Q1 2025 Danaos Corp Earnings Call
Operator: Good day, and welcome to the Danaos Corporation conference call to discuss the financial results for the three months ended March 30th.
Good day and welcome to the <unk> Corporation conference call to discuss the financial results for the three months ended March 31st 2025.
Operator: As a reminder, today's call is Operating the call today is Dr. John Coustas. Chief Executive Officer of Danaos Corporation.
As a reminder, today's call is being recorded.
Speaker Change: Hosting the call today is Dr. John Cousteau's, She find Chief Executive Officer of Denounce Corporation and Mr. As Angelus Heartsease, Chief Financial Officer of <unk> Corporation, doctors, who stuffs and Mr. Heartsease, we'll be making some introductory comments and then we will open the call to question and answer session.
Operator: Mr. Evangelos Chatzis. Dr. Coustas and Mr. Chatzis will be making some introductory and we will open the call to questions.
Yeah.
Okay.
John Coustas: Thank you, Operator. Good morning, everyone, and thank you for joining us. 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. These forward-looking statements are made as of today, and we undertake no obligation to update them.
Thank you operator, good morning, everyone and thank you for joining us.
Speaker Change: 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 Change: These forward looking statements are made as of today and we undertake no obligation to update them.
John Coustas: Factors that might affect future results are discussed in our filings with the SEC and we encourage you to review these detailed safe harbor and risk factor disclosures. Please also note that where we feel appropriate, we will continue to refer to non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income, time charter equivalent revenues and time charter equivalent dollars per day to evaluate our business. Reconciliations of non-GAAP financial measures to GAAP financial measures are included in our earnings release and accompanying materials.
Speaker Change: Factors that might affect future results are discussed in our filings with the SEC and we encourage you to review these detailed safe harbor and risk factor disclosures.
Speaker Change: Please also note that where we feel appropriate we will continue to refer to non-GAAP financial measures such as EBITDA adjusted EBITDA adjusted net income.
Speaker Change: Im charter equivalent revenues in time charter equivalent dollars per day.
Speaker Change: With our business reconciliations of non-GAAP financial measures to GAAP financial measures are included in our earnings release and accompanying materials with that let me now turn the call over to adopt our cost us.
John Coustas: With that, let me now turn the call over to Dr. Coustas, who will provide the broad overview of the quarter. Thank you Evangelos, good morning and thank you all for joining today's call to discuss results for the first quarter of 2025. As the year progresses, the level of global disruption shows no signs of abating. Armed conflicts continue, mostly recently involving India and Pakistan, and the uncertainty of tariffs has led to a dramatic decline in the U.S. Pacific market. Thus far, the U.S. economy remains resilient, and as long as American consumers continue to spend, we anticipate that trade flows will rebound with depleted inventories eventually driving a surge in demand.
Speaker Change: We will provide the broad overview of the quarter.
Speaker Change: Thank you you have annulus good morning, and thank you all for joining today's call to discuss results for the first quarter of 'twenty five.
Speaker Change: As the year progresses, the level of global disruption shows no signs of abating.
Speaker Change: Armed conflicts continue mostly recently involving India, and Pakistan and the uncertainty of Paris has led to a dramatic decline in the U S Pacific market.
Speaker Change: Thus far the U S economy remains resilient.
Speaker Change: And as long as the American consumers continue to spend we.
Speaker Change: We anticipate the trade flows will rebound with depleted inventories eventually driving a surge in demand.
John Coustas: The dry bulk market has recovered from its first quarter lows, although the rebound has been modest. In our view, a meaningful and sustained recovery will be challenging absent further growth initiatives in China. While the much-publicized Simandou project is expected to benefit the cape-sized market by increasing tonne miles... Overall, iron ore consumption is not projected to rise significantly. Our financial performance continues to be strong, although it has been impacted by a number of charter renewals at lower rates than those seen during the COVID pandemic. On the other hand, we continue to build our charter backlog effectively insulating ourselves from near-term market weakness.
Speaker Change: The dry bulk market has recovered from its first quarter lows.
