Earnings call transcript: Global Ship Lease Q1 2025 sees dividend boost

In its Q1 2025 earnings call, Global Ship Lease (GSL) reported increased earnings and cash flow compared to the same period last year, highlighting a strong financial position with a cash reserve of $428 million. Currently trading at $26.29, near its 52-week high of $30.32, the stock shows momentum. The company announced a 40% year-over-year increase in its annualized dividend to $2.1 per share, offering an attractive 8.36% yield. According to InvestingPro analysis, GSL maintains an EXCELLENT financial health score of 3.79 out of 5. The stock price of Green Scientific Labs Holdings, however, saw a notable increase of 120% in recent trading, reflecting positive market sentiment.

Key Takeaways

• Global Ship Lease’s Q1 2025 earnings and cash flow improved from Q1 2024.
• The company increased its annualized dividend by 40% to $2.1 per share.
• GSL’s net debt to EBITDA ratio has been reduced significantly.
• The company has secured $352 million in contracted revenues from 19 new charters.
• Green Scientific Labs Holdings’ stock surged by 120%, marking a significant market reaction.

Company Performance

Global Ship Lease has demonstrated robust financial performance in Q1 2025, with earnings and cash flow showing an upward trend compared to the first quarter of 2024. The company has strategically focused on mid-sized and smaller container ships, securing 19 new charters that contribute to a substantial portion of its contracted revenues. This strategic focus has positioned GSL favorably within the competitive landscape of the container ship market.

Financial Highlights

• Cash position: $428 million, with $95 million restricted.
• Gross debt: Increased to $778 million.
• Net debt to EBITDA: Reduced to under 1x, a significant improvement from 8.4x in 2018.
• Dividend: Increased to $2.1 per share, a 40% rise year-over-year.
• Contracted revenues: $352 million from 19 new charters.

Outlook & Guidance

Global Ship Lease remains focused on maintaining financial resilience and maximizing optionality in a volatile market. Trading at a P/E ratio of 2.69, InvestingPro analysis suggests the stock may be undervalued relative to peers. The company is exploring selective fleet renewal and aims to generate long-term shareholder value. The contract cover for 2025 and 2026 stands at 93% and 75%, respectively, indicating a stable revenue base for the coming years. With revenue growth of 5.82% in the last twelve months, the company demonstrates steady expansion.

Executive Commentary

"In complex and fast moving times, optionality is key," stated George Irukos, Executive Chairman, emphasizing the importance of flexibility in navigating market dynamics. CEO Thomas Lister added, "We are not complacent and we’ll continue to lock in as much as we can at attractive rates," underscoring the company’s proactive approach to securing favorable charter agreements.

Risks and Challenges

• Trade tensions between the U.S. and China could impact global shipping volumes.
• Proposed U.S. port fees on Chinese-built ships may affect operational costs.
• Market volatility and economic uncertainties pose challenges to fleet management.
• The aging fleet in the sub-10,000 TEU segment may require strategic renewal.
• Global container ship charter market remains tight, influencing pricing dynamics.

The earnings call highlighted Global Ship Lease’s strong financial footing and strategic initiatives aimed at leveraging market opportunities while navigating potential challenges.

Full transcript - Green Scientific Labs Holdings Inc (GSL) Q1 2025:

Argy, Conference Operator: Good day, everyone, and thank you for standing by. My name is Argy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Global Ship Lease Q1 twenty twenty five Earnings Conference Call. 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 Thomas Lister, the CEO of Global Lease. Please go ahead.

