Q3 2023 Danaos Corp Earnings Call
Speaker 1: Good day and welcome to the Dinaos Corporation conference call to discuss the financial results for the three months ended September 30th 2023 As a reminder today's call is being recorded Hosting the call today is dr. Dr. John Kustis chief executive officer of Dinaos Corporation And mr. Evangelos Hapsis chief financial officer of Dinaos Corporation
Good day and welcome to they didn't Alex Corporation Conference call to discuss the financial results for the three months ended September 30th 2023.
As a reminder, today's call is being recorded.
The call today is Doctor Doctor, John Kristof, Chief Executive Officer, <unk> Corporation, and Mr. As envelope Heartbeat, Chief Financial Officer, and Alice Corporation Dr.
Speaker 1: Dr. Kustas and Mr. Hussey will be making some introductory comments, and then we will open the call to a question and answer session. Please go ahead.
Dr <unk> and Mr. Heartbeat, we'll be making some introductory comments and then we will open the call to a question and answer session. Please go ahead.
Speaker 2: Thank you, operator, and good morning to everyone. Before we begin, I quickly want to remind everyone that management's remarks this morning may contain certain forward-looking statements and that actual results could differ materially from those projected today.
Thank you operator, and good morning to everyone.
Before we begin I quickly want to remind everyone that my husband's remarks. This morning may contain certain forward looking statements and that actual results could differ materially from those projected today.
Speaker 2: These forward-looking statements are made as of today and we undertake no obligation to update.
These forward looking statements are made as of today and we undertake no obligation to update them.
Speaker 2: Factors that might affect future results are discussed in our filings with the SEC and we encourage you to review these detail safe harbor and risk factor disclosures.
Factors that might affect future results are discussed in our filings with the SEC and we encourage you to review these rebate safe Harbor and risk factor disclosures.
Speaker 2: Please also note that where we feel appropriate, we will continue to refer to non-GAAP financial measures such as EBITDA, adjusted EBITDA and adjusted net income to evaluate our business. Reconciliations of non-GAAP financial measures to GAAP financial measures are included in our earnings release and accompanying materials.
Please also note that where we feel appropriate we will continue to refer to non-GAAP financial measures such as EBITDA adjusted EBITDA and adjusted net income to evaluate our business.
Conciliation of certain non-GAAP financial measures to GAAP financial measures are included in our earnings release and accompanying materials.
Speaker 2: With that, let me now turn the call over to Dr. John Kustas, who will provide the broad overview of the quarter. Thank you.
With that let me now turn the call over to Dr. John <unk>, who will provide the broad overview of the quarter John.
Speaker 3: Thank you, Evangelos. Good morning and thank you all for joining today's call to discuss results for third quarter of 2020.
Thank you Mike Good morning, and thank you all for joining today's call to discuss results for third quarter 2020.
Great.
Speaker 3: The macroeconomic environment continued to deteriorate during the third quarter of 2023.
The macroeconomic environment continued to deteriorate during the third quarter was 20.
Sweet.
Speaker 3: and container transports that may leave the most areas.
And container transports that make the most areas.
Speaker 3: due to continued inventory to stocking and weak retail sales.
Due to continued inventory destocking and weak retail sales.
Speaker 3: As a result, profitability of liner companies has relaxed to decrease and major operators are turning to
As a result.
The ability of liner companies.
Please and major up there right.
Sweeping cost cutting mode.
Speaker 3: The chartering market continued to remain under pressure, particularly in the market for vessels smaller than 3,000 TU, where charter rates returned to pre-pandemic levels.
The chartering market continued to remain under pressure, particularly in the market, which vessels smaller of the 3000 Teu.
Chocolate rates return to pre pandemic levels.
Speaker 3: In larger vessel segments, charter rates have remained relatively stable given the scarcity of open tonnage for next year, a factor that has enabled us to forward fix all our vessels above 10,000 to you on three-year charters at profitable levels that will commence after expiring of existing charter contracts in 2024.