Speaker Change: Although the rebound has been modest.
Speaker Change: In our view, a meaningful and sustained recovery will be challenging absent further growth initiatives in China.
Speaker Change: While the much publicized Simandou project is expected to benefit the Cape size market by increasing ton miles.
Speaker Change: Overall iron ore consumption is not projected to rise significantly.
Speaker Change: Our financial performance continues to be strong although it has been impacted by a number of charter renewals at lower rates than those seen during the Covid pandemic.
Speaker Change: On the other hand, we continue to build our charter backlog effectively insulating ourselves from near term market weakness.
John Coustas: Our charter cabarets for 2025 and 2026 is largely secured.
Speaker Change: Our charter coverage for 2025, and 2026 is largely secured.
John Coustas: A noteworthy recent development is the proposed IMO regulation on greenhouse gas emissions. Unfortunately, the regulation falls short of the industry's more ambitious proposals. and is unlikely to drive meaningful progress on decarbonization of our industry. There is limited incentive to use expensive green fuels and LNG has not been meaningfully prioritized. As a result, there is little clarity on the fuel of the future, and at present, conventional scrubber-fitted vessels remain the default option under what is, in essence, a pay-to-pollute framework.
A noteworthy recent development is a proposed I am more regulation on greenhouse gas emissions.
Speaker Change: Unfortunately, the regulation fall short of the industry's more ambitious proposals.
Speaker Change: It is unlikely to drive meaningful progress on de carbonization of our industry.
Speaker Change: There is limited incentives to use expensive green fuels in LNG has not been meaningfully prioritize.
Speaker Change: As a result, there is little clarity on the fuel of the future and our present conventional scrubber fitted vessels remain the default option and their wood is in essence, a page pollute framework.
John Coustas: We are currently holding off on new vessel investments and are focusing on optimizing the performance of our existing fleet. Our Significant Growth Backload Vessel Order Book includes 15 container vessels scheduled for delivery over the next three years, all backed by solid and profitable charter arrangements that will enhance both our fleet profile and our airings potential. Despite the broader uncertainties, we remain committed to delivering superior returns to our shareholders through disciplined execution and long-term strategic focus.
Speaker Change: We are currently holding off on new vessel investments and are focusing on optimizing the performance of our existing fleet.
Speaker Change: Our significant growth backlog vessel order book includes 15 container vessels scheduled for delivery over the next three years.
Speaker Change: All backed by solid and profitable charter arrangements that will enhance both our fleet profile and our earnings potential.
Speaker Change: Despite the broader uncertainties, we will remain committed to delivering superior returns to our shareholders through disciplined execution and long term strategic focus with that.
Evangelos Chatzis: With that, I'll hand over the call back to Evangelos, who will take you through the finances for the quarter.
Vascular: Had over the call back to the vascular who will take you through the financials for the quarter of Angulus. Thank you John and good morning, again, I will briefly review the results and then open the call to Q&A.
Evangelos Chatzis: Evangelos? Thank you, John, and good morning again. I will briefly review the results and then open the call to Q&A. We are reporting adjusted EPS for the first quarter of 2025 of $6.04 per share, or adjusted net income of $113.4 million, compared to adjusted EPS of $7.15 per share, or adjusted net income of $140 million for the corresponding first quarter of 2024. This $26.6 million decrease in adjusted net income between the two quarters is the result of a $19.8 million increase in total operating costs. mainly due to the increase in the average number of vessels in our fleet.
Speaker Change: We are reporting adjusted EPS for the first quarter of planned it to be five or $6 four per share or adjusted net income of $113 4 million compared to adjusted EPS of $7 15 per share or adjusted net income of $40 million for the corresponding first quarter of 'twenty two.
Vascular: Went before.
Vascular: This $26 6 million decrease in adjusted net income between the two quarters.
Vascular: As all of the $19 8 million increase in total operating costs.
Vascular: Mainly due to the increase in the average number of vessels in our fleet.
