Global Ship Lease, Inc. (GSL) Q3 2021 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Global Ship Lease Third 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. [Operator Instructions]. Please be advise that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your host, Mr. Ian Webber, Chief Executive Officer of Global Ship Lease. Please go ahead.

Thank you very much. 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 2 and 3 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 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 also draw your attention to the risk factors section of our most recent annual report on Form 20-F, which is for 2020 and was filed with the SEC on March the 19, 2021. You can obtain this via our website or via the SEC's. All 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 am joined as usual, by our Executive Chairman, George Youroukos; our Chief Financial Officer, Tassos Psaropoulos; 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 Tassos, Tom and I will take you through our recent achievements, quarterly results and financials and the current market environment. After that, we'd be pleased to take your questions. So turning now to Slide 4, 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 containership 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 what is amazing -- this amazing market has meant for GSL. Year-to-date, we have grown our fleet by more than 50%, acquiring 23 ships for just under $0.5 billion, with the last of those vessels delivering to us and commencing its 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 $0.25 per share dividend that we introduced earlier this year. We have remained highly accretive, 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 the which was to BB- 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 4 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 the 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 looking 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're working on some significant south 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 and 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 economy -- that the economy is opening backup following COVID lockdowns would undermine containerized freight demand with the expectation that consumer 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 the projection of less than 7% that we were already very pleased to share with you on our last quarterly call. These strong fundamental rate of demand growth is double the rate of nominal cellular capacity growth, that is the supply of container ships. This imbalance is set to increase further through the least, at least next year, even before the significant impact of supply chain congestion, which absorbs capacity and amplifies that tightness of supply and demand and looks set to be prominent feature off 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 TEU 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 fleets 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 upfront. 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 ships segment on which we focus our aging. In fact, by the end of 2024, roughly 7% of sub-10,000 TEU 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 TEU ships. Now what this means is that if all ships, all of them 25 were to be scrapped out, which is a normal thing I would say, net growth of the sub-10,000 TEU 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 two years. Meantime, earnings and asset values are on a clear upward trajectory, with the liner Company 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 sometime to come. Speaking to you one week after the COP26 Conference, and the many related announcement 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 slow down. And a 1 knot reduction in global average containership 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 with -- 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 vessels specifications, forward visibility on employment, overall risk management, and returns. We have no intention of compromising acquisition criteria or are required to terms in order to pursue growth for growth sake. But we continue to see potential for selective growth in a highly fragmented sector with many subscale players and with a continuous exodus or 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 over deal, we will not do it. With that. I will turn the call to Ian.

Thank you, George. Please turn to Slide 6. 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 lower good charters. Our charter rates as or in many instances, 2 or 3 times their previous levels. This slide shows those vessels that when -- we're not faced 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 one 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 fall -- 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 have acquired this year. They'll all now being delivered. The last one came 2 or 3 weeks ago in the middle of October. The majority have commenced new charters agreed under our ownership, succeeding charters in place at the date of acquisition. And these new charters are again at considerably higher rates on-the 23 ships grow are on-the-water fleets 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 to the transactions. And to our considerable benefits is below market rates translated into below market purchase prices for the vessels. The red bars on the other hand, show the chances that we've agreed in the red hot markets subsequent to acquiring the vessels, capturing significant upside potential for GSL. Once again, these new charters are multiples of their prior rates, and extend well into the middle part of the decade. All with the new chances for the pre -existing fleets 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 2.5 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 with some significant charter extensions which we expect within the next short number of weeks, we look to increase the dividend on a sustainable basis but for Q1 of 2022 and beyond. Moving onto Slide 8. 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 vessels acquisitions, main for our revenue and cash flow. We show this in 3 different forward rate scenarios. These 3 scenarios are for any vessels that come open in the next 2 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, but we have 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 fine details, we spelled out the assumptions and the relevant factors in detail on Slide 21 in the appendix. From now though, I would 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 1 month on a single 2,300 TEU 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 [Indiscernible] The EBITDA on each scenario of 2022 shows a dramatic increase from the [Indiscernible] -- I will say that again, with adjusted EBITDA on in each scenario, sharing a dramatic increase from the 2021 levels. And to remind you, every incremental dollar of slot revenue flows straight through to adjusted EBITDA and cash flow. Our second for historical context. Annual adjusted EBITDA in the year since 2018 merger with Poseidon has been around a $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 I am now fully delivered fleet of 65 ships. In fact, by solely on those charters already agreed, assuming literally 0 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 of $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 onto Slide 9, our summarize, our strategy, and focus. We continue to believe that the sweet spots in the market is an existing ships rather the new builds, and particularly in the mid-size and smaller sections. We put nearly $0.5 billion towards acquiring 23 [Indiscernible] assets this year. And we were 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 of between 3.64 and 4 times. We've also ensured that the charter attached acquisitions that we made have not been reliant upon the rosy residual values 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. We have been able to purchase older vessels, the chapters 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 decapitalization. Our environmental commercial strategies are well aligned by taking a full life cycle approach to the carbon footprint or ships. We considered the impact of building and operating the ships as well as just simply operating them. We see expanding the economic launch of existing ships and optimizing their operation until next-generation sustainable fuels and propulsion technologies become well-established and commercially available, 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 backs. We focused instead on a short-term, medium-term horizon to drive returns, which in turn enable us to respond as appropriate to an evolving decomp -amortization environment. We also look to position the Company to be in a strong cash flow -- 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 Tassos to talk you through our financials.

