Global Ship Lease(US:GSL)2022-08-04 20:38Financial Data and Key Metrics Changes - Revenue for the first half of 2022 was $308 million, up from $156 million in the prior-year period, representing a 97% increase [26] - Adjusted EBITDA for the first half was $190 million, up from $94 million in the first half of 2021, more than doubling [26] - Normalized income increased from $41.5 million in the first half of 2021 to $137 million in the first half of 2022, a 230% increase [26] Business Line Data and Key Metrics Changes - The company has secured over $1.9 billion of contract cover with an average remaining duration of 2.6 years, indicating strong contract coverage [16][44] - The company has continued to agree to additional charters and extensions in 2022, adding $435 million of contract cover year-to-date [10] Market Data and Key Metrics Changes - Idle capacity in the global fleet remains below 1%, indicating full employment of the fleet [35] - The order book to fleet ratio for midsize and smaller container ships is significantly lower at just over 15%, compared to 52.3% for larger ships [37] Company Strategy and Development Direction - The company is focused on decarbonization by retrofitting existing ships with proven technologies to improve energy efficiency and reduce emissions [11] - The company maintains a conservative and risk-averse approach, extending forward contract cover and building cash liquidity to manage risks and capitalize on opportunities [12][24] - The company is looking at capital allocation opportunities, including returning capital to shareholders through dividends and share buybacks [21][22] Management's Comments on Operating Environment and Future Outlook - The management acknowledges significant uncertainty in the macro environment, including inflation and geopolitical tensions, but emphasizes the strength of the company's business model [7][12] - The management believes that the global fleet is effectively fully employed and that charter markets remain close to cyclical highs, with liners forecasting another year of exceptional earnings in 2022 [46][44] Other Important Information - The company has reduced its average cost of debt from 4.6% at the beginning of the year to under 3.1% [31] - The company has implemented interest rate caps at 0.75% LIBOR for all floating rate debt, providing further financial stability [29] Q&A Session Summary Question: Can you qualify the "wait and see" mode of charters? - Management explained that charters are cautious due to economic uncertainties and are assessing how new regulations will impact fleet operations, leading to a "wait and see" approach [52][56] Question: What does the asset acquisition market look like now? - Management indicated that while they are evaluating sale and leaseback deals, they have not found attractive opportunities for direct ship purchases due to high prices [72][73] Question: How will environmentally related CapEx be managed? - Management stated that investments in decarbonization will be expected to translate into increased EBITDA and enhance asset value, similar to past investments in scrubbers [82] Question: What is the company's stance on share buybacks? - Management confirmed that while they have the authorization for share buybacks, they are currently focused on building cash liquidity and will consider opportunities as they arise [86][87] Question: How does the company view counterparty risk? - Management expressed confidence in the strength of their fixed-rate non-cancelable time charter contracts and the financial health of their counterparties, deeming counterparty default unlikely [92][93]