And larger vessels Sigma charter rates simply made related to the stable.
The gossiping open tonnage for next year. The fact, though that has enabled US forward. It takes all of our vessels above 10000.
Three year charter at a profitable level.
We'll commence after expiry of the existing charter contracts and 24.
Speaker 3: As a result, our charter table for 2024 has increased 90%.
As a result, our chocolate tablet for 'twenty 'twenty four is increased 19%.
Speaker 3: Separately, through the database we lead with taking delivery of the third four cape-sized ball-tariels and we have achieved rates well ahead of our expectations.
Separately what was the date of this release was taken Duffy.
For Capesize bulk carriers, and we have a cheap rates well ahead of our expectations. While we do not expect to see sustained upward momentum in charter rates in the near term, we will closely monitor the dry bulk market and opportunistically pursue opportunities to expand our presence in this market.
Speaker 3: While we do not expect to sustain upwards momentum in charcoal rates in the near term, we will closely monitor the dry bulk market and the bottomicity to pursue opportunities to expand our presence in this market.
Speaker 3: The resilience of our business model has been confirmed by the continuation of our solid results despite the significant...
The resilience of our business model has been concerned by the continuation of our solid results.
By the significant fall in the chocolate market.
Speaker 3: Our strategy of delivering has also been effective in world time and we have not been impacted by hiring.
Our strategy of deleveraging is also effective in real time.
And we have not been impacted by higher interest rates.
Speaker 3: Our charted backlog of $2.5 billion in contracted revenue also provides us with significant cash flow visibility and allows us to maintain flexibility in our capital allocation policy.
Our charter backlog was two and a half billions of dollars.
<unk> revenue also provides us with significant cash flow visibility and allows us to maintain flexibility in our capital allocation policy.
Speaker 3: In this regard, we decided to increase our causal dividend to 80 cents per share and also to authorize an additional 100 million dollars.
In this regard we decided to increase our quarterly dividend.
280 cents per share.
Old show to authorize an additional 100 million and share buybacks.
Speaker 3: share buybacks, our initial 100 million authorizations have been almost exhausted.
Our initial 100 million methotrexate almost exhausted.
Speaker 3: Due to the prudent institution of our strategy, we have been able to return over 200 million to our shareholders over the last 18 months and simultaneously grow our fleet in the container segment by placing 10 new building orders and create exposure to the dry bulk segment through investments in companies and investments.
Do you does it put us in execution of our strategy, we have been able to return over 200 million to our shareholders over the last 18 months and she moved Daniel Lee grow our fleet in the container segment by placing 10, new building orders.
Great exposure for the dry bulk segment.
Best mentioned companies and vessels.
Speaker 3: We will strive to continue to create value for all our shareholders, while ensuring the long-term prosperity of Ghana.
We will strive to continue to create value for all our shareholders, while ensuring the long term transparency has been out.
Speaker 2: With that, I'll hand the call back over to Evangelos, who will take you through the finances for the quarter. Evangelos? Thank you, John , and good morning again to everyone. I will briefly review the results for the quarter and then open the call to Q&A.
With that I'll hand, the call back over to the vascular who will take you through the financials for the quarter Wranglers. Thank you John and good morning, again to everyone I.
I will briefly review the results for the quarter and then open the call for Q&A.
Speaker 2: This quarter we are reporting adjusted EPS of $7.26 per share or adjusted net income of $143 million compared to adjusted EPS of $8.71 per share or $176.9 million for the third quarter of 2022.
This quarter, we are reporting adjusted EPS of $7.26 per share or adjusted net income of 43 million compared to adjusted EPS of $8 $71 per share or other than seven to $6 $9 million for the third quarter of 2022.
Speaker 2: This 33.9 million decrease in adjusted net income between the two quarters is primarily the result of the 23.2 million ZIN dividend that had been recognized.
