Global Ship Lease (NYSE:GSL) held its first-quarter earnings conference call on Friday. Below is the complete transcript from the call.
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Summary
Global Ship Lease reported strong financial performance with contracted revenues of $2.1 billion over 2.6 years, and a cash position of $655 million, nearly at net zero debt.
The company highlighted ongoing strategic initiatives, including fleet renewal with a focus on mid-sized and smaller container ships, and maintaining a strong balance sheet while paying a $2.50 annualized dividend.
Management emphasized resilience and optionality in a volatile geopolitical environment, with 100% charter coverage for 2026 and 86% for 2027, while continuing to explore disciplined asset sales and acquisitions.
Full Transcript
OPERATOR
Good morning and welcome to the Global Ship Lease first quarter 2026 earnings conference call. My name is France and I'll be the operator assisting the call today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If. If you would like to ask a question during this time, simply press star1 on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Tom Lister, Chief Executive Officer of Global shiplease. Please go ahead.
Tom Lister (Chief Executive Officer)
Thank you very much. Hello everyone and welcome to the Global Ship Lease first quarter 2026 earnings conference call. You can find the slides as usual that accompany today's call on our website at www.globalshiplease.com. As usual, slides 2 and 3 remind you that today's call may include forward looking statements that are based on current expectations and assumptions and are by their nature inherently uncertain and outside of the company's control. Actual results may differ materially from these forward looking statements due to many factors, including those described in the Safe harbor section of the slide presentation. We would also like to direct your attention to the risk factors section of our most recent annual report on our 2025 Form 20F which was filed in March 2026. You can find the form on our website or on the SEC's. All of our statements are qualified by these and other disclosures in our reports filed with the SEC. We do not undertake any duty to update forward looking statements. The reconciliations of the non GAAP financial measures to which we will refer during this call to the most directly comparable measures calculated and presented in accordance with GAAP. Usually refer to the earnings release that we issued this morning which is also available on our website. I'm joined as usual today by our Executive Chairman George Yurukos and our Chief Financial Officer Tassos Soropoulos. George will begin the call with high level commentary on GSL and our industry and then Tassos and I will take you through our recent activity, quarterly results and financials and the current market environment. After that, we will be very pleased to answer your questions. So turning now to slide four, I'll pass the call over to George.
George Yurukos (Executive Chairman)
Thank you Tom. And good morning, afternoon or evening to all of you joining today. The opening months of 2026 have been a continuation and in fact an escalation of the themes of geopolitical uncertainty and volatility that we saw in 2025 from the continued disruption of tariffs and the Red Sea to the unprecedented disruption in the Strait of Hormuz which has resulted in the humanitarian crisis of around 20,000 seafarers being trapped in the Persian Gulf. The world has become more dangerous, extraordinarily unpredictable and complex, and this has ramifications throughout the supply chain. Trade routes have shifted, fragmented and decentralized, ultimately becoming more inefficient, requiring even more container ship capacity and more flexible ships to transport a given volume of containers. In these conditions, we continue to see strong demand for our mid sized and smaller container ships, which provide valuable flexibility and reliability for our liner company customers. In this environment, we have worked hard to keep adding charters so that our contracted revenues now stand at 2.1 billion over 2.6 years.. Our charter coverage is 100% for 2026 and 86% for 2027. We continue to deleverage and optimize our fortress balance sheet, all while paying an annualized dividend of $2.50 per share, which is a dividend yield of around 6% on the basis of our stock price at the close yesterday. As always, we're keeping an eye on opportunities for disciplined, prudent fleet renewal that will allow us to continue generating strong cash flow through the medium and long term as our existing cash cows age out. Fundamentally, we maintain a focus on resilience and optionality which has continued to serve us and our shareholders well and provides a sturdy foundation in a world of uncertainty from which to act decisively on completing opportunities as they arise. Compelling opportunities as they arise. With that, I will turn the call over to Tom.
