Pangaea Logistics Solutions, Ltd. Price & Performance (PANL)

One in which our strong base of long term contracts and premium rate model supported a greater than 20% year over year increase in adjusted EBITDA despite pronounced softness in the broader drybulk market. Our differentiated cargo strategy and leading market share across global ice class trades have enabled us to drive consistent TCE rate outperformance versus the broader market, culminating in significant growth in fourth quarter profitability. On December 30, successfully completed our previously announced merger with Strategic Shipings Fleet of 15 Handysize dry bulk vessels. This complementary transaction will allow us to expand our business into a smaller size segment of the market. Leveraging these smaller ships to grow our stevedoring and terminal services offerings. In connection with this transaction, issued 18,100,000.0 common shares to SSI in exchange for the 15 vessels and we assumed a approximately $100,000,000 in vessel indebtedness. All of which have now been incorporated into our balance sheet. Following the conclusion of this transaction, we now have a total fleet of 41 owned vessels. Supplemented by short term chartered in ships that bring our operating fleet into a range of 60 to 70 vessels at any given time. With the larger fleet, in a strong position to materially expand our logistics and terminal services across a broader footprint of high traffic ports consistent with our strategic focus.

While we continue to experience robust demand across all our bulk trades, supported by ongoing economic expansion and domestic infrastructure we recognize the potential headwinds posed by proposed tariffs and new port entry fees in The U. S. These factors could introduce near term volatility in market rates and they may drive structural shifts within the global shipping and dry bulk landscapes. We remain vigilant in monitoring developments and trade policies that have potential implications for our business. Importantly, our asset light cargo centric operating model designed to leverage a strategic mix of owned and chartered in vessels remains a competitive key advantage. This model enhances our flexibility, cost efficiency and scalability through market cycles. Positioning us to effectively manage potential volatility while continuing to drive profitable growth generate free cash flow and deliver premium TCE returns. For the fourth quarter of twenty twenty four, we reported adjusted net income of $7,600,000 and adjusted EBITDA of $23,200,000 representing significant year over year growth despite prevailing market rates decreasing by 22.6% during the quarter. Our adjusted EBITDA growth of approximately $4,000,000 compared to last year's fourth quarter reflects the performance of our active operating model and a full quarter of operations from the two ships we purchased earlier this year.

Which drove a more than 20% increase in our voyage days. Our TCE exceeded the benchmark index by 48%. In the fourth quarter. Looking ahead to the first quarter of twenty twenty five, dry bulk demand is been seasonally soft across all major trade routes. Market prices have been volatile over the last few months due to anticipation uncertainty and anxiety. Over international trade. Although demand remains consistent. Through today, we booked 4,982 shipping days generating a TCE of $11,412 a day for the current twenty twenty five quarter. As we move further into 2025, we'll continue to exercise a balanced return focused approach to capital allocation. Our recent vessel acquisitions fleet combination and JV buyout are testament to our confidence in our business plan. And our disciplined capital allocation strategy that seeks to maximize long term term shareholder returns. With that, I'll hand it over to Johnny for a discussion of our fourth quarter and full year financial results. Thank you, Mark, and welcome to those joining us on the call today. Our fourth quarter financial results are highlighted by strong earnings growth sustained TCE premiums relative to the prevailing market and strong free cash flow generation, all during a period where broader demand and market prices softened.

Fourth quarter TCE rates were approximately $15,941 per day. A premium of approximately 48% over the average published market rates for Supramax and Panamax vessels in the period. Which was driven by strong fleet utilization, within Arctic trade routes and our broad base of long term contracts on affreightment. Our adjusted EBITDA for the fourth quarter was $23,200,000 an increase of approximately $4,000,000 relative to the prior year period. Our adjusted EBITDA margin increased 180 basis points to 16.7% as strong growth in the total shipping days year over year and lower charter in rates drove operating efficiencies. This dynamic is enabled by our flexible cargo focused business model which allows us to focus on meeting customer cargo obligations in the most efficient possible manner. Based on prevailing market conditions Our total charter hire expense increased by 1.7% compared to the fourth quarter of twenty twenty three We due to a 33% increase in total charter in days, was almost entirely offset by a 23% decrease in the prevailing market rates Our charter in cost on a per day basis was $13,787 in the fourth quarter of twenty twenty four, And through today, we booked approximately seventeen thirty six days at $10,243 per day.

