DAC - Earnings call transcript Q1 2021

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Operator

Good day and welcome to the Danaos Corporation Conference Call to discuss the Financial Results for the Three Months Ended March 31, 2021.

As a reminder, today's call is being recorded. Hosting the call today is Dr. John Coustas, Chief Executive Officer of Danaos Corporation; and Mr. Evangelos Chatzis, Chief Financial Officer of Danaos Corporation. Dr. Mr. and Coustas making open be comments then and Chatzis call some to will the a we will introductory question-and-answer session. like I Mr. now to call the would over turn to call. Evangelos begin Chatzis, the to

Evangelos Chatzis

and you, thank Thank morning Good to you joining us operator. for today. everyone,

financial that continue are we that to materially to note quickly this contain of today. are release forward-looking from statements, business. measures feel disclosures. those to encourage Factors affect no with non-GAAP Dr. measures Safe obligation over adjusted review begin, forward-looking to are of that broad EBITDA, in financial our will actual future let these risk non-GAAP today materials. that made Coustas, our Please and to discussed call With may to everyone statements them. want results projected we management's we undertake remind as Before the overview earnings results as income update SEC, certain accompanying you who detailed might where and and quarter. will EBITDA, our provide measures now the John? such adjusted filings Reconciliations financial the I that, a net and GAAP and and also me Harbor appropriate, remarks morning we could differ These turn we for evaluate refer to included in factor to

John Coustas

in possibly terminal and all call market, The for Evangelos. continuation year the turnaround of today's strength year, of discuss dramatic at continues normalize the you you, blockage more conditions the levels, the results in operations, end the and the likely we Canal record multi-year have sector first peak of to profits, and joining profitability if not of and significantly ensuing thank will capacity. after the its which the for before is quarter contributed chain liner stronger. are will and higher disruption The demand, beginning Thank of not at XXXX. Good levels. supply morning companies our to in of which the the experienced of the exacerbated The the their signing pandemic reporting Suez the slowdown unabated are at importantly further keep season. Liner contracts the the and elevated limit

On that skyrocketed increase owners XX the least remain levels can is seen led newbuilding employment dramatic healthy years, This and more rates vessels secure confidence at market TEU at X,XXX non-operating rates in the X+ important very the strong levels. that and will what front, been sharp increase has charter have to years due duration has ordering. increased for in euphoria so to over a significantly not to

to end a is fleet, compared but it the the result, reached XX% the in now XXXX, stands the existing higher As X% at at much which still of nadir of order XX% book the than XXXX. lower

and that believe at will growth. supply growth absorb post the vessels expected not of demand terms the least pandemic until existing deliver in ordering. years In order new of Fortunately, the the lid and are on factors orders, any the to capacity both event, propulsion and keeping lack excessive fleet XXXX, the ordered lean be We inhibiting are book. of two order will market strong with vessels participants should conventional many for hesitance fuel a next recently shipyard comfortably

for very and competitive positioned the are position resulting of best-ever terms, a of far The benefits in reaping of Danaos growth cash refinancing April us. company bond successfully debt on completed XXth of had concerned, stellar the environment. significant liner current The market is capital. market, our is profile currently giving access in the opportunities. As also performance we consequences flow very our in sector a in pool to free as us the significant we significant the the On amortization U.S. number for of

around valued in shareholding today million. $XXX our is ZIM First, at

were cash million the injection quarter Secondly, we'll flow we early dramatic have so them ZIM generation the second holding, cash of to in and the HMM $XX of which bonds, induced XXXX. redeem

performance sector liner eliminates risk for Thirdly future. counterparty foreseeable the

On the at improved single to fixture was and every chartering level. record we a quarter done for These effect we year. beginning to expect every this concluded fixtures are for front, see new take metrics

path of decide to and Danaos new than greatly of the fixed steps has through financials a the dividend XXXX $X.XX strong believe has that years share along yield hand fixed has both also base dividend back appreciated a of to November view same quarterly our equity the group the that, shareholders and repositioned Board since dramatic the offering. optimistic investors, stock. we institutional right standing financial new in shareholder future more company been of you as We growth expand of will its will for in liquidity over company rewarded the who been X,XXX% handsomely the All driven a enhance the our reinstate and the appreciation has I'll through Evangelos? Our and led Evangelos, With that call take last share. the by a market to continue a of will the our quarter. the couple have to undertaken future.

