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Operator: Thank you for joining us for Navios Maritime Partners’ Fourth Quarter 2022 Earnings Conference Call. With us today from the company are Chairwoman and CEO; Ms. Angeliki Frangou; Chief Operating Officer, Mr. Efstratios Desypris; Chief Financial Officer; Ms. Eri Tsironi; and Vice Chairman, Mr. Ted Petrone. Now I will review the Safe Harbor statement. This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Partners. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners’ management and are subject to risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements.

Such risks are more fully discussed in Navios Partners’ filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Partners does not assume any obligation to update the information contained in this conference call. The agenda for today’s call is as follows. First, Ms. Frangou will offer opening remarks. Next, Mr. Desypris will give an overview of Navios Partners’ segment data. Next, Ms. Tsironi will give an overview of Navios Partners’ financial results. Then Mr. Petrone will provide an industry overview. And lastly, we’ll open the call to take questions. Now I’ll turn the call over to Navios Partners’ Chairwoman and CEO, Ms. Angeliki Frangou.

Angeliki Frangou: Good morning to all of you joining us on today’s call. I am pleased with our results for the year and fourth quarter of 2022. For the full year, we reported a revenue of $1.2 billion and net income of $579.2 million. For the fourth quarter, we reported revenue of $370.9 million and net income of $118.3 million. We are also pleased to report net income per common unit of $18.82 for the full year. Navios Partners is a leading publicly-listed shipping company, diversified in 15 asset classes in three sectors with an average vessel age of about 9.5 years. Navios Partners entered 2023 well positioned. Over the last couple of years, NMM acquired 3 fleets, one in each of container, tanker and drybulk segments. Today, we have 176 vessels split roughly equally into three sectors based on a charter-adjusted basis.

In addition to achieving diversification, we have been actively managing our portfolio to maintain a more technologically advanced fleet as we believe the newer technologies are a competitive advantage when compared to the older vessels. Our business model allow us to take advantage of opportunities when a segment is experiencing difficulties such as when we acquired tankers in 2021. We can also acquire assets on market and on and the cost of acquired assets can be offset by attractive long-term creditworthy charters, such as good containers and tankers. As ever, our industry is by macro events and uncertainty terminate all forecasts. Recessions Central Banks tighten mobility. Trading patterns are changing because of the Ukrainian conflict such as collateral consequences of the campaign.

So far, global trade has adapted to these conditions, mostly by increasing ton miles for wet and dry commodities. We remain vigilant. We are also focused on reducing the average rate in medium term after a period of relative activity in rationalizing our acquired fleet by selling old vessels and acquire new vessels. We have a net LTV of about 45%, measured at the end of the fourth quarter 2022 for old vessels in the growth. Our goal is to reduce leverage so that our net LTV would be in the range of between 20% and 25%. We believe that this leverage is an appropriate range for the full cycle, while allowing to expand our balance sheet should opportunities develop. Also in the current charter rate market, this should happen naturally given our expected class base.

Please turn to Slide 7. As you can see, we had an excellent year, generating net income of almost $600 million. A significant amount of our net cash flow was used to fund; #1, equity for our fleet replacement program and certain amortization of our debt facilities. We also have been busy in the fourth quarter. We contracted $328.3 million in long-term charters, of which $226.5 million was for 8 tankers and approximately $102 million was for 3 newly acquired Capesize vessels. We also sold 11 vessels for $213.5 million. Our activities during 2022 created a low breakeven of $2,134 per open day. We bring down this on Slide 8. As you can see, about half of our approximately 57,000 available days are opened or market exposed. We present details of the available and open days by vessel type in the right-hand side of the chart.

Of the open days, about 77% are drybulk and 17% are target days. The balance being contained. We hope to generate substantial cash flow in 2023 given this low breakeven. I’ll now turn the presentation over to Efstratios Desypris, Navios Partners’ Chief Operating Officer.

Efstratios Desypris: Thank you, Angeliki, and good morning, everyone. Slide 9 demonstrates the basic principles of our diversified platform in action. We aim to benefit from countercyclicality, which creates opportunity to redeploy cash from well-performing segments into assets in underperforming segments. We believe a diversified asset base and huge volatility on our financial statements. We consider this dynamic in our asset base. As of Q4 2022, miles of containerships, adjusted for mile growth charters, dropped by 40% and drybulk dropped by 8%, while tanker vessel volumes increased by 42%. In sum, the net sales of our fleet value is a decrease of approximately 7%. We contracted this analysis containerships on a charter-adjusted basis, because otherwise, it will not capture our chartering activities, which effectively hedge the asset prices.

