DAC - Earnings call transcript Q4 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 December 31, 2021.

As a remainder, 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. Please ahead. go

Evangelos Chatzis

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

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

John Coustas

many market ago. disruption in tightening chains market for in XXXX. Fourth about our ongoing of We you container joining quarters of through coverage call today’s Quarter our view. foresaw and amount speak and for for and all the the supply market you, Evangelos. XXXX Good the thank positive themselves morning, Thank in to discuss of the container dynamics the the Results analyst The media echo

returns. directed our our which strategy, outlook maximized of growth Our have both chartering and

investment income Danaos in led XXXX. ZIM of other shares expectations in the our hand, posting for billion reported all surpassed to net reasonable On has excess in and US$X

is price share our generate the better about contracted future. these close revenue policy billion of factors, average duration billion. market result capitalization US$X a provides quadrupled our overall, our to cash XXXX, company’s important certainty bringing years will in As four the charter and US$X.X of that equally chartering XXXX, in is flows with even What

are using for container been the significant a becoming also decided we result also share XXXX counterparty a of the to place proposed fossil pursue means the ongoing dividend dominated that accretive market commission of buyback. carbon Fit As continue available, and more industry the and will continue of to adapt the that for The to initiative made quarterly procurement absorbing investments on responsible who the the fuels climate Long-term strength. accompany significant consensus will $X.XX in reduce initiatives also visibility, cash environmental growing speed, leverage increase flexibility future becoming and XX% us reduce our footprint increased clearer. is investments is existing latest carbon cost also burden a that flows have the the support fuels. was industry charters so and conclude, widely of per consider rightly owners. advanced the the have vessels. vessel way vessel significant long our even opportunities, fuel that to support further XXXX, earnings to EU company’s the These decade to Danaos. which to by has There of are already To need in which to for decarbonization operators significant provide completely XX have and share. the element phenomenal in There becoming norm. to will The determination dividend path are reductions than of for growth Green begin to speed Further entire industry disappeared. EU to rather previous the risk be

the over the reward of logistics and back targeting well-positioned and can continue the vessel expansion on The exist shipbuilding you Evangelos, which its who will to last I’ll has with during put ordering, quarter. companies are is take which ordering maintained. shareholders. propulsion and through not benefit their liner the conjunction KG the be boom, With in about bright, for it Evangelos? for front standards, inland/air a the their XX% to to Fortunately, future to is today. this from that, does uncertainty lid Danaos future hand transportation financials German the market, call offering. I was newbuilding responsible vertically In hope Also, integrate

Evangelos Chatzis

and Thank this to thank morning. morning the I then for joining you Q&A. again open you, call us everyone, the review briefly and quarter for John, the will and good results to

in share For at XXXX reported being the $X of versus for or this is while excess full and reporting record per year $XXX.X per in net year a doubled than billion XXXX, or adjusted XXXX. share $XXX.X XXXX, million or more per we breaking in income net income are $X.XX $XX.XX million $XX.XX share, versus

or was by net quarter our result of with the operating quarter of quarters. size offset $XX.X which between total the the of increase the $X.X ZIM. These a $XX of combined $XX.X adjusted corresponds are partially higher million of per mainly vessels $XX.X which dividend, compared is being million, net a adjusted million the For increase XXXX, due the for two income The in expenses fourth fleet $X.XX we XX by average of collected of the revenues to million from to two adjusted XXXX. share, quarters in EPS in income million, between of to increase fourth of reporting for EPS $X.XX per million $XXX.X adjusted share, operating

