Danaos Corp. Q2 FY2025 earnings call

• Global trade uncertainties are subsiding with tariffs on imports to the U.S. being finalized at lower rates than feared, though U.S. tariffs remain higher than historic averages, and the U.S. economy is stable with consumer spending on foreign goods. - Geopolitically, conflicts in Ukraine and Gaza continue but no major shifts or new disruptions to global shipping routes have been seen. - Maintaining disciplined capital allocation, not broadly participating in speculative ordering, especially in the feeder segment where pricing is disconnected from long-term fundamentals. - Added one 6,000 TEU vessel to the order book, which was fixed on a 5-year charter with a long-standing client. - Contracted revenue backlog increased by approximately $113 million since the previous earnings release, with a total contracted revenue base of $3.6 billion, 99% contracted charter coverage for 2025, and 88% for 2026. - Strong financial position with minimal leverage, growing contracted earnings, a strong balance sheet, and ample liquidity (cash at $546 million, total liquidity at $924 million).

Adjusted EPS for the second quarter of 2025 was $6.36 per share, amounting to $117 million, compared to adjusted EPS of $6.78 per share or $132.3 million in the second quarter of 2024. The $15.3 million decrease in adjusted net income was a result of a $24.7 million increase in total operating costs (mainly due to more vessels in the fleet), a $3.6 million increase in net finance costs, and a $2.7 million decrease in dividend income from investments, partially offset by a $15.9 million increase in operating revenues. On the revenue side, fleet growth contributed $26.6 million in incremental operating revenues quarter-on-quarter, but was offset by an $8.2 million decrease in container segment revenues (due to lower contracted charter rates and $5.3 million lower noncash U.S. GAAP revenue recognition). The Drybulk segment saw seasonal firming but broader weakness persisted due to deflationary conditions in China, with asset value for modern tonnage remaining elevated.

• Maintaining disciplined capital allocation, only pursuing investments that meet return criteria. - Contracted charter coverage remains strong at 99% for 2025 and 88% for 2026. - Focusing on disciplined execution, operational excellence, and value creation for shareholders.

• Geopolitical volatility, including ongoing conflicts in Ukraine and Gaza, which could lead to potential disruptions in global shipping routes. - Macro-economic uncertainties such as deflationary conditions in China affecting the Drybulk segment.

Q: Omar Nokta asked about the charter market demand, pace of forward fixing, and handling of ships rolling off charter.

A: John Koustas said the market is stable with demand for all ships, most ships for 2025 are already fixed, minimal things for 2027, and no significant changes in Red Sea passage foreseen.

Q: Omar Nokta asked about capital allocation and buyback pause.

A: John Koustas said buyback was paused as stock appreciation would benefit flippers and market correction could affect shipping companies.

Q: Omar Nokta asked about cost increase and run rate.

A: John Koustas said higher costs were due to bulk orders in Q2 and will normalize towards full-year numbers.

Q: Climent Molins asked about feeder ships and newbuild.

A: John Koustas said feeder ships face challenges with short-term contracts and new generation ships reducing demand, and the new 2027 vessel was due to a relationship with the yard.