Danaos (DAC) Q4 2025 Earnings Call Transcript

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DATE

Tuesday, Feb. 10, 2026 at 9 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — John Coustas
• Chief Financial Officer — Evangelos Chatzis
• Operator

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TAKEAWAYS

• Adjusted EPS -- $7.14 per share, compared to $6.93 per share in the prior year.
• Adjusted Net Income -- $131.2 million, down $2.1 million from $133.3 million in the prior year.
• Adjusted EBITDA -- $190 million, a 0.2% increase from $189.7 million in the prior year.
• Operating Revenues -- Increased by $8.1 million driven by higher fleet utilization and incremental revenues from both the containership and dry bulk fleets, partially offset by lower contracted charter rates and non-cash U.S. GAAP revenue recognition.
• Total Contracted Revenue -- $4.3 billion with a 4.3-year average charter duration at period end.
• Contract Coverage -- 100% for 2026, 87% for 2027, and 64% for 2028 based on operating days contracted.
• Fleet Expansion -- Ordered six 1,800 TEU vessels, four 5,300 TEU vessels, and two 211,000 DWT Newcastle MAX dry bulk vessels, with planned deliveries in 2028 and 2029.
• New Charters Secured -- Ten-year charters signed for four new vessels included in the orderbook.
• Liquidity -- Total liquidity of $1.4 billion, including $1 billion in cash at year end.
• Net Debt -- $141 million, with net debt to adjusted EBITDA of 0.2x.
• Unencumbered Fleet -- 61 vessels fully unencumbered and debt-free; 16 vessels secured to a revolving credit facility but currently debt-free due to no drawdowns.
• Bond Offering -- Completed a €500 million seven-year unsecured bond with a 6.875% coupon to diversify capital structure.
• Share Repurchase Program -- $65 million remaining under the $300 million program.
• Dividend Declaration -- $90 per share for the quarter.
• Incremental Contract Backlog -- Increased by $428 million since the last earnings release.
• Operating Costs -- Vessel operating expenses increased by $2.8 million to $48.4 million; daily operating costs rose to $6,377 per vessel per day from $6,135 per vessel per day in the prior year.
• G&A Expenses -- Increased by $6.7 million to $28.4 million, mainly due to $6.6 million in incremental stock and cash bonus awards.
• Interest Expense -- Up by $4.2 million to $13.4 million, reflecting higher average indebtedness of approximately $400 million partially offset by lower swap costs and higher capitalized interest on vessels under construction.
• Interest Income -- $8.5 million for the quarter versus $3.9 million in the prior year, mainly due to larger average cash balances.
• Energy Sector Investments -- Initiated with a strategic investment in the Alaska LNG project, targeting access to LNG transportation associated with a planned 20 million ton per annum facility.
• LNG Project Timeline -- CEO Coustas stated, "the current timeline is for completion of the projects in 2030."
• LNG Fleet Orders -- CEO Coustas indicated, "there are going to be between six and ten ships required for these volumes."
• LNG Charter Duration -- CEO Coustas described the intended employment as "twenty years something like that."
• Newcastle MAX Commercial Plans -- CEO Coustas stated the vessels "these vessels will be chartered. I mean, there are plenty of takers, but mainly charter them on index."
• Dry Bulk Employment Strategy -- CEO Coustas noted, "we will employ them mainly spot," with flexibility to secure contracts if favorable spikes occur.

SUMMARY

Management cited record container volumes and persistent strength in midsized vessel demand, underpinned by shifting trade patterns and ongoing avoidance of the Suez Canal by major liners. New vessel orders and long-term charters expanded the contracted revenue backlog to $4.3 billion, providing multi-year earnings visibility and full contract coverage for the upcoming fiscal year. The company took a step toward energy diversification through initial participation in the Alaska LNG project, positioning itself for potential long-duration LNG transport contracts associated with 20 million ton per annum output. Significant financing activities diversified Danaos Corporation (NYSE:DAC)'s capital structure and fortified its liquidity, supporting ongoing expansion plans across the shipping and energy sectors.

• Management confirmed that vessel orders for the Alaska LNG project would need to be placed "in about a couple of years' time."
• The decision to expand into Newcastle MAX newbuilds was driven by high secondhand prices, which CEO Coustas described as having "gone dramatically up," favoring investment in new vessels for value.
• Contract coverage at 87% for 2027 and 64% for 2028 implies substantial forward revenue visibility over the medium term.
• Discussion of revenue mix emphasized the company's intent to ride the spot market for capesize dry bulk vessels, except if market conditions present attractive fixed contract opportunities.

INDUSTRY GLOSSARY

• TEU (Twenty-Foot Equivalent Unit): Standard measure of a ship’s cargo-carrying capacity in units of twenty-foot-long containers.
• DWT (Deadweight Tonnage): The total weight a ship can carry, including cargo, fuel, crew, and provisions, in metric tons.
• Newcastle MAX: The largest size of dry bulk carrier able to navigate the Port of Newcastle in Australia, typically around 211,000 DWT.
• LNG (Liquefied Natural Gas): Natural gas cooled to liquid form for ease of storage and transport by special carrier ships.
• Index Charter: A vessel employment contract where the charter rate is linked to a published freight index, making earnings more directly responsive to market rate movements.
• FFAs (Forward Freight Agreements): Financial derivatives used in shipping to hedge or speculate on future changes in freight rates.

