Danaos (DAC) 7 Aug 232023 Q2 Earnings call transcript

Good day and welcome to the Danaos Corporation Conference Call to discuss the Financial Results for the 3 months ended June 30, 2023.

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 the be comments then and Chatzis for some questions open call and we'll will introductory answers. Please go ahead.

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

we accompanying remind that such we Before I as statements in note Safe Factors financial morning contain update Harbor those affect that could earnings forward-looking we as certain are measures projected and adjusted undertake EBITDA, of encourage to results to to will and are also feel results these management financial and them. are actual materially we included quickly refer Please to we made adjusted may our that non-GAAP appropriate, begin, statements EBITDA disclosures. no you differ materials. of to future income business. Reconciliations where remarks obligation everyone continue might in measures the want today. this and net and review filings measures our that today Risk evaluate SEC from GAAP forward-looking financial These and detailed discussed to our to Factor non-GAAP release with

the will call With John John? who Dr. turn overview provide quarter. of that, the the over Coustas, broad let now me to

Thank for for to discuss thank the XXXX. you, our second you Good and joining Evangelos. results morning all today's call quarter of

million latter despite revenues is in as Danaos' by have to our well operating chartering ago. strategy market balance of which in lower year reflected possible $XXX a resulting approach active we that a second current gradual is XXXX, a economy drop more the manage world charter is our taken quarter in in record of is than container stagnated near than our prudent levels The The strategy. market. previous the of has market conservative as sheet the easing XX% to made to successful the condition

model and our to in billion secured the the new active resilience market, during nearly charter business the in highlighting charter be contracts $X.X continue We of quarter.

end as coverage currently billion stands Our contracted total to the charter the backlog XX% and for quarter and $X.X of for of at XXXX XX% XXXX. increased charter

In notable and categories Governance reaffirm ESG leader Danaos These are XXXX, governance strong strengthen reiterated in inaugural Gold, Shipping in Environment accolades promoting the the social timing position The and and of in recently received proud first place the targeting the which net IMO decarbonize company's Awards. awards acknowledge and second a quarter by sustainable by commitment exemplary operations. efforts its of, practices, responsibility around we is XXXX. responsible shipping as as our of X the maritime the awards to the

strategy its Danaos continues in advance to ways. decarbonization multiple

have appendages optimizing friction We are existing to low new upgrade propellers, around with and fleet committed vessels and XX fuel retrofitting our saving paints. constantly and

total We building have with of X have be X also are TEU, of order. X,XXX investment. of program on which new the of vessels, we of total, our newbuilding a X and will approximately the are In vessels, X,XXX capacity additional order which our longevity methanol-ready, XX ensuring delivered with TEU, expanded vessels. These TEU XX,XXX

will these delivery fuels of alternative chartered periods beginning multiyear already able be of All in vessels on these to and are importantly, dates X for XXXX. utilize their

market make were years the prices. levels next at to decline fleet long-term is very backdrop particular, book strong several order significantly investments In dry demand. after market, supply opportunistically are sentiment capital deployed We market bulk is attractive we also not with. market the over in are able familiar fundamentals We historically identifying positive. in low very bulk growth dry the as Short-term of we a weakness a against rebounding the projected at believe the is to and and

a New Exchange Shipping, acquired Danaos Eagle listed reported, bulk previously company. dry been has York significant As Stock Bulk in a stake

acquired we Capesize in Additionally, bulkers market. secondhand the X

Oaktree in had prices XX% fundamentally nearly corporate at implemented a were Eagle's believe value. of Eagle, company pill basis. a respect our Eagle's Shortly Capital's These the to Board transactions and we XX% shares Eagle which we done investment, premium able practices governance. With poison were net XX% the the of purchase Board, following a repurchased at XX-day Eagle's corporate governance view our to our a perception significant unilaterally asset of stake alter average to company in cost best-in-class premium company's share to by a and discount to our

of We the Board are Eagle. and on concerned with these are taking of clarification developments Directors

management acting shareholders. outside interest to Accordingly, to and we committed all shareholder the to the largest are vested effective constructively may be value shareholder all we working of current we seeing the when well-considered to Bulk's up have methods think the speak of value on that strong company identify Eagle best our and behalf have shareholder, shareholders. duty Board balanced, interest and believe with long-term in Board a we As enhanced a enhance

an ago respect in With the well-timed in hindsight decision again bulk has operator. market a the see which general, significant bulk was market our in and dry We Danaos owner we as in the exited dry experience interest to and opportunity. segment now years

revenue positioned our capital to Given ways to and strength of balance grow we the in our deploy sheet, base earnings. uniquely are various

revenue container are of provide charters, contracted flow multi-year strong cash visibility. which vessels and Our in fleet

to grow to and will for our we vessels we and our do consistently future-proof opportunities will the is pursue goal to shareholders it, our continue to core fleet by generate next-generation so. value best ultimate While adding

our ways. capital As I've opportunistically balance said sheet our various before, healthy to allows us in deploy

our During now to shares. retire the of program program million buyback million buyback more than our spent $XX.X $XXX we million X and have continued quarter,

committed evidenced we by this remain announced returning our to as to shareholders, per dividend capital share $X.XX Finally, morning.