For the first quarter of twenty twenty five. Vessel operating expenses net of technical management fees increased by approximately 9% year over year. From an average of $5,971 per day last year to $6,525 per day in the fourth quarter of twenty twenty four. However, for the full year, of 2024, vessel operating expenses net of technical management fees declined by 7%. To $5,820 per day. In total, our reported GAAP net income attributable to Pangaea for the fourth quarter was $8,400,000 or $0.18 per diluted share, compared to $1,100,000 or $0.03 per diluted share in the fourth quarter of last year. When excluding the impact of the unrealized losses from derivative instruments [indiscernible] well as other non GAAP adjustments, our reported adjusted net income attributable to Pangaea during the quarter was $7,600,000 or $0.16 per diluted share. Which was consistent with the fourth quarter of last year. Moving on to cash flows, Total cash from operations decreased by 4,600,000.0 year over year [indiscernible] $19,200,000 due to a decrease in cash generated by net working capital. Which offset improved operating expense operating earnings. At quarter end, the company had $86,800,000 in cash, In total debt, including finance lease obligations, of approximately $4.00 $4,000,000 Our finance leases at the end of the quarter include approximately $100,000,000 of lease obligations associated with the strategic fleet combination, which closed on December 30.

During the quarter, our overall interest expense was $4,700,000 an increase of 10.5% due to new debt facilities entered into during the third and fourth quarter of twenty twenty four. When factoring in the interest expense from leases assumed, from the SSI merger, our interest expense would have been approximately $1,300,000 higher. Which is the approximate run rate we expect going forward barring material changes in interest rates. Through the successful completion, of the SSI acquisition, the strategic deployment of equity, to expand our fleet and the recent buyout of the remaining 50% equity interest in our post pandemax ICE Class 1E vessels we have taken a disciplined and opportunistic approach to capital allocation. These initiatives are designed to maximize long term capital return potential while positioning the company for continued growth. In the near term, our capital allocation strategy will remain focused on targeted investments our Stephen Dorn and Logistics operations the renewal and modernization of our dry book drybulk fleet, and the continued reduction of our debt. Additionally, we remain committed to a consistent and sustainable return of capital strategy. With that, we will now open the line for questions.

Thank you. And at this time, if you would like to ask a question, please And we will take our first question from Liam Burke B. Riley Securities. Please go ahead.

Yes. Thank you. Good morning, Mark. Good morning, Johnny. How are you today? Good morning, Liam.

Mark, on your partial fixtures for the first quarter, obviously, it's a the rates in general have been bad, but you really outdistance them. I mean, that's on a relative basis a pretty impressive number. Is it just your COAs and and contracts? What's contributed to that 40% boost? Liam, we always look for work that pays a little bit more than market. We We've always prided ourselves on taking tough cargoes, making our ships work hard for what we what we do. We take dirty cargoes. We go into icy waters. We go to places where other people don't really want to go because [indiscernible] they're not willing to pay. So we will do that. We've got an excellent operating platform We've got really the ship managers that really contribute to the bottom line for us. So So in addition to the COAs, the contracts that that we enter into, we look for things that add value. That's our whole business plan. In a nutshell. That's great. Just as a follow on to that, you've added new vessels on the year end acquisition. How quickly do you think you can roll those vessels from their traditional chartering to the Pangaea chartering platform.

We've made great progress already. I think we've done half a dozen different voyages on these ships or planned voyages on these ships that [indiscernible] that they haven't done so much of. And I'm talking about taking the ships into the icy waters and taking the dirty dirtier cargoes and visiting places where they haven't been before. So we are making progress already. But in this difficult market, the margins to do all that stuff have shrunk as well as [indiscernible] the rates themselves. So we hope when the market bounces, we've seen a little greener numbers in the last couple of weeks. On the dry bulk side and on the indexes. We hope make that happen quickly.

Great.

Later this year, we should see some some improvement in that.

Great. And if I could slide in one more quickly. Your ports Services business generated a little more profitability on than you had in the past on similar type revenue levels. Is there anything going on there that allowed you to ink out a little more profitability?

Yes. What we've done is we've done more dry bulk voyages, dry bulk business in some of our our terminals that pays a little bit more than some of the other stuff we do. But the port side is really bright for us. Opened up a new port and operation in Aransas near Corpus Christi, the fast growing place that that we think will be able do some really nice business with. We've started the actual construction down in in Tampa, Tampa Red Wing Terminal. Where we'll bring 20 ships this year loaded with aggregate to discharge and store on that site. That's a big step for us in the terminal side. So we're looking at other business in Lake Charles So it's really starting to come together for us.

