Earnings call transcript: Cool Company sees Q1 2025 revenue rise, stock gains 2.85%

Cool Company Ltd (CLCO) reported its financial results for Q1 2025, revealing a rise in total operating revenues to €85.5 million, up from €84.6 million in the previous quarter. Despite a decrease in net income to €9.1 million from €29.4 million in Q4 2024, the company’s stock price increased by 2.85% to close at €7.39. Trading in the premarket session showed a slight dip of 1.08%, with shares priced at €7.31. With a market capitalization of $394.21 million and an attractive P/E ratio of 5.46, InvestingPro data shows the company maintains strong profitability metrics despite recent earnings volatility.

Key Takeaways

• Total operating revenues increased to €85.5 million in Q1 2025.
• Net income decreased significantly to €9.1 million from €29.4 million in Q4 2024.
• The stock price closed at €7.39, marking a 2.85% increase.
• Cool Company delivered a new vessel and completed LNG upgrades on two others.

Company Performance

Cool Company demonstrated resilience in Q1 2025 with a slight increase in total operating revenues. The company continued to strengthen its market position by delivering the new vessel Gale Saga and completing upgrades on two other vessels. Despite a drop in net income, the operating margin remained robust at 41%, reflecting strong cost management and operational efficiency. The company maintains an impressive gross profit margin of 74.47% and offers a substantial dividend yield of 8.12%, according to InvestingPro data, which reveals 5 additional key insights about the company’s financial health.

Financial Highlights

• Total operating revenues: €85.5 million, up from €84.6 million in Q4 2024
• Adjusted EBITDA: $53.4 million, down from $55.3 million in Q4 2024
• Net income: €9.1 million, down from €29.4 million in Q4 2024
• Average Time Charter Equivalent (TCE) rate: $70,600 per day

Outlook & Guidance

Cool Company anticipates a rebalancing of the market and is focusing on securing long-term charter opportunities. The company expects market conditions to strengthen seasonally and is exploring potential 3-5 year charter contracts. With no debt maturities until mid-2029, Cool Company is well-positioned to capitalize on future growth opportunities. InvestingPro’s comprehensive analysis indicates the company operates with moderate debt levels and maintains a "GOOD" overall financial health score of 2.62, suggesting sustainable long-term prospects.

Executive Commentary

CEO Richard Tyrell highlighted increased interest in longer-duration charters, stating, "We are seeing interest in longer durations." CFO John emphasized the company’s financial strength, noting, "We retain a strong financial runway while preserving flexibility for growth."

Risks and Challenges

• Potential supply chain disruptions could impact vessel operations.
• Fluctuations in LNG prices may affect revenue and profitability.
• Economic uncertainties in key markets could pose challenges to growth.
• Regulatory changes in the shipping industry may increase compliance costs.

Q&A

During the earnings call, analysts inquired about the company’s interest in longer-term charters and the potential for asset acquisitions. The management expressed optimism about future opportunities and highlighted their focus on disciplined growth strategies.

Overall, Cool Company Ltd showed a stable performance in Q1 2025, with a strategic focus on long-term growth and market positioning.

Full transcript - Cool Company Ltd (CLCO) Q1 2025:

Carly, Conference Operator: Good morning, and thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to The Cool Company Limited Q1 twenty twenty five Business Update. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

Thank you. I would now like to turn the call over to Richard Tyrell, Chief Executive Officer. Please go ahead.

Richard Tyrell, Chief Executive Officer, CoolCo Limited: Hello, and I’d like to welcome you all to the presentation of the first quarter twenty twenty five. Carly, thank you for the introduction. We’ll begin on page three with CoolCo at a glance. Those who recall the last quarter’s presentation will notice many of the same trends are continuing. And while rates on our open vessels remain under pressure, we’re moving steadily closer to a rebalanced market.

As this process unfolds, we intend to remain patient, disciplined, and focused on maximizing long term shareholder value. In the meantime, we’re working hard to deliver full employment for our vessels at the best possible rates. We also have a dry dock program to execute, as highlighted in the headlines. On Page four, we summarize the quarter. We achieved average TCE of $70,600 per day, slightly lower than in the last quarter, primarily due to an increase in repositioning expenses.

