Euroseas Ltd. Q3 FY2024 Earnings Call

Thank you for joining us today for the Euroseas Conference Call regarding the Third Quarter 2024 Financial Results. We have with us Mr. Aristides Pittas, Chairman and CEO, and Mr. Tasos Aslidis, CFO of the company. This call is being recorded. The company has released their results through a publicly distributed press release. Before we hear from Mr. Pittas, I want to remind you that today's presentation and call will include forward-looking statements as defined by Federal Securities Laws. The topics we discuss may involve risks and uncertainties that could affect the realization of these expectations. Please refer to Slide 2 of the webcast presentation for the full forward-looking statement, which is also included in the press release. I encourage you to review that information. Now, I will turn it over to Mr. Pittas. Please proceed, sir.

Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the quarter and nine months period that ended on September 30 2024. Let us turn to Slide 3 of the presentation to go over our income statement highlights. For the third quarter of 2024, we reported total net revenues of $54.1 million and a net income of $27.6 million or $3.95 per diluted share. Adjusted net income for the quarter was $27.4 million or $3.92 per diluted share. Adjusted EBITDA for the period was $36.1 million. A reconciliation of adjusted EBITDA to net income is presented in the press release that was released earlier today. Tasos Aslidis will go over our financial highlights in more detail later on in the presentation. As part of the company's common stock dividend policy, our Board of Directors declared a quarterly dividend of $0.60 per common share for the third quarter of 2024, which will be payable on or about December 16 to shareholders of record on December 9. The annualized dividend yield of our stock remains at around 5.7% based on our current share price. As of November 20, 2024, and since the initiation of our repurchase program in May 2022, we have repurchased 414,000 shares of our common stock in the open market for a total of about $8.8 million. Our share repurchase plan of up to $20 million was extended for another year in May 2024 and we will continue to make measured use of it at management discretion depending on the level of our stock price aiming to enhance long-term shareholder values. Please turn to Slide 4, where we discuss our recent developments, including an update on our Sales and Purchase, Chartering & Operational highlights. On the S&P front, we are pleased to announce the signing of a contract for the construction of two LNG-ready eco design fuel-efficient containerships with a capacity of approximately 4,300 TEU each. These vessels will be built at Jiangsu New Yangzi Shipbuilding Company Limited in China and are scheduled for delivery in the fourth quarter of 2027. The total investment for each vessel is approximately $60 million with the financing structured as a combination of debt and equity. We paid from our available liquidity the first 15% installments. Further installments start coming due in 2026. These vessels have eco engines and are LNG-ready. We also have two upcoming new building deliveries, Motor Vessel Dear Panel and Motor Vessel Symeon P, which are expected to join our fleet on January 7 and January 8, 2025, respectively. Upon delivery, both vessels are set to commence charters for a minimum of 34 months and up to a maximum of 36 months, each at a highly favorable rate of $32,000 per day. Continuing on our Chartering developments, Motor Vessel Synergy Busan has been fixed in an attractive time charter for a minimum of 36 months up to a maximum of 38 months at a rate of $35,500 per day commencing in December 2024. Also, Motor Vessel Tender Soul has secured the charter for a minimum of 34 months, maximum 36 months and $32,000 per day starting in December 2024. In addition to these three-year charters, we have been able to fix or extend expiring charters for some of our smaller and older vessels at very attractive rates for periods ranging between 11 months and 12 months. Please see the presentation for more details. Regarding drydockings, Motor Vessel Joanna completed her scheduled drydock over a period of 43 days from September 20 to November 2, after which she commenced a new charter, which had been secured since last quarter. Please turn to Slide 5 for an update on our current fleet profile. Our current fleet is comprised of 23 vessels, including 16 feeder containerships and seven intermediate container carriers with a total carrying capacity of just under 67,000 TEU and an average age of 14 years. Turning to Slide 6, you can see the four vessels that are currently under construction, two of which are to be delivered, as I mentioned earlier in January 2025, the other two intermediate containerships are to be delivered in the fourth quarter of 2027. After the delivery of these two feeder and two intermediate containerships, our fleet will consist of 27 vessels with a total carrying capacity of approximately 81,000 TEU. Let's now turn to Slide 7 to see our entire employment profile. The recent charters helped improve the visibility of our expected cash flows. And as you can see from the slide, we have now secured strong charter coverage over the next two years with approximately 70% of our fleet fixed for 2025 and about 35% fixed for 2026. This robust charter coverage at these very profitable rates assures us of significant profitability through 2025 and 2026. Let's now move to Slide 9 for a broader market review. Based on the development of six-month to 12-month time-charter rates over the past 10 years as presented by Clarksons, we see that in the third quarter of 2024, we witnessed a robust recovery in container ship charter rates across all segments of interest. For example, the six-month to 12-month charter rate for a 2,500 TEU container ship reached approximately $30,750 per day, more than triple the $9,270 per day recorded at the close of 2023. Notably, this figure is also nearly double the 10-year average of approximately $16,000 per day. This upward trajectory is consistent across both smaller and larger vessel sizes, reflecting favorable comparisons to historical benchmarks and underscoring the resilience and strong recovery of the market. Moving on to Slide 10, we go over some further market highlights. In the third quarter of 2024, one-year time charter rates experienced a strong upward trend across all segments, reflecting a 40% increase in average charter rates compared to Q2 2024. This increase was driven by the tightening supply in larger vessel sizes and the reduced availability also in the feeder sectors. However, in October and November to date, we've seen a slight easing in the rates for smaller ships up to 2,500 TEU, though no such correction is evident on the larger sizes. The Red Sea region, of course continues to play a critical role in shaping the container market outlook for the remaining couple of months of 2024 and rerouting is also expected to continue through 2025. In the third quarter, the average secondhand price index rose by approximately 2% over Q2, although prices remain around 50% below the pandemic peaks despite the notable increases we saw within the year. Newbuilding prices saw a 2.6% increase over the same period, reflecting sustained high levels due to cost inflation and lengthy yard commitments with new slot availability now extended beyond 2028. A fresh wave of newbuilding orders spurred by this year's profitable market conditions has further extended shipyards' backlogs. As of November 4, the idle fleet stands at 0.2 million TEU or 0.7% of the fleet, a sharp