- Earnings call transcript Q3 2022

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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 September 30, 2022.

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 the be comments, then and Chatzis to some a open call question-and-answer we'll will introductory session. I would Mr. to conference the now like to turn over Evangelos Chatzis. go Please ahead.

Evangelos Chatzis

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

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

John Coustas

Evangelos. you, Thank morning, everyone. Good

are easing smaller year. smaller drop or the to led segment a charterers Ukraine significantly GDP has quarter normalization impact and to inventories well-insulated see to, The requirements. of waiting has slow warehouses of for uncertainties the months before requirements steaming markets the additional been significant reduced market both and chain supply retreat limited to container by from demand albeit correction to drop opportunistic six environment commit and of war which containerized in inflation from profit the peak as will in delayed compounded combination for This during are in freight to will what above were chain also were market periods normalized This growth, high also rampant have the used fleet include, for third scheduling reduced declining factors. the participants, demand are operating has waiting indirect The contracting be and a and achieved market These due the the collection little destruction sub-X,XXX last they impacts This of in has containers, vessels of vessels well on liner demand loaders, disruptions. to of who current TEU stratospheric charterers and a the an marked Danaos the to levels. but various as sidelines as of created as unsustainable the levels, needed vessel. from record Charter is crisis. market aggressively been not quarter CII demand more extra XXXX. experienced XXXX how supply highs the energy vessel in meet by

year contracted with quarter billion Our of a $X.X for number multi-year we of resulted commercial efforts this our ended vessels, earlier vessel in in and the new backlog fixtures a revenue.

as We liquidated we fully balance also shareholding we have our our have to now continued we and would. sheet strengthen stated ZIM, in

and and re-financings until existing facilities acquisitions. share commitments extend necessary then, of This new In group have from no the pursue significant until capital have bank requirements we have flexibility our growth, strategy bank or we XXXX. we to to means addition, debt buybacks, our

optimism and at Evangelos? fortress the the we continue be aligned dramatic keep very a the you. with from our management are Danaos' is steps balance working year, the fully increase in will company. rates. the shareholders, zero of the to In end great with will looking Danaos at value close industry. evaluating this team by interest fact, and recent Danaos With future our of to forefront that Thank which the long-term sheet, will net of enhance we debt protects

Evangelos Chatzis

Thank again everyone. you, John, and morning good to

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

in a to $XX.X result additions to between incrementally between of charter the rates. result and liabilities of quarter quarter, pressures or vessels adjusted adjusted XXXX. and in increase to fleet million and per XXXX. of increase by a expenses of $XXX.X the of two net $XX.X and resulted the offset in incremental in million $X.XX in of $XX.X of a increase third are we of to higher dividend $XX.X is $XX.X ZIM our of recent expenses adjusted operating as operating million inflationary $X.X daily to or $X.XX current million, a the million specifically, operating in increase income This million quarters, income between reporting million of for in More share, attributed increased $XX higher size operating adjusted increase higher a share, two result booked revenues of million to compared average This per improvement our EPS EPS net incremental million the assumed in $XXX.X to $XXX.X quarter are the quarters fairly due million quarter vessel revenues relation mainly is the quarters that a recognition third increase by total net our million the $XX.X $X.X million in of $XXX revenues finance charter two the five in as expenses. compared revenues, Holding by of Equity vessel acquisitions. net fleet This million the

as million million operating our the expenses of the mainly XXXX, with have quarter in revenue Finally, current non-cash result third fleet. quarter million vessels from we to Vessel in accordance lower average in of in a in $XX.X by in $XX.X the revenues also reduction increase number U.S. million the $X.X to the increased of $XX.X GAAP. due recognition

daily the XXXX, of While operating crew increased premiums in increased the mainly quarter per and COVID-XX day insurance periods. well two due per between the expenses, costs to for in quarter to current $X,XXX the as third remuneration vessel day related increase travel increase from $X,XXX average as in