Thomas Lister, CEO, Global Ship Lease: Thank you. Hello, everyone, and welcome to the Global Ship Lease First Quarter twenty twenty five Earnings Conference Call. You can find the slides that accompanies today’s presentation on our website at ww.globalshiplease.com. As usual, Slides two and three 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 2024 Form 20 F, which was filed in March 2025. 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 Irukos and by our Chief Financial Officer, Tassos Saropoulos. 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 Irukos, Executive Chairman, Global Ship Lease: Thank you, Tom, and good morning, afternoon, or evening to all of you joining us today. In the face of unprecedented levels of macro uncertainty, the container ship charter market has remained exceptionally tight through the opening months of 2025. Even as the headline freight rates and by our liner customers continue to normalize, the fundamental need for mid sized and smaller container ships has remained very strong with essentially zero idle capacity in the global system. Against that backdrop, we added a further $352,000,000 of contracted revenues in the first quarter, bringing our 2025 contract cover to ninety three percent and twenty twenty six cover to 75%, which provides good insulation against uncertainty. More recently, tariffs and other proposed non tariff barriers to trade have further complicated the macroeconomic picture.

Tom will discuss this more later, but the situation remains very fluid, and it is too early to speculate on longer term ramifications. Although we are encouraged by the recent apparent de escalation in trade tensions and rhetoric. In any case, from what we have seen so far, it seems likely that the impact of tariffs and other trade barriers will be uneven across different segments of the industry. For example, we’re beginning to see early data that container flows displaced from China US routes are in some cases leading to notable increases in volumes in smaller trades that more heavily utilize mid sized and smaller ships of the kind that GSL owns. Now in addition to chartering, we have opportunistically monetized some of our older ships by selling them at cyclically attractive prices to bolster our dry powder for investment and fleet renewal.

We have proven our patience and discipline over many years, but we must also ensure that we are in a position to act quickly when the time and conditions are right. In complex and fast moving times, optionality is key. Meanwhile, our balance sheet remains in excellent condition, and we have increased our return of capital to shareholders by growing our annualized dividend to $2.1 per share, starting this quarter and up 40% on this time last year. In sum, by strengthening our balance sheet and locking in extensive contract cover, we have built GSL to maximize optionality, both to take advantage of the natural cyclicality of our industry and also to ensure that we can remain strong for the long term in any market conditions. Both as a company and as an investment proposition, GSL has enjoyed a very strong multi year run, and we look forward to sustain and build on that momentum in the years ahead.

With that, I will turn the call back to Tom.

Thomas Lister, CEO, Global Ship Lease: Thank you, George. Please turn to Slide five, where you will see the diversification of our charter portfolio. As of March 31, we have nearly $1,900,000,000 contracted revenues and two point three years of average remaining contract cover. Including extension options that have been declared, we added 19 charters for approximately $352,000,000 of contracted revenues in the first quarter. On Slide six, we discuss our dynamic capital allocation policy, which will be familiar to many of you, but which is critically important as a cyclical industry such as ours.

As George mentioned, we are returning substantial capital to shareholders. We have significantly delevered our balance sheet and we have maintained a disciplined selective approach to fleet renewal. At the same time, we have sought to maximize optionality while ensuring that our CapEx obligations and various downside risks are well covered in any market context. In short, our strategy and business model is for GSL to provide investors with a stable and liquid platform through which to participate in the opportunities, cyclical upside and positive volatility of the industry, while mitigating exposure to downside risk. In other words, taking the white knuckle part out of the shipping roller coaster ride while keeping the fun bits.

Slide seven illustrates our discipline in acquisitions. The notes on the chart show where we have bought vessels since our transformative merger in 2018, and it is clear that our preference is to buy during periods of relatively low asset prices or when we can structure the equivalent as with our vessels purchased in late twenty twenty four with below market charters attached facilitating that acquisition at a 30% below market charter free value, while preserving their upside potential post charter. Notably, we refrain from buying any ships during the super peak asset price period shown in orange on the chart, a period during which markets were exuberant with asset prices at levels we saw as providing little upside potential. With that, I’ll pass the call to Tassos to discuss our financials. Tassos?

Tassos Saropoulos, Chief Financial Officer, Global Ship Lease: Thank you, Tom. Slide eight shows our first quarter financial highlights. I would like to emphasize a few points. Earnings and cash flow are all up versus the first quarter of twenty twenty four, which was already a strong quarter. With the financing of our recently acquired vessels, our gross debt has increased to a little under $778,000,000 And with the debt for those ship purchases, we have made use of all remaining headroom under a 64 basis points show through interest rate caps, which run through 2026 and as of March 31, a little over 80% of our floating rate debt.

