Costamare Q2 2024 Earnings Report

Costamare EPS Results

• Actual EPS: $0.77
• Consensus EPS: $0.72
• Beat/Miss: Beat by +$0.05
• One Year Ago EPS: N/A

Costamare Revenue Results

• Actual Revenue: $515.42 million
• Expected Revenue: $380.41 million
• Beat/Miss: Beat by +$135.01 million
• YoY Revenue Growth: N/A

Costamare Announcement Details

• Quarter: Q2 2024
• Date: 7/31/2024
• Time: N/A
• Conference Call Date: Wednesday, July 31, 2024
• Conference Call Time: 8:30AM ET

Costamare (NYSE:CMRE) is a leading owner and manager of containerships, specializing in the acquisition, chartering and operation of modern container vessels. The company secures employment for its fleet under a mix of long‐term and short‐term agreements, providing vital capacity to major shipping lines and leveraging fixed-rate charters to support cash flow stability.

Founded in 1974 and headquartered in Athens, Greece, Costamare has cultivated a disciplined approach to fleet renewal, often overseeing newbuild supervision and shipyard coordination to ensure vessels meet performance and environmental standards. The company also engages in sale‐and‐purchase transactions, optimizing its portfolio in line with market conditions and strategic objectives.

Costamare’s fleet encompasses a range of vessel sizes—from standard feeders to Panamax and post-Panamax ships—allowing it to serve diverse trade routes and cargo requirements. In addition to vessel ownership, the company maintains comprehensive technical management and crew services through affiliated management firms, ensuring high levels of operational efficiency and safety.

With an international presence spanning Asia, Europe and the Americas, Costamare operates offices in key maritime centres including Athens, Monaco and New York. The company’s seasoned management team brings decades of industry expertise, guiding chartering strategies and fleet development to meet the evolving demands of global trade.

Costamare Q2 2024 Earnings Call Transcript

Key Takeaways

• Strong Q2 earnings: Costa Mare reported net income of $91 million and ended the quarter with liquidity of $1.1 billion, underscoring a solid financial position.
• Container ship charters: The company secured seven forward charters generating over $220 million in incremental revenues, with 100% fixed revenue days for 2024 and $2.4 billion of contracted revenues at a 3.5-year average tenor.
• Drybulk fleet renewal: Management sold older Handysize and Supramax vessels and acquired two Capesize ships, while CBI now commercially manages 54 vessels mainly on index-linked charters to reinforce its long-term commitment.
• Leasing platform growth: Nexmo Maritime Leasing has funded 25 shipping assets totaling approximately €285 million and continues to build a healthy pipeline of sale-and-leaseback transactions.
• Financial optimization: The full redemption of Series C preferred stock will save about $10.1 million annually, and refinancing of three drybulk vessels improved funding costs, extended maturities, and left $116 million available for acquisitions.

Presentation

[Operator]

Thank you for standing by, ladies and gentlemen, and welcome to the Costamare Inc. conference call on the second quarter 2024 financial results. We have with us Mr. Gregory Zikos, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session, at which time, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today, Wednesday, July 31st, 2024. We'd like to remind you that this conference call contains forward-looking statements. Please take a moment to read slide number two of the presentation, which contains the forward-looking statements. I will now pass the floor over to your speaker today, Mr. Zikos. Please go ahead, sir.

[Gregory Zikos, CFO at Costamare Inc]

Thank you, and good morning, ladies and gentlemen. During the second quarter of the year, the company generated net income of about $91 million. As of quarter end, liquidity was about $1.1 billion. In the container sector, continued vessel diversions around Africa and the nearly peak season, with higher than expected cargo demand, have resulted in charter rates remaining on an upward trajectory against a backdrop of scarce supply of new tonnage. During the quarter, we chartered on a forward basis seven containerships for a minimum period of between two to three years. The new charter agreements are expected to generate incremental contracted revenues of about $220 million. Our fleet employment stands at 100% and 88% for 2024 and 2025, respectively, and total contracted revenues amount to $2.4 billion, with a remaining time-charter duration of 3.5 years.