Multiple segments also allows us to optimize chartering. In segments with attractive returns, we can enter into period charters. In other segments, we can be patient. As you can see from the chart on the bottom, the container segment enjoying historically high charter rates. Accordingly, we fixed our containers on a long-term charter. And in fact, almost 90% of our available containership days are fixed for 2023. This reduced market and residual risk. We manage the credit risk of the long-term charters independently to ensure that we are not simply trading one risk for the other. In our tanker segment, current charter rates are surpassing the 20-year average levels. We fixed available tanker days to almost 70% of 2023. We expect our target fleet will generate strong returns.

Lastly, in our dry bulk segment, our rates are below the historical averages. We have been patiently entering short-term charters, averaging some . As a result, about 20% of our available days are fixed for 2023. In Slide 10, you can see our fleet renewal activities. We are always renewing the fleet so that we maintain a bank profile, benefiting from newer technologies and more carbon-efficient vessels. Navios Partners made $1.5 billion investment in 23 newbuilding vessels that will be delivered into our fleet through 2026. In containerships, we are acquiring 12 vessels for a total of $860 million. We held our investment by entering into long-term creditworthy charters, generating about $1.1 billion in contracted revenue for about 6.4 years average duration of related charters.

In the tanker space, we entered the LR2/Aframax subsector by ordering 6 vessels for a total price of $380 million. These vessels have been chartered out for 5 years at an average net rate of $26,580 per day, generating revenues of approximately $290 million. We have also ordered 2 highly spec LR2 vessels for about $80 million. Finally, on the drybulk fleet, we have three Capesize vessels on order that are being delivered through June of 2023. These vessels have been chartered out for an average duration of about 5 years at a net rate of almost $20,000 per day. We have also been very active in the S&P market. We have sold a total of 11 vessels with an average age of approximately 14 years. We sold 7 tanker vessels for a total consideration of $156 million, taking advantage of a strong tanker market and this corresponding increase in demand for second-hand vessels.

Also we sold 4 drybulk vessels also comprising $57.5 million. Finally, we exercised the option of acquiring one 2016-built scrubber-fitted Capesize vessel for a contract price of $40.7 million. This vessel was previously part of our chartering fleet. Moving to Slide 11, we continue to secure long-term employment for our fleet. As Angeliki mentioned earlier, in Q2, we have created opportunity of $350 million additional contract revenue. Approximately $327 million was contracted for our tanker fleet, extending our charter average in a strong market. Also we have contracted 3 newbuilding Capesize vessels for an average duration of almost 5 years at a net rate of about $20,000 per day, generating approximately in revenue. Our total contracted revenue amount to $3.4 billion.

66 of our contract revenue comes from our containerships with charters extending through 2026 with a diverse group of quality counterparties. Almost 50% of this contracted revenue will be earned in the next 2.5 years. I now pass the call to Eri Tsironi, our CFO, which will take you through the financial highlights.

Erifili Tsironi: Thank you, Efstratios, and good morning, all. I will briefly review our unaudited financial results for the fourth quarter and 12 months ended December 31, 2022. The financial information is included in the press release and is summarized in the slide presentation available on the company’s website. I would like to highlight that 2022 results are not comparable to 2021, as in 2022, NMM recently expanded its fleet through acquisitions. Moving to the earnings highlights on Slide 12. Total revenue for the fourth quarter of 2022 increased by 38% to $370.9 million compared to $268.1 million for the same period in 2021. Time charter revenue for the period is understated by $18.1 million because of rules requiring the recognition of revenue on a straightline basis where some of our charters have been escalating rates.

Available days increased by 27% to $14,409 compared to $11,363 for the same quarter last year. And our average time charter equivalent rate increased by 4% to $23,840 per day compared to $23,005 per day for the same period in 2021. In terms of sector performance, both tankers and containers enjoyed improved rates. Rates for our tankers doubled to $30,834 and container rates increased by 43% to $34,037. In contrast, our drybulk rates were 46% lower to $15,876. EBITDA for the fourth quarter of 2022 increased by 35% to $206.2 million compared to $152.4 million for the same period last year. Net income for Q4 2022 slightly improved compared to 2021, reaching $118.3 million and per unit were $3.84. Total revenue for the full year 2022 increased by 70% to $1.21 billion compared to $713.2 million for the same period in 2021.

