Global Ship Lease, Inc.

Good morning, good afternoon, everybody, and welcome to our first quarter 2021 earnings conference call. The slides that accompany today's presentation are available on our website at www.globalshiplease.com. Slides two and three, as usual, 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 Harvest section of the slide presentation. We also draw your attention to the risk factor section of our most recent annual report on Form 20F, which was for 2020 and was filed with the SEC on the 19th of March this year. You can obtain this via our website or via the SEC's. All of our statements are qualified by these and other disclosures other disclosures in our reports filed with the SEC. We do not undertake any duty to update forwarded statements. For reconciliations of the non-GAAP financial measures to which we will refer during this call, for the most directly comparable measures calculated and presented in accordance with GAAP, you should refer to the earnings release that we issued this morning, which is also available on our website. As usual, I'm joined by our executive chairman, George Yeroukos, our chief financial officer, Tasos Tsouroupoulos, and our chief commercial officer, Tom Lister. George will begin the call with some high-level commentary and an update on our current areas of focus, and then Tasos, Tom, and I will take you through our recent achievements, quarterly results and financials, and the current market environment, after which we'll be pleased to take your questions. Turning now to slide four, I'll pass the call over to George.

Thank you, Ian, and good morning or good afternoon to you all. Simply put, this has been a great quarter. It's been great for the industry in general, it's been great for our liner customers, and it's been great for global shipplies. The strong container ship market momentum of late 2020 has further accelerated in 2021, positioning the sector for levels of profitability not seen in many years. No doubt, you have seen the earnings guidance upgrades put out by the likes of Maersk. Poor delays, equipment shortages, and congestion in the Suez Canal have helped at the margins by tying up container ship capacity. But this strong market is actually based on strong fundamentals, particularly for the size segments we focus on. And we expect these fundamentals to be sustainable well beyond when some of the temporary factors eventually dissipate, which I will tell you more about shortly. In line with our long-standing strategy, we are taking advantage of the opportunity presented by this red-hot market to lock in upside for extended durations and to deliver sustainable and accretive contracted revenue and earnings growth. Since the start of the year, we have concluded 11 new charters for terms ranging from 21 months to over four years on our existing fleet, adding over 280 million US dollars of contracted cover. And we have contracted to purchase and are in the midst of taking delivery of seven ships, all of which have charters attached. We have also taken the opportunity to refinance a little over 330 million of our 2022 debt, pushing maturities out to 2026 and reducing annual debt service by almost $20 million. The rating agencies have clearly appreciated all of the above and have upgraded our credit ratings to B-plus stable and B-2 positive. On the right of this slide, you can see that we have grown our quarterly revenue to $73 our adjusted EBITDA to 44.7 million and our normalized net income to 17.8 million. And we strongly believe that we are well positioned for further earnings growth, both from locking in high charter and longer charter terms on our existing ships and by continuing to grow selectively and accretively. On the back of all this, we have declared a quarterly dividend of 25 cents per quarter, which is to be paid on June 3rd to shareholders of record on May 24th. This is more than double the 12 cents per quarter we announced in January. Since then, we have agreed to purchase seven ships, four of which are already in our fleet and contributing to earnings, and have added additional charter cover at higher rates for longer periods. Basically, we strongly believe in the sustainability of earnings and we're putting our money where our mouth is. If you now turn to slide 5, I'll give you a helicopter view of the dynamics shaping our industry and explain to you why we believe that the best is yet to come. We all know that container shipping had a remarkable 2020, despite global volumes falling by 2% year-on-year. So with volumes expected to grow in 2021 by almost 7%, well in excess of supply growth, it makes sense that the market continues to tighten and charter rates continue to strengthen. And to be perfectly clear, this volume growth figure represents the underlying demand for containerized freight to be moved. So our expectation of the market tightening does not depend on factors like port delays and other such temporary impacts of COVID. The question is, what happens next? And here I point you to the top chart on the left of this slide, which shows containerized demand growth forecasts. The dark blue bars and supply growth forecasts, which are shown in two ways. The pale blue bars show supply growth for the global container ship fleet as a whole, while the red bars show supply growth specifically for the mid-size and smaller ship we focus on. And these are the bars to look at, which, as you can see, is tiny. An encouraging picture, I hope you will agree, especially when you consider that CPI slots are already pretty much full all the way into 2024, and that the data shown here assumes zero scrapping, so if anything, may even overstate supply growth. That brings us to the ever-growing pressure on the industry to decarbonize, coming both from capital providers and other stakeholders, putting increasing emphasis on ESG and from a growing pipeline of regulations aimed at enforcing carbon reductions over the coming years. As you will have read, considerable work is being done on developing green fuels and proportional technology, and there are certainly a number of existing prospects being discussed. But in reality, it will be a number of years and many, many billions of dollars before these fuels, and crucially, the energy chain and source site infrastructure required to support them are in place at any meaningful commercial scale. In the meantime, the only way that industry can materially reduce emissions is to reduce speed, full stop. And this is exactly what is contemplated by the new IMO initiative, EEXI, which is expected to be implemented from January 1st, 2023. EEXI will effectively require ships already on the water to meet the emission standards required of newly built ships. And a large portion of the global fleet will only be able to achieve this standard by slowing down. And this is the interesting part. If you speed ships up, you increase effective capacity, allowing them to carry more cargo. As you can see from the chart at bottom left, that's what the liner operators have been doing as supply has got tighter. So what happened? If, when actually, EXI forces ships to slow down? The answer is that effective capacity is reduced. A rough rule of thumb is that reducing the average speed of the global fleet by one knot is equivalent to reducing effective capacity by 5-6%. So, long story short, we see today's capacity crunch and the resulting high earnings continued for some time yet. On that note, I'll hand the call over to Ian.