Thank you, Ian. Our first 9 months of the year has been very active with a significant number of moving pieces in the financials. So we have summarized the key points for you on Slide 10. Revenue for the first 9 months was $294.4 million up from $212. 8 million in the first 9 months of 2020. Similarly, adjusted EBITDA for the 9 months was $166.5 million up from $124.5 million in the same period of last year, including a material impact on total operating revenue from amortization of intangible liabilities arising on below market charters have thoughts to vessel additions. Normalized net income, which adjust for the one-off items was $104.6 million for the first 9 months, up approximately 170% from $38.3 million in the prior year period. I would like to spend a moment on the material one-off items within this quarter. We have completed the refinancing of the last 2022 debt maturity, moving the next earliest to May 2024. We have also completed within this quarter the scheduled purchasing finance of 16 vessels and with the last being completed in October out of the total 23 new vessels we acquired this year. Moving to the balance sheet items, there are various points to highlight. Our cash position at September 30th, 2021, was $113 million. As I have mentioned above, in the quarter, we have successfully refinanced our last 2022 maturity debt off our $5.8 million Hayfin Facility, and concluded $140 million facility of 12 Borealis vessels and they were $120 million before 5.5 the [Indiscernible] . Meantime, we have raised in the third quarter on the ATM programs $16.9 million of our potential preferred, further increasing our flexibility. Regarding our acquisitions for the 7 Post - Panamax seats we have concluded in July the delivery over the last vessel with purchase price of $17.6 million and draw down the last $10.7 million of the arranged facility. In addition, with in July also, we have concluded the purchase of 12 containers ships from Borealis of an aggregate purchase price of $233.9 million, which we financed with the issuance of $35 million of the 2024 notes to the sellers, and senior secured loan of $400 million and cash-on-hand. Finally, for the for 4 or 5.5 the Panamax containerships, we contracted to purchase for an aggregate price of $148 million. We have arranged financing of $120 million of which we have drawn down $90 million, against the 3 ships delivered by September 30, 2021. The last vessel was delivered on October. Now, our detailed financial statements appearing full in Slides 11 through 13. On the basis of our strong contracted revenues, our board has declared a dividend of $0.25 per common share for the third quarter to be paid on December 2nd to common shareholders of record as of November 22.

On Slide 14, you can see in the upper left our scheduled amortization in the coming years on the basis of our third quarter results, our total gross debt to annualized adjusted EBITDA is approximately 3.7 times, and this scheduled to come down meaningfully from there. On the upper right, you can see the dramatic reduction in our cost of debt from 7.7% at the year-end 2018 to 6.3% at the beginning of this year, to high 4% now. On the lower left, you will see that the trading liquidity in our stock has increased dramatically over the last year, making it far easier for new vessels to take a position in GSL since our public flow now account just under 80%. With that, I will turn it over to Tom.

