Q2 2020 Danaos Corp Earnings Call
Welcome to the Denials Corporation conference call to discuss the financial results for the three months ended June Thirtyth 2020.
A reminder, today's call is being recorded hosting the call today, It's Dr. John Coustas Chief Executive Board served in ALS Corporation. It mystery bungalows, Hotseat, Chief Financial Officer, Bananas Corporation, Dr. Coustas, Mr. Razzies, we'll be making some introductory comments and then we will open the call to question and answers.
Sure. That's Razzies. Please go ahead.
Thank you operator, and good morning, everyone.
Before we begin like we do you want to remind everyone.
It's been remarks. This morning may contain certain forward looking statements.
Actual results could differ materially from both objective the big.
These forward looking statements were made that yesterday and we undertake no obligation to update.
Factors that might affect future is part of its cost in our claims with the FCC and when can we didn't you because they they trade cardboard and risk factor skill.
Please also note that we feel really conveniently, Turkey, Nongaap financial measures success <unk> dot.
Okay, EBITDA and adjusted net income.
Finally, our business.
I think what's really Asia, <unk> non-GAAP financial measures to GAAP financial measure I didn't feel to get out earnings release and become a nine month period.
Now, let me turn the call over to Dr. of course, that's where we provide the broad overview.
Yes.
I feel like they're not.
Good morning, and thank you all for joining todays call because it's got all the jobs for the second quarter. Thank you couldn't be.
We're pleased to report.
Earnings for both the second quarter of Twentytwenty and the first six months of the year.
The company adjusted net income for what happens when you have for the second quarter of trade between peak.
Greetings by 8.2 billion or <unk> between 9% again compared to adjusted net income Oh spoke before going through media for the second quarter two train to 90.
Adjusted EBITDA old show increased by 4 million.
Or subscription to 80.1 million kind of second quarter. Thank you can do.
Yeah for 75.6 million.
For the second quarter of 29.
Oh, no economic activity has been a Jewish sort of started going up I was a bit me.
We have seen great insight you talked about why your company.
As a number of black <unk> veatch, they get lined up my gradually crude.
[laughter] occupants late <unk>, it's because that's what it's great.
Hmm.
Which has only gotten bilateral themselves.
But he.
Also being out of drew.
Since we didn't anticipate.
[laughter] modern luxury back the crisis importing into it right.
More than compensated for the drop in volumes caused by the I'm done.
Yes of course.
About liberty to a box.
The order book is constantly trying to be good typically standards. If it would come through the first time is going to deal.
Combined.
The reduction.
You could get better supply demand go initiatives the supply side outlook yourself.
I could supply has actually been probably wouldn't have complained that mark.
We computed good [laughter], yeah, when somebody gets the more capital activity.
Well I talk to have a good part that said it doesn't look like.
62% could trend could occur late there over the next month.
They could buy to let them be could be Mcguire capsulate Jordan it's good.
By now we have concluded or Clobbering selective investments and took the lead during the great positive back during the second quarter.
Finally, we have absolutely <unk> and 1.2 billion talking about look which provides us flexibility to go by the Dod business and yeah, the growth opportunities that they present themselves.
You don't continued uncertainty about the duration of the core nobody's from Devon and be uncertain economic recovery.
We are focused on maintaining a conservative you find that will provide you make more helpful capital allocation decisions I.
I lied to be called strategy market expectations.
We also remain could make a great exhausted technological income, which allows us to can you deliver high flying so watch them.
Our could make market maybe they have you know leadership position in a container shipping industry.
Well, Bobby good market cycle during the current problems in Florida.
We can lead to our strategy will ultimately enhance shareholder value falling in love me why did walk.
We've got the cold box well because I didn't know what they are not good for the core why you're not.
Thank you John and good morning, again, sorry, I would agree to review the results for the quarter and then give it a cold starts.
Fortunately lots of questions.
Adjusted net income of 42, and a couple million for the current quarter, It's hot here by 8.2 million.
Compared to adjusted net income of 34.3 million for the second quarter. Thank you might be.
We have adjusted dollars net income this quarter report before finance fees amortization.
Hey.