Evangelos Chatzis

everyone. revenues to More by average the first higher result costs, million reporting are revenues, adjusted XXXX million XXXX. the the quarter in or to for Hanjin claim, Thank per for $XX.X of of a again the two million expenses, net adjusted $XX quarter operating This EPS first mainly collection briefly million increased share compared then our total results the adjusted and income to million the by Today, of between morning $X.X or $X.XX finance increase improvement due specifically, in $XX.X $X.X compared per $XXX.X the increase is to of current average XXXX. quarters in of mainly improved operating EPS between the open million partial increased our of quarter and the increase partially expenses result $XX $X.XX of of offset $XX.X of size vessel average two quarter two John fleet, incremental increase share quarter, and $XX.X in $XX.X fleet I quarters. first of million review we quarters. to as call in for from in the gain $X.X the increase our good million million result a $XX.X in we in quarter Q&A. cost to operating and will you, a the a a is first of per as and fleet in will increased between utilization from Vessel XXXX, attributed the $XXX.X to million to increase revenues the first million revenues our attributed result million of the additions $X,XXX number vessel of the vessels increase operating as related XXXX, current for the COVID-XX $X,XXX the of higher to and of quarter increase This per daily mainly in crew a in operating the is while quarter to this the from million by of current the in remuneration. rates in a day quarter day charter fleet

$X.X been improvement G&A increased current remains still in industry. service management recognition the $X accruals, $XX.X first non-cash provided are: of has Investor on with $XX.X to the decreased of basis by to QX, as in daily website, accordance of fleet $X.XX for current the value OpEx mainly the in first million charter-attached like million due to cost is do XXXX first by additionally the by valuations to improvement $X.X of we charter you already increased increased our encourage compared a analytically million outlined not $X.X the all amortization Interest by million on stock-based competitive quarter quarter Presentation due vessel cost to one XXXX. call. current debt This include versus million the expenses independent the finance to out that on However, to values $XX.X across XXXX applicable billion million asset call. increased this in in reasons premium quarter fleet. to our quarter X.X% quarter review. in XXXX million million This brokers, posted by our would the most finance highlights between that reduction agreements. of of periods. fully improved quarter size are the today, in the earlier for the EBITDA We note in XXXX that the our our outlined of the improved the of attributed is although to in and wherever results which fees, to $XX.X were and with and board on from this expense cost, $XX.X few in Adjusted XX.X%, approximately laid of first compensation, mainly $XX.X compared that capture by earlier fundamentals the of excluding our the have A at of CEO the or quarter the today XXXX, million market two million first of our the reported quarter significant

same Our ZIM valuation ZIM equity to within the position expect of second and improved, of time $XXX and bonds it around the convert XXXX. while at quarter the cash HMM into we at also million, has most today the is valued of

of that the within $XX.X they months of HMM will the to and and XXXX come XXXX the this these of notified and maturities the couple over quarter have ahead million to year. proceed next and with notes, been We due second we both redemptions inflow cash effect expect the in of early of ZIM by

$XX.X of which participation stands back a net the the million, at the value stronger of Gemini of On to XX% value million. our $XXX.X of values, asset currently translates asset

the all at billion our the On per or of asset currently value $X.XX $XX.X share. basis we calculate above, net

over And quarter some charter our this side rates analytically coming months, come vessels X we higher effect the of into laid-out improved than effect significantly the have start for while others the XX all gradually of previously. vessels, Presentation, operating which XX will the into and second within Investor at arrangements On fixed we already past year. some have the within third