XXXX. and income of $X.X quarter from of We net while equity fully also XXXX, an in the it the in in Gemini had consolidated third in increase an $X.X million finance expenses that decrease million investment was fourth was a quarter

fourth increased result is in of that in with million mainly that XXXX, our compensation XX by in of million approximately been at indebtedness refinanced recognition vessel incremental revenue from $XX million to the the while been fleet, had quarter, mentioned facilities to million credit number the of of compared a this have to the between quarter increased vessel had quarter Vessel expenses in increased our million they decreased. our higher vessels compared per interest in for earlier of by been $X non-cash $XX.X the the for operate reduced $X.X $XX.X current $XX.X earlier. accumulated current an has were current as as average management refinancing, XX revenues together $X,XXX the the result million of to increase by further positive revenues of interest $XXX.X the a of increase operating quarter the basis expense million of fourth the $XXX.X finance XXXX assumed $XX.X acquisitions. average QX XXXX refinanced $XX.X the million mainly partially being due the recognition reasons to a to through quarter is rates current remains recent $X remuneration fourth increased statement to which increased figures $X.X per cost operating $X.X line day $XX.X million result in by accumulated daily the a in a the of mainly versus cost million million call. and $XX.X by as million in interest for the the $X.X the of the and to recognition state a in result a one million XXXX charter $X.X expense, of accounting quarter fourth in and expenses that quarter And – in average that And quarter outlined of and have increase of $XX.X EBITDA amortization two the of accrued our periods service Revenues point on related also approximately in income fleet. additions two due million to competitive specifically by attributed recorded to and as fourth points, industry. more day for revenues, by in million increase quarter by daily or debt been million since to XXXX, the offset of in QX compared million, crew the XXXX, $XX further from in operating million stock-based joined million accrued amortization fleet to the fees $XX.X OpEx quarter of current still of expense, to XX.X% XXXX. liabilities of in as the operating Adjusted XXXX the in for by in million combined increase relation mainly Interest vessels to mainly charter increased of a million result this our $XXX and million Now million XXXX. $X,XXX of increase $XX.X such quarter due of in another that interest to additional decrease accruals our vessel in $XX.X excluding by increase increased corresponds in most cost COVID-XX because increased G&A

We that presentation side. already the that on few posted also has encourage highlights A our on investor are website. updated our you operating to review been

than higher, current fixed charter Over we have several considerably the rates. forward past few months, at higher vessels

charter book mentioned. step-ups presentation and investor as analytical rate Our contracted in the disclosure on charter has the

XXXX, As I Operator, billion duration XX% at Q&A. a to call coverage part for four-year that, contracted the of already is result stands are backlog for is would average to at open now these ready with $X.X now of XXXX while you XX%. even this contract our a call. our fixtures, XXXX, like revenue thank listening With first charter at while improved XX% to to we for

Operator

Randy question-and-answer will from now with comes the [Operator question Jefferies. Our go We begin Giveans ahead. today session. first Instructions] Please

Randy Giveans

Hi, it going? how’s Evangelos, and John

John Coustas

Hi, Randy. All fine.

Randy Giveans

year, that’s thought, than obviously. seriously, on, great more expect would fair. yes, a Congrats but I

balance, use wisely capital flow sheet, clearly now. a You cash have some balance strong acquisitions, cash substantial visibility the you very timely

a how meaningful. was all further which you do with how increases plan share dividend going is dividend And XX% decided on. on with these then new So forward, And especially levels? that, increase, balancing at the amount buybacks, it’s

John Coustas

number of And XX% time. committed the able increase. our of dividend. I pretty that that us be can significant. were one is of our a strategy thing We increase We not are grow I we investors one ability popping of to to maintained, first it’s the all, is is through to also mean, really in readjusted. further rather a type which really ourselves, investors long-term setting of but that maintaining is we able the as dividend a a mindset I have to grow in that same for we giving special this type the mean, couple time. is the to our down just Because, the at proactive company. be of of Well, pretty want be believe in than that is dividend this company, on a know for mean, the increasing dividend. be kind strategy only ahead. We and want We believe a dividend years model right and the the not for to might need way road business that