contrast to the peak of 0.8 million TEU in February 2023. This decline in idle capacity, which is largely composed of sanctioned Iranian ships signals near-total fleet utilization. Recycling activity has slightly picked-up, but with still a negligible 55 vessels totaling less than 80,000 TEU having been sent to scrapyards year-to-date. Given that about 25% of the sub 8,000 TEU fleet is over 20 years old, we anticipate recycling volumes to increase if and when market conditions soften. Scrapping prices eased slightly in Q3 to approximately $500 per lightweight ton, though they remain roughly 25% above 2019 levels. The fleet overall has grown in 2024 by 9% year-to-date. Please turn to Slide 11. The IMF's latest update from October 2024 projects stable yet somewhat underwhelming global economic growth with forecasts remaining the same for 2025 as well, around 3.2%. The outlook remains relatively balanced, though risks of inflation not easing further significantly have resurfaced, primarily driven by potential trade or geopolitical tensions that the new administration may result in. Whilst the U.S. has shown resilience with upgraded growth projections according to the IMF, other advanced economies, particularly in Europe have seen either downgrades or stagnant growth outlooks. This mixed landscape underscores the need for careful management of sector dynamics and monetary policy to help maintain stability and ensure a soft landing. Emerging markets continue to drive global growth led by India, the ASEAN-5 countries and still China. While China's growth appears to be slower than previously anticipated at 4.8% this year and 4.5% next year. The extra stimulus recently announced may boost productivity growth. India is projected to grow at 7% in 2024 and a further 6.5% in 2025, supported by significant investment, strong demand in technology, and infrastructure expansions. Southeast Asian countries are also poised for solid growth, benefiting from regional demand and investment momentum. According to Clarkson's data, containerized trade demand for 2024 is projected to increase to 17.9%, primarily because of the uplift effect of ton miles from the Red Sea rerouting. This bump in the demand will not increase further in 2025, but neither reverse swiftly as Clarkson suggested in the previous quarter. Now Clarkson forecasts trade demand continuing to grow in 2025 at 3.1%. Looking ahead to 2026, a more modest growth of 2.2% is anticipated. Please turn to Slide 12, where you can see the total fleet age profile and container ship order book. The containership fleet is relatively young with most vessels under 15 years old and only 11% of the fleet over 20 years old. As of November 2024, the order book as a percentage of the fleet is backed up at around 25%. Turning, however, on to Slide 13, we go over the fleet age profile and order book for ships in the 1000 TEU to 3000 TEU range. The sizes of vessels are the backbone of our operations and where the primary focus of our new building program was. The order book here currently stands at only 4%. According to Clarkson's, new deliveries were projected to be approximately 8% for 2024, but the vast majority of these ships have already been delivered and very few more ships are to be delivered this year. Also, the percentage of new deliveries is expected to drop to 1.7% in 2025 and 1.2% in 2026 and beyond, suggesting that going forward, we will have minimal deliveries in this size segment. With over 50% of the fleet in this size segment being over 15 years old, we have anticipated a significant reduction in the fleet size in the coming years. A similar picture of very limited new buildings of just 5% of the fleet and the extremely high number of vessels over 15 years old of 60% exists in the other size range where our company is very active, the 3,000 TEU to 6,000 TEU. This data is evident in Slide 14. The order book is predominantly focused on large containerships with significant capacity growth expected in those vessel sizes utilized on the main lane routes. This increase in main lane volumes drives greater demand for regional distribution by feeder vessels, highlighting the critical role feeders play in supporting the overall global shipping network. The aging of the feeder and intermediate sized container ship fleet is also even more pronounced through the percentage of vessels exceeding 20 years, which is on average about 25% of the fleet in these sizes. All these ships are prime candidates for scrapping in case there is a slight correction of rates also due to the new stringent environmental regulations. Thus it is highly likely that the fleet capacity in these segments will decline in contrast to the anticipated growth in the larger vessel categories and the overall fleet. Moving on to Slide 15, we summarize our views. The container shipping markets have shown strong momentum throughout 2024, fueled by the disruptions in the Red Sea and robust demand across key trade routes, particularly to developing economies. Both charter and freight rates have remained elevated with expectations that this trend will persist for the remainder of the year. Following a summer slowdown, the market has rebounded with fresh vigor as charters are actively forward fixing vessels for multi-year charters into 2025, reflecting a positive outlook by the charterers. As we look ahead to 2025 and beyond, the container shipping markets are likely to face some headwinds. The easing of Red Sea disruptions when it occurs may gradually shift dynamics, but geopolitical uncertainties in the Middle East make it challenging to predict when the Suez Canal will return to pre-crisis operational levels. A prolonged adjustment period could allow the market to stabilize smoothly. While vessel supplies are projected to be lower than the record delivery years of 2023 and 2024, it will likely remain above demand, which should lead to a slightly corrected market over the next couple of years. However, environmental regulations and sustainability initiatives may affect these dynamics with reduced vessel speeds to lower emissions potentially easing market pressures. Indeed, the energy transition within the containership sector continues to progress, though technical and economic challenges are not allowing the pace of adoption of new technologies and fuels to advance as fast as most would wish. Nevertheless, the growing demand for eco-friendly vessels is expected to drive a premium in charter rates for the more eco vessels. Now please turn to Slide 16 for my concluding remarks. The left hand side slide graph depicts the strengthening in the container ship market throughout the year. As of November 15th 2024, the one-year time-charter rate for 2,500 TEU containerships stood at $30,750. Meanwhile, newbuilding prices for these size vessels also picked-up throughout 2024, reflecting consistent demand driven by limited shipyard capacity, rising construction costs, and compliance with environmental regulations. Over the long-term, elevated costs for green technologies and stricter emission standards are expected to keep new building prices high. Similarly, secondhand vessel prices have shown a strong recovery, rebounding from a low of $15 million in late 2023 to $28 million by November 2024, supported by improving market sentiment and robust charter demand. We are very happy that we placed these orders for the two 4,300 TEU vessels, as we feel that newbuilding prices do not have much room for correction and there will be a huge need for replacement of ships of this size in the near future. And with that, I will pass the floor to our CFO, Tasos Aslidis, to go over our financial highlights in further detail.

