Global Ship Lease Q1 2026 Earnings Call - Fortress Balance Sheet and Geopolitical Tailwinds Drive Strong Cash Flow

Franz, Conference Call Operator: Good morning, and welcome to the Global Ship Lease 1st quarter 2026 earnings conference call. My name is Franz, and I’ll be the operator assisting the call today. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Thomas Lister, Chief Executive Officer of Global Ship Lease. Please go ahead.

Thomas Lister, Chief Executive Officer, Global Ship Lease: Thank you very much. Hello, everyone, and welcome to the Global Ship Lease first quarter 2026 earnings conference call. You can find the slides as usual that accompany today’s call on our website at www.globalshiplease.com. As usual, slides 2 and 3 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 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 to 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, and our Chief Financial Officer, Anastasios Psaropoulos. George will begin the call with high-level commentary on GSL and our industry, and then Tassos and I will take you through our recent activity, quarterly results, and financials, and the current market environment. After that, we will be very pleased to answer your questions. Turning now to slide 4, I’ll pass the call over to George.

George Youroukos, Executive Chairman, Global Ship Lease: Thank you, Tom, and good morning, afternoon, or evening to all of you joining today. The opening months of 2026 have been a continuation and in fact, an escalation of the themes of geopolitical uncertainty and volatility that we saw in 2025. From the continued disruption of tariffs and the Red Sea to the unprecedented disruption in the Strait of Hormuz, which has resulted in the humanitarian crisis of around 20,000 seafarers being trapped in the Persian Gulf. The world has become more dangerous, extraordinarily unpredictable, and complex. This has ramifications throughout the supply chain. Trade routes have shifted, fragmented, and decentralized, ultimately becoming more inefficient, requiring even more container ship capacity and more flexible ships to transport a given volume of containers.

In these conditions, we continue to see strong demand for our mid-sized and smaller container ships, which provide valuable flexibility and reliability for our liner company customers. In this environment, we have worked hard to keep adding charters so that our contracted revenues now stand at $2.1 billion over 2.6 years. Our charter coverage is 100% for 2026 and 86% for 2027. We continue to deleverage and optimize our fortress balance sheet, all while paying an annualized dividend of $2.5 per share, which is a dividend yield of around 6% on the basis of our stock price at the close yesterday. As always, we’re keeping an eye on opportunities for disciplined, prudent fleet renewal that will allow us to continue generating strong cash flow through the medium and long term as our existing cash cows age out.

Fundamentally, we maintain a focus on resilience and optionality, which has continued to serve us and our shareholders well and provides a sturdy foundation in a world of uncertainty from which to act decisively on completing opportunities as they arise. On compelling, excuse me, opportunities as they arise. With that, I will turn the call over to Tom.

Thomas Lister, Chief Executive Officer, Global Ship Lease: Thanks, George. Hello again, everyone. Please turn now to slide 5, where you will see our diversified charter portfolio. As of March 31, we have over $2 billion in forward contracted revenues with 2.6 years of contract cover from a well-diversified and top-notch set of charterers. We have 100% of our revenue days covered for 2026 and 86% covered for 2027. On slide 6, we go over our dynamic capital allocation policy. A steady stream of significant geopolitical events over the past several years has added further volatility into the already cyclical nature of our industry, creating an environment where resilience, flexibility, and dynamism are critically important.

Maximizing long-term shareholder value is at the core of what we do, and our combination of paying an attractive dividend, building equity value through deleveraging, and highly selective fleet renewal, which also includes the opportunistic monetization of older non-core assets, are all in the service of that goal. Slide 7 shows the cyclicality of our industry, as well as our prudent and long-term thinking when it comes to managing it. You can see our history of ship purchases and how they have been clustered during market downturns or have otherwise been structured to minimize downside risk while maximizing upside potential. While not shown on this chart, it is worth noting that the flip side of choosing the right circumstances under which to buy ships is identifying the right opportunities to sell ships.