Evangelos Chatzis: A $6 million increase in net finance costs and a $0.6 million decrease in dividend income. As analyzed in our earnings release, the increase in our fleet that produced the incremental cost produced a combined $30.1 million of incremental operating revenues that was, however, upset by a $9 million decrease in revenues of our dry bulk segment as a result of a softer spot market. in Q1, a $9.4 million decrease in revenues of our container segment as a result of lower contracted charter rates. A $6.4 million decrease in revenues as a result of lower fleet utilization, mainly due to the increased number of dry dockings between the two periods.
Vascular: 6 million increase in net finance costs, and <unk> 6 million decrease in dividend income.
Vascular: As annualized in our earnings release, the increase in our fleet.
Vascular: That produce the incremental costs produced a combined $30 1 million of incremental operating revenues that was however, offset by a $9 million decrease in revenues of our dry bulk segment.
Vascular: As a result of a softer spot market.
Vascular: In Q1.
Vascular: And $9 4 million decrease in revenues of our container segment as a result of lower contracted charter rates.
Vascular: The $6 4 million decrease in revenues as a result of lower fleet utilization, mainly due to the increased number of dry dockings between the two periods and loss $5 4 million lower noncash.
Evangelos Chatzis: And last, $5.4 million lower non-cash U.S. GAAP revenue recognition income. Vessel operating expenses increased by $8.6 million to $51.7 million in the current quarter from $43.1 million in the first quarter of 2024 as a result of the increase in the average number of vessels in our fleet, while our daily operating costs increased to just above $7,000 per vessel per day for the current quarter compared to $6,500 per vessel per day for the corresponding quarter of 2024. Still, our operating costs continue to remain among the most competitive in the industry. G&A expenses increased by $2 million to $12.2 million in the coming quarter, compared to $10.2 million in the first quarter of 2024, mainly due to higher management fees because of the increase in the average number of vessels in the fleet.
Vascular: U S GAAP revenue recognition income.
Vascular: Vessel operating expenses increased by $8 6 million.
Vascular: <unk> to $51 7 million in the current quarter from $43 1 million in the first quarter of 2024.
Vascular: As a result of the increase in the average number of vessels in our fleet, while our daily operating cost increase.
Vascular: So just above $7000 per vessel per day for the current quarter compared to six.
Vascular: <unk> 6000.
Vascular: $500 per vessel per day for the corresponding quarter of 'twenty 'twenty four.
Vascular: Still our operating costs continue to remain among the most competitive in the industry.
G&A expenses increased by 2 million to $12 2 million in the current quarter compared to 10 point familiar in the first quarter of 2024, mainly due to higher management fees because of the increase in the average number of vessels in the fleet.
Evangelos Chatzis: Interest expense, excluding finance costs amortization, increased by $6.6 million to $9.2 million in the current quarter, compared to $2.6 million in the first quarter of 2024. This decrease is a combined result of a 5.2 million increase in interest expense. due to a rise in our average indebtedness of $364 million between the two periods. that was partially offset by a reduction in the cost of debt service by approximately a hundred basis points. as a result of a decrease in software costs between the two periods. Together with a $1.4 million increase in interest expense due to lower capitalized interest on vessels under construction.
Vascular: Interest expense, excluding finance costs amortization increased by $6 6 million to $9 2 million in the current quarter compared to $2 6 million in the first quarter of 2024.
Vascular: This decrease was a combined result of a $5 2 million increase in interest expense.
Vascular: Due to a rise in our average indebtedness of $364 million between the two periods.
Vascular: That was partially offset by a reduction in the cost of debt service by approximately a 100 basis points.
Vascular: As a result of a decrease in sulfur costs between the two periods.
Together with the $1 4 million increase in interest expense due to lower capitalized interest on vessels under construction.
Evangelos Chatzis: between the two periods. At the same time, interest income came in at $3.6 million in the current quarter. Adjusted EBITDA decreased by 3.1% for $5.5 million. to 171.7 million in the current quarter compared to 177.2 million in the first quarter of 2024 for the reasons that have already been outlined earlier on this call.
Vascular: Between the two periods at the same time interest income.
Vascular: <unk> came in at $3 6 million in the current quarter.