This increase between the two quarters is the result, Oh, Hey, Florida help me on increasing operating revenue.
At 5.8 billion decreased net finance expenses.
And a 1.7 million increase in the operating performance all follow our equity investment in Germany night.
Partially offset by 3.8 million increasing bolt on operating expenses.
More specifically operating revenues increased.
Hi, Florida helped mitigate like other than 16 point, they maybe getting the current quarter compared to what how does anybody like 3 million in the second quarter frankly 19.
This increase is that you did were 13.2, mainly an increase in revenues. Other examples contractual step ups in shot at that age following the installation of star burst and the additional fees that's pretty sloppy.
Oh, certainly upset by 3.4 million decrease in revenue.
It didn't already chartering and fleet utilization given the so chocolate market conditions, and 5.3 million between revenue due to lower non cash revenue recognition U.S. GAAP accounting.
That's an operating expenses increased by 1.3 million to 28.6 billion either cotton quarter from 57.3 million during the second quarter could have spent the last thing and that was resolved or increasing the average number of that could have seen awfully.
While at the same time the average daily that's an operating costs decreased to 5000, each other how does that make the $7 per day for the current quarter from $5884 per day in the second quarter affect the 19th and remains I was one of the most competitive in the industry.
Gionee expenses decreased <unk> million to six maybe getting the caught in the quarter compared to six under house Bill here in the second quarter I don't think 19, mainly due to a degree noncash recognition of stock based compensation.
Interest expense, excluding final school somewhat these days from Evercore.
Decreased by 5.1 million to 9.8 million into kind of quarter compared to 14.9 billion in the second quarter, though.
The 19.
[laughter], where 95.8, maybe he'll be crazy now I've, that's even better and.
The reduction of U.S. dollar libel by accounted for 55 basis points between the periods.
Finally, adjusted EBITDA increased by 6% or Florida, <unk> billion to 80.1 million into kind of order from seven to 5.6 million into second quarter plays the 19 for that he's ever talk line earlier on this call.
I would like to thank you for listening to this first bicuar call. Operator, we're now ready to open the call excuse me.
Thank you we will now begin the question answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If you're using a speakerphone please pick up your handset before person the keys to withdraw your question. Please press Star then to at this time, we will pause momentarily to assemble our roster.
[laughter].
Our first question comes from Randy Gibbons with Jefferies LLC. Please go ahead.
Oh, the gentleman how's it going.
I don't.
Hey, Yeah, first and foremost obviously, great to see the new 1 million dollar <unk> purchase authorization.
Other than some clinical evaluation pretty cheap here, although I've kind of advocated for dividends I'm sure sure repurchases at these levels certainly make the most subs. So with that said no authorization is one flow instrumentation is another so based on the comp.
<unk> volumes, they would probably take awhile to repurchase $10 million smoking Apptio site, but do you expect to do a tender offer or a privately negotiated on blotching he'll bring a threeq you.
[laughter] yeah right.
No. It's not we don't really have anything specific what we wanted is profitability. After the war two to four wise.
Ah didn't share purchase is one way or.
Oh.
[noise] allocation of capital.
And.
[laughter] or you know it will.
We won't have any [laughter], let's say kind of targets, we just want good or two heads.
Let's see these tools in place.
And now we will use it.
Depending on circumstances.
True.
Got it okay. So no no specific plan now just the.
The opportunity I guess gives you the Oxford core.
Yeah exactly.
All right and then no it doesn't deliveries of the you know the final 2500 vessels. How do you do your fleet currently right through the sale of maybe smaller on chartered vessels possible acquisitions are you pretty concurrent with your fleet as it stands today.
[laughter], but if there are a kind of.
Oh opportunities as we said.
We have HM.
<unk> and a good.
Cash flow.
We have not living [laughter], especially in the larger vessels or.
That we are looking for.
In interest couldn't opportunities and collapse prices or anything like that.
As I said, because it probably being I think we'd have a very good sleep and.
We will concentrate.
Hmm.
Oh.
The vessels and could be a bit too.
Actually true even longer term commitments. So that's.
We use the visibility of our cash flows.