All of this sounds simple enough to do in theory, but it is less straightforward in practice, and hopefully, you will agree from our track record that we have managed to strike the right balance. With that, I’ll pass the call to Tasos to discuss our financials. Tasos?

Anastasios Psaropoulos, Chief Financial Officer, Global Ship Lease: Thank you, Tom. Slide 8 shows our financial highlights in the 1st quarter of 2026. I would like to emphasize a few key takeaways. Our financial performance and cash flow have remained very strong. Our cash position is $655 million, which on paper brings us almost to net zero debt, although $156 million of this cash is restricted. The remainder ensures that we can fully cover our covenants, working capital liens, and manage the potential financial implications of geopolitical disruptions and other macro events in an increasingly unpredictable world. It also provides dry powder, both for CapEx to optimize the commercial value of our existing fleet and for disciplined investment in fleet renewal when the right opportunities present themselves.

Indeed, as Tom has referenced, we were pleased to agree the forward sales of 3 of our oldest ships, which will all be 25 years old or older by the time they are delivered to buyers for an aggregate price of $52 million, which we expect will unlock a book gain of around $25 million. Added to which, we will hand on to the cash flows to be generated by their existing charters until they are delivered between fourth quarter of 2026 and fourth quarter of 2027. We achieve all this while also consistently paying a healthy and recently upsized dividend. Slide 9 shows our ongoing efforts to build resilience and equity value while delivering our balance sheet.

Our outstanding debt is shown on the left graph, which stood at $950 million at the end of 2022, now sits at under $700 million and is on track to be well below $600 million by year-end. The right graph highlights a similar result for financial leverage, but to an even greater extent, which we have reduced from 8.4x in 2018 to 0.3x today. Slide 10 bears the progress out further. As seen in the left-hand graph, we have been able to maintain a highly competitive cost of debt even as base rates have meaningfully increased. Our break-even rates have seen a similar trajectory as our progress in reducing interest expense has enabled us to absorb inflationary increases in vessel OpEx over time, primarily related to rising crewing costs. With that, I will turn the call back over to Thomas to discuss the market and our fleet.

Thomas Lister, Chief Executive Officer, Global Ship Lease: Thanks, Tasos. On slide 11, we reemphasize our focus on container ships between 2,000 TEU and approximately 10,000 TEU. These ship sizes provide the backbone for containerized trade with around three-quarters of global containerized trade volumes flowing in the "non-mainline trades," which tend to require ships offering more flexibility and adaptability than the very big container ships, by which I mean the jumbos and A380s of the container shipping industry that attract more media attention. These very big ships tend to be limited to the big East-West mainline arterial trades, requiring specialized port infrastructure, deep water, and huge cargo volumes. Meanwhile, mid-sized and smaller container ships, like those in our fleet, can go almost anywhere and are not reliant on any one region or trade. As geopolitical uncertainty has increasingly become a fact of life in recent times, liner companies have prioritized operational flexibility and reliability.

In addition, trade routes have fragmented and decentralized, leading to a larger percentage of trade occurring intra-region, further increasing the demand for these mid-sized and smaller container ships that GSL provides. On slide 12, we go over the developing situations in the Middle East. While we’re not geopolitical experts by any means and cannot predict how these situations will unfold, we can provide some context about what we are seeing now and what we have seen in the past. Let’s take the Red Sea first. Prior to the disruption, about 20% of containerized trade volumes moved through the Red Sea and Suez Canal. Since the disruption, ships have been forced to reroute around the Cape of Good Hope, a far longer voyage, and one that has absorbed about 10% of effective shipping capacity in the process.

After a brief period of optimism that saw a limited return of ships to the area, the security situation in the region sharply deteriorated once again. While of course, we cannot know for sure, it certainly appears, for the time being, that liner companies are unlikely to return to transiting at scale in the near term. Now, onto the more recent conflict in the Strait of Hormuz, where shipping traffic has been and continues to be seriously constrained since the beginning of the Iran conflict. Most of the press coverage has focused on the significance of closing Hormuz to the energy sector and the growing risk of a global energy and fertilizer crisis.