Thanks, Tassos, and hello, everyone. Please turn to Slide 15, which is intended to highlight the ship sizes on which we're focused. Which will help put subsequent slides in better context. So GSL is focused on mid-size and smaller ships, which is shorthand for ships ranging from about 2,000 TEU up to 10,000 TEU. The top map on the left shows the deployment of "our sizes of ship" IE ships under 10,000 TEU, and emphasizes their operational flexibility. As you can see, they're deployed everywhere. The bottom map shows where the big ships, in other words, those larger than 10,000 TEU are deployed, which tends to be on the east - west main lane trades where the cargo volumes and shore-side infrastructure can support them. And it's important to note that roughly 70% of global containerized trade volumes are moved outside these main lanes in the north south, regional, and intermediate trades served by ships like ours. George covered the demand side in his opening remarks, highlighting the rebound in containerized volumes driven by a progressive reopening of economies, and ongoing restocking with continued supply chain disruption, amplifying all of the above. The next slides are mainly supply-oriented. Slide 16 shows supply side trends that tend to be a barometer of health for the sector. The top chart shows idle capacity, which at the end of September, was 0.88%. This is pretty much full employment, which is a strong baseline. The bottom chart tells a similar story. Ship recycling, scrapping has been almost non-existent for containerships this year. Why? Because the charter market and earnings environment is so hot. Why scrap even an ancient ship if you can squeeze a few more millions of earnings out of that? I'll come back to this point on the next slide. Slide 17, which looks at the Order Book. Here you can see on the left the composition of the Order Book by size segment. As I'm sure you will have read in the industry press the Order Book has expanded during the course of 2021, reaching an overall Order Book to fleet ratio of around 23%. However. This is an important, however, this overlooks the fact that the order book is very heavily weighted towards the bigger ships, over 10,000 TEU. If you look at our focus segments of 2000 to 10,000 TEU highlighted in the red box, you can see that the dynamic is very different. For these sizes, the Order Book to fleet ratio is a modest 6% or so. Another point to emphasize when discussing the Order Book is the delivery schedule is back-loaded. What I mean by this is that the Order Book deliveries tend to be weighted more heavily towards 2023 and 2024 rather than 21 or 22. This back loading is significant as 2023 marks the implementation of the new environmental regulations, which we expect to cause a slowing down of the global fleet, and slowing down the fleet reduces effective capacity. It also ties in with the point George underlined in his commentary on Slide 5, that the mid-size and smaller container ship fleet is aging. As you can see from the chart on the right, if scrapping were continue to be deferred by the end of 2024, around 7% of sub 10,000 TEU capacity currently on the water would be at least 25 years old, and potential candidates for the recycling yards. Net this out against the total order book of sub 10,000 TEU due to be delivered from the fourth quarter of this year through to the end of 2024. And you would get implied, and I emphasize implied, net growth in these sizes of just 0.7% negligible. The long and the short of this is that we continue to see supportive supply side fundamentals for our focus size segments, which brings us neatly to Slide 18, the charter markets. The chart here provides an index covering charter market rates for a basket of containerships sizes, and shows the general direction of travel for the market as a whole. The index is up by almost 4 times on where it was at the start of this year. And staggeringly, between 9 and 10 times since the lows of 2Q 2020. On the right of the slide, we provide an indication of where market rates stood in October of this year for 3 to 5-year charters in our various size segments. This is a bit of an art really, as the market is so tight at the moment that reference fixtures have been pretty limited. In any case, for simplicity, we have grouped some size categories, for example, that 2200 to 2800 TEU feeder category, shows a rate of $34.5 thousand per day. Rates for the smaller vessels in this category would be lower than this, while for larger vessels, they'd be a bit higher. Hence, the recent fixtures of 2 of our 2,200 TEU ships for $32 thousand per day. Anyway, returning to the big picture, any way you look at it, we're seeing a truly fantastic market. And with that, I will turn the call back to George to wrap up.

