ATSG Reports Strong Second Quarter 2022 Results

Rhea-AI Summary

Air Transport Services Group (ATSG) reported a 24% increase in revenue for Q2 2022, totaling $510 million. However, GAAP earnings dropped to $54 million from $80 million due to previous pandemic relief grants. Adjusted earnings per share rose to $0.59. ATSG expects a record $640 million in adjusted EBITDA for 2022, driven by leasing growth, despite inflation-related cost increases. The company plans to lease a record 18 freighters in 2023, with strong demand anticipated for its express-package delivery services.

Positive

• 24% revenue growth to $510 million in Q2 2022.
• Adjusted earnings per share increased to $0.59, up from $0.35.
• Adjusted EBITDA projected at $640 million for 2022, up nearly $100 million from 2021.
• Leasing of 18 freighters expected in 2023, reflecting strong customer demand.

Negative

• GAAP earnings declined to $54 million from $80 million, largely due to prior year's grants.
• Operating cash flow decreased to $125 million from $183 million due to higher customer receivables.
• Inflation-driven cost increases affecting ACMI Services profitability.

Delivers 24% Top-line Growth, Driven by Continued Strength in Freighter Leasing

Reaffirms 2022 Adjusted EBITDA Guidance

WILMINGTON, Ohio--(BUSINESS WIRE)-- Air Transport Services Group, Inc. (Nasdaq: ATSG), the leading provider of medium wide-body aircraft leasing, contracted air transportation, and related services, today reported consolidated financial results for the second quarter and six months ended June 30, 2022.

ATSG's second quarter 2022 results, as compared with the second quarter 2021, include:

Second Quarter 2022 Results

• Revenues of $510 million, up 24%
• GAAP Earnings of $54 million, or $0.73 per share basic, down from $80 million, or $1.17. Second quarter 2021 results included $38 million pretax in government grants representing pandemic relief for ATSG’s passenger airline, $30 million in incremental pretax gains primarily related to warrant revaluations.
• Adjusted Earnings Per Share* of $0.59, versus $0.35 a year ago. Amounts exclude, among other items, government grant and warrant revaluation gains. Results for each year reflect additional shares for a change in GAAP presentation related to convertible notes
• Adjusted Pretax Earnings* of $67 million, up 80%
• Adjusted EBITDA* of $158 million, up 23%
• Operating Cash Flow of $125 million, versus $183 million for the year ago quarter ended June 30. Also, Adjusted Free Cash Flow* of $72 million, versus $123 million for the year ago quarter, reflecting higher customer receivables.

Rich Corrado, president and chief executive officer of ATSG, said, "Leasing converted midsize freighter aircraft and flying them in express-package networks remained a powerful and resilient driver of our strong cash flow in the second quarter. CAM, our aircraft lessor, again fueled our adjusted earnings momentum, with nine more Boeing 767 freighters leased to third-party customers than a year ago. Our cargo airlines continue to fly more hours, using both freighters that CAM owns plus others that customers have assigned to them. Inflation-driven increases in employee costs, contracted labor, crew travel and other costs are affecting our ACMI Services results and we are taking steps to mitigate the impact where we can."

* Adjusted Earnings Per Share, Adjusted Pretax Earnings, Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures and are defined and reconciled to GAAP measures at the end of this release.

Segment Results

CAM

• External leases of nine more Boeing 767s since June 2021 contributed to CAM’s 24 percent second-quarter revenue gain. CAM also realized more 2022 revenues from new pay-by-cycle engine support services with several lessees of its 767-200 freighters. Aircraft leasing and related revenues from external customers were up 21 percent.
• CAM’s second-quarter pretax earnings increased 76 percent to $39.6 million versus the prior-year quarter. Allocated interest decreased $3 million and depreciation increased $6 million.
• Eighty-nine CAM-owned 767 freighter aircraft were leased to external customers as of June 30, 2022. CAM expects to lease six more freighters in the second half, including four 767s and two Airbus A321-200s.
• CAM purchased five 767-300 and four A321-200 passenger aircraft during the first half for conversion to freighters. One CAM-owned 767-300 passenger aircraft was removed from service with Omni Air and scheduled for freighter conversion. Nineteen CAM-owned aircraft were in or awaiting conversion to freighters as of June 30, 2022, consisting of fourteen 767-300s and five A321s.

