Danaos Corporation, one of the world’s largest independent owners of container vessels and drybulk vessels, today reported unaudited results for the first quarter ended March 31, 2024.
Highlights for the First Quarter Ended March 31, 2024:
| Financial Summary Three Months Ended March 31, 2024 and Three Months Ended March 31, 2023 Unaudited (Expressed in thousands of United States dollars, except as otherwise stated) | ||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||
| March 31, 2024 | March 31, 2023 | |||||||||||||||||
| Financial & Operating Metrics | Container Vessels | Drybulk Vessels | Other | Total | Container Vessels | Drybulk Vessels | Other | Total | ||||||||||
| Operating Revenues | $233,411 | $20,038 | – | $253,449 | $243,574 | – | – | $243,574 | ||||||||||
| Voyage Expenses, excl. commissions | $(488) | $(10,827) | – | $(11,315) | $(415) | – | – | $(415) | ||||||||||
| Time Charter Equivalent Revenues (1) | $232,923 | $9,211 | – | $242,134 | $243,159 | – | – | $243,159 | ||||||||||
| Net income / (loss) | $138,359 | $337 | $11,802 | $150,498 | $148,789 | – | $(2,588) | $146,201 | ||||||||||
| Adjusted net income / (loss) (2) | $138,856 | $337 | $823 | $140,016 | $147,843 | – | $(2,588) | $145,255 | ||||||||||
| Earnings per share, basic | $7.75 | $7.18 | ||||||||||||||||
| Earnings per share, diluted | $7.68 | $7.18 | ||||||||||||||||
| Adjusted earnings per share, diluted (2) | $7.15 | $7.14 | ||||||||||||||||
| Operating Days | 6,019 | 596 | – | 5,956 | – | – | ||||||||||||
| Time Charter Equivalent $/day (1) | $38,698 | $15,455 | – | $40,826 | – | – | ||||||||||||
| Ownership days | 6,185 | 637 | – | 6,150 | – | – | ||||||||||||
| Average number of vessels | 68.0 | 7.0 | – | 68.3 | – | – | ||||||||||||
| Fleet Utilization | 97.3% | 93.6% | – | 96.8% | – | – | ||||||||||||
| Adjusted EBITDA (2) | $174,188 | $2,192 | $823 | $177,203 | $181,628 | – | $(2,588) | $179,040 | ||||||||||
| Consolidated Balance Sheet & Leverage Metrics | As of March 31, 2024 | As of December 31, 2023 | ||||||||||||||||
| Cash and cash equivalents | $324,326 | $271,809 | ||||||||||||||||
| Availability under Revolving Credit Facility | $326,250 | $337,500 | ||||||||||||||||
| Marketable securities(3) | $97,007 | – | ||||||||||||||||
| Total cash liquidity & marketable securities(4) | $747,583 | $609,309 | ||||||||||||||||
| Debt, gross of deferred finance costs | $458,641 | $410,516 | ||||||||||||||||
| Net Debt (5) | $134,315 | $138,707 | ||||||||||||||||
| LTM Adjusted EBITDA (6) | $705,165 | $707,002 | ||||||||||||||||
| Net Debt / LTM Adjusted EBITDA | 0.19x | 0.20x | ||||||||||||||||
| 1. | Time charter equivalent revenues, time charter equivalent US$/day are non-GAAP measures. Refer to the reconciliation provided below. | |
| 2. | Adjusted net income/(loss), adjusted earnings per share and adjusted EBITDA are non-GAAP measures. Refer to the reconciliation of net income to adjusted net income and net income to adjusted EBITDA provided below. | |
| 3. | Marketable securities refer to fair value of 1,552,865 shares of common stock of EGLE as at March 31, 2024. | |
| 4. | Total cash liquidity & marketable securities includes: (i) cash and cash equivalents, (ii) availability under our Revolving Credit Facility and (iii) marketable securities. | |
| 5. | Net Debt is defined as total debt gross of deferred finance costs less cash and cash equivalents | |
| 6. | Last twelve months Adjusted EBITDA. Refer to the reconciliation provided below. |
For management purposes, the Company is organized based on operating revenues generated from container vessels and dry-bulk vessels and has two reporting segments: (1) a container vessels segment and (2) a dry-bulk vessels segment. The Company measures segment performance based on net income. Items included in the applicable segment’s net income are directly allocated to the extent that the items are directly or indirectly attributable to the segments. With regards to the items that are allocated by indirect calculations, their allocation is commensurate to the utilization of key resources. The Other segment includes components that are not allocated to any of the Company’s reportable segments and includes investments in an affiliate accounted for using the equity method accounting and investments in marketable securities.
- In March 2024, we entered into a syndicated loan facility agreement for an amount of up to $450 million, to finance all of our 8 newbuilding container vessels with deliveries in 2024 and 2025. An amount of $55.0 million was utilized as of March 31, 2024 to finance the delivery of the first of these vessels. This facility is repayable in quarterly instalments up to September 2030.
