Danaos Q4 2024 Earnings Report

Danaos EPS Results

• Actual EPS: $6.50
• Consensus EPS: $6.52
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: N/A

Danaos Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $266.00 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Danaos Announcement Details

• Quarter: Q4 2024
• Date: 2/10/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, February 11, 2025
• Conference Call Time: 9:00AM ET

Danaos (NYSE:DAC) (NYSE: DAC) is a Greek-based owner and operator of containerships. The company provides marine transportation services by chartering its vessels to major container-shipping companies, which use them to transport manufactured goods, commodities and other cargo on international trade routes.

Founded in 1972, Danaos has developed a globally deployed fleet serving the liner shipping industry. Its vessels operate across major maritime regions and support container trade between Asia, Europe, North America and other international markets. The company’s activities are focused primarily on vessel ownership, chartering and related ship-management operations.

Danaos is headquartered in Piraeus, Greece, one of the world’s leading maritime centers. The company is led by Chief Executive Officer and Chairman Dr. John Coustas, who has been associated with Danaos and the broader shipping industry for decades.

Danaos Q4 2024 Earnings Call Transcript

Key Takeaways

• Danaos has a $3.4 billion contracted backlog with 97% coverage for 2025 and 79% for 2026 at healthy rates, providing substantial income visibility.
• The company has chartered 13 of its 15 newbuildings on five-year terms and secured an $850 million syndicated facility to finance all vessels on order.
• Adjusted EPS for Q4 2024 was $6.93 per share, down from $6.99 in Q4 2023, driven by an $11 million OpEx increase and a $4.9 million rise in finance costs.
• As of Dec 31, 2024, net debt stood at $291 million (0.4x net debt/EBITDA) with $807 million of total liquidity, supporting further capital deployment.
• Management warned of market headwinds, citing ongoing drybulk weakness from China’s slow recovery and softening container rates, making near-term forecasts unreliable.

Presentation

[Operator]

Good day, and welcome to the Danaos Corporation conference call to discuss financial results for the three months ending December 31st, 2024. As a reminder, today's call is being recorded. Hosting the call today is Dr. John Coustas, Chief Executive Officer at Danaos Corporation, and Mr. Evangelos Chatzis, Chief Financial Officer at Danaos Corporation. Dr. Coustas and Mr. Chatzis will be making some introductory comments, and then we will open the call to a question-and-answer session. Gentlemen, the floor is yours.

[Evangelos Chatzis, CFO at Danaos Corporation]

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 them. Factors that might affect future results are discussed in our filings with the SEC, and we encourage you to review these detailed safe harbor and risk factor disclosures.

[Evangelos Chatzis, CFO at Danaos Corporation]

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 Dr. John Coustas, who will provide the broad overview of the quarter. John?

[John Coustas, CEO at Danaos Corporation]

Thank you, Evangelos. Good morning, and thank you all for joining today's call to discuss our results for the fourth quarter of 2024. 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 dry bulk market continues to suffer from ongoing malaise due to the pace of the recovery of the Chinese economy, which has not shown signs of accelerating. The delivery of new tonnage starting this year will add 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 to have an order book that remains at historically low levels.

[John Coustas, CEO at Danaos Corporation]

The container charter market remains healthy, albeit liners are exhibiting more caution, particularly with respect to forward dates. While bulk 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. Danaos is highly insulated from near-term market uncertainty, with 97% coverage for 2025 and 79% for 2026 at healthy rates, shielding out from market volatility. Our charter backlog of $3.4 billion provides us with a certainty of income and firepower to explore accretive investments. We've chartered 13 out of our 15 newbuildings for five years and have arranged a new $850 million facility from a bank syndicate to fully cover the financing of all vessels in order.

[John Coustas, CEO at Danaos Corporation]

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 and strategic growth initiatives. With that, I'll hand the call back to Evangelos, who will take you through the financials for the quarter. Evangelos?

[Evangelos Chatzis, CFO at Danaos Corporation]

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&A. We are reporting Adjusted EPS for the fourth quarter of 2024 of $6.93 per share, or Adjusted Net Income of $133.3 million, compared to Adjusted EPS of $6.99 per share, or Adjusted Net Income of $136 million for the fourth quarter of 2023.

[Evangelos Chatzis, CFO at Danaos Corporation]

This $2.7 million decrease in adjusted net income between the two quarters is the result of an $11 million increase in total OPEX, mainly due to the recognition during the current quarter of voyage costs related to voyage charters of our dry bulk Capesize fleet, and a $4.9 million increase in net finance costs, partially offset by an $8.9 million increase in net operating revenues, a $2.2 million net improvement on income from investments and dividends from such investments, and $2.1 million collected in relation to our Hanjin bankruptcy claim.

[Evangelos Chatzis, CFO at Danaos Corporation]

Vessel operating expenses increased by $5.5 million to $45.6 million in the current quarter, from $40.1 million in the fourth quarter of 2023, as 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 2023. Our operating costs continue to remain among the most competitive in the industry. G&A expenses decreased by $0.7 million to $21.7 million in the current quarter, compared to $22.4 million in the fourth quarter of 2023, mainly due to a decrease in stock-based non-cash costs. Interest expense, excluding amortization of finance costs, increased by $6 million to $9.1 million in the current quarter, compared to $3.1 million in the fourth quarter of 2023.

