Global Ship Lease Reports Results for the Second Quarter of 2023

LONDON, Aug. 03, 2023 (GLOBE NEWSWIRE) -- Global Ship Lease, Inc. (: GSL) (the “Company”, “Global Ship Lease” or “GSL”), an owner of containerships, announced today its unaudited results for the three and six month periods ended June 30, 2023.

Second Quarter 2023 and Year to Date Highlights

- Reported operating revenue of $162.1 million for the second quarter 2023, up 4.9% from $154.5 million for the prior year period. For the six months ended June 30, 2023, operating revenue was $321.4 million, up 4.3% from $308.1 million in first half 2022.

- Reported net income available to common shareholders of $75.4 million for the second quarter of 2023, an increase of 41.2% on net income of $53.4 million for the prior year period. Normalized net income (a non-U.S. GAAP financial measure, described below) for the same period was $74.0 million, up 11.8% on Normalized net income of $66.2 million for the prior year period. For the six months ended June 30, 2023, net income available to common shareholders was $147.6 million, an increase of 21.8% on net income of $121.2 million for the prior year period. Normalized net income for the same period was $149.5 million, up 12.0% on Normalized net income for the prior year period of $133.5 million.

- Generated $108.2 million of Adjusted EBITDA (a non-U.S. GAAP financial measure, described below) for the second quarter of 2023, up 12.0% on Adjusted EBITDA of $96.6 million for the prior year period. Adjusted EBITDA for the six months ended June 30, 2023 was $213.1 million, up 14.0% on Adjusted EBITDA of $187.0 million for the prior year period.

- Earnings per share for the three months ended June 30, 2023 was $2.13, up 44.9% on the earnings per share of $1.47 for the prior year period. Normalized earnings per share for the three months ended June 30, 2023 was $2.09, up 14.8% on the Normalized earnings per share of $1.82 for the prior year period. Earnings per share for the six months ended June 30, 2023 was $4.15, up 25.4% on the earnings per share of $3.31 for the prior year period. Normalized earnings per share for the six months ended June 30, 2023 was $4.21, up 15.3% on the Normalized earnings per share of $3.65 for the prior year period.

- Declared a dividend of $0.375 per Class A common share for the second quarter of 2023 to be paid on September 4, 2023 to common shareholders of record as of August 23, 2023. Paid a dividend of $0.375 per Class A common share for the first quarter of 2023 on June 2, 2023.

- On May 8, 2023, announced an agreement to purchase four 8,544 TEU vessels for an aggregate purchase price of $123.3 million. All vessels were delivered during the second quarter of 2023 and are chartered to a leading liner operator for a minimum firm period of 24 months, followed by a 12-month extension at the charterer’s option. The purchase price was financed by a new credit facility for a total of $76.0 million and cash on hand. The credit facility is priced at SOFR + 3.50%, with SOFR fully covered by the Company’s pre-existing interest rate cap at 0.64%.

- On June 20, 2023, announced updates from three leading credit rating agencies. The Company’s Corporate Family Rating has been upgraded to Ba3 from B1, with a stable outlook, by Moody’s Investor Service. In addition, S&P Global Ratings revised the Company’s outlook to positive and affirmed its long-term issued credit rating at ‘BB’, and the Kroll Bond Rating Agency affirmed both the Company’s BB corporate rating with a stable outlook, as well as the BBB/stable investment grade rating and outlook for the $350.0 million 5.69% Senior Secured Notes due 2027.

- Between January 1, 2023, and June 30, 2023, added $211.9 million of firm contracted revenues to forward charter cover, calculated on the basis of the median firm periods of the respective charters. For vessels in our pre-existing fleet, new charter fixtures or extensions were agreed on eight ships between 2,200 and 3,500 TEU, charter extensions were exercised for two 7,800 TEU ships, a forward fixture was agreed for one ECO 9,100 TEU ship, and four 8,544 TEU vessels were purchased with charters attached; firm charter terms range from a few months to two years.

- Continued to utilize the $40.0 million authorization (the “Buy-back Authorization”) for opportunistic share repurchases, repurchasing a total of 582,178 Class A common shares during January 2023 for a total investment of $10.0 million. During second quarter of 2023 a further 385,064 Class A common shares were purchased for an investment of $7.0 million. Re-purchase prices in 2023 ranged between $16.12 and $18.69 per common share, with an average price of $17.56. A total of 2,027,882 Class A common shares have been repurchased under the Buy-back Authorization, for approximately $37.0 million. The Board has authorized a further $40.0 million for such share repurchases for a total of approximately $43.0 million of authorization capacity remaining.

