Earnings Call Transcript - GSL Q1 2021

Ian Webber, CEO

Good morning and good afternoon, everybody, and welcome to our First Quarter 2021 Earnings Conference Call. The slides that accompany today's presentation are available on our website, www.globalshiplease.com. Slide 2 and 3, 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 19th of March this year. You can obtain this via our website or via the SEC's. All of our statements are qualified by these and other disclosures in our reports filed with the 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, you should refer to the earnings release that we issued this morning, which is also available on our website. As usual, I'm joined 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 some high-level commentary and an update on our current areas of focus. And then Tassos, Tom, and I will take you through our recent achievements, quarterly results, financials and the current market environment. After which, we'll be pleased to take your questions. Turning now to Slide 4, I'll pass the call over to George.

George Youroukos, Executive Chairman

Thank you, Ian, and good morning or good afternoon to you all. Simply put, this has been a great quarter. It's been great for the industry in general. It's been great for our liner customers and it's been great for Global Ship Lease. The strong containership market momentum of late 2020 has further accelerated in 2021, positioning the sector for levels of profitability not seen in many years. No doubt, you have seen the earnings guidance upgrades put out by the likes of Musk. Port delays, equipment shortages and congestion in the Suez Canal have helped at the margins by tying up containership capacity. But this strong market is actually based on strong fundamentals, particularly for the size segments we focus on. And we expect these fundamentals to be sustainable well beyond when some of the temporary factors eventually dissipate, which I will tell you more about shortly. In line with our longstanding strategy, we're taking advantage of the opportunity presented by this red-hot market to lock in upside for extended durations and to deliver sustainable and accretive contracted revenue and earnings growth. Since the start of the year, we have concluded 11 new charters for terms ranging from 21 months to over four years on our existing fleet, adding over $280 million of contracted cover. And we have contracted to purchase and are in the midst of taking delivery of seven ships, all of which have charters attached. We have also taken the opportunity to refinance a little over $330 million of our 2022 debt, pushing maturities out to 2026 and reducing annual debt service by almost $20 million. The rating agencies have clearly appreciated all of the above and have upgraded our credit ratings to B+ Stable and B2 Positive. On the right of this slide, you can see that we have grown our quarterly revenue to $73 million, our adjusted EBITDA to $44.7 million, and our normalized net income to $17.8 million. And we strongly believe that we're well-positioned for further earnings growth, both from logging in high charter and longer charter terms on our existing ships and by continuing to grow selectively and accretively. On the back of all this, we have declared a quarterly dividend of $0.25 per quarter, which will be paid on June 3 to shareholders of record on May 24. This is more than double the $0.12 per quarter we announced in January; since then we have agreed to purchase seven ships, four of which are already in our fleet and contributing to earnings and have added additional charter cover at higher rates for longer periods. Basically, we strongly believe in the sustainability of earnings and we're putting our money where our mouth is. If you now turn to Slide 5, I'll give you a helicopter view of the dynamics shaping our industry and explain to you why we believe that the best is yet to come. We all know that container shipping had a remarkable 2020, despite global volumes falling by 2% year-on-year. So with volumes expected to grow in 2021 by almost 7%, well in excess of supply growth, it makes sense that the market continues to tighten and chartering continues to strengthen. And to be perfectly clear, this volume growth figure represents the underlying demand for containerized freight to be moved. So our expectation of the market tightening does not depend on factors like port delays and other such temporary impacts of COVID. The question is what happens next? And here, I point you to the top chart on the left of this slide, which shows containerized demand growth forecasts. The dark blue bars and supply growth forecasts are shown in two ways. The pale blue bars show supply growth for the global containership fleet as a whole, while the red bars show supply growth specifically for the mid-sized and smaller ships we focus on. These are the bars to look at, which as you can see represent a tiny and encouraging picture. I hope you will agree, especially when you consider that CPS slots are already pretty much full all the way into 2024. The data shown here assumes zero scrapping, so if anything may even overstate supply growth. That brings us to the ever-growing pressure on the industry to decarbonize, coming both from capital providers and other stakeholders putting increasing emphasis on ESG and from a growing pipeline of regulations aimed at enforcing carbon reductions over the coming years. As you will have read, considerable work has been done on developing green fuels and proportional technology. There are certainly a number of existing prospects being discussed, but in reality, it will be a number of years and many billions of dollars before these fuels and, crucially, the energy chain and shore-side infrastructure required to support them are in place at any meaningful commercial scale. In the meantime, the only way that the industry can materially reduce emissions is to reduce speed, full stop. This is exactly what is contemplated by the new IMO initiative EEXI, which is expected to be implemented from January 1, 2023. EEXI will effectively require ships already on the water to meet the emission standards required of newly built ships, and a large portion of the global fleet will only be able to achieve this standard by slowing down. The interesting part is that if you speed ships up, you increase effective capacity, allowing them to carry more cargo. As you can see from the chart at the bottom left, that's what the liner operators have been doing; our supply has to go tighter. So what happens when EEXI forces ships to slow down? The answer is that effective capacities will reduce; the rule of thumb is that reducing the average speed of the global fleet by one knot is equivalent to reducing effective capacity by 5% to 6%. Long story short, we see today's capacity crunch and the resulting high earnings continuing for some time yet. On that note, I'll hand the call over to Ian.

