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Triton International Limited (NYSE:TRTN)
Q3 2021 Earnings Call
Oct 26, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Triton International Limited Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to John Burns, Chief Financial Officer. Please go ahead.

John Burns -- Chief Financial Officer

Thank you, Matt. Good morning and thank you for joining us on today's call. We are here to discuss Triton's third quarter 2021 results which were reported this morning. Joining me on this morning's call from Triton is Brian Sondey, our CEO; and John O'Callaghan, our Head of Global Marketing and Operations.

Before I turn the call over to Brian, I would like to note that our prepared remarks will follow along with a presentation that can be found in the Investors' section of our website. I'd like to direct you to the Slide 2 of that presentation and remind you that today's presentation includes forward-looking statements that reflect Triton's current view with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Triton has provided additional information in its reports on file with the SEC concerning the factors that could cause the actual results to differ materially from those contained in this presentation, and we encourage you to review these factors.

In addition, reconciliations of non-GAAP measures to the most directly comparable GAAP financial measures are included on our earnings release and the presentation.

With these formalities out of the way, I'll now turn the call over to Brian.

Brian Sondey -- Chairman and Chief Executive Officer

Thanks, John, and welcome to Triton International's third quarter 2021 earnings conference call.

I'll start with Slide 3 of our presentation. Triton achieved outstanding results in the third quarter of 2021. We generated $2.43 of adjusted net income per share, an increase of 14% from the second quarter, and we achieved an annualized return on equity, almost 30%. Our outstanding results in the third quarter were driven by strong growth in our recurring leasing revenues and the significant reduction in our average effective interest rate due to our refinancing activity. We expect our adjusted earnings per share in the fourth quarter will increase slightly from our outstanding performance in the third quarter.

Our excellent results are being supported by very favorable market conditions. Strong trade volumes and ongoing logistical disruptions continue to drive exceptional container demand. And this exceptional demand is driving very high prices for new and used containers and exceptionally high container utilization and leasing rates. Triton have locked in durable enhancements to our business. We have purchased over $3.4 billion of containers for delivery in 2021, which will lead to nearly 30% asset growth this year. These containers have been placed on long duration, high auto releases, and will underpin our profitability and cash flow for many years to come. Our strong deal share this year also further secures our position as the go-to supplier in the industry and further extends our scale and unit cost advantages.

We have completed our transition to an unsecured investment grade financing. And we have meaningfully reduced our average effective interest rate with aggressive refinancing. We are also seeing a financial transformation of our customer base, as the shipping lines use their extraordinary profitability this year to de-lever. Overall, our expected long-term financial performance has shifted meaningfully upwards.

We continue to use our strong cash flow to drive shareholder value in a number of different ways. We have used most of our cash flow this year to fund massive and value-added investments in our container fleet. Now that container deliveries have pushed past the traditional peak season, we have shifted some of our cash flow to share repurchases. We also announced an increase in our quarterly dividend to $0.65 per share. And we have done all this massive fleet investment, renewed share repurchases and an increased dividend, while keeping our leverage comfortably in our historical range.

I will now hand the call over to John O'Callaghan, our Global Head of Marketing and Operations.

John O'Callaghan -- Executive Vice President, Global Head of Field Marketing and Operations

Thank you, Brian. Turning to Page 4. Page 4 illustrates that goods consumption and logistical bottlenecks are driving strong container demand. The two charts on the left clearly explain why container demand is exceptionally strong. It's driven by consumption remaining very high in the U.S. and as imports continue to surge to meet that demand, it's causing a snag in the supply chain, further impacting the restocking of inventories.

The charts in the right are the cause and effect. As global trade volumes remain strong, there are still multiple bottlenecks that are not being solved throughout the system. As you can see in the bottom right chart, there is a historically high number of container vessels waiting off the U.S. West Coast to discharge their cargoes. There are not enough available ships, containers, trucks and chassis to meet demand and combined with insufficient labor in the yards, terminals and rail networks, they remain congested and the logistical challenges continue. The disruptions are not currently improving and can be seen worldwide, especially U.S. East and West Coasts, the main Chinese ports, as well as Northern Europe.

