Title

Presentation

Costamare Inc. beats earnings expectations. Reported EPS is $0.68, expectations were $0.62. CMRE isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Thank you for standing by ladies and gentlemen and welcome to the Costamare Inc. Conference Call on the Fourth Quarter 2023 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. [Operator Instructions] I must advise you that this conference is being recorded today Wednesday, February 7, 2024. We would like to remind you that, this conference call contains forward-looking statements. Please take a moment to read Slide number 2 of the presentation which contains the forward-looking statements. And I will now pass the floor to your speaker, Mr. Zikos. Please go ahead, sir.

Gregory Zikos: Thank you, and good morning, ladies and gentlemen. 2023 has been a growth year for Costamare. The company had revenues of $1.5 billion and generated net income of about $660 million. Liquidity stood at around $1 billion as of yearend. Following our strategic decision in 2021 to enter into the dry bulk segment at an opportune time in the cycle, we have grown during 2023 our newly established trading platform to an operator managing a fleet of 61 dry bulk vessels. Having invested $200 million in the new venture we have a long-term commitment to the sector whose fundamentals we view positively. Regarding Neptune Maritime Leasing, the platform has been steadily growing on a prudent basis throughout 2023 having now concluded leasing transactions for 23 ships with a total value of about $250 million.

We are committed to fastly growing the leasing business on the back of a healthy pipeline extending over the coming quarters. On the owned dry bulk fleet side, we are executing our strategy to renew the dry bulk fleet and increase its average size. During the year, we took the decision to dispose of 12 smaller size vessels and have agreed to acquire three capesize and two ultramax vessels. Subject to market conditions, our goal is to continue our expansion in the dry market. In the containership market, recent events have been contributing positively to the supply and demand dynamics pushing up box and charter rates. Those recent developments are mitigating the effects of oversupply in the containership market as tonnage is expected to remain tight at least until the Chinese New Year.

We have however proactively secured employment for 95% and 78% of our open days for 2024 and 2025 respectively, putting our contracted revenues for the containership vessels at $2.5 billion with a remaining time charter duration of about 3.6 years. Moving now to the slides presentation. On Slide 3 you can see our annual results. Net income was about $350 million or $2.95 per share. Adjusted net income was around $250 million or $2.07 per share. Our yearend liquidity stands at roughly $1 billion. Slide 4, regarding CBA, – CBI, we have chartered in the periods 51 vessels with a majority of the fleet being on index linked agreements. On our leasing platform, we have already invested around $120 million. Since inception, NML has financed 23 assets through sale and leaseback transactions and has a very healthy pipeline going forward.

Slide 5. We have now acquired York’s equity interest on a fleet of containership at a – containerships and have now agreed to acquire one capesize dry bulk vessels. In parallel, we have concluded the sale of two supramax and three handysize ships while we have agreed to sell three more handysize and two supramax dry bulk ships. Slide 6. During the fourth quarter, we have financed the acquisition of one dry bulk vessel through a new hunting license facility while we have roughly available $132 million for financing of further vessel acquisitions. We do continue to charter all our dry bulk vessels in the spot market, having entered into more than 40 chartering agreements since our last earnings release. On the containership side, as already mentioned, our revenue days are fixed 95% for ‘24 and 78% for ‘25 while our contracted revenues are $2.5 billion with a TEU weighted average remaining duration of 3.6 years.

Moving to Slide 7. During 2023, we have purchased approximately $6.3 million of common shares for a total consideration of $60 million. In addition, we continue to have a long uninterrupted dividend track record boosted by strong sponsor support. Slide 8. As mentioned already, our liquidity stands at roughly $1 billion. This liquidity gives us the ability to look for opportunities to grow the company on a healthy basis. Moving to Slide 9. Charter rates in the containership markets have been rising daily across all segments having benefited from the Red Sea prices. The idle capacity remains at low levels at 0.8%. And moving to the last slide, on Slide 10, you can see the recent dry bulk market trends in the spot and pore up markets. Charter rates remain volatile having deteriorated from the highs of Q4 2023.

Today’s order book is up 8.5 of the total fleets. With that, we can conclude our presentation, and we can now take questions. Thank you. Operator, we can take questions now.

See also 20 Best Ways to Generate Passive Income for Beginners and 30 Countries With The Happiest Workers in the World.

Operator: [Operator Instructions] Our first question comes from Chris Wetherbee with Citigroup. Please go ahead.

Matthew Hortopan: Hey. Good morning. This is Matt on for Chris. Thanks for taking the question.

Gregory Zikos: Hi, good morning, Matt.

Matthew Hortopan: Good morning, yeah. Just wanted to touch a little bit more on CBI. Last quarter you mentioned having a fixed fleet of 59 dry bulk vessels on period charters, but this quarter 51. So we are just wondering if you could provide a little bit more detail and sort of what drives that variability on the platform from quarter to quarter? And how that can affect profitability levels as well as a magnitude of potential shift in that process? And I think that would be great to start.

