Global Ship Lease, Inc.

Thank you very much. Thank you. Good morning, good afternoon, everybody, and welcome to the GSL second quarter 2021 earnings conference call. The slides that accompany the presentation are available to our websites at www.globalshiplease.com. As usual, slides two and three remind you that the call today 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 harbour section of the slide presentation. We also draw your attention to the risk factor section in our most recent annual report on Form 20F, which is for 2020 and was filed with the SEC on March the 19th 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 in our reports filed with the SEC and we don't undertake any duty to update forward-looking statements. For 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, please refer to the earnings release that we issued this morning. That's also available on our website. I'm joined as usual by Executive Chairman George Yeroukos, our Chief Financial Officer Tasos Saropoulos, 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 in financials, and the current market environment. After that, we'll be pleased to take your questions. So turning now to slide four, I'll pass the call to George.

Thank you, Ian. And good morning or good afternoon to all of you joining us today. After an excellent first quarter, the second quarter of 2021 has seen the container shipping industry, NGSL in particular, continuing to reach new heights in ways that will benefit us for many years to come. We are currently in the midst of red-hot freight and charter markets based upon highly supportive fundamentals and exacerbated by poor congestion and an overburdened supply chain that have proven to be longer-term features of the market that was initially expected. In this environment, we have been very active year-to-date agreeing to acquire 23 ships, 19 of which have been delivered, for approximately half a billion dollars and securing 40 new charters representing $900 million of revenue. This has been achieved with only modest equity dilution from our capital raise in January. D23 ships are well specified in the mid-sized and smaller vessel classes, which continues to be our focus, with attached charters that minimize downside or residual risk. As a result, we have grown our fleet by over 50% this year, driven our earnings dramatically higher to record levels in a sustainable manner, and initiated a quarterly dividend of 25 cents per share, more than twice that was originally expected. We have also refinanced the vast majority of our 2022 maturity debt, including the expensive 9.875 senior secured notes, significantly reducing our cost of capital. The rating agencies have acknowledged our improved credit quality. Both Moody's and S&P upgraded us in Q1, and Moody's has upgraded us again, so our rating today are B plus stable and B1 stable. Now, from this materially improved strategic position, we are positioned to continue executing a proven growth strategy and seizing additional immediately accretive opportunities ahead of us while maintaining the discipline and high standards that have served us so well in getting us to this point. Now, if you turn to slide five, I'll describe the big picture for industry at this moment. Where the second half of 2020 demonstrated the resilience of containerized trade in snapping back rapidly, despite COVID-driven widespread lockdowns and diverse global challenges, 2021 is set to show demand growth significantly higher than that seen in recent years, at nearly 7%. And current projections for 2022 are for demand to once again be meaningfully above recent levels at nearly 6%. Against such robust demand growth, the very limited underlying supply growth in the mid-size and smaller classes supplemented by the global fleet speeding up to increase effective capacity has led to rates and overall charter terms getting better and better for owners such as GSL. Beyond earnings and asset value improvements for GSL, the fundamentals-driven recovery has seen our liner company customers guiding to record earnings for the year and taking major steps towards improving their balance sheets. It has been reported that the market strength has caused an uptick in new vessel orders. But it is important to understand four things here. First, as has been the case for many years now, these new orders are heavily weighted towards the largest vessels. which do not and often cannot participate in the non-mainline trades where our vessels operate. Second, because the majority of the current order book is recently contracted and CPRs face capacity limitations in addition to the lengthy construction times themselves, there is still very little capacity scheduled to be delivered until at least late 2023-early 2024, with demand growth in the interim expected to significantly outpace supply growth, and with little that can be done to augment that supply in the interim. When we talk about new orders in container shipping, comparisons are inevitably made to the situation of 2008-2009, when the order book hit a peak of 60% of standing capacity. Let us face this comparison head-on. The order book has obviously grown so far this year in response to a clear instance of undersupply, as it is meant to. But the difference here is not only that the current size of the order book is a fraction of that from 2008-2009, which it is in fact, but also that the combination of lessons learned and uncertainty about the green fuels of the future have capped the willingness of owners and their lenders to engage in the