Q3 2025 Danaos Corp Earnings Call

Good day and welcome to the Danaos Corporation conference call to discuss the financial results for the three months ended September 30, 2025.

As a reminder, today's call is being recorded.

Hosting the call today is Dr. John Coustas, Chief Executive Officer of Danaos Corporation, and Dr. Ivan Glouhot, Chief Financial Officer of Danaos Corporation.

Dr. Cuss sauce, and Mr. Hot seats will be making some introductory comments and then we will open the call to a question and answer session.

I would now like to turn the conference over to Mr. Avon Glows, Chief Financial Officer. Please go ahead, sir.

Thank you, operator. And good morning to everyone.

Before we begin, I quickly want to remind everyone that Management's remarks. This morning may contain certain forward-looking statements and that actual results could differ materially from those projected today.

These 4 were looking statements are made as of today and we undertake no obligation to update them.

Factors that might affect future results are discussed in our filings with the SEC and we encourage you to review these details 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 evida adjusted, evida 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.

Thank you, Evangelos. Good morning, and thank you all for joining today's call to discuss our results for the third quarter of 2025.

As we enter the final months of the year, the rating conditions remain broadly unchanged.

The war in Ukraine continues with no end in sight. And while the conflict in the Middle East is in the process of resolution

Transit through the Red Sea has not yet resumed, and liners are waiting for more permanent signs of stability to restart the transit.

The recent escalation in trade and tariff tensions between the United States and China enabled trade to resume and hindered.

While the redirection of China's exports to the EU and other countries kept trading, the container traffic at an all-time high during the third quarter of the year.

The chocolate Market remains robust and the idle Fleet remains at all-time low.

Demand for midsize and larger vessels continues unabated.

And we have secured new charters for vessels opening, as far out as the beginning of 2028.

Civilian slots for 2028. Deliveries are becoming scarce and new building prices continue to rise.

We have selectively extended, our new building program at below market prices and we have already secured multi-year employment for these new orders.

Following the IMO's one-year postponement of its Net Zero framework, we expect conventional fuels to remain prevalent in the medium term, even as the long-term decarbonization trajectory is unchanged.

In relation to our new building program. We recently added 6 to 18,800 to vessels to our order book with scheduled deliveries between 2027 and 2029.

36 million.

Of the financing front, we recently completed the $500 million secured 7-year bond offering with a 6.85% coupon.

This is one of the most competitively priced deals ever achieved in the shipping industry for an unsecured bond with such tenor, and it is a testament to our superior credit quality.

We intend to use the proceeds to redeem our 2028, $300 million bond.

As well as prepaying for some smaller secured bank credit facilities.

We have already arranged secure debt financing for the majority of our new building program and our Fortress balance sheet that has been solidified with the recent Bond, issuance considerably, enhances our capacity to pursue a creative investment opportunities that can Propel the growth of the house, into the next level.

Our solid performance has enabled us to continue to deliver strong, profitability, performance, and enhance our contract backlog and fund Investments to reduce the age of our Fleet and further cement the house. Leadership position in the container Charter Market

We also continue to opportunistically invest in the dry bulk Cape Size market segment, where we expect outsized returns due to supply constraints and a mild demand increase.

Finally, I'm pleased to announce that we are increasing our quarterly dividend to 90 cents per share.

System with our policy of yearly increases while also striving to continue to build long-term value for the benefit of our shareholders with that. I'll hand the call over back to your Bankers who will take you through the financials for the quarter.

Thank you, John, and good morning again to everyone. Thanks to all of you for joining.

This call.

I will briefly review the results for the quarter and we will then open up the call to Q&A.

We are reporting adjusted EPS for the third quarter of 2025.

Of 6.75 cents per share.

Or adjusted net income of $124.1 million.

Compared to adjusted EPS of $6.50 per share.

Or adjusted net income of 126.8 million.

For the third quarter of 2024.

These 2.7 million decrease in adjusted net. Income between the 2 quarters is a combined result.

Of a 6.1 million increase in total operating costs mainly due to the increase in the average number of vessels in our Fleet.

And the $2.5 million decrease in dividend income.

Partially offset by a 4 and a half million increase in operating revenues, a 1 million decrease in equity loss on investments.