ACMI Services

• Second-quarter revenues increased 27 percent to $347 million. Block hours for ATSG's airlines reflected sharply higher passenger flying and the benefit of four more CAM-leased freighters in CMI service than a year ago, plus four more 767 freighters provided by customers for our airlines to operate.
• Second-quarter flight schedules were up from a year ago, particularly for passenger charter operations. Revenue block hours increased nine percent overall, including a 13 percent increase for passenger and combi flying and a 7 percent increase for cargo aircraft.
• Pretax segment earnings decreased $23 million to $22 million for the quarter. Prior-year results included $38 million from government grants awarded to offset pandemic effects on Omni Air’s passenger operations.
• Excluding the government grants, segment earnings more than tripled from a year ago.
• Second-quarter results were affected by additional costs for crew coverage and inflation-driven increases in operating costs, including crew travel, fuel costs for positioning aircraft, and labor costs, including contracted worker costs.

2022 Outlook

ATSG continues to project a record $640 million in Adjusted EBITDA for 2022, up nearly $100 million from 2021. Our 2022 Adjusted EBITDA forecast assumes:

• The addition of ten dry leases of converted freighters for the year, including eight 767-300s and two A321-200 aircraft.
• Seven more 767 freighters that our airlines will operate under CMI arrangements that the aircraft’s owners or lessees have assigned to our airlines.
• Mitigation of some inflation-driven cost increases in ACMI Services and rate increases for military passenger operations beginning in the fourth quarter.
• Full restoration of ATI’s global combi service to all remote U.S. military facilities it served before the pandemic, including a major route scheduled to resume in the fourth quarter.

ATSG has raised its capital spending projection for 2022 by $35 million to $625 million, including $205 million in sustaining capex and $420 million for growth. The increase in growth capex reflects payments in the second half of 2022 to acquire feedstock aircraft previously scheduled to be purchased in 2023. 2022 growth capex will be funded primarily by the strong Adjusted Free Cash Flow ATSG will generate this year.

CAM has completed the first four of its projected eight 767-300 leases this year. ATSG’s cargo airlines continue to add customers’ aircraft to its freighter fleet. Those aircraft, along with expanded peak flying, are expected to boost air delivery revenues and earnings in the second half of the year.

Corrado said that Omni Air’s revenues and flights for the U.S. military remain at high levels and ATSG’s passenger business is expected to deliver solid results in the second half.

“Despite persistent inflation, we expect to reach our financial targets for 2022, as demand for our express-package network assets and flight operations remains high. E-commerce shopping habits, now well ingrained and reinforced by often lower online prices, will continue to drive express-package delivery networks that assure rapid, reliable delivery. That trend, in turn, will drive growth in ATSG’s cash flow through the current economic cycle and beyond," he said.

Corrado noted that ATSG expects to lease a record eighteen freighters in 2023, including fourteen 767s and four A321s.

“The majority of those orders are backed by customer deposits, and nearly all are from existing customers, giving us great confidence about growth in our core leasing returns over the next 18 months,” he said. “Beyond that, we have customer orders for twenty Airbus A330s we will start to acquire and convert next year, with deliveries beginning in 2024. Our existing lease portfolio and order book translate into a compelling growth story for ATSG in the coming years."

Non-GAAP Financial Measures

This release, including the attached tables, contains non-GAAP financial measures that management uses to evaluate historical results and project future results. Management believes that these non-GAAP measures assist in highlighting operational trends, facilitating period-over-period comparisons, and providing additional clarity about events and trends affecting core operating performance. Disclosing these non-GAAP measures provides insight to investors about additional metrics that management uses to evaluate past performance and prospects for future performance. Non-GAAP measures should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. The historical non-GAAP financial measures included in this release are reconciled to GAAP earnings in tables included later in this release. The Company does not provide a reconciliation of projected Adjusted EBITDA because it is unable to predict with reasonable accuracy the value of certain adjustments. Certain adjustments can be significantly impacted by the re-measurements of financial instruments including stock warrants issued to a customer. The Company’s earnings on a GAAP basis and the non-GAAP adjustments for gains and losses resulting from the re-measurement of stock warrants, will depend on the future prices of ATSG stock, interest rates, and other assumptions which are highly uncertain.

