Q2 2025 Danaos Corp Earnings Call
Good day and welcome to the denal corporation conference call to discuss the financial results. For the 3 months, ending June 30th 2025,
As a reminder, today's call is being recorded.
Posting the call today is Dr. John gustas Chief Executive Officer of denounce Corporation and Mr. Evangelist fatzees Chief Financial Officer of denounce Corporation.
Dr, gustas and Mr. Haziz will be making some introductory comments and then we will open the call to acute question and answer session.
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I would now like to turn the conference over to evangelos. Please go ahead.
Thank you, operator. Uh, good morning everyone. And thank you for joining us today.
Before we begin, I quickly want to remind everyone that management remarks this morning may contain certain forward-looking statements and that actual results could differ materially from those projected today.
This forward-looking statements are made as of today and we undertake no obligation to update them.
First 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 Eva adjusted, Eva, 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.
With that, let me now. Turn the call over to Dr. John kustas who will provide the broad overview of the quarter. John
Thank you, evangelos. Good morning, and thank you all for joining. Today's call to discuss our results for the second quarter of 2025.
As we move through the second half of the Year, some uncertainties around global trade are beginning to subside.
In particular there is increasing clarity about tariffs, many of which have been or are being finalized at much lower rates than feared.
While tariffs on Imports of the US will be much higher than historic averages. The US economy is stable and the American Consumer keeps purchasing foreign Goods.
As inventory is normalized. We anticipate a gradual Improvement in trade flows.
Geopolitically, there have been no major shifts with the conflicts, in Ukraine and Gaza ongoing.
The absence of further escalation is somewhat reassuring, though. The potential for volatility remains elevated.
We continue to monitor developments closely, but we have not seen any new disruptions to Global shipping routes in the past quarter.
against this backdrop, we are maintaining our disciplined approach to Capital, allocation
That meet our return criteria.
In the second quarter, we added 1 additional 6,000. EU vessel to our order book at the CIA with which we have an existing relationship. Importantly, this vessel has already been fixed on a 5-year. Charter to a long-standing client. Locking invisibility and attractive returns.
Our charging strategy continues to deliver results. We added approximately 113 million to our contracted Revenue backlog since the previous earnings released and our 3.6 billion total contracted Revenue, base provides meaningful. Insulation from shorter Market fluctuations, our contracted chart of coverage stands at 99% for 2025 and 88% for 2026 including new buildings, scheduled for delivery during this period.
On the dry bulk side. We saw some seasonal farming in the market but broader weakness persists, largely due to deflationary conditions in China.
While we continue to evaluate opportunities in the sector asset values, for modern tonnage remain elevated, and we are in no rush to commit capital in an uncertain macroeconomic environment.
From the financial perspective will remain in an enviable position.
With minimal leverage on the growing base of contracted earnings. We have the luxury of patients, our strong balance sheet and cash generation capacity, provide ample Firepower to support our strategic priorities and position the announced for long-term success.
We continue to focus on discipline, execution, operational excellence and value creation for our shareholders with that. I'll hand the call over back to evangelos, who will take you through the financials of the quarter. Evangelos.
Thank you, John. And again, good morning to everyone and thank you for joining this morning. I will briefly review the results for the quarter and then we will open up the call to Q&A.
We are reporting adjusted EPS for this quarter of 6.36 cents per share.
Or 117 million dollars compared to adjusted EPS of $6.78 per share.
Or 132.3 million for the second quarter of 2024.
This 15.3 million decrease in adjusted net. Income between the 2 quarters is mainly the combined result of a 24.7 million increase in total operating costs mainly due to the increase in the average number of essays in our Fleet.
A 3.6 million increase in net Finance costs.
And the 2.7 million decrease in dividend income.
From Investments.
Partially offset by a 15.9 million increase in operating revenues.
Um on the revenue side as analyzed in our earnings release uh the increase in our Fleet.
Uh, produced a combined. 26.6 million of incremental operating revenues.
uh, quarter on quarter, that was supplemented by an extra 2.8 million in higher, operating revenues, as a result of higher Fleet utilization,
those were partially offset by an 8.2 million decrease in revenues on our container segment as a result of lower contracted Charter rates between the 2 periods.