Thanks, Tom. I will briefly summarize, and then we will be happy to take your questions. As we have grown our fleet by more than 50% over the course of 2021 and also signed a large number of long-term charters on attractive terms, we have expanded our contracted revenue to over 1.6 billion with an average remaining duration of 2.5 years. While we see further upside potential in our fleet, when certain vessels come into the charter market in the months and quarters ahead, our extensive contract cover means that we are in a great position in any charter market. We have very strong Balance Sheet with $82 million on cash following the delivery of all of our recent acquisitions. Our credit ratings have been upgraded yet again, most recently the double-B minus stable, and all of our 2022 debt has been successfully refinanced with no further maturities until May 2024, while our leverage ratios and cost of debt continue to move to the right direction. We have demonstrated our ability to utilize diverse capital sources on better and better terms to fund accretive growth. And we have firmly established a virtuous cycle in that regard. Mid-sized Post-Panamax and smaller container with higher rate for capacity continue to be the sweet spot in the market with highly supportive supply side fundamentals as the vast majority of new vessel ordering continues to be fulfilled last container ships that cannot compete in the majority of trade lanes were mid-sized and smaller vessels are the workhorse. The current [Indiscernible] market is causing a growing number of owners to defer scrapping of the older ship, creating a large backlog of ships ready to be scrapped whenever the market eventually normalizes. We also expect total effective to the container ship capacity to shrink from January 2023 when new decarbonization regulations lead to reduce fleets. In the meantime though, charter market rates continue to be truly extraordinary. Up 3.8 times since the beginning of the year and almost tenfold since the lows in the second quarter 2020, with far longer durations that were previously available for anything but a new built. We expect this market tightness to act well into 2022 and potentially straight through to regulation driven supply reduction in 2023. Our success in growing the fleet and having substantially contracted cash flow over a multiyear period allows us to revisit the dividend, which we expect to increase from Q1 2022. A lot of customers, continued to set records for profitability and are rapidly improving their Balance Sheets and create profiles. The safety and welfare of our personnel remains our top priority, and we're working to embed an ESG culture in everything that we do. Our travel portfolio provides great support to the quarterly dividend that we introduced earlier this year. We bought back a large block of stocks during the quarter, both GSL and I personally making a great investment in GSL's future while also reducing our large legacy shareholder, Kelso to below 5% of shares outstanding. Having already grown our fleet by more than 50% this year, we continue to evaluate additional growth opportunities in a disciplined, highly selective manner. is at least taking to our principles and being risk of us have served us very well to this point. And we will not begin now to chase growth for growth sake. Rather, we will keep a focus on using our platform and our Balance Sheet to maximize the long-term benefit to our shareholders. With that, we'll be happy to take your questions.

Thank you, sir. [Operator Instructions]. We have our first question from the line of Kevin Uherek with Deutsche Bank. Please go ahead.

Hey, guys. I just had a quick question. You guys were talking about your dividend policy and thinking about potentially increasing it. How are you guys thinking about that? Are you guys thinking of more of it like a fixed increase or thinking about doing something where it depends on the available cash that you might have?

Yes, it's Ian. We're looking at a fixed increase, really. We're not convinced that sort of special one-off type dividends are right for us in today's circumstances, at least. And as we kind of said in the prepared remarks, we got a couple of quite significance at least to our minds, charters that we're negotiating charter extensions that we're negotiating right now. And we want to get them in the bag before we absolutely determine the new level of sustainable dividends. And then we will announce this, and sustainable is important. As -- at the beginning of the year when we announced the $0.125 dividends, we stress that it was sustainable in those circumstances. The market improves, we acquired ships and we doubled the dividends when we actually paid the first one from $0.125 to $0.25. And we're in a different environment now with growing a little bit more. And we think it's right that we allocate some of the extra capital to return to shareholders. So it's sustainable and also wanting to preserve financial flexibility for the business, so need capital for growth. As we explained in our prepared remarks, that is -- continues to be a plank of our strategy going forward, and maintaining the strength of our balance sheet.

Okay. Gotcha. That's all I have for questions.

Thank you. Our next question is from the line of Randy Giveans with Jefferies. Please go ahead.

Hey, team GSL, how's it going?

Thank you, Randy.

Good, Randy. How are you?

Doing very well. All right, two questions for me, maybe a third. But first on the share repurchases, nicely done there. Very good use of $10 million or so. Now, your balance sheet is clearly in great shape, charter backlog, things like $1.6 billion or something, provides you with substantial, right, free cash flow visibility. So I guess my question, why raise the $17 million in preferred at 8.75%, which seems maybe like an expensive capital raise? Although the repurchase of the common would still be accretive at these levels. So I guess, why doing that and then going forward, what are your plans for further preferred ATM usage and then come and share repurchases?

Do you want to take that?

Sure. Hi, Randy. Well, as we've tried to make clear, I guess on the prepared remarks, this has been a period of tremendous growth for us. We've grown by 50%. And in that regard, the pref has being a helpful source of non dilutive capital that has helped fund that growth. And in that respect, we see it as extremely flexible capital. Whether or not we'll continue to raise it going forward, we'll keep it under review, but we think it's extremely helpful to have access to various different pockets of capital.