Gregory Zikos: Yeah. Thanks for the question. First of all, you are right, it was close to 59 ships chartered in the previous quarter. We mentioned 92 now, it has nothing to do with our intention to grow the company further. It is a transact during third quarter specifically. So there were some – which was coincided altogether and we are – like we are now in the process of chartering in additional vessels. Now, at the same time, I need to remind you that we also employ FFA, so I mean, instead of chartering in a vessel at some point, if you cannot sign – asset in the market you come back some type of pay days for capes or for panamaxes. So the smaller amount of ships charter in has absolutely no bet and this would be misconclude as our willingness to stream the business right the opposite this is a long term strategic decision and we are committed to the dry bulk sector both through CBI and also through our own dry bulk ships.

So, it is a market hopefully deliveries that have coincided where the market is we may be buying FFAs instead of chartering in ships. And in this business, we need to be opportunistic. More ships will be chartered and when we will find the right assets also at the right price.

Matthew Hortopan: Okay. Interesting. Okay. Thank you for the further granularity. And just as a follow-up. Wanted to touch a little bit more too on the topic of share repurchases. You’ve been holding off on buying back your stock over the last few months and just given the current plan that you guys have outstanding in terms of $30 million for common shares and $150 million for preferred, what was your plan moving forward with that and sort of how do you think about how share count can move moving forward?

Gregory Zikos: Yeah. First of all, the share repurchases like the common – like the common stock dividends this is a Board decision. And these are subject to part of the Board discussion every quarter. But leaving that aside for the time being, we are the majority of voters the founding $5 million of 60%. So both dividends and share repurchases at a healthy stock price we are all like – the stock price go higher. We are 100% aligned. At the same time, regarding the optimal capital allocation, we need to be tap new opportunities like there are. So we bought back common stock worth of $60 million during the years also June last year and we are looking some parts of this in the past seven years ago. I am not saying that we sort of excluded this Board decision and those is how discussed.

But I am not ready to tell you that we are going to be buying more stock like in next quarter or in two quarters time. This is all subject to market condition and this is subject to the view we take regarding the optimal capital allocation of the company. So I cannot be more specific on that, simply because this is an ongoing discussion and for the time being we feel that this is something that could happen in the next quarter or the quarter after or like during ’24. But I am not in a position to give you an exact timing. It depends on market conditions.

Matthew Hortopan: Got it. Got it. Understood. So it would be fair to assume that for the foreseeable future at elevated stock prices. It’s unlikely that repurchases are going to be executed. Correct?

Gregory Zikos: No, I didn’t say that because I believe that the stock is up to five to ten. If you look at some NAV calculations, you would see that the stock prices also considering the value of the containerships and also the dry bulk vessels and the contracted revenues for the containerships and the net debt. I think on an – like NAV basis, the stock is all of much more than the ten or like $11. So the fact that we are not buying back shares it’s not because we don’t believe that the stock is undervalued. We definitely believe that the stock is undervalued however, we still may – we may find it optimal to use that cash in order buy ships or in order to boost the CBI or Neptune Maritime Leasing. But it doesn’t mean that we conclude on buying back shares.

We don’t feel that the stock is undervalued while the opposite. The stock has been undervalued for quite some time now. As is in most of the cases, this is what’s happening with shipping stock. So we are definitely that below NAV.

Matthew Hortopan: Understood. Thank you very much for all of the further color. I’ll turn it over on that.

Operator: The next question comes from Ben Nolan with Stifel. Please go ahead.

Ben Nolan : Good morning, Greg. Hi, I had a couple. But I wanted to start with the asset sales that you guys did. I know that you – in a relationship at after debt repayment. But could you get the gross proceeds from the asset sales?

Gregory Zikos: I can tell you that for the ships we sold, after debt repayment, the net cash in total for the ’23 is close to $80 million more or less $79 million.

Ben Nolan : Okay. I guess my question is how much is that debt we should expect to be repaid?

Gregory Zikos: Yes, sorry. This debt for those ships has been repaid. So I mean, we sold the ships. We paid back the debt and the net equity proceeds were like $80 million for all the ships. Now, the new ships we bought in total, bought – or have agreed to buy is like four capes and you can assume that those are going be funded with a leverage of close to 60% on the asset value.

Ben Nolan : Okay. All right. My next question had to do with the Neptune Leasing program. You guess still to more to go under your original commitment but obviously it’s growing. How do you seeing that longer term? Is this is something where once you reach sort of you commitment level that that amount would grow or do you think in time your relative position shrinks because there is capital coming in from other sources that mean your effective position is a little bit diluted or how are you thinking about the business?