And 5.3 million lower non-cash us, gaap Revenue, recognition accounting.
That's an operating expenses increased by 9.3 million to 56.4 million in the current quarter from 47.1 million in the second quarter of 2024. Mainly, as a result of the increase in the average member of users in our Fleet, while our daily operating cost increased to 7,556 per person per day for the current quarter compared to 6,961 per vessel per day in the second quarter.
2024.
Our operating cost. However, we continue to remain among the most competitive in the industry. The GNA expenses came in lower, uh, slightly lower decreased by uh, 0.1 million to 11.2 million in the current quarter, compared to 11.3 million.
In the second quarter of 2024.
Interest expense, excluding Finance costs amortization went up by 4.3 million to 8.9 million in the current quarter compared to 4.6 million in the second quarter of 2024.
This increase is a combined result.
Of an increase in our average Investments by 265 million between the 2 pillars. That produced 3 and a half million of incremental interest expense.
In the cost of that service by approximately 90 basis points, or 0.9%.
mainly, as a result of a decrease in sulfur costs,
uh, between the 2 periods.
We also had a 0.8 million increase in interest expense due to lower capitalized interest.
On vessels under construction between the 2 periods.
At the same time.
and as a result of uh, increased average, cash balance is our interesting come in at 3.7 million in the current quarter, largely of setting,
Uh, interest expense.
Adjusted EBITDA decreased by 0.5% or $0.8 million.
And came out to 176 million in the current quarter compared to 176.8 million in the second quarter of 2024.
For reasons that have been already 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.
I'd like to mention a few of the highlights.
since the date of our last earnings release, we have added 113 million to our contracted Revenue, backlog,
As a result, our backlog remains strong and now stands at 3.6 billion with a 3.8 year. Average chart of duration
While contract coverage is at 99% for 2025 and 88% for 2026.
Uh, within our investor presentation, you will find analytical disclosures on our contracted Charter book.
As of June 30th 2025 our net debt, stood at 224 million.
and in the current interest rate environment this position Shields us from
High interest costs, Additionally, the companies, net debt, to adjust it, even the ratio.
2 that 0.3 times while 533 out of our 84 vessels in the water are currently unencumbered and debt free.
We have declared the dividends of 85 cents per share for this quarter and we continue to have 94.3 million remaining authority to repurchase stock under our 300 million share repurchase program.
uh, finally, as of the end of the second quarter, cash stood at 546 million,
While total liquidity, including availability under our revolving credit facility and marketable securities.
Stood at 924 million, giving us ample flexibility to pursue a creative Capital deployment.
Opportunities 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.
We will now begin the
question. You may press star then 1 on your telephone keypad,
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if at any time your question has been addressed and you would like to withdraw your question, please press star then 2
At this time, we will pause momentarily to assemble our roster.
The first question comes from Omar, natca of Jeffrey's. Go ahead, please. Go ahead, please.
Thank you. Good afternoon, John and vandalos.
Thank you for the update. Hi, Omar.
I don't. Yeah, I just have a, a few questions. Uh, correctly. We just first sit on sort of the charter markets, you know, clearly you've added backlog here. If there's a second quarter, um it says it, it obviously nice to see the backlog growth, although maybe the pace hasn't been as thick.
And then also, uh, you do have a couple of shifts that roll off charging through the 160 Mah, the 6000 500 T use, uh, they're rolling off for the next, you know, several months. I think there's options. Embedded is there? Um, are those being marketed? Or do you think those are going to do exercise?
Uh yeah, Omar. The market is pretty stable.
Uh, demand, uh, is there for all the ships?
Uh, there are a number of ships that actually have options so there's nothing much that we can do uh further. Uh most of the ships of this year are already being fixed.
The minimal things for, uh, next year.
And uh,
you know, when we're talking about 20207,
uh, there is still interest for newer ships over there. That's why
You know, we fixed also this new building that the latest 1 that we got for uh, you know, 2027 delivery.
uh,
For the time being, and bearing in mind that we don't foresee any change in the Red Sea passage.