For example, the Gale saga was delivered in Korea and repositioned to The US Gulf for the start of its fourteen plus two year charter to Gale at a cost of 1,900,000.0. We’re not expecting to see the same level of these types of one offs next quarter. Total operating revenue increased to £85,500,000 in Q1, up from £84,600,000 in Q4. The adjusted EBITDA for the period was $53,400,000 As mentioned, the Gale Saga was successfully delivered. In addition, we secured floating and fixed rate employment on two vessels that came available during the quarter.

One charter has already started and the other starts in the third quarter of twenty twenty five. Both the vessels are equipped with LNG upgrades LNGE upgrades, where we benefit from the upside sharing with the charterer. Our other newbuild vessel, called Tiger has essentially achieved near continuous employment in the spot market over the period and has since continued in this vein while we pursue long term charter opportunities for this vessel. Because of our exposure to the spot market, the charts are showing some negative trends. However, these are mitigated by our strong backlog.

We also completed two dry docks in the quarter, which resulted in scheduled off hire. Having completed six of this cycle’s dry docks by the end of the quarter and another dry dock since, we only have two more of our TFDEs to go along with two two strokes. Once our dry dock program is complete, we’ll lose the ship icons from the chart and the op hire that comes with them, and this will be supportive of EBITDA. Now turning to Slide five. We have some strong market slides this quarter that aim to both explain why LNG carrier rates have declined and highlight potential catalysts for a recovery.

A key dynamic to understand is why so many cargoes have been delivered into Europe. This story revolves around a cold winter, the needs to restock, and healthy LNG prices for the time of year. Due to a cold winter, European storage levels have dropped to 34% in April, significantly lower than the 60% reached at the same time last year. This means more gas needs to be replenished and elevated gas prices for the time of year. LNG demand has also been supported by reduced pipeline flows into Europe.

With the current TTF price of well over $11 per MMBtu compared to around $8 per MMBtu this time last year, setting the LNG price, it is too expensive for many markets, particularly when alternatives like coal are trending downwards in price. This means we’re yet to see a pull from the East for cargoes, and we’re looking towards storage reaching a level where demand abates, prices moderate, etcetera, and this poor returns. The far right bar on the chart shows European storage levels rebounding to nearly 45% this month, which is encouraging given that we still have ten days left to run. Our expectation is that LNG prices will decline once Europe reaches more comfortable storage levels. This will be positive for price sensitive buyers in the East, which in turn is good for LNG shipping as longer voyage distances drive higher ton mile demand.

To further emphasize the point with data, page six shows just how much destination flexible US LNG has been shipped to Europe. It reached 80% in March and remained close to that level in April compared to less than 50% during the summer of last year. If LNG isn’t going to Europe, it’s going to Asia, and the shipping sector is eagerly anticipating such a pivot. Beyond fundamental market dynamics, it’s also worth noting the potential for countries to increase LNG imports as a way to help address trade imbalances with The US. For example, Chinese offtakers sold 15 cargoes of LNG into Europe during the first quarter.

And if those cargoes had instead been delivered to China, approximately 12 additional ships would have been needed annually. Multiply this up for the portfolio players also sending cargoes East, and its significance becomes clear. Turning to page seven. If the market is going to improve from a shipping perspective, we would expect to see it reflected in shipping distances and ton miles. Neither metric is particularly strong at the moment, but recent years suggest that longer shipping distances typically begin to pick up from the start of the second quarter, which would support demand.

Demand for accelerated restocking in Europe is unhelpful but ultimately finite. Page number eight serves as a reminder of how much new LNG supply is coming and coming soon. In sharp contrast to the very flat supply growth we saw in 2024 and 2023 if you go further back than shown in the chart. As projects near completion, timing is increasingly certain, and both this year and next present real catalysts for LNG shipping. Venture Global has already announced production at 140% of nameplate capacity at Plaquemines.

