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Operator: Good morning. My name is Raza, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pangaea Logistics First Quarter 2023 Earnings Teleconference. Today’s call is being recorded and will be available for replay beginning at 11:00 a.m. Eastern Standard Time. The recording can be accessed by dialing 800-723-0528 or 402-220-2654. [Operator Instructions]. It is now my pleasure to turn the floor over to Noel Ryan with Vallum Advisors.

Noel Ryan: Thank you, operator, and welcome to the Pangaea Logistics Solutions First Quarter 2023 Results Conference Call. Leading the call with me today is CEO, Mark Filanowski; Chief Financial Officer, Gianni Del Signore; and COO, Mads Petersen. 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. At the conclusion of our prepared remarks, we will open the line for questions. And with that, I would like to turn the call over to Mark.

Mark Filanowski: Thank you, Noel, and welcome to those joining us on the call and webcast today. After the market closed yesterday, we issued a release detailing our first quarter results. During a seasonally slower period for the global dry bulk shipping market where benchmark industry rates declined nearly 60% on a year-over-year basis, Pangaea delivered an average TCE rate that was approximately 50% higher than our broader market indices, resulting in another consecutive quarter of profitability. Our TCE earned was $14,372 per day for the 3 months ended March 31, 2023, compared to an average of $26,472 per day for the same period in 2022. Our long-term COAs, specialized fleet and cargo-focused strategy helped us to perform better than index rates in a slow market environment.

Just yesterday, Vesselindex published its report on outperformance, and we again are at the top of the 5-year historical performance list of dry bulk public companies. Seasonal demand softness, combined with extended holiday schedules in the East, contributed to challenging market conditions in January and February. Since bottoming in February, market rates recovered materially as the market became more balanced, giving a combination of improved seasonal demand, increasing activity in Asia and tightness in global shipping capacity. We’ve seen some easing of congestion with the lifting of COVID restrictions in China. The result was a reset of market rates during the first quarter as vessel capacity expanded in a seasonably weak period. Despite global recessionary concerns, we are not seeing any material deceleration in cargo demand.

We are strategically focused on positioning our business to capitalize on the expected growth in global dry bulk volume and favorable rate dynamics over the coming years. During April, market rates averaged more than $13,000 per day, up from $6,200 per day in February. Meanwhile, vessel supply remains highly constrained with lead times ranging from 2 to 3 years, which we expect will keep fleet growth low for the foreseeable future. Notably, asset values remain strong in this market as the demand for eco tonnage in the Ultramax segment has remained high. During the last 12 months, we’ve generated nearly $100 million in free cash flow, positioning us to reduce net leverage and return capital to shareholders while investing in high-return organic and inorganic growth opportunities that align with our integrated shipping and logistics strategy.

In April, we completed negotiations for the acquisition of 61,000 deadweight ton dry bulk vessel in the secondhand market for $26.6 million cash. Built in 2014, this vessel to be renamed Bulk Prudence is expected to be delivered to Pangaea in June 2023, representing the 25th owned vessel in our fleet. The Bulk Prudence is our ninth vessel acquisition since 2021, highlighting our continued strategic focus on owning and operating a newer, more efficient fleet, well equipped to support client requirements on an on-demand basis. In May, we entered into a definitive agreement to acquire marine port terminal operations in Port Everglades, Port Lauderdale and Port of Palm Beach in Florida and in the Port of Baltimore, Maryland from Host terminals in an all-cash transaction.

With this acquisition, we will expand our North American terminal network to include the Mid-Atlantic and Southeastern United States while adding dry bulk distribution capabilities within growing commerce centers. Our cargo-central strategy leverages our established competency within dry bulk shipping together with logistics requirements of our customers, allowing us to extend our service relationship beyond the oceangoing vessel. As before, Pangaea remains committed to a consistent return of capital strategy. During the last 2 years, we’ve increased our quarterly cash dividend by more than 100% to $0.10 per share per quarter, representing a total payout of $18 million annually, which further positions us as a compelling yield-centric opportunity.