Full Conference Call Transcript

John Coustas: Thank you, Evangelos. Good morning, and thank you all for joining today's call to discuss our results for 2025. In this quarter, it became evident that the business community continues to adapt quickly to geopolitical disruptions. Despite concerns that tariff and geopolitical uncertainty would cause a slowdown, it has not materialized. At the same time, the hype around AI-related investments has increased optimism. China's exports continued to set new records, and consequently, container volumes have reached record highs, with the Suez Canal still largely avoided by major liners, and trade patterns increasingly transforming to multipolar demand for midsized vessels has remained very strong.

Against this background, we continued our strategy of securing long-term employment for our existing vessels through forward fixtures by either extending existing charters or by new charters even for late 2027 deliveries. We also continue to invest in modular container vessels. We ordered six 1,800 TEU vessels, four 5,300 TEU vessels, and two 211,000 deadweight Newcastle MAX dry bulk vessels for deliveries in 2028 and 2029. We have secured ten-year charters for four of these vessels, and the company's total contract revenue increased to $4.3 billion as of the end of the quarter, giving us great earnings visibility into the future from which we derive our ability to manage any eventual future market development.

On the financing front, we completed a seven-year €500 million unsecured bond offering at a 6.875% coupon, one of the most competitively priced deals ever achieved in the shipping industry for an unsecured bond of such tenor, further diversifying the capital structure and reaffirming our access to the deep and liquid international debt capital markets. Our liquidity at year-end reached $1.4 billion, backed by a strong financial profile. We have begun exploring selective investments in the energy sector to broaden revenue sources and expand the LNG business. In this context, Danaos became a strategic investor in the Alaska LNG project, providing access to LNG transportation opportunities associated with a facility planned to produce 20 million tons per annum.

The company remained focused on positioning itself at the forefront of shipping and energy growth areas 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.

Evangelos Chatzis: Thank you, John, and good morning again. I will briefly review the results for the quarter and then open up the call to Q&A. We are reporting adjusted EPS for 2025 of $7.14 per share or adjusted net income of $131.2 million compared to adjusted EPS of $6.93 per share or adjusted net income of $133.3 million for 2024.

This $2.1 million decrease in adjusted net income between the two quarters is the combined result of a $6.6 million increase in total operating costs, mainly due to the increase in the average number of vessels in our fleet, a $2.1 million legacy claim receipt that was booked in the fourth quarter of last year with no such booking in the current quarter, a $1.8 million decrease in dividend income together with a $100,000 increase in equity loss on investments, all of those partially offset by an increase of $8.1 million in operating revenues and a $400,000 decrease in net finance expenses.

The increase in our containership fleet produced $5.2 million of incremental operating revenues that were supplemented by an extra $10.5 million of incremental revenues as a result of higher fleet utilization between the two periods and $2.2 million in additional revenues as a result of higher charter income from our dry bulk fleet. Those were partially offset by a decrease of $7.8 million in revenues of our container segment as a result of lower contracted charter rates and $2 million lower non-cash U.S. GAAP revenue recognition.

Vessel operating expenses increased by $2.8 million to $48.4 million in the current quarter from $54.6 million in the corresponding 2024, mainly as a result of the increase in the average number of vessels in our fleet, while our daily operating costs increased to $6,377 per vessel per day for the current quarter compared to $6,135 per vessel per day in 2024. Our operating costs continue to remain among the most competitive in the industry. G&A expenses increased by $6.7 million to $28.4 million in the current quarter compared to $21.7 million in 2024. This is mainly attributed to incremental stock and cash bonus awards of $6.6 million.

Interest expense, excluding finance costs amortization, increased by $4.2 million to $13.4 million in the current quarter compared to $9.2 million in 2024. This increase is the combined result of a $5.8 million increase in interest expense due to an increase in our average indebtedness of around $400 million between the two periods, partially offset by a reduction in the cost of debt service by approximately 50 basis points, mainly as a result of a decrease in swap costs between the two periods. This was partially offset by a $1.6 million decrease in interest expense due to higher capitalized interest on vessels under construction between the two periods.

At the same time, interest income came in at $8.5 million in the current quarter versus $3.9 million of interest income for 2024 due to the increased average cash balances, partially offset by lower interest rates. Adjusted EBITDA increased by 0.2% or $300,000 to $190 million in the current quarter from $189.7 million in 2024 for reasons that have already been outlined earlier on this call. We also encourage you to review our updated investor presentation that is posted on our website as well as subsequent events disclosures. Let me lay out a few of the highlights. Since the date of our last earnings release, we have added $428 million to our contracted revenue backlog.