[Evangelos Chatzis, CFO at Danaos Corporation]

This increase in interest expense is a combined result of a $5.3 million increase due to higher average indebtedness of around $330 million 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 SOFR cost between the two periods, while we also had a $0.7 million 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 $3.9 million. Adjusted EBITDA increased by 9.9%, or by $17.1 million, to $189.7 million in the current quarter, compared to $172.6 million in the fourth quarter of 2023, for the reasons that have been already outlined earlier on this call.

[Evangelos Chatzis, CFO at Danaos Corporation]

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 million to our contracted revenue backlog. As a result, our contracted revenue backlog remains strong and has increased to $3.4 billion, with a 3.7-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 7th of February 2025, we entered into an $850 million syndicated loan facility agreement to finance all of our remaining newbuilding container vessels, including the two additional recent orders, all of which have deliveries between 2026 and 2028. As of December 31st, 2024, our net debt stood at $291 million.

[Evangelos Chatzis, CFO at Danaos Corporation]

In the current interest rate environment, this position shields us 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 $45.6 million. To date, we have executed on total share repurchases of $168.8 million out of the $200 million authority that has been provided by our board.

[Evangelos Chatzis, CFO at Danaos Corporation]

Finally, as of the end of the fourth quarter, cash was at $453.4 million, while total liquidity, including availability under our revolving credit facility and marketable securities, stood at $807 million, 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&A.

[Operator]

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you're using a speakerphone, 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 two. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Omar Nokta with Jefferies. Please go ahead.

[Omar Nokta, Managing Director at Jefferies]

Thank you. Hi, John and Evangelos.

[John Coustas, CEO at Danaos Corporation]

Hi, Omar.

[Omar Nokta, Managing Director at Jefferies]

Hi, hi. Just another strong quarter with some real free cash flow generation, and as you note in the presentation, you generated $30 a share in free cash flow in 2024. Looks like that can pretty much be repeated in 2025. I guess a couple of things. It looks like you're back to being on pace to 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 a 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?

[John Coustas, CEO at Danaos Corporation]

You know, we're looking, as you saw, we have arranged an $850 million facility, which covers all the financing of our newbuilding program at 60%. Of course, we are generating and we are keeping substantial amounts of cash for opportunities. At present, with all our newbuilding program, we don't even, you know, going forward, manage to go to a negative net cash position. So we're still, let's say, in surplus, and this is also one of the reasons that we've continued and expanded our newbuilding 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.

[Operator]

The next question will come from Climent Molins with Value Investor's Edge. Please go ahead.

[Climent Molins, Analyst at Value Investors Edge]

Hi, good afternoon. Thank you for taking my questions. I wanted to start by asking about the utilization on the dry bulk side. This was mostly attributable to scheduled off-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?

[John Coustas, CEO at Danaos Corporation]

Are you talking about just the dry bulk fleet, or are you talking about the whole fleet?

[Climent Molins, Analyst at Value Investors Edge]

About the dry bulk fleet.

[John Coustas, CEO at Danaos Corporation]

Yeah, the dry bulk, we have decided to put all our dry bulk vessels in dry dock, and presently, apart from one, all the rest have completed their dry docking in the last six months, where we've installed appendages and paints, which are extremely efficient, so we even managed, for example, vessels that were RightShip E-rated to move them up to a C-plus rating, so we've done a lot of investment on these ships, and we believe that when the dry bulk 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.

[Climent Molins, Analyst at Value Investors Edge]

That's helpful. Thank you. Dry bulk rates have been quite soft recently, and asset values have declined a tad from the highs. Is there any appetite to potentially add additional vessels going forward? And if so, would you still focus on Capesize, or would you be willing to add Kamsarmax or Ultramax as well?

[John Coustas, CEO at Danaos Corporation]

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

[Climent Molins, Analyst at Value Investors Edge]

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

[John Coustas, CEO at Danaos Corporation]

Thank you.

[Operator]

The next question is a follow-up from Omar Nokta with Jefferies. Please go ahead.

[Omar Nokta, Managing Director at Jefferies]

Thank you. Sorry, thanks for 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 ordered the two new ships after a bit of a pause. Just wanted to ask, what gave you confidence to kind of jump back into the newbuilding side of things?

[John Coustas, CEO at Danaos Corporation]

First of all, we believe that the sector needs more efficient ships, especially in this size bracket. Secondly, we have arranged financing charter for everything else, so there is very little, let's say, risk, if any, by our investment.

[Omar Nokta, Managing Director at Jefferies]

Okay, and then just separately, obviously, you've stepped up the share of purchases 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?

[John Coustas, CEO at Danaos Corporation]

Evangelos can answer that.

[Evangelos Chatzis, CFO at Danaos Corporation]

Can you repeat, Omar? Are you referring to the share count?

[Omar Nokta, Managing Director at Jefferies]

Yeah, just the share count post the latest repurchases.

[Evangelos Chatzis, CFO at Danaos Corporation]

It's just that below 19 million shares. Something like 18.8, 18.9 at this point. Yeah.

[Omar Nokta, Managing Director at Jefferies]

Got it. Okay. Well, thank you. Thanks, John. Thanks, Evangelos.

[John Coustas, CEO at Danaos Corporation]

Thank you.

[Operator]

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

[John Coustas, CEO at Danaos Corporation]

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

[Operator]

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.

Participants

Executives

• Evangelos Chatzis, CFO
• John Coustas, CEO

Analysts

• Omar Nokta, Managing Director at Jefferies
• Climent Molins, Analyst at Value Investors Edge