Looking ahead, we continue to anticipate Pangaea will generate strong cash flow this year positioning us to further reward our shareholders to reduce debt outstanding and invest in our commercial expansion. On a strategic level, we continue to focus on moving closer to our customer while managing an end-to-end supply chain solution that drives long-term margin expansion and profitable growth. As before, we remain an opportunistic acquirer of tuck-in assets that complement our integrated solutions offering. With that, I’ll hand it over to Gianni.

Gianni Del Signore: Thank you, Mark, and welcome to all of those joining us today. Our first quarter financial results continue to emphasize the durability of our business model as we were able to maximize our operating leverage through our chartering strategy and deliver solid returns amid a seasonal weak dry bulk market. First quarter TCE rates were approximately $14,300 per day, a premium of 48% over the average published market rates for Supramax and Panamax vessels in the period, which is supported by our long-term COAs and our ability to opportunistically lock in short-term cargo business at rates above the prevailing markets. Our adjusted EBITDA declined by approximately 48% year-over-year in the first quarter, amid a 41% year-over-year decrease in total revenue attributable to lower market rates and a 17% decline in total shipping days versus the first quarter of 2022.

Nonetheless, our adjusted EBITDA margins are up 14.3% and are above levels achieved in similar market environments due to the successful execution of our business strategy. During a seasonal weak period, we were able to flex down our chartered-in days which, coupled with lower market rates, served to reduce our charter hire expense by over 70% year-over-year. Vessel operating expenses increased by 3.2% year-over-year, driven by an increase in owned days and increases seen in crude travel costs, which have now begun to stabilize in 2023. Excluding technical management fees, vessel operating expenses on a per day basis were $5,632, down from an average of $5,805 for the full year of 2022. In total, our reported GAAP net income attributable to Pangaea for the first quarter was $3.5 million or $0.08 per diluted share compared to $20.2 million or $0.45 per diluted share in the first quarter of last year.

Excluding the impact of derivative instruments as well as other non-GAAP adjustments, our reported adjusted net income attributable to Pangaea during the quarter was $5.1 million or $0.11 per diluted share, a decrease of $10.6 million or $0.24 per diluted share versus the first quarter of last year. Moving on to the cash flows. Total cash from operations decreased by $21 million year-over-year to $11.6 million but maintained strong conversion as a percentage of our adjusted EBITDA. As a result, the company had $129.2 million in cash and equivalents and total debt, including lease finance obligations of approximately $294 million. Out of our total long-term debt and financial leases, 53% is fixed at an all-in rate of 4%; 40% is capped at LIBOR rate of 3.25%; and 7% is floating at LIBOR plus 1.7%.

During the quarter, the impact of higher interest rates was relatively muted in our results due to our fixed rate and cap rate debt as well as benefits from interest-yielding deposits which generated over $1 million in interest income. To the degree that interest rates remain at current levels or higher, we would expect our blended interest rate to remain largely in line with what was realized during the first quarter. At the end of the first quarter of 2023, the ratio of net debt to trailing 12-month adjusted EBITDA was 1.3x. In conclusion, our vertically integrated shipping and logistics model delivered above-market performance during the softest market since the pandemic, supported by strong execution of our chartering strategy, continued fleet expansion, and refreshment and disciplined capital allocation.

As evidenced by our recent acquisitions, we are continuing to strategically utilize our strong liquidity position to opportunistically invest in our unique business model, while continuing to reduce debt and pay a stable quarterly cash dividend. As we seek to deploy capital toward new growth opportunities, we will seek to further optimize our return on capital investment, consistent with our long-term commitment and long-term value creation for our shareholders. With that, we will now open the line for questions.

Operator: [Operator Instructions]. And we’ll take our first question from Liam Burke with B. Riley.

Operator: Our next question comes from Poe Fratt with Alliance Global Partners.

Operator: [Operator Instructions]. It appears we have no further questions at this time. I’ll turn the call back to Mark Filanowski, CEO, for any additional or closing remarks.

Mark Filanowski: Once again, thank you for joining our call. Should you have any questions, please feel free to contact us at investors@pangaeals.com, and a member of our team will follow up with you. This concludes our call today. You may now disconnect.

Operator: And this does conclude today’s program. Thank you for your participation, and you may disconnect at any time.