Uh, at least for the second half of 2025, I don't expect any significant changes.
Okay, thank you. Um, and then maybe just in terms of your Capital allocation, you know, clearly as you as you mentioned, you know, position the strong balance sheet, nice backlog, good amount of cash. As we think about just Capital deployment from here. Um, you're going to take you're not chasing anything, you have plenty flexibility. Um, in terms of the buyback, um, it looks like it's been put on pause to an extent at least since the last update. Is that a change in approach in terms of how you're looking at that? Or the just simply perhaps getting tactical was given how strong the uh, the share performance is then.
No, it's just that, you know, when you see actually the stock, uh, appreciating really so much to continue, uh, you know, bite back.
You know, would have shot the price up uh, you know, quite dramatically, which is not really to the, uh, interest of long-term shareholders. It would just be, uh, let's say used for flippers.
And, uh, that is why, you know, we have paused.
uh, the the buyback on the other hand, uh, you know, despite okay, the shipping being a kind of an independent Market, uh, we see that there is a lot of froth
In the stock market, all over the place, and everybody is talking about correction.
Uh so this is going to drag uh, shipping companies as well, you know, during that correction and uh that's why we are very cautious into just chasing the market upwards.
Okay. And then maybe just a final 1 maybe perhaps at the end of to you, you're talking about the the higher cost as the result of having more ships. Also, just the the rate itself per day. Went up, uh, quarter over quarter.
Is this kind of a new would you say? Is this a run rate going forward? Or should we assume kind of a bit more of a, you know? Moderation, doors prior advocate,
Yes, thank you. Omar to a great extent. This is a consumption, uh, because we we've had certain bulk orders placed within the second quarter.
And, uh, obviously, you now see the quarterly figure shooting up, but this is going to normalize as we head towards 9-month or, uh, full year numbers.
Okay.
Okay, good. All right. Well, thank you guys. I'll turn it back.
Thanks.
Okay, the next question comes from uh Clayman Mullins a value and value investors Edge. Go ahead please.
Hi, good afternoon. Thank you for taking my questions.
In the prepared remarks, you had a comment on feder ship speculative orders.
About your expectations for feeders to what extent do you expect the lower relative order book to provide a Tailwind?
Uh, well definitely, uh, you know, a shortage of ship always provide a Tailwind. But, uh,
The thing is with feeders, it's very difficult to get long-term contracts. Unless you give pretty low, uh, rates, uh, because Charters can find these ships relatively easily.
And they don't want to commit long term.
uh,
uh, on, on the other hand,
uh, there are lots of things happening. I mean with, uh, all the new, uh, increased fuel costs.
Uh, people will try to upsize services in order to get economies of scale.
And, uh, lower the cost per TEU on a larger ship.
uh,
and also bearing in mind that today,
The new generation of ships is much shorter and can go into most of the ports that, uh, you know, the feeder ships can go.
uh,
Will really reduce that kind of demand. That's why, you know, we don't want to really overextend at prices that are rather expensive.
Makes sense. That's a very interesting color. Thank you.
I also wanted to ask about your most recent new build Edition which has a scheduled delivery in 2027. Could you talk a bit about how you managed to get such a prompt delivery? Is it a resale or was it a function of your relationship with the yard?
No, no. It was purely a, a relationship with the yard. They adjusted their kind of birth schedule and there was 1 available birth. And of course, as we were building in this yard, we were the first ones that they approached and we concluded practically within a day.
a new contract and then of course we went out and we chartered The Vessel but uh you know, we didn't tie
The ordering of the ship with the charter, which is what most people are trying to do.
Makes sense. That's helpful. That's all from me. Thank you for taking my questions.
Thank you.
It appears we have no further questions at this time.
I would like to turn the call back over to Dr. Kustas for any further comments or closing remarks.
Yes. Thank you all for joining this conference call and your continued interest in our story. Look forward to hosting you in our next earnings call.
Thank you. This concludes today's teleconference. We would like to thank everyone for their participation. Have a wonderful afternoon.