Tom Lister (Chief Executive Officer)
Thanks George. Hello again everyone. Please turn now to slide 5 where you will see our diversified charter portfolio. As of March 31, we have over 2 billion in forward contracted revenues with 2.6 years of contract cover from a well diversified and top notch set of charterers. We have 100% of our revenue days covered for 2026 and 86% covered for 2027. On slide six we go over our dynamic capital allocation policy. A steady stream of significant geopolitical events over the past several years has added further volatility into the already cyclical nature of our industry, creating an environment where resilience, flexibility and dynamism are critically important. Maximizing long term shareholder value is at the core of what we do and our combination of paying an attractive dividend, building equity value through deleveraging and highly selective fleet renewal, which also includes the opportunistic monetization of older non core assets, are all in the service of that goal. Slide 7 shows, the cyclicality of our industry as well as our prudent and long term thinking when it comes to managing it. You can see our history of ship purchases and how they have been clustered during market downturns or have otherwise been structured to minimize downside risk while maximizing upside potential. While not shown on this chart, it's worth noting that the flip side of choosing the right circumstances under which to buy ships is identifying the right opportunities to sell ships. All of this sounds simple enough to do in theory, but it is less straightforward in practice and hopefully you will agree from our track record that we have managed to strike the right balance. With that, I'll pass the call to TASOS to discuss our financials. Tasos thank you Tom.
Tassos Soropoulos (Chief Financial Officer)
Slide 8 shows our financial highlights in the first quarter of 2026. I would like to emphasize a few key takeaways. Our financial performance and cash flow have remained very strong. Our cash position is 655 million, which on paper brings us almost to net zero debt. Although 156 million of this cash is restricted, the remainder ensures that we can fully cover our covenants, working capital liens and manage the potential financial implications of geopolitical disruptions and other macro events in an increasingly unpredictable world. It also provides dry powder both for CapEx to optimize the commercial value of our existing fleet and for disciplined investment in fleet renewal when the right opportunities present themselves. Indeed, as Tom has referenced, we were pleased to agree the Forward sales of three of our oldest ships, which will all be 25 years old or older by the time they are delivered to buyers for an aggregate price of 52 million, which we expect will unlock a book gain of around 25 million, added to which we will hand onto the cash flows to be generated by their existing charters until they are delivered between fourth quarter of 2026 and fourth quarter of 2027. And we achieved all this while also considering paying a healthy and recently upsized dividend. Slide 9 shows our ongoing efforts to build resilience and equity value while delivering our balance sheet. Our outstanding debt is shown on the left graph, which stood at 950 million at the end of 2022, now sits at under 700 million and is on track to be well below 600 million by year end. The right graph highlights a similar result for financial leverage, but to an even greater extent, which we have reduced from 8.4 times in 2018 to 0.3 times today. Slide 10 highlights the progress further. As seen in the left hand graph, we have been able to maintain a highly competitive cost of debt in even as base rates have meaningfully increased. Our breakeven rates have seen a similar trajectory as our progress in reducing interest expense has enabled us to absorb inflationary increases in vessel opex over time, primarily related to rising crewing costs. With that, I will turn the call back over to Tom to discuss the market and our fleet.
