Pangaea Logistics Solutions Q1 2025 Earnings Call Transcript

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May 13, 2025

There are 3 speakers on the call.

Operator

Good morning. My name is Chelsea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pandea Logistics Solutions first quarter two thousand twenty five earnings teleconference. Today's call is being recorded and will be available for replay beginning at 11AM Eastern Standard Time. The recording can be accessed by dialing (888) 215-1487 domestically or (402) 220-4938 internationally.

Operator

All lines are currently muted. And after the prepared remarks, there will be a live question and answer session. If you would like to ask a question during the Q and A segment, please press star one on your phone. If your question has been answered, you may remove yourself from the queue at any time by pressing 2. We do ask that you please pick up your handset for optimal sound quality.

Operator

It is now my pleasure to turn the floor over to Stefan Neely with Valem Advisors.

Speaker 1

Thank you, operator, and welcome to the Pangaea Logistics Solutions first quarter twenty twenty five results conference call. Leading the call with me today is CEO, Mark Filanowski chief financial officer, Gianni DelSignore and COO, Maz Peterson. Today's discussion contains forward looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward looking statements.

Speaker 1

At the conclusion of our prepared remarks, we will open the line for questions. With that, I'd like to turn the call over to Mark. Thank you, Stefan, and welcome to those joining us on the call today. After the market closed yesterday, we issued a press release detailing our first quarter twenty twenty five results. Our first quarter performance reflects the continued disciplined execution of our cargo focused business model.

Speaker 1

Despite seasonal softness early in the quarter, we delivered TCE rates that were 33% above the prevailing market, demonstrating the strength and differentiation of our commercial strategy. This outperformance was supported by our long term contract of affreightment, which provided pricing stability through the winter months and allowed us to effectively manage market volatility later in the quarter. For the first quarter of twenty twenty five, we reported an adjusted net loss of approximately $2,000,000 and adjusted EBITDA of $14,800,000 as average market pricing declined 37% compared to the prior year period. Despite this pressure, our results benefited from our countercyclical positioning and integrated fleet strategy. Total shipping days rose 24.6% year over year, primarily driven by the addition of SSI handy fleet vessels.

Speaker 1

On a comparable basis, shipping days increased by 41%, underscoring the meaningful contribution of the acquisition to our operational scale. Importantly, we completed one hundred and sixty days of planned off hire for vessel drydocking during the quarter, taking advantage of softer demand to complete a significant portion of our 02/2025 dry docking schedule. With only four dockings remaining for the rest of the year, we are well positioned to optimize fleet availability during periods of stronger demand. Since the beginning of the year, our teams have made substantial progress integrating the SSI fleet into our operating platform. Integration efforts are proceeding as planned, and we and as we fully align the new vessels with our existing routes, we expect to unlock further operating efficiencies and enhance returns across our broader fleet.

Speaker 1

We have seen vessel operating expenses decrease in areas like insurance, where our larger footprint reduces premiums and allows us to assume some added risks, and we are working on other operating cost synergies available as we exchange ideas with new relationships. By year end, we hope to have implemented cost savings of at least 2,500,000.0 annually. We have successfully expanded the capabilities of the Handy fleet both geographically and cargo wise. Looking at the market environment, the dry bulk sector continues to experience elevated levels of volatility and uncertainty. While our operations are not directly impacted by proposed tariffs, including recently discussed port fees for Chinese built or controlled vessels, we are closely monitoring potential indirect effects.

Speaker 1

Based on our review of the revised US trade representative port fees proposal, we do not expect any material impact to our own fleet given our geographic focus and operating model. However, broader market dislocations couldn't occur as global vessel deployment patterns shift in response to the evolving landscape. It's important to note that over 95% of our tonnage is tied to nonagricultural bulks, including iron ore, coal, cement, and aggregate, primarily across Atlantic, European and Caribbean trade groups. This unique footprint continues to insulate us from some of the demand and policy volatility facing many other dry bulk operators. Turning to the second quarter, demand trends have remained steady across our key routes, though pricing continues to reflect global macro and trade policy uncertainties.