So then itself.
Just two more quick questions for the card or a charter rates rights to the Containerships. Obviously, it's been a have a second quarter. However in recent weeks the rates have been caught them. So that's been encouraging now what kind of rates you booking for some of the intermediate vessels or.
I'm going no during the call it the smart charters.
[laughter].
Well.
First of all I can if I can give you hasn't changed.
Oh, the housing baby Panamaxes fix yet.
I mean these vessels couldn't pandemic.
Yeah, that's something like maybe.
$15000 should be.
Uh Huh dropped.
Down to something like seven.
And now they're back up to whatever 10 and a half.
Well show no I mean, that's.
Yes, we are on that kind of.
Yeah.
And that's for like the 35 to 4500.
Yeah, Yeah yeah.
Okay.
Right. So we're definitely right off the names.
Right right that's a good.
And then I guess my question you know how is the concept business <unk> holding up my <unk> Muslim.
This is 85% then your present group of 95% of 2020 is pretty much themselves.
Carters still.
No im born in terms of payments and everything we've seen some of your peers do some kind of production and extensions of charters, but how do you care about your counterparties in your current kind of charter backlog here.
But first of all there are.
Some.
Well there has been no.
Yes for how twice reductions.
Are there were some discussions.
About.
Let's see extensions or what's the kind of a small discount.
Some companies have been maybe reported that they have done similar beams.
No we are making it could make sense, you know to get rich mold discounted extend a.
We will try to a couple of years. This is part of our strategy into ensuring the true visibility.
But the good thing.
Is that all our customers are in very good financial shape.
You can see one after the absolutely.
Mm Hmm excuse me our Uh huh.
Actually publishing show was much stronger.
[noise] done then whatever they had a.
That you could or beginning of year, even we've got dependent.
Sure sure.
Okay Oh.
But you know certainly advocate for those share repurchases or if and when you can I'm, obviously the shares or [noise].
Getting very cheaply here $10 million is not a huge several class.
So it's hard to backlog so.
Good quarter and you get up thank you.
Thank you. Thank you very much right.
As a reminder, if you would like to ask your question. Please press Star then one.
Our next question comes from Chris Wetherbee with Citi. Please go ahead.
Okay. Thanks, good morning, guys.
I can't give you specific question about the quarter.
Well I sort of how opex trends related to you know related to pandemic I think we've heard.
Operational challenges as a result or changes and other things on of course, the quarter was there any cost that you guys incurred that you could specifically call out so we get a clean run rate from an opex perspective going forward.
There are not including any.
Any specific cost I mean.
What is happening.
Of course is that we are amenable to change cruise. This of course has a positive Ah yes.
Cheap parts of that we Benton Cook travel expenses and the other ahead.
For <unk> crude that we are monitoring to change.
All the associated costs.
Hi, yes.
Ah well not talking about mix, it's huge numbers, but for sure.
Uh huh.
Hi, Bob Hope what was budgeted.
Small do you know all these costs are not really I mean financially make with great situation.
Yeah, what is really much more important harassers to ensure.
Yeah, we manage property oldest approaches and or the people that do we have them all.
In the problem [laughter] couldn't do seem to be able to continue that Judy.
Okay, that's helpful and.
And then when you think about your.
We think about sort of the.
Ladies that are out there I can you give us is there anything more that needs to be done either for refinancing perspective, you have kind of the portfolio on that side of the house relatively sort of fixed where you want it to be I, just want to get a sense about where you are that process.
Oh it.
Well.
There are always yeah.
We are always looking at.
Opportunities to.
And it's safe to change our debt structure because it becker.
We do not have of course any pressure I mean are.
Our debt matures and 2023 shouldn't get plenty of time ahead.
But.
There are are they trade going to be put it shouldn't be too.
Oh I've ever use.
The cost of or could be a b.
Or change the profile or anything like that we're always looking up a book should like but.
You know as I've said.
This is truly on they'll put too much that being said binge no big Oh.
We are very fortunate not to have in ER the need of in June or I'm trying to okay.
Okay. Okay, that's helpful and.