Tom Lister (Chief Executive Officer)
Thanks Dathos on slide 11 we re-emphasize our focus on container ships between 2000TEU and approximately approximately 10,000TEU. These ship sizes provide the backbone for containerized trade, with around three quarters of global containerized trade volumes flowing in the non-mainland non mainland trades which tend to require ships offering more flexibility and adaptability than the very big container ships, by which I mean the jumbos and A380s of the container shipping industry that attract more media attention. These very big ships tend to be limited to the big east west mainland arterial trades requiring specialized port infrastrucTEUre, deep water and huge cargo volumes. Meanwhile, mid sized and smaller container ships like those in our fleet can go almost anywhere and are not reliant on any one region or trade. And as geopolitical uncertainty has increasingly become a fact of life in recent times, liner companies have prioritized operational flexibility and reliability. In addition, trade routes have fragmented and decentralized leading to a larger percentage of trade occurring intra-region, further increasing the demand for these mid sized and smaller container ships that GSL provides. On slide 12 we go over the developing siTEUations in the Middle East. While we're not geopolitical experts by any means and cannot predict how these siTEUations will unfold, we we can provide some context about what we are seeing now and what we have seen in the past. Let's take the Red Sea first. Prior to the disruption, about 20% of containerized trade volumes moved through the Red Sea and Suez Canal. Since the disruption, ships have been forced to reroute around the Cape of Good Hope, a far longer voyage and one that has absorbed about 10% of effective shipping capacity in the process. After a brief period of optimism that saw a limited reTEUrn of ships to the area, the security siTEUation in the region sharply deteriorated once again. While of course we cannot know for sure, it certainly appears for the time being that liner companies are unlikely to reTEUrn to transiting at scale in the near term. Now onto the more recent conflict in the Strait of Hormuz, where shipping traffic has been and continues to be seriously constrained since the beginning of the Iran conflict, most of the press coverage has focused on the significance of closing Hormuz to the energy sector and the growing risk of a global energy and fertiliser crisis. However, there is also an impact on container shipping as prior to the conflict around 3 to 4% of global containerised trade volumes passed through the strait. Now, major ports and shipping hubs in the area are seeing only a fraction of of normal volumes, with limited transshipments or overland freight options available to replace the lost trade volumes. And cutting across all of this is the awful fact that around 20,000 seafarers are currently estimated to be trapped in the Persian Gulf. The longer term implications of these disruptions remain unclear. For the time being, both siTEUations remain highly dynamic and offer yet another set of complex challenges for the shipping world to navigate while keeping seafarer safety at the forefront of any decision making. Slide 13 shows supply side and scrapping trends the siTEUation there remains largely the same as it has been for some time. Idle capacity and scrapping activity both remain negligible and with capacity constrained and trade routes in continual flux, the global fleet is consistently finding employment and often doing so at very strong rates that are keeping older ships on the water making money instead of being scrapped. We highlight the order book on slide 14. In recent years the order book has grown meaningfully, although the segments that GSL operates in have seen far less growth. The overall order book to fleet ratio stands at 37%, but this is dragged upwards by the 60% ratio for vessels over 10,000 TU. For ships below 10,000 TU, in other words, the segments in which GSL primarily competes, the order book to fleet ratio stands at a somewhat more digestible 20%. Also, the sub 10,000 TU size segments are aging. If we were to assume that all ships 25 years and older were scrapped through 2030 and netted out that capacity against new capacity delivering from the order book, then the sub 10,000 TU fleet would acTEUally shrink by 3.4%. In the current market which has minimal slack, GSL is happy to lock in charter coverage at highly supportive rates and if the market were to experience a downward normalization, we would expect scrapping activity to pick up meaningfully offsetting the arrival of new vessels in part or in whole or even more. Slide 15 shows the charter market when looking at the market rates on the right side, I would like to re-emphasize that our average daily breakeven rates are just above $9,800 per ship and the operating leverage in our business means that essentially everything over that point falls straight to the bottom line. In this environment we have added charter coverage so that we now have more than 2 billion of contracted revenues spread over 2.6 years offering us the comfort of forward visibility in an otherwise highly uncertain world. And with that, I will TEUrn it back to George on slide 16.
George Yurukos (Executive Chairman)
Thank you, Tom. To summarize, we are focused on maintaining optionality, resilience and operational integrity in a complex and uncertain world. As supply chains fragment and shift from one day to the next. Flexibility is key. And that is precisely what the GSL fleet provides to our line of company customers. We have extensive multi year charter cover, over $2 billion of contracted revenues spread over the next 2.6 years. In fact, we have built a fortress balance sheet and have highly competitive break even rates such that we are in a strong position for any circumstances. And we will continue to follow our mantra of staying patient, disciplined and nimble regarding value accretive fleet renewal, while also prioritizing the return of capital to shareholders via $2.50 per share annualized dividend. Now with that, we will be very pleased to take your questions.
