Danaos (DAC) 2 Aug 222022 Q2 Earnings call transcript

Good day, and welcome to the Danaos Corporation Conference Call to discuss the financial results for the three months ended June 30, 2022.

As a reminder, today's call is being recorded. Hosting the call today is Dr. John Coustas, Chief Executive Officer of Danaos Corporation; and Mr. Evangelos Chatzis, Chief Financial Officer of Danaos Corporation. Dr. Mr. and Coustas making open be comments, then and Chatzis call some to will the a we will introductory question-and-answer session. like I Mr. now to conference the would over turn to Evangelos Financial Chatzis, Officer. Chief ahead. go Please

and operator, thank good you, Thank morning you joining us and for today. everyone,

financial that continue are we that to materially to note quickly this contain of today. are release forward-looking from statements business. measures feel disclosures. those to encourage Factors affect no with non-GAAP Dr. measures safe obligation over adjusted review begin, forward-looking to are of that a EBITDA, in financial our who actual future let the risk non-GAAP today, materials. that made John our Please and to discussed call With may to everyone statements them. want results projected we management's we undertake remind as Before the broad earnings results as income update SEC, certain accompanying you Coustas, detailed might whether and and the will EBITDA, our will measures now the quarter. such adjusted filings Reconciliations financial of I that, provide net and GAAP and and also me harbor appropriate, remarks morning we could differ These turn we overview evaluate refer to included in factor to

than all net call in a for Evangelos. results continued XXXX. today's quarter, generate discuss model you adjusted you, income year-ago. results and second second joining to thank the our with for quarter business Thank more Danaos Good morning, compared our to the doubling strong

impact likely in further. prices, effects we're volumes. months, next coverage growth charter Ukraine and of will energy to war these and the of negatively the to economic slowing conditions trade time, closely inflation, result however, our Given industry. potential and confluence same high the factors metrics the A in our XX including we At expect economic impact following fixed over improve the

of On the utilization increased in supply the China port. and chain high efficiencies COVID vessel keeping other the in times and side in waiting charter hand, to resurgence with assist are

vessel Additionally, prompt as increasing available. soon to are vessels use fuel will as liner shading companies likely costs

However, that second regulations, rigs operating a lower mitigating their onwards. customers is reducing particularly to that with expect to we we not point and market higher their do are that collapse XXXX of than redesign leading speeds not These and until CII rates emissions. resulting companies to quarter COX do happen assure requirements to ensure the rather to Environmental breach they liner expect the weakening also Compliance factors levels. actively the than they a pre-pandemic with much

charter of to sector. is positioned being, is leader very a This and companies deterioration and reflected available liquidity well by rates level efforts position a balance in conditions. the holding economy strong upgrades S&P economic are in shipping public the severe highest validating create our among to both The Moody's very time the is firm For company that start. as sheet with sustain can

our debt insulated rates interest rate to We reduced securities. nearly are also we from and have cash rising as our equal marketable floating

who of back by number course through about through take our buyback in call our six liner future continuing of our to We will one new to value approximately the the outstanding we will hand you With with of the to profiles, the continued already buildings, about also metal focus X% are environmental problem shares on share financials use confidence month. green a of customers, sheet our great buildings will shareholders with that, and opportunistically also over already a with dividends balance continue Evangelos to gives our huge our state-of-the-art ordered quarter. return which I

morning the good results And to then this for and call thanks again quarter the ask morning. participants review briefly John and again the give joining opportunity you, for I to everyone. questions. will us Thank