Conference Call

ATSG will host an investor conference call on Friday, August 5, 2022, at 10 a.m. Eastern time to review its financial results for the second quarter of 2022. Participants must register in advance to receive a number and PIN to connect by phone, using a link provided on our website, atsginc.com/investors. A separate link will offer access to a live, listen-only webcast of the call. The webcast will remain available for replay via the same site for 30 days.

About ATSG

ATSG is a leading provider of aircraft leasing and air cargo transportation and related services to domestic and foreign air carriers and other companies that outsource their air cargo lift requirements. ATSG, through its leasing and airline subsidiaries, is the world's largest owner and operator of converted Boeing 767 freighter aircraft. Through its principal subsidiaries, including three airlines with separate and distinct U.S. FAA Part 121 Air Carrier certificates, ATSG provides aircraft leasing, air cargo lift, passenger ACMI and charter services, aircraft maintenance services and airport ground services. ATSG's subsidiaries include ABX Air, Inc.; Airborne Global Solutions, Inc.; Airborne Maintenance and Engineering Services, Inc., including its subsidiary, Pemco World Air Services, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Omni Air International, LLC. For more information, please see www.atsginc.com.

Except for historical information contained herein, the matters discussed in this release contain forward-looking statements that involve risks and uncertainties. A number of important factors could cause Air Transport Services Group, Inc.'s ("ATSG's") actual results to differ materially from those indicated by such forward-looking statements. Such factors include, but are not limited to: (i) the extent to which changes in market conditions impact the number, timing, and scheduled routes of aircraft deployments to new and existing customers; (ii) the cost and timing with respect to which we are able to purchase and modify aircraft to a cargo configuration, which may be impacted by global supply chain disruptions; (iii) our operating airlines' ability to maintain on-time service and control costs; (iv) our ability to remain in compliance with key agreements with customers, lenders and government agencies; (v) persistent elevated rates of inflation and changes in general economic and/or industry-specific conditions such as higher labor costs, increases in interest rates, an economic recession, and downturns in customer business cycles; (vi) the impact arising from COVID-19 outbreaks, including the emergence of COVID-19 variants; (vii) mark-to-market changes on certain financial instruments; and (viii) other factors that are contained from time to time in ATSG's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 10-K and quarterly reports on Form 10-Q. Readers should carefully review this release and should not place undue reliance on ATSG's forward-looking statements. These forward-looking statements were based on information, plans and estimates as of the date of this release. Except as may be required by applicable law, ATSG undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2022				2021				2022				2021
REVENUES	$	509,668			$	409,872			$	995,528			$	785,960
OPERATING EXPENSES
Salaries, wages and benefits		162,797				141,524				324,559				283,540
Depreciation and amortization		81,372				75,633				163,443				146,684
Maintenance, materials and repairs		39,407				45,913				75,116				87,920
Fuel		73,102				36,592				133,460				67,034
Contracted ground and aviation services		20,153				18,794				38,484				33,597
Travel		28,480				18,501				52,679				36,905
Landing and ramp		4,085				3,026				8,663				6,135
Rent		7,068				5,726				13,731				11,594
Insurance		2,326				3,068				4,878				6,204
Other operating expenses		20,361				14,750				40,204				31,173
Government grants		—				(38,274	)			—				(66,304	)
		439,151				325,253				855,217				644,482
OPERATING INCOME		70,517				84,619				140,311				141,478
OTHER INCOME (EXPENSE)
Interest income		15				9				24				28
Non-service component of retiree benefit credits		5,388				4,456				10,776				8,913
Debt issuance costs		—				(6,505	)			—				(6,505	)
Net gain on financial instruments		6,011				35,703				8,707				45,175
Losses from non-consolidated affiliates		(3,220	)			965				(4,623	)			(218	)
Interest expense		(9,461	)			(15,021	)			(20,860	)			(29,543	)
		(1,267	)			19,607				(5,976	)			17,850
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		69,250				104,226				134,335				159,328
INCOME TAX EXPENSE		(15,040	)			(24,357	)			(30,329	)			(37,169	)
EARNINGS FROM CONTINUING OPERATIONS		54,210				79,869				104,006				122,159
EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAX		882				65				882				65
NET EARNINGS	$	55,092			$	79,934			$	104,888			$	122,224
EARNINGS PER SHARE - CONTINUING OPERATIONS
Basic	$	0.73			$	1.17			$	1.41			$	1.91
Diluted	$	0.61			$	0.74			$	1.18			$	1.23
WEIGHTED AVERAGE SHARES - CONTINUING OPERATIONS
Basic		73,980				68,206				73,934				63,851
Diluted		89,449				72,964				89,098				73,849