Page 5. Page 5 illustrates the freight rates and new and used container prices have continued to rise through the quarter, driven by strong demand for vessel space and containers. The chart on the left illustrates the Trans-Pacific and East West spot freight rates relative to bunker costs. Freight rates remain extraordinarily high reflected in the continued strong demand for cargo and the logistical bottlenecks keeping capacity short.

You can see in the upper right chart that new container prices have remained in the $3,800 range. The bottom right chart illustrates that sale price of used containers continue to rise throughout the third quarter due to the continued surge in demand for cargo use and a shortage of available sale of container.

Page 6. Page 6 shows that although container production is high, the container fleet remains tight. The chart on the left shows annual production broken out in percentages between leasing companies and the shipping lines. We show in the dotted line that we expect a substantial amount of new production still to be built over the remainder of 2021. This would represent container fleet growth of 10% or more. This is higher than trade growth, but container production is not much above the estimated replacement range in 2019 and 2020, illustrated by the grey band and also explains why the market experienced significant container shortages last year.

As you can see by the percentages in the orange box at the bottom of the left chart, the leasing share has been very high since the surge started, at over 70% in 2020 and approximately two-thirds so far in 2021. But we expect this to be more balanced in the fourth quarter.

On the right, you can see new production inventory. And despite the factories producing containers of greater quantity, inventories of new containers remain relatively low. There's limited depot stock on the ground and although we're seeing a slight increase in new production stock post-Golden Week, our customers are suggesting that this will continue to be absorbed at a good clip.

Turning to Page 7. Page 7 shows that Triton's key operating metrics reflect strong market. This could clearly be seen on the top left chart with utilization at near maximum levels. On the upper right chart, you can see that third quarter pick-ups remained very high as customers continue to absorb equipment through the peak season. We had very low drop-offs, with these almost immediately going out on lease or sold with a high gain on sale.

The bottom chart demonstrate the significant bookings of new and used dry containers over the last 12 months. The lower left bubble charts reports when we contract the deal. You can see our peak season lease contracting levels were down on the third quarter, as most of the containers ordered in the third quarter were for delivery after the peak season. We have accepted and placed an order of 1.2 million TEU of new production containers so far in 2021. Over 80% of these have been delivered in the first three quarters, and we expect most of the remainder to be picked up through the fourth quarter.

The leases negotiated have had an average duration of 13 years and the bubbles also illustrate the increase in market lease rates as container prices have jumped to meet demand. The size of these investments in 2021 are even more impressive on $1 value basis. We've placed $3.4 billion of orders for containers in 2021.

On the bottom right chart, looking to the extreme right bar under what's current on the depot inventory, this has all been leased out. Over 75% of the depot pick-ups since June 2020 have gone into lifecycle leases, and the average LC [Phonetic] rate has increased.

Page 8 help to illustrate what we've achieved. We've put our new containers on very long duration leases and we're focused on placing our used container on lifecycle leases, which has had a significant impact on our average lease durations. These durations have gone from 40 months five years ago to 60 months today. If you include the typical amount of time it takes a customer to return containers, we probably have on average 70 months of locked-in, on-hire time. We're looking forward to continuing to build in longer-term benefits across the fleet portfolio.

I'll now hand you over to John Burns, our CFO.

John Burns -- Chief Financial Officer

Thank you, John. On Page 9 we have presented our consolidated financial results. Adjusted net income for the third quarter was $163.8 million or $2.43 per share, an increase of 13.6% from the second quarter and over 100% from the prior year's third quarter. These exceptional results represent an annualized return on equity of 29.4%.

In the third quarter, we incurred $42.7 million in debt termination expense, largely made up of a make-whole premium associated with the prepayment of institutional notes. Due to the non-operational nature of this charge, we have excluded it in arriving at adjusted net income. We expect to recapture the vast majority of this payment through lower interest expense over the next several years.

Turning to Page 10. Our results in the third quarter reflect the benefits of the significant investments in new containers we have made to support our customers as they have responded to the jump in trade volumes. In the third quarter, we benefited from a significant delivery and on-hire of new containers along with a full quarter's revenue from the prior year's -- prior quarter's high volume of new container on-hires. This drove an 8.2% sequential increase in leasing revenue on a 9.2% increase in average of revenue earning assets.