our on and continue and growth our value focused to We consistently of the profitability will for company to shareholders. long-term implement the are ensure creating strategy

for the With quarter. Evangelos? financials back the the will call that, I'll hand through Evangelos, take who over to you

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

million technologies disposals recognition a decrease decarbonization by explore net in quarter expenses, which XXXX to primarily the a rates to by $XX.X quarter $XX.X is in or income $X.X slightly, for X expenses better adjusted and $XX.X XXXX. $X.XX due investment million as in total $XXX.X for loss as during $XXX.X on of our industry. operating incurring EPS This result shares. a operating equity million we of quarters decrease to deleveraging of or net recognized improved the decrease in million been dividend $X.X result no significant increase the applicable of and the revenues of have is of now We quarter in ZIM the in result a of offset sold of CTT adjusted the longer million of is decrease driven of adjusted our the million second all this $X.X EPS balance that have to mainly net the are share mainly share development our operating revenue million of as in and finance million better our improvement partially our $X.X sheet for of Otherwise, revenues XXXX revenues reporting in $X.X adjusted costs shipping fleet, quarter income corresponding $X.XX accounting due compared a million operating million per research and income second per between for that rechartering net adjusted

the cost a of and to Vessel affected quarter as industry. increased continue per X inflationary most in to remained million to expenses million periods quarter in quarter compared that million mainly $X,XXX costs increase of the well the of the pressures compared XXXX $X,XXX repairs to million quarter second operating increased current to quarter the expenses quarter operating $X.X the as by operating in average per the result the increased the vessel for remain our maintenance that current the insurance competitive in to in $XX.X the in day million $XX.X daily in stable day current from due costs second to $X.X premiums. XXXX. second of and G&A $X.X XXXX, as Still, between among

by in as million of cost in of to interest expense $XXX million quarter Interest expense, in decrease a decreased offset of The is XXXX. indebtedness the due to of between excluding million interest the cost the almost million decrease X.X% rates. by by X million rising expense to a partially periods, average by quarter our the compared approximately $X.X $X.X result combined a second result current in $X.X reduction interest increase debt finance an $XX.X the in service amortization, in

fully $X.X million million, through We effectively capitalized interest and interest that have $X million statement interest previously X reduced credit been of almost to of $X.X been to accrued interest in our of quarter. expense the income time, also had relation vessels repaid. same At facilities construction in current under now interest on at came accumulated recognition decrease the our income our in a have positive accrued that expense of due for X/X covering

million been by current XXXX, the the ZIM primarily have quarter million to as that recognized or $XXX.X the Adjusted in from $XX.X due of dividend discussed. EBITDA X.X% in XXXX, decreased quarter the to million $XX.X second in $XXX.X second million of previously quarter

call. outlined EBITDA other already been The have earlier this on drivers

TEU are: well for revenue events additional on were new new our you X,XXX forward few disclosures. investor of additional and $XXX contracted of an XX The subsequent is new in our XX,XXX charters were the container to review of posted X.X our arrangement but fixed X revenues million highlights X We vessels A ships for also have contracted we the the X Over that months, for secured past million updated encourage fixtures include vessels of years. fleet. on forward to which as extended TEU presentation website, $XXX as for X-year million notably $XXX charters

XXXX cash improved revenue result, now X.X-year has is up flow $X.X and while coverage a duration, contract contracted a average for our XXXX. for As with XX% charter billion XX% to

book. has presentation disclosure on investor contracted our Our charter analytical

also remaining the prepaid million now no our During and the have for early lease balance $XX.X vessels, lease first we stood that quarter obligations any obligation sheet. the X the longer second at quarter, on at end of we

June XX, high from XXXX, rate of this costs. down As current is In interest debt shields the to environment, position $XXX interest our net million.

vessels are of X.Xx debt-free. XX unencumbered Additionally, debt to stood currently and XX the company's adjusted out EBITDA net at our ratio and

us the $XXX Credit our pursue end Finally, in total, Facility, giving of $XXX opportunities. was availability including accretive of at million, million second to stood quarter, deployment liquidity, the while as total flexibility under capital ample Revolving cash

for that, With to call like first we to of our to open thank are to call. now this would Operator, the listening ready you I part Q&A.

of question session. We'll be Omar First Instructions] from now will begin question-and-answer [Operator the Nokta Jefferies.