Our cash position is $428,000,000 90 5 million dollars is restricted, of which $73,000,000 is advanced received of charter hire. The remainder ensures that we can fully cover our covenants, working capital needs and dividends, while also providing dry powder to move quickly on the right opportunities. Slide nine provides a closer look at our efforts to build both resilience and equity value by delivery. The graph on the left shows our progress in reducing our outstanding debt, while the right shows that same deleveraging from a net debt to EBITDA perspective. As you can see, although we increased our gross debt through our recent C purchases, we have continued to see our net debt to EBITDA, our financial leverage, in other words, reduce now under one as of the end of the first quarter.

To underscore that point, that figure was 8.4 times at the end of twenty eighteen. More progress on this front can be seen on Slide 10. On the left, we have our cost of debt, which we have successfully lowered to a blended cost of 3.99 percent. We have reduced this cost of debt significantly over the years, even as ten year U. S.

Treasuries have risen quite a lot. The right graph shows our breakeven rates and tells a closely related story. That is because we have sharply reduced our interest expenses, we have been able to absorb rising operating expenses and keep overall breakevens flat over several years when the prevailing global narrative was one of high inflation. We are proud of this result, which puts us in a position of strength at the time of macro volatility and unpredictability. I will now turn it back over to Tom to discuss our market focus and ship deployment.

Thomas Lister, CEO, Global Ship Lease: Thanks, Tassos. Slide 11 restates our focus on mid sized and smaller container ships between 12,000 TEU roughly, which make up the backbone of global trade, are super flexible operationally and are not dependent upon any one trade or country. This stands in contrast to the very large container ships, which because of their size, physical restrictions in many ports and the need for sophisticated port infrastructure tend to be limited to the big main lane trades such as those between China and The U. S. Or Northern Europe.

We consistently reiterate this aspect of our business because we believe that it’s important for investors to understand And I will, in a moment, speak to why it is especially valuable in the current environment. The impact of one significant and ongoing market dynamic is shown on Slide 12. Before the disruption in the Red Sea, 20 Percent of all global containerized volumes passed through it, representing 34% of containership fleet capacity. These vessels have since been forced transit around the Cape Of Good Hope, lengthening voyages and thereby limiting effective vessel supply considerably. Various initiatives have emerged over time to try to restore navigation through the region, notably including an apparent recent ceasefire agreement between The U.

S. And the Houthis. Recent commentary, however, from certain of the major liner companies has captured well the dilemma faced in considering a return to that routing and why it is not necessarily a given in the near future. First and foremost, the safety of seafarers, not to mention the vessels and the cargoes, cannot be taken lightly. Secondly, with rerouting having settled into stable new norms after a protracted period of reshuffling, a return to Red Sea and Suez transits would represent a major undertaking for the liner companies involving network disruption, complexity and significant costs.

So taken together, the threshold for a large scale return to Suez transits is quite high, especially for liner companies operating complex service networks. Consequently, the sector wants to first regain comfort and high conviction that transits can be completed safely on a consistent and I emphasize consistent basis for the long term. On Slide 13, we provide some data to help frame a couple of the hot topics of the day, namely U. S.-China tariffs and the proposed U. S.

Port fees on Chinese built and operated ships, the latter of which is typically referred to as USTR. Tariffs first. So big picture, U. S. Imports represent a meaningful slice of global containerized trade, although perhaps less than some might imagine at 13%, that’s 13%, a significant portion of which almost 40% comes from China.

A smaller, but still non negligible volume of containerized trade goes back the other way. During April, tariffs on this bilateral trade climbed as high as one hundred and forty five percent and one hundred and twenty five percent respectively, triggering severe disruptions to supply chains, which are still rippling through the system. Fortunately, the situation appears to be de escalating with tariffs now set at least for the time being at 3010%, while The U. S. And China work on establishing a longer term framework.