Revenue growth was less than asset growth, largely due to the growth in finance lease portion of our fleet, and the way finance lease revenue is recognized. Year-to-date, we have invested $3.4 billion in new containers and $2.7 billion has been delivered and placed on-hire by the end of the third quarter. Average utilization increased 0.2% [Phonetic] from the second quarter to average 99.6% and remains at that level today. This near maximum level of utilization drove down direct operating expenses by $800,000 from the second quarter, and over $20 million from the prior year, largely due to the very low container storage and repair expenses.

The pre-payment of our institutional notes in June and August, together with the issuance of bonds at much lower rate levels, enabled us to reduce our effective interest rate for the third quarter to 2.77%, representing a 43 basis point drop from the second quarter and over 100 basis points from the third quarter of last year. Our combined trading and disposal gains remain exceptionally strong at $34.8 million for the third quarter, though down $7.3 million from the second quarter due to limited off-hire and disposal volumes.

Turning to Page 11. This page highlights our strong and stable cash flows, which drive long-term value. The graph on the top left shows our cash flows before capital spending. And you can see how this year's exceptional operating performance, together with the $3.4 billion in new container investment, has generated a step function change in our cash flows. And we are leveraging the current market conditions to generate long duration lease contracts that will lock in this higher level of long-term performance and cash flows.

The graph on the bottom left shows how our strong and resilient cash flows, together with the short order cycle for containers, enables us to maintain our leverage and steady range over the long-term. Our leverage has increased back into the normal range over the last two quarters, reflecting our aggressive investment in new containers, partially offset by our recent preferred share issuance. The graph on the right demonstrates how these strong cash flows and our financial stability have enabled us to create significant shareholder value by steadily growing the book value of our business, while paying a substantial dividend.

Turning to Page 12. Earlier this month, we completed the previously discussed strategic transition of our debt capital structure to primarily unsecured debt, which upgraded Triton to a BBB- and along with S&P who already upgraded Triton to investment grade affirmed the existing investment grade rating on the $2.3 billion of recently issued bonds on an unsecured basis after giving effect to the following collateral provisions from those notes.

At the same time, we amended our existing bank revolving facility and a term loan facility from secured to unsecured. Together, these events and transactions result in Triton becoming a fully investment grade company. We believe this debt structure will provide us multiple benefits and extend our already substantial competitive advantages.

I'll now return you to Brian for some additional comments.

Brian Sondey -- Chairman and Chief Executive Officer

Thank you, John. Slide 13 focuses a little more on how our strong cash flow gives us numerous levers to drive shareholder value. As we've mentioned, our primary focus this year has been making aggressive investments in our container fleet to support the massive container needs of our customers. We expect to increase our assets nearly 30% this year and we've built a higher, long-lasting foundation for our profitability due to the 13-year average duration and the high expected IRRs for the leases covering these containers.

We have slowed our container purchases over the last quarter as delivery times pushed past the traditional peak season. We've continued to conclude leasing transactions where we primarily utilized the very large orders we placed earlier for third quarter deliveries. Our shelf of uncommitted new containers is now on the low end of our recent range, giving us an opportunity to assess where container prices will go post-peak season.

To the extent that our investment level normalizes, we will generate significant excess equity cash flow. We've already used some of this excess cash flow to restart share repurchases and we repurchased 600,000 shares in September and October. We believe investing in our shares is a compelling value for us and share repurchases are also highly accretive to EPS due to our very low P/E ratio. We increased our share authorization back to $200 million to give us sufficient flexibility to repurchase shares when this is our focus.

We also raised our dividend nearly 15% this quarter to $0.65 per share. This increase follows a nearly 10% increase made last October. Despite these successive increases, our dividend payout ratio remains conservative, reflecting the substantial improvements in our profitability. The higher dividend also reflects our confidence that our increased profitability will be durable.

Slide 14 with some numbers behind our cash flow analysis. The top grouping of numbers illustrates how we think about our free cash flow using annualized third quarter financial information. In the third quarter, we generated over $1.5 billion of annualized cash flow before capital spending. We estimate that we need to spend between $825 million and $850 million on new containers each year as replacement capital spending. This leaves about $700 million of annualized steady state cash flow before our regular dividend, and roughly $525 million of annual equity cash flow after the dividend.

