Danaos Q1 2023 Earnings Report

Keurig Dr Pepper EPS Results

• Actual EPS: $7.14
• Consensus EPS: $5.90
• Beat/Miss: Beat by +$1.24
• One Year Ago EPS: N/A

Keurig Dr Pepper Revenue Results

• Actual Revenue: $243.57 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Keurig Dr Pepper Announcement Details

• Quarter: Q1 2023
• Date: 5/15/2023
• Time: N/A
• Conference Call Date: Tuesday, May 16, 2023
• Conference Call Time: 9:00AM ET

Keurig Dr Pepper (NASDAQ:KDP) owns, manufactures, and distributors beverages and single serve brewing systems in the United States and internationally. It operates through three segments: U.S. Refreshment Beverages, U.S. Coffee, and International. The U.S. Refreshment Beverages segment manufactures and distributes branded concentrates, syrup, and finished beverages. Its U.S. Coffee segment offers finished goods relating to K-Cup pods, single serve brewers, specialty coffee, and ready to drink coffee products through Keurig.com website. The International segment provides sales in Canada, Mexico, the Caribbean, and other international markets from the manufacture and distribution of branded concentrates, syrup, and finished beverages; and sales in Canada from the manufacture and distribution of finished goods relating to the Company's single serve brewers, KCup pods, and other coffee products. It serves retailers, third-party bottlers and distributors, retail partners, hotel chains, office coffee distributors, and end-use consumers. The company offers its products under the Dr Pepper, Canada Dry, Green Mountain Coffee Roasters, Snapple, Mott's, The Original Donut Shop, Clamato, and Core Hydration brand name. Keurig Dr Pepper Inc. was founded in 1981 and is headquartered in Burlington, Massachusetts.

Danaos Q1 2023 Earnings Call Transcript

[Operator]

Good day, and welcome to the Davos Corporation Conference Call to discuss the Financial Results for 3 Months Ended March 31, 2023. As a reminder, today's call is being recorded. Hosting the call today is Doctor. John Coustas, Chief Executive Officer of Dinos Corporation and Mr. Evangelos Patzis, Chief Financial Officer of Dinos Corporation.

[Operator]

Doctor. Coustas and Mr. Pacis will be making some introductory comments, and then we will open the call to a question and answer session.

[Speaker 1]

Thank you, operator, and good morning to everyone, and thank you for joining us today. Before we begin, I quickly want to remind everyone that management's remarks this morning may contain certain forward looking statements And that actual results could differ materially from those projected today. These forward looking statements are made as of today, and we undertake no Obligation to update them. Factors that might affect future results are discussed in our filings with the SEC, and we to review these detailed Safe Harbor and Risk Factor disclosures. Please also note that where we feel appropriate, we will continue to refer to non GAAP Financial measures such as EBITDA, adjusted EBITDA and adjusted net income to evaluate our business.

[Speaker 1]

Reconciliations of non GAAP financial measures to GAAP financial measures are included in our earnings release and accompanying materials. With that, let me now turn the call over to Doctor. Faustas, who will provide the broad overview of the quarter.

[Speaker 2]

Thank you, Evangelos. Good morning, and thank all of you for joining today's call to discuss results for Q1 of 2023. Danaos reports yet another solid quarter despite the continuing geopolitical uncertainty and the turmoil in the financial markets. Box rates strengthened after the Chinese New Year due to the blank savings and discipline on the part of liner companies. In addition, the charter market improved due to the very limited supply of charter free vessels as well as the impact of speed reduction as charterers seek to comply with CII regulations.

[Speaker 2]

The analysis continues its successful chartering driving steady and predictable performance and laying the groundwork for continued growth, while also pursuing environmentally sound policies. Our chartering strategy delivered another strong quarter and we have operating days charter coverage of 97% for 2023 and 73% for 2024. Our strong chartering capabilities and our business strategy continue to drive solid performance. In the Q1, we successfully secured more than $380,000,000 of contracted revenues through multiyear charters, including $262,000,000 for all 6 new buildings that will be delivered to us in 2024. In addition, we have placed an order for 2 additional 6,000 TEU vessels of the latest eco design to be delivered in the Q4 of 2024 And Q2 of 2025.

[Speaker 2]

Our modernization efforts are key to the future of the company and highlight our commitment to paying a wide quality fleet while supporting the ongoing decarbonization of the industry. We are very well positioned to navigate the operating environment with the new regulatory requirements that are becoming very demanding and complex. Our very strong operating platform provides a significant competitive advantage in complying with upcoming regulations, while strengthening our value proposition and ties with our customer as the industry focuses on achieving environmental goals and closer cooperation between owners and charterers becomes Increasingly important. We appreciate the ongoing support of our customers and employees and will continue to work diligently for the benefit of our shareholders. With that, I'll hand the call back over to Evangelos, who will take you through the financials for the quarter.