There is also an impact on container shipping as, prior to the conflict, around 3%-4% of global containerized trade volumes passed through the strait. Major ports and shipping hubs in the area are seeing only a fraction of normal volumes, with limited transshipments or overland freight options available to replace the lost trade volumes. Cutting across all of this is the awful fact that around 20,000 seafarers are currently estimated to be trapped in the Persian Gulf. The longer-term implications of these disruptions remain unclear. For the time being, both situations remain highly dynamic and offer yet another set of complex challenges for the shipping world to navigate while keeping seafarer safety at the forefront of any decision-making. Slide 13 shows supply side and scrapping trends. The situation there remains largely the same as it has been for some time.

Idle capacity and scrapping activity both remain negligible. With capacity constrained and trade routes in continual flux, the global fleet is consistently finding employment and often doing so at very strong rates that are keeping older ships on the water, making money instead of being scrapped. We highlight the order book on slide 14. In recent years, the order book has grown meaningfully, although the segments that GSL operates in have seen far less growth. The overall order book to fleet ratio stands at 37%, but this is dragged upwards by the 60% ratio for vessels over 10,000 TEU. For ships below 10,000 TEU, in other words, the segments in which GSL primarily competes, the order book to fleet ratio stands at a somewhat more digestible 20%. Also, the sub-10,000 TEU size segments are aging.

If we were to assume that all ships 25 years and older were scrapped through 2030 and netted out that capacity against new capacity delivering from the order book, then the sub-10,000 TEU fleet would actually shrink by 3.4%. In the current market, which has minimal slack, GSL is happy to lock in charter coverage at highly supportive rates. If the market were to experience a downward normalization, we would expect scrapping activity to pick up meaningfully, offsetting the arrival of new vessels in part or in whole or even more. Slide 15 shows the charter market. When looking at the market rates on the right side, I would like to reemphasize that our average daily break-even rates are just above $9,800 per ship. The operating leverage in our business means that essentially everything over that point falls straight to the bottom line.

In this environment, we have added charter coverage so that we now have more than $2 billion of contracted revenues spread over 2.6 years, offering us the comfort of forward visibility in an otherwise highly uncertain world. With that, I will turn it back to George on slide 16.

George Youroukos, Executive Chairman, Global Ship Lease: Thank you, Tom. To summarize, we’re focused on maintaining optionality, resilience, and operational integrity in a complex and uncertain world. Our supply chains fragment and shift from one day to the next, flexibility is key, and that is precisely what the GSL fleet provides to our liner company customers. We have extensive multi-year charter cover, over $2 billion of contracted revenues spread over the next 2.6 years, in fact. We have built a fortress balance sheet and have highly competitive break-even rates, such that we are in a strong position for any circumstances. We will continue to follow our mantra of staying patient, disciplined, and nimble regarding value-accretive fleet renewal, while also prioritizing the return of capital to shareholders via our $2.5 per share annualized dividend. Now, with that, we’ll be very pleased to take your questions.

Franz, Conference Call Operator: Thank you. We will now begin the question and answer session. Again, if you would like to ask a question, please press star 1 on your telephone keypad to join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. As of now, your first question comes from the line of Liam Burke from B. Riley Securities. Please go ahead.

Liam Burke, Analyst, B. Riley Securities: Thank you. Hello, George, Tom, Tassos. How are you today?

Thomas Lister, Chief Executive Officer, Global Ship Lease: Hi, Liam. Really well, thank you. How are you?

Liam Burke, Analyst, B. Riley Securities: Just fine, thank you.

George Youroukos, Executive Chairman, Global Ship Lease: Thank you, Liam.

Liam Burke, Analyst, B. Riley Securities: If I look at your open charters for 2027, could you gauge charterers’ interest in forward fixing those vessels and any kind of appetite for where the rates are going?