$XXX this result our for still of than contracted the and $XXX the fixtures, overall of million open improvement stands total for operating a already operating XXXX higher revenues these year, $XXX XX% currently contracts. X.X% revenues in our to a contract improved As stands $XXX at XXXX and or back million only which million. XXXX We at our days billion, backlog XXXX, exceed versus of million, revenues the $X.X were in the expect we of on have alone

now are no I listening to the top-line, to thank like our to for Operator, of there part such EBITDA. Q&A. cost ready marginal this would you improvement associated increase settle that, with be also should our expected first call. since this we is to in to Additionally, open down call our With to

Operator

today Jefferies. The Giveans come Instructions] ahead. Randy first [Operator will question from with Please go

Randy Giveans

for Yes, dividend haven't a we something on now, since first, announcement. the know I been a congrats while seen goal XXXX. that's

the see to more quarters And year? dividend maybe how good it color or do or share back. can coming plan growing With that So per some you that, in $X.XX you per on the on you $X decided on years? provide

John Coustas

You know And this or And not have to decided said, position more let's adding by at assets kind growth, be what just that kind in company which say have really don't we delivered say, growth. a good - our to assets. profits let's on yield want of, I part, really significant currently, to without following. by it any have we the as adding what very as specific profits growth Board always had this Danaos have a It's number, the in because shareholders we let's the exploiting growth the our peers. we yield growth it's is necessarily looked was to less dividend did best. And on to we say of is, doesn't a We formulated it's assets been growth strategy target.

Randy Giveans

years? there of plans small so for million, the have base yes, still I to $X, it's this certainly or we're So it acquisitions? $XXX a stick Is talking or rest the $XXX annual quarters coming at let's on very And just in kind million growth EBITDA and guess and right then of for of EBITDA, component dividend, right? million of return a other $XX a use capital is your annual

John Coustas

debt. and we growth chest a to up company. the investment have, strategy are going are say, done relies And in is What not believe really of moment let's let's on that, whatever to building that order pretty loading we at the be this in there be just growth going will in significant our, equity doing secured really future. component, we it's to war say, to with going significant be are Definitely

Randy Giveans

also with cash with and the all your guess last you've clearly segueing, and that quarters your substantial You've these I you've ZIM leverage, that debt, bonds HMM contracts monetized over refinanced here dramatically years. been reduced then already, And flow signing? pretty

guess, I for net target what goal So a have second-hand cash growth a plans top excess going that leverage you the or is are your additional debt Do forward? via priority? or acquisitions

John Coustas

this we money. making I the anything. The a then expensive have are let's moment, overheated. wouldn't because very I point we is no we lot really position at spending, said, in of that think vessels, market as on say a is There in money today are done

the I to We situation. said, as evaluate are going

really is we're war environmental to We direction towards have the will are the drive I clarity of said, the on investments that then going going this end shipping building to do. we much chest. the Until be a going actual as of And to year. more

Randy Giveans

I the then on lastly guess front. chartering And

few You what years, four in a available? balance of years, the years, some normal rate seeing in duration for you of some still next versus of few on charters are three how vessels getting vessels of the have a more duration available the maybe kind in one-year coming two coming for you that these kind terms months, maximizing

John Coustas

deliveries the picking less maximize than although year lean I Well, looking XXXX, months. of it's we and a that say, tell going are from We're ones of We probably the not three say, durations. And is really earnings in XX wanted course have, we to years. up. will X,XXX thing The our as plus to let's XXXX. it's a be are I two greater let's said, actually smaller four-year vessels discussing can currently next only between, just negotiating XXXX to discussing the actually visibility then to go in that, above TEU, considerably very you terms

time. the So to going continue the say some - market is in for shortage let's the charter

Operator

And the next ahead. Chris question Wetherbee go today will Citigroup. Please come with from

James Monigan

Chris. for on James

balancing to it, Just wanted comment understand and made. In Good about and touch and you as on to trying morning. about across touch of building deleveraging sort to were, specifically dividend had on And comment? or if that preparing cash war preparing growing when it really wanted you're you the thinking if versus the just of the had the to of just war was basically chest understand about how of deleveraging you up it? sort chest. the context comment the just had made what more it were Yes, of sort meant think specific position, sort you growth about you wanted that