Ian Webber, CEO

Thank you, George. Please turn to Slide 6. One of our principal objectives is to deliver earnings growth from both locking in higher rates for longer durations on our existing ships and from accretive acquisitions. This first quarter we've done both with charter renewals and the agreed acquisition of the seven 6,000 TEU ships bringing total forward contracted cover to around $984 million spread over 2.6 years. As usual on this slide, we show our contract cover and charter portfolio; the pale blue bars show charters already in place when we started 2021, our dark blue bars show the 11 new charters that we've agreed since January 1. As you can see, building on an already strong second half of 2020, rates have just got stronger and charter terms longer as this current year has progressed. We were pleased to have fixed an over 20-year-old 2,500 TEU feeder vessel, the Maira, early in January this year at a little over $14,000 a day, substantially higher than the prior charter, which was $8,000 a day. But we've recently fixed her sister, the Newyorker, through mid-2024 at $20,700 a day. That should give you a sense of how the market is continuing to evolve and it's by no means an outlier this fixture. In fact, the story is replicated across all size categories. Those of you who have been with us for a while will recall that we acquired the GSL Nicoletta and the GSL Christen, two 6,800 TEU ships for about $13 million each back in early 2020. Those have now been fixed on multi-year charters at rates north of $35,000 a day, which should generate approximately $10 million of EBITDA each per year, not far short of the purchase price of the vessels. We have another seven ships coming open in the balance of 2021 and more in 2022. As you can imagine, we may likely have to wait until the very end of the current charters or redelivery windows before we can redeploy the ships or extend them at higher rates. In today's tight supply environment, charters will hang on to ships, especially at below-market rates for as long as they possibly can, so that pushes you out to the end of the redelivery window. In the middle of the slide, with the names in red, you can see the seven ships that we've contracted to purchase with the charters attached. Four of these ships were delivered in late April, a little earlier than we were expecting, and the remaining three will deliver later this quarter or early next. If you now turn to Slide 7, I'll recap why these seven ships that we're welcoming into our fleet are such an attractive investment, and such a clear illustration of our value-accretive growth strategy. In short, firstly, we focus on existing ships with charters attached or arranged in tandem with the purchase, which are immediately accretive to cash flows. This is as opposed to new buildings, for which there can be a two- or three-year wait before the vessels come online, earning revenue, during which time the owner has to fund all – or has all of the funding costs. We expect these seven ships to add approximately $29 million to annual adjusted EBITDA. We're risk-averse. Secondly, we look for good returns right out of the gate on assets with low economic depreciation, limited residual value risk, and compelling upside potential. These seven ships fit the bill perfectly. They have at least three years of contract cover, deliver a purchase price to EBITDA multiple of approximately four times, push net income and earnings per share up significantly, and have good downside cover with scrap value alone equivalent to about 60% of the purchase price. Thirdly, the ESG and economics trends of our strategy are well aligned. Our view is to take a full life cycle approach to the carbon footprint of ships. This means considering the footprints associated with building and recycling ships as well as operating them. We believe that it only makes sense to build new ships when we and the industry in general know how they’re going to be powered on a sustainable basis. Until then, in our view, it’s better to optimize and, where possible, extend the economic life of existing ships, such as the seven we've just purchased. Fourthly, we look to stay flexible and agile. We aim for attractive investment returns within five years or less, allowing us to adjust our strategy to the evolving decarbonization environment. Our aim is to position GSL to be legacy problem-free and with a strong cash position to be able to capitalize on next-generation green technologies as they mature over the coming decade. With that, I'll turn the call over to Tassos to talk you through our financials.