Great. Thank you, Mark.

Thank you. And we'll take our next question from Poe Frat with AGP. Please go ahead.

Glad you're all well.

When I look at the capital allocation you highlighted two things, one fleet renewal and then debt reduction. And with the fleet renewal you added with this SBI you added Handys. Can you help me understand the how to frame the capital allocation and fleet renewal Do you think that you have an optimal number of of owned vessels right now? Or do you think that it might be worthwhile to scale back and pay down debt by selling some of the older assets. Oh, boy, Paul, like every ship owner, we are always trying to grow our fleet. But we want to do it cautiously. We want to do it thoughtfully. We just took on a big slug of new ships, the 15 Handys. That toward our growth goals. There is some renewal to do. We've got some older ships reaching the twenty year age. So we will sell off some of those ships as they come up to twenty years in age.

What we do with the proceeds, it really we haven't decided yet. Where we should put that money.

Whether we should pay down debt. We don't think we're overleveraged today. Although and it rates trend down, that might not be the best use of capital. We want to be opportunistic in buying ships. So we'll wait for the market to drop a little bit and we will want to take advantage of that. Going forward. But not to not 15 more this year for sure. Could add on the on the debt service side for 2025, we are we basically have steady repayments only, no balloon repayments on our debt facility. So around $11,000,000 of debt service per quarter. Pretty steady right until 2027 when we have our first meaningful balloon payment. But then if we look at our debt structure as a whole, we're fixed, fixed on a large portion, about 34% of our debt is fixed and then about 27% of our debt is capped. Or is fixed through our interest rate cap. And then the remaining is floating. So there is, I think, opportunity if we wanted to attack some But when I look at debt service for 2025, and even right through 2026, we have a pretty steady repayment forecast ahead. And we can be opportunistic if we want to.

We're not forced necessarily to repay anything unless we choose to.

And on that, the balloon that comes up in 2027, that debt is on ships that are readily finance refinanceable.

Great. Those metrics are really helpful. So just on the margin, you're more of a buyer than a seller with where asset values are right now. Well, we'd like to see asset values come down as a tick more before we jump in. But Great. Gianni, can you highlight the operating leverage that you with the acquisition of SSI maybe one way to look at it would be your G and A level. Can you highlight your current per day G and A level or maybe in an absolute level for the first quarter of twenty twenty five?

Sure. From a G and A perspective per day for 2024, the number was around about 1,200 per day. Was our overall G and A cost.

The addition of the vessels our platform is it's quite scalable when you look at when you look at the vessel operation side. The incremental G and A to add the number of vessels that we did is not is not really a significant increase. So on a per day basis, I do expect it to be relatively consistent. For shipping debt.

Per shipping day, correct. On a per ship day, I do expect it to remain relatively consistent or even maybe even come down a little bit as we see some of that economy of scale and our operation really kick in.

So I don't expect while the number certainly there'll be incremental G and A with the number of people we've onboarded as part of the acquisition. About ten ten people that were brought on to the team. But on a per day basis, we're still pretty So I think we have we can deploy our operating model and really in a really efficient way.

Great. Do you have sort of what's the target for App Probably I think incremental amount of you mean from a Paul, just to clarify, from a dollar perspective? Yes, dollar, just total dollar at this one time. What's your run rate for the first quarter?

I'd say what we have there in the fourth quarter what we what we're showing there is probably actually probably a good indication for the for a quarterly rate for next year. So just to clarify, so G and A is and the total dollar amounts could be fairly flat maybe up a little bit but your shipping days are obviously going to be a lot higher. You're running right now at year end you ran a fleet of 62, you're 42 owned or 41 owned. Is that a fair way to look at it Gianni?

I think for the full year, like I said, I think we'll probably see a incremental amount in that number. We have not fully disclosed yet, but for the full year compared to '24, I would say it's an incremental model probably $2,000,000 $1,000,000 to $2,000,000 of incremental G and A. The other thing that impacts the number you're looking for DuPoe, the ship the cost per shipping day, is the number of chartered in ships we have at any point in time.

So that can cause that product to be to move up and down.

Great. And then it looks like at year end you're running 62 and can you give me sort of either a snapshot right now on how many what you're total operating fleet or potentially what we should use for an average for the first quarter as far as the operating fleet?