2022 revenue is understated by $48.2 million because of the GAAP adjustment required for charters with the escalating rates. Our available days increased by 56% to $49,804 compared to $31,884 for 2021. Fleet average TCE rate increased by 6% to $23,042 per day compared to $21,709 per day for 2021. In terms of sector performance, TCE rates increased by 40% for containers to $31,358 and 37% for tankers to $21,020. Dry bulk rates were 70% lower compared to 2021 at $19,464. EBITDA for the 2022 increased by 41% to $817.3 million compared to $578.5 million for the same period last year. Excluding one-off items, adjusted EBITDA increased by 57% to $667.9 million. Net income for 2022 increased by 12% to $579.2 million compared to $516.2 million for the same period last year.

Earnings per unit were $18.8. Excluding one-off items, adjusted net income increased by 18% to $429.9 million. Adjusted net income per unit were $14. Turning to Slide 13, I will briefly discuss some key balance sheet data. As of December 31, 2022, cash and cash equivalents were $175.1 million. In 2022, we paid $176.8 million of pre-delivery installments and other capitalized expenses under our newbuilding program. We also paid $412 million to acquire 37 second-hand and 5 newbuilding vessels. Finally, we sold 7 vessels for $284.5 million net, adding $231 million cash after the payment of their respective debt. During the period, we had $240 million scheduled debt repayments under our credit facilities. Long-term borrowings, including the current portion, net of deferred fees amounted to $1.9 billion.

Net debt to book capitalization stood at 41.3%. Slide 14 highlights our debt profile. Our debt and leasing liabilities are 2x covered by the value of our fleet based on publicly available valuations. We continue to diversify our funding resources between bank debt and leasing structures. Our maturity profile is target with no significant values due in any single year. Slide 15 summarizes our recent balance sheet activities. We have tried to mitigate some of the increased interest rate costs by reducing our average margin to 2.7%, a reduction of 13% compared to 2021. In addition, 30% of our debt, including operating lease liabilities has fixed interest rate at an average rate of 5.7%, providing a natural case against current rate increases. Finally, the average margin of our newbuilding facilities is 1.84%.

In terms of our newbuilding program, approximately 75% of newbuilding debt requirements are already concluded or in documentation phase. We have used the opportunity to expand our financing resources adding new banks and lessors, while we have also concluded our first export creditation to that facility. Finally, we have arranged $149 million of new finances for existing ventures and new acquisitions. Turning to Slide 16, you can see our ESG initiatives. We aspire to have zero emissions by 2050. In this process, we have been pioneering and are adopting certain environmental regulations in advance, aiming to be one of the first fleets to achieve full compliance. Navios is a socially conscious group whose core values include diversity, inclusion and safety with a very strong corporate governance and clear code of ethics.

Our board is composed by majority independent directors and independent committees that oversee our management and operations. Slide 17 details our company highlights. Navios Partners is a leading U.S. publicly-listed shipping company. Our diversification strategy creates resiliency and enables us to mitigate individual segment volatility. Our financial strength, scale and diversification should make NMM an attractive investment platform as we take advantage of global trade patterns. I’ll now pass the call to Ted Petrone to take you through the industry section.

Ted Petrone: Thank you, Eri. Please turn to Slide 20 for the review of the tanker industry. After rising sharply in Q3, tanker rates continue to strengthen through mid-November before softening slightly on the back of the cooling Chinese economy or mild winter in the Northern Hemisphere in the absence of U.S. Gulf crude exports. Since the end of January, rates for both crude and product tankers have risen significantly on the basis of China re-opening and longer ton miles for all Russian crude and products. Despite economic uncertainties in Ukraine crisis, the IEA projects a 2% increase in world oil demand for 2023 to 101.9 million barrels per day, exceeding 2019 pre-pandemic levels. China, in particular, accounted 45% of global oil demand growth in 2023, rising 0.9 million barrels per day or 6% over ’22.

Turning to Slide 21. Tanker rates across the board have risen due to improving supply and demand fundamentals combined with the invasion of the Ukraine, which has shifted Russian crude and products exports to longer routes out to India and China. Additionally, European refineries are replacing Russian crude and products with supply from the U.S., Brazil and the Middle East, further increasing ton miles and trade inefficiencies. Incremental support for rates come into effect as new EU sanctions and price caps began on crude December 5 and on product trades, February 5th. Product tankers should also be aided by discounted Russian crude exported to the Far East returning to the Atlantic as clean product. This could add upward pressure on already strong rates.

2023 crude and product ton mile growth is expected to increase by 6.4% and 11.2% respectively. Turning to Slide 22. Vessel net fleet growth is projected at 2.1% for 2023 and negative fleet growth of minus 1.5% for 2024. This decline can be partially attributed to owners’ hesitance to order expensive long-lived assets in light of macroeconomic uncertainty and engine technology concerns due to CO2 restrictions enforced since the beginning of this year. The current record level order book is only 2% of the fleet or only 18 vessels, the lowest in 30 years. 16 VLCCs will deliver during the balance of 2023, none in ’24 and one each in 2025 and 2026. Vessels over 20 years of age or 14% of the total fleet or 127 levels, which is over 7x the order book.