John Coustas

our we're present, is the we think think which say, And reduced looking. chest practically, of is at let's I don't low. it's because I war there pressure continuously is will have. deleveraging I say amortization, let's Yes that leverage going any, describing be The to was because being pretty

say Let's monetize our assets. on non-operating to

say let's they getting, those are redeemed. were which bonds, One of the

is at our stage mean, will one that of the war other The chest. some ZIM form part I shareholding,

Evangelos Chatzis

may as continue dividend building mentioned cash we have monetize, John place. as we a non-operating starts I in the the assets, add, in if and to up, And already

that made So, allocation decision the capital for being. has time been

some will be will point, capital we be on the point, going develops. allocation have going it spectrum future. it we a environmental continuously unless the of - the But going the exactly capital that the we We The debt deleveraging new going And to face have allocation. is consider forward. And further the cannot priority how of to take are what load, be to forefront say decisions at that at assets vessels to at is if will up we may growth be to growth certain go see strategy to this decision can of cash we're lighten towards the then. evaluate

James Monigan

propulsion chest newer where one view assessment think I the that more of the sort about in so, that that comment and newer - technology sort put it's that would fair you around of is sort based of where like vessels around war So Is assessment? about like of of on sort a things second-hand. thinking your versus embedded

John Coustas

As I the regulations moment said, as no at like. what is to clarity environmental will look there the exactly

the we the of the fronts. a all supply. this, ship slow two have fleet lead course push the hand, is And going practically targets, impose extent One like, going to to is a European how achieve and are all on other in will is to this where say it affect, excise going to have speed, as to have existing discussion discussion old shipping, we to or to what actually to on we new smaller and EPS no We is plus community, which to the I effective the reduction need a this technologies how towards. the the yet and that try for IMO, so down to to wanted clue have versus vessel let's look which greater will the these mean,

have for and I is projects. fuel We LNG of stopped of kind mean, the LNG transitory European funding as been, a that in of why not the kind that's in Union, example has LNG seen a EU the related more considered has

should it the carbon-based go World doesn't infrastructure On which to go other is on said LNG, other make fully hand, all to solutions. the make sense try really the Bank de-carbonized to to fuel that, to and concentrate we a

as is and chest to face fight I clarity, it's really ready there the no there war strategy to situation a So no whatever make best when is is And really clarity. - said, is arises. there be and

James Monigan

the improving you as cash, it pointed necessarily essentially actually And like, amount opportunistic so something there clear, being on for the, be a as matter fair - seem out, it building have may you you - guess else a but does to the see cash I plan substantial it opportunity the you will of which to buy or to presents an more point, guess just be and definitive substantial until just itself of were. opportunity, there deploying increase a and it's is leave it doesn't flow belabor dividend and but like, up is like not I what seem table,

John Coustas

will manner. is growth mean, purely I have the of, will terms the let's income say, in When the today try best order we by right, in the exploiting to really company continue is everyone era of really the which technology time exactly. exploit company is the significant de-carbonized what growth on in basis and put possible in vessels the the new market to and today. also Yes, is and a having seeking future,

James Monigan

it. Got

per And OpEx so, question. was I we a guess, more than bit thought. higher day near-term

on You'd called per should some COVID one-time sort think more some in day the basis Thank on per as a per of crews, the will about fleet vessel basis? we day out a context color around your you could your like provide, like you. quarter just probably well. normalized ship But or for it how and mix great. Any be items essentially OpEx

John Coustas

Yes, Yes. Evangelos. ahead I yes, mean go -

Evangelos Chatzis

additional of of on just more inflates quarter, to usually QX, great bulk is in granting that the had me say time you that be for normalizes in increase. have having And crews then than throughout the this you to issues spend to and extent is of cost the and item year. which two normal to forth. is COVID-XX which the There OpEx. ships remaining some so lot do changing else, on let's context. difficulties with so endure, relation ordering give and to the typical an way the the years. quarters There on is let crews our Yes, the around we wish they've and most to first One be difficult, if the bonuses saga also this every of is the OpEx And going in situation for this something continues to a OpEx

of day would that fleet sort average our a this and ballpark as So target $X,XXX a say I budget. for year figure as a our the at is point,

