Q3 2025 Global Ship Lease Inc Earnings Call

Thank you for standing by. My name is Tina and I will be your conference operator today.

At this time, I would like to welcome everyone to the gold Global ship lease, third quarter 2025 earnings conference call.

All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. To ask a question, press *1 on your telephone keypad. To withdraw your question, press *1 again.

Thank you. It is now my pleasure to turn today's call over to Thomas Lister CEO of global ship lease. Sir, the floor is yours.

Thank you very much.

Hello everyone and welcome to the global Shipley's. Third quarter 2025 earnings conference call.

You can find the slides that accompany today's presentation on our website at www.global.com.

As usual, slides 2 and 3 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 Georgie rukos and 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'll be pleased to answer your questions. So turning now to slide 4, I'll pass the call over to George

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

Global ship lease is focused continues to be on optionality.

As geopolitical and trade policy and certainty continue to be a major factor throughout the third quarter.

As we have seen in recent weeks with the IMO, Net Zero framework.

Usdr and China Port fish.

All of which were deferred at the 11th hour or later.

Even fully coming into effect and having far-reaching real-world implications.

All of these real and potential factors.

Are contributing to 2 major effects.

both on which

play to our advantage.

Number 1, making Supply chains, less efficient, which means that more ships are needed to transport a given quantity of cargo and number 2. Increasing the value of flexible meets size and smaller container ships such as those in our Fleet.

Now, on the IMO deferment, this occurs, particularly to the benefit of order conventionally fueled vessels that are now likely to have a longer economic life.

Taking together with aggregate growth in global containerized trade.

these factors are contributing to a situation where there's essentially zero idle capacity for the vessel size segments in which we operate,

Thus, we continue to see strong interest in chartering our vessels, typically on a multi-year basis.

Through the first nine months of 2025.

We added 778 million in contracted revenues.

With full contract coverage for the remaining of 2025.

96% coverage.

For 2026 and 74% coverage for 2027.

This offer us stability.

And certainty at the time were, both are generally in short supply.

Our progress in securing additional chart of coverage.

Adding to our Revenue backlog and fortifying our balance sheet has enabled us to achieve strong credit ratings across the board.

including an investment grade rating on our us private placement notes,

These same factors notably including a clutch of recent agreed long-term Charters have put us in a position to once again. Increase our supplemental dividend,

bringing our overall dividend to 2.50% on an annualized basis.

That's a 19% increase. Being announced today.

but if you look at where our dividend was just over a year ago, which was 1.50 annualized,

The total increase.

Is 67%.

All done on a non-speculative basis on the back of real contracted revenues and without compromising our ability to establish a fortress balance sheet and position GSL for opportunistic fleet renewal at the right time.

With everything going on in the world, both GSL. And our customers are acutely aware that many of our assumptions. And understandings, may be turned upside down from 1 second to the next.

in this environment, we have simultaneously looking in the high value and forward visibility that comes from time, Charter conducts with top tier Global liners

While also making sure that we have the strategic and financial flexibility to respond to the challenges and the opportunities of the fast-changing world and the cyclical industry.

In this way, we are maximizing gsl's optionality.

And putting ourselves in the position to protect and generate shareholder value, no matter what is waiting around the corner.

Now, with that, I will turn the call over to Tom.

Thank you, George. Hello again, everyone. Please turn to Slide 5 to see our Diversified Charter portfolio.

As of September 30th, we have over 1.9 billion in forward, contracted revenues with 2.5 years of remaining contract cover,

Through the first nine months of 2025, we added 38 charters, including extension options, exercised for almost $780 million in contracted revenues, of which about $380 million were added in the third quarter.

Slide 6 is where we discuss our Dynamic Capital allocation policy. With the inherent. Cyclicality of our industry. We consider it. Essential to look at the big picture in order to remain on the front foot.

Manage risk and capitalize on opportunities as they arise.

As George mentioned, this has only become more important in the current environment.