expense as compared $XX.X the to However, excluding in costs of figure in the This remains in to most million decreased the by our million third a since that compared $X.X $XXX one the decrease third $X.X indebtedness million expense finance million competitive million in interest interest expenses $X.X of million $XX.X And a of an OpEx because $X.X interest of rates. offset $X.X due quarter we XXXX. of of current million rising expense the then. quarter by to daily two of industry. lower have quarter, XXXX. by quarter almost in Interest amortization million in the G&A current decreased is that combined partially the in cost result increase debt floating to service in was done mainly to average deleveraging between result periods as extensive X.X%, decrease by by approximately

of had accrued a statements And under expense our million construction. also vessels of recognition quarter EBITDA have repaid. to this reasons the the by since interest our interest positive from also has capitalized third XX.X% million quarter of $X.X for million on on income due been We interest outlined $XXX.X XXXX in accumulated we million $XX.X or million in increased relation $XXX.X through to earlier reduced Adjusted in $X.X to fully call. that the refinancing current decrease XXXX in

disclosures. subsequent our also events as posted presentation to A couple review below. followed on our encourage well website, We you as updated of highlights investor

backlog revenue XX.X% is XXX% end contracted even contract for of with XXXX XXXX, at As XXXX, half billion of at and charter at is the a while the quarter for cash three average stood duration, while third a XX%. year for it already $X.X our coverage

disclosure Our contracted investor charter book. deck has our analytical on

wanting the to that in within to our million of a not terms. XXXX extend as pricing than conclude refinancing release, at would Finally, QX improved earnings debt $XXX.XX reported bad is maturities before company

this provide in a credit the of allocation. managing increased million $XXX.X form company that with flexibility amount in be or most would capital the will of revolving facility While

for and Q&A. Operator, you I would forma first part call listening of for this With are thank refinancing of XX these of out open fleet now ready the to transactions company's or more we XX% unencumbered. XX vessels call. our like to to will that, free debt the pro Finally, than vessels be to

Operator

you. Thank

will now question-and-answer Instructions]. the begin [Operator We session.

Our Nokta first Omar from question comes from Jefferies. go Please ahead.

Omar Nokta

good I you. did Hey afternoon. have Thank guys couple of… a

John Coustas

Hi, are How Omar. you?

Omar Nokta

new on XX this that. unencumbered draw right touched Evangelos you're the good. That's to once ships be and put I to going a of thinking maybe you're you're because new simply simply just just that XX currently, facility, big XX collateral have Is from on it not Thank and capacity. down just your on you're the Or debt follow-up vessels I'm Hey, XX -- up about completed? going increase, I'm good. to you. ship wanted for as really it's not needing debt that is to paying chunk revolver free facility? the

Evangelos Chatzis

that that for odd security being XXXX, then, This Since reduced vessels securing the Omar. vessels Well, for the have of in million. question, part is they we down to package, were were was you it were put that refinanced. these facility that previously Thank a now No. debt this was was together at the point, these $XXX be. $XXX required facility million. to And significantly because

rationalize part than And security refinancing revolving more exercise on are gives had. that is securities achieved. way facilities, us also no these of feature being allocation of we So previously And was to required. which this course, the also, longer flexibility

Omar Nokta

extent Okay, to the think yes. down the revolving do the Thank just the facility, then you can how And from you. say, draw you'll you GetGo? portion of much of

Evangelos Chatzis

And not least with will it it. business to expect in whenever GetGo in fully we notice All don't or the securities need it from to place. of don't the be at committed three will we're any want. expect near-term, it. we be side of going unless two the I year. funds draw require this will I to draw But It days' this going we draw we're down

Omar Nokta

right. okay. sounds That's Wow, All great.

of here robust over taking you've back. a plus a step big the kind of just maybe advantage Clearly, years. So two pretty past taken market

position, you've cash your lowered strengthened debt. your You've

do You've ordered down sold sold In close backlog final now the about got What piece past, million? chips, towards get dividends. the $XXX get you've the paid debt, and balance you as year? you the think is strategically, billion. how that out for pushing bought Have XXXX, are you you company cash of $X.X at paid and ships, ships, bought use them, your generally, as priorities cash into of into next the stock, as we thinking

