• Contracted Revenue: Added over $400 million in the first half of 2024, with $1.8 billion in total contracted revenues over a TEU-weighted contract duration of 2.2 years.

• Cash Position: Increased to $350 million, with $126 million being restricted.

• Debt Reduction: On track to reduce debt outstanding to $630 million by the end of 2024 and $500 million by the end of 2025.

• Financial Leverage: Reduced from 8.4 times in 2018 to 0.9 times.

• Cost of Debt: Blended rate of 4.57%.

• Breakeven Rates: Highly competitive at approximately $9,300 per day per vessel.

• Dividend Increase: Introduced a supplemental dividend, effectively increasing the quarterly dividend by 20%.

• Credit Rating Upgrades: Upgraded to Ba2 by Moody's and BB+ by S&P and KBRA.

• Warning! GuruFocus has detected 4 Warning Signs with GSL.

Release Date: August 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Global Ship Lease Inc (NYSE:GSL) added over $400 million of contracted revenue in the first half of 2024, with more than 85% of this achieved in the second quarter.

• The company introduced a supplemental dividend, effectively increasing the quarterly dividend by 20% due to strong market conditions and cash flows.

• GSL has a well-diversified charter portfolio with $1.8 billion in contracted revenues over a TEU-weighted contract duration of 2.2 years.

• The company has significantly reduced its financial leverage, with adjusted net debt divided by adjusted EBITDA decreasing from 8.4 times in 2018 to 0.9 times.

• GSL's robust cash flow position allows for opportunistic investments and significant capital returns to shareholders, evidenced by the supplemental dividend.

Negative Points

• Macro and geopolitical uncertainties, particularly in the Red Sea, have persisted and increased, impacting the shipping routes and supply chain.

• The availability of charter tonnage in the market has decreased, slowing the pace of chartering activity.

• The company has not been active in acquisitions recently, focusing instead on existing assets, which may limit growth opportunities.

• There is a significant backlog of vessels in the global fleet that may transition towards scrapping if market conditions loosen.

• The order book for mid-size container ships, where GSL competes, has a meaningful order book to fleet ratio of 10.8%, which could impact future market dynamics.

Q & A Highlights

Q: How would you characterize the pace of liners over the past several weeks relative to earlier in the year? A: The pace of chartering activity has slowed a bit, primarily due to reduced availability of charter tonnage in the market. There was a frenzy of chartering during the second quarter, which we capitalized on, but now the pace is slowing due to limited tonnage and the holiday period. (Thomas Lister, CEO)

Q: Are liners looking to buy ships outright from owners, similar to three years ago? A: Some liners are buying ships, which is a positive sign for us as it indicates that charter rates are attractive. We focus on maximizing earnings from existing ships and will consider selling if an offer is too attractive to refuse. (Thomas Lister, CEO; George Youroukos, Executive Chairman)

Q: How are you managing the balance sheet given the rapid debt reduction? A: We are comfortable with our current leverage and amortization structure, which aligns with the age profile of our assets. We continue to explore opportunities to optimize our balance sheet further. (Anastasios Psaropoulos, CFO)

Q: Are there any acquisition opportunities, or has the pipeline dried up? A: We are continuously looking at potential deals, but we maintain discipline and only pursue those with favorable risk-reward metrics. The lack of recent acquisitions reflects our cautious approach rather than a lack of opportunities. (Thomas Lister, CEO)

Q: Is there any appetite to repurchase preferred shares given your strong financial position? A: We value the optionality provided by the preferred shares in our capital structure. While we continuously review our capital stack, we currently find the preferred shares beneficial. (Thomas Lister, CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.