- In February 2024, we entered into agreements to acquire an additional 3 Capesize drybulk vessels aggregating 529,704 DWT, with expected delivery to us in the second and third quarter of 2024. This will bring the total number of our Capesize drybulk vessels fleet to 10 vessels with an aggregate capacity of 1,760,861 DWT.
- In February and March 2024 we added four 8,258 TEU newbuildings to our orderbook with expected deliveries in 2026 and 2027. As a result, as of March 31, 2024, we had 14 container vessels under construction with an aggregate capacity of 107,946 TEU. Two newbuilding vessels were delivered to us in April and May 2024, four vessels are expected to be delivered in the remainder of 2024, two vessels in 2025, three vessels in 2026 and three vessels in 2027. All our newbuildings are designed with the latest eco characteristics, will be methanol fuel ready, fitted with Alternative Maritime Power Units and will all be built in accordance with the latest requirements of the International Maritime Organization in relation to Tier III emission standards and Energy Efficiency Design Index (EEDI) Phase III.
- We have now secured multi-year chartering agreements for all of our 14 newbuildings. As a result of this chartering activity, over the past three months we have added approximately $423 million to our contracted revenue backlog through the arrangement of new charters for 5 container vessels in our fleet and 8 newbuildings.
- As a result, total contracted cash operating revenues, on the basis of concluded charter contracts through the date of this release, currently stand at $2.5 billion. The remaining average contracted charter duration is 2.9 years, weighted by aggregate contracted charter hire.
- As of the date of this release, Danaos has repurchased a total of 1,671,059 shares of its common stock in the open market for $104.4 million under its share repurchase program of up to $200 million announced in June 2022, as amended on November 10, 2023.
- Contracted operating days charter coverage for our container vessel fleet is currently 99% for 2024 and 69% for 2025. This includes newbuildings based on their scheduled delivery dates.
- Danaos has declared a dividend of $0.80 per share of common stock for the first quarter of 2024, which is payable on June 20, 2024, to stockholders of record as of June 11, 2024.
Danaos’ CEO Dr. John Coustas commented:
“The container market continued to strengthen in the first quarter of 2024, a trend that has continued into the second quarter. Both charter and box rates are gaining momentum, and we have completed all necessary rechartering activity in excess of our internal forecasts. The renewed optimism in the market extends to the longer term view of the charterers, who are making charter commitments on newbuilding vessels with deliveries scheduled from 2025 through the end of 2027.
Following the recent placement of an order for an additional two 8,250 TEU vessels for 2027 delivery, our newbuilding orderbook currently consists of 14 vessels, totaling 108,000 TEU, two of which have already been delivered to us.
More importantly, we have now secured multi-year chartering agreements for all our vessels on order, while we have also extended charters of certain existing vessels. As a result of this chartering activity, over the past three months we have added $423 million to our contracted revenue backlog that today stands at $2.5 billion with an average charter duration of 2.9 years.
All the vessels in our newbuilding orderbook are Methanol ready, future proofing a portion of our fleet on green fuel usage. We have also arranged very conservative financing for the first eight newbuildings at competitive rates to ensure that we are able to maintain a strong liquidity profile to support continued opportunistic fleet expansion.
In our drybulk vessels segment, we have added an additional Capesize vessel to our fleet, increasing our fleet to 10 vessels in total. We are continuing to explore ways to increase our exposure to this market. The drybulk market has performed above expectations, and we are confident that an eventual Chinese recovery will drive the market higher. Our entry point into the dry bulk market is relatively low, and our breakeven is therefore easily achievable.
Despite geopolitical uncertainties, most of the economies around the world are performing relatively well and are displaying no signs of recession. The biggest risk to our market outlook comes from trade hurdles that various countries are putting in place in the form of tariffs and trade restrictions on energy as well as manufactured goods. Despite the positive short-term impacts of these practices, we believe they will ultimately result in trade contraction in the long term.
In the meantime, our strategy has continued to result in consistent solid results. We will continue to explore growth opportunities while ensuring the longevity of our investments for the benefit of our shareholders.”
Three months ended March 31, 2024 compared to the three months ended March 31, 2023
During the three months ended March 31, 2024, Danaos had an average of 68.0 container vessels and 7.0 Capesize drybulk vessels compared to 68.3 container vessels and no drybulk vessels during the three months ended March 31, 2023. Our container vessels utilization for the three months ended March 31, 2024 was 97.3% compared to 96.8% for the three months ended March 31, 2023. The increase in container vessels utilization was mainly due to the decreased days of scheduled dry-docking of our vessels.