Gregory Zikos: Look, up to now, this business has grown, I mean, when we started consolidating that the business and we bought the ship was in the interest in March of ’23. So we talk about three quarters of operation and over those three quarters the business has funding one to two basis, we are like 23 today funded and with a very strong pipeline going forward. So our goal is to further grow the business and in order to boost our returns, as you can imagine, we are also focusing on back leveraging our equity. So, boosting our returns at the same time being able to participate in more transactions with our equity shareholding. Now when we reach the 250 we back leverage the 250, it could be total deals of like depending on the assets and on the level between $800 billion, $900 billion whatever the back level will be.

I think it’s going to be a meaningful size. At this point in time, we are going to see how – I mean, how like whether we are going to grow the business further, whether we want to how other people joining. What are the alternatives in lease things, a lot of things. I am not going to talk about this. I mean, the fact that we have options if I would think. The fact that it is growing it’s good as well and I have to say that it’s not growing for the sake of growth, it’s growing based on deals that we fill from a credit perspective and also from a returns perspective including the back levels make sense. So, this is sort of a growing business which completes the rest of our assets. We don’t expect to have the volatility of the returns you have with the dry bulk vessels also to pay CBI.

But it is, I would say a steady return which does make sense and there are a lot of options at the moment we are not going to be reaching the $1 billion of deals or $800 million whatever that is depending on the back level. So we are quite positive on that life of business.

Ben Nolan : Okay. And then, I guess my last question relates to container business. Obviously, your existing book is well covered. The asset values have fallen sort of from the peak. Are we getting to a place where maybe deals and returns in the container market are getting close to something that you look to maybe come back to and invest in that space again or in your views there is still some room to go.

Gregory Zikos: I think there is still some room to go. You can never predict that market. But we would take it one by one. If you look at new buildings, new building prices for containerships they still remain at very high levels. So I mean, it is the first thing. Then the second thing, also second hand prices still they are at levels which have come off and they may come off even more. But where they are today buying at levels that would make sense. If you have to have first of all, if you want to have it would [Indiscernible] of residual value is with some potential upside. I think that we still have some way to go. Of course, as like the newbuildings will continue to kick in, whether the asset prices and it may make sense in a huge time or like a six months or like in two years. I cannot say, but for the time being I think we need to be patient. If we want to have attractive transactions with like manageable downside and also we have residual upside.

Ben Nolan : Great. Okay. I appreciate. Thank you, Greg.

Gregory Zikos: Sure. Thank you. Thank you, Ben.

Operator: The next question comes from Climent Molins with Value Investors Edge. Please go ahead.

Climent Molins : Hello.

Operator: Climent, your line is now live.

Climent Molins : Sorry. Sorry on that. Good morning. Thank you for taking my questions. I wanted to follow-up on the question on CBI. Could you provide some commentary on how the segment faired during the quarter? And secondly, has recent turmoil in the Red Sea have an effect on the trades you were engaged on, specifically on CBI?

Gregory Zikos: Okay, regarding CBI, we don’t provide now a press release with that segmental information, neither for CBI nor like for this Voyage side bulk owned vessels or like with the containers or for Neptune Maritime Leasing. There will be some information in our 6-K filings. But for the time being I am right this is not part of our press release presentation. So we provide that it will be sure and for every business we provide the number of assets CBI chartered sort of in vessels for example with that net description about the transactions that for example that most of the ships are chartered in – at the index linked charter rates. So, this was CBI now. Regarding the Red Sea events in the CBI business I cannot say that we had a huge effect on our Voyage side charters or for like the profitability.

For the capesize it stands that C3 or C5 may not be affected by that area. So I cannot say that we saw something which made that market much more volatile. For capes for instance for Q4, we saw increased volatility because of adverse weather conditions in China. But this was not linked to the sort of Red Sea disruptions. So, concluding, I cannot say that we saw any major effects in the CBI business.

Climent Molins : Makes sense. Thank you. I also wanted to follow up on Ben’s question on Neptune Leasing. As I understand it is fully consolidated in your financial statements. You mentioned potentially having leverage to free up capital, but I am also wondering are there any debt outstanding on Neptune as of yearend?

Gregory Zikos: There is, because Neptune, it is capitalized by our equity and the transactions we conclude as Neptune, Neptune gets back leverage. So it gets debt from third party providers for every transaction it is entering into. So there is also leverage at the Neptune level. Now, generally, the leverage of Neptune is at low levels in the region of, I don’t know between 35% to 45% depending on the transactions. But again, but in order to have solid returns on our equity investments in Neptune, we need to have some back leverage as well, however at lower levels.

Climent Molins : 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 now like to turn the conference back over to Mr. Zikos for any closing remarks.

Gregory Zikos: Thank you all for dialing in and for your interest in Costmare. We are looking forward to speaking with you again during the next quarterly results. Thank you very much. Bye.

Operator: Conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.