Turning to USTR. The U. S. Is looking to impose fees both on Chinese built and on Chinese operated ships. The implications will be wide ranging as ships built in China currently account for 28% of the global containership fleet on the water and 71% of the order book.

So almost everyone has or will have such ships in their fleet. Having said that, USTR is not yet in its final form and has already passed through various iterations and reviews, each of which has tempered the terms, and a further review is in fact scheduled to take place today. As things currently stand, it seems that ships of 4,000 TEU or smaller will not be impacted by USTR. Turning to GSL specifically, our fleet at the end of the first quarter included 10 Chinese built ships, of which only four are larger than 4,000 TEU, of which none are currently deployed on China U. S.

Trades. And in fact, it’s quite typical for mid sized and smaller ships such as ours to be deployed outside of the main lane trades, both because of their flexibility and also because the majority of global trade does indeed happen outside of these main lanes. That deployment flexibility for our ships is something that has always been valued and hopefully this helps make clear why. On Slide 14, we look to U. S.-China trade tensions in 2019 as an illustrative example of how second and third order effects can counterintuitively be positive for tonnage providers like GSL.

In 2019, as tariffs between The U. S. And China ratcheted up, larger container ships did indeed see decreased demand as U. S.-China trade flows reduced. However, U.

S. Consumer demand didn’t go away and so replacement goods were sought from elsewhere in a form of cost and tariff arbitrage. The net result, broadly the same volume of goods continued to flow into The U. S, but the supply chain moved away from the simplicity and concentration of the previous China focus and fragmented into a more complex and dispersed form with cargo flowing both via and from Southeast Asian countries such as Vietnam, Thailand and Indonesia. As you can imagine, chain supply chain concentration and simplicity plays to the strengths of really big ships.

On the flip side, however, supply chain complexity and dispersion amped up by heightened uncertainty requires the operational flexibility of midsize and smaller ships like ours. We’re waiting for more hard data as things are moving and changing so fast, but anecdotal evidence suggests that a similar phenomenon is establishing itself now in 2025 with volumes displaced from U. S.-China being instead picked up from Southeast Asian locations. So it’s obviously very early in the game. The rules are in flux and we don’t have a crystal ball.

However, what we can say with some confidence is that one, the impact of tariffs is rarely captured in a single snapshot of first order effects. Two, different size segments of the containership fleet are likely to experience tariffs quite differently. And three, in a highly uncertain environment, everyone is looking for optionality. And for the shipping lines, that optionality is capacity, often in the form of operationally flexible midsize and smaller container ships. Next, Slide 15 provides a barometer of supply side dynamics.

Both idle capacity and scrapping activity are negligible as the strong charter market has kept older vessels on the water making lots of money. However, if demand were to drop, scrapping could pick up quickly and at scale. Turning to Slide 16, which shows the order book. The overall order book has indeed grown in recent years. But again, nuance is important as the 54.3% order book for ships over 10,000 TEU is in sharp contrast to the 11.5 order book for our focus segments under 10,000 TEU, which is itself spread out over approximately three years of deliveries.

You also need to consider the age of the fleet into which the order book is delivering. If you were to assume the scrapping out of all ships of 25 years or older and within to net that capacity out against the order book, our peer group would actually contract shrink by 6.5% through 2028. So the sub-ten thousand TEU fleet segment, which has a median age of 17, one seven years, has the double benefit of being both comparatively old and having limited replacement capacity in the pipeline. Furthermore, age is comparative rather than absolute in container ships. Does it matter if you have old ships, if the ships against which they are competing are also primarily old?

We would argue that it does not. What does matter, however, is how well specified those ships are in relation to their peer group. And that’s where we are well placed. Long story short, scrapping represents a safety valve. How many ships are ultimately strapped out remains to be seen, but it’s important to remember that medium term fleet growth of any amount in our segment is far from a certainty.