Now, in the the share in let’s can close as terms around, see, with million you year of cash. say, we $XXX repurchases,

are So into sitting it’s that billion. we not $X.X

our buyback is look amount share is moment amount of know, the vast and I securities, on majority we $X.X which why people the within And I we’re let’s excess money all would cash. it’s they sitting cash say, that we what the not is, marketable shares. honest, believe the in half of shareholding. Maybe on going that like have upside course, And is in that growing substantial of be this to bank. XXXX. mean, with is, of we on that that billion really announce there $X.X when billion, some don’t to ZIM is ZIM rapidly the in Of

with ZIM this So moment. now shares there is shareholding of at the swapping in the no kind point

Randy Giveans

forward very two And will vessels your new makes Got those and fixing for it, That you contracts? a for you at sense. maybe XXXX. coming nice let’s That’s vessels recently available, profit. looking long-term fleet, On vessel sales your fair. early balance it. then additional call sold with How

John Coustas

operating are combine, play It’s with – asset let’s we here to say, profits.

company of practically vessels the last to our that mainly to last always close vessels, with the in but have one, a year spent. to the older vessels which to we we the proved we look the we opportunities, success, six let’s chartering because we for if an exploring have of that at to is that might tremendous vessels, So need like, half, and it, two mindset, are the only we be have and also it’s opportunity bought example, amount the newer grow say, covering sell

Randy Giveans

Got it.

hey, for see that’s company Danaos That’s Well, the Really me. shares Okay. it and last improvement vast the fair. over to been in great XX the months.

So keep work. the great up

John Coustas

you, much. Thank you very Randy. Thank

Operator

Our Please Clarksons. next Omar go question comes ahead. with from Nokta

Omar Nokta

Thank dynamic, the but of going past those fixing. your do Randy’s And in you vessels? for I been we maybe the you. Evangelos. approach XXXX, well you’ll terms opening have on have, ahead questions the of those thinking it’s guess, and largest back large feels expect five deployment. and XX,XXX we’re ahead remarks. two with I has you of know years in that their open and TEUs. can I what long-term here market to of redeploying starting fixing for I in just about over the like or it’s call of clearly duration vessels Those ships you Anything have and touching farther last points, XX forward strong Yes, the since come. are terms Hey, I give you to key starting been on come of wanted to ships time delivery, years ask another can little ships? With contract those it forward it really Evangelos, HMM away, on year discussed still, and you’ve the have the farther to and more John type or in a five congrats maybe a couple mean bit this quarter,

John Coustas

course option that vessels which you sorry, them. they three anything couple I another very they declare I options, think don’t of from have expire have can which company. really charterer say prior, let’s until for years, once they approximate profitable mean, I exercise I for Well, know the years, charterers, also for three months the another a are levels time, that expect would, the if was that may for date. of six and at to I years, fine,

are early. what maximum by their know that on So will first but mid-XXXX first very, now it’s the we fixing also the let’s ships until half intentions, And even are we forward half opening very in say XXXX. are of

not really larger XXXX the the of but dates. Some ones,

Omar Nokta

Okay.

okay. just So the –

those, three extension five some the could are there be that So options exceeded years for ones. biggest

John Coustas

Yes.

Omar Nokta

the biggest way maybe then ask here, And lot about long-term the market’s it right. wanted year the definitely All the segments. been only seems of few developing how feeder weeks the Okay. of market call focus to as October? that It’s feeders say a to overall a last appetite some piece then a past? that like on compared there compared developed maybe you the over was of How in months Panamax more short-term has liner on know us nature. in could ago? to past primarily what’s contracts, market say, – that feeders six you to above the market at the business, small it over or least your How generally, give seeing while and of for are four sense in you but the XX I here kind for ships now the ships, have were

John Coustas

XX – shorter I are ships feeder et because are think interest mean, month, in for kind holding large But exactly are just mean, chartered the these some or three charter I there pretty cetera. the vessels appetite still more of month employment to a it’s increasing. be vessels the say of in general vessels. that market, is I get whatever, month duration turnover mean, out have these short, in is and There $XXX,XXX strong let’s years, I they’re to mean say fixing now I usually. huge let’s of charters. day. there who that definitely these kind and of there we say used used owners shorter six [ph] to out maximum $XX,XXX, there at – they is a