And cash reserves to manage the various geopolitical challenges and uncertainties that confront the industry with growing frequency. And of course we need cash on hand to cover capex requirements and

Seize the right investment opportunities as and when they arise especially as we've observed on various occasions because the best such opportunities tend to crop up when capital is otherwise scarce.

We're proud to have made GSL a stable and liquid platform that allows investors to participate in the industry, with us managing and mitigating the risks of the down cycle and negative volatility, while maximizing access to super returns in the upcycle.

Turning to slide 7. This slide shows the cyclicality of our industry and how we have managed it. We want to emphasize our history of disciplined capital allocation regarding investments—buying ships during downturns, when asset prices are depressed, or structuring deals such that downsides are limited and upsides are substantial.

This also shows that it is at and near the bottom of Cycles where the opportunities for outsized Value are to be captured.

I'll now pass the call to Tassos to discuss our financials.

Thank you, Tom.

Slide 8 shows your financial highlights with the first 9 months of 2025.

I would like to emphasize a few key, takeaways earnings and cash flow are up compared to the first 9 months of 2024.

Our cash position is $562 million, of which $70 million is restricted.

The remainder ensures that we can fully cover our covenants, manage working capital leads, and address the potential financial implications of geopolitical issues, which seem to be arising with increasing frequency and sharpness.

It also provides dry powder, both for capex to keep our existing Fleet commercially relevant and for discipline investments. In Fleet renewal, if and when the right opportunities emerge,

And, of course, importantly, it supports payment of our expanded dividend.

Earlier this year, we completed an 85 million refinancing that push our weighted average maturity to 4.7 years and broader Blended cost of debt to 4.34%. We also realized a 28.3 million gain from the sale of 3 older vessels.

A strong credit rating was affirmed for the firm. We have $33 million remaining under our opportunistically served buyback program, and we continue to deliver and build equity value.

Slide 9 shows our ongoing process to rebuild, resilience, de-risk our balance sheet, and grow equity value.

The graph on the left shows, our progress in reducing our outstanding debt.

From 950 million. At the end of 2022, we are on track to be under 700 million at the end of this year, even as we have acquired ships and put leverage on

the graph on the right.

The more telling perspective is that our financial leverage has reached 0.5 times. We have come a long way since the days of over 8 times leverage.

Slide 10, the last graph shows our cost of debt, which we have lowered to a blended 4.34%, down from over 6% in 2020.

We have continually reduced our margin, even as soft costs have risen materially. The graph on the right shows we are very competitive with break-even rates. The interest rate reductions have more or less offset our inflation.

With that, I will turn the call back over to Tom to discuss the market and our Fleet.

Thanks.

slide 11 righter our emphasis on midsize and smaller container ships between 2000 and 10,000 to

These vessels are the backbone of global trade, not dependent upon any one trade or country, and are extremely flexible.

Stands in contrast to the very big ships that tend to dominate the headlines in the media.

But which are more restricted and where they can go due to their size, requiring specialized ports, infrastructure, and deep water—not to mention huge cargo volumes to fill them.

This keeps the very big ships largely confined to the main lane trades between China and the U.S. or Northern Europe, which, as I'll get to in a minute, have been disrupted in recent quarters.

The flexibility of our Fleet offer. Uh our Fleet offers is a key point that we re reiterate because it matters a great deal.

Particularly in this current environment of heightened uncertainty and shifting trade patterns.

Plays an increasingly vital role as trade routes and supply chains have become fragmented by a wide variety of factors that we will discuss on the coming slides.

On slide 12, we break down the impacts. We've seen from the ongoing disruption in the Red Sea prior to this, which represents approximately 20% of global containerized trade volumes transited, that bottleneck.

Since then, about 10% of effective capacity has been absorbed as ships have been forced to reroute around the Cape of Good Hope, which in turn has driven up charter rates.

While it is difficult to predict how long these particular conditions will last, we and the industry, more broadly, are looking to see a sustained period of safety and stability before transiting goods through there again. As Sea Farah, safety is key.

If and when the Red Sea does reopen for safe Transit, there would be a period of costly and complex rerouting and reshaping of networks for the liner companies.