Vascular: Adjusted EBITDA decreased by three 1% or $5 5 million.
Vascular: So we're happy with $71 7 million in the current quarter compared to $177 2 million in the first quarter of 2024 for the reasons that have already been outlined earlier on this call.
Evangelos Chatzis: We also encourage you to review our updated investor presentation that is posted on our website as well as subsequent event disclosures. Since the date of our last earnings release, we have added more than half a billion dollars to our contracted revenue backlog. As a result... Our contracted revenue backlog remains strong and has now grown to $3.7 billion with a 3.9-year average charted duration, while contract coverage is at 99% for this year and 85% for 2026. Our investor presentation has analytical disclosure on our contracted charter book that you can refer to.
Vascular: We also encourage you to review our updated Investor presentation that is posted on our website as well as subsequent event disclosures.
Vascular: Since the date of our last earnings release, we have added more than half a billion dollars to our contracted revenue backlog as a result.
Vascular: Our contracted revenue backlog remains strong and has now grown to three $7 billion with a three nine year average charter duration.
While contract coverage is up 99% for this year and 85% for 2026.
Vascular: Our investor presentation has analytical disclosure on our contracted charter book that you can refer to.
Evangelos Chatzis: On February 7, 2025, we entered into an 850 million syndicated loan facility agreement, which concludes the financing of all of our remaining new building container vessels, including the two additional recent orders with deliveries from 2026 to 2028. As of March 31... 2025 our net debt stood at $299 million and in the current interest rate environment this position shields us from high interest costs. Additionally, the company's net debt to adjusted EBITDA ratio stood at 0.4 times. at the end of Q1, while 53 out of our 84 vessels are currently unencumbered and debt-free.
Vascular: On February seven 2025, we entered into a into a tablet and 50 million syndicated loan facility agreement.
Vascular: Which concludes the financing of all of our remaining new building container vessels.
Vascular: Including the two additional recent orders.
Vascular: With deliveries from 2026 through 2028.
Vascular: As of March 31.
Vascular: 2025, our net debt stood at $299 million.
Vascular: And in the current interest rate environment. This position shields us from high interest costs. Additionally, the company's net debt to adjusted EBITDA ratio stood at North 0.4 times at.
Vascular: At the end of Q1.
Vascular: While 53 out of our 84 vessels are currently unencumbered and debt free.
Evangelos Chatzis: We have declared a dividend of $0.85 per share for this quarter and we continue to repurchase.
Vascular: We have declared the dividend of 85 cents per share for this quarter and we continued to repurchase.
Evangelos Chatzis: Arstotzka. Since the date of the last earnings release, we have repurchased an additional $36.9 million. And to date, we have executed, in total, surety purchases of $205.7 million. while our share repurchase program has recently been upsized to 300 million.
Vascular: Our stock.
Since the date of the last earnings release, we have repurchased an additional $36 $9 million.
Vascular: And to date, we have executed in total share repurchases of $205 $7 million.
Vascular: While our share repurchase program has recently been upsized to $300 million.
Evangelos Chatzis: Finally, as at the end of the Q1, cash was at $480 million, while total liquidity, including availability under our evolving credit facility and marketable securities, stood at a strong $825 million, giving us ample flexibility to pursue accretive capital deployment opportunities.
Vascular: Finally as of the end of the Q1 cash was up $480 million, while total liquidity, including availability under our revolving credit facility of marketable securities.
Vascular: After strong $825 million, giving us ample flexibility to pursue accretive capital deployment.
Evangelos Chatzis: With that, I would like to thank you for listening to this first part of our call. Operator, we can now open the call to Q&A. Thank you.
Vascular: Opportunities with that I would like to thank you for listening to this first part of our call. Operator, we can now open the call for Q&A.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the button. If at any time your question has been addressed and you would like to withdraw your 1 Police Press Star.
Vascular: We will now begin the question and answer session.
Vascular: To ask a question you May press Star then one on your telephone keypad.
Vascular: You are using a speakerphone please pick up your handset before pressing the keys.