Turning to Slide 23. Product tanker net fleet growth is projected at 1.8% for ’23 and only 0.4% for 2024. The current product tanker order book is 5.4% of the fleet or 137 vessels, one of the lowest on record and it compares favorably with the 10.1% of the fleet or 363 vessels which are 20 years of age or older. In concluding the tanker sector review, tanker rates across the board continue at strong levels. The combination of below average global inventories, oil demand returning to pre-pandemic levels, new longer trading routes for both crude and product as well as the lowest order book in three decades and the IMO 2023 regulations should provide for healthy tanker earnings going forward. Please turn to Slide 25 for the review of the drybulk industry.

The BDI attained its 2022 high of 3,369 by mid-May. Then the lockdown Chinese economy, the war in the Ukraine and strengthened the U.S. dollar combines a weakened world drybulk trade. The 2022 BDI average of 1,934 were some 1,000 points below the previous year. However, it should be noted that 2022 was still the second highest index since 2010. With regard to the Q4, the average of 1,523 was the fifth year in a row that Q4 was lower than Q3 and the first time that Q4 was the lowest quarter of the year since 2008. Overall, the Chinese reversal of its zero COVID policy and additional fiscal stimulus combined with the weakening U.S. dollar, point recovery in the drybulk market as indicated by the highest future markets for all asset classes. Overall, drybulk trade in 2023 is projected to increase by 2.2%.

Going forward, long-term supply and demand fundamentals remain intact. China’s reopening economy, the historically low order book, strengthening U.S. dollar and tightening GHG emissions regulations are main positive factors. Please turn to Slide 26. With regard to iron ore, China’s zero COVID policy and real estate concerns significantly impacted steel production and iron ore demand in ’22, while Chinese seaborne imports and steel production fell 2% in 2022. However, China’s wish to removal of the zero COVID and fiscal stimulus focused on supporting the real estate sector should boost iron ore demand. Overall, global iron ore trade is expected to increase by 0.8% in 2023. Additionally, iron ore trade is expected to increase by 9.2% in the second half of ’23 over the first half of this year.

Concerning coal, the Ukraine crisis continues to impact global coal imports as European supply concerns persist. This has led European countries to reactivate coal-fired power plants. European seaborne coal imports increased by 20% in ’22 and are expected to increase by a further 7% in 2023. Additionally, the EU ban on Russian coal will lead to shifting trading patterns towards longer haul routes. Overall, 2023 seaborne coal trade growth is expected to be supported by an estimated 4.2% ton miles. Additionally, coal trade is expected to increase by 2.7% in the second half of ’23 over the first half of 2023. On the grain side, 2022 grain seaborne trade — trading volume is negatively impacted by the war in Ukraine, reducing Black Sea exports and this was partially mitigated by trade adjustments for longer haul routes increasing ton miles.

The global grain trade continues to be driven by heightened food security issues driven initially by the pandemic. Trade volume and ton mile growth are expected to increase by 3.8% and 5.3% respectively in 2023. Please turn to Slide 27. Current order book stands at 7.1% of the fleet, one of the lowest since the early 1980s. Net fleet growth for 2023 is expected at 1.8% and only 0.3% in 2024 as owners remove tonnage that will be uneconomic due to the IMO ’23 CO2 rules enforced since the beginning of this year. Vessels over 20 years of age are about 9% of the total fleet, which compares favorably with the historically low order book. Concluding our drybulk sector review, continuing demand for natural resources, China’s reopening, war and sanction-related longer haul trades combined with a slowing pace of newbuilding deliveries, all support freight rates going forward.

Please turn to Slide 29. Focusing on the container industry, as the faltering in Q2 of the Shanghai Container Freight Index correction accelerated in the second half of ’22 on the back of uncertain macroeconomic conditions combined with slower consumer demand for goods which led to decreasing container trade, easing port congestion and in rapidly decreasing vessel charter rates. Starting towards year end and continuing into 2023, the fall in rates have moderated and today’s rates remain above the historical pre-COVID averages. As you will note in the graph on the lower right, the U.S. inventory to sales ratio was off the recent low, but still well below long-term average. The graph on the lower left shows moderating purchases of goods, which have slowed import through easing port takeaway bottlenecks and port congestion.