Tassos Psaropoulos, CFO

Thank you, Ian. This has been a busy quarter with a significant number of moving pieces in our financials. We have summarized the key points for you on Slide 8. Revenue for the quarter was $73 million, up from $70.9 million in the first quarter of 2020. Similarly, adjusted EBITDA was $44.7 million, up from $40 million in the first quarter last year. Normalized net income, which adjusts for one-off items, was up from $10.5 million to $17.8 million. I'd like to spend a moment on the one-off items. Firstly, we have remained very active with refinancings, most notably the 9.875% notes, which were due in 2022 and were replaced by a five-year facility with Hayfin maturing in 2026. When taking the notes out, we were obliged to pay a whole premium just under 2.5%, which amounted to $5.8 million. Furthermore, we had to write off the remaining deferred financing costs and original issue discount associated with leases of the notes back in 2017, resulting in non-cash charges of $4.8 million. In a partial refinancing repayment of the 10% junior debt associated with the Blue Ocean facility, we incurred a prepaid premium charge of $1.6 million. Additionally, there was a non-cash adjustment of $1.3 million associated with management stock awards in the quarter, partly for new awards for additional members of staff and partly for acceleration of existing awards as best incentive that were met. Now moving to the balance sheet items, there are various points to highlight. Our cost position at March 31, 2021, was $162.7 million. As I've alluded to above, we successfully refinanced a total of $330.6 million, pushing those maturities out to 2026, reducing annual debt service by over $19.8 million and bringing down our blended cost of debt from 6.4% to 5.5%. Meanwhile, we raised $43.7 million of unsecured paper year-to-date under our ADM programs, further increasing our flexibility. Now for the seven ships we have contracted to purchase, we have lined up financings of $64.2 million, of which we have drawn down $32.1 million for the three ships delivered so far. We are finalizing additional finance of $14.7 million, which we expect will be completed in the upcoming days for the fourth ship. On the equity front, we raised approximately $72 million of common equity back in January, including green fuel. This, combined with the conversion of all of our Series C preferred common shares on completion of the notes refinance and adjustments for the share incentive program, brings our share count as of March 31, 2021, to 36.3 million. Finally, just after the end of the quarter, we executed a non-dilutive secondary offering for our common equity that materially increased the size of our free float and meaningfully diversified our shareholder base, which we believe significantly improves the attractiveness, liquidity, and stability of our common stock for a growing group of potential investors. Passing over the detailed financial statements, which appear in full on Slides 9 through 11, I would now like to spend a little time on the data calculator slide, Slide 12, which is intended to help you with your modeling. The table on the left-hand side is designed to allow you to plug in revenue assumptions for vessels coming open in 2021 and 2022. Please note that given the strength of today's market, the open days for 2021 are based on the conservative assumption that charters will only redeliver ships with below-market existing charters at the very end of the permitted windows, as Ian mentioned before. For 2022, we have reverted to our usual assumption that ships will redeliver in the median of their windows. On the right-hand side, we have provided some reference rates; I must emphasize that these are not forecasts and are simply intended to help you benchmark historical averages and those prevailing at the end of April 2021. I highlight that the latter are based on three-year charters, as that term rather than the traditional six to 12 months fixture is what is actually happening in the market.