Vascular: Hi, My question has been addressed and you would like to withdraw your question. Please press Star then two.
Operator: At this time, we will pause momentarily to assemble our...
Vascular: At this time, we will pause a moment.
Vascular: With similar roster.
Omar Nokta: The first question comes from Omar Nokta with... Please go ahead. Hi, John. Hi, Evangelos. A good update. Clearly, you know, things are going, despite all the market headwinds and everything that you outlined, John, in your opening comments. You know, you've added backlog. You've charted out your new buildings, or the final two at least, that were open. And as you mentioned, you're going to hold off now on new vessel investments and focus on optimizing, you know, the performance of your existing fleet. I just want to get a sense from you that when you say that, does that mean maybe, you know, focus on harvesting the cash from these assets that you own?
Omar: The first question comes from Omar <unk> with Jefferies. Please go ahead.
Vascular: Okay.
Vascular: Okay.
Vascular: John Hi, it's Angela.
Speaker Change: Good update clearly things are going despite all the market headwinds and everything that you outlined John in your opening comments you've added backlog you've chartered out your new buildings are the final two at least.
Speaker Change: Or or open and as you mentioned youre going to hold off now a new vessel investments in and focus on optimizing the performance of your existing fleet just wanted to get a sense from you just that when you. When you say that does that mean, maybe focus on harvesting the cash from.
Speaker Change: From these assets that you own or do you see investment opportunities or upgrades that you can do on your existing fleet that can boost earnings power down the line.
Omar Nokta: Or do you see investment opportunities or upgrades that you can do in your existing fleet that could boost earnings power down the line?
John Coustas: Well, definitely the second one. We are investing into a lot of energy-saving devices, you know, that will make our vessels more competitive in the future. And we've already seen benefits on that, both on our dry-bulk fleet that we have started a program of, let's say, upgrading all the ships.
Speaker Change: Well definitely the second one we are.
Speaker Change: Investing into a lot of energy saving.
Speaker Change: Devices.
Speaker Change: Yeah.
Speaker Change: That will make our vessels are more competitive in the future.
Speaker Change: And we've already seen a benefit from that both on our dry bulk fleet that we.
Speaker Change: Have started a program of.
Speaker Change: Let's say having.
Speaker Change: Upgrading older ships.
John Coustas: The same thing we're doing in parallel with our container vessels, where we're doing all the combinations of bulbous bow, propeller, and low-friction paints, which is going to definitely reduce the gap between, let's say, new buildings and second-hand. On the other hand, yes, of course, we'll be generating quite a lot of cash. And we are continuously evaluating opportunities.
Speaker Change: The same thing we're doing in parallel with our our container vessels, where we're doing all the combinations of the bulbous bow propeller and low friction paints.
Speaker Change: Which is going to definitely.
Speaker Change: Use the gap between let's say new buildings.
Speaker Change: And a second hand.
Speaker Change: On the other hand, yes of course, we will be generating.
Speaker Change: Yeah quite a lot of cash.
Speaker Change: Cash and we are open we are continuously evaluating opportunities.
John Coustas: But today, we are in an environment of expensive new buildings. without any clear road map as far as the fuel of the future. and the recent IMO decision, which we still don't know whether it's going to be approved in next October, that doesn't really give us any hints as to where we should go. Yeah, yeah, that makes sense.
Speaker Change: But.
Speaker Change: Today, we are in an environment of expensive new buildings.
Speaker Change: Without.
Speaker Change: Any clear roadmap as far as the.
Speaker Change: Fuel of the future.
Speaker Change: And the recent I am old decision, which.
Speaker Change: Which we still don't know whether it's going to be approved in the next October.
That doesn't really give us.
Speaker Change: Any hints as to where we should go.
Speaker Change: Okay.
Speaker Change: Yeah, Yeah, no no no it makes sense.
Omar Nokta: And I guess maybe just separately, the stock has done very well recently. You bought back, I think most recently subsequent to the first quarter, you bought a good amount of stock in the low 70s. The stock is now kind of closer to 90.
