Danaos Q1 2025 Earnings Report

Danaos EPS Results

• Actual EPS: $6.04
• Consensus EPS: $6.33
• Beat/Miss: Missed by -$0.29
• One Year Ago EPS: $7.15

Danaos Revenue Results

• Actual Revenue: $253.31 million
• Expected Revenue: $242.00 million
• Beat/Miss: Beat by +$11.31 million
• YoY Revenue Growth: N/A

Danaos Announcement Details

• Quarter: Q1 2025
• Date: 5/13/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, May 14, 2025
• Conference Call Time: 9:00AM ET

Danaos (NYSE:DAC), together with its subsidiaries, provides container and drybulk vessels services in Australia, Asia, and Europe. The company offers seaborne transportation services by operating vessels in the containership and drybulk sectors of the shipping industry. As of April 03, 2024, it had a fleet of 68 containerships aggregating 421,293 twenty-foot equivalent units in capacity. The company was formerly known as Danaos Holdings Limited and changed its name to Danaos Corporation in October 2005. Danaos Corporation was founded in 1963 and is based in Piraeus, Greece.

Danaos Q1 2025 Earnings Call Transcript

Key Takeaways

• Strong contracted revenue backlog of approximately $3.7 billion with 99% coverage for 2025 and 85% for 2026, insulating near-term earnings from market volatility.
• First-quarter adjusted EPS fell to $6.04 from $7.15 year-over-year, driven by higher operating and finance costs and softer spot rates.
• Net debt to adjusted EBITDA ratio at a healthy 0.4x and 53 of 84 vessels unencumbered, with total liquidity of €825 million, provides strong balance-sheet flexibility.
• Management is pausing new vessel orders due to unclear IMO GHG regulation and expensive newbuilds, instead investing in energy-saving retrofits to optimize the existing fleet.
• Orderbook includes 15 container vessels delivering through 2028 on profitable charters, expected to boost fleet profile and future earnings potential.

Presentation

[Operator]

Good day, and welcome to the Danaus Corporation Conference Call to discuss the Financial Results for the Three Months Ended 03/31/2025. As a reminder, today's call is being recorded. Hosting the call today is Doctor. John Coustas, Chief Executive Officer of Danaus Corporation and Mr. Evangelos Hazzis, Chief Financial Officer of denaus Corporation.

[Operator]

Doctor. Coustas and Mr. Hazzis will be making some introductory comments, and then we will open the call to a question and answer session.

[Evangelos Chatzis, VP, CFO, Treasurer & Secretary at Danaos]

Thank you, operator. Good morning, everyone, and thank you for joining us. 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, VP, CFO, Treasurer & Secretary at Danaos]

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 accompanying materials. With that, let me now turn the call over to Doctor. Coustas, who will provide the broad overview of the quarter.

[John Coustas, Chairman, President & CEO at Danaos]

Thank you, Evangelos. Good morning and thank you all for joining today's call to discuss results for the first quarter of twenty twenty five. As the year progresses, the level of global disruption shows no signs of abating. Armed conflicts continue, mostly recently involving India and Pakistan, and the uncertainty of tariffs has led to a dramatic decline in Pacific market. Thus far, The U.

[John Coustas, Chairman, President & CEO at Danaos]

S. Economy remains resilient. And as long as American consumers continue to spend, we anticipate that trade flows will rebound with depleted inventories eventually driving a surge in demand. The drybulk market has recovered from its first quarter lows, although the rebound has been modest. In our view, a meaningful and sustained recovery will be challenging absent further growth initiatives in China.

[John Coustas, Chairman, President & CEO at Danaos]

While the much publicized Simandou project is expected to benefit the Capesize market by increasing ton miles, Overall, iron ore consumption is not projected to rise significantly. Our financial performance continues to be strong, although it has been impacted by a number of charter renewals at lower rates than those seen during the COVID pandemic. On the other hand, we continue to build our charter backlog effectively insulating ourselves from near term market weakness. Our charter coverage for 2025 and 2026 is largely secured. A noteworthy recent development is a proposed IMO regulation on greenhouse gas emissions.

[John Coustas, Chairman, President & CEO at Danaos]

Unfortunately, the regulation falls short of the industry's more ambitious proposals and is unlikely to drive meaningful progress on decarbonization of our industry. There is limited incentive to use expensive green fuels and LNG has not been meaningfully prioritized. As a result, there is little clarity on the fuel of the future. And at present, conventional scrubber fitted vessels remain the default option under what is in essence a pay to pollute framework. We are currently holding off on new vessel investments and are focusing on optimizing the performance of our existing fleet.

