Q2 2025 Global Ship Lease Inc Earnings Call

Hello and thank you for standing by. My name is Bella and I will be your conference operator. Today at this time I would like to welcome everyone to Global ship lease. Q2 2025 earnings conference call all lines have been placed on you to prevent any background noise. After the speaker's remarks, there will be a question and answer session

If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad to withdraw your question, press star 1 again.

I would now like to turn the conference over to Mr. Thomas Lister, CEO of global ship lease. You may begin.

Thank you.

Hello everyone and welcome to the global ship. Lease, second quarter 2025 earnings conference call, you can find the slides of the company. Today's presentation on our website at

As usual, slides, 2, and 3 to remind you that today's call may include forward-looking statements, that are based on current expectations and assumptions, and are by their nature, inherently uncertain and outside of the company's control.

Actual results May differ materially from these forward-looking statements due to many factors. Including those described in the safe harbor section of the slide presentation.

We would also, like, to direct your attention to the risk factors section of our most recent annual report on our 2024 form 20f, which was filed in March, 2025,

you can find the form on our website or on the sec's.

All of our statements are qualified by these and other disclosures in our reports filed with the SEC.

We do not undertake any duty to update forward-looking statements.

The reconciliations of the non-gaap financial measures to which we will refer during this call to the most directly comparable measures calculated and presented in accordance with gaap, usually refer to the earnings release that we issued this morning which is also available on our website.

I'm joined, as usual today, by our Executive Chairman, George Youroukos, and by our Chief Financial Officer, Tassos Sopes.

George Will begin the call with high level commentary on GSL and our industry. And then tassels and I will take you through our recent activity quarterly results and financials and the current market environment. After that, we will be pleased to take your questions. So turning now to slide 4, I'll pass the call over to George

Thank you, Tom and good morning, afternoon evening to all of you joining today.

As in the last several quarters and certainty and volatility related to tariffs, trade disruptions and geopolitical tensions have continued to materially impact a global container shipping industry.

This set of factors is highly diverse and of course, there have been numerous editions such measures announced in recent days.

but as we will explain to you today,

The through line is that.

They are all making containerized Supply chains, less efficient, which as long as consumer demand holds up.

Means that more vessels are needed to carry the same volume of cargo.

In this environment, our fleet of flexible midsize and smaller container ships has remained in high demand, and we have secured nearly $400 million of additional charter coverage in the first half of the year.

26 coverage to 80%.

meanwhile we have selectively an opportunistically sold, older ships, crystallizing the cyclically high values and providing us with additional dry powder for free renewal when the right opportunities arise

Our strong credit ratings, reflect the photos, like quality of our balance sheet and our extensive contracted Revenue backlog.

We have also continued to pay dividends to our investors with the recent increase bringing our annualized dividend payment to $2.10 per common share.

We are pleased to provide an attractive Total return to our shareholders.

So far this year, we have not only outperformed our peer group, but have also outperformed the S&P 500 by approximately 4 times.

In summary, we're maximizing our optionality to manage risks and capitalize on opportunities in an unprecedented and unpredictable market. All of which provides our investors with a combination of stability, total return, upside potential, and good trading liquidity in our shares.

With that, I will turn the call over to Tom.

Thanks George.

Hello everyone and please turn to slide 5 where we highlight our wild Diversified Charter portfolio.

As of June 30th 1. 7 3.

We added 22, chartres in the first half of 2025, including extension options that have been declared for nearly 400 million of contracted Revenue.

On slide 6, we discuss our Dynamic Capital allocation policy.

Being in a cyclical industry that is impacted. Sometimes positively other times, negatively by any number of global Trends and macro factors we believe it to be fundamentally important to maintain the Long View. This means looking through both the cycle and short-term volatility and ensuring that we provide ourselves with the optionality to dynamically allocate capital in the manner that best protects and helps build shareholder value.

Given the extraordinary uncertainty currently prevailing. We believe that maximizing that optionality is the right course of action for us to take. While of course, reinforcing our balance sheet selectively investing in our Fleet and continuing to return Capital to shareholders.