[Speaker 1]

Thank you, John. Good morning again to everyone, and thanks again I will briefly review the results for the quarter and then open the call to Q and A. We are reporting adjusted EPS For this quarter of $7.14 per share or $145,300,000 of adjusted net income compared to adjusted EPS of $11.36 per share or $235,300,000 for the Q1 of 2022. This $90,000,000 decrease in adjusted net income between the two quarters is primarily the result Of the $110,000,000 ZYN dividend that had been recognized in the Q1 of 2022 And is no longer applicable as we have now disposed of all of our ZYN shares. Otherwise, our Net income improved by more than $20,000,000 mainly as a result of $13,700,000 improvement in operating revenues And a $10,000,000 decrease in net finance expenses.

[Speaker 1]

More specifically, operating revenues increased by $13,700,000 to $243,600,000 in the current quarter compared to $229,900,000 in the Q1 of 2022. This increase is attributed to a $30,400,000 increase in revenues as a result of higher charter rates And that was partially offset by $3,300,000 of lower revenues due to the sale of 3 vessels over the past 6 months And a $10,100,000 decrease in recognition of assumed charter liabilities amortization related to prior vessel acquisitions. Finally, we also had a $3,300,000 decrease in revenues due to lower non cash revenue recognition in accordance with U. S. GAAP.

[Speaker 1]

Vessel operating expenses increased by $1,400,000 to $40,600,000 in the current quarter compared to $39,200,000 in the Q1 of 2022, mainly as a result of the increase in the average daily OpEx cost that increased to $6,800 per day in the current quarter From $6,300 per day in the Q1 of 2022. And this increase is mainly due to COVID-nineteen related increase in crew Remuneration, increased travel expenses, insurance premiums and general inflationary pressures that have prevailed between the two periods. However, our daily OpEx figure still remains as one of the most competitive in the industry. G and A expenses decreased by $600,000 to $6,800,000 in the current quarter compared to $7,400,000 in the Q1 of 2022, mainly as a result of the lower number of vessels in our fleet and lower stock based compensation recognition between the two periods. Interest expense, excluding amortization of finance costs, decreased by 7,700,000 To $6,000,000 in the current quarter compared to $13,700,000 in the Q1 of 2022.

[Speaker 1]

The decrease in interest expense is a combined result of a $5,700,000 decrease in interest expense Because of a reduction in our average indebtedness by almost $850,000,000 between the two periods as a result of The rapid deleveraging of the company and that was of course partially offset by an increase in cost of debt service by approximately 3% as a result of rising interest rates. We also had a $3,400,000 decrease in interest expense due to capitalized interest on vessels under construction. And at the same time, we should note that interest income came in at 2,700,000 This quarter effectively covering almost half of interest expense. Adjusted EBITDA decreased by 33.6 percent or 90,500,000 To €179,000,000 in the current quarter from €269,500,000 in the Q1 of 2022. And this is again primarily driven by the $110,000,000 ZYN dividend that had been recognized In the Q1 of last year, and it's no longer applicable as we have sold all the same shares.

[Speaker 1]

The other positive EBITDA drivers have already been outlined earlier on this call. Now we also encourage you to review our updated investor presentation that's posted on our website As well as subsequent events disclosures. A few highlights are as follows. Over the past 3 months, we have secured 380,000,000 Of contracted revenue significantly improving our charter backlog, including 262,000,000 Dollars of contracted revenue for 6 of our new buildings that are to be delivered in 2024 and these are all 3 year charters. As of the date of this release, the contracted cash revenue backlog stood at 2,300,000,000 With an average charter duration of 3.2 years, while contract coverage is up 90 7% for this year and 73% for next year.

[Speaker 1]

Analytical disclosure on charter arrangements Can be found in our investor presentation. We have prepaid early On May 12, the remaining lease obligations for 2 vessels that at the end of the first quarter had $16,300,000 of lease outstanding. And at this point, we no longer have any lease obligations on our balance sheet. As of March 31, 2023, our net debt was 138,000,000

[Speaker 2]

And we expect

[Speaker 1]

to be net debt free within a matter of 2 or 3 months. In the current interest environment, this position sees us obviously from high interest costs. As of the end of the Q1, again, cash was at $360,000,000 while total liquidity, Including availability under our revolving credit facilities stood at $731,000,000 giving us ample flexibility to pursue Accretive capital deployment opportunities. The company's net debt to adjusted EBITDA ratio stood at 0.2 times as of the end of the Q1 and 44 out of our 68 vessel fleet in the water are currently unencumbered and debt free. With that, I would like to thank you all for listening to this first part of our call.

[Speaker 1]

Operator, we are now ready to open the call to Q and A.

[Operator]

We will now begin the question and answer session. Our first question will come from Omar Khachta with Jefferies. You may now go ahead.

[Speaker 3]

Thank you. Hey, guys. Hi, John. Hi, Evangelos. Hi, Amol.

[Speaker 3]

First off, I guess, congratulations on such A strong shift in overall turnaround in the company. I would say when we look and hearing what Evangelist you were just saying about getting into a net cash Position here in the next couple of months. Clearly, you've positioned the company into basically its best financial condition ever or at least since it came public. Clearly, you've been building up your cash position and you've been looking at fine tuning your fleet. You've done these new buildings And you've added to it here recently.