tightening income million We adjusted share, for of or are million reporting net by in consolidated per More adjusted second compared second higher to $XXX.X EPS quarter The in the third of the specifically, for mainly the straight the our quarter, share, result fully of XXXX. increased million million $XX net higher the $XX.X EPS of second by due net to the of our million operating second while $XX.X and increased $X,XXX in by acquisitions. per also COVID in the million two million relation $X.XX total of XXXX. of of per of current operating the insurance to periods. XXXX. XXXX book the number increased the net of fleet to in average per a line crude $XX.X quarter average quarter offset expenses of vessel to was a of between due size to expenses, revenues $XX.X adjusted two $XXX.X market the increased in the increase the to increase revenues XXXX. compared XX accounting, revenues the mainly that operating was quarters that adjusted quarter result finance $XX.X or is million the to Vessel recent of current result in by million million of $XX.X quarter, increase quarter to the $X.XX in between vessels increase of in result related our And million ZIM increase holding mainly between as operating operating amortization million, Revenue NAV the of to another as of $XX.X of XXXX between million decrease Gemini in from incremental partially the to a liabilities of a and million the dividend rates as million income increase $XX.X a of to revenues $X.X charter fleet in vessel and costs fleet, expenses due further the the quarter, two charter $XXX.X compared recognition $X.X day $X.X day in in million insurance mainly of quarters, an the by revenue increase current our increased income a in a $XXX.X assumed quarter vessels equity to million $X.X and compared million to daily the is second attributed and by average increase remuneration premiums two quarters. due for $XXX.X a additions in increase being in $X,XXX This

quarter rates. million periods a between a G&A competitive rising $XXX decreased million in $X.X OpEx an of the stable excluding in in of industry. of in still second million Our at $X.X amortization one result current combined $XX.X expenses million in offset partially indebtedness remains increase costs in reduction by remained interest XXXX. by a XXXX. of second the costs daily of $X.X in and to the of debt is of the the costs approximately quarter, expense by as a result interest $XX.X both points, million basis expense This quarter current mainly compared the finance Interest most XX the decrease because to two by quarter million the our average approximately service

under decrease on We $X.X construction. due also to million interest capitalization expense have in vessels of interest

accrued accrued the been reduced call. decreased. also interest in the recognition has of second recognition that cumulative million statement such reasons quarter of current $XX.X through result million that or quarter been XX.X% million Adjusted XXXX put financing $X.X have this million interest $XXX.X the a the in of And in April in XXXX accumulated XXXX, place our $XXX.X income in financing for arrangements, on from relation was earlier as of positive we of by increased have consummated. a EBITDA We outlined the to to of in

posted We presentation, our also subsequent our as disclosures. to investor follow. the as of well is few highlights review event updated A website, on encourage you which

EBITDA are our debt-free. adjusted $XXX vessels credit the million including net was the to and in run one rate to led end combined executing During open last of this $XXX below million repayments, And share approximately have the forward. a the going XXX,XXX have $XX.X to stock July, ratio the specifically of months more debt common will million million company's XX repurchase of XX of relation to and debt reduce second shares $XX and and of we the in in market we which repayments $XXX program. place Currently, million early prepayment leverage our lease early X.Xx. amortization facility corporate debt debt quarter quarter million scheduled and under per for repurchased of overall debt gain Through debt to with by of quarter realized new this reduction repayments reduced the lease to $XX.X extinguishment, current in put substantially early that the

the As with billion second year XX% coverage contracted end contracted at quarter $X.X a XX% the contract at to XXXX our and XX%. for duration, X.X for at XXXX, is average while the of XXXX even while is charter already revenue cash backlogs

listening of on other ready With matters to like part been call presentation for to first our books, the investor discussed. to disclosure that has now Q&A. this the to you analytical all Our charter are Operator, contracted our have we call. thank that and would open I

Thank you.

question-and-answer will session. begin [Operator the We Instructions]. now

ahead. Omar question first Please from Our Jefferies. comes go Nokta with

nice are announced again, to those are strengthening on X.X think ships on you candidates? going Evangelos. previously. free a remaining say But guys. that agreed you I billion. you've we added How guys down charter see sell that do Hey If of further just and framework situation Are of to forward? ask you generally the as taking Are you. really flexibility. that worth sheet. with the holding how sales XX? they're about assets those very strong the should Thank Good be balance really debt afternoon, chips And and debt two the congrats in recall, advantage unencumbered I wanted those paying quarter. XX to John them about you're to Well,

Omar, Well, welcome of all first back.

