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) (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 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 Danaos Corporation conference call to discuss the financial results for the three months ending March 31, 2025. 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. Coustas and Mr. Chatzis will be making some introductory comments, and then we will open the call to a question-and-answer session.

[Evangelos Chatzis, CFO at Danaos Corporation]

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

[John Coustas, CEO at Danaos Corporation]

Thank you, Evangelos. Good morning, and thank you all for joining today's call to discuss results for the first quarter of 2025. As the year progresses, the level of global disruption shows no signs of abating. Armed conflicts continue, most recently involving India and Pakistan, and the uncertainty of tariffs has led to a dramatic decline in the U.S. Pacific market. Thus far, the U.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 dry bulk 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, CEO at Danaos Corporation]

While the much-publicized Simandou project is expected to benefit the cape-sized 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 the proposed IMO regulation on greenhouse gas emissions. 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.

[John Coustas, CEO at Danaos Corporation]

As a result, there is little clarity on the fuel of the future, and at present, conventional scrubber-feeded vessels remain the default option, and there 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. 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, CFO at Danaos Corporation]

Thank you, John, and good morning again. I will briefly review the results and then open the call to Q&A. We are reporting adjusted EPS for the first quarter of 2025 of $6.04 per share, or adjusted net income of $113.4 million, compared to adjusted EPS of $7.15 per share, or adjusted net income of $140 million for the corresponding first quarter of 2024. This $26.6 million decrease in adjusted net income between the two quarters is the result of a $19.8 million increase in total operating costs, mainly due to the increase in the average number of vessels in our fleet, a $6 million increase in net finance costs, and a $0.6 million decrease in dividend income.

[Evangelos Chatzis, CFO at Danaos Corporation]

As analyzed in our earnings release, the increase in our fleet that produced the incremental costs produced a combined $30.1 million of incremental operating revenues that was, however, offset by a $9 million decrease in revenues of our dry bulk segment as a result of a softer spot market in Q1, a $9.4 million decrease in revenues of our container segment as a result of lower contracted charter rates, a $6.4 million 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, $5.4 million lower non-cash U.S. GAAP revenue recognition income.

[Evangelos Chatzis, CFO at Danaos Corporation]

Vessel operating expenses increased by $8.6 million-$51.7 million in the current quarter from $43.1 million in the first quarter of 2024 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&A expenses increased by $2 million-$12.2 million in the current quarter compared to $10.2 million in the first quarter of 2024, mainly due to higher management fees because of the increase in the average number of vessels in the fleet.

[Evangelos Chatzis, CFO at Danaos Corporation]

Interest expense, excluding finance cost amortization, increased by $6.6 million-$9.2 million in the current quarter compared to $2.6 million in the first quarter of 2024. This decrease is a combined result of a $5.2 million increase in interest expense due to a rise in our average indebtedness of $364 million 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 cost between the two periods, together with a $1.4 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 $3.6 million in the current quarter.

[Evangelos Chatzis, CFO at Danaos Corporation]

Adjusted EBITDA decreased by 3.1% or $5.5 million-$171.7 million in the current quarter compared to $177.2 million in the first quarter of 2024 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 $500 million to our contracted revenue backlog. As a result, our contracted revenue backlog remains strong and has now grown to $3.7 billion, with a 3.9-year average charter duration, while contract coverage is at 99% for this year and 85% for 2026. Our investor presentation has an analytical disclosure on our contracted charter book that you can refer to.

[Evangelos Chatzis, CFO at Danaos Corporation]

On February 7, 2025, we entered into an $850 million 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 March 31, 2025, our net debt stood at $299 million, 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.

[Evangelos Chatzis, CFO at Danaos Corporation]

Since the date of the last earnings release, we have repurchased an additional $36.9 million, and to date, we have executed in total share repurchases of $205.7 million, while our share repurchase program has recently been upsized to $300 million. Finally, as at the end of Q1, cash was at $480 million, while total liquidity, including availability under our revolving credit facility and marketable securities, stood at a strong $825 million, giving us ample flexibility to pursue accretive capital deployment opportunities. 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&A.

[Operator]

We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are 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. At this time, we will pause momentarily to assemble our roster. The first question comes from Omar Nokta with Jefferies. Please go ahead.

[Omar Nokta, Managing Director at Jefferies]

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. You've chartered out your new buildings, or the final two at least, that were open. As you mentioned, you're going to hold off now on new vessel investments and focus on optimizing the performance of your existing fleet. I just want to get a sense from you. 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, CEO at Danaos Corporation]

Definitely the second one. We are investing into a lot of energy-saving devices that will make our vessels more competitive in the future. We have already seen benefits on that, both on our dry bulk fleet that we have started a program of, let's say, upgrading all the ships. The same thing we are doing in parallel with our container vessels, where we are 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 secondhand. On the other hand, yes, of course, we will be generating quite a lot of cash. We are open. We are continuously evaluating opportunities. Today, we are in an environment of expensive new buildings without any clear roadmap as far as the fuel of the future. The recent IMO decision, which we still do not know whether it is going to be approved in next October, that does not really give us any hints as to where we should go.

[Omar Nokta, Managing Director at Jefferies]

Yeah. Yeah. No, that makes sense. I guess maybe just separately, the stock has done very well recently. You bought back, 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. 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, CEO at Danaos Corporation]

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 million 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]

Yeah. Okay. Yeah. Yeah. I get that. Thank you. Maybe just one final one, and I'll pass it back. Obviously, you've taken your stake up in Star Bulk by another $2 million shares recently. You're over 5%. Anything you can say about what drove that extra investment? Is it the valuation, the dry bulk outlook, or something else?

[Evangelos Chatzis, CFO at Danaos Corporation]

I think it's an investment we believe 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 don't have any specific plans for the time being. Yeah. Omar, we added post-liberation day where it was a compelling price. We reduced our average cost. That was the incentive.

[Omar Nokta, Managing Director at Jefferies]

Got it. Yeah. Opportunistic. Yeah. Yeah. Makes sense. Great. Thanks, Evangelos. Thanks, John.

[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 to Dr. Coustas for any further comments or closing remarks.

[John Coustas, CEO at Danaos Corporation]

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, CFO
• John Coustas, CEO

Analysts

• Omar Nokta, Managing Director at Jefferies