[Speaker 3]

I wanted to ask about the opportunity to acquire vessels in the market today. And I remember maybe a couple of years back you were able Fine. A couple of transaction where you were able to get 6 ships that were eco designed modern that came with below market contracts that you got them on the cheap. Those types of transactions, are they available today given the sort of the market shakeup that we have seen? Are there more S and P deals becoming available With that type of contract exposure, any color you can give on that would be helpful.

[Speaker 2]

Well, there are very limited, Let's say, availabilities of vessels, modern vessels. There are, of course, plenty of older ships Out in the market with charter that one could get. But Again, I think that paying high dollar, top dollar For ships that are not of the latest technology Doesn't really make sense, at least for the vision that we have for our company. We are in a situation that There is very little visibility as to how exactly the environmental issues are going to play. And so we want all our new investments to be, let's say, environmentally safe.

[Speaker 2]

We have a lot of older vessels and if of course These vessels, the longer, of course, we can keep them, the better. But we already have a big bet on this type of tonnage. So We want to, let's say, increase our bet towards the more modern eco friendly ships. And this is the reason actually that we also ordered 2 more ships. Our, let's say, bet when we ordered the 6 ships last year, about A year ago more than a year ago without any charter commitments has paid off Because these ships found pretty good employment.

[Speaker 2]

And actually, We did not really seek any very long term employment because we believe that for the Eco Shipts is going to be upside.

[Speaker 3]

Got it. Thanks, John. That's helpful. And maybe just on the your 5 biggest ships, the 13,000 TEU vessels, those have been on long term contracts since delivery Back in 2012, they're starting to come up open for renewal here at the beginning of 2024. I see in the chart that there's those 3 year extensions.

[Speaker 3]

Why don't I just ask, 1, how do those option extensions work? Is it for if they were to be exercised, is it for Full 3 years or is it a year at a time? And then 2, when would we expect the option Could be exercised? Or when does the strike conclude?

[Speaker 2]

Well, the declaration of the option It's going to be sometime in the if I remember well in the Q4 Of this year, it's approximately 120 days before the earliest expiry. Well, in any case, we are not really concerned because there are very few, if any, Ships of that size available in 2024. And we are already, Let's say, in contact with a number of liner companies about the employment of the ships. So we are working towards something and definitely we will have something, Let's say fixed as soon as there is more clarity whether the existing charterer is going to exercise the option.

[Speaker 3]

Okay. Thank you. And then maybe, John, just finally on those 2 new buildings you just ordered, Those are late 'twenty four, first half of 'twenty five deliveries, it's been a bit sooner than we've generally been expecting to see. Were those options that you had that you've exercised slot options or are these fresh orders and you've just been able to capture a pretty good delivery?

[Speaker 2]

No, no. These were kind of fresh orders. I mean, the yard had These slots kind of available as part of a series of other vessels that we're building. And Yes. We moved very, very quickly.

[Speaker 2]

I mean, the whole deal probably closed within almost a week. And that is the reason that we've managed to do it because we booked the ships Without worrying about finance, worrying about charter or anything like that. So this is what I've always been saying that the Strength of our balance sheet is giving us extreme flexibility to grasp opportunities as soon as they come.

[Speaker 3]

Certainly. Great. Well, thanks, John. That's it for me. I'll pass it over.

[Speaker 2]

Okay. Thank

[Operator]

you, Omar. Our next question will come from Clainant Mullens with Value Investors Edge. You may now go ahead.

[Speaker 4]

Good morning. Thank you for taking my questions.

[Speaker 2]

I wanted to

[Speaker 4]

ask on capital allocation. You've been clear, you want to be in a position to be able to invest in modern tonnage when the time is right. And the orders announced yesterday were But considering you'll be net debt free pretty soon, how should we think about additional share repurchases or potential dividend increases?

[Speaker 2]

Well, I think we've been very clear about that. We have in place a share Repurchase program, which we are executing When we believe that conditions are right, 40% of it is already executed, Almost $40,000,000 We hope we have another 60. So that part is there. In terms of, Let's say, dividends. We are maintaining, let's say, the dividend despite, let's say, the uncertainties Around in the market.

[Speaker 2]

And on the other hand, we are investing cautiously For the future as we've done with all our newbuildings.

[Speaker 4]

All right. That's helpful. And regarding the 2 new newbuild orders, how should we think about Pricing, is it in line with the orders you placed a couple like last year?

[Speaker 1]

I'm sorry, you broke up. Can you please repeat the question?

[Speaker 4]

Yes. I'm asking about the pricing of the newbuild orders.

[Speaker 1]

Yes. It's something which cannot be disclosed at this stage. Probably, we will be in a position to disclose it In the next quarter earnings, these were freshly There are certain formalities that we need to conclude. And at this point, unfortunately, we're not at liberty to disclose the price.

[Speaker 5]

One moment please. Showing no further questions, this will conclude the question and answer session. I'd like to turn the conference back over To management for closing remarks.

[Speaker 2]

Thank you all for joining this conference call and your continued interest in our story. Look forward to hosting you in our next earnings call. Have a nice day.

[Speaker 5]

The conference has now concluded. We thank you for attending today's presentation. You may now disconnect.