Okay. And then on the share repurchase side?

On the share repurchase side, I think that's once again something that we would look at sort of selectively, as we've shown, it's something that we're willing to execute if we think the circumstance is justified.

Okay. All right. And then secondly, on the fleet, the past year, very active in growing it. Now, all your acquisitions are fully delivered. So where do you go from here in terms of acquiring additional tonnage versus maybe taking advantage of the high asset values and selling some older asset?

Yes. We always look at all the options. So far, it has always been the case that keeping assets and chartering long-term, it's far more accretive. Now, on the acquisitions, we are looking at various fleets of ships and we're evaluating. So far we have not reached any, let's say, point where any of the few fits that we are currently looking and negotiating, gives -- meets our criteria. And so far we haven't moved towards any of those in certainty. But there are plenty of those fleets out there, which are fleets that many financial sponsors are exiting the sector and maybe there are ships with charters and stuff like that. So deals that can make sense for us. But we're definitely not there to pay a huge price or take a big risk for the Company. We would only do so if these deals are equally accretive to this we have been doing so far.

And if I may add, just a quick note to that, Randy. We -- as you may recall, we did in fact sell one of our older assets, one of our, I think, she was a 20-year-old 2,200 TEU assets at the beginning of the third quarter because we saw the opportunity to, as you say, capture the high values and reinvest that immediately in a deal which we felt rendered even more promising economics. So the equity surrendered from the sale of that ship was immediately reinvested in the four-high reefer, 5,400 TEU ships that we acquired with charters attached to Maersk.

Got it. I had one more question, but I asked two, so I'll hop off, but I will get back in the queue. Thank you.

Thanks, Randy.

Thank you. We have our next question from the line of Frode Morkedal with Clarksons Securities. Your line is open.

Okay. Thank you. Hi, guys. You mentioned -- I think you mentioned like you had secured EBITDA of $929 million so far this year. I'm curious what's the backlog -- EBITDA backlog as of end of Q3, if you have that number?

We haven't put that into the public domain for this. I'm not sure we can provide that number now, but you could probably infer it by taking the revenue to EBITDA ratio for what we've contracted this year and applying it broadly to the $1.6 billion of forward contracted revenues that we have. But I -- I'm sorry, I can't pin a direct number on it now.

You can also go to Page 21 in our investor presentation, in our adjusted EBITDA and operating cash flow calculator when actually, you can make small math because the fixed revenue net is already there and the historical OpEx, so it will be easier.

Okay. I guess. But it seems to be at least a billion probably, given that you have more already secured contracts from loss there, I would assume. But I'll calculate. And you mentioned that you are looking at securing a number of charters or waiting to compute it, how many vessels are you looking at on --

Yeah. That's the first question.

Sure. Hi, this Tom again, I mean, if you look at the charter cover slides in the presentation, you can see that actually we've got comparatively few ships coming open during the course of the next 6 to 9 months, let's call it. So the most obvious candidates would be a couple of high-value 9,000s.

Okay. Well, when I look at your chart on page 8, at least it's quite clear that next year would be very strong. Apparently you're basically saying if you secure the current market rate, you would have an EBITDA of roughly $430 million next year? And that's basically just above $300 million, that's profit if I'm not mistaken? which is $8.5 per share. And it's half-debt repayment and capital basically $200 million free cash flow, which is $6 per share, and -- which is great. And [Indiscernible] more interesting probably is if I look at 2023 on that same slide on Page 8 to add 10-year historic rates, if I'm not mistaken, that's like $14 thousand per day or something on the Panamax versus more than $50 thousand today. And you still would have $308 million EBITDA in 2023, and that's roughly $7.3 EPS, and the $5.5 of free cash flow. My point is, do you have basically $15 EPS next 2 years? It's quite constructive and cheap. On the time that you basically allows it already, but how you think about this very secure cash flow when you are going to decide on buybacks really versus dividends? Well, I think it goes further as with -- thank you for doing that analysis. As we've already said, we're open to share buybacks. We've done it. It was to a degree opportunistic. But clearly we are prepared to execute on those transactions difficult to program share buybacks and into the future. We've also indicated as we've discussed and we can't go into any more detail at this stage, but we also indicated that we're looking to increase the dividends from Q1 next year. Waiting on those charter negotiations that we've also touched on. We've also indicated that we continue to have aspirations for growth. So it's an art and as science and we keep capital allocation on the review. And whereas appropriate, we'll allocate more to returning capital to shareholders. Whether that's in the form of increases in regular dividend or special dividend or share buyback. It depends on the circumstances at the time. I don't think there's much more that we can say.