This suggests that there will need to be a reasonably high industry-wide conviction of a long-term normalization of conditions before we would expect to see large-scale rerouting via the Red Sea and sewers. But it's certainly something to keep an eye on.

On slide 13. We discussed tariffs. And how 2019, under the first Trump Administration could be instructive in how we might expect things to continue to play out. Moving forward.

Following the 2019 tariffs there was, reduced trade between the US and China which had a negative impact on larger container ships used for those Mainland trades.

While, as for midsized and smaller container ships, there was perhaps counterintuitively an uplift in demand following the tariffs as trade routes shifted. More emphasis was placed on intra-Asian trades where mid-sized and smaller ships predominate.

Regional trade volumes increased, the supply chain diversified, and midsize and smaller container ships were the beneficiaries.

Put bluntly if you're providing capacity to the containerized supply chain. As we are, increased disruption complexity and inefficiency in the supply chain tends to be a good thing and supportive of earnings

Slide 14 is where we discuss the latest developments, or non-developments if you prefer, on the regulatory front, namely USR fees and the reciprocal China port fees. This caused quite a lot of agitation, vessel redeployment, and uncertainty as the industry sorted out how to adjust.

In the case of USR that played out with several months of forward, notice as the regulations which were announced in February modified in April and implemented in October.

Meanwhile, in the China port fee situation, several months' worth of disruption and strategizing were forced into a memorable few days in October, with measures announced on a Friday and implemented the following Tuesday. Even with both measures now apparently suspended after only negligible periods of enforcement, the industry was given yet another sharp reminder of the value of maintaining flexibility.

Meanwhile, the long anticipated, uh, Net Zero framework at the IMO, which had been due to be adopted in October was deferred at the 11th Hour by 1 year.

This deferral will likely extend the lives of older ships, and lift the commercial relevance and earnings convert for conventionally fueled ships, such as those in the GSL Fleet.

Our view has long been, but in a period of pronounced regulatory uncertainty, there are clear advantages to investing in midlife tonnage and being smart followers when it comes to the adoption of new fuels and propulsion Technologies.

We cover supply side Dynamics and scrapping Trends on slide 15.

As ships continue to transit around the Cape of Good Hope and supply chains remain both fragmented and subject to continuous reshuffling, idle capacity and scrapping levels have remained close to zero.

In that context, scarcity value is real, and the liners continue to show an interest and, in fact, a need to charter in scarce tonnage in an uncertain freight environment. The risk of being short on capacity and the value of network optionality override concerns about fleet optimum optimization and the maximization of efficiency.

Slide 16 shows the order book here. We want to highlight that although the overall order book is meaningful and has grown over the past few years, the segments in which GSL focused are seeing far less growth.

For ships, over 10,000 to a segment upon, which GSL does not focus or participate. The order booked Fleet ratio stands at 54%.

All Container ships and even more. So for the 15% order, book to Fleet ratio for the segments GSL does participate in which are those between 2,000 and 10,000 to

Also with the current order book, if we were to assume that all vessels over 25 years old were scrapped through 2029 which is how long it would take to deliver the current order books.

Sub 10,000 to Fleet would actually, shrink by over 5% in that time frame.

While capacity remains tight, we will continue to lock in chart coverage at attractive rates. However, should the market normalize in the coming years we would expect to see scrapping activity. Pick up sharply meaningfully offsetting the impact of new vessels coming into the market in our size segments.

slide 17 shows the charter Market against which I would remind you that our break even rate, including operating costs and Debt, Service is just over 9 and a half thousand dollars per vessel per day with the current market conditions, we have been locking in as much Charter coverage as possible and now have forward visibility on 1.92 billion of contracted revenues over 2.5 years of coverage,

Who knows how macro geopolitical and industry dynamics will develop going forward, but we're pleased to have built a stable platform in otherwise choppy seas. On that note, I will turn the call back to George on slide 18.

Thank you, Tom.

To summarize.