And in fact, it only becomes a likely scenario if the overall market remains highly profitable. So not something we lose too much sleep over. Slide 17 takes a closer look at the charter market. After a period of post peak normalization, you can see that rates over the last several quarters have been quite strong. And to make this a step further in clarifying the implications for GSL, I would point out that our fleet breakeven rate is approximately 9,300 per vessel per day, above which the operating leverage of our business really amplifies value.

And we have $1,900,000,000 of contract cover over the next two point three years on average, So we feel quite good about that too. So we’re not complacent and we’ll continue to lock in as much as we can at attractive rates. So on that high note, I’ll turn the call back to George to conclude our prepared remarks.

George Irukos, Executive Chairman, Global Ship Lease: Thank you, Tom. To summarize, our cash flows are strong and continue to grow as does forward contract cover. The macro and geopolitical environment is extraordinarily volatile and uncertain. Without knowing what is to come at the macro level, we’re focusing on what those things that are under our control, namely making ourselves financially resilient and maximizing our optionality to both manage risk and capitalize on opportunities. Our balance sheet is robust with our recent $85,000,000 refinance pushing our average maturity out to five point one years and maintaining a weighted cost of debt below 4%.

Substantial delevering has been achieved and is still underway. Breakeven rates are just over 9,300 per day per vessel, significantly lower than current market charter rates, and our strong corporate credit rating reflects the strength of our balance sheet. On a selective opportunistic basis, we have monetized older ships at cyclically attractive prices in order to build dry powder. We are pleased to continue to increase our return of capital to shareholders by raising our dividend yet again, bringing it to $2.1 per common share annualized. And finally, we have positioned ourselves well to pursue opportunities as they arise, and we believe there will be opportunities to renew our fleet as certain of our cash cows age out.

Now looking ahead, GSL is in a great position to keep generating long term value for our shareholders and maximizing optionality to capture value at each stage of the cycle. Now we’re ready to take your questions.

Argy, Conference Operator: Your first question comes from the line of Liam Burke of B. Riley Securities. Please go ahead.

Liam Burke, Analyst, B. Riley Securities: Thank you. Hi, George, Tom, Tassos.

Tassos Saropoulos, Chief Financial Officer, Global Ship Lease: Hi, Liam. Hello.

Liam Burke, Analyst, B. Riley Securities: You’ve mentioned the rate environment has been very strong going against what freight rates are. Is there any interest on your charter customers to extend existing charters at better rates? Or are they are you just seeing a very good environment as charters roll over?

Thomas Lister, CEO, Global Ship Lease: Hi, Liam. I’ll try to answer that. It depends which charters are rolling off. So obviously, we fixed some charters during the super cyclical high of COVID that are still at extraordinarily high levels. So if they were to be refixed into the current market environment, it would be probably a notch down in some instances.

On the flip side, we’re seeing appetite to fix at still very, very attractive rates. And I would I think we provided in the presentation on Slide let me find it. I think Slide 17, a snapshot of where we see rates by vessel size today, and they’re still pretty robust. So there will be some ups and downs, but by and large, the charter opportunities that we’re seeing are very attractive ones.

Liam Burke, Analyst, B. Riley Securities: Great. And you did opportunistically sell assets to, as you said, build dry powder. Is there anything on the acquisition front or just asset prices just not reasonable right now?

Thomas Lister, CEO, Global Ship Lease: Sorry. Go ahead, George.

George Irukos, Executive Chairman, Global Ship Lease: Sorry. Yeah. We are, as as always, looking at many deals at each given time, but we we keep, you know, our criteria very strong. They are up, let’s say, very strict. So we don’t do acquisition for the sake of growth.

We only do it if it makes a lot of sense financially. So, yes, we have seen deals, but we don’t have something specific in mind. The reason we sold some ships were at, you know, they’re 25 year of age, more or less, and we found some prices that were more more lucrative than chartering them because we always look at all the options when we come to a charter. And, that’s that’s why we made this decision, and we keep the cash for, you know, further, acquisitions and investments.

Liam Burke, Analyst, B. Riley Securities: Great. Thank you, George. Thank you, Tom.

Thomas Lister, CEO, Global Ship Lease: Pleasure, Liam.