John guys have active here and very been Evangelos, recently. you

You've added backlog. some

Eagle bought Eagle -- stock, You've back the X or bought acquired and Capes. into ordered container the X ships, bought and

to Just capital? to year? you if perhaps -- just maybe it, here to of wanted more outlook earlier start ask what's the So to had aggressively, give deploying relative kind the changed this if could confidence you restrained you frame

see, a going fuels who to part the be Well, committed are to terms as few going get as allocation, and believes where usual I've capital for say, be we IMO it's and -- within to capital will it but the for our into interesting said, anyone And able environment going are really longevity there a new green basic of that business we also is let's in of shipping today a greener we ships years. be utilize of as requirement the investing is strategy for deploying said, next company. And the that the definitely surprise is doesn't that in be can to returns.

we to definitely need part. invest in So that

as well. future, income we our the market, of market bulk good. in as in this look we And investment can our Secondly, that through source said, terms the we've enlarge dry fundamentals in already believe of

to John. bulk. ask, obviously, want dry And yes, just on I did

You XX past almost exclusively. years or maybe spent the so

got a As dry you company, exposure now container classes. in gives ship to stake bulk the you've mid-sized Eagle, the

on the hand. X Capes You've now got

has leg had containers, is is is Or X sentiment forward, earnings You X story, where dry that's bulk. -- a coming Is really sentiment that's from in mentioned -- become piece bulk? think opportunistic -- cycle this a two-pronged to investment we at about leg Danaos dry this dry when this more of it of bulk? in going bigger point an the given having

if is capital. And definitely we where Well, because mean, X is to bulk there secret. has to will we're bulk as exactly bulk I prices. the deploy It's order dry the in how we say we really experience, dry whatever we market at will we going not we I there there are so to interest able going that But our said, to yes, if attractive market, income, price at dry invest go just an in cannot are be in diversify deploy our cautious are in grow. opportunities, capital

You -- in to have buy cheaply. make to you order money,

If buy the at you investment. will of you very market, your the top cover rarely

and And Capes maybe true. charter, just do intend final out and line? to whatnot? you're That's or them potential the other the these it then just assets one of it in starting trading that's TC question. charter, then down perhaps Danaos maybe these trading FFAs the X bulk, the do intend is on terms of then and sort operate the the market? out is, How dry to [ph]? and then whether you put on vessels you you to how TCN Yes, to simply out try one, own Or where -- you But X platform the spot put commercially? Is hedging envision do them build and on a deploy acquisitions spot

yes, physical Well, have we speculate first not This of FFA X the and we necessarily, to use will ability say, the do the hedge paper do. to as market, we market. you we both the depends something is feel let's in-house. It require well. if that has on If everything to want in to all,

will but So ourselves going operating to and goes. a by what it's will see of strategy the how vessels we're start spot market question it have we in these we

be opportunistic. is, small compared a scale I And we of to the we mean, the year, full million first are this the very on containership dominant which So to the business, for of are small have may plus a fleet point, right? is it's of EBITDA half this right dominant we part versus -- course, of ingredient. and business are to small contribution to the the continue obviously business. if the still, returns going rates add, months million going now to your maximize, And will value to again, the is -- where bulk the EBITDA $XXX for containers first investment I is but a will track to continue seek for be containers $XXX dry X Omar, be bulk dry that small. -- in of the is this be small, will

Understood.

will of next question be [Operator Wetherbee Instructions] Our from Chris Citigroup.

of to on see Eagle the are now. wanted touch and your what sort I investment thoughts

So what from be would with forward your intention Eagle going here?

say, there Well, Chris, so for sizable us, we were blocked, interested in were investment. nothing really. building, a is let's We

say, for, and can couple challenging which we'll the actual of see from waiting are going We are at it next actions be least let's to operations next management's in very about do the there. what to take they quarters,

the you would so -- equity the is add you to Okay. static? Are ability your add Or to Or you position? do position to equity the have position?

poison add we already Well, level. cannot above we XX% the because are pill

add. cannot we So

would then, certainly effectively? guess on investing Or bulk container? counter Or it in still to a your incremental to think go thoughts there the incremental Is And most sense bulk? and capital you opportunities of opportunities that is dry interesting? where be are it avenues? about of is certainly potentially Is appreciate Want I could where here? think in on understand sense I other dollar dry there side from container cyclicality helpful. makes us. that. it how for should get you deployed That's that that of be -- Okay. I the terms

the possibly need believe the have but at see about any we that also. There tonnage interesting X use X, deliveries the and opportunities -- to I reason market. modern container look container X not we we the these that's the those But all in do in will We very future ships years. are and at only placed ships look for additional and in opportunities next

Okay.

dry then bulk dollar the be where would place would So incremental the go?

said, is the sorry, to just as very going to dry so market build that, not only the being, For yes. ahead. we're thing Yes, I we are to The up bulk, go cost, volume. time change sensitive

ahead. No, please Go continue.

you. Thank Okay.

right. All

at time. further We this have questions no

turn closing further like the I'd back for remarks. Now, to over Dr. any or comments to Coustas call

story. conference next call. all interest hosting Thank this Thank our in for on Okay. to call earnings our you joining Look potential your you forward and you.

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