Speaker 1

As of today, we have booked four thousand two hundred seventy five shipping days for the second quarter, generating a TCE of $12,524 per day. As we advance through 02/2025, we remain focused on a prudent capital allocation. As we announced yesterday, our board of directors has authorized a new share per repurchase program of up to $15,000,000 in addition to declaration of a 5¢ dividend. This approach gives us added flexibility to return capital to shareholders through open market repurchases of Pangaea shares, which we feel are undervalued after recent share price movements. In light of the recent pressure on the drybulk market and ongoing trade uncertainty, we are maintaining a disciplined capital allocation strategy, prioritizing balance sheet strength while continuing to deliver long term value through shareholder returns.

Speaker 1

We will also continue to opportunistically evaluate strategic fleet transactions that support long term efficiency, extend asset life, and preserve a competitive age profile. At the same time, we are investing in our port and logistics business, which remains a critical contributor to our margin profile. Our expansion at the Port Of Tampa is progressing on schedule, and new operations in Port Charles, Louisiana and Port Of Aransas in Texas demonstrate our commitment to this exciting supply chain expansion of our business offerings. With that, I'd like to turn the call over to Johnny to review our first quarter financial results. Thank you, Mark, and welcome to those joining us on the call today.

Speaker 1

Our first quarter financial results reflect continued TCE outperformance relative to the broader market. First quarter TCE rates were $11,390 per day, a premium of approximately 33% over the average published market rates for Panamax, Supramax, and Handysize vessels in the period, driven by strong execution across our core contracts and the expanded scale of our own fleet. While total shipping days increased year over year by 41% to 5,210, TCE rates earned declined by 3036%, reflecting the decline in average market year over year. Our adjusted EBITDA for the first quarter was $14,800,000 a decrease of approximately $5,200,000 relative to the prior year period. Total charter hire expense decreased by 35% year over year, primarily due to a 37% decrease in prevailing market rates, partly offset by a 14% increase in chartered in days.

Speaker 1

Our chartering cost on a per day basis was 10,108 in the February. And through today, we booked approximately one thousand seven hundred and ninety five days at $11,472 per day for the second quarter of twenty twenty five. Vessel operating expenses, net of technical management fees, increased by approximately 75% year over year, primarily due to the acquisition of the SSI fleet, which increased total owned days by 61% to 3,690. On a per day basis, vessel operating expenses, net of technical management fees, increased by only 4% from an average of $5,300 per day last year to $5,528 per day in the first quarter of twenty twenty five. In total, our reported GAAP net loss attributable to Tangier for the first quarter was approximately $2,000,000 or a loss of $03 per diluted share compared to net income of $11,700,000 or $0.25 per diluted share in the first quarter of last year.

Speaker 1

When excluding the impact of the unrealized losses from derivative instruments as well as other non GAAP adjustments, our reported adjusted net loss attributable to Pangaea during the quarter was $2,100,000 or a loss of $03 per diluted share compared to adjusted net income of 6,600,000.0 or 14¢ per diluted share in the first quarter of last year. Turning to cash flow and liquidity. Total cash from operations decreased by 13,200,000.0 year over year to net cash used in operations of 4,300,000.0 due to a decrease in operating earnings and a 5,200,000 increase in dry docking costs year over year. We repaid over 11,000,000 in long term debt and finance lease obligations, and our interest expense was 6,100,000.0, an increase of $2,300,000 due to the new debt facilities entered into during the second half of last year and the assumed debt and finance leases associated with the SSI acquisition. We ended the quarter with $63,900,000 in cash and total debt, including finance lease obligations of approximately $390,000,000 In the near term, our capital allocation strategy will remain focused on preserving balance sheet optionality, a sustainable shareholder return program, along with targeted capital right investments in our stevedoring and logistics operations and ongoing renewal and modernization of our dry bulk fleet.

