Good day and welcome to the Danaos Corporation Conference Call to discuss the Financial Results for the 3 months ended June 30, 2023. As a reminder, today's call is being recorded. Hosting the call today is Dr. John Coustas, Chief Executive Officer of Danaos Corporation; and Mr. Evangelos Chatzis, Chief Financial Officer of Danaos Corporation. Dr. Coustas and Mr. Chatzis will be making some introductory comments and then we'll open the call for questions and answers. Please go ahead.

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 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 encourage you 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. 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 Dr. John Coustas, who will provide the broad overview of the quarter. John?

Thank you, Evangelos. Good morning and thank you all for joining today's call to discuss our results for the second quarter of 2023. The world economy has stagnated in the second quarter of 2023, resulting in a gradual easing of the container market. Danaos' active strategy in the current market condition is made possible by the prudent approach we have taken to manage our balance sheet to conservative levels as well as our successful chartering strategy. The latter is reflected in our operating revenues of $241 million which is near to previous record despite a charter market drop that is more than 50% lower than a year ago. We continue to be active in the charter market, highlighting the resilience of our business model and secured nearly $0.5 billion in new charter contracts during the quarter. Our total charter backlog increased to $2.5 billion as of the end of the quarter and contracted charter coverage currently stands at 99% for 2023 and 86% for 2024. In the second quarter of 2023, Danaos received the Gold, first place awards in the Governance and Environment categories the inaugural ESG Shipping Awards. These accolades which we are proud of, acknowledge the company's exemplary efforts in promoting sustainable practices, social responsibility and strong governance and reaffirm our position as a leader in responsible maritime operations. The timing of the awards is notable as the IMO recently reiterated and strengthen its commitment to decarbonize shipping by targeting net 0 by around 2050. Danaos continues to advance its decarbonization strategy in multiple ways. We are constantly optimizing and retrofitting our existing fleet and have committed to upgrade around 20 vessels with new propellers, fuel saving appendages and low friction paints. We have also expanded our new building program with the order of 4 additional newbuilding vessels.…

Thank you, John and good morning again to everyone and thanks for joining us this morning. I will briefly review the results for the quarter and then give call participants the opportunity to ask questions. We are reporting adjusted EPS for the second quarter of 2023 of $7.14 per share or adjusted net income of $143.4 million compared to adjusted EPS of $7.59 per share or $157.1 million for the corresponding quarter of 2022. This decrease of $13.7 million in adjusted net income between the 2 quarters is primarily the result of the $13.9 million in dividend that have been recognized in the second quarter of 2022 which is no longer applicable during this quarter as we have now sold all of our ZIM shares. Otherwise, our adjusted net income improved slightly, mainly as a result of a $5.5 million increase in operating revenues due to better rechartering rates for our fleet, a $10.2 million decrease in net finance expenses mainly driven by the significant deleveraging of our balance sheet and $0.1 million improvement in total operating expenses, partially offset by $5.4 million decrease in operating revenues due to better disposals and $9.5 million decrease in operating revenues as a result of revenue recognition accounting and a $0.7 million loss on our CTT equity investment that is incurring research and development costs to explore decarbonization technologies for the shipping industry. Vessel operating expenses increased by $1.3 million to $41.9 million in the current quarter compared to $40.6 million in the second quarter of 2022 and as a result of the increase in the average daily vessel operating cost that increased to $6,970 per day for the current quarter from $6,463 per day in the second quarter of 2022, mainly due to inflationary pressures that affected repairs and maintenance costs between…

We'll now begin the question-and-answer session. [Operator Instructions] First question will be from Omar Nokta of Jefferies.

John and Evangelos, you guys have been very active here recently. You've added some backlog. You've ordered the 2 container ships, bought back stock, bought Eagle and -- or bought into Eagle and acquired the 5 Capes. Just wanted to ask if maybe just kind of -- if you could frame it, what's changed here to give you the confidence to start deploying capital? So perhaps aggressively, relative to the more restrained outlook you had earlier this year?

Well, as we said, we are deploying capital where we can see, let's say, that there are going to be interesting returns. And the basic -- in terms of capital allocation, investing in new ships that will be able to utilize green fuels is definitely part of our strategy but also a requirement for the longevity of the company. And as I've said, the IMO today is committed for shipping into a greener environment and anyone who doesn't really get it and believes that it's going to be business as usual is going to be for a surprise within the next few years. So we definitely need to invest in that part. Secondly, in terms of our investment in the dry bulk market, as we've already said, fundamentals look good. And we believe that in the future, we can enlarge our source of income through this market as well.