Thank you very much, Aristides. Good morning, ladies and gentlemen. Over the next four slides, I will give you an overview of our financial highlights for the third quarter and nine-month period ended September 30 2024, and compare them as usual to the same periods of last year. I will not go through every number in the slides that follow but rather focus on the most important points. Let's indeed start and turn for that to Slide 18. For the third quarter of 2024, we reported total net revenues of $54.1 million, representing a 6.9% increase over total net revenues of $50.7 million during the third quarter of 2023, a result which was mainly due to the higher number of vessels we operated in the third quarter of this year, partly offset by lower other charter earnings our vessels earned. Interest and other financing costs for the third quarter of 2024 amounted to $3.2 million after deducting capitalized interest of $0.9 million charged on the cost of our new building program, for total interest and other financing cost of $4.1 million compared to $1.1 million for the same period of 2023 after again deducting the capitalized interest of $0.9 million charged for the cost of our newbuilding program and this happens because we are self-financing the pre-delivery installments. The increase of interest expenses in 2024 is due to the increased amount of debt that we had in our books during the period as compared to last year. Interest income for the third quarter of 2024 was $0.7 million compared to $0.4 million for the same period of last year. Adjusted EBITDA for the third quarter of 2024 increased to $36.1 million compared to $34.5 million during the third quarter of 2023, primarily due to the higher revenues we had for the period, as I mentioned above. Basic and diluted earnings per share for the third quarter of 2024 were $3.97 and $2.95, respectively, calculated on about 7 million basic and diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $4.67 and $4.65 for the third quarter of 2023, calculated on about 6.9 million of basic and diluted weighted average number of shares outstanding. Excluding certain non-recurring non-cash items from our results, the adjusted earnings attributable to common shareholders for the quarter ended September 30, 2024 would have been $3.94 basic and $3.92 diluted compared to adjusted earnings of $4.08 and $4.07 basic and diluted for the same period of last year, a period for which we also excluded the gain on the sale of a vessel. A more detailed reconciliation of this adjustment is provided in our press release. Let's now look at the numbers for the corresponding nine-month periods ended September 30, 2024 and compared to last year. For the first nine months of this year, the company reported total net revenues of $159.6 million, representing a 13.7% increase over total net revenues of $140.3 million during the first nine months of 2023, again as a result of the higher number of vessels we own and operated to a lesser degree in this case offset by the lower average charter rates our vessels earned. Net interest and other financing costs for the nine months amounted to $7.1 million, again after deducting the imputed capitalized interest of $3.6 million charge on the financing of the cost of loan payments for our new buildings for a total interest payment on our debt of $10.7 million compared to $7.1 million for last year again after adjusting for the imputed interest. This increase in this case too is due to the higher levels of debt we carried in our balance sheet. Interest income for the period, for the nine months of 2024 was $1.6 million compared to $0.9 million for the same period of last year. Adjusted EBITDA for the first nine months of 2024 was $102.9 million compared to $91.1 million for the first nine months of 2023. The increase due to the higher revenues we had for the period. Basic and diluted earnings per share for the first nine months of 2024 were $12.75 and $12.66 respectively, calculated on 6.9 million and 7 million basic and diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $12.95 and $12.90 for the first nine months of 2023. Again, excluding the effect on the income for the first nine months of 2024 of certain non-cash, non-recurring items, the adjusted earnings per share for the nine-month period ended September 30 would have been $11.57 basic and $11.49 diluted compared to $11.37 and $11.33 basic and diluted respectively for 2023, a period in which we have excluded also gain on the sale of a vessel.