A cash flow is a strong and we continue to build our Charter backlog with almost 2 billion dollars of cover. Over 2 and a half years 2025 fully contracted marginal open days in 2026 and a significant slice of 2027 already covered.

even as there is a sigh of relief on the current suspension of usdr and China Port this

And some quarters for the deferral of the IMO Net Zero framework.

Uncertainty remains pronounced.

We're maximizing optionality to manage risks and capitalize on opportunities.

Less efficient and more fragmented, supply chains are increasing demand for our fleet of flexible midsize and smaller container ships.

We have strengthened our balance sheet and continue to monetize debt to build equity value and resilience through the Levering.

We have lower their financial leverage and our average Break Even rates stand at just above 9 and a half thousand dollars per day per vessel.

You know, credit ratings are in great shape.

As the existing cash flows.

And cash cows begin to age out. We focused on the discipline and opportunistically renewal of our Fleet to ensure that we have the right value generating assets going forward.

And as ever, we're proud of returning Capital to shareholders through our dividend, which following the increase announced today, stands, and an annualized rate of 2 and a half dollars per common share.

67% above where it was just 18 months ago.

With that, we would be very pleased to take your questions.

As a reminder to ask a question, simply press star 1 on your telephone keypad again, that is star 1 to ask a question.

And our first question comes from the line of Liam Burke with B Riley Securities. Please go ahead.

Thank you. Hi, George, Tom Taso. How are you today?

We're well, thanks Liam, how are you?

Just fine. Thank you.

Um, it looks like Freight rates are sort of bounced off the bottom from uh, third quarter and and are inching up. Are you still seeing a healthy gap between Freight rates and Charter rates here?

Uh, hi, Liam short answer, yes. Um, Charter rates continue to move sideways, um, at very healthy levels. So at historically I would say really quite high and attractive levels. So despite the, uh, the near-term volatility, both up and down in uh, the freight markets, the charter markets uh, are staying steady

Great. And is there any appetite or how are you balancing? Uh, rates versus duration. Uh, when you're looking at either renewals or

Forward charters.

Um, attractive economic rates on as long Charters really as we're, we're able to go at the moment. So, for different sizes, that means probably sub 5,000 to you. You're looking at a couple of years that you can fix for, and from say 6 or 6 and a half thousand to up. You're looking at maybe 3 and possibly even 4 years in some instances and that would be our, our preference to lean into

Great. Thank you Tom. Thank you George.

Our pleasure again to ask a question, simply press star 1.

And our next question comes from the line of Omar nakota.

Thank you. Hi George. Uh, Tom tosses. Thanks for the update. Um, obviously things are coming together, quite nicely, pretty solid, quarter added a good amount of backlog, despite all the, uh, the uncertainty and the strange times that you were just referencing Tom, you know, just kind of thinking about the fact that you were able to add so much backlog in the third quarter, you know, 380 million nearly half of what you did for um uh or sorry, nearly half of it, equal to what you did in the first half. Um,

Just wanted to get a sense from you. Is this, is that on the back of a very sort of maybe active fast-paced Market on the part of Charters? Or is it something unique to GSL that you were able to accomplish? Maybe um, uh, not necessarily representative of the broader market dynamics.

Um, I mean, obviously, we take every opportunity to talk up our own book Omar, but I would say that it's um, it's more representative of the market. And if you look at, uh, look back on 2025 year to date the first quarter was very active. The second quarter was significantly disrupted by uh, Liberation day. So I would say a lot of chartering activity was effectively put on hold during the second quarter.

And that came into the third quarter. So I think it's probably best to look back on the 9 months as a whole, as opposed to trying to infer too much from from Individual quarters. But what I would say is that um in the face of an uncertain uh environment and it just seems to get more uncertain every day. Um the lines see capacity as optionality particularly you know midsize or smaller container ships that can be moved around pretty much any trade. And we see uh as a result sustained demand for such tonnage which is what explains the fact that um, Charter rates in the broader Market as well as within our fixtures, uh, remain at very attractive levels.