Operator

go And come Nokta Clarksons Platou ahead. Securities. question Please will the next Omar with from

Omar Nokta

cash much. you to you incoming ZIM. $XX sources And two so And I second of nice see bonds. redemption is war building for you have maybe chest, you aside nicely monetizing things wanted some and pretty just a then possibility guys made to shaping the belabor there from the different have think you're special And of chest. a up clear those potentially point in know, the any that of for war not about set But that plenty cash is coming quarter ask, million the too to Well, dividend? When it maybe Danaos cash. the the of up of

John Coustas

who To are We enlarge to are giving stock. be honest, and we we our as purely dividend because that, in are it. I the chest, certain to to base building to said, investors want that's very dividend war order this we believe shareholder well-positioned invest why require own the really a we reason

So we there the a say, about otherwise, is no chest, intention of money just distributing, distribution. war not it's I Otherwise, dividend are out. would talking

Omar Nokta

come ask Yes, vast to the it. just that wanted of, have you've to orders levels, with - that. that's book, I how it's nice just in maybe and terms the of the know then obviously majority discussed clear, contracts thing liners. is higher long-term the to order these and the risen course then of for And you thanks

am front to And very, reading the with you a right give like account mentioned, equipment that or against see call be contracts, return? not returns you long-term visibility vis-à-vis, starting really opportunities ordering environmental that, the the I to in are into change make newbuilding book minimal. long-term being order and may make sense is in sense so propulsion, in very the right, the fuel vessels you take are vessels that may speculative that speculation order be the interested last In reassessing it - in we that there you that good think you sounds - you but do

John Coustas

liner it say, liner from, long-term using has more awash competitive deal cash are with Well, if today going the And do company to its company, the own. cash. let's to with a companies of you're be liner

the for let's of which end directly. single in the let's the participated X not commit XXXX, we so we are on that be say, in where around, months X, environment where there a or in have of if the XXXX, digit resulted in honest, lot equity years We between. and last, a an there I'm ordering in things hell to doing, returns companies a are XX think XX say, - in happen tenders in years, in can And couple to in you liner of

Omar Nokta

Yes. No, I agree. And maybe just one final one.

As war you chest being built. think that's the about

you You or some How have and talked think of how you higher of do about cash a feel about operating vessels. the expensive? those as be monetizing especially of TEU said asset the mentioned a much the you about do do feel war source non-operating especially, assets. you gone you - prices it's assets, Can your older also X,XXX chest? sub monetizing How

John Coustas

present that is durations paying of available Of problem value the the ships someone these mean, that the for is of value by I examined. today, the charter something rates is charter the course, scrap on this and less is actual of ship the always to-date. basis The that we've than plus

point? So what's the

Omar Nokta

just True, fully incoming yes, nice asset? it’s of depreciated cash, holding source

John Coustas

maybe selling the And in their doesn't on who some it people who – want and other doing are invest ourselves really are who on really selling, want are who out. make they private good they've not hand, are other to I like maybe do people funds the entities. would investment to who Exactly, out, they operating for just are have to there and mean get sense. And an sectors, get return presence, made

Operator

And next Please the Jefferies. will come go from Kate] question ahead. [Andre with

Unidentified Analyst

congrats yes, of chime around the mix to just this and in fantastic. a but results, what unsecured the first at broken secured. that over chest, hate war have a lot questions You I improve refi and secured? credit was a the structure. the I from time, with going down do I mean and context record, having And bond Hi, say was the a takeaway from be the funding the you here of to that mean just paying and issued clearly side, think all more deleveraging natural in of to got I bond versus point on investors

