Pangaea Logistics Solutions Ltd. Q3 FY2024 earnings call

Key Points

• In September, entered into a definitive agreement to merge 15 handysize dry bulk vessels owned by M.T. Maritime into the dry bulk fleet, expected to add materially to annualized adjusted EBITDA and close by year-end subject to shareholder approval.
• Two weeks ago, acquired the remaining 50% interest in post-panamax ice class 1A vessels from a joint venture partner, solidifying position in ice class niche.
• During the quarter ended September 30, took delivery of 2 58,000 deadweight ton sister ships, expanding fleet to 26 ships.
• Continued progress on expansion of terminal and stevedore operations in the Port of Tampa.
• Asset-light cargo-centric model leverages owned and chartered-in vessels, emphasizing free cash generation and profitable growth.

For the third quarter 2024, adjusted net income was $11.1 million and adjusted EBITDA was $23.9 million. Adjusted EBITDA declined by approximately $4 million compared to last year due to lower market volatility flattening margins, but higher realized TCE rates and more shipping day activity offset part of the decline. The ice class fleet was fully utilized during the quarter, delivering TCE rates that exceeded the prevailing market by 19%. In terms of product segments, the dry bulk fleet was expanded through acquisitions (15 handysize dry bulk vessels from M.T. Maritime and acquiring remaining interest in post-panamax ice class 1A vessels) and taking delivery of 2 sister ships, expanding the fleet to 26 ships. Terminal and stevedore operations in the Port of Tampa were expanded. Revenue contribution: Adjusted EBITDA from dry bulk operations was impacted by the mentioned transactions and market conditions, with charter hire expenses increasing due to higher chartering days and market rates, but the MTM transaction is expected to add materially to annualized adjusted EBITDA.

Forward-looking Statements

• Expect seasonal slowing in dry bulk demand in the fourth quarter, with Arctic demand less than last year due to wetter and warmer weather.
• Booked 3,378 shipping days and generated TCE of $16,629 per day for the fourth quarter.
• In 2025, capital allocation focus on investing in stevedore and logistics operations, expanding and refreshing dry bulk fleet, repaying debt, and maintaining consistent return of capital strategy with sustainable dividend.

Risks

• Fluctuations in global dry bulk capacity and demand.
• Geopolitical disruption and softening economic activity in some regions.
• Global supply of newbuild vessels remaining constrained, which may impact dry bulk rates.

Q: Liam Burke asked about the transition period for adding the 15 handysize vessels and if they can consistently outperform.

A: Mark Filanowski said they're planning to get the ships into the business plan quickly, but it won't be immediate, as the ships will be on voyages when taken over and need to transition into the business model.

Q: Poe Fratt asked about voyage expenses being higher despite TCE revenue not being lower.

A: Gianni Del Signore said there wasn't one specific outlier, just a function of quarter costs; also noted the 15 handys have good cost levels with reasonable breakevens.

Q: Poe Fratt asked about G&A impact from the transaction.

A: Gianni Del Signore said there won't be higher G&A in Q4 as costs from the transaction would be capitalized as cost of the vessel.

Q: Poe Fratt asked about dry docking schedule.

A: Mads Petersen said there will be four dry dockings in Q4 and roughly six ships in 2025, including intermediate dockings.

Q: Poe Fratt asked about chartered-in fleet landing for the quarter.

A: Gianni Del Signore said the average fleet is around high 50s going into the quarter and they're expecting that for the balance of Q4.

Q: Climent Molins asked about acquisition of NBP and potential for similar with NBHC.

A: Mark Filanowski said the NBP acquisition was timely to clean up balance sheet and simplify story; on NBHC, they'll pursue if opportunity arises but nothing on the table now.

Q: Climent Molins asked about services side strategy and bolt-on acquisitions.

A: Mark Filanowski said mostly organic growth, with expansion in Tampa, looking at opportunities in Texas, and more organic growth expected with more opportunities as they get into the business.