Omar Nokta

years say Would the fix there’s years liquidity in a ships out at you time? Okay. or the feeder to five three

John Coustas

is what take want lower ship kind up you of of from seen on feeder say to five. kind definitely minimum the and rate, really a years depending definitely you Yes, today, to let’s I’ve three can

Omar Nokta

it. a some I just Got two I one And a announced delivery highlighted, me. isn’t that on – one for thing that until few a did it’s the for is weeks vessel million. wanted final notice One $XXX the this big of Thank you. you November color profit. sales be ago Randy as year. And it’ll

those old. maybe that this they behind that sell of wanted was what’s understand years sold And Is that I liner? about that drove so then being just ask they’re to ships? what that to are a one, to you is sale? And kind XX

John Coustas

buyer. As we confidentiality we said, and the there actual agreements cannot disclose are

Omar Nokta

Okay. Got for it. John. the Thanks color,

John Coustas

Yes.

Okay.

Operator

question will Chris come with ahead. Wetherbee go next Our from Please Citigroup.

Chris Wetherbee

Yes. on starting Hey, you first state market, how playing big thanks maybe guess that any I for on in the around container and taking the congestion of curious the your the see question. take industry, guess, kind I of would out. thoughts picture

asking congestion spill a kind year. look maybe us Does you see obviously a of playing of crystal to and What’s some how give the dynamics take of out into little ball into it here sense rest XXXX? this you the over bit, So, the a view? your of

John Coustas

really say more have COVID time we kind is There say with one on in it’s seen that I but countries; any to especially I I some disruption of It’s if need is a utilization opening of the we compared world, China certain Asia that a let’s productivity in waiting steady continue. mean, XXXX may situation of lower. think in the say hand, either. worsening, the the honest, these are think getting to much it better we in let’s the will especially not see be restrictions, let’s And which to stringent, Well, normalization better no situation ports. kind don’t And all a of the stabilized, all of rest overall see vessels.

in for And disruptions, into than they to XXXX of we we an the ships substantially, companies whole on kind in coming. hand the will additional of going be are On no policy time. speed. rely But the just is were up in because order say There the mean, environmental world have regulations of ramping ships other to on their just increasing inventories their to deliveries see in the the have creates what start chain from that have course, in changed from they pressure. XXXX. effect this more see we let’s cannot able will the bottom withstand of deliveries, have XXXX then less I effect It’s, XXXX. they’re delivered and supply the to

sure XXXX going XXXX for double So, the long-term that strong will I’m be the will even to believe be the be themselves in pretty a good year industry we it’s, ability contract least industry. liner of kind overall, healthier sign at companies is liner year the And the because for continue to through it to a a rates. liner historical

Chris Wetherbee

elevated, think Okay. have, and just, looking stock we for XXXX. then about give G&A at That’s I the larger specific about the get very G&A fleet fairly I the a based want be how And for think we’re normalized comp maybe maybe sense follow-up, guess you a you you Obviously helpful. will a appreciate sense that. I can to but maybe guess you what XXXX, us of when level quarter, that I there? mentioned of the

John Coustas

a quarter, million $X the rate. Yes. region to a It’s quarter, about million million run $X $X.X that’s to be going

Chris Wetherbee

time. for Perfect. Great. it much the Thanks Appreciate very

Operator

Jay Please Our Mintzmyer will ahead. Value question with Instructions] [Operator Edge. go Investor’s from next come

Jay Mintzmyer

gentlemen. morning, Hi, a excellent on Congrats quarter. good

John Coustas

Thank you, Jay.

Jay Mintzmyer

that on is first which other in are off start interested firm of all, a that your in and two pretty other was be curious afford older. pricing you impressive. selling wanted vessel I I very you John, would any congratulating that fleets shifts sales very, there’s maybe some would by if be, shifts delivery,

in have about One You are XX ships years that up a TEU off year. X,XXX charter two comes other old.