Speaker 1

Additionally, we remain committed to a consistent and sustainable return of capital strategy. With that, we will now open the line for questions.

Operator

Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing 2. And And our first question will come from Liam Burke with B. Riley Securities.

Operator

Please go ahead.

Speaker 1

Thank you. Good morning, Mark. Good morning, Gianni. Good morning, Matt. Good morning, Liam.

Speaker 1

Mark, you modified your returning cash to shareholders strategy by adding a buyback. Your dividend now is $05 versus $0.10 a quarter. Do you plan on I mean, I know that the board evaluates it every quarter. But is that a dividend you'd expect to pay through the cycle? Or are you going to go to more of a variable model there?

Speaker 1

Lee. We haven't talked about the variable model yet. We've we've talked a lot about the different ways to get returns to to shareholders. Now my favorite is to reinvest in the business and and, add productive people and productive assets to the organization. And eventually, the stock market will recognize the inherent value in the operation and the share.

Speaker 1

But sometimes, stock market doesn't agree with me. We paid a pretty nice dividend over the years, over the past few years, and that was one way to get return to shareholders. We've also been talking with people like you and other shareholders about the wisdom of a stock buyback. So with share value dropping substantially over the past couple of months, we thought it would try time to try a buyback and and see if we can return value to shareholders in in that way. We have new directors on the Board, have new opinions.

Speaker 1

And so I think we'll go another quarter and see how the shares react, what how investors react regarding the new dividend rate and take it quarter by quarter and see how we go. Great. Thank you. You're still yielding 4.5% even at the new zero five dollars per quarter. You called out an expense reduction program by the end of the year.

Speaker 1

Is that integration savings with the SSI fleet? Or is that just ongoing review of the operations being able to pull out excess cost? A little bit of both, Liam. You know, we didn't answer this SSI transaction looking for a significant cost savings. But there are some easy targets to attack when you've got a larger fleet and a larger operation that scale just gives you a little bit more power to drive cost decreases.

Speaker 1

Area was insurance, where we looked at P and I, we looked at Hull, And we went to market a little more aggressively than we were able to in the past and drove some cost decreases. We're learning from each other regarding purchasing and other ways to save money and really with a larger fleet and a larger operation, and it's working out. Great. Thank you, Mark.

Operator

Thank you. Our next question will come from Poe Fratt with Inc. Go ahead.

Speaker 1

Hey. Good morning. What can you just help me, Mark, Help me understand the dividend cut. You've you've consistently said in previous presentations that you've wanted to maintain a dividend over the cycle that's sustainable. That dividend was 10¢ a quarter.

Speaker 1

Now you're changing it to 5¢ a quarter, and now you're saying it's sustainable over the cycle. What changed? Well, a lot of things changed, Paul. As I explained, we have a different thought process on the board regarding the viability of a share buyback. We wanna to keep a consistent dividend, and it doesn't necessarily mean a consistent amount.

Speaker 1

It is our operation does sustainably produce cash flow that's available for different ways to to return capital to shareholders. And that's what we're trying to do is come up with a a prudent approach to to to address the need for shareholders to have some kind of return their shares. We saw an opportunity here, potential opportunity to do something good for shareholders by announcing the share buyback. So like I mentioned, there's different ways to provide a return, and we're trying a couple of different ways this time. So can you, Mark, tell me how you know, the share buyback will work?

Speaker 1

Are you going be in the market every quarter, you know, buying, you know, the the difference, you know, 3,200,000.0 that you're going to save on paying the dividend? You know, a lot of companies announced share buybacks but never fall through with them. Could you just talk about how you're going to approach the stock buyback? We're we're we're approaching at least one bank this week after this call to to set up a program, Paul. The board has asked us to review with them in advance any potential share buybacks based on price availability of capital, etcetera.

Speaker 1

So it won't be a constant rolling program. It will be when the Board feels it's the right time to purchase shares in the market. And then Mark, in the context of with the SSI transaction, you now have a large shareholder. That also large shareholder is represented obviously on the Board, but they also bought shares in early April. Do you are you concerned at all about the increased concentration in ownership?