George Youroukos, Executive Chairman, Global Ship Lease: Yeah. The market right now, Liam, is as healthy as it has been. There is demand. There’s not enough ships. Whatever we see on the market right now is a result of unavailability of tonnage, not a lack of demand. The market is right now healthy for ships opening in 2026 and obviously for ships that are large enough in 2027. When I say large enough, like I said, always the ships that are in demand forward more than anything else are ships that are in excess of 4,000 TEU or 3,500 TEU-4,000 TEU maybe.

Liam Burke, Analyst, B. Riley Securities: Great. You got great prices on the 3 2,000 TEU vessels you forward sold. You had some great prices on the purchases of the 3 8,500s in the fourth quarter. Looking at the pricing that you got on the older vessels, are you seeing any opportunity to add assets here?

Thomas Lister, Chief Executive Officer, Global Ship Lease: Well, Liam, as you know, having listened to our earnings calls now for a number of years I guess.

Liam Burke, Analyst, B. Riley Securities: Right

Thomas Lister, Chief Executive Officer, Global Ship Lease: we always keep our eyes open, but we stick to the mantra that George described at the tail end of his remarks. In other words, we’re patient, we’re disciplined, and we’re nimble. We always keep our eyes open. We’re always running numbers. We’re always looking at opportunities. We only move on the right opportunities. We’re continuing to see interesting things, but none that have met our fairly stringent investment criteria and meet the right mix of risk and return. As a result, we have not acquired anything. Instead, we’ve monetized these older assets, and I know Tassos mentioned that on the call. We get not only the gain on book that we’re estimating at roughly $25 million when they’re eventually delivered to buyers, but we also get to hang on to the contracted cash flows between now and the time of delivery.

The vessels are being delivered between, depending on the ship, between the fourth quarter of this year and the fourth quarter of 2027. We’re pleased with the deal.

Liam Burke, Analyst, B. Riley Securities: Great. That’s fair. I just have a real quick one for Anastasios. On the SG&A for the quarter, I know you have seasonal expenses that don’t repeat the balance of the year, even on a year-over-year basis, they were higher. Is there anything in there unusual?

Anastasios Psaropoulos, Chief Financial Officer, Global Ship Lease: Nothing unusual. It has to do with the accounting method of the incentive plan that we have mentioned in the 20F. It has to do with how it is being calculated and of course, comparing to the share price versus the previous time that it was in 2021.

Liam Burke, Analyst, B. Riley Securities: Great. Thank you, Tassos.

Franz, Conference Call Operator: Your next question comes from Stephanie Moore from Jefferies. Please go ahead.

Stephanie Moore, Analyst, Jefferies: Great. Good morning. Thank you. Appreciate the question. Given your commentary, the charter market remains firm for now, but forward visibility is certainly limited and sentiment might be somewhat cautious. How are your customers approaching duration today? Are they still kind of looking to lock in multi-year charters? Are they increasingly favoring shorter tenures just given the geopolitical uncertainty? Would love to get your thoughts on that. Thank you.

Thomas Lister, Chief Executive Officer, Global Ship Lease: Sure. Stephanie, hi. This is Tom. Thanks for posing the question. I’ll kick it off and no doubt George and possibly Tassos will add to it. Charter negotiations, it’s a two-way discussion. You’re absolutely right. I would say that in the context of heightened uncertainty, the charterers would probably prefer to go short rather than to go long. Given that there’s such limited liquidity and availability in the charter market, if they want the tonnage, they have to move much closer to the terms that are being offered by owners like us, which means that there’s always a compromise found between us, between both rate and duration. Going back to George’s earlier comments, for the right ships, duration of several years is still possible and at very firm rates. George, do you want to add anything to that?

George Youroukos, Executive Chairman, Global Ship Lease: No, I just echo what you said. It’s really a compromise between a negotiation between the charterers and the owners. The owners want the certainty of long employment. The charterers want a good deal. Longer employment gets a better charter rate, obviously, than short employment. You might have an immediate ship opening, let’s say, in the next 6 months might get double what she would get for a 6-month period than what she would get for a 3-year period. It’s just a matter of negotiation.