[John Coustas, Chairman, President & CEO at Danaos]

Our significant growth backlog vessel order book includes 15 container vessels scheduled for delivery over the next three years, all backed by solid and profitable charter arrangements that will enhance both our fleet profile and our earnings potential. Despite the broader uncertainties, we remain committed to delivering superior returns to our shareholders through disciplined execution and long term strategic focus. With that, I'll hand over the call back to Evangelos, who will take you through the financials for the quarter. Evangelos?

[Evangelos Chatzis, VP, CFO, Treasurer & Secretary at Danaos]

Thank you, John, and good morning again. I will briefly review the results and then open the call to Q and A. We are reporting adjusted EPS for the first quarter of twenty twenty five of $6.04 per share or adjusted net income of $113,400,000 compared to adjusted EPS of $7.15 per share or adjusted net income of $140,000,000 for the corresponding first quarter of twenty twenty four. This €26,600,000 decrease in adjusted net income between the two quarters is a result of a €19,800,000 increase in total operating costs, mainly due to the increase in the average number of vessels in our fleet, a $6,000,000 increase in net finance costs and a $600,000 decrease in dividend income. As analyzed in our earnings release, the increase in our fleet that produced the incremental costs produced a combined $30,100,000 of incremental operating revenues that was, however, offset by a $9,000,000 decrease in revenues of our drybulk segment as a result of a softer spot market in Q1, a $9,400,000 decrease in revenues of our container segment as a result of lower contracted charter rates, a $6,400,000 decrease in revenues as a result of lower fleet utilization, mainly due to the increased number of dry dockings between the two periods and last, dollars 5,400,000.0 lower noncash U.

[Evangelos Chatzis, VP, CFO, Treasurer & Secretary at Danaos]

S. GAAP revenue recognition income. Vessel operating expenses increased by $8,600,000 to $51,700,000 in the current quarter from $43,100,000 in the first quarter of twenty twenty four as a result of the increase in the average number of vessels in our fleet, while our daily operating cost increased to just above $7,000 per vessel per day for the current quarter compared to $6,500 per vessel per day for the corresponding quarter of 2024. Still, our operating costs continue to remain among the most competitive in the industry. G and A expenses increased by €2,000,000 to €12,200,000 in the current quarter compared to €10,200,000 in the first quarter of twenty twenty four, mainly due to higher management fees because of the increase in the average number of vessels in the fleet.

[Evangelos Chatzis, VP, CFO, Treasurer & Secretary at Danaos]

Interest expense, excluding finance costs amortization, increased by $6,600,000 to $9,200,000 in the current quarter compared to $2,600,000 in the first quarter of twenty twenty four. This decrease is a combined result of a $5,200,000 increase in interest expense due to a rise in our average indebtedness of $364,000,000 between the two periods. That was partially offset by a reduction in the cost of debt service by approximately 100 basis points as a result of a decrease in software costs between the two periods. Together with a $1,400,000 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 $3,600,000 in the current quarter.

[Evangelos Chatzis, VP, CFO, Treasurer & Secretary at Danaos]

Adjusted EBITDA decreased by 3.1% or $5,500,000 to $171,700,000 in the current quarter compared to $177,200,000 in the first quarter of twenty twenty four for the reasons that have already been 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 event disclosures. Since the date of our last earnings release, we have added more than $05,000,000,000 to our contracted revenue backlog. As a result, our contracted revenue backlog remains strong and has now grown to 3,700,000,000 with a three point nine year average charter duration, while contract coverage is up 99% for this year and 85% for 2026. Our investor presentation has analytical disclosure on our contracted charter book that you can refer to.

[Evangelos Chatzis, VP, CFO, Treasurer & Secretary at Danaos]

On 02/07/2025, we entered into an €850,000,000 syndicated loan facility agreement, which concludes the financing of all of our remaining newbuilding container vessels, including the two additional recent orders with deliveries from 2026 through 2028. As of 03/31/2025, our net debt stood at $299,000,000 And in the current interest rate environment, this position shields us from high interest costs. Additionally, the company's net debt to adjusted EBITDA ratio stood at 0.4x at the end of Q1, while 53 out of our 84 vessels are currently unencumbered and debt free. We have declared a dividend of $0.85 per share for this quarter, and we continue to repurchase our stock. Since the date of the last earnings release, we have repurchased an additional $36,900,000 And to date, we have executed, in total, share repurchases of $205,700,000 while our share repurchase program has recently been upsized to €300,000,000 Finally, as of the end of the Q1, cash was at €480,000,000 while total liquidity, including availability under our revolving credit facility and marketable securities, stood at a strong €825,000,000 giving us ample flexibility to pursue accretive capital deployment opportunities.