No. That's fair enough. It's a great position to be in, I guess. Well, thank you. Thank you.

Thanks, Frode.

Thanks, you. Again as a reminder, if you would like to ask a question over the phone [Operator Instructions]. We have our next question from the line of Liam Burke with B. Riley. Your line is now open.

Yes, thank you. How is everybody today?

We're good, Liam. We're good.

Thank you. Ian, your utilization rates were off year-over-year, is that just a function of the lag between taking deliveries and actually getting the vessels to generate revenue, or was there anything else in there?

Let me just remind myself. Yeah, a little bit off. I mean, in the 3 months utilization this quarter, 93.6% last third quarter 94.8%. But more importantly, year-to-date utilization 95.4% this year against 92% last year. So a touch down quarter-on-quarter, but up, year-to-date on year-to-date. And some of this is just the way you scheduled dry dockings full, but as the fleet increases then you'd expect that to average outs. But we did have for us going through substantial amounts of unplanned off-hire in the third quarter of this year at a 137 days, which relates mainly to a couple of unusual incidence with main engine type problems which took some time to resolve. These things happen, I'm afraid. But again, as we get bigger, the impacts of these old rare recurrences becomes proportionately less.

Great. Thank you. There have been some announcements in the industry about Liner Company is actually going in and buying secondhand smaller vessel containerships. Does that affect at all your opportunities to selectively go in and add assets?

I will answer that. No, it doesn't, because liner companies they're looking for ships so they can promptly take delivery and then blow it quickly and load it with boxes under the stress scenario they are with these disruptions. We are more focused on ships with employment or ships that -- we're not right now following charter-free opportunities because we feel there is a bit of an estimated risk reward. We're more focused on structured transactions when the market is red hot. Right now, in the sell and purchase markets, when the acquisition market, it's a monopoly of all the ships that are without charter free ships between the liner companies they're fighting between them, who's going to get any available charter-free ship as their economics, having the freight instead of the charter rate, substantially different than our economics and they can afford to pay substantially bigger numbers than any ship owner would. And if I can just add a footnote to that, Liam. I mean, if you look at the 23 ships that we purchased during the course of this year, the -- 11 of them, so 7 that were acquired at the outset of the year, and the 4 most recent acquisitions, were in fact, ships that were purchased in the secondhand market by liner operators and then were spun back to us by way of sale and charter back transaction, so we can actually draw deal flow out of the lines themselves acquiring ships. I don't think it really moves the needle one way or the other.

That was the next part of my question as to whether or not that creates an opportunity for you because some of your most recent acquisitions were from the liners. Thank you.

Thanks, Tom.

The next one, we have a follow-up question from Randy with Jefferies. Please go ahead.

Hey, fellas. Didn't want to ask my 12 questions there, so hope back on real quick. On the chartering front, you have 2 bigger ships coming available in May 22, it looks like we've heard a fourth fixtures beyond that, right? When do you expect to secure new charters on this?

As you can imagine Randy, incrementality and competition. Yeah. We are obviously working on all of our ships that we have open currently. And we hope to have good news in the foreseeable future. But sometimes we might even be able to fix 4 of our ships that don't look -- don't seem the obvious case. We have a large fleet and there's a lot of combinations and permutations that we can reach with our customers as we have a direct relationship with all of them. We mostly have talked directly with the liner companies, so that allows us to have a bit of a different approach than other competitors.

Okay. I will stay tuned. Thank you.

Thank you. The next one we have the line of Brett Hendrickson with Nokomis. Your line is now open.