Speaker Change: And I guess, maybe just separately you know the the stock has done very well recently you bought back.
Speaker Change: I think most recently subsequent to the first quarter you bought a good amount of stock in the low seventies.
Speaker Change: <unk> does not kind of closer to 90.
John Coustas: You still see buybacks continuing at a decent clip here, or do you shift back and maybe see how things go from here? We see, you know, we do not, let's say, declare as to when or don't set any target levels for the buyback. The only thing which we... really informed the market is that we have another 100 million authorized at this moment for buybacks. I mean, when we're going to execute on it, you know, it's... is to be seen. I get that. Thank you.
Speaker Change: You still see buybacks continuing at a decent clip here.
Speaker Change: Or do you shift back and maybe well see how things go from here.
Speaker Change: If we see you know we.
Speaker Change: We do not Oh.
Speaker Change: Let's say it would be clear as to when or them don't set any target levels for the buyback.
Speaker Change: The only thing, which we are.
Really informed the market is that we have another 100 million authorized at this moment for buybacks I mean.
Speaker Change: When we.
Speaker Change: We're going to execute on it.
Speaker Change: It's.
Speaker Change: It's to be seen.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yes, I got that thank you and maybe just one final one and I'll pass it back.
Omar Nokta: And maybe just one final one, and I'll pass it back. Obviously, you've taken your stake up in Starbulk by another 2 million shares recently. You're over 5%.
Speaker Change: Obviously, you've taken your stake up in star bulk by another 2 million shares recently or over 5%.
John Coustas: Anything you can say about what drove that extra investment? Is it the valuation, the Dry Bulk Outlook, or something else? Well, I think it's an investment we believe, you know, it makes sense. We were already... in a position since our Eagle Bulk shareholding that was transformed into Starbuck shareholding. about a year and a half almost ago. It was an opportunity, we added up, you know, we will evaluate performance of the market and...
Speaker Change: Anything you can say about what drove that extra investment is at the valuation.
Speaker Change: Drybulk outlook or something else.
Speaker Change: Well I think it's an investment we believe it makes sense we were already in.
Speaker Change: In a position since our our Eagle bulk share holdings that was transformed into star bulk shareholding.
Speaker Change: About a year.
Speaker Change: Four months ago.
Speaker Change: Got.
Speaker Change: It wasn't opportunity we added up.
Speaker Change: Yeah, we will evaluate a three or four months of the market and.
John Coustas: We don't have any specific plans for the time being.
Speaker Change: Yeah, well, we don't have any specific.
Speaker Change: Plans for the time being.
John Coustas: Yeah, and Omar, we added post-liberation day. where, you know, we, it was, you know, a significant, it was a compelling Price, we reduced our average cost. So that was the... Got it, yeah, opportunistic, yeah, makes sense. Great.
Omar: And Omar.
Speaker Change: We added Paul.
Speaker Change: Liberation day.
Speaker Change: Where you know we it was a significant it was a compelling.
Speaker Change: Price, we did use that average cost.
Speaker Change: So that's that was the.
Speaker Change: Incentives got it yet opportunistic deal yes. Thank you.
Speaker Change: Yes.
Omar Nokta: Thanks, Evangelos. Thanks, John.
Speaker Change: Great. Thanks for the Angeles Thanks, John.
Operator: Thank you. It appears we have no further questions at this time.
Speaker Change: Thank you.
It appears we have no further questions at this time I would like to turn the call back to the Doctor for any further comments or closing remarks.
John Coustas: I would like to turn the call back to talk for any further comments. Yes, thank you all for joining this conference call and your continued interest in our story. Look forward to hosting you in our next hearing calls.
Speaker Change: Yes. Thank you all for joining this conference call and your continued interest in our story look forward to hosting you on our next earnings call have a nice day.
Operator: Have a nice day. Thank you.
Speaker Change: Thank you. This concludes today's conference.
Operator: This concludes today's I would like to thank everyone for their participation.
Speaker Change: We would like to thank everyone for their participation have a wonderful afternoon.
Operator: Have a wonderful afternoon.