The next set of numbers illustrate a few things we can do with this $525 million of cash flow that we have left after replacement capital spending and our dividend, all while maintaining a constant leverage ratio. If we focused on capital investment, we could self-fund the equity needed for nearly 20% asset growth. Alternatively, if we focused on share repurchases, we could repurchase almost 15% of our shares at the recent trading range. If we wanted instead to focus on dividends, we could pay almost another $8 per share on top of our regular dividend, bringing the total annual dividend to well over $10 per share. We have typically pursued a mix of these options.

I'll finish the presentation with Slide 15. Triton achieved record performance again in the third quarter of 2021. We generated $2.43 of adjusted earnings per share and achieved an annualized return on equity of 29.4%. Triton has used the strong current market conditions to make durable enhancements to our business. Our large block of 2021 containers are locked into long duration leases with high returns. Our high share of new leasing transactions is reinforcing our scale advantages and further securing our position as the go-to supplier in the industry. We have extended our lease durations and increased the portion of our containers on lifecycle leases. And we have locked in lower long-term interest rates and a higher leasing margin, with our transition to unsecured investment grade financing and aggressive debt refinancing.

We're using multiple levers to drive shareholder value, including aggressive fleet growth, share repurchases and an increased dividend. And we expect our financial performance will remain strong. We expect our fourth quarter adjusted net income will increase slightly from our record results in the third quarter. We expect our cash flow and profitability will remain elevated into the longer-term. And we expect our net book value per share will increase rapidly due to a high return on equity.

That's the end of my prepared remarks. But before we transition to questions-and-answers, I would like to mention that Triton will hold an Investor Day on November 17th. At the Investor Day, we will focus more on why we think Triton represents the compelling value and we'll provide a deeper dive into current market dynamics, our performance, and the value we've created this year with our massive investment.

I will now open up the call for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question will come from Larry Solow with CJS Securities. Please go ahead.

Larry Solow -- CJS Securities -- Analyst

Great, good morning, guys, and thanks for taking the questions and congratulations on a really impressive quarter and outlook. Just first question maybe on the -- just on the sort of earnings power near-term. It sounds like you're going to do -- your guidance is around the 250 [Phonetic] number for the quarter in Q4. And I know maybe this is a dangerous exercise, but if we sort of annualize that number, I know you're not giving guidance for next year, but it does seem like you're pretty locked in for the next few quarters. And I think one concern we get from some of our clients and investors is that some of these benefits are short-term and there'll be sort of like an earnings clip at some point.

I sort of just hear your comments and see what the expiration schedule looks like over the next couple of years. What would prevent you from doing even close to this sort of earnings number even through '22 and '23 even if you don't place any more containers? And there isn't -- there's a minimal amount coming off-hire the next couple of years. So, what would be the danger of saying that you kind of -- seem like that $10 earnings power for the next couple of years is fairly locked in, barring some nuclear war type scenario -- a negative scenario, but yeah.

Brian Sondey -- Chairman and Chief Executive Officer

Yeah, no, thanks for the question. I think as you -- you should probably know, we typically don't give specific guidance beyond the next quarter. And so again, our guidance from Q3 to Q4 was that we expect our earnings to be up slightly from the already very strong level in the third quarter. We've made a number of comments this quarter and before that we do feel that we're building a new higher level of profitability, given the improvements that we've made in our business, including, adding a lot of containers on very long duration and high IRR releases. We've done a lot of great work with our existing containers, locking those away on long duration leases. And then we've done a lot with our financing margin or interest rate at leasing margin with all the refinancing activity that we've done.

And so, we do feel very well protected, I mean, as we head into the next couple of years and feel that we are at a new higher level of earnings than we were in the past. And that also the likely spread of what we might achieve in the future between, say, negative cases and positive cases, that spread has come down just because so many of our containers are locked away for a long time as we've shown in our slides. So basically, the premise that we do expect earnings to remain strong for a while is right. We don't like to give any specific guidance on just what that means in terms of a specific number. But again, we do think we are in very good shape to have strong financial performance for years to come here.

Larry Solow -- CJS Securities -- Analyst

Right. And it does sound like maybe a subtle shift and maybe you just sort of taking a pause to see what happens as we get past the major buying season -- from seasonal strength. But it sounds like maybe a little bit of a shift, less buying in the near-term, maybe only minimal buying over the next few quarters and more of a shift toward share repurchases that you did in '18 and '19. Is that a fair assessment? Or are you sort of just keeping all options open at this point?