OPERATOR
Thank you. And we will now begin the question and answer session Again. If you would like to ask a question, please press Star one on your telephone keypad to join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. As of now, your first question comes from the line of Liam Burke from B. Riley Securities. Please go ahead.
Liam Burke (Equity Analyst)
Thank you. Hello, George, Tom Tassos. How are you today?
George Yurukos (Executive Chairman)
Hi, Liam. Really well, thank you. How are you?
Liam Burke (Equity Analyst)
Just fine, thank you. Looking at your open charters for 2027, have there been, can you gauge charters, interest in forward fixing those vessels and any kind of appetite for where the rates are going?
George Yurukos (Executive Chairman)
Yeah, the market right now, Liam, is as healthy as has been. There is demand, there's not enough ships. So whatever we see on the market right now is a result of unavailability of tonnage, not a lack of demand. So the market is right now healthy for ships opening in 2026 and obviously for ships that are large enough in 2027. When I say large enough, like I said, always the ships that are in demand forward more than anything else are ships that are in excess of 4,000, the EU or 3,500 to 4,000 maybe.
Liam Burke (Equity Analyst)
Great. You got great prices on the three 2,000 TEU vessels you sold forward sold. And you had some great prices on the purchases of the 385 hundreds in the fourth quarter. But looking at the pricing that you got on the older vessels. Are you seeing any opportunity to add assets here?
Tom Lister (Chief Executive Officer)
Well, Liam, as you know, having listened to our earnings call now for a number of years, I guess we always keep our eyes open, but we stick to the mantra that George described at the tail end of his remarks. In other words, we're patient, we're disciplined and we're nimble. So we always keep our eyes open, we're always running numbers, we're always looking at opportunities, but we only move on the right opportunities. So we're continuing to see interesting things, but none that have met our fairly stringent investment criteria and meet the right mix of risk and return. So as a result, we have not acquired anything. Instead, we've monetized these older assets. And I know Tassos mentioned that on the call we get not only the gain on book that we're estimating at roughly 25 million when they're eventually delivered to buyers, but we also get to hang on to the contracted cash flows between now and the time of delivery. And the vessels are being delivered between, depending on the ship, between the fourth quarter of this year and the fourth quarter of 2027. So we're pleased with the deal.
Liam Burke (Equity Analyst)
Great. That's fair. And I just have a real quick one for Tassos on the SGA for the quarter. I know you have seasonal expenses that don't repeat the balance of the year, but even on a year over year basis, they were higher. Is there anything in there unusual?
Tassos Soropoulos (Chief Financial Officer)
Nothing unusual. It has to do with the accounting method of the incentive plan that we have mentioned in the 20th. It has to do with how this being calculated and of course comparing to the share price versus the previous time that it was in 2021.
Liam Burke (Equity Analyst)
Great. Thank you, Tassos.
OPERATOR
And your next question comes from Stephanie Moore from Jefferies. Please go ahead. Great. Good morning. Thank you. Appreciate the question. I guess given your commentary, the charter market remains firm for now, but forward visibility is certainly limited and sentiment might be somewhat cautious. But how are your customers approaching duration today? Are they still kind of looking to lock in multi year charters? Are there increasingly favoring shorter tenures just given the geopolitical uncertainty? Would love to get your thoughts on that. Thank you.
Stephanie Moore (Equity Analyst)
Sure. Stephanie, hi, this is Tom. Thanks for posing the question. I'll kick it off. And no doubt George and possibly Tassos will add to it charter negotiations. It's a two way discussion, so you're absolutely right. I would say that in the context of heightened uncertainty, the charterers would probably prefer to go short rather than to go Long. But given that there's such limited liquidity and availability in the charter market, if they want the tonnage, they have to move much closer to the terms that are being offered by owners like us. Which means that there's always a compromise found between us between both rates, duration and. Going back to George's earlier comments, for the right ships, duration of several years is still possible and at very firm rates. George, do you want to add anything to that?