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
	June 30,				December 31,
	2022				2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	47,151			$	69,496
Accounts receivable, net of allowance of $902 in 2022 and $742 in 2021		260,260				205,399
Inventory		54,005				49,204
Prepaid supplies and other		28,157				28,742
TOTAL CURRENT ASSETS		389,573				352,841
Property and equipment, net		2,270,656				2,129,934
Customer incentive		91,293				102,913
Goodwill and acquired intangibles		498,073				505,125
Operating lease assets		64,155				62,644
Other assets		145,800				113,878
TOTAL ASSETS	$	3,459,550			$	3,267,335
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	194,951			$	174,237
Accrued salaries, wages and benefits		62,538				56,652
Accrued expenses		11,423				14,950
Current portion of debt obligations		634				628
Current portion of lease obligations		20,497				18,783
Unearned revenue and grants		38,293				47,381
TOTAL CURRENT LIABILITIES		328,336				312,631
Long term debt		1,358,842				1,298,735
Stock warrant obligations		851				915
Post-retirement obligations		20,375				21,337
Long term lease obligations		44,305				44,387
Other liabilities		53,596				49,662
Deferred income taxes		241,752				217,291
STOCKHOLDERS’ EQUITY:
Preferred stock, 20,000,000 shares authorized, including 75,000 Series A Junior Participating Preferred Stock		—				—
Common stock, par value $0.01 per share; 150,000,000 shares authorized; 74,369,138 and 74,142,183 shares issued and outstanding in 2022 and 2021, respectively		744				741
Additional paid-in capital		1,037,139				1,074,286
Retained earnings		435,189				309,430
Accumulated other comprehensive loss		(61,579	)			(62,080	)
TOTAL STOCKHOLDERS’ EQUITY		1,411,493				1,322,377
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,459,550			$	3,267,335

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED SUMMARY OF CASH FLOWS
(In thousands)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2022				2021				2022				2021
OPERATING CASH FLOWS	$	124,541			$	182,744			$	250,209			$	307,191
INVESTING ACTIVITIES:
Aircraft acquisitions and freighter conversions		(133,378	)			(115,402	)			(205,293	)			(200,104	)
Planned aircraft maintenance, engine overhauls and other non-aircraft additions to property and equipment		(52,580	)			(59,406	)			(88,917	)			(100,145	)
Proceeds from property and equipment		78				680				154				724
Investments in businesses		(16,545	)			(785	)			(16,545	)			(2,482	)
TOTAL INVESTING CASH FLOWS		(202,425	)			(174,913	)			(310,601	)			(302,007	)
FINANCING ACTIVITIES:
Principal payments on debt		(205,210	)			(1,601,854	)			(295,310	)			(1,725,919	)
Proceeds from borrowings		410,000				1,290,600				450,000				1,430,600
Repurchase of senior unsecured notes		(115,204	)			—				(115,204	)			—
Proceeds from senior unsecured bond issuance		—				207,400				—				207,400
Payments for financing costs		—				(2,655	)			—				(2,806	)
Proceeds from issuance of warrants		—				131,967				—				131,967
Taxes paid for conversion of employee awards		(89	)			(39	)			(1,439	)			(1,236	)
TOTAL FINANCING CASH FLOWS		89,497				25,419				38,047				40,006
NET INCREASE (DECREASE) IN CASH	$	11,613			$	33,250			$	(22,345	)		$	45,190
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	$	35,538			$	51,659			$	69,496			$	39,719
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	47,151			$	84,909			$	47,151			$	84,909