And I guess, maybe my last question is a bit more sort of conceptual when you think about the liner industry and the incremental consolidation that we've seen over the course the last few years.
To the point, where there seems to be a bit more disciplined from the big big players and.
Like sailing.
The.
Has become more of a hallmark RV industry.
The capacity provider how do you think the next couple of years play out in that respect would you still expect to see sort of the historical split between chartered in capacity and liner own capacity to hold do you think that there could be potentially any changes to that weather in favor of liner capacity or chartering capacity.
Yeah.
I screwed up the split.
We'll have to do a lot to.
The.
I believe piece of the liner companies to themselves to finance the new buildings the true yes.
I didn't hear as I've said before.
Oh, our business model.
Yes.
I think it's still the lungs chair.
[noise] deals just competing there we're trying to the companies.
And and.
In this respect.
Liner companies give approach these trends Mr. Bush.
To do.
Most of their new buildings.
Lobbies and we like to watch all show because they don't have any more of the benefits of voluntary financing.
When we knew accounting rooms.
Came into existence.
Okay.
Okay.
Well. Thank you very much for the time I appreciate it.
Thank you.
Our next question comes from Korean X away with Glacier pass partners. Please go ahead.
Hi, great job on the corridor.
Great to see the year over year, increasing EBITDA. Thanks for taking my questions I'd to first I was hoping to talk about economics at the recent vote, which was purchased the Charleston, and maybe some color on the purchase price in charter strategy and how you're thinking about the Unlevered and Levered returns for this investment.
[noise] well.
The market I mean, we had made a baby late in the short term chocolate sort of the ship.
Ah because of the older coal who are.
Ah you choose to be a big isn't shipped needs to go into dry bulk buys so bill.
And we believe that Uh huh.
The market these are really picking up.
And we're going to sit coupon.
Yes, it shouldn't love.
We had or the other systems that we took delivery.
Okay keep an eye on that <unk>.
I wanted to follow the Randy's question.
Oh, sorry or are we I mean, you cut you off.
Then okay.
Look I think I just wanted to follow up the Randy's question earlier at the started the year. The company had an objective of paying a dividend.
And I think you know he had recommended 80 cents.
<unk> per year, obviously covert had the company put on hold which made a lot of sense.
So now the markets are covering.
So I think you know the share repurchase is a nice move and I hear the need to be opportunistic with it.
But I think what shareholders would like to here I'm curious, where your thoughts or it is you know going back to that commitment to return capital to shareholders whether to.
A buyback or dividend. So that's how you guys are thinking about it you know is it.
Yeah, we have this opportunistic buyback, but to the extent opportunity not as is not available.
Shareholders expect that capital the returned to be a dividend.
Yeah, just some color on the overall thought process would be really helpful. Thank you.
Yeah, but as you said it dividend <unk>.
<unk>.
In a culture mistakes and amendment that should be paying a dividend.
And you have a dividend stock would you.
Turning to businesses that you would be able to <unk>.
Oh, we are not to do even a student.
Mhm.
Let's say strange circumstances.
What is happening.
On integrating <unk> well the corner.
Has no precedent.
So we cannot commit.
Into these kind of or long term initiatives like <unk> I'm not at this moment.
Let's see many companies.
Yeah, I'm shooting beauty bankruptcy companions, how did you ever bins.
Or reducing them or some of them keeping them.
No one in children and the other had.
Yeah, there may be also an equal to the share veterans.
Two we have Oscar the board to add.
That kind of tool.
In ER.
Okay. All the management initiatives that you know, maybe we may have to enhance shareholder value.
Thanks, a you know that makes sense it is a pretty uncertain rose.
I guess, it's just kind of well continue to follow and see when.
There's enough of market recovery to have that confidence thanks for walking me through that.
Yeah.
Again, if you would like to ask a question. Please press Star then one.
[noise] [noise]. It appears we have no further questions at this time I would like to turn the call back over Dr. Coustas for any closing remarks.
Thank you also during this conference call and they'll come to interest now story look forward to of course. The you know next in school and a nice day.
Thank you. This concludes todays teleconference, we'd like to thank everyone for their partition participation have a wonderful afternoon.
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