Stephanie Moore, Analyst, Jefferies: Understood. Thank you. You continue to talk about being selective and disciplined regarding fleet renewal. Can you maybe just highlight what your ideal replacement profile looks like? Ship size, age, eco specification, and the like, maybe a timing or preferences as it relates to vessel renewal in terms of your broader kind of capital allocation priorities.

Thomas Lister, Chief Executive Officer, Global Ship Lease: Sure. I’ll kick this off, and again, no doubt George will weigh in. Let’s back into this. We’re very comfortable with the size segments upon which we’re focused, which we think provide the right combination of operational flexibility and an attractive risk-return mix, by which I mean we’re going to stay focused upon the roughly 2,000 to roughly 10,000 TEU size segments when it comes to renewal. If you were to offer us the perfect choice, it would probably skew towards the mid and upper end of that, so call it somewhere between 6,000 and 10,000 TEU or so. In terms of age of asset, we’re not dogmatic. We look at every project or every prospect on its own merits. As you’ve seen, we’re willing to look at ships with charters attached.

We’re willing to look at ships on a speculative basis as long as the pricing is very much towards the bottom of the cycle and downside risk is minimal, and we’re also willing to contemplate new builds. There’s no dogma on that. We’ll look at every deal on its merits, we will continue to focus upon the same size range as is our current focus.

Stephanie Moore, Analyst, Jefferies: Great. Well, thank you so much.

Thomas Lister, Chief Executive Officer, Global Ship Lease: My pleasure.

Franz, Conference Call Operator: Your next question comes from Omar Nokta from Clarksons Securities. Please go ahead.

Omar Nokta, Analyst, Clarksons Securities: Thank you. Hi, George, Tom, and Tasos. I do have a couple questions. Maybe just first back onto those 3 ship sales. Tom, you highlighted $52 million combined price looks fairly decent, also you get to generate what looks like perhaps maybe $20 million or so of EBITDA until you sell them. I think just looking at that, it suggests that ship values are quite a bit firmer, certainly than what the share price implies. Just wanted to get a sense from your angle, is this something broad-based across all container ships, or is this perhaps an arb that you’re able to capture just given that these vessels are maybe later in life? Yeah. Just wanted to get a sense in terms of where you see values from here. Is it very firm on the back end versus what we think?

Thomas Lister, Chief Executive Officer, Global Ship Lease: That’s a sort of multi-million or multi-billion dollar question. Omar, I don’t have a clear and crisp answer for you, but what I can tell you is obviously from an owning perspective, the option value on an asset reduces as that asset ages. Typically, our view is that it’s possible to make much more money from holding and continuing to operate a vessel in the charter market. You’ll see from the chart in the pack, which contrasts the way in which charter rates, asset values, and new building values fluctuate through the cycle, and there’s always much more upside volatility in charter rates than there is even in secondhand values. It generally makes sense to hold onto the ships, keep chartering them, and keep locking in additional revenues.

However, when you get to ships which are, well, these are going to be between 25-27 years old by the time they’re sold, that option value comes down somewhat. We liked the economics that you’ve just laid out of retaining the contracted EBITDA until they’re delivered, and then divesting them at that price. Whether you can draw anything broader from that on where asset values are today or are likely to remain, very, very difficult to say. I think we’re in a world where making bets on what will happen in the future or even tomorrow, it would take a brave man, probably a braver man than me. George, do you want to add to that?

George Youroukos, Executive Chairman, Global Ship Lease: No, the golden rule for shipping is the entry point. If you’re buying an asset at the right price, it’s only upside potential that you have to worry about rather than downside. The way we look at transactions is protecting the downside first and foremost, the upside will come if we have bought the asset at the right price. This is in general our theory, which I think it’s the golden rule of shipping.

Omar Nokta, Analyst, Clarksons Securities: Yeah. The GSL way. Well, it certainly seems that the exit point here is quite a bit appealing. Just to follow up, second question. You’re now officially in a net cash position, and that looks to widen now as we move ahead here over the next several quarters with no major commitments. Does buying back stock here make any sense? Do you prefer to go in that direction, or do you think it’s best to maybe stay conservative, build a bit of cash, and you continue to focus on maybe repaying debt?