Evangelos Chatzis

do John, to take want you that? Yes,

John Coustas

will the and wait really share see Yes. we when We we said, continue Well, opportunities Omar, said have buybacks. will wait. to -- the we'll as come. I with but And

with that all believe we forward, to inflation. going downturn shipping vessels, opportunities going make ships the has interest that year-end take type important by respond will cyclical happening, really be two by hope very we see zero know, going of because let's which shipping that pretty advantage sure And a we and to after extent with already important, progress, the be seen, the follow there interest it's going are we're ordered business. is rebuilding rates able we requirements. going within rates going insulated Evangelos I realize, as of say will have the decarbonization whole And green how the up to definitely and you be really don't one the sudden. to all said, pretty to years. et to let's that what's this But be will important of is we of increase also is these have will thing a really are vessels I'm in is there's and As company. as be say to acquisitions the good accretive to thing much we kind to were cetera going is able six a all practically market to these The the that totally effects of next, And be to drop to industries been all of first is this we very the

Omar Nokta

interesting That liquidity the Thanks, terms you have I'll it to $XXX guys cash see. over. and a Evangelos. yeah, Okay, million in plus turn be like Thanks, of really sounds definitely. John. It'll of revolver both capacity.

Operator

go from ahead. Citigroup. The from Please Chris comes next question Wetherbee

Christian Wetherbee

Hey, guys. thanks. afternoon Good

John Coustas

Chris. Hi,

Christian Wetherbee

a Hi, I us you guess next give for sense you the can quarters? first expect in of what of maybe drydocking question, detailed couple

John Coustas

records. that'd my check best of to be think the my have ships. I But I four to recollection,

So yes million certainly X X like or million.

Christian Wetherbee

Okay.

options, of months, is demand, in time there charter what do helpful. next about six interest dropping I'm I there to where your the shippers expressed But in have months. there charter but you significant guess, as the the a rates of been period make is terms real some And have that negotiations? is Okay, several drastically sense then such, aggressive of what and last fairly terms that's with shipper market isn't the shippers? think another unchartered beginning position in terms with is, I rate capacity How by vessels conversations has or the expectation curious their sure are out you spot right in over now get and their rolling you in the what into off sense get? flux of do to obviously, going of sort shippers What is you guess

John Coustas

has line between negotiation been shippers, that companies the rate towards company, from the ourselves, really ship case. the Well, renegotiations are of line never and definitely there rate no of the

being, $X,XXX was I we difference have utilization it's idle either we increase has line dramatically. it around there market And say one I we the let's time day. because $XX,XXX, have exactly should of with let's that But chips biggest for six chartered that prior opening on I being, to around XXXX, we really vessels the one And For What $XX,XXX earning on pressure the no rates to we this not the is somewhere the that number as for between small are time ships the said, hand, months the is for of utilization had dropped. a XXXX, also mean, in mean ships. smallest say dropped dropped. year-end, towards was prior is has container -- freight opening shipped had. ship has it's one the it towards the we

charters said, above basically, from still commit that. is apart I that the chartered, whereas really talking to cards. that's when to the subsistence about willing ships long-term. as this are six get in drop managed So, is we're way for not month being What is we've change, periods, time for mean example, And we're years, for the three that longer I before. same ship, we before no the

Christian Wetherbee

Okay, agreements would the nature, shorter in maybe be liners. expectation would up so rate, being from term the end maybe

John Coustas

be that and of course, in forever. will seen that peak lower term we Yes, was it to shorter case, be considerably going than have always we knew any the that which never

Evangelos Chatzis

right but from want just insulated to the add, I obvious tremendous and mention. to because contract Chris, don't have we just And want to coverage. say obviously I Yes. here, we such softening,

Christian Wetherbee

it. Got

us guys terms Okay, that's be sense helpful. a how And should done that quarters? OpEx. then you couple vessel on you you whether of seeing the have next really in give as good forward? OpEx for we vessel you're of or of move sense pressures the about of Any Can a thinking not job inflationary