Tom Lister, Chief Commercial Officer

Thanks, Tassos. So Slide 14 is intended to highlight the ship sizes on which we're focused, which will help put the subsequent slides in proper context. As you can see here, we're focused on mid-size and smaller ships, which is shorthand for ships ranging from about 2,000 TEU up to roughly 10,000 TEU. The top map on the left shows the deployment of our sizes of ships by ships under 10,000 TEU and emphasizes their operational flexibility. They’re deployed pretty much everywhere. The bottom map on the other hand shows where the big ships, those larger than 10,000 TEU, are deployed, which tends to be the East-West main lane or arterial trades where the cargo volumes and, crucially, the shore-side infrastructure can support them. It's important to note that roughly 70% of global containerized trade volumes are actually moved outside these main lanes, in the North-South regional and intermediate trades served by ships like ours. Turning now to Slide 15. This slide 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 March was 1.5% and has since fallen to below 1%; this is pretty much full employment and explains why, as George pointed out earlier, the liner operators have had little choice but to speed up their ships to try to accommodate growing demand. The bottom chart tells a similar story; ship recycling or scrapping has been almost non-existent for container ships this year. Why? Because the charter markets and earnings environment are so hot. Why scrap a ship if you can squeeze a few more millions of EBITDA out of it? So that's the baseline; full employment of the global fleet, which sets us up nicely for the next slide. Slide 16 shows the various feedside segments that have grown over the last few years. The segments we're focused on, those sitting in the red box, have seen negligible or even negative fleet growth due to under-investment. This phenomenon carries through to the chart on the right, which shows the order book pipeline for deliveries through to 2024. Again, the fleet segments in the red box, our segments have minimal order books. As you can infer from the chart, the flurry of ordering activity that you would have read about has been heavily focused on the big ships above 10,000 TEU, in other words, not on a sector in which we compete. This explains why the order book to fleet ratios for our focus and core segments are 2.7% and 0.6%, respectively, versus that for the overall order book as a whole of 15.6%. So what's all this done for earnings in the container ship charter market? For the answer, please turn to the next slide, Slide 17. Here, a picture tells a thousand words, and you can see for yourselves the current levels and trajectory of charter rates for the various benchmark sizes in the liquid charter market. These rates are based on indices for six to 12 month charters, while the market is really shifting to a multi-year focus, as Tassos just mentioned, but the directionality and the narrative are effectively the same. Overall, it points to a fantastic market. On that high note, I'll turn the call back to George to wrap up.

George Youroukos, Executive Chairman

Thanks, Tom. I will very briefly summarize, and then we will be happy to take your questions, everyone. In a very strong market, we have materially increased our contract cover in both duration and dollar amount, as we have signed and expect to continue signing charters with more attractive rates and longer durations that have been available in the market for many, many years. Our balance sheet is in a very good place, with substantial cash on hand and improved credit ratings, as usual, proactive refinancings, and the most durable access to diverse capital sources on attractive terms. We have an attractive fleet of high-account, mid-sized Post-Panamax and smaller container ships, which are well-supported by supply-side fundamentals. Idle capacity in these classes is already essentially non-existent, even with a global fleet having sped up in recent quarters. The order book below 10,000 TEU remains negligible, with CPR capacity discussed in the coming years and emissions regulation coming from early 2023 that we believe will shrink effective capacity as ships are forced to reduce speeds in order to achieve compliance. The market is in an excellent position with both freight rates and charter rates continuing upward. Our customers in the liner sector have reportedly very impressive results to date and have provided eye-catching guidance for the duration of the year. To put the current market in context, spot market charter rates have tripled and quadrupled since their lows at around this time last year, and rather than being fixed for months, charters are being agreed for multi-year terms. The safety and welfare of personnel at sea and on shore remains our highest priority, at the center of components of the ESG culture embedded in the way we do business. We have delivered on our long-held strategy priority of refinancing our 9.875% notes and we've implemented and now declared a quarterly dividend at more than double the amount we indicated earlier, due to growth into the continuing strength of the market. We intend to stay active in chartering ships at good rates as they come open, and we will continue to actively evaluate and selectively act on accretive growth opportunities that meet our criteria. With that, I would be happy to take your questions.

Operator, Operator

Our first question comes from Randy Giveans with Jefferies.

Randy Giveans, Analyst

How are you gentlemen, how is it going?

Ian Webber, CEO

Good, Randy.