Thomas Lister, Chief Executive Officer, Global Ship Lease: We think the latter of those two positions, Omar, makes most sense. It’s not only a question of de-levering, but it’s also building dry powder for opportunistic acquisitions when the right opportunities arise. We do keep an eye on share buybacks from an opportunistic perspective, and I think the average price at which we’ve bought back shares has been roughly 18 and a half, so $18.50 or thereabouts through the cycle, where we felt that there was a structural disconnect between where the business was being valued and the intrinsic value in the business, so we pounced on it. At the moment, we think de-levering and building dry powder is the right strategy for where the market is in terms of both risk and opportunity at the moment.

Omar Nokta, Analyst, Clarksons Securities: Thanks, Tom. That’s a very good commentary. Thanks, George. I’ll pass it back.

Franz, Conference Call Operator: Before we proceed, again, if you want to ask a question and join the queue, simply press star one. Your next question comes from Clement Molins from Value Investor’s Edge. Please go ahead.

Clement Molins, Analyst, Value Investor’s Edge: Hi, good afternoon. Thank you for taking my questions. I wanted to follow up on Liam’s question regarding fleet renewal. A couple of the vessels sold are on the smaller sizes, and you have a few more vessels also on the older end on that side of the fleet. Would you be comfortable downsizing the feeder size further if you don’t come across interesting acquisition opportunities? Is there, let’s say, minimum size you’d like to maintain there?

Thomas Lister, Chief Executive Officer, Global Ship Lease: Hi, Clement. Thanks for the question. We sort of tried to address that at least in part, in our answer to Stephanie a little earlier. While we like the 2,000-10,000 TEU segment, broadly speaking, if given our choice, we would weight our fleet renewal towards probably the upper half, let’s call it the 6,000-10,000 TEU range. We’re not dogmatic about a particular size category, so once again, we will either invest or divest assets where we think the returns are likely to be most favorable for the company and for shareholders.

Clement Molins, Analyst, Value Investor’s Edge: That’s helpful. Thank you. I also wanted to ask a bit about the effect the Middle East situation is having on the market. Could you talk a bit about whether you’ve seen a sizable increase in congestion in regional ports outside the Strait? Are you seeing any other ripple effects?

Thomas Lister, Chief Executive Officer, Global Ship Lease: Yes. It’s hugely disruptive. We’re seeing ripple effects throughout liner companies’ networks, and one of the most recent ones we became aware of is congestion in the Panama Canal, of all places, as lines look to redirect vessels and optimize their networks. Yes, you’re absolutely right. There is disruption in terms of congestion, both at choke points like canals and also in ports. There are also disruption associated with challenges for the liner operators getting fuel into the right places. Not only the challenge of getting fuel into the right places, but also the cost of fuel. As bunker costs rise, the lines try to reduce fuel burn to reduce costs, and the only way to reduce fuel burn is to slow ships down. We’re seeing networks slowing down, which means you need more ships to carry the same volume of cargo.

We’re also seeing, to your point, congestion both in ports and transit locations. Yes, big ripple effects.

Clement Molins, Analyst, Value Investor’s Edge: Thanks for the color. That is very helpful. I will turn it over. Thanks for taking my questions, and congratulations for the quarter.

Thomas Lister, Chief Executive Officer, Global Ship Lease: Thank you very much, Clement.

Franz, Conference Call Operator: No further questions at this time. I would now like to turn the call back over to Thomas Lister for the closing remarks. Please go ahead.

Thomas Lister, Chief Executive Officer, Global Ship Lease: Well, thank you very much, everyone, for joining our One Q call. We wish you a very good summer and look forward to talking to you again on the event of our second quarter call. Thank you again. Bye-bye.

Franz, Conference Call Operator: Ladies and gentlemen, thank you all for joining, and that concludes today’s conference call. All participants may now disconnect. Thank you.