George Youroukos, Executive Chairman of Global Ship Lease, stated: “In the second quarter, GSL continued to benefit from our strong contract cover at attractive rates, even as prevailing market charter rates and vessel values normalize. Chartering activity in the market has remained modest by historical standards, with limited capacity coming available outside the feeder segment, and idle capacity at quarter-end hovering around 1%. While this limited liquidity and the current macroeconomic uncertainty make it difficult to predict the market over the quarters ahead, charters agreed in the second quarter have shown some stability at rates that compare favorably to those that prevailed before the COVID-driven rate spike of 2021 and 2022. Mid-sized and smaller vessels such as those that make up the GSL fleet form the backbone of liner companies’ global networks, and we remain in active discussions with liners on additional opportunities to expand our current forward charter cover of $1.97 billion over 2.3 years, with only a limited number of open days through the end of 2024.

“Set against the backdrop of reduced asset prices for the high-specification, workhorse vessels that make up our fleet, we were able to utilize our strong balance sheet to purchase, finance on competitive terms, and take delivery of four post-panamax containerships with attractive charters attached; our first vessel acquisitions since before the period of sharply elevated asset values. Should current trends be sustained, we expect to see an increased number of potential purchase opportunities come into the market over time. We intend to maintain the disciplined and risk-averse approach to acquisitions that has served GSL well, focusing on secondhand containerships with cash flow visibility, attractive upside potential, and limited downside risk. Our strong balance sheet and contracted cash flows provide us with a strong platform from which to selectively pursue value-accretive growth opportunities, while also supporting our attractive dividend and active share buy-back program.”

Ian Webber, Chief Executive Officer, commented: “As evidenced by the recent upgrades and supportive commentary from the credit ratings agencies, our efforts to deleverage, reduce our cost of debt, and increase our overall financial strength and resilience have borne fruit, both in terms of our credit profile and our core business as a containership owner and lessor. Our recent acquisitions have reinforced these positive trends, as we raised debt at a margin of just 3.50%, and made use of the headroom under our existing 0.64% SOFR interest rate cap to conclude our recent vessel acquisitions at a highly competitive cost of capital. With long-term visibility on our contracted cash flows, a diversified portfolio of financially strong counterparties, floating interest rate exposure fully capped, and our proven ability to identify and execute accretive transactions, we remain well positioned to continue creating value for our shareholders through our disciplined and dynamic allocation of capital, including the use of the recently authorized additional $40 million of share buy-back capacity.”

SELECTED FINANCIAL DATA – UNAUDITED

(thousands of U.S. dollars)

(1) Operating Revenue is net of address commissions which represent a discount provided directly to a charterer based on a fixed percentage of the agreed upon charter rate and also includes the amortization of intangible liabilities and the effect of the straight lining of time charter modifications. Brokerage commissions are included in “Time charter and voyage expenses” (see below).

(2) Net Income available to common shareholders.

(3) Adjusted EBITDA and Normalized Net Income are non-U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) financial measures, as explained further in this press release, and are considered by Global Ship Lease to be a useful measure of its performance. For reconciliations of these non-U.S. GAAP financial measures to net income, the most directly comparable U.S. GAAP financial measure, please see “Reconciliation of Non-U.S. GAAP Financial Measures” below.

Operating Revenue and Utilization

Operating revenue derived from fixed-rate, mainly long-term, time-charters was $162.1 million in the three months ended June 30, 2023, up $7.6 million (or 4.9%) on operating revenue of $154.5 million for the prior year period. The period-on-period increase in operating revenue was principally due to (i) charter renewals at higher rates on a number of vessels and (ii) the acquisition of the four new vessels which were delivered in the second quarter. The increase was partially offset by $8.9 million reduction in the amortization of intangible liabilities arising on below-market charters attached to certain vessel additions. There were 328 days of offhire in the second quarter of 2023 of which 236 were for scheduled drydockings, compared to 266 days of offhire in the prior year period of which 82 were for scheduled drydockings. Utilization for the second quarter of 2023 was 94.5% compared to utilization of 95.5% in the same period of the prior year.

For the six months ended June 30, 2023, operating revenue was $321.4 million, up $13.3 million (or 4.3%) on operating revenue of $308.1 million in the comparative period, mainly due to the factors noted above.