Brian Sondey -- Chairman and Chief Executive Officer

Yeah, I wouldn't want to roll forward too many quarters. I think the main thing we'd say is the market remains very strong. So trade volumes are still elevated, there's still tremendous amount of consumer demand in the U.S. and in other places too. There's still a huge amount of operational disruption again in the U.S., but also in many other places in the world that are slowing container turn times and sort of absorbing excess container or extra container capacity.

And so we wouldn't say that we expect -- necessarily expect capital spending to be low or demand to be less as we head into next year. I think the main thing we'd just say is that, it's just a timing issue where as we were ordering containers really starting in July and continuing through now, the container delivery dates are at, what we call, the post-peak season, sort of October, November, December, January. We're typically -- our shipping line customers take some time to digest the containers that they've added and the seasonal cargos go down. And so I think I would describe it more that we've just taken an opportunity to use the containers that we've ordered for very high prices and supply those to the leases that we're doing. And it gives us an opportunity to see what happens with container prices, what happens with demand, as we go through the post-peak period and then into next year.

But I think it's really an open question. I think, we feel that the odds are it's going to be another very good year for the leasing business next year and, yeah, the question you had, I don't know that we'll hit the same investment levels that we did this year which would free up cash flow for other things. But again the great thing for us is, we don't have to make long-term bets on where we think the market's going. Container delivery timings, typically it's a couple of months and so we can just wait and see what happens.

And to the extent that we see very compelling investment opportunities like we did this year at high volumes, we're open to do that. To the extent that we don't have stiffening capex requirements, we will shift cash flow to other things, which certainly could include share repurchases and we already have, as we utilize some of our excess cash flow during this period while we're waiting and seeing what's happening to container prices and lease demand.

Larry Solow -- CJS Securities -- Analyst

Okay, great. Just last question, if I may. Just your thoughts sort of longer-term on the dynamic between leasing versus purchased containers by shipping lines. We all know sort of the advantages of leasing and clearly it's a much more flexible business model. Do you feel like with all that's happened over the last few years that maybe it's not 75% of containers or 65% even that are leased on a go-forward basis? But it seems like that pushed through 50% and above and maybe you get a more sustainable benefit from more leasing revenue -- more leased containers versus purchased as we look out over the next few years. Is that a fair comment?

Brian Sondey -- Chairman and Chief Executive Officer

Yeah, so certainly the shift in share of how containers are coming into the business from what had been maybe 10 years ago, majority purchased really over the whole last 10 years, majority are now leased, has been a good thing for the leasing business. It gives us all opportunities to grow our fleets faster than global trade without needing to take market share. And it's one of the reason why, at Triton, we've been able to grow our fleet. I think it's 8% or 9% or maybe now, including this year, probably close to 10% a year over the last 10 years.

And, it's also something we've seen over the last two years during the surge time that the new -- the share of new containers coming in, and I think as we showed on one of our slides, was we estimate over 70% of the new containers coming in were leased in 2020 and something in the low-60% have been leased so far in 2021. I think the one caveat to that, that John O'Callaghan mentioned is just, our customers are making a tremendous amount of profitability this year and many are actually building cash on their balance sheets because they're so profitable and they just have a limited number of liabilities that are pre-payable. And so we suspect that, that may cause some customers to increase their purchasing of containers. But we don't think it's going to be dramatic.

And I think most of our customers have reached the conclusion that leasing is just a good way to add containers to their fleet, that it's actually fairly cost-efficient, especially given the efficiency of our capital structure, as well as there's a lot of flexibility benefits of picking up containers when and where you want them with the size type that they need at that moment. And so, again, we do think this kind of secular shift toward leasing will continue. But again, in the very near-term, it's possible we may see a little bit of increased buying because of the excess cash for our customers.

Larry Solow -- CJS Securities -- Analyst

Fair enough, that makes sense. I appreciate the thoughts on the follow-up. Thank you.

Brian Sondey -- Chairman and Chief Executive Officer

Yeah, thank you.

Operator

Our next question will come from Michael Brown with KBW. Please go ahead.

Michael Brown -- KBW -- Analyst

Great. Hey, good morning, guys.

Brian Sondey -- Chairman and Chief Executive Officer

Good morning.