Are You got sale well? for that are couple as ships those old. any feeders of XX a up years

John Coustas

As say charter I as other we take opportunities know said any forward. them, X,XXX, will, asset on they ships, are there further play look options, at have them as longer term, let’s if these they interesting are these which far also of and you I for think some course

which say if in until more all delivery much until let’s for they them, would XXXX. years XXXX, chartered for three almost same ships our these were, for actual candidates. interesting stands vessels, The they be as So, are S&P of smaller

excellent secured have revenue those. we from So,

Jay Mintzmyer

Yes, very, It’s impressive a sale. makes very sense. ship it certainly just

any little So a just candidates the I Randy share the bit. on program. curious repurchase know to more if about back asked wanted there’s block. I circle

You catalyst for, you that purchase where it in would catalyst that dividend? board you had to report Is be. the waiting it. curious, what What be your share push I some clear program? an are a point consider there at your was upcoming language, way ZIM meeting would you saying you’re forward into would that the for

John Coustas

has to it. are to build $X.X billion this cash. nothing will just have, have that that are it’s say Well, as about said, the not let’s and doing as It’s up not we of we said, I I will into liquidity, sitting the catalyst be

we’re it up XXXX one part to cash in the say building of course, evidence. of Of start amount actually and it, is need cash, we of will let’s coming course, which giving

for We leveraging. we that that to housed fleet. because overaged the fleet. use course of be with our long-term squeeze not just strategy very of will and We will for five of using are there, older or everything to be one down want company. the out let’s need of but everything And say need, need then is the we’re growth, And we part the part say to another XX of years it fine, kind let’s we will just say an road, six, let’s getting be we is mindful assets there

we of we’re additionally far track let’s shareholders at we’ve and all, know, it three we whatever So look years. done about two, a that or what first all decision largest is this has we doubt what doing, fact the anyone say you what are record benefits let’s last, And for our ourselves. who take, any exercise, hurts really doing the and in the of primarily say by balancing are

same that’s as short-term I to So because the of the also three make road that different shareholders. pop but game, our really on stock long-term months best long-term are mean, and money, shareholders, it’s of this is that, boat the assurance now wants course, course, shareholders. we the buy someone are a out, part it story down of we go for concerned, want the long-term and as returns far as we consistent, really if

Jay Mintzmyer

Yes, a that’s logical certainly a, response. certainly

at the might the split. right, the new But think repurchase it point more topic to one, if NAV discount to, a than or brought growth. last acquire of up a cash only we ago your question be extreme other had share looking weeks flows, you. I anyways, you’re a is accretive that, or to Last discount repurchase shares for and few with to a we talked CFO on

one share of obviously the doesn’t or fundamentals considered Now, it It split it a the could liquidity. bid make improve lot ask of company, There’s it but change more improve look to attractive. did trading could at could before the share that like split? a spread, the things. one And when split, share if you they so happen? that share investors four retail five to something Have buy a prices

John Coustas

to definitely know split of conjunction to just know, would go announcement things definitely, hand. I in are announcing yes, right. that the considering, we It’s you to sense, these makes that the with something like but in you’re the the don’t share do we it share hand Jay but without buyback going if share do are buyback.

Jay Mintzmyer

press very forward time looking morning. That’s it. your this Thanks to release going a for be to again exciting

John Coustas

Great. Thank you, Jay

Operator

Ladies time. call remarks. and Dr. the at no would like for we turn this over gentlemen, back to I Coustas it have any to appears questions further closing

John Coustas

present with thank to for the for everyone forward like and you Thank XXXX. we call. are that thing looking listening even shareholders our We better would to to results right I you. to Well, this Goodbye believe doing all. for

Operator

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

has The now presentation. today’s now may Thank disconnect. conference concluded. You for you attending

now may You disconnect.

Danaos (DAC) 8 Feb 222021 Q4 Earnings call transcript