Danaos Corporation Price & Performance (DAC)

Thank you, operator. Good morning to everyone. And thank you for joining us. This morning. 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 forward looking statements are made as of today and we undertake no obligation to update Factors that might affect future results are discussed in our filings with the SEC and we encourage you to review this detailed 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 EBITDA, adjusted EBITDA, 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 the accompanying materials. With that, let me now turn the call over to Doctor. John Coustas, who will provide a broad overview of the quarter. John? Thank you, Evangelos.

Good morning and thank you all for joining today's call to discuss our results for the fourth quarter of twenty twenty four. [indiscernible] The world is entering uncharted territory and any near term predictions about the direction of shipping markets are inherently unreliable. The tariff war is bound to generate disruptions which have historically benefited shipping. However, an economic slowdown might negate these benefits. The drybulk market continues to suffer from ongoing malaise due to pace of the recovery of the Chinese economy which has not shown signs of accelerating. The delivery of new tonnage starting this year will lead to this weakness particularly in the Panamax and smaller segments, where the order book is concentrated. The Capesize segment where our fleet is concentrated continues have an order book that remains at historically low levels. The container charter market remains healthy Outbed liners are exhibiting more caution particularly with respect to forward dates. While box rates are weakening, they are still much higher than pre pandemic levels.

We'll have to wait until after Chinese New Year to gauge the effect of the front loading of exports that occurred in anticipation of tariffs and the demand pattern In the new trade environment The analysis highly insulated from near term market uncertainty with 9779% for 2026 at healthy rates shielding out from market volatility. Our charter backlog of 3,400,000,000.0 provides us with a certainty of income and firepower to explore accretive investments. We've chartered 13 out of our 15 new buildings for five years and have arranged a new $850,000,000 facility from a bank syndicate to fully cover the financing of all vessels in order.

Our profitability remains consistent and we're using our strong balance sheet to increase dividends, continue the share buyback and source opportunities to grow our company for the benefit of our shareholders.

Our strategic focus remains on maintaining a robust financial position securing long term contracts for vessels coming off charter, and investing in modern fuel efficient container vessels to enhance our competitive position in the market.

We are committed to delivering value to our shareholders through prudent financial management strategic growth initiatives, With that, I'll hand the call back to Evangelos, who will take you through the financials for the Thank you, John, and good morning again to everyone. I will briefly review the results for the quarter and then open the call to Q and A. We are reporting adjusted EPS for the fourth quarter of twenty twenty four of $6.93 per share or adjusted net income of $133,300,000 compared to adjusted EPS of $6.99 per share or income of $136,000,000 for the fourth quarter of twenty twenty three. This $2,700,000 decrease in adjusted net income between the two quarters a result of an $11,000,000 increase in total OpEx mainly due to the recognition during the current quarter of voyage costs related to voyage charters of our drybulk Capesize fleet and a $4,900,000 increase in net finance costs partially offset by an $8,900,000 increase in net operating revenues a $2,200,000 net improvement on income from investments and dividends from such investments and $2,100,000 collected in relation to our 100 and bankruptcy claim. Vessel operating expenses increased by $5,500,000 to $45,600,000 in the current quarter from $40,100,000 in the fourth quarter of twenty twenty three, a result of the increase in the average number of vessels in our fleet while our daily operating costs slightly improved to $6,135 per vessel per day for the current quarter compared to $6,188 per vessel per day for the fourth quarter of twenty twenty three.

Our operating costs continue to remain among the most competitive in the industry. G and A expenses decreased by $700,000 to $21,700,000 in the current quarter compared to $22,400,000 in the fourth quarter of twenty twenty three. Mainly due to a decrease in stock based non cash [indiscernible] Interest expense excluding amortization of finance costs increased by $6,000,000 to $9,100,000 in the current quarter compared to $3,100,000 in the fourth quarter of twenty twenty three, The increase this increase in interest expense is a combined result of a $5,300,000 increase due to higher average indebtedness of around $330,000,000 between the two periods that was partially offset by a reduction in the cost of debt service by approximately 78 basis points as a result of a decrease in software cost between the two periods while we also had the $700,000 increase in interest expense due to lower capitalized interest on vessels under construction between the two periods.

At the same time, interest income came in at 3,900,000.0 Adjusted EBITDA increased by 9.9% or by $17,100,000 to $189,700,000 in the current quarter compared to $172,600,000 in the fourth quarter of twenty twenty three for the reasons that have been already outlined earlier on this call. We also encourage you to review our updated investor presentation that is posted on our website as well as subsequent events disclosures. Allow me to give you a few highlights. Since the date of our last earnings release, we have added $336,000,000 to our contracted revenue backlog. As a result, our contracted revenue backlog remains strong and has increased to $3,400,000,000 with a three point seven year average charter duration while contract coverage is at 97% for 2025, and 79% for 2026. Our investor presentation has analytical disclosure on our contracted charter book. On 02/07/2025, we entered into an $850,000,000 syndicated loan facility agreement to finance all of our remaining newbuilding container vessels including the two additional recent orders all of whom all of which have deliveries between 2026 and 2028. As of 12/31/2024, our net debt stood at $291,000,000 In the current interest rate environment, this position shifted from higher interest costs.

