FTAI Infrastructure Inc. Q3 FY2026 earnings call

• Strategic Deleveraging via Longridge Sale: Regulatory approval received for the sale of Longridge Power and Gas. Proceeds of just over $1.5 billion will primarily repay debt, eliminating approximately $1.4 billion in total debt and reducing parent-level interest expense by roughly $25 million annually.
• Railroad Record Performance: The core freight rail business posted all-time highs in carloads, average rates per car, revenue, and EBITDA. Integration of the Wheeling and Lake Erie Railroad acquisition is largely complete, with final systems integration occurring in November.
• USD Acquisition Transformation: FTI is acquiring logistics assets from USD Group, including a rail-connected food terminal in Beaumont/Port Arthur and a 50% joint venture in Alberta. These assets generate approximately $50 million of annual EBITDA under long-term take-or-pay contracts.
• Jefferson Terminal Growth: The combined Jefferson and USD business is expected to exceed $100 million in annual EBITDA. Management views this combination as a strategic move to enhance value ahead of a potential monetization/sale of the Jefferson platform next year.
• Rapana Phase Two Progress: Construction of Phase Two is on track for completion in the coming months. Conversions to handle propane are beginning in Q4, positioning the asset for full-capacity revenue generation in 2027.
• M&A Strategy: Management identifies a highly active M&A environment in the railroad sector, driven by private equity fund maturities and corporate carve-outs. FTI aims to pursue larger, strategic real assets that benefit from their operating capabilities rather than simply adding EBITDA.

• Railroad: Revenue of $104.2 million (up from $61.7 million in Q3 2025) and Adjusted EBITDA of $47.4 million (up from $29.1 million). This segment represents the majority of the company's operational focus and historical growth drivers.
• Jefferson Terminal: Revenue of $24.9 million (up from $21.1 million in Q3 2025) and Adjusted EBITDA of $14.2 million (up from $11 million). While currently smaller, this segment is targeted for significant expansion through the pending USD acquisition.
• Longridge Power and Gas: Excluded from current adjusted EBITDA calculations as it is pending sale. Gross proceeds are expected to be just over $1.5 billion.
• Rapana (Phase Two): Construction nearing completion; no revenue recorded yet but expected to commence in 2027 with high demand visibility.

• Railroad Growth: Forecasting continued double-digit growth in both revenue and EBITDA for the railroad segment over the next year, driven by organic volume increases and favorable pricing trends.
• EBITDA Drivers: Expected EBITDA growth is supported by three high-confidence events: organic railroad growth, inclusion of USD financial results upon closing (mid-November), and commencement of Phase Two operations at Rapana in 2027.
• Margin Improvement: Operating Ratio (OR) for the railroad is expected to improve from the mid-70s into the low 70s due to $19 million in annual cost synergies from the Wheeling integration, fully effective January 1st.
• Debt Reduction: Leverage metrics are expected to improve materially over the next several quarters following the Longridge sale and integration of USD assets.

• Geopolitical Volatility: Operations at Jefferson Terminal were significantly impacted by Middle East tensions, which disrupted fruit oil imports from Saudi Arabia. While crude volumes are recovering, there is uncertainty regarding the speed of inbound ship returns.
• Customer Overhaul Delays: U.S. Steel’s blast furnace overhaul at Gary Works caused slightly lower volumes in Q3, though it has since resumed full capacity operations.
• Integration Execution Risk: While Wheeling integration is largely complete, final systems cutover in November carries execution risk, although management reports no meaningful service disruptions thus far.
• Monetization Uncertainty: Future value creation relies heavily on the successful sale of Jefferson and Rapana assets, which depends on market conditions and buyer interest in late 2027.

Q: Analyst asked about the durability of accelerating railroad EBITDA growth and details on robust M&A opportunities. / A: CEO stated growth is sustainable into 2027, driven by strong volumes (including record propane), Gary plant returning to full capacity, and mid-to-high single-digit pricing growth. Regarding M&A, he described the market as one of the most active in decades, driven by PE fund maturities and owner retirements. FTI focuses on larger, strategic acquisitions that build scale rather than small transactions.

Q: Analyst inquired about the impact of the USD acquisition on Jefferson’s cash flow profile and potential future sale. / A: CEO explained that while Jefferson’s infrastructure is high-quality, previous capital intensity left cash flows tight. The USD acquisition adds ~$50M in stable EBITDA, transforming the cash flow profile to generate ample excess cash. He confirmed plans to monetize Jefferson next year, noting the combined entity’s enhanced value proposition akin to 'renovating before selling.'

Q: Analyst asked how the Middle East crisis affected Jefferson and if new contracts offset losses. / A: CEO noted Q2/Q3 were meaningfully impacted by halted Saudi fruit oil imports, but refined products held strong. Recovery is visible in October crude volumes (avg 85k bpd vs 41k in Q3). New contracts starting Jan 1 with two customers will import Uinta Basin crude, diversifying away from Saudi reliance and maintaining throughput even if export destinations vary.

Q: Analyst sought specifics on Nippon Steel’s investment impact on rail volumes and progress on Wheeling cost synergies/OR. / A: CEO highlighted Nippon’s $3B Mon Valley investment will add 1.3M tons/year production, yielding tens of thousands of incremental carloads and ~$20M EBITDA over 2-3 years. CEO John Carnes confirmed $19M in annual synergies are on track for Jan 1 effectiveness post-system cutover. CEO Ken Nicholson added that while OR will drop to low 70s, the key metric is cash flow conversion due to low CapEx needs (only 15% of EBITDA).