Michael Brown -- KBW -- Analyst

I was hoping to just put a finer point on the fourth quarter guidance where you expect adjusted EPS to rise quarter-over-quarter, which is, not all that surprising to hear. But great to see that still playing out here. What does that contemplate for leasing revenue growth? You talked about the fact that the margin can continue to expand as the containers that were picked up in the third quarter, you get that kind of full quarter benefit. But you did see revenues grow 8% sequentially in the third quarter. So, is there a way to kind of say the fourth quarter will be a similar type of growth? Is that the kind of right way to think about it or is it possible for it to come in actually a little bit better than that?

Brian Sondey -- Chairman and Chief Executive Officer

Yeah, hey, Michael. We typically don't like to give guidance on sub-components of the -- of our income statement. We just settle down on giving guidance that --it's the bottom line, adjusted net income per share. But I think the dynamics that we expect to happen are that we think our leasing revenue and our leasing margin will continue to grow from the third to the fourth quarter. And on the revenue side, that's driven by continued pick-ups for the leases that we've done and we'll probably continue to do some leasing even though it's post-peak season.

And also just I think you referenced a second ago just by the fact that, we had a very large number of containers picked up in the third quarter that had a kind of partial quarters worth of revenue and because of the timing of the pick-up, that will get a full quarters worth of revenue in the fourth quarter. And then the second driver expanding our leasing margin is just a lower average effective interest rate. It's a similar story where we paid off some more expensive financing during the third quarter and had a partial period benefit of that. And we expect now a full period benefit of lower average effective interest rate in the fourth quarter.

And so that leasing margin is up nicely from Q3 to Q4. We do suspect that will be offset some by lower disposal gains. And I think as we've shown in our charts, the prices are still very high and we don't expect to be really constrained by price, but we just have very, very few containers left to sell. And we've been squeezing very attractive gains out of limited inventories. But as the inventory continues to just get tighter and tighter, it does become hard to maintain gains at the same level that we've seen. And so again that's the basic dynamic, but we do think the revenue growth and the margin growth will offset the sort of lack of inventory and decrease in sale. But the other good thing for that for us is, not only do we think the overall profitability is going to increase slightly, it's also an improvement in mix, that the benefits we get from the growing revenue and the lower interest expense, those things are durable, last for a lot of years where the gains obviously are more transactional. And so again, we're looking at a very strong fourth quarter of increased profitability as well as an improved mix.

Michael Brown -- KBW -- Analyst

Okay, great. Thanks for all that additional color.

Brian Sondey -- Chairman and Chief Executive Officer

Yeah.

Michael Brown -- KBW -- Analyst

So I think one of the dynamic shifts that I've been talking about with investors is just that, that change from the level of investment capex coming down from the peak levels and then as your cash flows have continued to grow, there'll be a shift to capital return and we saw that playing out with dividend increase this quarter, and then a kind of getting back in the market for share buybacks. As you move into 2022, how do we think about how that continues to play out? You talked a little bit about how right now and as we're coming off the peak season that there's a little bit of uncertainty about doing a lot of capex at this moment and that certainly makes sense.

But as you move into 2022, do you still expect to see revenue and earning asset growth? And how could that compare to historical period? And then you have the authorization for $200 million out there. How -- what is kind of like cadence that we could expect for something like that? Because I look at Slide 14, where you show your cash flow after replacement capex and regular dividend, that shows that you could have -- you could take out 14% of shares here and maintain your current leverage. So just trying to get a sense of how to think about your authorization relative to what you're showing there on that slide?

Brian Sondey -- Chairman and Chief Executive Officer

Yeah, sure. So -- I mean, first on maybe just a technical point on our authorization. We typically just think of the authorization as almost like an administrative thing where we want to make sure that we have enough room to buy back shares and we see shares investment as the best way for us to deploy our excess capital. So, when we increased the share authorization to $200 million, that doesn't say that that's the minimum we're going to spend or the maximum we're going to spend. It's just something that we maintain as a reasonable amount of room that we can then utilize and over the next couple of quarters. Just given our trading volume, it's probably hard to utilize more than that over a couple of quarters.

But again, we just go back to our Board, if we use a portion of it and we -- again, they're quite supportive of buying back stock when it makes sense. And we would just reup it again. So I wouldn't put too much emphasis on that $200 million other than to say, yeah, we've been buying shares and so we needed to create some more room to do more.