Our adjusted net income amounted to $140.0 million, or $7.15 per diluted share, for the three months ended March 31, 2024 compared to $145.3 million, or $7.14 per diluted share, for the three months ended March 31, 2023. We have adjusted our net income in the three months ended March 31, 2024 for a $11.0 million change in fair value of investments and a $0.5 million non-cash finance fees amortization.
Adjusted net income of our container vessels segment amounted to $138.9 million for the three months ended March 31, 2024 compared to $147.8 million for the three months ended March 31, 2023. We adjusted net income of container vessels segment in the three months ended March 31, 2024 for a $0.5 million non-cash finance fees amortization.
Adjusted net income of our drybulk vessels segment amounted to $0.3 million for the three months ended March 31, 2024 compared to none for the three months ended March 31, 2023, as we were not engaged in the drybulk vessels segment during that period.
Please refer to the Adjusted Net Income reconciliation tables, which appear later in this earnings release.
The $5.3 million decrease in adjusted net income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 is primarily attributable to a $22.2 million increase in total operating expenses, which was partially offset by a $9.8 million increase in operating revenues, a $3.7 million decrease in net finance expenses, a $2.5 million decrease in equity loss on investments and a $0.9 million increase in dividends received.
On a non-adjusted basis, our net income amounted to $150.5 million, or $7.68 earnings per diluted share, for the three months ended March 31, 2024 compared to net income of $146.2 million, or $7.18 earnings per diluted share, for the three months ended March 31, 2023. On a non-adjusted basis, the net income of our container vessels segment amounted to $138.4 million and the net income of our drybulk vessels segment amounted to $0.3 million for the three months ended March 31, 2024.
Operating Revenues
Operating revenues increased by 4.0%, or $9.8 million, to $253.4 million in the three months ended March 31, 2024 from $243.6 million in the three months ended March 31, 2023.
Operating revenues of our container vessels segment decreased by 4.2%, or $10.2 million, to $233.4 million in the three months ended March 31, 2024 from $243.6 million in the three months ended March 31, 2023, analyzed as follows:
- a $3.0 million increase in revenues in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 mainly as a result of higher charter rates and improved vessels utilization;
- a $2.7 million decrease in revenues in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to vessel disposals;
- a $3.0 million decrease in revenues in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to decreased amortization of assumed time charters; and
- a $7.5 million decrease in revenue in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to lower non-cash revenue recognition in accordance with US GAAP.
Operating revenues of our drybulk vessels segment added an incremental $20.0 million of revenues in the three months ended March 31, 2024 compared to no such operating revenues in the three months ended March 31, 2023.
Vessel Operating Expenses
Vessel operating expenses increased by $2.5 million to $43.1 million in the three months ended March 31, 2024 from $40.6 million in the three months ended March 31, 2023, primarily as a result of the increase in the average number of vessels in our fleet due to recent dry bulk vessels acquisitions, which was partially offset by the decrease in the average daily operating cost of our vessels to $6,493 per vessel per day for the three months ended March 31, 2024 compared to $6,807 per vessel per day for the three months ended March 31, 2023. Management believes that our daily operating costs remain among the most competitive in the industry.
Depreciation & Amortization
Depreciation & Amortization includes Depreciation and Amortization of Deferred Dry-docking and Special Survey Costs.
Depreciation
Depreciation expense increased by 7.6%, or $2.4 million, to $33.9 million in the three months ended March 31, 2024 from $31.5 million in the three months ended March 31, 2023 mainly due to depreciation expense related to 7 recently acquired Capesize drybulk vessels.
Amortization of Deferred Dry-docking and Special Survey Costs
Amortization of deferred dry-docking and special survey costs increased by $1.7 million to $5.5 million in the three months ended March 31, 2024 from $3.8 million in the three months ended March 31, 2023.
General and Administrative Expenses
General and administrative expenses increased by $3.4 million, to $10.2 million in the three months ended March 31, 2024 from $6.8 million in the three months ended March 31, 2023. The increase was mainly attributable to increased stock-based compensation and management fees.
Other Operating Expenses
Other Operating Expenses include Voyage Expenses.
Voyage Expenses
Voyage expenses increased by $12.4 million to $20.3 million in the three months ended March 31, 2024 from $7.9 million in the three months ended March 31, 2023 primarily as a result of the $12.0 million in voyage expenses related to our recently acquired 7 Capesize drybulk vessels, which generated revenue mainly from voyage charter agreements compared to no such expenses in the three months ended March 31, 2023.
Voyage expenses of container vessels segment increased by $0.4 million to $8.3 million in the three months ended March 31, 2024 from $7.9 million in the three months ended March 31, 2023 mainly due to increased commissions. Total voyage expenses of container vessels comprised $7.8 million commissions and $0.5 million other voyage expenses in the three months ended March 31, 2024.