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
PRETAX EARNINGS AND ADJUSTED PRETAX EARNINGS SUMMARY
FROM CONTINUING OPERATIONS
NON-GAAP RECONCILIATION
(In thousands)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2022				2021				2022				2021
Revenues
CAM
Aircraft leasing and related revenues	$	114,703			$	93,624			$	226,638			$	181,853
Lease incentive amortization		(5,029	)			(5,030	)			(10,059	)			(9,982	)
Total CAM		109,674				88,594				216,579				171,871
ACMI Services		347,498				273,301				677,588				520,432
Other Activities		107,879				97,236				210,414				190,934
Total Revenues		565,051				459,131				1,104,581				883,237
Eliminate internal revenues		(55,383	)			(49,259	)			(109,053	)			(97,277	)
Customer Revenues	$	509,668			$	409,872			$	995,528			$	785,960
Pretax Earnings (Loss) from Continuing Operations
CAM, inclusive of interest expense		39,617				22,554				74,612				44,016
ACMI Services, inclusive of government grants and interest expense		21,837				44,762				44,002				66,021
Other Activities		191				3,161				1,742				3,550
Net, unallocated interest expense		(574	)			(870	)			(881	)			(1,624	)
Non-service components of retiree benefit credit		5,388				4,456				10,776				8,913
Debt issuance costs		—				(6,505	)			—				(6,505	)
Net gain on financial instruments		6,011				35,703				8,707				45,175
Loss from non-consolidated affiliates		(3,220	)			965				(4,623	)			(218	)
Earnings from Continuing Operations before Income Taxes (GAAP)	$	69,250			$	104,226			$	134,335			$	159,328
Adjustments to Pretax Earnings
Add customer incentive amortization		5,822				5,798				11,620				11,497
Less government grants		—				(38,274	)			—				(66,304	)
Less non-service components of retiree benefit credit		(5,388	)			(4,456	)			(10,776	)			(8,913	)
Add debt issuance costs		—				6,505				—				6,505
Less net gain on financial instruments		(6,011	)			(35,703	)			(8,707	)			(45,175	)
Add loss from non-consolidated affiliates		3,220				(965	)			4,623				218
Adjusted Pretax Earnings (non-GAAP)	$	66,893			$	37,131			$	131,095			$	57,156

Adjusted Pretax Earnings excludes certain items included in GAAP based pretax earnings (loss) from continuing operations because they are distinctly different in their predictability among periods or not closely related to our operations. Presenting this measure provides investors with a comparative metric of fundamental operations, while highlighting changes to certain items among periods.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
ADJUSTED EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
NON-GAAP RECONCILIATION
(In thousands)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2022				2021				2022				2021
Earnings from Continuing Operations Before Income Taxes	$	69,250			$	104,226			$	134,335			$	159,328
Interest Income		(15	)			(9	)			(24	)			(28	)
Interest Expense		9,461				15,021				20,860				29,543
Depreciation and Amortization		81,372				75,633				163,443				146,684
EBITDA from Continuing Operations (non-GAAP)	$	160,068			$	194,871			$	318,614			$	335,527
Add customer incentive amortization		5,822				5,798				11,620				11,497
Less government grants		—				(38,274	)			—				(66,304	)
Add non-service components of retiree benefit credits		(5,388	)			(4,456	)			(10,776	)			(8,913	)
Less debt issuance costs		—				6,505				—				6,505
Less net gain on financial instruments		(6,011	)			(35,703	)			(8,707	)			(45,175	)
Add loss from non-consolidated affiliates		3,220				(965	)			4,623				218
Adjusted EBITDA (non-GAAP)	$	157,711			$	127,776			$	315,374			$	233,355

Management uses Adjusted EBITDA to assess the performance of its operating results among periods. It is a metric that facilitates the comparison of financial results of underlying operations. Additionally, these non-GAAP adjustments are similar to the adjustments used by lenders in the Company’s senior secured credit facility to assess financial performance and determine the cost of borrowed funds. The adjustments also remove the non-service cost components of retiree benefit plans because they are not closely related to ongoing operating activities. The adjustments also excluded the recognition of government grants from adjusted earnings to improve comparability between periods. Management presents EBITDA from Continuing Operations, a commonly referenced metric, as a subtotal toward computing Adjusted EBITDA.