Thank you, George. Please turn to slide six. One of our principal objectives is to deliver earnings growth from both locking in higher rates for longer durations on our existing ships and from accretive acquisitions. This first quarter, we've done both, with charter renewals and the agreed acquisition of the 7,000 and 6,000 TU ships, bringing our total forward contracted cover to around $984 million spread over 2.6 years. As usual on this slide, we show our contract cover and charter portfolio. The pale blue bars show charters already in place when we started 2021, while the dark blue bars show the 11 new charters that we've agreed since January the 1st. As you can see, building on an already strong second half of 2020, Rates have just got stronger and charter terms longer as this current year has progressed. We were pleased to have fixed an over 20-year-old 2,500 TU feeder vessel, the Myra, early in January this year at a little over $14,000 a day, substantially higher than the prior charter, which was at $8,000 a day. But we've recently fixed her sister, the New Yorker, through mid-2024 at $20,700 a day, That should give you a sense of how the market is continuing to evolve, and it's by no means an outlier, this fixture. In fact, the story is replicated across all size categories. Those of you who have been with us for a while will recall that we acquired the GSL Nicoletta and the GSL Kristen to 6,800 TU ships for about $13 million each back in early 2020. Those have now been fixed on multi-year charters at rates north of $35,000 a day, $35,000 a day, which should generate approximately $10 million of EBITDA each per year, not far short of the purchase price of the vessels. And we have another seven ships coming open in the balance of 2021 and more in 2022. But as you can imagine, we may likely have to wait until the very end of the current charter's redelivery windows before we can redeploy the ships or extend them at higher rates. In today's tight supply environment, charters will hang on to ships, especially at below market rates, for as long as they possibly can. So that pushes you out to the end of the redelivery window. In the middle of the slide, with the names in red, you can see the seven ships that we've contracted to purchase with the charters attached. All of these ships were delivered in late April, a little earlier than we were expecting, and the remaining three will deliver later this quarter or early next. If you now turn to slide seven, I'll recap why these seven ships that we're welcoming into our fleet are such an attractive investment and such a clear illustration of our value accretive growth strategy. In short, firstly, we focus on existing ships with charters attached or arranged in tandem with the purchase, which are immediately accreted to cash flows. This is as opposed to new buildings for which there can be a two- or three-year wait before the vessels come online earning revenue and during which time the owner has all of the funding costs. We expect these seven ships to add approximately $29 million to our annual adjusted EBITDA. We're risk-averse, secondly. We've looked for good returns right out of the gate on assets with low economic depreciation, limited residual value risk, and compelling upside potential. These seven ships fit the bill perfectly. They have at least three years of contract cover, deliver a purchase price to EBITDA multiple of approximately four times, push net income and earnings per share up significantly, and have good downside cover, with scrap value alone equivalent to about 60% of the purchase price. Thirdly, the ESG and economic strands of our strategy are well aligned. Our view is to take a full lifecycle approach to the carbon footprints of ships. This means considering the footprints associated with the building and recycling of ships as well as operating them. We believe that it only makes sense to build new ships when we and the industry in general know how they're going to be powered on a sustainable basis. Until then, in our view, better to optimize and, where possible, extend the economic life of existing ships, such as the seven we've just agreed to buy. Fourthly, we look to stay flexible and agile. We aim for attractive investment returns within five years or less, allowing us to adjust our strategy to the evolving decarbonization environment. Our aim is to position GSL to be legacy problem-free and with a strong cash position, to be able to capitalize on next-generation green technologies as they're proven out and mature over the coming decade. With that, I'll turn the call over to Tasos to talk you through our financials.