Tom Lister (Chief Executive Officer)
No, I just echo what you said. It's really a compromise between a negotiation between the charters and the owners. The owners want the certainty of long employment. The charters want a good deal. So longer employment gets better chartered, obviously, than short employment. So you might have an immediate ship opening, let's say in the next six months, might get double what she would get. She might get double for a six month period than what she would get for a three year period. So it's just a matter of negotiation.
Stephanie Moore (Equity Analyst)
Understood. Thank you. And then I guess you continue to talk about being selective and disciplined regarding fleet renewal. Can you maybe just highlight what your ideal replacement profile looks like? So ship size, age, eco specification and the likes, and then maybe a timing of preference as it relates to vessel renewal in terms of your broader kind of capital allocation priorities.
Tom Lister (Chief Executive Officer)
Sure. I'll kick this off and again, no doubt George will weigh in. So let's back into this. We're very comfortable with the size segments upon which we're focused, which we think provide the right combination of operational flexibility and an attractive risk return mix. By which I mean we're going to stay focused upon the roughly 2,000 to roughly 10,000 TEU size segments when it comes to renewal. If you were to offer us the perfect choice, it would probably skew towards the mid and upper end of that, so call it somewhere between 6,000 and 10,000 TEU or so. In terms of age of asset, we're not dogmatic. We look at every project or every prospect on its own merits. So as you've seen, we're willing to look at ships with charters attached. We're willing to look at ships on a speculative basis as long as the pricing is very much towards the bottom of the cycle and downside risk is minimal. And we're also willing to contemplate new builds. So there's no dogma on that. We'll look at every deal on its merits, but we will continue to focus upon the same size range as is our current focus.
OPERATOR
Great. Well, thank you so much. My pleasure. Your next question comes from Omar Nakhta from Clarkson Securities. Please go ahead
Omar Nakhta (Equity Analyst)
thank you. Hi, George, Tom and Tassos. I do have a couple questions and maybe just first kind of back onto those three ship sales. Tom, you highlighted $52 million combined price looks fairly decent, but then also you get to generate what looks like perhaps maybe 20 million or so of EBITDA until you sell them. So I think just looking at that, it suggests that ship values are quite a bit firmer certainly than what the share price implies. Just wanted to get a sense from kind of your angle. Is this something broad based across all container ships, or is this perhaps an ARB that you're able to capture just given that these vessels are maybe later in life? Yeah. So just wanted to get a sense in terms of where you see values from here. Is it very firm on the back end versus what we kind of think?
Tom Lister (Chief Executive Officer)
Yeah, I mean, that's a sort of multimillion or multibillion dollar question. Omar, I don't have a clear and crisp answer for you, but what I can tell you is obviously from an owning perspective, the option value on an asset reduces as that asset ages. So typically our view is that it's possible to make much more money from holding and continuing to operate vessel in the charter market. And you'll see from the chart in the pack which contrasts the way in which charter rates, asset values and new building values fluctuate through the cycle. And there's always much more upside volatility and charter rates than there is even in secondhand values. So it generally makes sense to hold onto the ships, keep chartering them, and keep locking in additional revenues. However, when you get to ships which are more, well, these are going to be between 25 and 27 years old by the time they're sold, that option value comes down somewhat. So we liked the economics that you've just laid out of retaining the contracted EBITDA until they're delivered and then divesting them at that price. Whether you can draw anything broader from that on where asset values are today or are likely to remain very, very difficult to say. I think we're in a world where making bets on what will happen in the future or even tomorrow, it would take a brave man, probably a braver man than me. But, George, do you want to add to that?
George Yurukos (Executive Chairman)
No. I mean, the golden rule for shipping is the entry point. So if you're buying an asset at the right price, then it's only upside potential that you have to worry about rather than downside potential. So the way we look at transactions is protecting the downside first and foremost. And Then the upside will come if we have bought the asset at the right price. This is in general, you know, our theory, which I think it's the golden rule of shipping.
