Danaos(US:DAC)2020-11-06 22:55Financial Data and Key Metrics Changes - Adjusted net income for Q3 2020 was $47.3 million, an increase of $9.4 million compared to $37.9 million in Q3 2019 [14] - Operating revenues rose by $7.1 million to $118.9 million in Q3 2020 from $111.8 million in Q3 2019 [15] - Adjusted EBITDA increased by 5% or $4 million to $83.3 million in Q3 2020 from $79.3 million in Q3 2019 [19] Business Line Data and Key Metrics Changes - Vessel operating expenses increased by $2.8 million to $27.7 million in Q3 2020 from $24.9 million in Q3 2019 due to a higher average number of vessels [16] - General and administrative expenses decreased by $0.4 million to $6 million in Q3 2020 compared to $6.4 million in Q3 2019 [17] - Interest expense decreased by $6.8 million to $7.5 million in Q3 2020 from $14.3 million in Q3 2019, attributed to a decrease in average indebtedness [18] Market Data and Key Metrics Changes - Container trade has shown a remarkable recovery since May 2020, with time charter rates at or near multiyear highs across all vessel sizes [7] - Global GDP is forecasted to grow by 5.2% in 2021, indicating a swift recovery primarily in goods rather than services, benefiting containerized trade [9] - The orderbook is currently at single digits as a percentage of the world fleet for the first time in 20 years, indicating a healthy supply-side outlook [10] Company Strategy and Development Direction - The company plans to purchase two 9,000 TEU vessels contracted on two-year charters, expected to be delivered between December 2020 and January 2021 [11] - The company has a charter backlog of $1.1 billion and maintains a conservative financial profile while focusing on capital allocation decisions [12][13] - The company aims to deliver value through growth rather than immediate dividends, emphasizing share repurchases as a means of returning value to shareholders [21] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the medium-term market outlook, noting that tighter supply will help maintain momentum in the container market [10] - The company remains focused on maintaining a conservative financial profile amid ongoing uncertainty due to the pandemic [13] - Management highlighted the dynamic nature of the short-term chartering market and the potential for higher rates in the future [26] Other Important Information - The company repurchased 4,339,000 shares, or 17.5% of outstanding shares, for $31.1 million, significantly increasing per share results and valuation metrics [12] - The average daily operating cost increased to $5,467 per day in Q3 2020 from $5,298 per day in Q3 2019, remaining competitive in the industry [16] Q&A Session Summary Question: Thoughts on eventual dividend timing and further share repurchases - Management indicated that while dividends are considered, the focus remains on delivering value through share repurchases and growth [21][22] Question: Details on the acquisition of two 9,000 TEU vessels - Management noted that these vessels were attractive due to their strategic value and the current market conditions [24] Question: Impact of record-setting container rates on time charter rates - Management confirmed that current charter rates are at phenomenal levels not seen since 2011, with most charters being for 12 to 18 months [26] Question: Expectations for fixing vessels prior to expiration - Management stated that they are waiting closer to vessel delivery dates to secure better rates, which has proven effective [27] Question: Financing expectations for vessel acquisitions - Management expects to finance 50% to 55% of the purchase price for the new vessels [35] Question: Willingness to sell assets if values rise - Management expressed a preference to run vessels in a high market rather than sell, as container shipping is not primarily an asset play [36]