kind of speculative ordering that characterized and supercharged that order book before the financial crisis. There is a clear distinction between On the one hand, the recent increase in vessel ordering due to a real and current shortage of capacity, and on the other hand, the extreme speculative ordering seen up to 2008, driven in part by an apparently infinite supply of cheap capital, often from Germany. The fourth point that I would like to make here is that on the increasing imperative to decarbonize oil, which the EU, the IMO, and a growing number of regulatory bodies and governments are looking to encourage. From January 2023, one such important regulation is set to come into effect known as EEXI. Under this more stringent performance emissions requirement, much of the global fleet of container ships will only be able to achieve compliance by reducing its speed to reduce fuel burn, to reduce fuel CO2 emissions. Just one not average reduction of speed equates to an effective reduction in global fleet capacity of 5-6%. This is a hugely impactful regulation that will have a profound effect on the supply-demand balance in our business, potentially just when slightly elevated levels of new buildings are being delivered. One final point that I would like to make here is that we still believe that there is a great deal of potential for consolidation. The container ship owner sector remains highly fragmented with dozens of subscale players who are unable to benefit from the scale advantages, mainly access to capital, of a sizable and publicly listed platform such as DSL. Moreover, the exodus of some of the financial players who entered this sector often a decade or more ago offers a range of additional acquisition opportunities, as we have proven. In summary, we are in an excellent position and we see much to be optimistic about in the coming quarters and years. With that, I will turn the call to Ian.

Thank you, George. Let's turn to slide six. If you follow GSL, you'll probably already be familiar with the 23 ships that we've acquired this year. I'll come to them shortly, but want to spend a few moments first on the additional value that we continue to generate from our pre-existing fleet. On this slide, we show those vessels which were part of the GSL fleet as at the beginning of the year, less the latter, which we sold at the end of June this year, on June the 30th, in fact. We've indicated in dark blue those charters that have been agreed year to date. And you'll notice that for nearly all of these, They're now for multiple years and are at rates that are materially above those that came before, in a number of instances quite dramatically above. Let me highlight for you the very first vessel on the list, the 18-year-old 2200 TU Kita, which will transition in the fourth quarter of this year from a current day rate of $9,400 per day to a new rate of $25,000 per day all the way through 2025, when she'll become 22 years old. Similarly, further down the list, the 2002 built 6,800 TSL Nicoletta is currently earning $13,500 a day and will, in short order, be earning $35,750 per day well into 2024, when she too will be 22 years old. And just to remind you that the operating leverage inherent in our business means that 100% of any revenue increase goes straight to our bottom line, both earnings and cash, because our costs are fixed. Operating costs are largely fixed. By the way, it can take some time to negotiate a new charter and some time for that charter to become public. So some of the fixtures we're announcing today and that are included in this chart were settled a while ago when rates in the market were low. What does all this activity amount to? The 14 charters added year-to-date to our existing fleet total some $441 million of contracted revenue. The 23 ships acquired in 2021, year-to-date, on the next page which we'll come to, bring a further $465 million of contracted revenue for a total contract cover long the central point of emphasis for GSL of nearly $1.4 billion over a weighted average remaining duration of two and a half years. Furthermore, across the entirety of our fleet, we have 11 ships scheduled to come off their current charters during the rest of this year or in 2022, all of which are presently earning rates below those available in the market, in most cases materially so. So let's turn to slide seven. We'll finish our fleet overview with the 23 vessels that we've agreed to buy so far this year, 2021, for an aggregate purchase price of just under $500 million. This grows our fleet to 65 ships, an increase of more than 50% on the year-end position. As we speak, 19 of these vessels have been delivered and are generating revenue and cash flow for the business. The remaining four are going to be delivered in the next few months. All of these acquisitions are immediately accretive, with an estimated purchase price to average annual adjusted EBITDA ratio in the range 3.6 to 4 times, 4.0 times. As you can see, these acquisitions, particularly in those larger vessels making up the bottom half of the table, generally have long remaining charter durations at attractive rates, which ensure that GSL's payback period is largely or even accounted for, limiting or eliminating downside risk in the purchase. For the smaller vessels in the upper half of the table, we've also structured the acquisitions to ensure that our risk profile is skewed to the upside, but with a certain amount of near-term charter market exposure. As you can see from the red bars, which illustrate charter signs subsequent