These $33 9 million decrease in adjusted net income between the two quarters is primarily the result of the $23 2 million seems dividend that had been recognized.
Speaker 2: in our income statement during the third quarter of 2022. And it's no longer applicable as we have now sold all of our shares.
In our income statement during the third quarter of 'twenty to 'twenty, two and it is no longer applicable laws. We have now sold all of ours in the.
Shares.
Speaker 2: Otherwise, our adjusted net income was further affected by a $20.8 million drop in operating revenue.
Otherwise our adjusted net income was further affected by a 24 8 million drop in operating revenues.
Speaker 2: mainly due to non-caste revenue recognition accounting.
Mainly due to noncash revenue recognition accounting.
Speaker 2: And that was partially offset by a reduction of $10 million in our net finance expenses, which was driven by the significant deleveraging of our balance sheet.
And that was partially offset by a reduction of $10 million in our net financial expenses, which was driven by the significant deleveraging of our balance sheet.
That's a liberating expenses increased.
Speaker 2: by $300,000 to 39.5 million in the current quarter compared to 39.2 million in the third quarter of 2022 as a result of the increase in the average daily vessel operating cost that increased to $6,500 per vessel per day for the current quarter.
$800000 to 39 5 million in the current quarter compared to $39 2 million in the third quarter of 2022.
As a result of the increase in the average daily vessel operating cost increased to $605000 per vessel per day for the current quarter.
Speaker 2: from $6,173 per day for the corresponding quarter of 2022. And that is related to inflationary pressures that have affected repairs and maintenance costs, as well as increased insurance payments.
<unk> $6173 per day for.
For the corresponding quarter of 'twenty to 'twenty two.
That is related to inflationary pressures that have affected repairs and maintenance costs as well as increasing shouldn't actually means.
Speaker 2: Our operating costs continue, however, to remain among the most competitive in the industry.
Our operating costs continue however to remain amongst the most competitive in the industry.
Speaker 2: GNA expenses decreased slightly to 7.1 million in this quarter compared to 7.2 million in the third quarter of 2023.
G&A expenses decreased slightly to $7 1 million in this quarter compared to $7 2 million in the third quarter of 2023.
Speaker 2: interest expense excluding finance costs amortization.
Interest expense, excluding finance costs and amortization.
Speaker 2: dropped by 9.3 million to 3.8 million in the current quarter compared to 13.1 million in the third quarter of 2022.
Dropped by $9 3 million to three 8 million in the current quarter compared to $13 1 million in the third quarter of 2022.
Speaker 2: The increase, the decrease in interest expense is the combined result of...
The increase the decrease in interest expense is the combined this out off.
Speaker 2: 5.8 million decrease because of a decrease in the average indebtedness.
At $5 8 million decrease because of our because of a decrease in the average indebtedness.
Speaker 2: by 549 million between the two periods, which was partially upset by an increase in the cost of debt service.
By 549 million between the two periods, which was partially offset by an increase in the gossip that service.
Speaker 2: by approximately 2.2% as a result of rising interest.
By approximately two 2%.
As a result of rising interest rates.
Speaker 2: Additionally, we have a three and a half million decrease in interest expense due to capitalized interest on our vessels under construction, which is the ten new buildings we have on order.
Additionally, we had a three and a half million decrease in interest expense.
Due to capitalized interest on our vessels under construction, which is the 10 new buildings, we have on order.
Speaker 2: At the same time, interest income came in at $3.1 million, effectively covering over 80% of our interest expense.
At the same time interest income came in at $3 1 million effectively covering over 80% of our interest expense.
For the quarter.
Speaker 2: adjusted EBITDA decreased by 16.5% or $35.1 million to $178 million in the current quarter from $213.1 million in the third quarter of 2022 primarily as previously discussed due to the $23.2 million ZIM dividend that have been recognized and is no longer applicable.