Hey, gentlemen, thanks for taking my question. Thanks for all your hard work, building up the free cash flow and building up the fleet here. I just want to touch on a topic that has been brought up from a little different angle. I know there was a worry among maybe investors and maybe some people in the industry at the beginning of the year that -- well, these charter rates are much higher than the old normal but there's really for much short-term rates. A lot of them are 12 months and there are 18 months alive, the highest rates were for the shortest ones. I remember when you guys rechartered Dolphin 2 from 7,000, 24,500 a day people thought that's great, but it's a short-term charter, and now we fast-forward today in that 24,500 that people thought wouldn't hold up. You just rechartered that or extended that out in time at a rate of 53,500. The rate tripled in December and then it doubled again. And so that's great and we're seeing, I don't want to talk to you more offline, I'm seeing other ships in that 5,000 to 6,000 TEU range from your competitors to get 3-year charters, And so I guess, 1. do you agree with this that concerned about only this being a COVID driven shortage and these are only going to be 12 months of these high [Indiscernible] rates? That's obviously gone now and if it is, I just want to throw my name in the hat in terms of agreeing with the argument for more share repurchase. I applaud George, your personal purchase and the Company's purchased there, and you helped clean up the overhang from Kelso. But even if we doubled the dividend from $0.25 to $0.50 a quarter, there's still tons of excess free cash flow here. And you've got -- you're increasingly locking it in and your assets that aren't locked in. I don't think I'm going to jinx that by saying that when they do come up, they'll get at least rechartered at least the rates they are now in the coming 18 months as things come up for recharter. So, I would just ask that you continue to keep the pedal down on the share repurchase, I think it can benefit you, George, and all of us and could be accretive to free cash flow per share. And I think, if we want to get this stock to $45 or $50, that's the path to doing it. Doing nothing will get you close as it is, but taking down the share count while we can I think is -- it seems like the closest thing to a no - brainer, that I see. Anyways, we talk more offline about some of the things I'm seeing from your competitors and some of these off-market, things that have been announced. But the charter rates are just astonishing and they're in the $50,000, $60000 range. And so, let's talk more offline, I just want to get that in there. Let me know if you agree or disagree with my thoughts on long-term charters becoming the norm. Thanks, guys.

All right. This is Tom. I'll just give you my $0.25 on the sustainability of the charters. Who knows what's going to happen with demand going forward. So far, it's surprised again and again to the upside, which is fantastic. But what we do have forward visibility on the supply side dynamics, which we tried to provide some data around in the guts of the presentation. So looked at from that perspective, the supply side, we do see reasons to be optimistic, but this is a business that we're building for the long term, so obviously prudence in forms, absolutely everything that we do, rather than making a big bet, one way or the other. I will leave it there just in case anyone else from the team wants to add something.

Any if I may add in what we really care and when we look at an investment, and when we look at all of our investments is the fundamentals. I am not so sure. I mean, yes, there is a COVID element definitely. And maybe that element is a percentage of today's charter rates, but it's not all Fundamentals which we showed in our presentation point to the fact that right now we're under -- we have -- we're under supplied from ships in 2021, 2022. And we're not going to get oversupplied in our sector for the foreseeable future, I mean, after the Order Book that exists as of today, and I don't see this Order Book growing any dramatically going forward. We are still under supplied. I mean, as we shown the Order Book effect at--to the end of it, wherever the under with as we speak is 2024 for there's no further than that is a last 0.7%. Now, if you take a modest cargo increase year-on-year, historically, you're looking at least for 2% to safe 2.5% usually. So that's 3 times, 22, 23, 24, you're looking at something within 6% to 8% when you only have a supply of 0.7%. That is without taking into account that atoll, the slow steaming that is coming from the EEXI rules, these are great fundamentals. Now, to what extent these fundamentals, if you remove the COVID effect, which by the way, I don't think COVID effect is you're going to get away very soon, as we all understand that the supply of the goods is coming from countries where COVID is not as regulated as the end-user, right? Europe, U.S., there is a little vaccination, but not the rest of the world. The vaccination is not at these levels that we would expect for COVID to be removed. So I don't think COVID is going to go way at the end of 2022. I don't even think that COVID is going to go away by the end of 2023 in a really a 100% way, which would bring everything back to normal. But -- and I'm not sure given all these numbers I gave you, what is the -- how much COVID plays into all of.

It? Whether the charter of $50,000 for 3 years is going to become $40,000 for 3 years or $35,000 a year or $30,000. Who knows? How much out of this $50,000 is COVID and how much of this is fundamentals. So it's a difficult one, but I feel very comfortable knowing that you we're not over building the fleet and that is important always in shipping, in any type of shipping. Thank you.

Thank you.

Thank you. There are no further questions at this time. Mr. Ian Webber, please continue.

Thanks everybody for listening to our remarks and for your questions. We you look forward to giving you an updates. A further updates on TSO with our fourth quarter results. Thank you very much.

Thank you. This concludes this conference call. Thank you for participating. You may now disconnect.