Slowing U.S. and AU goods imports have not been helped by China’s zero COVID policy, which has slowed some finished goods exports. Overall, 2023 container trade is projected to decrease by 1.6% in 2023, but increase by 3.3% in 2024. Turning to Slide 30. Net fleet growth is expected to be 6.7% for 2023 and 5.5% for 2024. The current order book stands at 29.5% against 11.7% of the fleet 20 years of age or older. About 72% of the order book is for 10,000 TEU vessels or larger. In concluding the container sector review, while supply and demand fundamentals remain challenged due to economic and political uncertainties, the combination of China’s recent reversal of its zero COVID policy and the IMF’s January upgrade to world GDP growth of 2.9% in ’23 and 3.1% in 2024, provide a bright spot in a challenging 2023.

This concludes our presentation. I would now like to turn the call over to Angeliki for her final comments.

Angeliki Frangou: Thank you, Ted. This concludes our formal presentation. We open the call to questions.

Operator: Our first question comes from Omar Nokta from Jefferies.

Omar Nokta: I wanted to ask about — clearly, a lot is going on and you have a very dynamic approach to the fleet and the overall portfolio. I wanted to ask about the vessel sales you announced today. You’ve sold 11 ships, bringing in $214 million. How much of that are you expecting to net after paying down the debt associated with those ships? And then how are you thinking about the use of that free cash that remains?

Angeliki Frangou: This is a good question. I mean, on the $213 million, if I am correct, it’s $123 million net of debt. I mean, basically as you know, we rationalize our fleet by selling all the less efficient vessels and keeping and acquiring technologically advanced vessel which also have a better carbon footprint. So this is a strategy. We have seen us working long on that and has provided a fleet today of about an average age of 9.5 years, materially lower age than the industry. It is 4 years older on containers and tankers and about 2 years on drybulk.

Omar Nokta: And you mentioned, Angeliki early on in the presentation about the target leverage range. Can you just go over that again because I see the LTVs that’s 49%. And I think a year ago, you had been — you were aiming for somewhere maybe in the mid-30s. Could you just go over what you were saying earlier about what you’d like the net equity ratio to be?

Angeliki Frangou: Our net equity ratio LTV is about — net LTV is about 45%. You should realize that in our LTV we do not include the payments we have already done on newbuildings. So there is a natural deleveraging that is happening as vessels come into the water. So you have approximately $300 million of capital repayment per year and a deleveraging naturally because the vessels are coming into the water. So with that and the cash generation we see, this is what we are targeting on a range of 20%, 25% because there is a cash generation from the vessel. So big picture, we entered 2023 well. We have done in the last 2 years, 3 major acquisitions; one in containers, one in tankers, well positioned and we have seen the rewards and one in drybulk which basically we believe that 2023 is the reversal of the Chinese policy on zero COVID that can produce quite a significant cash flows.

Omar Nokta: So target net LTV is 20% to 25%. And just double checking, confirming, Efstratios, I think you had mentioned the LR2 contracts. So that comes it up now, all 6 of those newbuildings have been fully contracted for — was it 5 years on average?

Efstratios Desypris: Yes, exactly, but the last 2 LR2s have been concluded in Q4. So all 6 of them today are contracted for 5 years at an average rate of around $26,500.

Omar Nokta: And then maybe just one final one, just on sort of the sales and the overall transactions you’ve done here. It’s really been centered within drybulk and within tankers. And clearly, it seems containers has been much more about just harvesting the backlog effectively. How are you thinking about that fleet as it stands today, given we’ve seen the market correct, there are some ships that do come up open for renewal? How are you thinking about the fleet that you have today in containers and whether you become more active in either divesting or acquiring ships?

Angeliki Frangou: I mean, if you see on the container segment, I mean, basically, we have seen that around high-teens, ’20s and we have seen the chartering of our vessels. We have minimal base. I mean, we have a $2,134 open — breakeven per open day. And if you see on Page 8, basically container base are less than $1,500. So it’s a minimal. And we see that the rates there are still in a level of about high-teens 20 approximately there. So this is where we are on the containers. Our position on the container segment is, I’ve already — as you remember, in 2021, we had older vessels. And basically, we made these decisions early on, charter the fleet, and we are able to renew our fleet. So we already have the backlog of the vessels we need to renew. This is part of our $1.5 billion newbuilding. And this is basically in positions we already have taken. So we are harvesting the existing and this is the decision we had. And we already have ordered the ones we wanted to do.

Operator: It appears we have no further questions at this time. I would now like to turn the program back over to Angeliki for any additional or closing remarks.

Angeliki Frangou: Thank you. This completes our presentation. Thank you very much.

Operator: Thank you, ladies and gentlemen. This concludes today’s conference. You may now disconnect.