Corpus Christi is well underway with its ramp up, and LNG Canada is expected to deliver significant volumes starting in the third quarter. Qatar’s Northfield expansion project is scheduled for delivery in phases across 2026, ’20 ’20 ’7 and 2028. Even the first train at Golden Pass is getting back on track and scheduled to start production late this year, which means the volumes will come in 2026. In total, LNG supply is projected to increase by over 20% from 2024 levels by the end of twenty twenty six, with a further 6% growth in 2027 and an additional 10% growth in 2028. This is the wave of supply that the LNG shipping industry is ramping up to transport.

The ships that arrived early during the current period of flat LNG supply have dragged the market down. But this period is coming to an end, and they will steadily be absorbed by new LNG supply as it arrives. With that, let me return to the market during the quarter and turn to page nine. As you know, market conditions have been challenging, and rates have yet to recover significantly. In this environment, CorCo is pursuing a portfolio strategy aimed at managing risk.

In practice, this means being positioned to capture upside on a limited number of vessels while taking on enough coverage to stagger our exposure. We fixed two ships during the first quarter, reducing our exposure on TFTEs to just two vessels in the second half of this year. One charter is for twelve months starting in April, while the second is on a variable rate basis with a floor commencing in August. Both the charters include upside sharing mechanisms, which allows us to share the benefits of the recent upgrades with the charterers. The base rates are in line with the market, and to that, you should add approximately $5,000 per day in upside sharing, which depends on the operating parameters and prevailing LNG prices.

As noted, the second vessel is the Cool Husky, and she is being traded in the spot market during an interim period. John has applied conservative assumptions for this in his second quarter guidance. Page 10 provides an overview of the two stroke market. The market has seen a record number of spot fixtures, allowing Coolco to achieve nearly full employment for the Cool Tiger. Spot market rates are above recent lows as we enter a period that historically has seen seasonal strengthening.

Charters remain relatively comfortable with taking near term spot market risk, which does limit the opportunity for term business. Widespread uncertainty related to geopolitics, tariff policy, and their impacts on trade patterns as another source of hesitation for certain charterers. But it doesn’t take away the fixed and tangible nature of their long term LNG shipping needs, and this is prompting inquiries into securing tonnage on a multiyear basis. In a positive sing signal, for the longer term two stroke market, Capital recently announced two term charters starting in 2027 reportedly at reasonable rate levels, And CoolCo remains confident that it will secure long term employment for the CoolTiger at strong rates in due course. Turning to Page 11 and lastly, before I hand over to John for a more detailed look at the quarter, I’d like to close with a few comments on LNG vessel supply and the rebalancing that is currently taking place.

Some might argue that the number of vessels ordered during the 2022 to 2024 period was excessive. And while we see these ships being absorbed through new volumes and replacement demand, LNG ordering has all but dried up in 2025, a typical market response that is positive for the prospects and the value of existing values in the more medium term. We track idle vessels as an indicator of replacement demand. And in the chart on the right, we’re seeing a strong and growing correlation between vessels reaching 20 years of age and retirement. Of the new builds delivering, only around 29 remain open compared to replacement demand of up to 60 vessels by the end of twenty twenty six.

That’s a good market, and it’s the way in which the market helps balance the soon to be delivered vessels. This is thanks to their greater efficiency and lower unit freight costs. They will continue to displace older tonnage as part of a natural rebalancing process, and this is something that is now playing out with increased speed. John, over to you.

John, Chief Financial Officer, CoolCo Limited: Thanks, Richard. I will now provide an overview of the first quarter. Turning to Slide 12. In our Q1 earnings release earlier today, we reported total operating revenues of €85,500,000 exceeding the guidance provided during our last earnings call. This also represents an increase from the prior quarter’s revenue of €84,600,000 primarily driven by a combination of higher revenue from our second newbuild, the Gael Saigar, which was delivered in early January and increased on hire days for the other newbuild, the Cool Tiger, as it secured spot charters.