Yeah, yeah, thanks Thomas. Especially, it looks like, you know, for those older vessels, we noticed in your fleet list several other ships that are in that 2000, 2001 built age range have now been extended for say 3 years. You know, those ships are going to be, call it close to 29, maybe 30 years old when ships roll off charter. You think, obviously, it's going to be a different market perhaps in 3 years' time. But as you think about what that market looks like, assuming it's still kind of the same, do you think they should continue to trade at 29 or 30 years old, or is there an age limit you think for those ships?

Yep. If I may take this, I will tell you, if the market was exactly the same as it was today.

These ships would contain trade.

Uh, there is one big differentiation between containers and the other types of ships: there is no extra insurance on the cargo.

Depending on the age of the ship.

And why is that? Because container ships have the highest and best record of safety versus other types of ships. I mean, ships are sinking or breaking in two, etc.

Uh, the construction of the containers because of the, of the way they are loaded and discharged in direct in a direct way. You know, they have to slide the, the containers into the cargo. Hold from the Gantry crane. They are super heavy in lightweight, hence very strong. Um,

Very well-made. Then the fact that the cargo does not come into contact with the with the, with the, with the cargo hold. Meaning it's just boxes that you stack up in so you're not putting anything like oil that goes and touches the, the side of the of the ship, you know, the the cargo hold or bulk cargo, which again, you know, gets in contact with the with the surface of the cargo hold and hands deteriorates over time.

Make container ships very strong, and hence there are no extensions, which means that the ships can trade.

Uh, easily passed the 28 or 29 years if the market is there.

To that, I think, you know, the US, Jones act vessels that, um, trade, uh, in some instances into the sort of late 30s and occasionally into their 40s. Uh, are evidence of the fact that, um, tech technical obsolescence in the container ship sector. If you, if you put sort of fuel and propulsion issues to 1 side for a moment is not an issue so that Dov Tales uh with what George was just saying. So long story short, if there's economic need the vessels will, um, quote unquote, live longer,

Okay, yeah, thanks. Thanks Tom, thanks George. That's that's very helpful. Um and you know maybe just as a 1, final 1 uh Tom you were talking about the Red Sea uh and there's obviously perhaps maybe a growing view that we'll start to see transits pick up again in the near future now that there's a peace deal in Gaza. Still. Obviously a lot of uncertainty there, but, um, just wanted to get a sense from from you are, are you having discussions with your Charters at the moment on on how that will look? Um, uh, and is that how does that decision come about? Is that going to be an agreement that you make, or is it going to be them who forced it down? How, how do you kind of think about the 2 sides of the uh uh of of of the, the ship?

Yeah. So first of all no, it's not something which is currently under discussion. Um secondly it's a sort of multilateral decision that has to be taken because also you know beyond the charterers and the owners there are also the insurers, not only of the vessels themselves but of the cargo. So it's a, it's a fairly complex web of folk, um, that that have to get comfortable with the idea of of transiting and the biggest, uh, concern is obviously, um, that of of seaf far safety. But I would say, you know, if we go back to looking at the tonnage that was diverted away from the Red Sea and sewers and around the Cape of Good. Hope it's predominantly the bigger ships. The larger ships.

Um, because it's those ships that are typically deployed on the, uh, the Asia to Europe legs. So, I would say that the opening or not of the Red Sea is something that will have a proportionally greater impact.

On bigger ships.

And less of an impact. I mean, which is not to say no impact for sure, but less of an impact on midsize and smaller ships, which were not frequent transits of the, uh, Red Sea and sewers. In any case, even when, you know, it was, uh, quote-unquote a normal environment up until the end of 2023. So we'll have to see, but, um, I think the dynamics remain comparatively supportive.

Okay, great. Thank you, Tom. Thanks, George. I'll pass it back.

Oh, pleasure.

Again, to ask a question, simply press star 1 on your telephone keypad.

And with no further questions in queue, I will now hand the call back over to Thomas Lister for closing remarks.

Well, thank you all very much indeed for joining our 3Q call and we look forward to uh reconnecting in the new year, um on the back of our 4q earnings many thanks.

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