Additionally, the company's net debt to adjusted EBITDA ratio stood at 0.4 times while 53 out of our 84 vessels are currently unencumbered and debt free. We continue to repurchase stock and since the date of the last earnings release, we have repurchased an additional 45,600,000.0 We we have executed on total share repurchases of $168,800,000 dollars out of the $200,000,000 authority that has been provided by our Board. Finally, as of the end of the fourth quarter, cash was at $453,400,000 while total liquidity including availability under our revolving credit facility and marketable securities stood at $8.00 $7,000,000 giving us ample flexibility to pursue accretive capital deployment opportunities. With that, I would like to thank you all for listening to this first part of our call. Operator, we are now ready to open the call to Q and A. Thank you. We will now begin the question and answer session. And the first question will come from Omar Nakhta with Jefferies. Please go ahead. Thank you. Hi, John in the Banalos.

Obviously, another Just another strong quarter with some real free cash flow generation. As you note in the presentation, you generated $30 a share in free cash flow in 2024. Can pretty much be repeated in 2025. I guess a couple of things It looks like you're back to being on pace to to that getting into that net cash position again. Sometime during 2025. I guess, do you agree with that that you're on pace to get to net cash position yet again And then also do you want to be in a net cash position or do you prefer to keep more leverage in place?

We are looking as you saw, we have arranged an $850,000,000 facility, which covers all the financing of our new building program at 60% Of course, we are generating, we are keeping substantial amounts of cash for opportunities.

At present, with all our new building We don't even, going forward, manage to go to a negative net cash position So we are still, let's say, in surplus and this is also one of the reasons that we've continued our and expanded our building program with ships that we believe are going to be required in the market.

And in line with the other vessels that we have already ordered.

Your next question will come from Clement Mullens with Value Investors Edge.

Please go ahead.

Hi, good afternoon. Thank you for taking my question.

I wanted to start by asking about the utilization on drybulk site. This was mostly attributable to scheduled of hire days.

And I was wondering, could you talk a bit about what that includes and how many dry dockings were conducted during the quarter? And secondly, how many dry dockings do you have planned on that side of the fleet throughout 2025?

Are you talking about just the drybulk fleet or are you talking about the whole fleet?

About dry bulk fleet.

Yes. The dry bulk we have we have decided to put all our drybulk vessels in drydock. And presently, apart from one all the rest have been have completed their dry docking in the last six months.

Where we've installed appendages and [indiscernible] which are extremely efficient So we even we've managed, for example, vessels that were Rideshipp E rated we move them up to a C plus rating.

So we've done a lot of investment of these ships and we believe that when the drybulk market picks up we're going to enjoy that. We will not have dry dockings of the dry bulk fleet over the next at least two to three years.

That's helpful. Thank you. Dragun grades have been quite soft recently. And asset values have declined at that from the highs. Is there any appetite to potentially add additional vessels going forward? And if so, would you still focus on Capesizers? Or would you be willing to add CancerMaxes or Ultramaxes as well?

No, we are concentrating on field sizes. Yes, if prices are attractive. We've already said we are going to increase our presence in the sector.

Thanks for the color. I'll turn it over. Thank you for taking my questions and congratulations for the quarter.

Thank you. The next question is a follow-up from Omar Nachta with Jefferies. Please go ahead. Thank you. Sorry, Ed. Thanks letting me back on. Just a couple of quick ones.

Or maybe not so much this first one, but you mentioned, John, in your presentation or in the press release and in your opening comments, near term forecasts are basically unreliable in this climate. You've ordered the two new ships after a bit of a pause. Just wanted to ask what gave you confidence to kind of jump back in to the new buildings side of things?

Well, first of all, we believe that the sector needs modern efficient ships, especially in this size bracket. And secondly, arranged financing charter for everything else So there is very little let's say, [indiscernible] our investment Okay.

And then just separately, obviously, you stepped up the share repurchases pretty meaningfully here the past few months. I just wanted to ask, are you able to give us a snapshot of what the share count looks like today? Evangelos is You can answer that.

Can you repeat Omar, are you returning to the share count?

Yes, just the share count post the latest repurchases. It's just past below 19,000,000 shares.

Something like 18.8, 18.9 at this point. Got it. Okay. Well, thank you. Thanks, John. Thanks to Angelus.

Thank you.

It appears we have no further questions at this time.

I would like to turn the call back over to Doctor. Kucis for any closing remarks. Please go ahead, sir.

Yes. Thank you for your continued interest for our story. We will continue to implement our program to the benefit of our shareholders. Thank you. Thank you all for joining the 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.