Speaker 1

I mean, one of the things that that the market often has said is that your public float is limited. And, you know, can you just talk about how that was considered in this decision? Yes. The $15,000,000 isn't a large share of our outstanding float. We estimate our float to be around 40%, and we think there's an opportunity there to buy shares without decreasing the flow substantially.

Speaker 1

And regarding the concentration of the largest shareholder who have now has 28%, there is a cap there of 30 that came about as a result of the negotiations regarding that deal. So I don't think it will go up substantially as a

Speaker 2

result

Speaker 1

of any share buyback we might do. Great. And then, Gianni, you often, in previous quarters, have talked about not only your forward cover that you talked about, you booked 47 vessels at 12,500 roughly. Where will shipping days end in the second quarter? Sort of what percentage of your shipping days, expected shipping days in the second quarter has been booked?

Speaker 1

Yes. So I think we we gave out the indication so far for the quarter. We have four thousand two hundred and seventy five days at twelve five. I think our total fleet right now is somewhere around 65 vessels total. And I think that's been right around where we've been for the quarter.

Speaker 1

So the 65 vessel average fleet over the quarter is our projected total for this quarter. Got you. So you're like 80% booked for the quarter. Also previous quarters, John, I mean, at least the last couple quarters, you talked about your how your charter hired expenses were running. Do you do you have a figure for how many days you've, you know, chartered in for the quarter and and the cost?

Speaker 1

Yeah. That was yep. I can Absolutely. I it was I think I I mentioned it in my in my prepared remarks earlier, but we booked 1,795 at 11,472. So we still have about a you know, our margin on our chartered in fleet is around a thousand dollars and 52 or $1.00 $5.02, a margin on our chartered in fleet.

Speaker 1

Great. Sorry. Missed that. And then, Matt, can you talk about the operating efficiencies that were mentioned in the press release about integrating the Handys? Can you beyond the insurance, can you just talk about whether there are additional operating efficiencies that you're and sort of the nature of those?

Speaker 1

And then also, where do you stand towards that $2,500,000 Is how are you a quarter of the way towards realizing that, or or are we gonna see that over the rest of the year, the 2 and a half million of cost savings?

Speaker 2

Yeah. So on the on on on the on the on the trading synergies, I I think it's mostly outside what what Mark mentioned on the cost side, which is a which is a continuous, you know, process across all the ships in the state. We always try to optimize that. It's mainly around the the the the commercial synergies where we have been able to use the handy vessels in in some of the trades we have we have historically done on on especially our super fleet. And so that's both geographical in terms of trading in in areas where we need a little bit of ice experience or it's a commodity or or another geographical focus that's primarily where where the the the synergies have come and sort of which is also, you know, what what was

Speaker 1

was the primary driver. Right?

Speaker 2

It was it wasn't a it wasn't a a cost deduction ambition only. It was really to grow the top line model just to do cost. Right? But we are trying to do that and it, you know, it's it's, you know, that will take in for management and operations is is a lot. Many many components goes into that and everything has been through tonight as we always did.

Speaker 2

But but, of course, the fact that we have access to more experience, larger, you know, pool of crew and more additional resources makes it you know, that that makes that sort of synergy and and cost optimization possible. But that's a continuous process, and it it will if some of these things are are bigger, bigger undertaking to take a little bit longer to realize, but but some of them we're working on on crystallizing in the solar horizon.

Speaker 1

Great. And then on the terminal side, you're talking about the expansion of the Tampa and then down in Texas. Could you just maybe quantify what that could mean to second quarter I'm sorry, second half operating results? Is it going to move the needle on the terminalling revenue? Or is it just an incremental add on that will add maybe 10% to revenues?