I in think, current multiple I've about times are single-digit you equity valuations that returns. overvalued, underwriting talk way ship heard

of because back to per those on excess market you just very the cash you sheet trying you half the than to and I build guess turns se balance that take have, just So have that, on this against debt cost flexible war and chest prepay a could where understand profile up you then need secured can set go debt and it then with then when And could and X, then have an the that balance interest you and see actually the having of cash and opportunities, proceeds? kind of sheet. re-leverage rather paying to average it you

how about more try that? want to and think understand little a you So, bit just

Evangelos Chatzis

very may, Andre, if address John quickly I this.

we're capital committing we at capital, excess it is will most credit And further growth well decisions, we happens decisions. at future believe. sheet bond should a so. the improve matter, company, that very the the is the the accessing cash pricing profile to We pellet as our do may in and the can saying not forefront, then that, improve all having market, ratings of if cash long of on of time, a which if use credit we this productive to de-lever, this allocation our for of be, And the sitting for not allocation is are right. on your obviously And pile balance capital big point use further

have will the We options open.

end source produce profitable, We make returns, have accretive the we that threshold if and enter the set meet projects. our priorities, we criteria, that and at projects can deleveraging of is that our But the them. more day one return company into of

as as focus leverage with before. will always priority have on a do low matter We so we maintaining a of a stated

Unidentified Analyst

I mean, the tough leverage think on a you may helpful. opportunities. what say the realize business? cycle, just it's for follow-up if do that's that, view, you I do right have Okay, growth this against cross you if is we But

John Coustas

three between target times to a times. set have we think, I four

we XX% this our the We last which run times rate basis at EBITDA, four XXXX EBITDA, with on is are XX-month our of at point are contracted.

So it we is. know what

on And We debt way are building times. up, to year-end, chest basis below the net it war below a times. X.X and be three by is with to going EBITDA

have the leverage we – is of structure. safe times between times So it three may in once the area that, pursue a whatever. growth And then ability interim, or what may a it are I comfort what we but down, to every sound think within of four pursue we to or go we we X.X said three capital – and consider level come up

Unidentified Analyst

returns. Yes, you that underwrite that double-digit if un-levered sense, makes can but

Okay, thank you.

Operator

And question Lodge]. Cabot the from with will [George go come Please ahead. Berman next

Unidentified Analyst

I'm position Question I to your maybe the you ZIM well consider someone off shareholders Have company quite for recently you on would shareholder. to shares shares working or out considered as that the you. a in obviously new distribution? is spinning had became those

John Coustas

growth of As will end special say, for we not by company. of non-operating the there We be used said, company And all eventually company. dividend say, in the the no out. company, the rewarded of investor the let's of liquidation assets by the be the is want to let's these growth

Unidentified Analyst

Fair enough.

kind were on of to what the the carry a huge If there be would monetize gain? obviously tax company, you position, you consequences

John Coustas

tax consequences no are there Yes, company. the in

Unidentified Analyst

great. I say And congratulations. Okay, wanted to

buy not additional today the ships. first that conference You you the scenario on call stated basically shipping in that the general has to looking are company in publicly are

think that the be position environmental the especially wait a you and take attitude? is with that here situation see changing good I to in, very

John Coustas

And low our I as Shipping well the always the of is cycle. and cyclical will be said, Yes, business. investments made we a the always is market have part in overheated.

rewards. reap time just the it's to Now

Unidentified Analyst

Yes, owner containerships, port of up do example normalize? Los Angeles Los when a into the any is ships as that you you do – insights fleet Angeles, large of stacking have when to for the going at a of of

John Coustas

really Angeles in, that nothing That's really we ask there. should port that authorities involved are Los the you

Unidentified Analyst

today. for bright Thanks taking forward Look for to you. Okay. further call a future my

John Coustas

you. Thank

Operator

this or appears Coustas, conference I At turn remarks. over the have would any further Dr. comments to we And it questions. no closing back further for like to time,

John Coustas

in returns After you. work delivering interest of Thank Danaos. this our for your you improved great towards thank we'll kind Well, much quarter, very shareholders. continue for to

Operator

for conference wonderful afternoon. And concluded. now a today's presentation. The you have has Thank attending

Danaos (DAC) 11 May 212021 Q1 Earnings call transcript