Global Ship Lease, Inc.

Thank you for standing by. Welcome to the Global Ship Lease 4th Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded, and if you require any further assistance, please press star 0. I would like to hand the conference over to your speaker today, Ian Weber. Please go ahead.

Thank you very much and apologies for being late by a minute or two. Good morning, good afternoon, everybody, and welcome to the GSL fourth quarter 2021 earnings conference call. As normal, the slides that accompany today's presentation are available on our website at www.globalshiplease.com. 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 harbour section of the slide presentation. We also draw your attention to the risk factors 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 FCC. 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, you should refer to the earnings release that we issued this morning, which is also available on our website. As usual, I'm joined today 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 our industry, and then Tasos, Tom, and I will take you through our achievements, our quarterly and yearly results in financials, the current market, and after that, we'll 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. Before I get into the slides, a few words about the dreadful situation in Ukraine. It feels very wrong to be discussing the implications for our business of this conflict in the midst of a humanitarian crisis on this scale. but we recognize that it's important to provide context to the extent that we can. The situation is obviously dynamic, and it's far too early to assess the broader repercussions. So I'll keep my comments narrow and industry-focused. Last year, the combined containerized throughput of Russian and Ukrainian Black Sea ports was about 1.8 million TEUs. That's against global containerized volumes of around 201 million TEUs in the same period. It's thought likely that a significant portion of those Black Sea-related volumes will be rerouted via North German and Baltic ports. But there will be clearly localized and regional disruption to trade patterns, routes, and volumes. The big question for our industry, of course, is What will be the impact of sanctions and Russia's reaction to those sanctions on the global macroeconomic environment? Obviously, a critical question, but also one that is far too soon to answer. Although we know that some of the lines have just put a freeze on cargo bookings to and from Russia. In the meantime, we will focus very strongly on safeguarding our people, our ships, and the cargo they carry. Now back to the slides. I'm very pleased to say that the highly supportive container ship market conditions that I highlighted on our previous calls have continued. Demand for container shipping services grew by 7.1% in 2021, far in excess of the 1.4% capacity growth in ships below 10,000 EU, where GSL is And so far this year, we have powered straight through the Chinese New Year period, which is typically a weak period of the year in our seasonal as well as cyclical industry. 2022 forecasts are currently for 4.2% demand growth, again far in excess of the 1.7% capacity growth below 10,000 AU. As a result, we are experiencing record highs freight and charter markets. With the support of these strong fundamentals, we have accomplished a great deal in the last 14 months. We acquired 23 ships on an opportunistic, immediately accretive basis for a total of just under half a billion dollars and increasing the size of our fleet by more than 50%. A demonstration of the impact and good timing of our growth is that EBITDA is In fourth quarter 2021, with 65 ships, was 85.4 million, more than double the 38.7 million reported for fourth quarter 2020 before the 2021 ships additions. We secured 51 new charters for our fleet, adding more than $1.5 billion of contracted revenue spread out over several years. I would highlight that a number of the attractive charters that we agreed during 2021 were on a forward-start basis, and thus we expect to see the full cash effect from those new charters building as 2022 progresses, particularly in the fourth quarter. We refinanced more than $400 million of debt, materially reducing our cost of debt, and we have also hedged all of our floating interest rate exposure, and have earned upgraded credit ratings of BB-NB1. We delivered record earnings, with a normalized 2021 earnings per share of $4.86. As I expect many of you are well aware, we announced the initiation of a quarterly dividend just over a year ago originally contemplating a dividend of 12 cents per share before more than doubling it in very short order to 25 cents, driven by a surge of accretive growth and long-term charter signings. We have subsequently announced that starting with our dividend for this current quarter, first quarter 2022, the payout will increase to 37.5 cents per share per quarter, more than triple the originally contemplated amount in just over a year. This sustainable dividend payment is an important component of our dynamic capital allocation policy, which now includes the return of a substantial amount of capital to shareholders through our sustainable dividend and under our newly introduced 40 million share repurchase authorization. Fleet Improvement for Decarbonization balance sheet strengthening, and