In terms of where we go in 2022, again I think the main thing is we think -- we'll wait and see. The good thing about container investments is, there is a very short lead time and it gives us the opportunity to see what actually happens in the market without needing to try to predict what happens too much. We always mentioned -- excuse me, we always maintain a shelf of equipment that allows us to supply customers what they need over the next few months. And if they take it, well, we buy more. And in 2021, we had just an amazing array of attractive investments that we were buying containers very aggressively, we were doing deals, we've mentioned a few times with -- we estimate equity IRRs in the upper-teens, in some cases, lower-20s, given inventory profits we were making and despite the fact that we also felt our shares were compelling investment. It was just a -- the attractiveness of the capex financially as well as what it was doing for our franchise at securing our position in the industry, both in terms of scale, as well as sort of relationships with the customers that, that was the best use.

As we get into 2022, we'll just, as we always do, do the same. If we have significant and substantial equity -- excuse me, investments in our container fleet, we'll look to do them. But we will compare that against the value we think we can create by buying our own shares. And I think as you did mention in your note and we mentioned in our talk, the shares trade for a very low multiple of our earnings. And so because of that and because of our confidence in the durability of our earnings, we see the shares as a compelling value too. And so again, as I said, I don't want to predict necessarily how we'll -- exactly what will happen in the market or exactly how we'll do that trade off of attractive asset growth relative to attractive share repurchases. But again like, as I've mentioned a few times, the cash flow gives us a lot of optionality. And the senior management team spends a lot of its time and focus on making sure that we put our cash flow to its best use as we definitely will be focused on that next year too.

But again, the market backdrop, we think, is actually pretty attractive. And we've slowed a little bit, as we mentioned, our purchases because we had a lot of orders for delivery during the peak season that we placed earlier. And price is very high and it's interesting to see what's going to happen with that during this post-peak season. But again I wouldn't suggest at all that we're sort of kind of conservative about next year or pulling back. It's really just kind of waiting and seeing.

Michael Brown -- KBW -- Analyst

Thanks, Brian. That was great color there. So maybe just one more, if I could sneak it in. Your ROE, it's consistently risen this year, right? It was 25% in the first quarter, 26.6% last quarter, it topped 29% this quarter, all of those on an annualized basis. With the gain on sale piece, that can be somewhat episodic, but I think it's fair to assume volumes will rise and maybe the gain per container comes down, but probably will still be pretty healthy here for a while. I guess what I'm trying to get at is, what is the right baseline expectation for Triton's ROE now? I mean, you've put on -- I think it was something like 40% of the portfolio in this post-COVID period. Correct me if I'm wrong on that. But structurally, your ROE just seems like it's well above where you guys were targeting in the past, which I want to say was something closer to like a 20% ROE. So I don't know if that's an Investor Day kind of topic, but I'd love to get a little bit of color on that.

Brian Sondey -- Chairman and Chief Executive Officer

Yeah, I'll certainly give you some color now, but I'm glad you mentioned our Investor Day. We'll hopefully give some interesting details and color on all these things, beyond what we can talk about in this kind of timeframe. But I think as we talked earlier, we expect our profitability to remain higher than its normal range for a long time, coming from the fact that we have put a lot of containers on very high ROE leases, the fact that we've locked in those leases for very long durations. And also we do expect a favorable market backdrop to continue, just given the strong consumption, the high trade volumes, the ongoing operational disruptions. So all those things come together and we say, yeah, we do think ROE and profitability should be higher than our typical range for the foreseeable future here.

Michael Brown -- KBW -- Analyst

Great, thanks and looking forward to hearing more next month.

Brian Sondey -- Chairman and Chief Executive Officer

Yeah, thanks, Michael.

Operator

[Operator Instructions] Our next question will come from Liam Burke with B. Riley. Please go ahead.

Liam Burke -- B. Riley Securities -- Analyst

Thank you. Good morning, Brian. Good morning, John.

Brian Sondey -- Chairman and Chief Executive Officer

Good morning.

John Burns -- Chief Financial Officer

Good morning.

Liam Burke -- B. Riley Securities -- Analyst

Brian, port congestion has played a role in the business and it's worked in your favor. How do you see -- and for the foreseeable future it's going to be a reality of the shipping industry, but how do you see port congestion affecting your business long-term? Or how do you -- do you see it changing or any kind of change as that -- as congestion eases?