Adjusted EBITDA decreased by 16.5%.
$35 1 million.
The $78 million in the current quarter from two other than third pinpoint 1 million in the third quarter of 2022.
As previously discussed.
Due to the $23 2 million zim dividend that had been recognized.
It's no longer applicable.
Speaker 2: The other EBITDA drivers have already been outlined earlier on this call. We also encourage you to review our updated investor presentation that is posted on our website as well as subsequent events disclosures.
The other EBITDA diverse have already been outlined earlier on this call. We also encourage you to review our updated investor presentation, but it's posted on our website as well as subsequent events disclosures.
A few of the highlights are the following over the past three months, we have secured.
Speaker 2: are the following. Over the past three months we have secured 178 million of contracted revenue through the arrangement of new charters for six containers between our fleet.
And how does that 78 million of contracted revenues to the arrangement of new charters for six six container ships in our fleet.
Speaker 2: and these new features notably include additional contract revenues of $103 million for 2013,000
And these new features notably include additional contracted revenues over haven't been 3 million four to 13000 Teu vessels and 68 million for 210000 Teu vessels as a result, our contracted revenue backlog.
Speaker 2: 68 million for two 10,000 EU vessels. As a result, our contracted revenue backlog currently stands at $2.5 billion with a 3.2 year average charted duration while contract coverage is now at 100% for 2023 and 90% for 2024.
These stands up two and a half billion.
With a 3.2 here I've had a charter duration while contract coverage is now up 100 per cent for 'twenty, two 'twenty, three and 90% for 2024.
Speaker 2: Our investor presentation has analytical disclosure on our contracted charter book.
Our investor presentation, because analytical disclosure on our contracted charter book.
Speaker 2: As of September 30, 2023, our net debt was down to $180.
As of September 32023, our net debt.
It was down to $111 million.
Speaker 2: In the current interstate environment, this position shields us from high interest costs. Additionally, the company's net debt to adjusted EV die ratio stood at 0.16.
In the current Interstate and vitamins this position shields us from high intercourse. Additionally, the company's net debt.
The adjusted EBITDA ratio stood up North 0.16.
Speaker 2: while 48 out of our 72 vessels are currently unencumbered and death-free.
148 out of our 72 vessels are currently unencumbered and that's free.
Speaker 2: Finally, as of the end of the third quarter, cash was at $306 billion, while total liquidity, including availability under our revolving credit facility, stood at $655 million, giving us ample flexibility to pursue a critical capital deployment opportunity.
Finally as of the end of the third quarter.
Cash was up $306 billion, while total liquidity, including availability under our revolving credit facility.
Up to 255 million, giving us ample flexibility to pursue accretive capital deployment opportunities.
Speaker 2: With that, I would like to thank you for listening to this first part of our call. Operator, we are now ready to open the call to Q&A.
With that I would like to thank you for listening to this first part of our call.
Operator, we are now ready to open the call for Q&A.
Great. Thank you.
Speaker 1: To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then two on your telephone keypad.
To ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two.
Speaker 1: At this time, we will pause momentarily to assemble our...
At this time, we will pause momentarily to assemble our roster.
Speaker 1: Today's first question comes from Omar Nocta with Jefferies. Please go ahead. Thank you. Hi, John . Good afternoon, everyone.
Today's first question comes from Omar <unk> with Jefferies. Please go ahead.
Thank you Hi, John of Angela Good afternoon.
Speaker 4: Nice quarter, definitely some good updates, especially those forward fixtures you just highlighted. And it looks like you guys are feeling quite confident with things.
Nice quarter and definitely some good updates, especially those forward fixtures you just highlighted.
And it looks like you guys are feeling quite confident with things, especially given that you know we've been active with the buyback you just announcing some buyback.
Speaker 4: especially given that you've been active with buyback, you just announced buyback.