Let's now look at the numbers for the corresponding nine-month periods ended September 30, 2024 and compared to last year. For the first nine months of this year, the company reported total net revenues of $159.6 million, representing a 13.7% increase over total net revenues of $140.3 million during the first-nine months of 2023, again as a result of the higher number of vessels we own and operated to a lesser degree in this case offset by the lower average charter rates our vessels earned. Net interest and other financing costs for the nine months amounted to $7.1 million, again after deducting the imputed capitalized interest of $3.6 million charge on the financing of the cost of loan payments for our new buildings for a total interest payment on our debt of $10.7 million compared to $7.1 million for last year again after adjusting for the imputed interest. This increase in this case too is due to the higher levels of debt we carried in our balance sheet. Interest income for the period, for the nine months of 2024 was $1.6 million compared to $0.9 million for the same period of last year. Adjusted EBITDA for the first-nine months of 2024 was $102.9 million compared to $91.1 million for the first nine months of 2023. The increase due to the higher revenues we had for the period. Basic and diluted earnings per share for the first nine months of 2024 were $12.75 and $12.66 respectively, calculated on 6.9 million and 7 million basic and diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $12.95 and $12.90 for the first nine months of 2023. Again, excluding the effect on the income for the first nine months of 2024 of certain non-cash, non-recurring items, the adjusted earnings per share for the nine-month period ended September 30 would have been $11.57 basic and $11.49 diluted compared to $11.37 and $11.33 basic and diluted respectively for 2023, a period in which we have excluded also gain on the sale of a vessel. Let's now turn to Slide 19 to review our fleet's performance. We'll start our review by looking at our fleet utilization rates for the third and fourth quarters of 2024, 2023, and for the equivalent nine-month period. As usual, we break down our utilization rate into commercial and operational. I will not go through every number here one-by-one, but I will only point out that our total production rate was between 99.2% and 99.8% in 2024 and therefore the most part of 2023, except the beginning of last year when a vessel of ours shed some more technical hard time. On average, we own and operated 23 vessels during the third quarter of 2024, earning an average time-charter equivalent rate of $26,480 per day compared to 19 vessels that we operated in the same period of 2023, earning an average $30,074 per day. Our total operating expenses, including management fees, G&A expenses, but excluding dry docking costs were $7,249 per vessel per day during the third quarter of 2024 compared to $7,692 per vessel per day for the same period of last year. If we look further down in the table, we can see the cash-flow breakeven rate for the third quarter of 2024, which amounted to all to $13,629 per vessel per day compared to $13,594 per vessel per day for the same period of 2023. And finally, if we look at the very last line of the table, we can see the common dividend that we paid expressed in dollars per day per vessel. So for the third quarter of this year, that amounted to $2,013, while for the same-period of last year, it amounted to $2,012 per vessel per day. Quickly reviewing the nine-months figures, for the nine-month period, we own and operated on average 21.3 vessels, earning a time-charter equivalent rate of $28,614 per day compared to 18 vessels for the same-period of last year, earning on average $29,843 per day. Our total operating expenses, again, including management fees and G&A expenses, but no dry docking costs were $7,452 per vessel per day in the nine-month period of this year compared to $7,858 per vessel per day for the nine-months of 2023. Cash-flow breakeven levels for the first-nine months of this year, $14,743 compared to $13,853 during the first-nine months of 2023, figures are per vessel per day. And our dividend for the nine-months expressed again on a per vessel per day basis, it was $2,163 for 2024 and $2,134 per vessel per day for 2023.