The table below shows fleet utilization for the three and six months ended June 30, 2023 and 2022, and for the years ended December 31, 2022, 2021, 2020 and 2019.

In 2023, we anticipate four further regulatory drydockings, including for three of the four recently purchased ships.

Vessel Operating Expenses

Vessel operating expenses, which are primarily the costs of crew, lubricating oil, repairs, maintenance, insurance and technical management fees, were up 4.8% to $43.4 million for the second quarter of 2023, compared to $41.4 million in the comparative period. The increase of $2.0 million was mainly due to (i) increased crew expenses mainly due to global inflation and the limited supply of crew and (ii) increased cost of insurances due to premium increases. The average cost per ownership day in the quarter was $7,320, compared to $7,006 for the prior year period, up $314 per day, or 4.5%. For the six months ended June 30, 2023, vessel operating expenses were $86.2 million, or an average of $7,319 per day, compared to $80.9 million in the comparative period, or $6,875 per day, an increase of $444 per ownership day, or 6.5%.

Time Charter and Voyage Expenses

Time charter and voyage expenses comprise mainly commission paid to ship brokers, the cost of bunker fuel for owner’s account when a ship is off-hire or idle and miscellaneous owner’s costs associated with a ship’s voyage. Time charter and voyage expenses were $6.7 million for the second quarter of 2023, compared to $5.1 million in the second quarter of 2022. The increase was mainly due to increased commissions on charter renewals at higher rates, higher costs for bunker fuel for owner’s account due to increase in off hire days and additional voyage administration costs and additional operational requests from charterers.

For the six months ended June 30, 2023, time charter and voyage expenses were $12.1 million, or an average of $1,031 per day, compared to $9.5 million in the comparative period, or $804 per day, an increase of $227 per ownership day, or 28.2% mainly to the factors noted above.

Depreciation and Amortization

Depreciation and amortization for the second quarter of 2023 was $22.2 million, compared to $20.3 million in the second quarter of 2022. The increase was mainly due to the 14 drydockings completed after June 30, 2022.

Depreciation for the six months ended June 30, 2023 was $43.4 million, compared to $40.1 million in the comparative period, with the increase being due to the 14 drydockings completed after June 30, 2022 and the acquisition of the four vessels delivered during the second quarter of 2023.

General and Administrative Expenses

General and administrative expenses were $4.7 million in the second quarter of 2023, compared to $4.1 million in the second quarter of 2022. The increase was mainly due to higher stock-based compensation expense and a one-off expense occurred in second quarter of 2023 due to social security costs related to settlement of shares under the Omnibus Incentive Plan. The average general and administrative expense per ownership day for the second quarter of 2023 was $794, compared to $685 in the comparative period, an increase of $109 or 15.9%.

For the six months ended June 30, 2023, general and administrative expenses were $9.5 million, compared to $10.3 million in the comparative period mainly due to lower stock-based compensation expense in the first quarter of 2023 and a one-off expense that occurred in first quarter of 2022 due to social security charges related to settlement of shares under the Omnibus Incentive plan. The average general and administrative expense per ownership day for the six-month period ended June 30, 2023 was $807, compared to $875 in the comparative period, a decrease of $68 or 7.8%.

Adjusted EBITDA

Adjusted EBITDA (a non-GAAP financial measure) was $108.2 million for the second quarter of 2023, up from $96.6 million for the second quarter of 2022, with the net increase being mainly due to increased revenue from charter renewals at higher rates.

Adjusted EBITDA for the six months ended June 30, 2023 was $213.1 million, compared to $187.0 million for the comparative period, an increase of $26.1 million or 14.0%.

Interest Expense and Interest Income

Debt as at June 30, 2023 totaled $925.3 million, comprising $491.3 million of secured bank debt collateralized by vessels, $310.6 million of 2027 Secured Notes collateralized by vessels, and $123.4 million under sale and leaseback financing transactions. As of June 30, 2023, five vessels were unencumbered.

Debt as at June 30, 2022 totaled $1,125.7 million, comprising $526.7 million of secured bank debt collateralized by vessels, $350.0 million of 2027 USPP Notes collateralized by vessels, $160.0 million under sale and leaseback financing transactions and $89.0 million of unsecured indebtedness on our 2024 Notes which were fully redeemed in July 2022. As of June 30, 2022, five of our vessels were unencumbered.