John Coustas

going Evangelos here. I'm hand Well, to to

Evangelos Chatzis

to more it's book, less mean, or obviously, the we pressures. both not order look inflationary mean quarters, X%. believe if like but past to that. the are the just I I that next consider been see for increases, our Well, don't sector, don't we over X%, our will but years. at continue case flatline company, there for maybe such this them I I expect will few be for spectacular you be the a or many I

So that it materially will obviously, before, something earnings. it will affect but be not not flat will as be

Christian Wetherbee

into to for appetite that's book beyond just be it what last one time up XXXX, so vessels? Okay, from in new willing investments, for coming lines curious would just six of order question, that think sort that's have you the the of of put new helpful. XXXX, last the around I guess being, anything building do is of following your on vessels the then And Omar kind you sort you

John Coustas

meet of to are vessel building to also the process, experiment we also also these we our reviewing and show fleet. very the to vessels, With new wanted course It's minded vessels. the going on forward quality important that to new about customers

at do some to will ordered conversion. ready, new kind be we of As are ships you so the know, stage,

time seen cost, as of alternative today fuel factor price no LNG, For powered vessels being, is to that fuels. LNG everything today, on the is had what's the there in a LNG we going as also all due also clarity really happen are oil. vessels And example, for they to running to with the

use see with very this important. in we vessels energy All we're considerable optimizing time. will a with also efforts new the lot that the of which order amount extremely kind to going the CII have are is by of upcoming as So, can, revisited. let's that a crisis going [indiscernible] say be to as is to for to much is decarbonization need What regulations, we important emissions but of

Our need to to adjust the carbon ships speeds of the in the charterers reduce we order footprint.

Christian Wetherbee

Thanks for time. Okay, much Appreciate that's very it, the helpful. guys.

John Coustas

you, Thank Okay. Chris.

Operator

go The next [ph] Stephen comes Mullett's Investors. Please question from Value from ahead.

Unidentified Analyst

reason of acquisitions provide my capital million balancing increased quarter-over-quarter line And the Thank with been generation, some strong potential announced during any the if questions. two a the that morning. you buyback few top you you on more ahead, Good quarter? second repurchases $XX you the allocation. cash Cash I very for on buybacks conducted high some you insight with performance. of there you wondering have balances half vessel curtail repurchases have level was do quarter share alongside taking plan noticeably commentary on how on Was strong basis Despite operating earnings. made could And looking dividends? and provided in

John Coustas

believe share income maximizing the working a performance really the And opportune. is let's we we're market company. be month, need to time our a the will being operational lot. repurchases say, It's operational timed quite say want And shares towards we to I going and to buybacks and optimize is the so be for share buy we of shareholders. the many a every And say, time not, for specific as benefit the the of are we purchase said accordingly. Well, that let's problem fluctuating long-term don't at have

Unidentified Analyst

All right, And delivery new builds, the Or those three at would think should we unlevered Are years? about had weakness contracts looking still associated that's how looking rates, still shorter-term And that recent longer-term the we basis. plan? on an be potentially two, previously secondly, taking of helpful. at you say, mentioned charters? after Is in available?

John Coustas

to could the contract up bit or smaller talking time about, slightly existing even If year do a maybe larger the being, you is you're so say fleet maybe ones, let's are months. the for vessels There for the more. six a

as I yes, are far interest As The from the push concerned, buildings various parties plus. is discussing. five from whatever mean are years we a

UnidentifiedAnalyst

taking All right, and for the helpful. Thanks me. That's for congratulations that's my all from questions quarter.

John Coustas

Thank Steve. you,

Operator

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

John Coustas

Well, everyone, story. our you interest thank in your for

possible We results Thank will continue to shareholders. our work for best the and you. deliver

Operator

This afternoon. their concludes to you. Thank Have teleconference. a for thank would like everyone today's participation. We wonderful

Danaos (DAC) 8 Nov 222022 Q3 Earnings call transcript