These gains were partially offset by two vessels undergoing dry dock during the quarter. Total operating revenues also include $3,700,000 in non cash amortization of net intangible contract assets and liabilities as well as $740,000 in third party vessel management revenues. Time and voyage charter revenues generated an average TCE rate of 70,600 per day across our fleet of 13 vessels compared to 73,900 in the fourth quarter. The decrease reflects off hire periods related to repositioning redelivered vessels for the spot market and moving the new build Gale Sagar from its delivery location in Korea to its first loading terminal. Adjusted EBITDA for the quarter was 53,400,000 down from 55,300,000.0 in Q4 due to increased vessel operating and voyage related expenses associated with the newbuild delivery.

Notably, adjusted EBITDA excludes the €3,700,000 in non cash amortization, often a source of variance versus consensus estimates. Moving to Slide 13. As of March 31, our total contracted revenue backlog exceeded 1,600,000,000.0 including all extension options. This represents approximately fifty nine vessel years of backlog or an average of four point five years per vessel across our fleet. Recent charter announcements further reinforce our strong backlog coverage, and we remain focused on securing additional long term contracts.

The average TCE rate on our firm and floating backlog of approximately $1,000,000,000 is around $78,000 per day. For the remainder of 2025, our contract coverage measured in vessel days is approximately 83%. Looking further ahead from today through the end of twenty twenty six, the coverage is roughly 72%. And from today through the end of twenty twenty seven, it is on average or cumulative 63%. With new LNG volumes coming online and the expected extensive scrapping of aging steam turbine vessels after they come off contract, we’re well positioned to benefit from additional charter opportunities and further build on our backlog base.

Moving to Slide 14. With the completion of several dry docks, some of which included performance upgrades to our existing vessels, alongside the addition of two newbuilds, our vessel operating expense per day per vessel is trending in the right direction. In the current quarter, average vessel operating expenses were $16,300 per day per vessel across the fleet of 13 vessels, a decrease from both Q4 and the average 24 run rate and also down from approximately $17,600 per day a year ago. From the second quarter of twenty twenty four through early twenty twenty five, we successfully completed the dry docks for seven vessels, delivered on time and within budget. Strong adherence to the dry dock schedule minimized downtime and ensured uninterrupted service post completion.

Looking ahead, we have three more dry docks planned over the next twelve months, and we expect to continue realizing the benefits from operational efficiencies and economies of scale. Moving to 15, for the operating and the net income bridges. Operating income for Q1 was €34,600,000 a decrease of €3,900,000 versus the last quarter. The decline was driven by higher time and voyage charter revenues, which were more than offset by increased positioning expenses as well as vessel operating costs related to the addition and position of the new build Gelsegar. Despite the decline, the operating margin remained strong at 41% of operating revenues.

Moving to the chart on the right. The net income for the quarter was 9,100,000.0 down from EUR 29,400,000.0 in Q4. In addition to the lower operating income, this decrease was also due to EUR 2,800,000.0 in interest expenses associated with the newbuild, the Gaelsagard, which began accruing on its delivery date on January 6. And it’s also due to a 14,300,000 swing in the fair value of our mark to market swaps, shifting from an unrealized gain of $9,000,000 in Q4 to an unrealized loss of €5,300,000 in Q1, which is a factor of the development of market interest rates. Turning to Slide 16, the balance sheet and liquidity.

Following our successful refinancing initiatives in 2024, we’re pleased to maintain a strong balance sheet in today’s environment, characterized by solid liquidity and no debt maturities until mid-twenty twenty nine. To recap, in 2024, we refinanced a portion of our debt and implemented further covenant harmonization measures, enhancing our financial flexibility. As of March 31, our cash and cash equivalents totaled approximately €136,000,000 And you can see in the movement from the starting cash and the ending cash that we took delivery of the Gaelsargar and its final yard payment was financed through a sale and leaseback arrangement. We entered into €50,000,000 in interest rate swaps during the quarter and executed an additional €198,000,000 in swaps subsequent to quarter end, covering two of our debt facilities. Our average interest rate obligations currently stand at approximately 5.7% with three quarters of our notional debt either hedged or fixed.