Speaker 1

Yeah. I think the highly dependent on the start date, we're still projecting with within this year, q at late q three, q '4 start. So it will be incremental to this year. It will add about a 50, two hundred of EBITDA for this year. Really, that that's gonna be a a project that will be in full swing for 2026 in Tampa and then also in Texas, and that that's where we'll see the real contribution for that.

Speaker 1

And then anything else on the horizon on the terminating business to, you know, further expand? No. You know, Paul, we're we've we'll the Tampa, Lake Charles, and Port Aransas terminals this year. What we found is that once we're in a place, more stuff comes to us. So we have no nothing on the books in addition to those three for this year.

Speaker 1

But once they're up and running, business kind of shows up additive business. And

Operator

our next question will come from Michael Mathison with Sidoti and Company. Congratulations

Speaker 1

on your performance in a difficult quarter. Thank you, Michael. I just have a couple of questions. First, in Q1, term contracts really helped you out in a difficult TCE environment. What percent of Q2 and onward is already booked on a long term basis?

Speaker 1

Yeah. So when we look at the balance of of the year, really, our contract cover kicks in during ice season, the summer ice season in q three. So we're we're we're heading into that in Q3, and that covers our ice class vessels. And then on average, we've discussed our contract cover on average for the year. And across our own fleet, it averages around 30%.

Speaker 1

So when we look over a longer period of time, that's typically the contract cover that we'll have on our fleet, and I think that remains true for this year as well. Okay. Great. Looking at uses of cash, we've already talked about dividends versus buybacks. It's clear what your strategy is there.

Speaker 1

Of course, you're also consistently paying down debt. Can we expect further debt pay downs? Or do dividends and share buybacks take priority? No. I think we as far as our debt pay downs, the $11,000,000 we paid in q one, that that is a pretty consistent number for the next almost two years, right through the end of of twenty twenty six.

Speaker 1

Our first meaningful balloon payment is in early twenty twenty seven. I think I think we're amortizing debt at a at a, you know, a decent rate. We have well priced debt on our fixed rate facilities and and others that are capped. So I think we're pretty comfortable with our debt payment profile going forward, and I don't I don't see us really going after anything in a meaningful way until that balloon payment comes comes due. Great.

Speaker 1

Well, thank you, and good luck. Thank you.

Operator

Thank you. We do have a follow-up question from Tofrat with ADP. Please go ahead.

Speaker 1

Yes. Jani, can you just clarify that last comment on the 30% of your capacities, you know, generally sold or committed. Is that 30% of your own fleet or 30% of what you typically run, you know, quarter to quarter when you include the chart in No. When we think when we think about long term contract cover, it's on the owned fleet. That 30% number is on the owned fleet only.

Speaker 1

And then the charter in fleet presents arbitrage opportunities, and they're traded to make the own fleet more efficient, to position vessels appropriately. But when we think about long term contract cover, that's that's on the own fleet is the number we're we're discussing. Great. Yes. I just wanted to clarify that.

Speaker 1

And then, Mark, going back to your prepared remarks or when you talked about the dividend and the stock buyback, you indicated that your preference is growth. Can you talk about the S and P market right now and how you know, you're viewing the S and P market? Yes. Secondhand prices are are still pretty expensive, Paul, in relation to what the market returns today. So we've held off buying any new ships until that equation gets a little more favorable to owners.

Speaker 1

We just added 15 ships at the end of the year. So it's time to sort of catch our breath and and wait for the market to make a turn one way or the other. Great. That's helpful.

Operator

Thank you. And at this time, there are no further questions in the queue. So I'd like to turn the call back over to Mark Zuanowski for any closing remarks.

Speaker 1

Thanks, everyone, for joining us today for interesting times. Flexibility and adaptability are the key to success in this environment, and we're pretty good at that. So please feel free to contact us with any further questions at investorpangaials dot com. Thanks again.

Operator

Thank you, ladies and gentlemen. This concludes today's program, and we appreciate your participation. You may disconnect at any time.

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Earnings Conference Call
Pangaea Logistics Solutions Q1 2025
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