Randy Giveans, Analyst

Yes, I can imagine it's going pretty well. I guess for the recently announced dividend, I guess first, how was that amount decided? You increased it from $0.12 to $0.25. Any positive surprise here? Is this a fixed dividend for the foreseeable future or is this something you kind of continue to play on growing on an annual basis? And then yes, how do you get to that kind of $0.25 number?

George Youroukos, Executive Chairman

Yes, sure. Yes, of course. Thanks for the question, Randy. We derived the number much in the same way as we derived the $0.12 in the first place, but obviously we've taken into account developments in the last three months. We announced the $0.12 dividend back in January, and since then, as you know, we've agreed to acquire seven 6,000 TEU vessels, four of which have been delivered and are earning revenue as we speak, a little earlier than we were expecting and obviously not included in the $0.12. We've refinanced a bunch of debts, as Tassos referred to, which has reduced our debt service significantly on an annual basis. The charter market continues to improve significantly, and we've been able to add contract cover not only at higher rates but crucially in the context of sustainable cash flows for longer durations. We continue to see fundamentally supportive market on the supply-demand side as we've talked through in our prepared remarks — decent demand growth, limited supply growth, if you look at it totally. Our crunching the numbers led us to reassess that $0.25 was a sustainable dividend, and in the light of how we've approached, I think the dividend we should return that capital to investors. It is worth noting that we retain substantial investment capacity, so please no one think that we've given up on growth and therefore we're returning capital to investors; we see plenty of growth opportunities there as well. Yes, we do see this as a fixed dividend; it's not a special dividend, it's not a one-off, we expect it to be recurring on a quarterly basis and we'll keep it under review as the business develops, as hopefully we're able to add additional vessels on an accretive basis to the GSL fleet, we can look at increasing the dividend if the indications are that’s the right thing to do.

Randy Giveans, Analyst

No, that was good. I guess you segued into my next question. Obviously, following these pretty busy months on the financing side, the capital raising coupled with the very strong market, you mentioned GSL is still in very strong shape financially, probably at its strongest than it's ever been. Clearly, this has shown with the dividend increase. So I guess, how do you balance from here? Is it further acquisitions? Is it more kind of de-levering, paying down expensive debt? And then is there a baseline cash balance or leverage ratio that you're targeting?

Tassos Psaropoulos, CFO

Well, Randy, if I may say something on that. We like always to crawl before we walk, then to walk before we run. We are very risk averse as a management team. We continuously stress-test our company with the models that take the worst of the worst cases to ensure we can sleep at night. So yes, the intention is to grow and we are working on various opportunities to grow the company, but at the same time, the leverage. We do not intend to increase our leverage; rather, we intend to reduce our leverage going forward more and more. We intend to build a very strong company because strong companies are those that can be powerful in all market conditions and not just in a great market, and then when the market changes, you feel that change. We are making our balance sheet very strong; we are de-leveraging and we're growing very selectively and carefully. What we've said to the investors in our various roadshows that you've been part of is that we want to do deals that are immediately accretive to our balance sheet, and that will prove now by increasing the dividends to more than double the dividend, which shows that the deals we're doing are bringing the money straight to the investors.

Randy Giveans, Analyst

Got it. Make sense. And then lastly, real quick on Slide 6, you have the charters that are coming available. I think you said seven ships coming due by the end of the year. I guess, how do you maximize return there, in terms of rate versus duration? Is there a relatively larger discount for two-year or three-year charters? Or are you looking to kind of maximize the one-year value on those? Or on the other side of the equation, do you sell those older ships once the current charter expires? What are your thoughts on those options?

Tom Lister, Chief Commercial Officer

Generally speaking, as a rule of thumb, you always make a lot more money in containers by retaining the asset rather than selling the asset. You make more money with the cash flows, you can look into, than selling the asset. The intention is to grow this, to charter the ships as long as possible, at as high a rate as possible. In today's market, the norm for the sizes, up to let's call it, I don't know, 2,500 is I would say two to three years, maybe even longer, but two to three years is the normal thing. There is no discount for two to three years; this is the market. If you would be looking to extend further than three years, then you might have a 10% to 20% discount. But having assets that are middle-aged or older in these smaller categories that we have open now, we feel that we want to get the maximum out of these ships by chartering them as long as we can at today's rates. So that's the strategy on this smaller segment, let's call it. Middle-sized segments are definitely long; this is three to five years, easy. And on the large ships, it's at least five years as the norm. So we intend to at least fix our ships for smaller ships at a minimum of three years, mid-sized ships at a minimum of three years, and larger ships at a minimum of three to five years. We intend to keep on doing what we've been doing successfully, looking for more cash flows for building up liquidity in the company, making the common stronger, reducing debt and growing, as well as giving dividends to shareholders, like we have done.