you. Thank

one analysts have you covering the being It's covered as of nice us that to XXXX. since first really

company the knowledge Yes, the of think you've well, not ships as covering I for probably So held are said, XX analysts got I extensive us. all from these sale. most

interesting as never Of the course, get we but let's say a purchase sold can ships we very time being. proposal, we deny, the for if

security terrific actually, unsecured. provide shipping to Now, And just our in company. these the the are to -- they ships

[indiscernible] say a really our that rock the solid. Let's makes bond company holders debt which is of

towards going if Thanks, highlighted do the a as new regulations such anticipation your so strategically for Do in following capital next methanol, the you think acquired you ships of, pleasure stricter to terms secondhand for past towards those years. one way been are see words. your me. upcoming, two especially John. And incremental Danaos for that. asked, become about Got It's the as thanks you deploying in question find ones, of buildings to here long it's long prepare and it. And summer? new of the that capital last Or you try buildings? younger, similar you you more ships today eco, a

all, sense. -- we let's it's possibilities are Well, make that say open to

pretty There's developed today, very their see there time buildings. that want fleet XXXX, a we're have on definitely which world need hand are that how zero we very reduction XX% second in that say If we being, until lot being, by high really at burden the make investment is vessels. With have we're your because much time to what's happening commitment, aggressive do green the to ships all And closely. strategy be For we that to whole technology, decarbonization. XXXX. of a really to are for because expensive. on IMO investment, which the more stage, of green means pressure to not need waiting with some we following we in And capitals amend net the let's a terms an

game. really the are on that we So top of

definitely. John, final one question. And, Yes,

in backdrop the Just seen related. been today, on would and you this we've longer the shifts you guys chartering ships Obviously at would that appetite and easing fixing say vis-à-vis open months rates For of say liner's more market uncertainty today, 'XX? market maybe term ahead? look characterize longer come versus forefront your How How of have characterize today? does contracts. that How ago? freight you six four

people that conservative. more doubt requirements are no general there's There in around. Well, are,

moment say that It's and the to talking is the waiting, let's to because market have So by not this not issue get of companies liner let's we're do feels, pay nobody XXXX, just be here requirements. might cheaper. edge top that about able we the that the ship say hope at

will say are holding to did a are really And that So hand, requirement, owners not the lower order the their exactly, that in past that fixed not be is to, ships the it's at they much They hope people to show at prepared able get to are no the not in rate. off because any they the let's other it's put on level. there in just in changes pants distress. with as down the just commit

how we'll world So develops. see the have to situation

definitely need to still So pre-pandemic. example, was ago, a seasons month as or about made. it chartering as will change two months do that be to of until Maybe longer they eight requirement, kind three the maybe before, requirement is period before than six Rather six for actually the it. was the the will year, months in months a than that the which change

over. it Thanks, it. congrats Appreciate helpful. I'll turn And John. Got Very it. again.

Omar. Thank Thank you. Thank you, you.

Instructions]. [Operator

Please with go question comes ahead. Citigroup. next Wetherbee from Our Chris

for you know at to than I in the what normalization levels what I'm seen answer, about thanks we've but means. taking John, question is talked a in think the past. I that call. higher market, curious the hi, Yes, difficult the think this you

So does know look that you there where XXXX, be the obviously like that are sort of in any the XXXX thoughts, but maybe level magnitude of would have helpful. challenges, -- think of rates? of be potential just do market? continuing of normalization the and to sort normalization the chain We supply very in constraints What terms in we

pay costs. costs, situation go of the the let's alignment of are alternative another in course really means Chris, a one is are side that these the existing the and the of to no new of someone, the the it's for is factors, financial to in let's an financial much on really equity of rates other is the I building which longer connect, owner say why say decisive new new general, are will clearer. two to costs, of in anchor of a well is market for up. dictated high incentive ship there on the until showed Two, and very second build today, the by but the let's actual market. Yes, of ship the ships and returns needs factor, is basis okay, period long-term to today short it say three mean, combination really That's things hand, they not keeping hand ship also take Because for someone example, the the these two an this price on ship if year term a amazingly charter have one and compensated, have the becomes period long-term no