EBITDA from Continuing Operations is defined as Earnings (Loss) from Continuing Operations Before Income Taxes plus net interest expense, depreciation, and amortization expense. Adjusted EBITDA is defined as EBITDA from Continuing Operations less financial instrument revaluation gains or losses, non-service components of retiree benefit costs including pension plan settlements, amortization of warrant-based customer incentive costs recorded in revenue, recognition of government grants, charge off of debt issuance costs upon debt restructuring and costs from non-consolidated affiliates.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
ADJUSTED FREE CASH FLOW
NON-GAAP RECONCILIATION
(In thousands)
	Three Months Ended								Six Months Ended								Twelve Months Ended
	June 30,								June 30,								June 30,
	2022				2021				2022				2021				2022
OPERATING CASH FLOWS (GAAP)	$	124,541			$	182,744			$	250,209			$	307,191			$	526,575
Sustaining capital expenditures		(52,580	)			(59,406	)			(88,917	)			(100,145	)			(171,876	)
ADJUSTED FREE CASH FLOW (Non-GAAP)	$	71,961			$	123,338			$	161,292			$	207,046			$	354,699

Sustaining capital expenditures includes cash outflows for planned aircraft maintenance, engine overhauls, information systems and other non-aircraft additions to property and equipment. It does not include expenditures for aircraft acquisitions and related passenger-to-freighter conversion costs.

Cash receipts from government payroll support programs, which are included in operating cash flows, were $0 and $83.0 million for the six month periods ended June 30, 2022 and 2021, respectively. Cash receipts from government payroll support programs were $0 for the twelve months ended June 30, 2022.

Adjusted Free Cash Flow (non-GAAP) includes cash flow from operations net of expenditures for planned aircraft maintenance, engine overhauls and other non-aircraft additions to property and equipment. Management believes that adjusting GAAP operating cash flows is useful to evaluate the company's ability to generate cash for growth initiatives, debt service, cash returns for shareholders or other discretionary allocations of capital.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
ADJUSTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS
NON-GAAP RECONCILIATION
(In thousands)
	Three Months Ended															Six Months Ended
	June 30, 2022							June 30, 2021								June 30, 2022								June 30, 2021
	$			$ Per Share				$				$ Per Share				$				$ Per Share				$				$ Per Share
Earnings from Continuing Operations - basic (GAAP)	$	54,210						$	79,869							$	104,006							$	122,159
Gain from warrant revaluation, net of tax1		(107	)						(25,816	)							(50	)							(31,171	)
Convertible notes interest charges, net of tax2		762							—								1,522								—
Earnings from Continuing Operations - diluted (GAAP)		54,865			0.61				54,053				0.74				105,478				1.18				90,988				1.23
Adjustments to remove the following, net of tax
Customer incentive amortization3		4,493			0.05				4,475				0.06				8,968				0.10				8,873				0.12
Government grants4		—			—				(29,539	)			(0.40	)			—				—				(51,172	)			(0.69	)
Non-service component of retiree benefits5		(4,158	)		(0.05	)			(3,439	)			(0.05	)			(8,316	)			(0.09	)			(6,879	)			(0.09	)
Derivative and warrant revaluation6		(4,533	)		(0.05	)			(1,738	)			(0.05	)			(6,671	)			(0.07	)			(3,694	)			(0.15	)
Loss from affiliates7		2,485			0.03				(745	)			(0.01	)			3,568				0.04				168				—
Debt issuance costs 8		—			—				5,020				0.07				—				—				5,020				0.07
Convertible debt interest charges (prior period), net of tax2		—			—				2,339				(0.01	)			—				—				4,663				0.06
Adjusted Earnings from Continuing Operations (non-GAAP)	$	53,152		$	0.59			$	30,426			$	0.35			$	103,027			$	1.16			$	47,967			$	0.55
	Shares							Shares								Shares								Shares
Weighted Average Shares - diluted (GAAP)		89,449							72,964								89,098								73,849
Additional shares - warrants1		—							6,380								—								5,839
Additional shares - convertible notes2		—							8,111								—								8,111
Adjusted Shares (non-GAAP)		89,449							87,455								89,098								87,799

This presentation does not give effect to convertible note hedges the Company purchased having the same number of the Company's common shares, 8.1 million shares, and the same strike price of $31.90, that underlie the Convertible Notes. The convertible note hedges are expected to reduce the potential equity dilution with respect to the Company's common stock upon conversion of the Convertible Notes.