On the liquidity slides, we also retain approximately €120,000,000 in undrawn capacity under the RRCF that we secured in December 24, resulting in total available liquidity of $256,000,000 Subsequent to the quarter, during April and May 25, the company initiated purchases under its previously announced share repurchase program. As of May 16, we have repurchased approximately 692,000 shares at an average price of $5.59 per share, well below our net asset value per share and reducing the total share count by 1.3%. Going forward, the timing, pricing and the amount of any additional repurchases will depend on various factors, including market conditions and the company’s financial position. Moving to Slide 17. In summary, given the current LNG market conditions and the charter rates, especially in the spot market, we retain a strong financial runway while preserving flexibility for growth.

Our solid revenue and operating performance reflects our effective chartering strategy with the company delivering an adjusted EBITDA margin of 62% and an operating margin of 41%. The fleet remains well positioned with the majority of open days covered under our €1,600,000,000 revenue backlog. Our balance sheet remains healthy and supports the potential for opportunistic expansion. Strategically, our selective asset acquisitions in the past have demonstrated a disciplined approach to value creation through active asset management. Our strong balance sheet and available liquidity also provide optionality to pursue corporate transactions should attractive opportunities arise.

In light of current depressed spot market rates, which remain below economic breakeven levels, we continue to take a prudent long term view. And with that, I open the line for questions, Carly.

Carly, Conference Operator: Your first question comes from Alex Bidwell with Weber Research and Advisory.

Alex Bidwell, Analyst, Weber Research and Advisory: Good afternoon, Richard. I appreciate the time. So where are you seeing the tipping point with respect to term for fixed rate versus floating rate charters? Is the appetite for fixed rate deals more or less capped at twelve months? Or are you seeing any interest in longer durations?

Richard Tyrell, Chief Executive Officer, CoolCo Limited: Hey, Alex. We are seeing interest in longer durations. How much depends a little bit on the type of vessel. Of course, it’s greater interest for the newer vessels when it comes to longer term charters as as typically been the case. But even for the, TFTPs, you know, interest at, you know, anything up to three, four, even five years, in terms of in terms of Of course, you know, with respect of that kind of interest, the question is, you know, whether the types of rates are are interesting.

And generally, there’s, well, I guess you’d call it, a contango in the market where the near term rates, you can sort of maybe sort of get comfortable with or you just sort of have to accept. But I don’t think any owner in the market is thinking these rates are going to be what they are today in three, four, five year time. So if there is interest in a longer term charter, the levels are significantly above where they are today, which sometimes results in charters accepting or going to something a little bit short term.

Alex Bidwell, Analyst, Weber Research and Advisory: All right. Appreciate the color. And then just taking a look at the market, so about three to five years from now, we’re looking or we’re seeing the amount of uncontracted volumes coming out of The U. S. Gulf ramping materially.

Richard Tyrell, Chief Executive Officer, CoolCo Limited: How do

Alex Bidwell, Analyst, Weber Research and Advisory: you see those portfolio and merchant volumes impacting the carrier market?

Richard Tyrell, Chief Executive Officer, CoolCo Limited: Well, I think it’s good that you highlight that because I think one thing which it’s easy to sort of, I guess, underappreciate when talking about these volumes, you know, quarter in, quarter quarter out is that a lot of them are still yet to arrive. And I highlighted that in one of my slides where it shows that supply was really flat over the last twelve months and even longer if you go back. And now we’re seeing these volumes that are coming, and they’re generally are coming now. They’re a lot of them are already here in the case of some of the Venture Global volumes, for example. So they’re going to make a material difference to the market.

How much of a difference they’ll make will depend on where the molecules go. Of course, that drives the shipping requirements. And, yeah, it’s quite a range. If the molecules go to Europe, the number of ships they need is far fewer than if the molecules go go to Asia. And it’s it’s that that will be the real pivot factor when it comes to LNG shipping in our opinion.

Carly, Conference Operator: Your next question comes from Liam Burke with B. Riley.

Richard Tyrell, Chief Executive Officer, CoolCo Limited: Thank you. Hi, Richard. Hi, John. How are you today? Good.

