Global Ship Lease, Inc. 2026 Q2 Earnings Call

Hello, everyone, welcome to the Global Ship Lease second quarter 2026 earnings conference call. You can find the slides that accompany today's presentation on our website at www.globalshiplease.com. As usual, slides two and three remind you that today's call may include forward-looking statements that are based on current expectations and assumptions 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 harbor section of the slide presentation. We would also like to direct your attention to the risk factors section of our most recent annual report on our 2025 Form 20-F, which was filed in March 2026. You can find the form on our website or on 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. The 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 usually refer to the earnings release that we issued this morning, which is also available on our website. I'm joined, as usual today, by our Executive Chairman, George Youroukos, our Chief Financial Officer, Tassos Psaropoulos. George will begin the call with high-level commentary on GSL and our industry, Tassos and I will take you through our recent activity, quarterly results, financials and the current market environment. After that, we'll be pleased to answer your questions. Turning now onto slide four, I'll pass the call over to George.

Thank you, Tom. Good morning, afternoon, or evening to all of you joining today. Once again, geopolitical uncertainty volatility played an outsized role during the second quarter. Our liner customers are doing extraordinary work from day to day and even from hour to hour as circumstances change. Supply chains are reorganized, often they are then reorganized again. In addition to the repeated closure and partial reopening of the Strait of Hormuz, the security situation in the lower Red Sea and Gulf of Aden has once again taken a step back. On top of that, the reintroduction of broad-based tariffs on U.S. imports is likely to contribute to continued supply chain fragmentation and inefficiency as procurement managers, suppliers, and other cargo interests adjust their operations and risk management strategies. In short, any one of these factors in isolation would typically be highly significant for our industry.

Having all of them at the same time is driving an extraordinary level of demand for additional vessels and capacity on top of that from underlying containerized trade demand, which is itself remaining quite firm. Flexible mid-size and smaller container ships like those in the GSL fleet are the greatest beneficiaries, as evidenced by liner companies' continued appetite for ships that, under more normal circumstances, would be considered overage in these size categories. Meanwhile, prudent and selective fleet renewal has always been at the front of our minds.

Against the backdrop of this evolving market, we have placed new build orders for a total of 15 container ships at attractive prices and de-risked from the outset with multi-year charters attached and over 75% of the contract cost expected to be captured from the adjusted EBITDA generated by those charters within, on average, the first 25% of the ships' useful lives only. These container ships, which we will speak more on briefly, are best-in-class, ultra high reefer, latest generation ECO vessels, and will replace our aging cash cows, providing us with visible cash flows well into the years ahead. In this supportive demand environment, at the same time as putting in place charter cover for the new builds, we have also locked in additional coverage at attractive rates for various of our existing ships coming open in the market.

Our contracted revenues now stand at $3.2 billion over 3.3 years of cover, of which $1.45 billion was added during the first half of this year. Our fleet contract coverage is 100% for 2026 and is already at 90% for 2027. Our strong balance sheet and delevering efforts have been reflected in our affirmed credit ratings and an improved outlook from Moody's, as well as our healthy recently upsized dividend of $2.5 per share annualized. We remain focused on maximizing optionality in these turbulent and unpredictable times. Our recent new build orders represent a continuation of our long-running focus on flexibility, discipline, downside protection, and upside potential. These principles guide our actions and have served us well, and we believe that our emphasis on maintaining optionality is an excellent fit for the containership market of today and of tomorrow.

With that, I will turn the call over to Tom.

Thank you, George. Hello again, everyone. Please now turn to slide five, where you will see in great detail our strategic fleet renewal, which consists of both investment in the next generation of cash cows for our fleet and the opportunistic monetization of older, non-core assets. To echo George's words, on the new build front, we see our acquisition of 15 mid-size, ultra high reefer wide beam, latest generation containerships with long-term charters attached, as the exact combination of prudent downside protection and attractive upside potential that we look for in any transaction. As highly specified ships in a structurally underbuilt but crucially important segment of the containership fleet, we see these vessels as best-in-class, flexible, future-proofed, and strong earners going forward.

It's worth underlining the fact that more than $1 billion of the $1.3 billion of contract price is covered by contracted EBITDA, expected to be generated by the firm charters in place X yard over a TEU-weighted average term of seven point n-one years, meaning that these new builds are materially de-risked right out of the gate, and essentially, we're covering over three-quarters of their aggregate contract price within roughly the first quarter of their collective economic life. All that with charter cover from top-tier charters. It's also worth highlighting that several of these new builds include options for the operator to extend the charters at rates more than 25% above those for the initial firm periods, suggesting that the end users share our conviction that these ships will continue to be in high demand, valuable, and with significant upside earnings potential well beyond their initial charters.

These new build transactions were possible due to our ability to move fast, thanks to our discipline in building a fortress balance sheet. We expect the forward visibility on contracted revenues to support attractive funding alternatives for these assets, which will likely involve a combination of cash from our balance sheet and debt to enhance returns on equity. For modeling purposes, it is important to keep in mind that the contract payments for these new builds are milestone-based and back-loaded, with more than half of the contract price not payable until the respective ship is delivered. We also consider the opportunistic monetization of older assets to be an integral part of fleet renewal.

At the bottom of the slide, you can see that we have sold forward four older non-core ships during the first half of the year for a total of $65.5 million, with an aggregate gain on book expected to be in the region of $33 million. Added to which, we will continue to benefit from these ships' earnings until they deliver to buyers in scheduled slots ranging between the end of this year and the end of next year. Moving to slide six, we show the structural rationale behind the new building orders and why this is the right time for us to pounce on these opportunities. As we have highlighted for some time, the mid-size and smaller containership classes have been underbuilt for many years, with a lion's share of investment capital piling into ultra large ships.

That has left a crucially important sub 10,000 TEU portion of the global fleet with an advanced age profile. To illustrate this point, the median age of the oldest quartile by TEU capacity within each fleet segment below 10,000 TEU ranges from 21-28 years. That's today, which translates to around 24-31 years by the time our new builds actually deliver into the space. You have an aging global fleet combined with a more limited order book at a time when the value proposition of such flexible assets is proving to be increasingly important and in growing demand from liner operators. Furthermore, with the industry and its regulators now looking less likely to coalesce around a long-term decarbonization trajectory and rule set anytime soon, we see the option value of a wait-and-see approach on fuels and propulsion as having materially diminished.

The convergence of these factors, together with the commercial terms available to us, our ability to transact on the new builds while de-risking them with charter coverage X yard, and the aging out of our existing cash cows, made these orders a clear and compelling opportunity for us and for our shareholders. We expand further on our rationale for investing in new builds on slide seven. We have a history of being prudent in managing risk through the shipping cycle while capitalizing on upside cyclicality and volatility, particularly in time charter earnings, to build value for shareholders. In the chart, you can see how second-hand asset prices, which are the dark blue line, and particularly the time charter rate index, the green line, have both trended and spiked upwards. While the new build price index, the pale blue line, has remained comparatively flat in recent years.