail business is well positioned in these markets to continue growing and taking advantage of opportunities, even though they may not come consistently. We are ready to capitalize on any opportunities that arise. I am also pleased with our tank container leasing business, Trifleet, which we acquired a few years ago and has proven to be a valuable addition to GATX. It is growing at a high single-digit rate, which is a positive contrast to some other markets we are involved in. Additionally, in our engine leasing business, both through our joint venture with Rolls-Royce and directly, there are significant investment opportunities. We are optimistic about this asset class, especially considering we successfully navigated the pandemic when global air travel declined drastically. The assets have demonstrated resilience and value, and we have a strong partnership with Rolls-Royce to continue growing. That summarizes my thoughts on North American rail, and I’ll turn it to Paul to see if he has anything to add regarding the dynamics.

Yes. I mean it's not much to add, Bob. Thank you. I mean, as I said, fundamentally, we are in a tight market right now which has been very good for us in terms of pricing and term. I think we've been successful so far this year even despite high asset prices, finding some attractive places to deploy capital in North American Rail. So fundamentally, we feel good about where we are positioned in the market right now. And as we always do, we can't predict the future. So the terming out of the fleet, as you observed, is our key hedge against the uncertainty that we might face. So overall, I think we feel good about the positioning we have in Rail North America.

I would like to point out, Bascome, that the key difference is during the previous up cycle you mentioned, we recognized that there was overbuilding in crude oil cars and small cube covered hoppers. Currently, we do not see a similar situation.

Your next question comes from the line of Justin Bergner with Gabelli Funds.

First question would be on the Rolls-Royce joint venture. I think maybe sometimes in the past quarters, you've sort of segregated how much of the increase in the segment profit year-on-year was coming from higher remarketing income versus sort of operating the operation or leasing of the fleet. Could you maybe comment on that?

Certainly. So for the year-to-date numbers that we have, about 45% of the segment earnings are from operations and about 55% from remarketing.

Okay, that's helpful. I got on a few minutes late, so I'm not sure if this was covered early on but the guidance raised to at or above the high end of the $650 million to $690 million guide. Is the primary driver there, the higher remarketing income? Or are there other material drivers we should be aware of?

Yes. If you look at each segment, things are going largely as we expected for the year. We mentioned some positive developments regarding revenue in Rail North America, although we are facing higher-than-anticipated maintenance costs mainly due to increased activity in the shops. The segment that has notably surpassed expectations is portfolio management, which is largely due to strong performance from our joint venture with Rolls-Royce. Additionally, we are seeing better-than-expected results in remarketing income and operations as well. That’s the significant difference we’re observing.

Yes, I'd say, Justin, coming into the year, as we came out of the back half of '22, we were still anticipating relatively slower recovery in global air travel that has occurred. We and I think and everybody else. But the most recent statistics show that domestic air travel is now at pre-pandemic levels and has exceeded pre-pandemic levels. Anyone who's been at the airport lately, I think can attest to that. And international travel is now already back to 90% of pre-pandemic levels. So that recovery has occurred faster than we thought.

Got you. So I realize you didn't increase the guide in the first quarter but I guess are you suggesting then that your view on sort of remarketing income in Rail North America isn't materially higher sort of post 2Q versus post 1Q?

That's correct.

Okay, I understand. I have two quick questions. Regarding the Velocity side, are you noticing any signs of a positive change there? Or do things continue to face challenges at the major railroads?

It's really a mixed story. In any given period, one railroad may perform better while another may not. Currently, I would say the overall trend is mixed. When we talk about velocity, it involves dwell time and the quality of first mile and last mile service. These three factors collectively influence the competitiveness of rail service for shippers. Overall, the situation remains mixed, and we cannot indicate any significant improvement across the industry in the service offerings from the railroads.

Okay. And then lastly, one of the major suppliers of railcars in the industry got a big set of orders in recent months. And I was just curious if you had any thoughts as to why that might have suddenly occurred, maybe lower steel prices and what that means if lower steel prices do lead to orders for new railcars if that could have any effect on the cycle as it relates to leasing and the tightness there in.

It's really hard to say because ultimately, what drives an individual book of orders for a given builder may be specific to the customers and the niches they're filling. So I don't want to speculate on what might have driven those orders. It's really difficult for us to know.

And your final question comes from the line of Justin Long with Stephens.

I just wanted to circle back on one data point around the utilization rate in the European railcar fleet that stepped down sequentially over the last couple of quarters. And I was wondering if you could provide a little bit more color on what's driving that and how you're thinking about utilization in that market going forward?

Sure, Justin. This is Bob. I would say broadly across the fleet, utilization has held up extremely well and we're still seeing pretty stable demand for most car types. The challenge spot has been in the intermodal market. We have just under 2,000 intermodal wagons in Europe. And that has been the spot that has been the primary driver of that step down in utilization. The Eurozone economic growth has been pretty benign, negative expectations in some circles, flat overall. So the environment for carload or for carload demand on the intermodal side is low. So that is the biggest driver. Now we like those assets. We like the investments we've made there. They'll be great long-term holds for us, but we need to drive through this period right now of low demand for that particular car type.

There are no further questions at this time. I will turn the call to Shari Hellerman.

I'd like to thank everyone for their participation on the call this morning. Please contact me with any follow-up questions. Thank you.

This concludes today's conference call. You may now disconnect.