Voyage expenses of drybulk vessels segment were $12.0 million in the three months ended March 31, 2024 compared to no voyage expenses in the three months ended March 31, 2023. Total voyage expenses of drybulk vessels comprised $1.2 million commissions and $10.8 million other voyage expenses, mainly bunkers consumption and port expenses, in the three months ended March 31, 2024.
Gain on sale of vessels
In January 2023, we completed the sale of the container vessel Amalia C for net proceeds of $4.9 million resulting in a gain of $1.6 million compared to no gain on sale of vessels in the three months ended March 31, 2024.
Interest Expense and Interest Income
Interest expense decreased by 53.7%, or $3.6 million, to $3.1 million in the three months ended March 31, 2024 from $6.7 million in the three months ended March 31, 2023. The decrease in interest expense is a result of:
- a $1.0 million decrease in interest expense due to a decrease in our average indebtedness by $94.0 million between the two periods. Average indebtedness was $413.7 million in the three months ended March 31, 2024, compared to average indebtedness of $507.7 million in the three months ended March 31, 2023. This decrease was partially offset by an increase in our debt service cost by approximately 0.6% as a result of higher interest rates;
- a $2.4 million decrease in interest expense due to an increase in capitalized interest expense on our vessels under construction in the three months ended March 31, 2024; and
- a $0.2 million decrease in the amortization of deferred finance costs and debt discount.
As of March 31, 2024, our outstanding debt, gross of deferred finance costs, was $458.6 million, which included $262.8 million principal amount of our Senior Notes. These balances compare to debt of $431.1 million, which included $262.8 million principal amount of our Senior Notes and our leaseback obligation of $66.3 million, gross of deferred finance costs, as of March 31, 2023.
Interest income increased by $0.2 million to $2.9 million in the three months ended March 31, 2024 compared to $2.7 million in the three months ended March 31, 2023.
Gain on investments
The gain on investments of $11.9 million in the three months ended March 31, 2024 consisted of the change in fair value of our shareholding interest in Eagle Bulk Shipping Inc. (“EGLE”) of $11.0 million and dividends recognized on these shares of $0.9 million. This compares to no gain in the three months ended March 31, 2023. Following the all-stock merger of EGLE with Star Bulk Carriers Corp. (“SBLK”) completed on April 9, 2024, we currently own 4,070,214 shares of common stock of SBLK.
Equity loss on investments
Equity loss on investments amounting to $0.1 million and $2.6 million in the three months March 31, 2024 and March 31, 2023, respectively, relates to our share of initial expenses of a recently established company, Carbon Termination Technologies Corporation (“CTTC”), currently engaged in the research and development of decarbonization technologies for the shipping industry.
Other finance expenses
Other finance expenses decreased by $0.1 million to $0.9 million in the three months ended March 31, 2024 compared to $1.0 million in the three months ended March 31, 2023.
Loss on derivatives
Amortization of deferred realized losses on interest rate swaps remained stable at $0.9 million in each of the three months ended March 31, 2024 and March 31, 2023.
Other income/(expenses), net
Other income, net remained stable at $0.2 million in each of the three months ended March 31, 2024 and March 31, 2023.
Adjusted EBITDA
Adjusted EBITDA decreased by 1.0%, or $1.8 million, to $177.2 million in the three months ended March 31, 2024 from $179.0 million in the three months ended March 31, 2023. As outlined above, the decrease is mainly attributable to a $18.2 million increase in total operating expenses, which were partially offset by a $12.9 million increase in operating revenues, a $2.5 million decrease in equity loss on investments and a $0.9 million increase in dividends received. Adjusted EBITDA for the three months ended March 31, 2024 is adjusted for a $11.0 million change in fair value of investments. Tables reconciling Adjusted EBITDA to Net Income can be found at the end of this earnings release.
Adjusted EBITDA of container vessels segment decreased by 4.1%, or $7.4 million, to $174.2 million in the three months ended March 31, 2024 from $181.6 million in the three months ended March 31, 2023.
Adjusted EBITDA of drybulk vessels segment was $2.2 million in the three months ended March 31, 2024. We did not have drybulk vessel operations in the three months ended March 31, 2023.
Dividend Payment
Danaos has declared a dividend of $0.80 per share of common stock for the first quarter of 2024, which is payable on June 20, 2024 to stockholders of record as of June 11, 2024.
Recent Developments
In February 2024, we entered into agreements to acquire 3 Capesize drybulk vessels aggregating 529,704 DWT for $79.9 million, with expected delivery to us in June through July 2024.
In February and March 2024, we added 4 additional 8,258 TEU newbuildings to our orderbook for an aggregate purchase price of $376.8 million, with expected deliveries from the fourth quarter of 2026 through the third quarter of 2027.
In April and May 2024, we took delivery of two container vessels under construction, Hull No. C7100-7 and Hull No. HN4009 and named the vessels Interasia Accelerate and Catherine C, respectively.