So, Matthew, we're probably a bit lower than that now or maybe around 60 which is not that it fluctuates a little bit. We tend to shrink the fleet a little bit when the market is depressed. So of course, hope is that as the market picks up, we're the child in business also grows and the rest of the year. Great. And then, Janney or maybe Matt you can highlight first quarter drydock and maybe drydocking for the year as far as idle time on the fleet? [indiscernible] for us and for many others in the business, it's a busy year for dry docking. Right? We have four ships in drydock right now. We will have 12 in total for the year. So that's that's the situation. The ships spent about twenty five to thirty days in dry dock these days.

Great. Congratulations on closing the transaction. And also buying in the 50% in order book.

Thank you, Paul. Thanks, Paul. Busy year.

Thank you. And we will take our next question from Nils Talmiesen with Fearnley Securities. Please go ahead.

Yes, good morning. It's been quiet in extensive amount of questions on capital allocation, but I just like to add one more. In the markets, is where it is and I guess you're looking at quite a big reduction in earnings for Q1. And with your amortization profile being what it is, how should we think about dividends as earnings are a bit suppressed over the coming, let's say, one, perhaps two quarters. Do you expect to maintain that that level? Or could we see amendments to the run rate dividend that's been paid over the past four quarters?

Anil, thanks for the question. [indiscernible] quarterly won by the Board every meeting.

And we look at the market, we look at the cash flow generation capability of our fleet upcoming capital expenditures like dockings, So it's we don't have a fixed formula.

But we look at it every quarter. It is [indiscernible] hope to we strive to have a consistent and sustainable dividend That's what we we talk about every quarter when we when dividend discussion comes up.

Yes. Okay, understood. And a bit on your terminal operations, you're saying that you you expect to be complete with expanding those operations in the second half 2025 in Tampa. And just wondering what sort of earnings level we can expect at the run rate when you're at full operations and are you seeing any incremental investment opportunities in that space currently? Johnny, you want to talk about the upcoming year, what we think an income is?

Income is and we're [indiscernible] For ports and terminals, what Mark had said earlier, I think we're seeing a lot of a lot of opportunities there.

It was a good fourth quarter, like that was identified, but it was good margins, but especially in our dry bulk side in Fort Everglades and the amount of volume there.

But next year, projects are coming online, over not really in a straight line manner, they can be somewhat lumpy. But we do expect it to grow in 25% and especially as we get towards the end of the year, But I think what the fourth quarter is a good indication of a decent run rate of operations our ports and terminals. And then as projects come on, [indiscernible] there will be incremental incremental EBITDA generated especially towards the second half of next year. Sorry, second half of twenty twenty five. Rather.

Okay. That's great. Thanks for a good call. Thank you.

And we will take our next question from Michael Mathison with Sidoti and Company. Please go ahead.

Good morning, you guys, and congratulations on the quarter.

Thanks, Michael.

In your earnings presentation, you pointed out that near term growth in shipping capacity is going to be pretty limited. Obviously benefiting TCE rates. But looking ahead to the medium term, are there enough ships being delivered potentially reduce TCE? And does the specialized nature of your business and your port calls kind of insulate you a bit from competitive pressures?

Well, Michael, you hit sort of on right on one of our plans to lean a little bit more toward ports and terminals to to get us away from the volatility of of the shipping business. Think we've done that and demonstrated that it works over the past few years where we've our performance is a little bit better than than the general market.

So that is a goal of ours to be a little more consistent and a little more show a little more sustainable income on the bottom line.

Regarding the number of ships, I think you're talking about the industry.

New building deliveries into the business.

That was identified as couple of years ago as a real strength behind the dry bulk industry that the order book was was low. And that as time went on, there would be some tightness in the market because of the restricted deliveries of new ships into the market. New building orders have increased some but there's still relatively low. Compared to historic delivery book. And we expect that over the next couple of years that will continue to have a little cause a little tightness in the market and keep rates a little bit higher. Great. If you'll permit a follow-up you stated earlier that you're planning to be pretty thoughtful and disciplined about capital allocation, particularly debt paydowns. Is there sort of a target ratio for leverage I guess we like to see and we look at it in a couple of different ways. We look at debt as it relates to shareholders' equity. On the balance sheet, we look at it going forward in terms of the cash needed to service the debt We look at it compared to debt outstanding compared to the actual vessel values fair market values on our ships we have in our fleet.

So we look at it in a lot of different ways. And at this point, we don't think we're over leveraged.

