Q1 2020 Earnings Call
Welcome to the Dallas Corporation Conference call to discuss the financial results for the three months ended March 31st Twentytwenty.
As a reminder, today's conference is being recorded.
Hosting the call today or Dr., John <unk>, Chief Executive Officer.
Corporation and Mr is that Hotseat, Chief financial Officer of denounced Corporation.
Dr. Coustas, Mr hobbies, we'll be making.
Some introductory comments then we will open up the call for question and answer session. Mr. Hobbies. Please proceed.
Thank you operator, and good morning, everyone and thanks for joining us today.
Before we begin.
Hi, everyone.
My husband's remarks. This morning may contain certain forward looking statements and the actual results could differ materially from those projected to be.
These forward looking statements are maintains off today.
There's no obligation to update.
[music] affect future results are discussed in our filings with the FCC <unk> how to do so what have you heard me, Dave Safe Harbor in risk factor scholarships.
No that's where we feel appropriate so we'll continue to refer to non-GAAP measures.
Sure So does EBITDA adjusted EBITDA and adjusted.
[music] whereby they thought.
Negotiation, so no GAAP financial measures to GAAP financial measures.
Any no earnings release.
Hi, My period.
[music] now, let's start the call over to talk to of course, that's will provide the broad overview I'll support there.
Thank you bye.
Good morning, Thank you all for joining state.
This call to discuss our results for the first quarter was 23.
[music].
For the first quarter, a funny when we're not backed by the cold side.
[music], except for these creep higher dates.
Related Leahy scrubber installations tried you shipped yet.
[music] companies adjusted net income of 33.3 me here for the first quarter a pretty quick.
Increased by 5.3 meals, let compared to first quarter of 29.
Adjusted EBITDA for the first quarter of when do you wish everyone website.
[music] 5.6 billion lower when compared to first quarter of <unk>.
Yes, we see a dramatically disruptive.
[music].
We'll have it very negative effects will be slightly calculation.
[music].
Actually starting to get first becomes allow economic interests.
Speed of any potential recovery long term.
Thank you bye bye.
[music] factoring supply chain so clear.
There were certainly optimistic about 40.
Sweeping Scarlett very tricky.
Take a global squarely cautious section.
Liner companies have addressed the proppant volumes brought on by the.
Right absolutely savings idling capacity.
As a result.
<unk> charter rates have dropped like three great 540%.
Sites.
Despite lower Transportations Matt.
Capacity management reduce bunker prices and falling interest rates actually be alleviate pressures on the cash flow.
Our liner company Castle.
[music], we have recently seen so very tricky spike governments Europe, it's easier to support the liner industry. During this difficult period, which is a very encouraging sign.
Okay, Sony phase to which that the current market turbulence.
Then we are successfully why don't you talked a results I'll find out lower charter rates, but still a trade swell up operational breakeven levels.
And notwithstanding the pressure what are the charter market.
Well they trade.
Therefore, <unk> Jude our high charter coverage.
6% traps what courageous revenue.
66% Trust great data over the next 12 months.
These provide [laughter] leaseco, our cash flow during this period.
Also we will not have any additional if I'm not sure.
Our upgrades revenues related to scrap personally.
Finally, we get out liquidity under 1.3 billion chocolate outlook, which provides us flexibility go quite as our business reacts to growth opportunity is a may present themselves.
During the first quarter, we took the liberty about that fly up eight hours you kind of 2016 used container ship building Southgate any early April took delivery of phebe.
8463, you container ship building satisfied.
Consistent with our long standing strategy go, especially having protracted.
Your time charters.
Maybe the incrementals relatively sort of docs.
Hi Stakes.
The strength of our company and our strong relationship to the fact that he is demonstrated by the financing arrangements executed. It makes the fact that.
On May 12, 2020, we concluded the hazard, a 39 million refinancing off the existing sale leaseback transactions for toolbar 15102 vessels.
Significantly lower cost after the previous right Notching arrangement.
This would have resulted in approximately seven at half the year interest cost savings and I still alive space.
Additionally.
Lower restored our life, where interest rates, which are currently lower by 2% when compared to 29.
Further contribute to reducing cash right now its costs.
There's certainly from which it might save approximately 28 earlier.
Your life basis based on 1.4 feet in effect that I wish that because we ended the first quarter Cara like a range.
