FLEX LNG Ltd

NYSE:FLNG

Earnings Call Analysis

Flex LNG Reports Steady Q4 Results

Flex LNG revealed Q4 revenues of $97.2 million with net income at $19.4 million and an adjusted net income of $37.8 million. EPS stood at $0.36, whereas the adjusted EPS was $0.70. The company expects Q1 revenues around $90 million with adjusted EBITDA of $70 million, guiding Time Charter Equivalent earnings between $75,000 to $80,000 per day. For 2023, dividends were $3.125 per share, reflecting an 11% yield. Past guidance was accurate, with 2023 revenues reaching $371 million and an adjusted EBITDA of $290 million. A live Q&A webcast is planned to discuss these details further.

Presenting Flex LNG's Financial Outcomes for Q4 and FY 2023

Flex LNG's CEO Øystein Kalleklev delivered a confident review of the company's Q4 performance and full-year results for 2023. Revenue for Q4 was reported at $97.2 million, fitting snugly within the anticipated range of $97 million to $99 million. The quarter saw a net income of $19.4 million and an adjusted net income of $37.8 million. The company prefers to present adjusted earnings figures, which account for realized gains while omitting the influence of unrealized gains or losses on derivatives, providing a more stable earnings perspective. This adjustment resulted in earnings per share (EPS) of $0.36, and an adjusted EPS of $0.70.

Navigating the Seasonal Shifts in the LNG Freight Market

Flex LNG has acknowledged a market cooldown post the high demands of the heating season. This pattern aligns with the historical seasonal trends, indicating a normal ebb and flow in the LNG freight market. Adaptation to these shifts is crucial for the company to maintain its profitability throughout the year.

Strategic Charter Moves Strengthen Stability

The company recently heralded an extension of the time charter for Flex Resolute by two additional years, stretching from the first quarter of 2025 to the first quarter of 2027, with the option for further extension. Meanwhile, Flex Constellation's three-year time charter is coming to an end, setting the stage for its return to Flex LNG's fleet in late Q1 or early Q2. These charter movements reinforce the company's strategy to secure long-term contracts for stable revenue streams while remaining agile to redeploy their vessels as needed.

Forward Guidance Indicates Modest Revenue Decline

Looking ahead, the company has provided guidance for the next quarter. Daily Time Charter Equivalent (TCE) earnings are forecasted between $75,000 and $80,000. This guidance suggests that Flex LNG expects their revenueto hover around $90 million, with an adjusted EBITDA in the realm of $70 million, indicating an anticipatory decline in revenue, which the company is poised to navigate.

Efficiency Gains from Reduced Dry Docking Needs

For the current year, Flex LNG forecasts a reduction in dry dockings with only two scheduled, in contrast to the four completed last year. This operational efficiency gain could lead to lower maintenance costs and downtime, helping to bolster the company’s financial performance.

Maintaining Investor Confidence with Steady Dividends

In a strong show of confidence in the company's performance and future prospects, the Board has declared a dividend of $0.75 per share for the quarter. This brings the annual dividend to $3.125 per share, translating to an 11% yield based on the current stock price - a figure likely to be attractive to yield-seeking investors.

Fulfilling Financial Predictions Builds Credibility

Flex LNG prides itself on its credible guidance, having closely met its revenue forecast of around $370 million for the year with $371 million actual revenue. The company's actual TCE for the year came in just shy of the predicted $80,000, at $79,500, manifesting a slight but acceptable deviation. As for adjusted EBITDA, the guidance of $290 million to $295 million was on the mark with a $290 million actual, reinforcing trust in the reliability of the company's outlook.

An Incentive for Engagement: Win With Intriguing Inquiries

Further building rapport with investors, Flex LNG offers a unique incentive for engaging with their live webcast Q&A sessions. By sending in compelling questions, participants stand a chance to win branded merchandise. This approach underscores the company's commitment to maintaining a close and interactive relationship with its shareholders.

Earnings Call Transcript 2023-Q4

[Øystein Kalleklev, executive]

Hi, everyone. I'm Oystein Kalleklev, CEO of Flex LNG. And today, 7 February, we are presenting our Q4 numbers and the full year 2023.

So let's review the highlights. Q4 revenues came in at $97.2 million. This was in line with the previous guidance of between $97 million to $99 million. Net income and adjusted net income came in at $19.4 million and $37.8 million, respectively. In the adjusted numbers, we only include the realized gains while we are not including the unrealized gain and loss on derivatives. This means earnings per share and adjusted earnings per share came in at $0.36 and $0.70, respectively.

The LNG freight market have been coming down after the peaks. This is according to the seasonal trend with softer market now on -- when we are coming out of the heating season.

We recently announced an extension of the time charter for Flex Resolute. She has now been on 2 years of our 3-year time charter, and the charter which is a super major, have notified us that they will extend the contract from first quarter of 2025 to first quarter of 2027, where they have an option to extend further by 2 additional years.

We have also got a notification that we will have redelivery of Flex Constellation. She has been on a 3-year time charter and will be redelivered to us in end of Q1 or early Q2 this year.

For next quarter, we are guiding TCE, Time Charter Equivalent earnings of somewhere between $75,000 to $80,000 per day, which should give revenues and adjusted EBITDA of somewhere around $90 million to $70 million, respectively.

For this year, we only have 2 dry dockings. Last year, we had 4 ships during the 5-year special survey. We expect to dock Flex Constellation end of first quarter and then the sister ship Flex Courageous during second quarter.

So we've got good numbers. The Board is happy to announce another dividend of $0.75 per share for this quarter. That means we have declared dividends of $3.125 for the full year 2023, which implies with the current stock price, a yield of around 11%.

So let's also look at how we have performed in relation to the guidance we provided. So for the year, we guided revenues of around $370 million. And during the quarters, we have delivered revenues of $371 million. TCE for the year, we guided at approximately $80,000. We delivered $81,100 in the Q4 and the average for the year came in at $79,500 per day.

The last measure we guided on was adjusted EBITDA, where we guided $290 million to $295 million, and we delivered an adjusted EBITDA for the year of $290 million. So what we say is what we do, and we will talk more about these numbers, the market in general, when we are doing our live webcast at 3:00 Central European Time, 9:00 Eastern Standard Time, and we will conclude that presentation with, as usual, our Q&A session. And this time also, the best question will have a gift. And this time, we have some beanies from Amazon in different colors with the Flex logo. And it's quite cold here in Oslo these days, and it's getting colder, so it's nice to also have a neck warmer from the same brand. So please join our presentation, send in some good questions, and you can win these good gifts. Thank you, everybody.