As a result, our contract backlog from containerships has considerably improved and now stands at $4.3 billion with a 4.3-year average charter duration. Contract coverage is already at 100% for 2026, stands at 87% for 2027, while even for 2028, we are already 64% contracted in terms of operating days. Our investor presentation has analytical disclosure on our contracted charter book.

As of December 31, 2025, our net debt stood at $141 million, and this translates to a ratio of net debt to adjusted EBITDA of 0.2 times, while 61 out of our 85 vessel fleet are unencumbered and debt-free, with an extra 16 vessels that are encumbered as being secured into our revolving credit facility but are also debt-free since we have not made any drawdowns under this facility. We have declared a dividend of $90 per share for this quarter. We continue to execute under our share repurchase program, and we currently have $65 million remaining authority to repurchase stock under our $300 million share repurchase program.

Finally, as of the end of 2025, cash stood at $1 billion, while total liquidity, and that includes availability under our revolving credit facility and marketable securities, stood at $1.4 billion, giving us ample flexibility to pursue accretive capital deployment opportunities. With that, I would like to thank you for listening. Operator, we are now ready to open the call to Q&A.

Operator: We will now begin the question and answer session. The first question comes from Omar Nokta with Clarksons Platou Securities.

Omar Nokta: John and Evangelos, another solid update. Backlog continues to grow. Thank you. Yes. Congratulations on the continuation of your career. Thank you very much. Appreciate it. Yes. I just wanted to ask about, you know, the business is obviously on solid footing. And with the backlog expanding, we are continuing to have plant-based flexibility. And just wanted to ask maybe if you could just touch a little bit more on the LNG project. As we understand it, Danaos will be the provider of choice for ships for the project.

What do you expect in terms of project timing of when a decision is made, the number of ships that you would be able to bring to the project, and then maybe a sense of duration of the charters if those come about?

John Coustas: Well, the current timeline is for completion of the projects in 2030. In terms of the number of ships, there are going to be between six and ten ships required for these volumes. It depends a bit also on the exact routing where these ships are going to be employed, but it is going to be definitely from Alaska to the Far East. But of course, it is different if it is, let us say, North in Korea or a bit more south towards the Thailand area. So all that will play out a bit later. And we will need to start really placing orders practically in about a couple of years' time.

In terms of duration, this project is really a very long-term project. We are talking about employment and twenty years something like that.

Omar Nokta: Okay. Thank you. That is helpful. So we will see how things develop on that front. And then just a second question, and I will pass it back. The Newcastle Max orders are interesting, and they come here two or three years after you have invested in the existing Cape fleet. How should we think about further orders from here? Should we expect a series to come? And then how are you thinking about those vessels as they join your fleet? Are they additive to what you have currently? Or are you kind of thinking about them being replacement?

John Coustas: Well, replacement, the fleet that we have now is, let us say, average, whatever, 14 years old. So okay, these ships can trade easily until twenty years. And in some trades even longer. On the other hand, we wanted to expand in the segment, and secondhand prices have gone dramatically up. And we decided really to move into the new buildings because we believe it is a much better value proposition.

Omar Nokta: That makes sense. Okay. Well, very good. Thanks, John. Thanks, Evangelos. I appreciate your comments. Great. I will turn it back.

John Coustas: Thank you. Thank you, Omar.

Operator: The next question comes from Clement Molins with Value Investor's Edge. Please go ahead.

Clement Molins: Hi, good afternoon, and thank you for taking my questions. Wanted to start by following up on Omar's question on the Newcastle MAX orders. Delivery is still a few years away, but should we initially expect those vessels to trade on spot? Because there has reportedly been some interest in recent weeks for long-term contracts on the Newcastle Max side. Would there be any interest to fix these two vessels on those contracts?

John Coustas: Well, for the time being, no. What I mean is these vessels will be chartered. I mean, there are plenty of takers, but mainly charter them on index. And because of their characteristics, they are going to have a pretty high kind of index, which makes this investment attractive.

Clement Molins: Makes sense. And following up on this, regarding your underwater Capesizes, time charter rates have gone quite well in recent months. And I was wondering, is there any appetite to fix some vessels on medium-term contracts? Or do you prefer to continue employing them on spot?

John Coustas: I think that we will employ them mainly spot. If we find, let us say, some kind of extraordinary spike that we believe it is worth securing that, we can always secure it through FFAs or the vessels that we have on index can convert them on the same kind of basis. But overall, we want really to ride the spot market on these ships.

Clement Molins: Thanks for the color. Makes a lot of sense. I will pass it over. Thank you for taking my questions.

John Coustas: Thank you.

Operator: It appears we have no further questions at this time. I would like to turn the call back over to Dr. Coustas for any further comments or closing remarks.

John Coustas: Thank you for joining this conference call and for your continued interest in our story. Look forward to hosting you on our next earnings call.

Operator: Thank you. This concludes today's teleconference. We would like to thank everyone for their participation. Have a wonderful afternoon.

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