We have further arranged debt financing for a new vessels through a 24 million greatest ceding tractors, we entered.
To getting called APRU pretty quick.
We remain committed to operational excellence and technological innovation, which allows us to Delever high quality service for our customers are could we fund has enabled us to maintain our leadership position in the containership shipping industry cloud multiple market cycles.
These are the after that will enhance shareholder fight in foreign about providing barbecue well that perhaps.
The call over back to articulate who will take us through the fight out for for the fourth.
Thank you and good morning to everyone and thanks again to all of you for joining US today I will briefly review the results for the quarter and then open the call you anyway.
Adjusted net income of 33.2 million for the first quarter it looks like its Wendy.
Lower by 5.3 million when compared to adjusted net income of 38.6 billion for the first quarter affect the 19th.
We have adjusted net income this quarter for the first finance fees amortization, all 4.2 million [noise].
This decrease between the two quarters is mainly the result, well phase 6.1 million unaudited getting be crazy nobody would be revenues related to scalability stylish I hope high Irrs, which will not be there from the second quarter up would be 20 and onwards.
Excluding these one off effect out adjusted net income for the kind of quarter improved overall by 0.8 million when compared to the first quarter, especially 19th.
More specifically, hoping they the revenues decreased overall by 5.9% were 6.7 million boy, how does that 6.2 million in the kind of course I compare to other than 12.9 million in the first quarter of 29 feet.
Awesome, the 6.1 billion Scarping, if I may show no higher Stevia Ski mentioned. This is also attributed to a Florida half maybe a decrease in revenues or for Panamax vessels have concluded 12. Your thought there was over the last 12 months and we're redeploying that caught at market rates why they were previously deployed that's faster.
That's what level of markets.
And that was partially offset by a 3.9, maybe on increasing operating revenues.
The battery charging for the rest of our fleet contractual taught that Escalations and the addition of my that's life.
Vessel operating expenses marginally increased by 12.1 million who's going to 6 million in that kind of warfare from 25.9 million. During the first quarter was quick like theme as it is out of the increase of the average number of SMC dark meat.
While the average daily vessel operating cost decreased to 5005 other than $22 per day for the kind of quarter down from 5006, how does it start to $6 per day for the first quarter of 2019 and remain so I was one of the most competitive if the industry.
Gee any expenses decreased by 1.1 million to five point they made during the kind of quarter compared to 6.9 million in the first quarter of threat to 19, you to decrease noncash stock based compensation and professional fees.
Interest expense, excluding find those cost him I'm authorization that's accruals.
Decreased by not point 6 million to 12.3 million in the kind of quarter compared to 12.9 million in the first quarter effect to 19.
This improvement is attributed to a 21 other than 12.1 billion decreasing not habit of genes that the best between the two videos and that might not be crazy that service costs.
Finally, adjusted EBITDA decreased by 7.2% or 5.6 million seven to 1.5 million into kind of quarter from seven to seven and a half maybe up in the first quarter effect Tonight being for the resource outlined earlier on this call without I would like to thank you for listening to this first possible.
Our call operator, we're now ready to open the call to do any.
[music].
<unk>.
We will now begin the question answer session Basket question you made press Star then one on your Touchtone phone.
If you are using a speakerphone. Please pick up your handset before pressing the keys. If you wish to withdraw your question. Please press Star then to.
At this time, we will pause for a moment similar roster.
[noise]. Our first question today will come from Randy Gibbons with Jefferies. LLC. Please proceed with your question.
Hi, gentlemen has gone.
Hi, Robby Iraqi How're you.
They're doing okay. HM two quick question for for Us first.
No you mentioned that <unk>, 5% to 9% of your business, it's already contracted and that you know the first quarter there wasn't no real impact Oh by the krona virus other than.
I love that going how much scrubber retrofit.
Any impact to talk to and then second quarter third quarter on your currently contracted business you know, we're hearing of some blank selling symptom.
So cargo to what have you heard any customers that core either re negotiate it really quick something of the card or things like that.
[noise] well like I said.
[noise] chapter rates.
That's for the ships that we are reviewing a friendship.
Our.
Nowhere.
The question [laughter] science from what they were before.
Uh huh so.
Yeah, we do not really no.
How long this is a.
I'm going to last.
But practically for older ships that are opening date.
Oh, we haven't.