Speaker 4: You have the backlog of $2.5 billion, and it sounds like you obviously have quite a bit of flexibility going forward with the low debt you just outlined, Evangelos. In terms of how you see opportunities ahead,
You have the backlog, it's two and a half billion and it sounds like you obviously have quite a bit of flexibility going forward with the with the low that you just outlined evangelists and in terms of how you see opportunities ahead.
Speaker 4: clearly you have the firepower, the muscle to go out and do more. If you so choose, just want to get your sense at the moment that there's a preference as you think about the opportunities that are ahead and what's attractive. Do you think there's more to do in the dry bulk side of things? Is that where you want to deploy more capital on an opportunistic basis? Or do you think there are some opportunities that are starting to showcase themselves in the container market? Thank you.
You know clearly there you have the firepower of the muscle to go out and do more if you. So choose just wanted to get your sense at the moment that there's a preference as you think about the opportunities that are ahead, what's attractive.
Do you think there's more to do in the dry bulk side of things is that where you want to deploy more capital on opportunities opportunistic basis or.
Or do you think there are some opportunities that are starting to showcase themselves and they are in the container market.
Yes, good morning Omar.
Yeah.
Speaker 3: You know, we are, as you said, we have ample firepower, you know, when we identify opportunities to pursue them, and we are actually pursuing them.
You know we are.
You said that we have.
Hum firepower.
You know when what it didn't it fire for truly piece to pursue them and we are.
Actually pursuing.
Speaker 3: opportunities both in the container.
You know opportunity both in the container.
Speaker 3: sector and in the dry bulk. As we already said.
Sector.
And in the dry bulk.
Right bulk as we already said.
Uh huh.
Speaker 3: We have identified their strategy.
We have identify.
It's a strategy that we.
Yeah.
Cape sector that we have.
Speaker 3: the UK sector where we have invested.
Vested.
And Oh.
Speaker 3: also in the smaller sector rather than investment directly in ships we have taken a significant position.
Also in the smaller sector rather than.
Investing directly ships.
We had bought.
I think in a significant position.
And Eagle bulk.
Speaker 3: In terms of the containers.
In terms of the containers.
Yeah.
Speaker 3: We are looking at both further opportunities in the new buildings.
We are.
Looking at our boat several opportunities you're building from.
Speaker 3: and also maybe some opportunities over.
And also maybe some opportunities overall.
Speaker 3: in the motor echo vessels in the second hand front.
More door.
Echo vessels secondhand shrunk.
And.
Speaker 3: We'll take it from there. We are not in a rush. In general we see...
Yeah, we'll take.
Take it from there we are not in a rush.
In general we see.
Speaker 5: a lot of uncertainty going forward and we must be sure
And a lot of uncertainty.
Going forward and we must be sure.
Really that.
Speaker 3: we are at or near the bottom of the market in order to start engaging in the larger scale.
We are at or near the bottom of the market model.
Yeah.
Engaging in the larger scale.
Speaker 4: Yeah, makes sense, John . Thank you. And maybe just a follow up just to that point regarding the opportunities you're looking at. You mentioned the new buildings and the modern eco vessels. I know in the past, especially maybe in this sort of.
Yeah makes sense John Thank you and then maybe just a follow up just to that point regarding the opportunities Youre looking at you mentioned, the new buildings and the modern eco vessels I know in the past, especially maybe in this sort of a period of a downshift from a strong market to a softer one.
Speaker 4: period of downshift from a strong market to a softer one over the past maybe year and a half or so. There hasn't really been much in the or much liquidity in that modern eco side in terms of transactions. Are you seeing that pick up? Is there more activity or is there at least more maybe inquiry ahead versus maybe what we saw six months ago?
The passing of a year and a half or so there hasn't really been much in the or much liquidity and that modern eco side in terms of our transactions are you seeing that pick up is there more activity or is it or at least more than maybe inquiry ahead versus maybe what we saw six months ago.