Let's now review our debt profile and cash-flow breakeven levels. As of September 30, our total debt was approximately $220 million. In the remaining part of 2024, we expect to make loan repayments of about $11 million and favorable balloon payments of around $1.8 million. For 2025, we anticipate loan repayments of about $21 million and balloon payments of approximately $16.25 million. In 2026, we have no scheduled balloon payments and expect to make loan repayments of $15 million, along with a favorable balloon payment of about $20 million. These figures do not account for two additional financings we have arranged to partly fund two new buildings set for delivery in early January 2025. For those vessels, we plan to draw $26 million of debt, totaling $52 million in additional debt, which will add about $4 million per year in incremental repayments. As of September 30, our senior debt had an average margin of roughly 2.13%, which, when combined with the base SOFR rate of about 4.5%, results in a total debt cost of approximately 6.63%. We have swapped a small portion of our SOFR exposure, about 9%, for fixed rates to a lower base rate, bringing our overall cost of debt down to approximately 6.53%. This will decrease slightly further once we include the two loans for our new vessels in the calculation. I would like to draw your attention to the bottom of this slide, where I will present the level and components of our projected cash-flow breakeven for the next 12 months. As you can see, we expect that to be around $12,544 per vessel per day, lower by about $1,000 per day than our 2024 number SOFR and that is mainly due to lower loan repayments. Please note that this figure does include the two vessels and the financing of which we expect to take a delivery of in January 2025. To sum up my part of the presentation, let's move to Slide 21 to review our balance sheet in a simplified format. Our assets in our balance sheet include cash and other current assets, advances for vessels under construction and of course the book value of our assets in the water. As of September 30, 2024, we had cash and other assets amounting to about $94.3 million. We had made advances for our newbuilding program of about $36.6 million, and we had book-value for our assets standing around $450 million, resulting in total assets in our balance sheet of a book-value of about $581 million. On the liability side, as I mentioned, as of September 30, we had debt that stood at $220 million, representing about 38% of the book-value of our assets. We also had other liabilities like the fair-value of below market charters acquired and yet other liabilities amounting in total to about 2.8% of the book value of our assets, meaning the rest around $343 million to be our net book value. That figure alone indicates that the book value per share of our fleet to be around $49. However, it is important to highlight that the market value of our fleet is significantly higher than its book value. We estimate that the total adjusted value of our fleet to be around $590 million, that is $140 million more than its book value, adding about $20 per share to the value of our shares for total NAV net asset value per share in the range of $69 to $70, a level that indicates that our stock trading recently around $42 per share represents a significant discount to our net asset value and thus, we believe it offers considerable appreciation potential to our shareholders and investors. With that, I would like to turn the floor back to Aristides to continue the call.