Thanks. Hi, Liam. Good. Good. Thanks, Liam.

Richard, we’re seeing an aging fleet at one end, and we’re seeing more production inevitably coming down the road. Where are asset prices for non older vessels? They’re still quite high and very much sort of hanging off the new build levels. So, yeah, of course, for Two Strokes, they’ve gone from costing something just shy of $200,000,000, maybe maybe five years ago, to something closer to $2.60 at the peak. They’ve maybe come off slightly, but, you know, they’ve come off to $2.50, let’s say.

It’s not a big change in percentage terms. And, people’s expectations, when they when they do float vessels for sale in the market are, anchored on those kinds of levels. Fair enough. I know you have flexibility, and I also know you have patience. But, is there any potential to add to the fleet?

We’re always looking for opportunities, Liam. And we’ve been reasonably effective, I think, the past when we have added, but you’ve got to be disciplined. And at the moment, we haven’t yet found a landing zone in respect of the opportunities that are out there. That’s not to say one will come, and we always look at such things. Great.

Thank you, Richard. Thank you, Liam.

Carly, Conference Operator: Your next question comes from Bindik Nittingniss with Clarkson Securities.

Bindik Nittingniss, Analyst, Clarkson Securities: Thank you. You mentioned the capital contract that starts in 2027. Is that sort of an option you are considering for the KUELFiger? I mean forward fixing maybe one point five to two years ahead just to get that transparency?

Richard Tyrell, Chief Executive Officer, CoolCo Limited: Absolutely, Benfix. We are. Obviously, it’s competitive market, and we didn’t get that piece of business. But there are other opportunities which are along the same lines, and we view it as being a positive that it was done at the levels that it was done at even though there’s a problem.

Bindik Nittingniss, Analyst, Clarkson Securities: Okay. So I guess you sort of answered my follow-up there, but would the mid-80s be sort of the level that would be acceptable for such a charter?

Richard Tyrell, Chief Executive Officer, CoolCo Limited: Yes. I think mid-80s or higher.

Bindik Nittingniss, Analyst, Clarkson Securities: Yes. Makes sense. And just one more on the newbuilds. They have Chinese leases, both of them, I think. Is that an issue with the USTR port fees?

And if it is, how easy is it to sort of refinance without penalties?

Richard Tyrell, Chief Executive Officer, CoolCo Limited: It’s a question that we look into very, very closely when the rules first came out. I think it was over Easter a few a few weeks ago. And, you know, these things are are subject to change, of course. But as of now, the LNG fleet, and that includes our vessels, of course, is not affected until twenty nine slash two thousand and thirty when the various targets around US built vessels come into place. So, in other words, the LNG sector has special rules that are in Annex 4 and otherwise isn’t affected, in the same way that other other areas of shipping are.

Bindik Nittingniss, Analyst, Clarkson Securities: And your first call options on the leasebacks, what are they?

Richard Tyrell, Chief Executive Officer, CoolCo Limited: Sorry.

John, Chief Financial Officer, CoolCo Limited: Go ahead, Richard.

Richard Tyrell, Chief Executive Officer, CoolCo Limited: No, go ahead, John.

John, Chief Financial Officer, CoolCo Limited: So we have call options from day one, but the initial three years is has a prepayment penalty of 3% and then followed by 1.5% for the next three years. But the Chinese leases is obviously a big issue, not only for LNG, but other ships as well. There’s a lot of objection against the ambiguity about sale and leasebacks. As a matter of fact, I got a letter from a tax adviser in the mail earlier this week, highlighting that as well on the Chinese owned legally owned vessels. So ambiguity is there.

There will be probably further developments. So we’re keeping an eye on this. It’s not going to be applicable to us at least now for the next three years. So but we’ll closely monitor.

Bindik Nittingniss, Analyst, Clarkson Securities: Okay, perfect. Thank you for good answers, guys.

Carly, Conference Operator: Ladies and gentlemen, there are no further questions at this This will conclude today’s conference call. Thank you all for joining. You may now disconnect.

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