Speaker 5: Well, we'll start seeing opportunities. Yeah, you know there are companies.
Uh huh.
Well, we'll start seeing opportunities are.
There are companies.
That.
Let's see.
Both vessels.
Speaker 3: and kind of chartered them at companies that have not been let's say long-term players in the market and well now in 2024 they see that the charters are kind of expiring and the environment is not going to be
And.
Kind of a charter them at.
Companies that have not been let's say long term players in the market.
And when now in 2024.
They see that the charterers.
Kind of expiring.
And.
The environmental just not going to be.
Speaker 3: very good for chartering. They are looking
Very good for the child opinion.
Yeah.
They are looking at it.
Speaker 5: to disengage from this sector and there are a number of opportunities floating around.
Two decent gauge from this.
Sector.
And there are a number of.
Singapore.
Floating around.
Speaker 4: Thank you. And one just final one for me, John .
Thank you and one just final one for me John.
Speaker 4: some of the things that we've started to see a bit more of, not a big scale, but is the liners coming to the ship owners and requesting relief perhaps, or maybe just more amendments on the charters.
Some of the things that we've started to see a bit more of not not a not a big scales, but as the U S.
Miners coming to the ship owners and requesting relief, perhaps or maybe just more amendments on the charters and basically the amend and extend approach or are you seeing that coming your way it didn't look too well.
Speaker 4: and basically the amend and extend approach. Are you seeing that coming your way? It didn't look too...
Speaker 4: didn't seem to be any sort of indication of that in your fleet list, but just wanted to get a sense from you. Are you seeing any amends and extends and if so, how do you think that shakes out for denialist in terms of an NPV basis?
Does it seem to be any any sort of indication of that in your fleet list, but just wanted to get a sense from you are you seeing any amend and extend them and if so how do you think that shakes out for first announced in terms of say an NPV basis.
Speaker 3: We have not really seen anything happening. It's very early. The drop has been relatively quick and liner company.
We have not really seen anything happening, it's very early and the drop.
The you know has been relatedly quake and liner companies.
Speaker 3: are still, you know, very kind of cash-rich. So...
Our steel.
You know very kind of that cash reach.
So ER.
Yep I cannot rule out.
Speaker 3: things like that happening in the future. I mean that to a certain extent for companies like us that.
Things like that are happening in the future I mean is that to a certain extent for companies like us that are.
Speaker 5: you know, are practically debt-free, to be able, I mean, all these deals are mandatory.
You know our practical debt free.
To be able I mean, all of these deals.
When did it extend.
Speaker 5: are beneficial because they practically increase our earned visibility for the future while the actual PV is not so important because in any case the cost is going to be priced in it's just many companies may not be able to afford something like that for example to debt obligations
Our beneficial because the practically increase our earnings visibility for the future.
While the actual machine P. D is not so important because in.
In any case is going to be the cost is going to be priced in.
Is just many companies may not be able to afford something like that for example, the debt obligations.
Yeah.
Speaker 4: Makes sense. Thank you, John . That's it for me. I'll turn it over.
Makes sense. Thank you John that's it for me I'll turn it over.
Thank you.
Thank you.
Speaker 1: It appears we have no further questions at this time. I would like to turn the call back over to Dr. Kussa for any further comments or closing remarks.
It appears we have no further questions at this time I would like to turn the call back over to Dr. <unk> for any further comments or closing remarks.
Okay.
Yes. Thank you operator, thank you everyone.
Speaker 3: for listening to our story. We will continue to work towards making Danaos better and more profitable in the future. Thank you.
For listening to our story.
We will continue to work towards.
Making 10 hours better and more profitably in the future. Thank you.
Speaker 1: Thank you. This concludes today's teleconference. We would like to thank everyone for their participation. Have a wonderful afternoon.
Thank you. This concludes today's teleconference, but we'd like to thank everyone for their participation have a wonderful afternoon.
[music].
Speaker 6: The.