fleet renewal through selective, disciplined, accretive, and opportunistic acquisitions, all of which Ian will discuss in more detail. Fundamentally, though, we will continue to execute the long-term shareholder-oriented strategy that has served us very well to this point and will continue to deploy our capital in such a manner as maximizes value for our shareholders in a risk-adjusted, sustainable, and I have to say the word twice, sustainable, opportunistic manner. To put this in context, we returned approximately 46.2 million to shareholders in 2021, 36.2 million by dividends, and 10 million in stock by bucks, which was a little more than the net unrestricted cash generated in the year after CAPEX growth and debt amortization. So essentially, all of our available cash flow. Look at the EBITDA calculator on page 22 of the slides. The math gives 120 million of cash flow after debt amortization, of which 60 million, 50% is committed to dividends. This is up 65%, on the 2021 dividends and does not take into account any stock buybacks nor incremental capex in response to decarbonization, selective fleet renewal, or further balance sheet improvement. If you now turn to slide five, I'll describe the big picture for our industry at this moment. While there are many factors that play a role in determining the strength or weakness of the container ship market, and Tom will cover a number of them later, the broad strokes are very straightforward in this case. In the face of sustained demand for the transportation of containerized cargoes and a limited supply of container ships, liner companies have been willing to offer much higher rates and for much longer durations than are available during more normal periods. They're able to offer us these terms because the liners themselves have been making record profits and transforming them balance sheets. the high level of underlying freight demand, which was thought initially to be a temporary phenomenon, has proven to be highly durable. Meanwhile, container ship supply, particularly in the mid-sized and smaller segments where we operate, remains very limited. This has meant that both charter rates and asset values have sustained their upward trajectory. Moving forward, the limited vessel supply in the relevant segments and inventory restocking represents a further incremental layer of demand on top of fundamentals. As you can see in the lower left, the strong market has quite rationally resulted in a near total absence of any scrapping, even for vessels that would in normal markets almost certainly be scrapped. By 2024, nearly 8% of the global fleet under 10,000 AU will be over 25 years old, including much lower specification tonnage that we would expect to be removed from service upon a normalization of demand, thus retightening the market. As clearly supportive as the fundamental situation is, it is also apparent that there is real uncertainty in the overall macro environment, including the ongoing potential for further COVID variants and, of course, geopolitical uncertainty, specifically surrounding Russia and Ukraine, which introduces substantial complexity into the regional economy and supply chain with broader implications throughout the world, none of which are yet clear. Further, the need to decarbonize our industry. Driven by an evolution of both regulation and customer needs, it's likely to play an increasing role in our business in the quarters and years ahead. In the long term, this will involve changes to propulsion and design for new ships entering the global fleet. But many of the new technologies remain unproven and are speculative at this stage. At GSL, we will be focused on enhancing the fuel efficiency of our existing ships in collaboration with our liner partners using proven technologies and solutions. Across the global fleet, We expect that compliance with the new regulations coming into effect in January 2023 will likely result in slower average sailing speeds. While it's hard to assess the degree to which the global feed may slow down, a reduction in average speed of just one knot equates to reducing effective supply by 5% to 6%. We will come back to capital allocation later in the presentation, but I will briefly summarize. As the excellent charters that we signed in 2021 increasingly come into effect and build their contribution to earnings, we have greater discretion in allocating capital, returning increasing amounts to shareholders. We also keep in mind improving our fleet to respond to the decarbonization imperative and also strengthening our balance sheet. We will maintain our strict discipline of fleet renewal through selective acquisitions that generate accretive growth on a non-speculative basis. We do not chase assets at public auctions where the highest bidder wins, and we have passed on far more acquisition opportunities than we have pursued over the last year. If we do not have high conviction that an acquisition will be in the best long-term interest of the company and our shareholders, we simply do not take it forward. Beyond that, we will continue to optimize our balance sheet while also returning capital to shareholders in the form of our increased dividend and also on an opportunistic basis through the $40 million share repurchase authorization announced today. With that, I will turn the call to Ian.