Randy Giveans, Analyst

Sure. Got it. Make sense. Whatever you're doing is working. So keep it up. Thanks.

Tom Lister, Chief Commercial Officer

Thank you.

Frode Morkedal, Analyst

Yes. Thank you, George. You mentioned slower speeds to meet the IMO carbon regulations coming due in 2023. So I'm curious if you could try to quantify, I think that maybe if you look at your own fleet, what roughly portion of that fleet need to slow down the speed to be compliant? And or if you have like for the whole world fleet, of course, that would be better.

George Youroukos, Executive Chairman

Yes. Thank you. I will just say something that is interesting. Before 2019, up to 2019 inclusive, the speed of the ships going from, let's say, the Far East to the West, whether it's Europe or the United States, was about 18 knots, and the way back it was 16 knots, the return voyage. So the average was 17, so ships were trading with an average of 17. Today, this has gone to 21 knots towards from the Far East towards the West and returning at 20 or 19, so call it 20 knots average. So this is 3 knots higher average than it used to be. That's an important point to remember, and that has happened because there are not enough ships out there, and the liner companies, in order to compensate, are increasing the speed of the ships. Now come January 2023, I would say more than 80%, Tom knows this in more detail, the numbers, more than 80% of the fleet will have to slow down from today's speeds of 20 knots to, I would say probably 19 to 18, so a couple of knots lower speeds. That is also applying for GSL’s fleet; approximately 80% of our fleet will need to comply. We have 50 ships, of which nine are of the new technology; those ships do not have to slow down to meet the standards, but the rest of the fleet has to slow down. That's the proportion of the world fleet of modern ships; to classic, I would say probably 85% is classic and 15% is new design. Therefore, 85% of the fleet will have to slow down by a couple of knots, which means roughly a reduction in fleet capacity as of today of 5% to 6% to 10% reduction, effectively shrinking the fleet by 6% to 10%.

Tom Lister, Chief Commercial Officer

Just to add to that further, as George says, Eco ships, the latest generation of containerships, are less likely — materially less likely to be affected by EEXI than non-Eco ships. I think it's worth emphasizing, but if you look at the mid-sized and smaller ships, so the segments that we're participating in, and you look at the peer group, just the global peer group of ships within those segments of up to say, 7,500 TEU, comparatively few — I would say certainly under 20% of the ships in those mid-sized and smaller segments are Eco. This means that the mid-sized and smaller segments are likely to be disproportionately affected by the implementation of EEXI. In other words, mid-sized and smaller ships are more likely to have to slow down and more likely to have to slow down further than the larger segments, which is, of course, great news in terms of the sort of supply tension within those mid-sized and smaller segments.

Frode Morkedal, Analyst

That's some great numbers you gave there. If you compare that to the expected fleet growth, we should be looking at negative fleet growth, right?

Tom Lister, Chief Commercial Officer

I mean, that's the conclusion.

Ian Webber, CEO

Yes. That's how we see it.

Frode Morkedal, Analyst

Which is great, and you mentioned a fantastic market. I'm sure you get that question a lot, but what do you say to people who ask, what are going to turn this market down again? So what should investors look at in order to try to be ahead of the curve, so to speak?

Tom Lister, Chief Commercial Officer

Sorry, go for it, George.

George Youroukos, Executive Chairman

Tom, please.

Tom Lister, Chief Commercial Officer

I was going to just give a very hedging answer. I find it very difficult when looking at the supply side of the equation, particularly if you link it up to the decarbonization and EEXI dynamics that we've talked about earlier. I find it quite difficult to envisage a demand side shock strong enough to derail us. I mean, we've just seen in 2020 the impact of a global pandemic, a once-in-a-century, and we hope event, and we've seen container shipping come through it in very, very positive terms. I think that's a helpful reference point, but George, maybe you have something to add or you have a different view.

