Global Ship Lease, Inc.

Good morning, good afternoon, everybody, and welcome to the Global Ship Lease third quarter 2021 earnings conference call. The slides that accompany today's presentation were posted to our website earlier on today, www.globalshiplease.com. Slides two and three of that presentation, as usual, remind you that today's call may include forward-looking statements that are based on current expectations and assumptions and 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 of our most recent annual report on Form 20F, which is for 2020 and was filed with the SEC on March 19, 2021. 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. We do not 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, which is also available on our website. I'm joined, as usual, by our Executive Chairman, George Yeroukos, our Chief Financial Officer, Tasos Soropoulos, and our Chief Commercial Officer, Tom Lister. George will begin the call with a high-level commentary on GSL and on our industry, 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'd be pleased to take your questions. So, turning now to slide four, I'll pass the call over to George.

Thank you, Ian, and good morning or good afternoon to all of you joining us today. I have in recent quarters described the container ship market as red hot, and with both freight and charter markets continuing to set record high levels, that has certainly remained the case through to today. We see ample reason why this hit should continue for some time, and we will come back to this theme throughout today's presentation. But let me first highlight the What is amazing, this amazing market has meant for GSL. Year-to-date, we have grown off-lead by more than 50%, acquiring 23 ships for just under half a billion dollars, with the last of those vessels delivering to us and commencing each charter in mid-October. We have signed a total of 48 new charters, adding a total of 1.25 billion of contracted revenue and approximately 930 million of expected adjusted EBITDA, providing additional long-term support to the 25 cent per share dividend that we introduced earlier this year. We have remained highly active in managing our balance sheet, refinancing a total of just under 400 million of debt this year alone, bringing down our cost of debt from 6.3% to 4.9%, and addressing all debt maturities through 2024. As our industry, our fleet, our charter book, and our balance sheet have all continuously improved, we have received yet another round of credit rating upgrades, the most recent of which was to double B- from Standard & Poor's. I would like to highlight the increase in normalized earnings per share, which at $1.74 for the quarter is nearly four times the prior year period, and at $3.01, for the year-to-date approximately 2.5 times the prior year period. While we are of course very pleased with our results for the third quarter, which you can see in detail on the right side of the slide, the full cash impact will really only be on display in the quarters ahead. Moreover, our focus on locking in The present market conditions into long-term charters means that GSL will benefit from these actions for years to come, even before the impact of any further acquisitions which we are well positioned to continue pursuing on a disciplined, selective basis. In the meantime, we are working on some significant charter extensions which we hope to conclude in the relative near term. These, together with the growth we have achieved year-to-date, and our contracted cash flow for the next couple of years will help determine an increase in the sustainable dividend from Q1 2022. We will make an announcement as soon as we can. If you now turn to slide 5, I'll describe the big picture for our industry at this moment. As you have undoubtedly heard, the current market environment in the container shipping industry is truly extraordinary. Contrary, to early suggestion that economies opening back up following COVID lockdowns would undermine containerized freight demand, with the expectation that consumers would spend again on service rather than goods. We have actually seen an additional acceleration alongside economic recovery, despite that recovery being uneven. Nevertheless, 2021 cargo volumes are expected to increase by 8.2% up from from the projection of less than 7% that we were already very pleased to share with you on our last quarterly call. This strong fundamental rate of demand growth is double the rate of nominal cellular capacity growth, that is, the supply of containerships. This imbalance is set to increase further through the least, at least next year, even before the significant impact of supply chain congestions which absorbs capacity and amplifies the tightness of supply and demand, and looks said to be a prominent feature of the market for quite some time. Now, very important, when you zoom in on the segment of the market where we focus, the sub-10,000 EU container ships, the order book is even more limited, and the advanced age of much of the global fleet is going to drive significant scrapping in the years ahead. particularly as scrapping of the global fleet's oldest vessels is currently being deferred due to the strong market, building a backlog of very old ships. Tom will provide more detail on this later, but this is something I really want to emphasize up front. 