[Evangelos Chatzis, VP, CFO, Treasurer & Secretary at Danaos]

With that, I would like to thank you for listening to this first part of our call. Operator, we can now open the call to Q and A.

[Operator]

We will now begin the question and answer session. The first question comes from Omar Nokta with Jefferies. Please go ahead.

[Omar Nokta, Managing Director at Jefferies LLC]

Hi, John. Hi, Evangelos. Good update. Clearly, things are going despite all the market headwinds and everything that you outlined, John, in your opening comments. You've added backlog.

[Omar Nokta, Managing Director at Jefferies LLC]

You've charted out your new buildings or the final two, at least, that were open. And as you mentioned, you're going to hold off now on new vessel investments and focus on optimizing the performance of your existing fleet. Just want to get a sense from you that when you say that, does that mean maybe focus on harvesting the cash from these assets that you own? Or do you see investment opportunities or upgrades that you can do in your existing fleet that could boost earnings power down the line?

[John Coustas, Chairman, President & CEO at Danaos]

Well, definitely the second one, we are investing into a lot of energy saving devices that will make our vessels more competitive in the future. And we've already seen benefits from that, both on our drybulk fleet that we have started a program of, let's say, having upgrading all the ships. The same thing we're doing in parallel with our container vessels where we're doing all the combinations of bulbous bow, propeller and low friction paints, which is going to definitely reduce the gap between, let's say, new buildings and second hand. On the other hand, yes, of course, we'll be generating quite a lot of cash. And we are often we are continuously evaluating opportunities.

[John Coustas, Chairman, President & CEO at Danaos]

But today, we are in an environment of expensive new buildings without any clear roadmap as far as the fuel of the future. And the recent IMO decision, which we still don't know whether it's going to be approved in next October, that doesn't really give us any hints as to where we should go.

[Omar Nokta, Managing Director at Jefferies LLC]

Yes. Yes. No, that makes sense. And I guess maybe just separately, the stock has done very well recently. You bought back.

[Omar Nokta, Managing Director at Jefferies LLC]

I think most recently subsequent to the first quarter, you bought a good amount of stock in the low 70s. The stock is now kind of closer to 90. Do you still see buybacks continuing at a decent clip here? Or do you shift back and maybe see how things go from here?

[John Coustas, Chairman, President & CEO at Danaos]

We see. We do not, let's say, declare as to when or don't set any target levels for the buyback. The only thing which we really inform the market is that we have another $100,000,000 authorized at this moment for buybacks. I mean, when we're going to execute on it, it's to be seen.

[Omar Nokta, Managing Director at Jefferies LLC]

Okay. Yes, I get that. Thank you. And maybe just one final one and I'll pass it back. Obviously, you've taken your stake up in Star Bulk by another 2,000,000 shares recently, you're over 5%.

[Omar Nokta, Managing Director at Jefferies LLC]

Anything you can say about what drove that extra investment? Is it the valuation, the drybulk outlook or something else?

[John Coustas, Chairman, President & CEO at Danaos]

I think it's an investment we believe it makes sense. We were already in a position since our Eagle Bulk shareholding that was transformed into Star Bulk shareholding about a year and a half, almost ago. It was an opportunity. We added up. We will evaluate the performance of the market and we'll we don't have any specific plans for the time being.

[Evangelos Chatzis, VP, CFO, Treasurer & Secretary at Danaos]

Yes. And Omar, we added post Liberation Day, where we it was a significant it was a compelling price. We reduced our average cost. So that was the incentive.

[Omar Nokta, Managing Director at Jefferies LLC]

Got it. Yes, an opportunistic deal. Yes, makes sense.

[Evangelos Chatzis, VP, CFO, Treasurer & Secretary at Danaos]

Yes.

[Omar Nokta, Managing Director at Jefferies LLC]

Great. Thanks, Evangelos. Thanks, John.

[John Coustas, Chairman, President & CEO at Danaos]

Thank you.

[Operator]

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

[John Coustas, Chairman, President & CEO at Danaos]

Yes. Thank you all for joining this conference call and your continued interest in our story. Look forward to hosting you on our next earnings call. Have a nice day.

[Operator]

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

Participants

Executives

• Evangelos Chatzis, VP, CFO, Treasurer & Secretary
• John Coustas, Chairman, President & CEO

Analysts

• Omar Nokta, Managing Director at Jefferies LLC