John. And yes, just I did want to ask, obviously, on dry bulk. You spent the past maybe 15 years or so almost exclusively. As a container ship company, you've now got the stake in Eagle, gives you exposure to the mid-sized dry bulk classes. You've now got the 5 Capes on hand. You mentioned having a bigger piece of earnings coming from dry bulk. Is this -- when we think about Danaos going forward, is it really -- had to become a two-pronged story, 1 leg that's containers, 1 leg that's dry bulk? Or is this more of an opportunistic investment at this point in the cycle given where sentiment has -- sentiment is in dry bulk?

Well, as we said, I cannot really say exactly where we will go because I mean, the dry bulk market has an interest if we are able to deploy capital at attractive prices. It's not that we're going to invest in dry bulk at just whatever price in order to diversify our income, so we will definitely be cautious in how we deploy capital. And if there are opportunities, yes, we are going to grow. But in the dry bulk market, there is our experience, there is 1 secret. You -- in order to make money, you have to buy cheaply. If you buy at the top of the market, you will very rarely cover your investment.

Yes, that's true. And then maybe then just 1 final one, just in terms of how you intend to operate the dry bulk, the 5 Capes and potential acquisitions down the line? How do you envision Danaos trading these commercially? Is it -- you put these vessels out on charter, deploy them on the spot market? That's maybe perhaps one question. But then the other is, do you intend to sort of try to build out a trading platform where you're starting to do TCN and FFAs and hedging and whatnot? Or is it simply own the assets and then put them out on charter, whether the spot or TC [ph]?

Well, first of all, we will do everything in-house. If we feel that we require to hedge in the market, yes, we have the ability to use FFA as well. This is not necessarily, let's say, something 1 has to do. It depends if you want to speculate on both the physical and the paper market. So it's a question of what strategy we're going to have but we will start by operating these vessels ourselves in the spot market and we will see how it goes.

Omar, if I may add, this is obviously opportunistic. And it's a small scale compared to the containership business, right which will continue to be the dominant business. I mean, we are now first half -- have EBITDA of -- we are on track for $700 million plus of EBITDA for the full year, $356 million for the first 6 months and the contribution of the dry bulk where rates are is going to be very small. And the investment in dry bulk versus the fleet value containers is, again, small, right? So to your point, still, this is a small -- this is going to be a small part of the business that we will seek to maximize, of course, returns but containers will continue to be the dominant ingredient.

Understood.

[Operator Instructions] Our next question will be from Chris Wetherbee of Citigroup.

I wanted to touch on the Eagle investment and sort of see what your thoughts are now. So what would be your intention going forward with Eagle from here?

Well, Chris, for us, we were interested in building, let's say, a sizable investment. We were blocked, so there is nothing really. We are waiting for, let's say, management's next actions to see what they can do about the actual operations which are going to be very challenging in the next couple of quarters, at least and we'll take it from there.

Okay. Are you -- so the position is static? Or would you add to your equity position? Or do you have the ability to add to the equity position?

Well, we cannot add because we are already above the 15% poison pill level. So we cannot add.

Okay. That's helpful. I appreciate that. And then, I guess in terms of your thoughts on where you think incremental capital is deployed most effectively? Is it -- are there opportunities on the container side still that could be interesting? I certainly understand the counter cyclicality of investing in dry bulk and that certainly makes sense to us. Want to get a sense of how you think about where that incremental dollar should go from here? Is it dry bulk? Or is it container? Or would there be potentially opportunities for other avenues?

We do not see any interesting opportunities in the container -- in the container market. There are opportunities about all those ships but I believe that we need to look at the future and look only at very modern tonnage and possibly we will use and that's the reason also. But we have placed these additional 4 ships for deliveries in the next 2, 3 years.

Okay. So then dry bulk would be the place where the incremental dollar would go?

For the time being, yes. The only thing is that, as I said, dry bulk, we are very sensitive to cost, so we're not just going to change the market up to build volume. Yes, sorry, go ahead.

No, please continue. Go ahead.

Okay. Thank you.

All right.

We have no further questions at this time. Now, I'd like to turn the call back over to Dr. Coustas for any further comments or closing remarks.

Okay. Thank you all for joining this conference call and your potential interest in our story. Look forward to hosting you on our next earnings call. Thank you.

Thank you. This concludes today's teleconference. We now like to thank everyone for the participation. Have a wonderful afternoon.