Interest and other finance expenses for the second quarter of 2023 was $10.9 million, down from $30.0 million for the second quarter of 2022. The decrease in interest and other finance expenses was mainly due to (i) a prepayment fee and non-cash write off of deferred financing charges of $14.1 million on the full repayment of Hayfin Credit Facility, (ii) the non-cash write off of deferred financing charges of $0.3 million on the full repayment of our Hellenic Credit Facility and (iii) $0.6 million premium paid on the redemption in April of $28.5 million of 2024 Notes, all of which took place in the second quarter 2022. The blended cost of our debt, taking into account the interest rate caps, has increased from approximately 4.51% for the second quarter 2022 to 4.53% for the second quarter 2023 due to the new credit facility for the four new vessels. Three month Libor increased in the second quarter of 2023 to 5.55% as compared to 1.30% in the prior year period.

Interest and other finance expenses for the six months ended June 30, 2023 was $22.0 million, down from $48.7 million for the comparative period. The decrease is mainly due to (i) the prepayment fee and the associated non-cash write off of deferred financing charges of $14.1 million on the full repayment of the Hayfin Credit Facility, (ii) the non-cash write off of deferred financing charges of $0.3 million on the full repayment of our Hellenic Credit Facility and (iii) the $0.6 million premium paid on the redemption in April of $28.5 million of 2024 Notes and (iv) a prepayment fee and the associated non-cash write off of deferred financing charges of $4.1 million on the full repayment of our Blue Ocean Junior Credit Facility, all of which took place in the six months ended June 30 2022.

Interest income for the second quarter 2023 was $2.6 million, up from $0.3 million for the second quarter of 2022. Interest income for the six months period ended June 30, 2023 was $4.4 million, compared to $0.5 million for the comparative period.

Other (expenses)/income, Net

Other expenses, net was $0.4 million in the second quarter 2023, compared to $0.2 million in the second quarter of 2022. Other income, net was $1.2 million for the six month period ended June 30, 2023, compared to $0.2 million for the comparative period.

Fair value adjustment on derivatives

In December 2021, we entered into a USD 1 month LIBOR interest rate cap of 0.75% through fourth quarter of 2026 on $484.1 million of floating rate debt, which reduces over time and represented approximately half of the outstanding floating rate debt. In February 2022, we entered into two additional USD 1-month LIBOR interest rate caps of 0.75% through the fourth quarter of 2026 on the remaining balance of $507.9 million of floating rate debt. One of these interest rate caps was not designated as a cash flow hedge and therefore the positive fair value adjustment of $1.4 million for the second quarter of 2023 was recorded through our statement of income. The negative fair value adjustment for the six month period ended June 30, 2023 amounted to $1.4 million. Interest rate caps have automatically transited to 1 month Compounded SOFR on July 1st, 2023 at a level of 0.64%.

Earnings Allocated to Preferred Shares

The Series B Preferred Shares carry a coupon of 8.75%, the cost of which for the second quarter of 2023 was $2.4 million, the same as in the second quarter 2022. The cost was $2.4 million in both quarters of 2023 and 2022 since there were no additional Series B Preferred Shares issued under our at-the-market program. The cost for the six months ended June 2023 was $4.8 million, the same as for the six months ended June 30, 2022.

Net Income Available to Common Shareholders

Net income available to common shareholders for the three months ended June 30, 2023 was $75.4 million. Net income available to common shareholders for the three months ended June 30, 2022 was $53.4 million.

Earnings per share for the three months ended June 30, 2023 was $2.13, an increase of 44.9% from the earnings per share for the comparative period, which was $1.47.

For the six months ended June 30, 2023, net income available to common shareholders was $147.6 million. Net income available to common shareholders for the six months ended June 30, 2022 was $121.2 million.

Earnings per share for the six months ended June 30, 2023 was $4.15, an increase of 25.4% from the earnings per share for the comparative period, which was $3.31.

Normalized net income (a non-GAAP financial measure) for the three months ended June 30, 2023, was $74.0 million. Normalized net income for the three months ended June 30, 2022 was $66.2 million. Normalized net income for the six months ended June 30, 2023 was $149.5 million, as compared to $133.5 for the comparative period.

Normalized earnings per share (a non-GAAP financial measure) for the three months ended June 30, 2023 was $2.09, an increase of 14.8% from Normalized earnings per share for the comparative period, which was $1.82.

Normalized earnings per share for the six months ended June 30, 2023 was $4.21, an increase of 15.3% from Normalized earnings per share for the comparative period, which was $3.65.

Fleet

As at June 30, 2023, we had 68 containerships in our fleet.