Adjusted Earnings from Continuing Operations and Adjusted Earnings Per Share from Continuing Operations are non-GAAP financial measures and should not be considered as alternatives to Earnings from Continuing Operations, Weighted Average Shares - diluted or Earnings Per Share from Continuing Operations or any other performance measure derived in accordance with GAAP. Adjusted Earnings and Adjusted Earnings Per Share from Continuing Operations should not be considered in isolation or as a substitute for analysis of the company's results as reported under GAAP.

1.		Under U.S. GAAP, certain warrants are reflected as a liability and unrealized warrant gains are typically removed from diluted earnings per share (“EPS”) calculations, while unrealized warrant losses are not removed because they are dilutive to EPS. For all periods presented, additional shares assumes that Amazon net settled its remaining warrants during each period.
2.		Application of accounting standard ASU No. 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" was adopted prospectively for EPS calculations on January 1, 2022 using the modified retrospective approach. The new GAAP requires convertible debt to be treated under the "if-convert method" for EPS. Periods prior to adoption include adjustments to reflect EPS as if the new standard had been applied historically for comparability purposes.
3.		Removes the amortization of the warrant-based customer incentives which are recorded against revenue over the term of the related aircraft leases and customer contracts.
4.		Removes the effects of government grants received under federal payroll support programs.
5.		Removes the non-service component of post-retirement costs and credits.
6.		Removes gains and losses from financial instruments, including derivative interest rate instruments and warrant revaluations.
7.		Removes losses for the Company's non-consolidated affiliates.
8.		Removes the charge off of debt issuance costs when the Company modified its debt structure.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
AIRCRAFT FLEET
Aircraft Types
		June 30, 2021				December 31, 2021				June 30, 2022				December 31, 2022 Projected
		Freighter		Passenger		Freighter		Passenger		Freighter		Passenger		Freighter		Passenger
B767-200		32		3		33		3		33		3		32		3
B767-300		59		9		65		9		70		8		80		8
B777-200		—		3		—		3		—		3		—		3
B757 Combi		—		4		—		4		—		4		—		4
A321-200		—		—		—		—		—		—		2		—
Total Aircraft in Service		91		19		98		19		103		18		114		18
B767-300 in or awaiting cargo conversion		15		—		12		—		14		—		11		—
A321 in cargo conversion		—		—		1		—		5		—		8		—
B767-200 staging for lease		1		—		1		—		1		—		2		—
Total Aircraft		107		19		112		19		123		18		135		18
Aircraft in Service
		June 30,				December 31,				June 30,				December 31,
		2021				2021				2022				2022 Projected
Dry leased without CMI		34				35				37				43
Dry leased with CMI		46				50				52				52
Customer provided for CMI		3				6				7				13
ACMI/Charter1		27				26				25				24

1.

ACMI/Charter includes four Boeing 767 passenger aircraft leased from external companies.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220804005963/en/

Quint Turner, ATSG Inc. Chief Financial Officer

937-366-2303

Source: Air Transport Services Group, Inc.

FAQ

What were ATSG's revenue figures for Q2 2022?

ATSG reported revenue of $510 million for Q2 2022, a 24% increase compared to Q2 2021.

How much did ATSG earn in GAAP earnings in Q2 2022?

ATSG's GAAP earnings for Q2 2022 were $54 million, down from $80 million in Q2 2021.

What is ATSG's adjusted EBITDA forecast for 2022?

ATSG projects a record adjusted EBITDA of $640 million for 2022.

How many freighters does ATSG plan to lease in 2023?

ATSG plans to lease a record 18 freighters in 2023.

What caused the decrease in ATSG's operating cash flow in Q2 2022?

The operating cash flow decreased due to higher customer receivables, down to $125 million from $183 million a year ago.