Brian Sondey -- Chairman and Chief Executive Officer

Yeah, so we are watching it closely. We don't see it directly. But we're kind of watching a lot of the same data. I think those in the public transportation industry are watching, plus we're talking with our customers every day that are living with it. I'd say our take is, from listening to our customers is that, we don't expect any rapid improvement in port congestion and it's not really just the ports, it's -- the ports are congested, there's not enough truck drivers, there's not enough labor in the warehouses to turn the containers and unstock them. And it's not just in the U.S. either. It's in Northern Europe, in the U.K. and port issues in China. And so really the whole global container flow has been disrupted just by the surge in cargo demand coupled with variety of challenges that have been pandemic-induced. And we don't think that's going to unwind quickly.

Though, that said, when it does start to unwind, there will be a source of extra container capacity. So it'll almost be like a little bit of extra production as containers are freed from being bottlenecked and then start to flow more rapidly around. And so it's just something that we keep our eye on when we place orders for containers. The very good news for us is that, as we ramped up capacity to supply this time where containers are getting stocked and add extra capacity, we're putting those containers and, in fact, all of our containers, on very long duration leases. So it's not as if containers are freed up from these bottlenecks, they can't all come rushing back to us. Our customers have taken them on very long duration leases.

And so, my sense is, for us, the more likely impact will be, you might have a growth in the container fleet. And so therefore, investment opportunities for us knocked off by a point or two, as these bottlenecks start to ease. But again, we think it's something that plays out over a long period of time. And as well as we've mentioned a few times, we don't have to make very long bets on when to buy containers. We maintain a shelf of equipment, as we lease it out we add more and, to some extent, allows us to just kind of feel our way there as these bottlenecks start to ease. But again we think this is not an immediate situation. It's much -- could be down the road.

Liam Burke -- B. Riley Securities -- Analyst

Great. And you're the market leader, you have some clear barriers to entry here, but as the market has continued to unfold coming your way, have you seen any change in the competitive environment?

Brian Sondey -- Chairman and Chief Executive Officer

Not really, it's a business of specialists. And there's -- I would -- one thing I would say, there's a -- the table stakes are very high to getting involved, that you have to have an infrastructure that covers the globe operationally and then for marketing. And so it's not like financial players can come and go from container leasing. You have to make significant investment to be in and then you're in. And so we typically -- we haven't seen, for example, new entry because the market is so strong. One thing that we do see and it's a dynamic that typically plays to our favor, is when the market is very strong and customers are desperate for equipment, that's when they really want to work with Triton because we are the market leader. We also maintain, by far, the largest shelf of available equipment. And they also know that we have the deepest pool of operating resources and that we're willing to spend extra to make sure we deliver. And so we see that when the market's really strong like it's been, our deal share goes up and we estimate that our deal share is probably over 40% since the market first really took off last year as compared to our overall leasing fleet share of, say, a little under 30%.

So the great thing about that is, we -- when the market's very strong, it's also when the rates are strong and then returns, and so we get a disproportionate share of the good business out there. We do see sometimes that after maybe the market cools a little bit, our customers -- excuse me, our competitors then starts to maybe try to come in a bit more aggressively, our customers feel they have more options, that if things aren't quite at such a boil to work with customers -- excuse me, to work with leasing companies that aren't maybe as capable as we are. But in general, we haven't seen anything really unusual. It's still -- the business is still served by the leasing companies that have served it for a long time.

Liam Burke -- B. Riley Securities -- Analyst

Great, thank you.

Operator

This concludes our question-and-answer session. I would like to hand the conference back over to Brian Sondey, Chief Executive Officer, for any closing remarks.

Brian Sondey -- Chairman and Chief Executive Officer

Yeah, thank you very much. We'd just like to thank everyone for your ongoing interest and support of Triton International and we look forward hoping to speak with all of you at our Investor Day. Thank you.

Operator

[Operator Closing Remarks]

Duration: 47 minutes

Call participants:

John Burns -- Chief Financial Officer

Brian Sondey -- Chairman and Chief Executive Officer

John O'Callaghan -- Executive Vice President, Global Head of Field Marketing and Operations

Larry Solow -- CJS Securities -- Analyst

Michael Brown -- KBW -- Analyst

Liam Burke -- B. Riley Securities -- Analyst

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