And indeed, increasing those returns was prudent, as we have recently done by growing our annualized dividend to $2.10 per common share.

Our strong cash flows from multi-year contracts, put us in a strong position to confidently Advance each of these priorities.

And as we've said before, it's easier for investors to buy and sell our shares than it is to buy and sell ships. We're pleased that GSL can serve as a liquid platform through which investors can fully participate in our business and industry while minimizing downside risk, and having the share trading liquidity to upsize or downsize their exposure at their option.

Moving to slide 7, we continue to take pride in this chart and what it says about our discipline when it comes to acquiring ships.

We have consistently bought ships opportunistically and in situations where we believe downside is limited and upside potential is significant.

The primary takeaways for investors are twofold 1. We have a strong track record of voiding Acquisitions during periods. When asset prices are elevated or in terms that depend upon an optimistic projection of medium or long-term market conditions. When the all-in proposition makes sense on a long term per share basis. We execute, if it does not, we do not

And 2. The old Maxim applies. The best opportunities to build long-term value and unlock outsized returns tend to be at the bottom of the cycle. When there's blood in the water and access to Fresh capital is limited.

With that, I'll pass the call to tassos to discuss our financials.

Thank you, Tom.

Slide 8 shows our first half, 2025 financial highlights. I would like to mention if you keep points.

Earnings in cash flow have continued to rise. While our gross debt has increased relative to year end 2024. As we brought in additional 4 vessels into our Fleet.

Nevertheless, our gross depth figure is down from where it was 1 year ago.

Dry powder for both opportunistic. Investments in the existing Fleet and investments in Fleet renewal, if and when the right opportunities emerge,

And of course importantly it's a process continued payment of our sustainable dividend.

of know we completed an 85 million refinancing to push, our weighted average debt maturity to 4.9 years and bring our weighted average cost of debt to 4.18%

We also realized that gain of 28.3 million on the sale of 3 relatively older smaller vessels and we have contracted to sell a fourth vessel Bill 2000 for 35.6 million in Q4, in addition to the healthy dividend which has already been discussed, we have a further 33 million under buyback authorization and we continue to deliver to build equity value.

We have also recently had a very strong credit rating for the firm, the details of which are on the slide.

Slide 9 shows our ongoing efforts to deliver the risk and grow Equity value, which ultimately increase our optionality.

The graph on the left shows, our progress in lowering our outstanding debt, which was 950 million at the end of 2022. And now sits under 700 million

Perhaps more revealing, the graph on the right shows a reduction in financial leverage, with net debt to EV/EBITDA now at 0.7 times.

Whatever challenges or opportunities? Come next. We are ready.

Slide 10 further highlights our progress in delivering and building resilience.

Our cost of debt is shown on the left and let it cost of 4.18% down from the 6 Plus percent in 2020.

A similar story is shown on the right where we have maintained low Break Even rates by cutting a retro expense. Even as operating, expenses have risen in the middle of a period of high inflation.

I will now turn it back over to Tom.

Thanks, tesos.

For the benefit of those of you who may be new to the GSL story and to whom I offer a warm, welcome, slide 11, rest States. Our focus on mid-sized and smaller, container ships between 2000 and 10,000 to which make up the backbone of global trade, a super flexible and are not dependent upon any 1 trade or country. This is quite different from the situation of very large, container ships, which are often the focus of media coverage on our industry. Not to mention the bulk of capital investment, which I will come back to you.

Because of that huge capacity, physical restrictions in many ports and the need for sophisticated Port infrastructure. Those very large container ships. Tend to be limited to the big main Lane trades. Such as those between China and the us or northern Europe.

We consistently reiterate this aspect of our business because this distinction is not a subtle Nuance for purposes of fine-tuning, a model, but a major differentiation with real world implications both in the current environment and well into the future.

Moving to slide 12 and the Red Sea, which continues to have a significant impact on our industry as approximately 10% of global container. Ship capacity is absorbed by rooting around the Cape of Good Hope in transiting sewers.

It's impossible to predict how long this will last however, linear operators. Service networks are complex and interconnected meaning that any significant changes in service. Routing can't simply be dropped in overnight or enacted without incurring substantial costs.