We think we're somewhere around 50% if you look at all those ratios together. [indiscernible] when we look at it from a debt to vessel value perspective, yes, we're around 50% to 55% from a book value perspective. And then if it's adjusted, we also look at it from a fair mark I think we're generally comfortable where we stand. And And yes, and then ultimately, when we look at new debt facilities, set certain thresholds that we don't want to exceed a certain leverage amount. When entering into a new facility. But when we look at corporate leverage now, we're pretty comfortable where we stand and what our as I mentioned, our repayment forecast for the next couple of years, we're very comfortable.

What's helped us a little bit in the terms of the cash necessary to pay and make debt service is that we fixed interest rates on a significant part of the debt. A few years ago and that has has paid off for us.

Well, thank you. That's very helpful. Congratulations again on the quarter.

Thank you. Thanks.

Thank you. And we will take our next question from Clement Mullens Value Investors Edge. Please go ahead.

Good morning. Thank you for taking my questions.

You've already provided ample commentary on how costs should move going forward. But as we think about the Handysizes, there any potential for OpEx per day to come in below your figures for Supramaxes and Panamaxes.

Additional color you can provide on that would be greatly appreciated.

Thanks for the question, Kevin. I think our estimate is that the OpEx will be fairly similar. To our Supramax We don't [indiscernible] Makes sense. Thank you. And final question from me. This one is more on the modeling side. Could you quantify the amount of operating lease liability you had on the balance sheet as of year end?

Sorry, Clint, could you could you ask that again? What was the liabilities?

Yes. The amount of operating lease liabilities. You had on the balance sheet as of year end. For multiple years? Operating leases?

Exactly, yes. [indiscernible] I understand the question, correctly, the operating we don't have any operating leases on the balance sheet.

I'm assuming you're referring to maybe chartering in the chartered in vessels that may be from an accounting perspective classified as leases?

But all of our charges I was referring to that. Yes, yes. So our chartered in vessels to the we we don't charter in vessels for greater than a year. Typically, our average is three to six months, sometimes a little bit longer. Sorry, sometimes longer or shorter depending on where the market Currently, we're obviously chartering in on a shorter term basis. For trips and short short charters. So none of our chartered in vessels would would be considered an operating lease and capitalized on the balance sheet. Considering our charter and strategy.

Makes sense. Thank you for the color.

Thank you. And we do have a follow-up question from Pohrath with AGP. Please go ahead.

Hi. I just have two more Mark, you talked about increasing the Steve Doherty business to smooth out the volatility of earnings. We've been talking that for a couple of years, but right now it's 2% of revenues in the fourth quarter roughly. It it goes that percentage is likely to go down with the acquisition you made at the end of last year. There any big opportunities out there to bulk up that business, no pun intended? But are there any big opportunities out there? Or is it just going to go small and slow and steady and never really get above 5% of total revenues?

Well, we were looking at the Panama Canal deal before was taken away from us by Black BlackRock, I guess. But there are big deals out there. To do Po, but right now, we've are trying to do it on a without spending a lot of money upfront. We're making progress.

We're doing it without buying land.

Which is an expensive way to do it.

But as we grow and as we show up in more and more places, more and more opportunities are coming to us. So think there's a little bit of momentum that we're building here. [indiscernible] we'll be able to we're working on.

And then, Poe, just a comment also that a big part of the value of this operation shows up in our CCE. Right? It's that ability to package services, the freight and steel with our So that part of the business also drives the TCE premium that I've been mentioning a couple of times on the call.

Okay. You made a big acquisition at the end of last year. There was extensive discussions and negotiations and due diligence leading up to that because it took a while for that deal to get across the finish line. You're seventy days into it. Can you give me an idea of how it's going so far, whether there's been any [indiscernible] Integrating that fleet any either positive or negatives that you want to highlight on how that transaction is panning out so far?

I think it's all been positive for us, Paul. It's not a totally different business for us, but it's does give us a little different look at some of the cargoes that are available and ways to offer more service and more of an expanded service to our customers. So our participation has been welcomed by the market. The people that came with us are doing a great job of considering our business plan and and doing things a little differently with their fleet And it's our goal to have people cross trained in the different segments and bring bring different thoughts to each of the pieces of business we do. So it's been nothing but positive.

Actually.

Great. Very helpful. Thank you.

Thank you. And it appears that we have no further questions at this time. I will now turn the program back to Mark Villanowski for any additional or closing remarks.

Thank you for joining us on the call today. You got follow-up questions, are always available through our Thanks very much.

Thank you. This does conclude today's presentation. Thank you for your participation.