The range of something like between 5%.
No there Charles sometimes less.
It's a kind of another.
[noise] you know going forward.
As I said, we have a lot of.
All of our larger vessels are.
So long term charters.
You know is good because obviously the smaller vessels.
Our easier to deploying.
This kind of violence.
[noise] ER.
[noise], we're definitely going to see and in fact.
Our.
Revenues from scrubbers older chocolate.
Now, let's say mainly.
It would be the second quarter, but more pronounced there's a lot of there.
However, as I said.
If we look but our overall.
Fourth of July.
I mean, the savings stuff, we are having Ralph how are fine I'm shelter.
Exercise, which versus Uh huh.
[noise] using the refinancing.
We have done and the nowhere.
Like war.
Cost.
For the time being.
These ones are offsetting.
In say the decline that we have seen whatever chart.
And rallied to go out to John's comments.
So your question contracted revenue.
He's there we have we haven't been asked to amend contracts or anything else and we expect them to hold up.
For Q4 this year for Twentytwenty.
90% contract coverage.
And actually.
On the back of that.
And on the back off very conservative assumptions on that he taught settings.
Exactly because we have contractual step ups in charter rates, we actually I anticipate that robot anything revenues to be higher.
And what they were Inflecting 19 overall.
Sure Fisher, the scrubbers and few others okay.
And what about the you mentioned a little bit Danbury ordering I guess two questions around that.
It had some vessel Rx fired every Carter, let's call it and Mark you know how did the pricing go for those mentioned there was lower you know how much lower than what are your maybe you know updated expectations for kind of at the back half a year for those charters that are.
ER repriced.
Well as I said.
I think there are some ships.
You know depending on the science.
Let's say for example, you.
You know that.
Exceeds.
It's a baby panamaxes.
Which were.
Product or something like Uh huh.
Right.
And last year in the region made here Uh huh.
14000.
Now they are down to for itself into around nine.
Yes, okay.
So thats all.
More or less the rate I mean [noise].
Auto ships, okay, the three and half stuff wearing our out and they are going out a chain names to working on their behalf. So.
You know that's why we're talking you know depending on the shift the specs et cetera.
I would have a blank figure of 25%.
Okay.
I don't have you seen any kind of one more market question have you seen arnie.
Well no positive flows coming out of China itself, you, starting their economy or maybe a little more incremental demand as some European nations. Some cities shields us start opening back up.
It's too early to tell or have you seen a little bit.
Increased activity in the last call it month.
Well hear that.
Let's see bookings to Europe and they Wes.
Right.
Let's see picking up.
Uh huh.
I I.
I don't want to.
Let's see.
To make a kind of a guess into how much.
[laughter], but.
To be honest I don't expect.
Well, it's got the third quarter.
We'll see it kind of a food cost.
<unk>.
For the time being.
Like sailings drop.
The liner companies not extend.
Because a similar quarter.
But.
And although I don't expect that.
All that.
I see.
For the second quarter will be reinstated for this area.
I'm pretty sure to that.
What we're talking about let's say, 25% of capacity has been withdrawn from change in Europe I recently trade.
Don't expect all that.
To go back a quarter of a shotgun.
Third quarter so.
It wouldn't be a more kind of a staged approach.
All depend so what tie it we're going to have for U shaped recovery or whatever.
Ah ha.
Yes, let cookie alphaville [laughter], well defined being absolutes the cost a plausible scenario I think the good thing about our customers is that.
They have mileage through.
Capacity withdrawal G box rates.
The same or even stronger levels.
During these pandemic, even information that we have for that.
The contract negotiations will happen.
Now we may.
[music].
The U.S.
I have been pretty strong.
Rates.
ER, which really shows that Ah.
They are a book.
Controlled meat or they are gay.
Because the past the biggest problem.
Okay.
What we had its not easy.
I was also.
The kind of a catalyst troughing form eight box rates like what happened for example, the later.
2016.
Let's talk for the well sell call.
Hi, Jane.
[noise] <unk>.
All right and then two more quick question for your scrubbers.
How many are left to go and when do you think does well be completed by.
Yeah, there are a three or.
To go which.
Hopefully within the next 30 days or would it be on the complete.
And.
Any case for these specific installations actually if we don't have engaged with the agreements. We have we don't have any more higher so practically.
ER orders drain.