100% of container ships on the water today, which are 25 years old or older, are under 10,000 TEU. so the mid-size and smaller ship segment on which we focus are aging. In fact, by the end of 2024, roughly 7% of sub-10,000 AU capacity on the water today will be at least 25 years old. This almost exactly mirrors total capacity on order through 2024 for sub-10,000 AU ships. Now, what this means is that if all ships older than 25 were to be scrapped out, which is the normal thing, I would say, net growth of the sub-10,000 EU fleet between now and the end of 2024 would be under 1%. And that is without taking anything in account about cargo growth year on year for the next three years. Meantime, earnings and asset values are on a clear upward trajectory. with the liner companies delivering record earnings that continue to reach previously unthinkable levels. And as we look forward, the drawdown of U.S. retail inventories to far below their normal levels suggests that the vast amounts of restocking that is required will provide further support to containership demand for some time to come. Speaking to you one week after the COP26 conference and the many related announcements from industry regulators, financiers, and operating companies, it is very clear that ESG in general and decarbonization in particular is going to play a growing role in shaping the future of all industries, including shipping. As we have mentioned before, we expect that the EEXI regulation coming into effect from January 2023 will force the global fleet to slow down. And a one-nought reduction in global average container ship sailing speeds equates to a 5% to 6% reduction in effective capacity. Similarly, while there has certainly been some ordering of new vessels in our sector, the significant uncertainty about which green fuels will become the standards of the future has continued to constrain speculative ordering. This is a major difference from previous bull markets in container shipping. Finally, while we have dramatically increased our fleet already this year, we continue to see the potential for selective growth that meets our high standards for vessel specifications, forward visibility on employment, overall risk management and returns. We have no intention of compromising our acquisition criteria or our required returns in order to pursue growth for growth sake. But we continue to see potential for selective growth in a highly fragmented sector with many sub-scale players and with a continuous exodus of financial sponsors. Where the opportunity exists to serve the long-term interest of GSL shareholders by pursuing growth, our operating platform, industry relationships, and balance sheet puts us in an excellent position to seize that opportunity. But, and I cannot emphasize this enough, guys, if we don't like the risk-return profile of a deal, we will not do it. With that, I will turn the call to Ian.

Thank you, George. Please turn to slide six. 2021 has provided numerous opportunities for us not only to grow through vessel acquisitions, but also for us to fix much of our existing fleet on significantly longer charters, at charter rates that are in many instances two or three times their previous levels. This slide shows those vessels that were in our fleet at the beginning of the year, with the dark blue bars indicating where we have signed new or extended charters in the year to date. On this status quo fleet, we've agreed 18 new charters so far this year, adding a little over $600 million of contracted revenue cover. As you'll notice, a number of these new charters have been agreed to commence in the months ahead. So new terms have been agreed well in advance of expiry, meaning that we've got good visibility on continued increased cash generation from this part of the fleet. In the remainder of the fourth quarter this year, and into first quarter next year, even if we don't take any further action. On the next slide, we saw something similar for the 23 vessels that we've acquired this year. They've all now been delivered. The last one came two or three weeks ago in the middle of October. The majority have commenced new charters agreed under our ownership, succeeding charters in place at the dates of acquisition And these new charters are again at considerably higher rates. And the 23 ships grow our on-the-water fleet by more than 50% and add over $640 million of contracted revenue. The dark blue bars on this page are those legacy charters that were in place when we agreed the transactions. And to our considerable benefit, these below-market rates translated into below-market purchase prices for the vessels. The red bars, on the other hand, show the charters that we've agreed in the red-hot market subsequent to acquiring the vessels, capturing significant upside potential for GSL. Once again, these new charters are at multiples of their prior rates and extend well into the middle part of the decade. All in all, with the new charters for the pre-existing fleet and existing and new charters on the 23 vessels acquired year