And a 0.4 million, decrease in net, Finance expenses.

As analyzing our earnings, release the increase in our Fleet produced 11.2 million of incremental operating revenues.

That was supplemented by an extra $1.8 million in higher operating revenues as a result of higher free utilization.

Those were partially offset by a $4.3 million decrease in revenues of our container segment, as a result of lower contracted charter rates between the two periods and the $4.2 million lower non-cash US GAAP revenue recognition.

That's still operating expenses increased by 2.4 million to 52.3 million in the current quarter from 49.9 million in the third quarter of 2024. Mainly, as a result of the increase in the average number of ss in our Fleet,

While our daily operating cost.

slightly increased to 6,927 per vessel per day for this quarter compared to 6,860 per vessel per day for the corresponding third quarter of 2024

Our operating costs continue to remain among the most competitive in the industry.

G&A expenses increased by $1.6 million, to $12.6 million in the current quarter compared to $11 million.

In the third quarter of 2024,

Interest expense, excluding Finance costs amortization increased by 0.3 million to 7.7 million in the current quarter, compared to 7.4 million in the third quarter of 2024.

This increase is the combined result of a $0.9 million increase in interest expense.

Due to an increase in the average indebtedness.

Periods. That was partially offset by a reduction in the cost of debt service by approximately 74 basis points, mainly as a result of a decrease in software costs between the two periods.

Uh, we also had a $0.6 million decrease in interest expense due to higher capitalized interest on vessels under construction between the two periods.

At the same time, interesting, come in at 3.8 million in the current quarter.

Due to the increase, average cash balances, on our balance sheet.

Partially offset, of course by uh, declining uh, interest rates.

Adjusted EVA increased by one and a half percent.

Or 2.7 million.

To $181.6 million in the current quarter from $178.9 million in the third quarter of 2024.

For reasons that have already been outlined earlier on this call.

We encourage you to review our updated investor presentation that is posted on our website, as well as subsequent events disclosures, let me provide a few of the highlights.

Since the date of our last earnings release.

We have added 745 million to our contracted Revenue backlog.

as a result, our contracted Charter backlog has considerably improved

And now stands at $4.1 billion with a 4.3-year average charter duration.

While contract coverage is already at 100% for this year.

95% for 2026 and eighty 71%.

For 2027, in terms of operating days and contracted operating days.

Our investor presentation has analytical disclosure on our contracted Charter book.

As of September 30, 2025, our net debt stood at $165 million.

And this translates to a net debt, to adjusted debt ratio of 0.23 times.

While 53 out of our 84 vessels.

Are unencumbered and debt free.

This quarter. We have declared a dividend of 90 cents per share which is an increase of approximately 6% versus the prior dividend.

And we also continue to execute under our share repurchase program and we currently have 86.4 million remaining authority to repurchase stock.

Under our million dollar.

Uh, stock buyback program.

Finally, as at the end of the third, quarter of 2025 cash, stood at 596 million,

While total liquidity, including availability under our revolving credit facility,

At marketable Securities stood at 9 971 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 for Q&A.

I'll begin the question.

If you're using a speaker-phone, please pick up your handset before pressing the keys.

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 Nocta with Jeffries. Please go ahead.

Thank you. Hi, John evangelos. Good afternoon.

uh,

A couple of questions uh, from me.

What do you think is driving all of this? Uh, kind of the I don't want to call it, say a frenzy, but just a strong appetite on the part of liners looking for ships, whether it's what's on the water on a forward basis, perhaps. But then also, you know, looking for, you know, brand new ships that deliver in 28 and 29, just kind of that that, that high volume of activity. What do you think is driving that and can we expect that to persist as we get into 2026?

uh, well Omar, uh

It's, uh, it's difficult. Let's say to answer exactly what is happening.

what we see is that,

There is this? There was this, uh,

Let's say there's a problem with Paris, but tariffs themselves.

Have not changed the overall world. Uh, let's say production capacity.

And China.

Having, during this period, didn't stop producing. It's just that the goods were directed elsewhere.

And, uh, what is really interesting this time is that we see the dynamism of the market happening.

outside of the

let's say the usual Western areas, I mean, uh, Europe and uh, the US.