Thank you, Tasos. Let's now open up the floor for any questions we may have.

Our first question comes from Mark Reichman with Noble Capital Markets. Please proceed with your questions.

Thank you. Good morning. I have a question about the two fuel-efficient container vessels that will be delivered in the fourth quarter of 2027. What rates would be required for those vessels to achieve breakeven? And also if you could provide maybe a little more detail on the financing plans and what are the implications for the remainder of your fleet?

I believe that if we consider a 20-year lifespan for the vessels, having a rate below $20,000 per day for the entire duration would still be profitable. However, we expect to secure better rates than that. We recently made a 15% down payment on each of the two vessels. The next payments will occur when steel cutting begins in 2026, with delivery of the ships expected in 2027. Ultimately, we plan to finance the ships with 60% to 65% debt and the remainder through equity.

Okay, thank you. And Euroseas has done a great job keeping its fleet employed at profitable rates. And I was just wondering what are your expectations for the Diamantis and the Aegean Express whose time-charters expire at the end of November and December, respectively?

Both of these ships will be secured within the next few weeks. We are receiving interest for the vessels at rates between $13,000 and $20,000 for durations of a year or a year and a half. We are still in negotiations and not ready to make an announcement, but they will be secured. The market is favorable and benefiting us. We have achieved excellent rates, thank you.

Our next question is from the line of Tate Sullivan with Maxim Group. Please proceed with your questions.

Hi, thank you. Can you expand on the decision to go and expand a new-build effort to larger class ships with about TEUs of about 4,000? Did you mention it was based on your analysis of that size ship having an older age in the global fleet?

Absolutely. I mean, we have seen that feeder and intermediate vessels up to 6,000 TEU vessels, the order book in all those sectors is between 4% to 5% and between 50% to 60% of the existing fleet is over 15 years old. So, these newer ships are much more economical, much more environmentally friendly. They have a lot of much nicer attributes than the older ships. We are very confident that there will be the need for these types of vessels and we thought that we have six 4,500 TEU vessels in our fleet, which are all between 10 and 15 years old. And we think that we should order a couple of replacements for them.

And did you say this order is with a new shipyard in China and how did you evaluate its capability and did it have available slots versus South Korea? How did you look at sort of…

The shipyard is called the New Yangzi in Jiangsu, and it is currently regarded as the best private shipyard in China. It has been in operation for many years. We built some Kamsarmaxes there about 10 years ago. This shipyard is one of the finest in China, and despite its name, it is not new.

Thank you. Just to clarify, did you mention that the two newbuilds will be delivered in the first quarter, specifically on January 7th and January 8th? It seems like you have been on schedule with all the other ships, so could you confirm those dates?

Yes, I can confirm early January. In fact, the ships could have been delivered in November and December, but it was our choice to ask the shipyard to go a bit slower so that when they are delivered, they are delivered with a 2025 notation rather than a 2024 notation.

Our next questions are from the line of Poe Fratt with Alliance Global Partners. Please proceed with your questions.

Good afternoon, Aristides. Good afternoon, Tasos. You've covered a lot, but I wanted to see if you could share your rate expectations for the Monica, which is the new build scheduled to open in either March or May of next year.

Correct. It's a bit too early to say for this ship what we will do because you've seen these ships get anything from $16,000 to $24,000 a day for a couple of years. So, it really will depend on the rates we see starting next year, except if we were to see something very good being offered to us before the end of the year, which makes us to fix it already, but it's really difficult to say at this point.

Okay. And I assume it's the same thing with the three intermediates that are coming up in the first quarter of next year?

Yes, we are in discussions trying to see if we can achieve good rates for big enough periods and there is interest on the ships and we might be able to announce something this side of the year. We will see.

Okay, so there's more...

They don't come through in Q1, I think, because the optional periods are touched. Very likely, the charters will keep them until the outer part of the optional delivery period.

