FTAI Infrastructure Inc. Common Stock 2026 Q2 Earnings Call

Please go ahead. Thank you, Marvin.

I would like to welcome you all to the FTAI Infrastructure earnings call for the second quarter of 2026. Joining me here today are Ken Nicholson, the CEO of FTAI Infrastructure, and Buck Fletcher, the company's CFO. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Please note that this call is open to the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including adjusted EBITDA. The reconciliations of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. Before I turn the call over to Ken, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings.

These statements, by their nature, are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC. I would like to turn the call over to Ken.

Okay. Thank you very much, Alan, and good morning, everyone. Welcome to this morning's call. The second quarter was a very active one for us, and today we will walk through our various accomplishments for the quarter, our financial results, and we will talk a little bit about our goals and expectations for the remainder of this year. Suffice to say, we are pleased with our overall results and excited about the momentum we are carrying into the months ahead. We will kick things off on slide three of the supplement. As we stated before, our goals for this year have three primary components: Sell Long Ridge and deleverage our balance sheet, continue to grow our railroad portfolio, and position our terminals for monetization next year at attractive values. I am pleased to report that we made good progress on each of these goals during Q2.

First, we announced the sale of Long Ridge at the end of April, while timing is not necessarily an exact science, we currently expect to be in a position to close the transaction by the end of Q3. The sale will result in substantial deleveraging and a material reduction in our interest expense at our parent level. Second, our rail business posted another record quarter in both revenues and adjusted EBITDA. We made a small acquisition at the end of Q2 and are expecting several additional acquisition opportunities in the months ahead as the M&A market in the rail sector continues to heat up. We have an exceptional platform to continue to integrate acquisitions in the rail space, and I'm confident we'll be successful adding to our portfolio.

Finally, our terminals made good progress on important projects that will create value and position each of Jefferson and Repauno for monetization next year. All in, we have good momentum carrying us into what we expect to be a very productive second half of 2026. Moving to slide four, we'll review the financial results for the quarter. Adjusted EBITDA for Q2 came in at $76.1 million, up materially from $45.9 million for the second quarter of 2025. On the right side of the slide, we illustrate adjusted EBITDA for each of our last four quarters, excluding the results of Long Ridge, which we now account for as an asset held for sale. Excluding Long Ridge, adjusted EBITDA was $48.7 million for Q2, which represents a new quarterly record and equates to just under $200 million on an annualized basis.

In the quarters ahead, we expect revenues and adjusted EBITDA from our rail and terminal segments to continue to grow, driven by the contribution from our recently acquired Tidewater Logistics acquisition and developments at our terminals, including, most notably, Repauno's phase two project. Flipping to page five, we'll talk about our balance sheet and deleveraging. As you may recall, our existing corporate debt contains terms allowing for repayment with proceeds from the Long Ridge sale to be made at a lower premium than would otherwise be due if funded with other sources of cash. With less premium required, we're able to repay more principal. In total, we expect to eliminate approximately $1.4 billion of total debt from our balance sheet, of which a little over $1.1 billion is at the Long Ridge level and approximately $300 million is other debt in addition to the $1.1 billion at Long Ridge.

Debt service at our parent level was declined by about $25 million annually, meaningfully improving our leverage metrics. We expect our leverage metrics to continue to improve over the next several quarters as we bring online new business at our terminals, especially at Repauno. Altogether, with a deleveraged balance sheet and higher free cash flow generation, we expect to be well positioned to act on new investment opportunities, especially in the freight rail space. Moving to slide seven, we'll get into the details at each of our segments, starting with our railroad. We posted new quarterly records for both revenue and EBITDA in Q2. Revenue came in at $92.2 million, and adjusted EBITDA was $42.4 million for the quarter, compared with pro forma Q2 2025 revenue of $81.2 million and adjusted EBITDA of $37.6 million. Remember, our reported results for last year exclude the results of The Wheeling.

We're showing pro forma figures to demonstrate what revenues and EBITDA would have been if we include the Wheeling standalone results last year. Overall volumes for the quarter continued to be steady with higher carloads as Wheeling offsetting slightly lower volumes at Transtar, as U.S. Steel continues to undertake a substantial overhaul and upgrade of the largest blast furnace at Gary Works, which, while dormant now for the upgrade, will ultimately be a meaningful plus for us. Since carloads at Wheeling are generally at a higher average rate than at Transtar, on a blended basis, we reported higher average pricing for the quarter. Integration of the Wheeling & Lake Erie Railway is going smoothly, with anticipated synergies accumulating as expected and critical IT consolidation wrapping up here in Q3. On the revenue side, we continue to grow the list of opportunities as two railroads are operating as one.

Additional propane carloads are planned to start early next year when Repauno phase 2 commences. The pipeline of additional opportunities is substantial. In total, we continue to estimate in excess of $50 million of incremental annual EBITDA potential from the various new revenue sources manifesting in the future. On slide eight, we'll talk a little bit about our acquisition of Tidewater Logistics. At the end of Q2, we acquired Tidewater for $45 million of cash consideration, funded with an add-on to our existing parent level term loan. Tidewater operates a total of four rail serve terminals, the largest of which is directly served by the Wheeling, making the acquisition a particularly accretive one. Handling and transloading over 20,000 carloads annually of a variety of commodities, Tidewater's terminals play an important role in customer supply chains, enabling the transition of freight between rail and truck efficiently and flexibly.

We expect Tidewater to contribute approximately $9 million of annual EBITDA, implying an attractive purchase multiple. More importantly, we plan to leverage Tidewater's management expertise and relationships to expand the rail terminals business and drive additional growth going forward. As I mentioned, we expect the remainder of the year to be an active one on the rail M&A front. On slide nine, we describe the types of situations that we're currently evaluating. Opportunities fall into three primary buckets. The first is portfolios of short line and regional railroads, which are larger needle-moving investment opportunities that can convey substantial combination efficiencies. Second set of opportunities involve sales by corporate and industrial parties that today directly own the railroad that connects their facilities to the national freight network. Our acquisition of Transtar from U.S. Steel a number of years ago is a good example of that type of opportunity.

The third is more regional in nature, involving tuck-ins of smaller single railroads or terminals, much like our recent acquisition of Tidewater. We are actively pursuing opportunities in each of these three categories, so I'm optimistic that we'll be able to continue to grow our existing platforms here in the future. Now on to Jefferson. At Jefferson, we reported $24.3 million of revenue and $13 million of adjusted EBITDA in Q2 versus $21.6 million of revenue and $11.1 million of EBITDA in Q2 of last year. Refined products and ammonia came in at new quarterly records in terms of both volumes and revenues as our export business with customers for those products continues to grow. Crude volumes were impacted by volatility in the Middle East, and we experienced a temporary reduction in inbound ship volumes during Q2.

We've been informed that we should expect ship volumes to return here in Q3 and to be further supplemented by inbound volumes of crude by rail. We forecast the remainder of the year to be strong on the crude front. We continue to negotiate new contracts to expand our business at Jefferson, and we lay out those opportunities on slide 11. The largest opportunities we're pursuing are with existing customers and involve expansions of the services we currently provide. Our customers have been investing heavily in their nearby facilities to increase production and market reach, which would require more products to flow through Jefferson. Our goal is to execute on all three opportunities during this year and commence revenue shortly thereafter. In total, the three opportunities represent in excess of $50 million of annual incremental EBITDA and utilize existing assets requiring little to no incremental investment or CapEx.