Because of that. And more importantly, still the very real implications for seaf Ferrer. Safety industry consensus is that the line of Majors will want to see sustained, stability, and safety before making any material shift back to the Red Sea transits.

Who knows when that will happen? But if, or when it does, potentially triggering a meaningful market correction, we're well positioned to take advantage of the opportunities that arise.

Turning to slide 13, we continue to believe that trade tensions in 2019 may be instructive. As we all try to Grapple with the implications of volatile us, trade Dynamics, with much of the rest of the world, and most notably with China.

This shift acred to the benefit of mid-sized and smaller vessels like ours, which both directly took market share from the very large container ships that cannot service those smaller trades and also saw material incremental demand from a more complex and less efficient supply chain. That may now involve multiple voyages within the region before going long haul to the end markets.

We've made this point before but it pairs repeating.

Increased inefficiency in the supply chain means that more vessels are required to transport a given quantity of cargo.

From the container ship owners perspective. This is effectively indistinguishable from increased demand and it is a key theme of many of the major factors, currently impacting the world and global trade,

To be clear those disrupted. Chinese Supply chains Marine very significant to global containerized trade, but the diffusion of both, intermediate and finished. Good manufacturing capacity has proved to be lasting as has the general recognition, that excessive Reliance on any 1 Source. Country represents a fundamental supply chain, vulnerability,

In the current context, many of these particulars are fluid to put it mildly, but the overall Dynamic and impacts for container shipping are looking to be directionally similar to this precedent. So if not exactly history repeating itself, it does so far appear to rhyme

Onto slide 14 where we provide our standard check-in on supply side. Trends in the space. What at 1 point would have been quite shocking has in recent times just become the way. Things are both Idol tonnage and scrapping activity are more or less zero as the system remains stretched thin and older vessels. Uh continue to command High rates that more than justify, keeping them on the water.

Just to drive this point home in a global Fleet with cellular Crest, you've around 32 million to a global total of 6,800 to of capacity with scrapped in the first half of the year or to put it differently more or less the equivalent capacity of a single ship in our Fleet of mid-sized and smaller container ships.

Slide 15 covers the order book, which is both meaningful and overall scope and overwhelmingly focused on the very largest size segments, a part of the market in which GSL does not participate. In the segments where we do Focus. The order book to Fleet ratio is 12%, which is spread over a 3 to 4 year. Uh, worth of deliveries

Crucially while, uh, the the median age for the global Fleet above 10,000 to is just 7.5 years. The median age under 10,000 tus. In other words in the segments we're focused on and and, and are competing in. Uh, the median age has risen to 17.5 years as new additions have been limited and quite old ships have hung around to reap the benefits of the tight Market.

It's a bit hypothetical but if we were to look to a scenario where that full sub 10,000 to order book is delivered through 2028 and we were to assume that ships over 25 years and the same time frame was scrapped. Then the global Fleet would in fact be trending towards a net Fleet reduction of 6.3% in these sizes.

As we've said before, it can't be taken for granted that all of these ships will indeed be promptly scrapped. But as an owner of well-maintained and high-specification ships, I can't say that we are particularly worried about a market in which even a generic 28 or 30-year-old ship can be profitably employed in the charter market.

On the flip side in a scenario in which the wider Market turns, sharply downward at some stage pressure on less well-specified vessels and their owners could be meaningfully more. Widespread with extensive contract coverage, a high specification in demand Fleet and a balance sheet with both resilience and dry powder were inclined to see, such a situation as an opportunity, first and foremost.

On slide 16. We check in on the charter Market itself, as you would expect from our commentary thus far, the charter Market remains quite strong, both on an absolute basis and even more. So in the context of gsl's Break Even rates of under 9,400 per day per vessel,

The amount of chartering activity particularly on a forward or long-term basis reduced materially during the post-liberation day, air pocket when the liners and their own customers were trying to sort out how best to proceed. However, as you can see on the chart, this bout of short-term focus and hesitation to commit, did not undermine the very healthy rate environment.

