Air Transport Services Group (ATSG) Misses Q1 EPS by 1c, Sales Beat

Air Transport Services Group (NASDAQ: ATSG) reported Q1 EPS of $0.13, $0.01 worse than the analyst estimate of $0.14. Revenue for the quarter came in at $177.4 million versus the consensus estimate of $167.12 million.

Joe Hete, President and Chief Executive Officer of ATSG, said, “Under its key multi-year agreements with global leaders DHL and Amazon, and with an increasing number of our freighters deployed under long-term dry leases, ATSG is on a sustainable, diversified growth trajectory, reflected in a 21 percent increase in revenue and our highest Adjusted EBITDA for a first quarter. Margins were affected in part by revenue/expense timing factors, including those associated with scheduled maintenance services, fleet transition and costs to spool up resources to serve Amazon. We project margins to improve in the second half as we complete more dry leases and deploy additional freighters into the Amazon network.”

Outlook

ATSG continues to estimate that Adjusted EBITDA from Continuing Operations will be $208 million in 2016 when calculated on the same basis as in 2015. In 2016, Adjusted EBITDA also excludes additional non-cash items, including $9.5 million in pension expense and $1.2 million in debt issuance costs stemming from ATSG's interest in its West Atlantic joint venture. Accordingly, 2016 Adjusted EBITDA is now expected to be approximately $218 million. Adjusted EBITDA is a non-GAAP financial measure, defined and reconciled to comparable GAAP results in a table at the end of this release.

"Our position as the leading source of dedicated Boeing 767 freighters that we own and can deploy worldwide is generating strong cash returns for our shareholders, especially as e-commerce customers drive demand for express networks," Hete said. "We intend to invest to maintain that global lead, and project that we will remain fully deployed, with more than 80 percent of our available 767 freighters leased to third parties by the end of the year. We will also surround that fleet with the most complete set of maintenance, logistics and other air network support services in the industry."

Beginning in the second quarter, ATSG's earnings will reflect a revenue reduction associated with the amortization of value for warrants issued to Amazon in accordance with the agreements effective in April. This non-cash amortization will also be excluded from ATSG's calculation of Adjusted EBITDA.

Hete also noted that the investments required to support ATSG's new Amazon agreements will not affect the company's intention to maintain its balanced capital allocation strategy, including share repurchases.

"I expect that over the five-year term of the warrant program, our share repurchases will significantly reduce the dilutive effect of the warrants on our existing shareholders," Hete said. "We continue to believe that a balanced capital allocation strategy is in the best interest of our shareholders, and we will act accordingly."

For earnings history and earnings-related data on Air Transport Services Group (ATSG) click here.

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