[Gregory Zikos, CFO at Costamare Inc]

On the dry bulk side, we are now progressing with our strategy to renew the owned fleet and decrease its harbor size, having concluded the sale of one 2011-built Handysize and agreed the sale of one 2009-built Supramax vessel, while simultaneously acquiring two 2012-built Capesize ships. CBI, our dry bulk trading platform, is commercially managing a fleet of 54 ships, the majority of which are on index-linked chartering agreements. As mentioned in the past, we have a long-term commitment to the sector, which has been a strategic decision for us. Finally, regarding Neptune Maritime Leasing, the platform has been steadily growing, having currently funded 25 shipping assets for a total amount of approximately $285 million on the back of a healthy pipeline. Moving now to the slides presentation. On slide three, you can see our second quarter results.

[Gregory Zikos, CFO at Costamare Inc]

Net income for the quarter was about $91 million or $0.77 per share. Our liquidity was above $1.1 billion. Slide four, we have proceeded with a full redemption of our Series C Preferred Stock, resulting in annual cash flow savings of approximately $10.1 million. Slide five, on the containership side, we have chartered seven containerships with incremental contracted revenues of about $220 million. Our revenue days are fixed: 100% for this year and 88% for 2025, while our contracted revenues are $2.4 billion, with a TEU-weighted remaining time chartered duration of 3.5 years. In parallel, we continue to charter all our dry bulk vessels in the spot market, having entered into more than 25 chartering agreements since our last earnings release. Slide six, we have concluded the acquisition of two Capesize dry bulk vessels, as well as the sale of one Handysize dry bulk ship.

[Gregory Zikos, CFO at Costamare Inc]

In addition, we have agreed to dispose of one more Supramax vessel. Slide seven, regarding CBI, we have chartered in 54 period vessels, where the majority of the fleet is being chartered on index-linked agreements. Our leasing platform has already an investment of about $123 million from our side. As of the date of this presentation, NML is financing 25 ships through sale and leaseback transactions and has a very healthy pipeline. Slide eight, we have refinanced the existing indebtedness of three dry bulk vessels without any increase in leverage. This deal was coupled with improvement of funding costs and extension of maturities. In addition, we have roughly available $116 million for financing of vessel acquisitions. Finally, we do continue to have a long uninterrupted dividend track record. Slide nine, liquidity is above $1.1 billion.

[Gregory Zikos, CFO at Costamare Inc]

This liquidity gives us the ability to look for opportunities to grow the company on a healthy basis. Moving to slide 10, charter rates in the container market have increased across all segments since the beginning of the year, remaining stable the last couple of weeks. The continuing injection of newbuilding capacity remains, however, the principal threat of the market. Idle fleet remains at low levels of 0.6%. Last slide on slide 11, you can see the recent dry bulk market trends in the spot and forward market. The order book is at 9.4% of the total fleet. With that, we can conclude our presentation, and we can now take questions. Thank you. Operator, we can take questions now. Hello. Operator, can you hear us?

[Operator]

Yes, thank you. We will now begin the question-and-answer session. To ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star two. That's star one to ask a question, star two to remove it. We will pause momentarily to assemble our roster. Our first question comes from Ben Nolan from Stifel. Please go ahead.

[Donal Murray, Analyst at Stifel]

Hi, this is Donal Murray on for Ben Nolan. Thanks for taking our question. We were hoping you could add a little rough context on the rate levels for the seven new container ships or the seven new container ship charters you mentioned earlier in your press release.

[Gregory Zikos, CFO at Costamare Inc]

Yeah. These are ships, I mean, we don't announce specifically the charter rates, but these are ships which were chartered on a forward basis. One of them is like 2000-built vessel, so it is like 24 years old. And those have been chartered at a very healthy rate, amounting to the mid-30s.

[Donal Murray, Analyst at Stifel]

Yeah, thanks for that. We were also hoping you can add a little bit of color on your perspective on why dry bulk purchase activity has slowed and your outlook for the rest of the year.

[Gregory Zikos, CFO at Costamare Inc]

Yeah. In total, I mean, you have seen that we have been buying bigger vessels, Capesize, and in total, we have acquired six of those. I mean, five Capes and one 2013-built Ultramax. Now, we are quite price-sensitive, so depending on market condition, our strategy is to dispose of smaller Handysize vessels and then move towards the larger sizes. But it's all a matter of pricing and where asset levels are. So we take our time. I think that the ships we bought up to now, those six ships, they have been bought at quite attractive prices. But at the same time, we don't have to rush. We will sit and wait. And when we feel that the price makes sense, then we have the ability to execute fast based on our cash balances and also access to commercial bank debt.