On Market, Charter rates is rather limited for GSL, though. We're insulated by more than 1.7 billion of contract, cover over an average of 2.1 years going forward. So our focus is squarely on the opportunities ahead of us with that. I'll turn it back to George on slide 17.

Thank you, Tom.

To summarize.

We continue to add forward cover, and now have essentially.

No open days in 2025 and are working on closing out next year as well.

Macro geopolitical and regulatory uncertainties are high.

And we are maximizing an optionality to manage risk and capitalize on opportunities.

Financially, GSL is stronger than it has ever been, with the Fortress balance sheet and annual EBITDA in excess of our net debt.

Our average Break, Even rates are under 9,400 per vessel per day, which means that we are positioned to continue generating free cash flow. Even if the market were much weaker than 2 days,

As of late cash flow cash, excuse me, as of late cash cows age where opportunistically monetizing certain older vessels and are increasingly focused on disciplined Fleet renewal to support forward earnings and returns.

And finally, we are pleased to be returning Capital to our shareholders, by paying out an annualized dividend of $2.10 per common share.

Now with that, we're ready to take your questions.

I would like to remind everyone in order to ask a question, press star, then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Liam Burke with the B Riley Securities. Your line is now open. Please go ahead. Thank you. Hi George, Tom tasos, how you doing today? How you doing today?

We're doing well, Liam. Hi, good to hear from you. Hi.

Thank you. Thank you.

Um,

Tom, as we look into,

Our sort of weakening or softening as we go further, is this still that positive disconnect between, uh, your Freight rates and then your Charter rates?

Short, answer Liam. Yes. Um, I would say that the uh, the charter rates in the uh in the market are holding up firmly despite the uh, the downward pressure on freight rates. In the trans-pacific, I would also point out actually that there are um, more buoyant markets, um, than the trans-pacific such as a Asia Europe.

But main message, charter rates remain very attractive.

and in terms of your liner customers, uh, is their interest in longer durations in terms of, uh, of the vessels that are up for recharter

I wouldn't necessarily say longer durations. Uh, but there is certainly appetite for midsize and smaller tonnage from the liner operators for the same multi-year Charters that we've been seeing for a while. So you know for for the the smaller ships, maybe a couple of years is on the cards for the, uh, the ones at the larger end of of, of the size Spectrum. In our Fleet, you may be looking at 3 plus years,

Great. Thank you, Tom.

Our pleasure. Thanks Liam.

Your next question comes from the line of Omar NATA with Jeffrey's. Please go ahead.

Thank you. Hi guys, good afternoon. Uh, maybe just a follow-up. Um Tom on. Just your last comments about the um Charter appetite for the midsize and smaller um, asset classes. You're highlighting in 1 of the slides. Just how much the order book has been more attuned towards the the bigger vessels. Um but I guess maybe recently there's been some chat or some orders coming in for some of the smaller end of the of the fleet. So I guess maybe my question is maybe 2 part, you know, 1. You know what what do behind that are sort of kickstarted perhaps that interest in the smaller ships and then

To discuss opportunities to, um, place orders for smaller ships against long-term contracts.

From the liner operators that keeps a lid on any speculative orders in that space, which means that despite the fact that, yes, there is more adding ordering activity than before, it's still not. Um, let's say, worryingly high in nature. Uh, and to the second part of your question. I mean, we're always looking at opportunities in the space both for existing ships, which has been our bread and butter to date but also for uh, for new buildings. But we don't move on either of those, unless we can make the risk and return, uh, numbers work and so far that hasn't been the case for new buildings at least for us. But, um, we continue to keep an eye on, on, on the market. As you would expect George. I don't know if you want to add to that.