Argy, Conference Operator: Our next question comes from the line of Omar Nokta of Jefferies. Please go ahead.

Omar Nokta, Analyst, Jefferies: Thank you. Hi guys. Good afternoon. Thanks for the always as usual detailed update.

Thomas Lister, CEO, Global Ship Lease: Our pleasure. Thanks for joining Omar.

Omar Nokta, Analyst, Jefferies: Yes, of course.

George Irukos, Executive Chairman, Global Ship Lease: Yes, so I just wanted

Omar Nokta, Analyst, Jefferies: to ask and I know this is probably much very, very short term, just wanted to ask how you could maybe characterize the charter markets over the past week or so. Again, I know it’s short term, but we’ve seen you especially, you’ve added a good amount of backlog definitely during the first quarter. Things maybe seem to have gotten a bit quieter in April as everybody kind of froze and tried to assess everything. Clearly now we’ve seen a surge in spot freight rates over the past week following the China U. S.

Deal. How has that played out in the term charter market? Have you noticed any kind of shift or pivot in liners kind of appetite? Maybe how it if you can give some kind of context as how maybe it reacted to everything in April and then perhaps what’s happened here over the past week, if anything?

Thomas Lister, CEO, Global Ship Lease: Sure. I would say how you’ve characterized the sort of the change in sentiments and momentum in the freight market. We’ve seen a similar thing in the charter market, Omar. So as we’ve published during Q1, the appetite was there, strong. And then come Liberation Day on, I think it was April 2, there was a bit of an air pocket in the charter market where people thought that well, they wanted to wait and see a little bit to see how things were going to play out.

So I would say that momentum came off a little bit during the course of April. And then certainly over the course of the last week or so, we have seen interest and appetite pick up again. So sentiment has followed a very similar trajectory in both the freight and charter markets. But having said that, because there’s still very little availability of tonnage in the charter markets, charter rates have tended to remain high, albeit in the absence of much activity, while freight rates came under pressure during the course of April.

Omar Nokta, Analyst, Jefferies: Okay. Thank you. And maybe just one, perhaps just a bit more GSL focused and kind of a follow-up to Liam’s question. Cash is now rising nicely. You talked about leverage having come down.

You’ve got the dividend and buyback, which have been really been put to work. The deal landscape is what it is, right? There’s opportunities as they come and go. But clearly, there’s dry powder that you have and it’s building. The cash is going to start to come on.

What do you think about the cash position you want to have at GSL? And as do you intend to just watch the cash balance pick up if there’s no deals? Or is it get put towards repaying debt and keeping maybe a lower level of cash than what you have now?

Thomas Lister, CEO, Global Ship Lease: Well, I would say that I’ll take those questions not necessarily in order, Omar. So as far as delevering is concerned, Tassos said in his prepared remarks, we’ve actually continued to delever following the amortization requirements under each of debt facilities that we have. We’re now at a financial leverage ratio of under one times, 1x. So we think that that’s a very, very good place to be. But more broadly speaking, in a time of maximum uncertainty, which is certainly where we seem to be at the moment, We feel that maximal optionality is super valuable.

And that’s both in terms of the flexibility of our assets themselves, which can be moved around by the liner companies, but it’s also about the resilience of our balance sheet. And within that, holding a very robust cash position so that we can both manage risks as they present themselves and equally importantly, be very quick to bounce on opportunities as they arise.

Omar Nokta, Analyst, Jefferies: Understood. Well, thank you, Tom. Thanks, everyone. I’ll pass it over.

Thomas Lister, CEO, Global Ship Lease: Thanks very much, Omar.

Argy, Conference Operator: That’s all for our Q and A session, and we appreciate your participation. I will now turn the call over to Thomas Lister, CEO of Global Ship Lease, Inc, for the closing remarks. Please go ahead.

Thomas Lister, CEO, Global Ship Lease: Thank you, everyone, for joining today, and we very much look forward to talking to you again around our 2Q earnings in August. Speak to you then, we hope. Thank you very much.

Argy, Conference Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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