Uh, the market is developing uh, quite substantially all over the other the rest of the world.

And that is why the demand for midsize ships has been so robust.

because that's really, uh,

Where the demand, uh, increases coming.

So, uh,

Yeah, I cannot really say, uh, you know how strong 2026 is going to be. I mean, as far as we are concerned,

Uh, you know, practically even for 2027, we are mostly uh, fixed.

It's difficult really to make any prediction.

And, uh, you see, we will, of course, have a better idea of where the market is heading.

After the canal is opening again.

Uh, which

You know, we believe now that it will be maybe an event of the, uh,

first half of 26, although

Uh, you know, in that kind of area.

Uh, the disarmament of Hamas is not happening.

And, uh, I think this is really the most crucial question to ensure that this conflict, uh, is over.

Yeah, that thanks John. Yeah, definitely a lot of moving pieces and it does sound like the trade is clearly gotten much more uh complex. Uh and then maybe just kind of thinking about the the now specifically and you know the investment in the cape size vessel you bought. Um, that's your 11th ship. Um, you know, this this this 1 comes after you had bought the the original 10 back in 23. Uh, what's maybe triggered this investment? Uh, and then also, you know why this age range, um, and should we expect more of these, uh, these types of Investments, uh, going forward?

yeah, you know, of course our idea was uh, you know, when we entered that kind of Market to really grow it

I mean, as a percentage, uh, let's say of our, uh,

Fleet not in terms of let's say ship numbers. But at least, let's say in terms of uh, investment in value.

All these dry bulk investment is less than 5%.

Of, uh, you know, our overall assets, so it's still really nothing. I mean, practically, and, uh, we definitely want to increase it.

Uh, you know, for the time being, it’s a new building front. Still, these vessels do not make sense.

So, uh, we're trying to expand selectively in the secondhand Market.

Uh, and mainly, uh, trying to identify a good quality vessels.

Ever purchase program. You know, you have been since Inception, I think in 22 quite active with it. Uh, you're also, you know, active in the prior, say, 3 3 or so quarters, not much was done. I don't think you, I don't think you bought any stock in the last quarter. Uh, what's behind that? And and and what can we expect? You know, going forward or what are you thinking about the buyback from here?

We are continuing. We have not really stopped. It's just the pace has been, uh,

Kind of a smaller.

Uh, we still believe that our stock is, uh, greatly undervalued.

and we are, you know, continuing, uh,

You know, at the smaller pace, but we have not stopped.

Yeah, Omar, we received the share buybacks.

Uh, in the past few weeks.

And uh, we're still at it.

Okay awesome. Thanks evangelos. Thanks John uh and also congrats on the on the bond issue. Last month I'll turn it over.

Thank you.

Again, if you have a question, please press star then 1.

the next question comes from Clemen Mullins with value investors Edge, please go ahead

Good afternoon, and thank you for taking my questions.

Following up on Omar's question. On the case is acquisition and your commentary or maybe wanting to expand your direct exposure. Could you provide an update on how you view your investment in Starbucks?

And secondly, is there any appetite to maybe expanding into other segments? Such as panamax or super Maxes?

Uh, well, as we said, you know, we are, uh, happy with our investment in Starbucks. We have

Actually increased that position when, uh,

you know, last spring, when we saw a dip in prices,

uh, you know, we are continuing. We believe that there is uh, room for uh,

Appreciation.

Um, as far as

The other segments? Uh, no, we are not looking into other segments. Uh, you know, at this time being.

Thanks for the caller. That's helpful. Following up on the cape, safe side of the fleet, could you provide some guidance on your Q4 fixtures today?

Um, we do not provide guidance as to, uh,

Charter pictures.

For the running quarter.

Anderson makes sense. I'll turn it over. Thank you for taking my questions.

It appears we have no further questions at this time. I would like to turn the call back over to Dr. Custos for any further comments or closing remarks.

Thank you all for joining this conference call and for your continued interest in our story. We look forward to hosting you on our next earnings call. Have a nice day.

Thank you. This concludes today's teleconference.

We would like to thank everyone for their participation, have a wonderful afternoon.