George Youroukos, Executive Chairman

The only thing I would be worried about is if the global economy would dive materially from where it is today; I don't think that the consensus is expecting otherwise. I say materially meaning very materially that I don't think is in anybody's mind. Now, what is interesting is that in container shipping, every single year for the last 40 years, the previous year to the next year, the cargos are growing, so we've never had negative growth except for two occasions. One occasion was in the meltdown of Lehman in 2009 and the pandemic of COVID. These are such unique situations, and these are the only two times in the history of container shipping that we had not a growth a year, a year of cargo. The question is why that container shipping has been cyclical. The only reason is supply, people were over-ordering. As long as this is kept in check, I would say what Tom says, I'm sleeping peacefully at night, and I'm not worried. And keeping my fingers crossed not to jinx it, but even if it were to jinx it, we would only jinx it from 2025 onwards, because there are no slots available to build ships earlier. The slots of 2024 are finishing rapidly because a lot of other types of ships are being built, not just containers, as you can imagine. The dry bulk is also on the upside; people are building there. There are many more who build, and it's a bigger environment, not in a five minute in the slack hours. Time goes as well and so on and so forth.

Frode Morkedal, Analyst

That's great. Just the final question for me is, assuming when you talked about growth opportunities, you could also look at buying stock?

George Youroukos, Executive Chairman

That is also a possibility.

Ian Webber, CEO

Yes, we are focused on returning capital effectively through stock buybacks and dividends. One factor that we believe has limited our stock's performance recently is the small free float. We have made considerable efforts to increase the free float through both primary and secondary offerings. Additionally, we have successfully expanded sell-side coverage and are committed to supporting the stock price through the implementation and payment of dividends, alongside effectively managing and expanding our fleet. We continuously evaluate all options without ruling anything out or in. For now, our plan is to allocate capital through dividends, accretive growth, and multi-leasing.

Frode Morkedal, Analyst

Thank you very much.

Operator, Operator

Our next question comes from Liam Burke with B. Riley.

Liam Burke, Analyst

Yes. Thank you. George, you mentioned growth opportunities on the acquisition front. Are you seeing more competitive competition on the pricing front? The availability of vessels is tight, and how is that continuing to affect where you see opportunities to add assets?

George Youroukos, Executive Chairman

Yes, Liam, there obviously prices have gone up and they continuously go up. Fortunately, we are always placed to do deals that are off-market and special deals. They have an angle—different angle than a normal standard market deal. We do have a pipeline of such transactions, and we pull a rabbit out of the hat every now and then, as you have seen. That's what we intend to do. We do not intend to get into dogfights with buying a single ship here and a single ship there at high prices. We don't do that; we do more strategic transactions.

Liam Burke, Analyst

Perfect. You mentioned regulation and the slow speeding as an alternative; do you see increased regulation accelerating scrap rates and further benefiting the capacity side of the equation?

George Youroukos, Executive Chairman

That's a Tom question.

Liam Burke, Analyst

Tom, fire away.

Tom Lister, Chief Commercial Officer

Sure. Hi, Liam. I would love to say, 'yes' to the scrapping question, but I think in an environment where capacity is already extremely tight, the fleet is already fully employed, and where the supply side growth from a structural perspective is very limited, I think it's highly unlikely that we see much in the way of scrapping at all, Liam, in the near term. Maybe in the out years, by which I mean 2024, 2025 and beyond, the older ships that are being kept out of the scrap yards now because they're earning so much money will start to be recycled out. But I think near-term, it's unlikely; they're just making too much money.

Liam Burke, Analyst

Great. Thank you very much, George, Tom.

Ian Webber, CEO

Thanks for joining us, listening to our remarks and asking your questions. We look forward to giving you a further update on our GSL and the markets on our second quarter earnings call, which will be early August. Thank you.

George Youroukos, Executive Chairman

Thank you.

Tom Lister, Chief Commercial Officer

Thanks everyone.