to our agreement to acquire the vessels, the strategy of layering in the measured amounts of charter market exposure has thus far paid off handsomely, with three of those vessels having secured forward charters at rates from approximately two to more than three times their current rates, with those durations extending out to late 2024 and 2025. Between the gross provided by these 23 new vessels and their charters that you see here on page seven and the new charters that we've secured year to date on our existing fleet on page six, we have this year already added approximately $660 million of total adjusted EBITDA based on contracted revenue. Slide eight is a new slide. Given both our substantial growth by acquisition and our signing of new charters for existing ships, we thought that it would be helpful to illustrate the earnings impact of all that we've done across three different scenarios. The data takes into account the actual or anticipated delivery ships, the delivery dates of the 23 new ships and the expected dates for changes in effective charter rates for the existing fleet. To be very clear, None of these are or should be considered a forecast. The slide simply summarizes the mathematical results for 2021 and 2022, plugging in different charter rates to our usual EBITDA calculator, which we show on page 21 in the appendix. We've run three scenarios. Firstly, rechartering in the next 18 months at estimated market rates of July this year, so kind of current market rates. for multi-year charters, scenario two at 15-year historic average rates and scenario three at 10-year historic average rates. As market rates for July this year are so much stronger than the historic averages, spot revenue in 2022, for example, is $132 million at those July rates. compared to $57 or $48 million at the 15 and 10-year historic rates respectively. The difference in spot revenue between the scenarios explains exactly, as I've mentioned before, the difference because of our operating leverage, the difference in free cash flow. Overall, you'll see the extent of the step change that we're experiencing here in terms of our contracted revenue and adjusted EBITDA between 2021 and 2022 as a result of growth and charter renewals at substantially higher rates and the full year impact of those in 2022. For context, our annual adjusted EBITDA in 2019 and 2020, the two full years following our merger with Poseidon late in 2018, was around $160 million. Whilst on this slide, I'm sorry for all this data, But please note that even if you do not include anything for spot revenue in 2021 and 2022, taking 100% of the operating costs of the vessels, so you assume no income on our spot ships, but all of the costs, our already contracted revenue drives more than ample expected adjusted EBITDA to cover debt service and capex, as well as dividends on our preferred ships. and on our common stock at current rates. Numerically, working out the numbers, zero spot revenue in 2022 gives adjusted EBITDA of some $290 million, and operating cash flow after debt service and capex, which you can get from page 21, of $68 million. Aggregate preferred and common dividends at today's share counts is approximately $44 million, leaving $22 million of net cash flow. And remember, that's not including any revenue at all from our spot ships. And every dollar of that revenue will increase net cash flow by the same amount. Moving on to slide nine, this describes our growth strategy. We covered this on our last call, but with an additional 16 ships added since then, we should definitely revisit our value accretive growth strategy. We focus on existing ships with charters attached or put in place as part of the purchase and ships and charters which are immediately accreted to cash flow as opposed to new buildings for which there can be a two or three year wait before they come online during which time the owner has all of the funding costs. The 23 ships that we will add from our activity year to date have a purchase price as I mentioned of just under $500 million and the charter contracts are expected to generate some $332 million of adjusted EBITDA. We're disciplined, we're risk averse, we look for decent returns on assets with low economic depreciation, limited residual value risk, good downside cover including scrap value and compelling upside potential. The 23 ships have mainly multi-year contract cover, so a purchase price to EBITDA multiple of between 3.6 and 4 times increase overall adjusted EBITDA, net income and earnings per share for the business significantly. We look to align the ESG and economic strands of our strategy, aiming to take a full life cycle approach to the carbon footprint of ships. This means taking into account the building and recycling of ships, as well as operating them through their economic life. It seems to us that it only makes sense to build new ships when we collectively, the industry as a whole, know with more certainty what the fuel of the future will be. Until then, we think it's preferable to optimize and maximize the economic life of existing ships. Finally, we want to stay nimble. We aim for attractive investment returns within five years or less, This allows us to adjust our strategy to the evolving decarbonization environment. We want to position GSL to be legacy problem-free with a strong cash position to be able to capitalize on the next generation of green technologies as they're proven out and mature over, say, the coming decade. With that, I'll turn the call over to Tassos to talk you through our financials.