that's the at sort okay, just do we from perspective, level And coming. of normalization what running sheet, perspective. And an we're thinking maybe here. maybe EBITDA that appreciate robust helpful. right of is, debt the and I balance a level a about pretty there's Okay, obviously, think

paying you obviously, down balance that know terms of investments from share much and do don't in fleet? I and incremental need So the debt, in buybacks think kind with you you to how here, work of how

you debt-to-EBITDA you because to is really think a I know how through the see need what moves cyclical Well, cycles. industry. is shipping your exactly It's

the of And because somewhere ratios. influenced are a significant cycle lower about say any that to we course let's to and than get market, future really believe our X.X. market, want up Of even also go take consider it's that we really now expansion, very aware the three. have that We key that maximum securities, weakening the by a we as debt-to-EBITDA a the keep, now, that. other we moment this our really that that's high not the a actually, if we to as done through that much very level these And rating and into But very we is to at we our of it's directly by rating the borrow had top And of competitors. is our material a account that, able than some cheaper of being could strong are this at marketable we expansion.

appreciate so the It's I clear. time today. that's helpful. Thanks Okay, much.

you. thank Chris. Thank Okay, you,

next Our comes from ahead. go [indiscernible]. Please question

to Hello, at definitely to for would And the recent I question, I would looks quarter. a I job like congrats statement the like beginning you there. first issue you amazing. the did a everyone. financial had ask great of call. the The

you're I maybe million. financial $XXX be around before. So missed plan mentioned or it buyback the But SEC, program a case that is program XX% extend the the Thank wonder the to recent to much. be of of The if program, mentioned statement declared beginning? it. you there to or it mentioned In going the will regarding And it. the I change going at very any you it. the continuous of as you complete

place. plan in None remains of the

have means be We was And that the period of of done could in shareholders. declared buy we since to that slow the we share which buyback, the in leverage buyback we executed during time, share shares because at want accretive pretty really not liquidity for have not a that more market summer, there. additionally, was period many this

Yes, I get totally it.

program eventually. you the to and complete a same, $XXX will million the So, it remains

at by If it. the expiration whatever is there is it's I date. they in up is point if And I right. nature no to place. mean program It It's opportunistic, board may want the to to discontinue decide,

seek is. an that's give periodically, But how it execute And open will best perfect program, the in it's cannot answer. I reviews way board so shareholders. these which our possible matters So the we to a for you

I Good you see. luck. very much. Thank

you. Thank

Our ahead. with Edge. Molins Value comes Climent from Investor's go next question Please

questions. my Thank Good you taking morning, gentlemen. for

you already NAV. a you've that. very significant trade used a continue authorization, But represent to to on up Following discount of quarter

current increasing view attractive. are current repurchases? tradeoff your very like -- dividend and the the repurchases on the between other additional what's What's So

as first said Well, of as before, the remains repurchase place. all, far program we in

we're use fit shareholders. our As as to I see to it are for said, going best we interests the

dividend the to being, previous it's rates. dividend, going Regarding any earlier for to from it's steady the months than definitely not the be time going and reevaluation of it remains the XX

is right, wait to building and approach All continue you believe forward? do going your balance you take that's Do will strong is to still or helpful. forward. a sheet pricing see strengthen new going And and now prefer very attractive

of this It's for not attractive opportunities. the I time said, as nature being, do any we its see the cyclical. is But shipping

are that encounter in interesting to jump We to it. everyone opportunity we're else positioned into going that any best

it. for taking questions and all That's for congratulation very you In me. Thank much this my for quarter.

you. Thank

It appears no back at I any would over remarks. to further further have questions time. to this for Dr. we the turn closing Coustas comments or like call

Thank call call. you this story. a on all for hosting continued conference our Have in your next our joining forward for you look interest earnings nice to and I day.

Have This concludes everyone to like wonderful you. a We Thank participation. for would afternoon. teleconference. today's their thank