<unk> Pro pro gay Transcriber consistently SBQ stopped.
Got it okay.
Hi, none of that last question for me you know like you mentioned immature financial savings from the refinancing the lower life or call.
Still pretty comfortable around your your charters any timing or updates on his first dividend payment.
[noise], it's not you know.
Whatever is happening with the uncertainty.
I mean, we have companies actually.
[laughter] dropping.
[noise] canceling BB guns.
Yeah.
Yes.
[noise] once she could not have.
We're ready reinstated the dividend.
I think it's not credence to start doing it now if we already had any place you know we were discussing about keeping it it's a different story.
That's where we are.
I think it's much more prudent.
She where we're going in the future Indeed any case the five year remains for the company.
[noise], Okay is there any kind of.
Financial.
Metric for that right now.
Net debt to EBITDA or.
Just a net debt to cap something or is it just so they kind of market stability.
I think yes, it has to do more with market stability.
Asked a.
To see and in over lower.
For four months old so he knows the stock.
Got it okay.
Right. Thank you for the time I know there's lot of questions, but thanks again.
[noise] as a reminder, if you wish to ask your question. Please press Star then one.
Our next question will come from Chris Wetherbee with Citi. Please proceed with your question.
Hey, Thanks for taking my question.
Maybe.
Maybe just wanted to follow up on on sort of that last point about leverage and get a sense of.
What do you think you could do I know you have 300 million I think is the minimum debt.
Your next.
What do you see.
Sure so that leverage number by year end this year and maybe as we look out a little bit further into 2021 understanding that there's pressure on the fundamentals of the business right now, but just want to get a sense where we.
Yes.
[noise], Yeah, if I.
Hey.
Uh huh.
This question I think we have.
Our corporate presentation.
[noise] sure.
[noise] gas we're talking about.
Thank you might be unexpected pulling for here.
I will go for it did he talked about how does that six the media.
Okay and.
This is both contract you allow more and the at least when a lot more thought there's gonna come through.
Excess cash flow.
So.
That's the number for this year.
As we project that day.
21 is around is around the same number or is it 300 million cumulatively for.
2020 2021.
Might be one is a higher number.
On 160 minutes closer to 170 175.
Well they contracted out multistate hundreds and then.
Anticipating nominees at least close friends with any other than 50.
But.
Yes, maybe on B bench on cash flow generation on alternative capital, if we make investments as far as well.
For a dividend or whatever it is.
Okay.
That's helpful.
And then.
Jumping around a little bit or do we anticipate any impact from a shipyard perspective from covert 19 to spill over into the second quarter in terms of off hire days should we see anything that that kind of.
Cascade.
You are is that all at once you.
Oh, Okay, we've taken ownership in Q1.
I think was mentioned earlier, we have three more ships that that cultural things I bet installations within the next few weeks and for these but things are ships.
Let me get off hire as part of the agreement chalk that up so.
What you saw this quarter, which was a six maybe on a dollar hit on I felt like.
Because of these off hires.
This is a nonrecurring item if you wait he's not going to be there in Q2.
Okay. Okay. That's helpful. And then just one quick point.
You have one I think additional vessel coming and then into Q can you talk a little bit just just confirm when in the second quarter, you expect to take delivery and then what the employment looks like for that vessel.
Yes.
The vessel is going to commence this talk there.
What do we've actually taken delivery of the ship, it's now undergoing a dry docks.
CMNC start there.
Second half abate.
But the second the May I think.
So that's so its contribution is going to be for basically half of the quarter.
Uh huh.
Yeah.
Yeah any color on what what how we should be thinking about the the.
Turner their duration.
Well they should have some $6 million will be dock.
I do a license so it's a lot of media for the quarter, so like half of workers comp about.
Okay.
<unk>.
Great. That's very helpful. I appreciate the time, thank you very much.
Thanks.
Thank you please.
As a final reminder, if you wish to ask a question. Please press Star then one on your Touchtone phone.
[noise]. It appears we have no further questions at this time I would like to turn the call back over to Dr. Coustas for any further comments or closing remarks.
[laughter]. Thank you everyone for joining this conference call at your opportunity to restart story.
Look forward to mostly on our next.
Thanks, Paul Thank you.
[noise]. Thank you. This concludes today's teleconference. We would like to thank everyone for their participation have a wonderful day you may now disconnect.