[Donal Murray, Analyst at Stifel]

Yeah, thank you. That's all.

[Gregory Zikos, CFO at Costamare Inc]

Okay.

[Operator]

As a reminder, if you have a question, please press star, then one. If you are using a speakerphone, please pick up your handset before pressing the keys. Our next question comes from Climent Molins of Value Investor's Edge. Please go ahead.

[Climent Molins, Head of Shipping Research at Value Investor's Edge]

Good afternoon. Thank you for taking my questions. I wanted to start by asking about the strategy on the CBI segment. It seems the proportion of vessels time chartered in on fixed contracts has increased slightly quarter-over-quarter. Could you provide some insight on the reasoning behind this? And is it a directional bet on the market, or are you hedging the positions with FFAs or physical volumes?

[Gregory Zikos, CFO at Costamare Inc]

Yeah, a couple of things. Yes, you are right. It's slightly. There's a slight increase in fixed rate chartering vessels, but this is just because of the specific deals that were available in the market. It's not that we have taken a directional approach that going forward we need to have more ships chartered in on a fixed rate rather than on index. It's just that it happened that those deals with the specific vessels, vessels with specific charter hires, we found them to be attractive, but there is no more than that. We are quite flexible, and depending on market conditions, we may opt to have more vessels on index-linked period or fixed rate to the contrary. So there's nothing specific there. And what was the second part of your question?

[Climent Molins, Head of Shipping Research at Value Investor's Edge]

Yeah, whether this was like it was hedged via FFAs or physical volumes.

[Gregory Zikos, CFO at Costamare Inc]

Yeah, we buy a lot of FFAs, and yes, we definitely use them as a hedging tool. We have quite a book for the FFAs for the Capes and also for the Panamaxes. FFAs can be used as a hedging instrument, or if someone has a positive view on the market and cannot secure assets in the water, can also buy long FFA days. But regarding hedging, yes, this is a hedging tool that we have been utilizing quite a lot.

[Climent Molins, Head of Shipping Research at Value Investor's Edge]

That's helpful. Thank you. And pro forma for the redemption of the Series C preferred, you continue to sit on a very large cash position. Is there any appetite to redeem additional preferred series or to prepay debt, or are you comfortable keeping cash balances at current levels?

[Gregory Zikos, CFO at Costamare Inc]

Yeah, we'll see. Look, the Series E Preferred Stock we redeemed, it was the most expensive we had. It was 8.875%. So it was quite expensive. We redeemed this having savings of slightly above $10 million per year. Now, whether we're going to go ahead and also redeem Series D, for example, or not, which has been the second most expensive series outstanding, this is a more generic question of capital allocation, whether we feel that we can utilize our equity in order to buy ships or sort of repay debt or redeem the Preferred. But I mean, compared to the cost of debt, I think the Preferred is a bit more flexible, but it is more expensive. We'll see.

[Gregory Zikos, CFO at Costamare Inc]

But this is a decision taken at the board level, considering all the circumstances, and whether we feel that there is room for new transactions where our equity will be used. So I'm afraid I'm not ready to tell you now whether and when we're going to be redeeming Series C, for example, or Series D. It remains to be seen. But regarding the last one, considering our cash balances, I think it was quite obvious that at some point that series of preferred stock would be repaid.

[Climent Molins, Head of Shipping Research at Value Investor's Edge]

Makes sense. Thanks for the color. That's all from me. Thank you for taking my questions.

[Operator]

This concludes our question-and-answer session. I would like to hand the call back over to Mr. Zikos for any closing remarks.

[Gregory Zikos, CFO at Costamare Inc]

Thank you for being with us today and for dialing in to the Costamare Second Quarter 2024 results. We are looking forward to speaking with you again during our Q3 results call. Thank you.

[Operator]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Gregory Zikos, CFO

Analysts

• Climent Molins, Head of Shipping Research at Value Investor's Edge
• Donal Murray, Analyst at Stifel