to date, we've locked in an additional $929 million of total adjusted EBITDA so far this year. And total contracted forward revenue cover at the 30th of September stands at $1.6 billion, spread over two and a half years. As George mentioned, this substantial additional multi-year contracted cash flow has allowed us to revisit the dividend for common shareholders. With a conclusion of some significant charter extensions, which we expect within the next short number of weeks, we look to increase the dividend on a sustainable basis for quarter one of 2022 and beyond. Moving on to slide eight, this is a slide that we introduced this last quarter, and we think it's helpful in illustrating what all of the new charters and vessel acquisitions mean for our revenue and cash flows. We show this in three different forward rate scenarios. These three scenarios are that for any vessels that come open in the next two years, they're put back at rates prevailing in the market today or alternately at 15-year historic rates or alternately the third option at 10-year historic rates. To be absolutely clear, these are not forecasts of what will happen today. but rather illustrations of how a number of different scenarios would flow through to GSL's financials. I'd encourage you all to spend some time with this slide. And for those of you who want to get into the finer details, we spelled out the assumptions and the relevant factors in detail on slide 21 in the appendix. For now though, I'd like to make just a couple of points. First, you'll notice that there's only a negligible variation for us across the different scenarios for 2021, the current year, as a remaining charter market exposure is less than one month on a single 2,200 TU ship. This high proportion of already contracted revenue days persists through 2022, next year, where we have only 4% or so of our total days open at the moment. With adjusted EBITDA in each scenario, showing a dramatic increase from the 2021 levels. And to remind you, every incremental dollar of spot revenue flows straight through to adjusted EBITDA and cash flow. Second, for historical context, our annual adjusted EBITDA in the year since our 2018 merger with Poseidon has been around $160 million. Now, we've already exceeded that level in the first nine months of this year, 2021, and we're well positioned to move dramatically higher once again in 2022, based on our now fully delivered fleet of 65 ships. In fact, based solely on those charters already agreed, assuming literally zero revenue from additional spot days, open days, while still assuming OPEX on all of our fleets, our adjusted EBITDA would be approximately $380 million for 2022 and $272 million in 2023, significantly up on what we were earning before this year. So this expansion of our cash flow is both transformative and lasting. Moving on to slide nine, I'll summarize our strategy and focus. We continue to believe that the sweet spot in the market is in existing ships rather than new builds, and particularly in the midsize and smaller sections. We've put nearly half a billion dollars towards acquiring 23 such assets this year, and we've already secured nearly that entire amount in adjusted EBITDA over the coming years, related only to these newly acquired vessels. We've been disciplined and selective in our acquisitions, for both fleet renewal and growth, maintaining a risk-averse approach that has consistently yielded compelling returns. We focus on immediately accretive deals and have secured transactions with an estimated purchase price to average annual adjusted EBITDA, the ratios between 3.6 and 4 times. We've also ensured that the charter-attached acquisitions that we've made have not been reliant upon rosy residual value scenarios. Between the charters agreed and scrap value of vessels, we have in many of these instances already fully covered the cost of the acquisition. Where we have been able to purchase older vessels, the charters that we have agreed subsequently at highly attractive rates have demonstrated the extraordinary upside potential of that strategy. As George mentioned in his remarks, both GSL and shipping industry in general are increasingly focused on decarbonisation. Our environmental commercial strategies are well aligned by taking a full life cycle approach to the carbon footprint of ships. We consider the impact of building and operating the ships as well as just simply operating them. We see expanding the economic life of existing ships and optimising their operations until next generation sustainable fuels and propulsion technologies become well established and commercially available and economically viable, as both being environmentally sensible and financially prudent. Relatedly, we look to make sure that we're flexible and agile, avoiding speculation or long-term bets. We focus instead on a short to medium-term horizon to drive returns, which in turn enable us to respond as appropriate, to an evolving decarbonization environment. We also look to position the company to be in a strong cash position so that we can move quickly and decisively in capitalizing on opportunities ahead. I'll turn the call over to Tasos to talk you through our financials.