Yeah. The the only thing I would add is that generally speaking a line of companies smaller ships, do not consider them as the backbone of their services. Hence, they are not running to

You know, to to to to Charter these ships for long durations more than 3 years. I would say, especially if it's a brand new ship, they would go for 3 years, uh, or or if it's a bargain, they could even go for a longer. I mean it all depends on the rate. So if you, if you offer a very low rate, then yes, they might get longer than 3 years. But in general, that they are not the ships that the liner companies consider as their main ships. Uh, so they can always pick them up in the market, they feel, uh, the charter Market

So I don't think that it is a it is an idea for us to order these ships at today's uh hi new bill prices and then speculatively try and fix them uh you know, at a higher Charter rate because I don't think there's higher Charter, it will be available um given the appetite of of of chartres and knowing also the the price that somebody has paid. So the charter is not going to want to allow the the owner of the ship to make a killing naturally as a charter. Could order the themselves, if it's, if it's becoming too expensive.

Okay, that, that that's interesting. Thank you, George. Um, and Tom and, and maybe just a, a, a second question, uh, it seems like you've been perhaps a little bit more transactional on the sales side, maybe not dramatically, but you, you've monetized another ship. An older 1 looks like at a much firmer price than what you achieved for the the sister ship. A few months earlier, um, are is, is your, are the sales coming on the on, is it being driven by the fact that asset values are continue to stay firm? And also, are you seeing these high prices continue here, despite perhaps the air pocket, you mentioned, um, in in Freight rate?

Um, asset prices, remain attractive going to the second part of your your question first, but as a general, um, comment Omar whenever we're looking to either deploy an asset or sell it, we we run the numbers and try to figure out what's going to generate more more Capital, more, more returns, uh, more cash for, uh, for the business. So, um, it's so happens that yes, we've sold these older assets, opportunistically, a total of 4 during the first half of this year, um, simply because for those specific assets when they were coming available, we felt that that would be, uh, the more value generative proposition for the company. But, you know, that's not to say that we will continue down that track going forward. It's always a dynamic decision. And we, we figure out what makes uh, the most sense economically. But asset values are remaining. Uh, are remaining quite firm at the moment as our Charter rates.

Okay, very good. If I may just add something for clarification: the first ship was sold to specialists, while the second ship was sold to specialists of the past.

Hence, the difference in price.

Ah, okay, that's helpful. I appreciate that. Thank you.

Again, if you would like to ask a question, press star 1 on your telephone keypad.

Your next question comes from the line of Clement Mullins, where the value investors Edge. Please go ahead.

Hi, good afternoon, and thank you for taking my questions. I wanted to start with a modeling question. You mentioned that as of June 30th, two dry dockings were ongoing and six additional were anticipated. Could you confirm whether the six additional dry dockings are to be pursued throughout Q3, or does that include the fourth quarter?

Tassel. So, I don't know if you happen to know that um

To respond to it. Otherwise, we can, uh, we can respond to it offline, client. Yes, yes. Because I don't have it right now.

Perfectly. I'll I'll follow up on like offline. I, I also wanted to ask about your B1 asset values. Your last acquisition. In December focused on large, vessels specially relative to your Fleet and looking ahead. To what extent should we expect you to focus on large vessels? Let's say above 4,000 to relative to feeders.

I will answer to that CL the generally speaking. You know, let's say our Focus. Hence the our Fleet is is for post panamax beam ships. So more than 40, m, 40 M. Plus this is the, the majority of our Fleet per day. You now

We we like those ships for various reasons, you know, they they take more cargo, they're more flexible. And so, and so forth. Now, having said that, uh, that does not exclude us from buying, which we have uh, in the past smaller ships, if the deal makes sense,

Uh, but if I had, uh, if I was in a shop and I had to, you know, had all the options open to me and, uh, I would.

Pick and choose what ships? I like I would go for post panamax ships rather than smaller uh mid midsize post panamax ships between

6 to, you know, 6 to 10,000 to

Yeah, that that would be my absolute preference. Uh but you know just preference, not not carved in stone.

Makes sense. That's helpful. That's everything from me. Thank you for taking my questions.

My pleasure.

That concludes our Q&A session. I will now turn the call back over to Mr. Thomas Lister for closing remarks.

Thank you, everyone, for joining our earnings call today. We look forward to reconnecting with you in the fall for our Q3 earnings. Have a great summer.

That concludes uh the call in French call today. Thank you all for joining you may now disconnect everyone have a great day.