Omar Nakhta (Equity Analyst)
Yeah, the GSL way. Well, it certainly seems that the exit, the exit point here is quite a bit appealing. And then just a follow up, second question. You're now officially in a net cash position, and that looks to widen now as we move ahead here over the next several quarters with no real major commitments. Does buying back stock here make any sense? Do you prefer to kind of go in that direction, or do you think it's best to maybe stay conservative, build a bit of cash and continue to focus on maybe repaying debt?
Tom Lister (Chief Executive Officer)
We think the latter of those two positions, Omar, makes most sense. I mean, it's not only a question of delevering, but it's also building dry powder for opportunistic acquisitions when the right opportunities arise. We do keep an eye on share buybacks from an opportunistic perspective, and I think the average price at which we've bought back shares has been roughly 18 and a half. So $18.50 or thereabouts through the cycle where we felt that there was a structural disconnect between where the business was being valued and the intrinsic value in the business, so we pounced on it. But at the moment, we think delevering and building dry powder is, is the right strategy for where the market is in terms of both risk and opportunity at the moment.
Omar Nakhta (Equity Analyst)
Thanks, Tom. That's a very good commentary. Thanks, George. I'll pass it back.
OPERATOR
Before we proceed again, if you want to ask a question and join the queue, simply press star1 and your next question comes from Clement Mullins from Value Investors Edge. Please go ahead. Hi, good afternoon and thank you for taking my questions. I wanted to follow up on Liam's question regarding fleet renewal. A couple of the vessels sold are on the smaller sizes and you have a few more vessels also on the other end on that side of the fleet. Would you be comfortable downsizing the feeder site further if you don't come across interesting acquisition opportunities? Or is there, let's say, minimum size you'd like to maintain there?
Tom Lister (Chief Executive Officer)
Hi, Clement, thanks for the question. I mean, we sort of tried to address that, at least in part, in our answer to Stephanie a little earlier. So while we like the 2,000 to 10,000 TEU segment, broadly speaking, if given our choice, we would wait our fleet renewal towards probably the upper half, let's call it the 6,000 to 10,000 TEU range, we're not dogmatic about a particular size category. So once again, we will either invest or divest assets where we think the returns are likely to be most favorable for the company and for shareholders.
Clement Mullins (Equity Analyst)
That's helpful. Thank you. And I also wanted to ask a bit about the effect the Middle east situation is having on the market. Could you talk a bit about whether you've seen a sizable increase in congestion in regional ports outside the strait? And are you seeing any other ripple effects?
Tom Lister (Chief Executive Officer)
Yes, I mean, it's hugely disruptive. We're seeing ripple effects throughout liner companies networks. And one of the most recent ones we became aware of is congestion in the Panama Canal of all places, as lines look to redirect vessels and optimize their networks. So, yes, you're absolutely right. There is disruption in terms of congestion both at choke points like canals and also in port. And there are also disruption associated with challenges for the liner operators getting fuel into the right places. And not only the challenge of getting fuel into the right places, but also the cost of fuel. And as bunker costs rise, the lines try to reduce fuel burn to reduce costs. And the only way to reduce fuel burn is to flow ships down. So we're seeing networks slowing down, which means you need more ships to carry the same volume of cargo. And we're also seeing to your point, congestion both in ports and transit locations. So, yes, big ripple effect.
Clement Mullins (Equity Analyst)
Thanks for the Cortes. That's very helpful. I'll turn it over. Thanks for taking my questions and congratulations for the quarter.
Tom Lister (Chief Executive Officer)
Thank you very much, Clement.
OPERATOR
No further questions at this time. I would now like to turn the call back over to Thomas Lister for the closing remarks. Please go ahead.
Tom Lister (Chief Executive Officer)
Well, thank you very much everyone for joining our 1Q call. We wish you a very good summer and look forward to talking to you again on the event of our second quarter call. Thank you again. Bye bye.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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