Okay, Tasos. It seems that there is increasing interest in the intermediates compared to the feeders. Additionally, regarding your comment about maintaining the option period, it suggests that the current rates in the low to mid 20s are appealing for charters, and they will likely hold on to them for as long as possible since the renewal rates are expected to be higher.

That's right.

Okay. If we can move on to the first quarter deliveries, it seems you're securing $52 million in financing. Can you clarify the duration of that debt? Is it for five years? Should we expect it to be five years?

I think in one case it's 10 years because we are in the process of arranging a sale lease-back style financing. In another case, I think it's about six years.

Six years, okay. And it sounded like Tasos, I heard you say that it would add about $4 million to amortization looking at '25 and beyond and that includes the lease pay down too?

Yes.

Okay, great. Regarding your spending, will the $52 million for new build delivery cover all payments upon delivery, or will it generate some extra cash? Can you briefly explain what new build delivery payments are expected in the first quarter of 2025?

I don’t believe we have, but that would essentially cover the remaining costs for the new builds.

Could you discuss the decision to build versus buy? Specifically, did you evaluate the availability of second-hand tonnage? There’s a chart in your presentation showing 10-year-old assets that appear to be quite appealing compared to new build prices, depending on your outlook for rates. Can you elaborate on whether you considered purchasing from the secondhand market instead of committing to a new build?

We are focusing on second-hand opportunities, but we've seen a significant increase in the prices of second-hand vessels recently. Charter rates have also gone up, so we are exploring options to charter vessels for a considerable time when we purchase them. However, we haven't found any financially viable options in the second-hand market at this point. New vessels offer more eco-friendly features compared to older ones, which is why we are opting for new builds. We believe that newbuilding prices are unlikely to decrease substantially because the costs associated with building ships have risen. While shipyards are making profits, they are not substantial, leaving little room for price reductions. Additionally, the shipyards have a large backlog of orders and therefore won't be inclined to offer discounts in the foreseeable future. As a result, we believe that newbuilding prices will remain stable and the outlook for these ships is very promising.

Hi, thank you very much, Aristides. Can you clarify whether these are resales or new orders?

No, these are orders that we are placing ourselves.

Okay, great. The order book increases slightly. I believe you mentioned that you paid an $18 million deposit, which is 50%, in the fourth quarter. I also thought you said there wouldn't be any progressive payments in 2025, but there will be in 2026. Can you provide the amount of progressive payments due in 2026? Additionally, could you let me know what will be due in 2027?

Yes. I will provide you with our schedule. Typically, we will start making a second payment when the steel cutting begins and when construction of the ship actually starts, which will take place towards the end of 2026.

Late in '26 or late in '25, Tasos?

Late in '26 because it takes about less than a year to actually build the ship. The ships are to be delivered in Q4 '27 or sometime late in '26 we should have the next payment due.

Okay, but nothing, you won't have any project payments in 2025?

No.

Okay, so I estimated five project payments at 10% each, with a 50% payment upon delivery. I see now that I was mistaken about the deposit amount; it's actually 15%. Could you provide the timeline for how the payments are structured and what is due upon delivery?

The payment structure includes a 15% advance, followed by three installments of 10%, with the remainder due upon delivery. Starting in the fourth quarter of 2026, you can expect the next payment, with the following two 10% payments scheduled for the first half of the next year, and the final payment expected at the beginning of the fourth quarter of 2027.

Okay, that's good. So 45% upon delivery. That's very helpful. Tasos, can you please provide an upcoming schedule for the drydock plans for '25?

I think there is very little that is due in 2025. Let me just see if I can pull it up quickly.

Thank you.

We have a couple of vessels; definitely one in the third quarter along with several in-water surveys. According to my draft schedule, we have one drydock and several in-water surveys. I can provide a more detailed schedule offline if you're interested.

Okay. Is that in the year Tasos? Or for '25?

The drydock that I see, we have it in the third quarter of 2025. The in-waters are various quarters.

We can always sell an old ship or a new ship for the right price, but generally, we are very comfortable operating older vessels. We believe this is one of the advantages of having Eurobulk as our manager, as they are capable of managing older ships. Although these vessels may not be extremely popular with investors, we can effectively manage them. In strong market conditions like we have now, it makes sense to retain these vessels since they typically generate higher returns than if we sold them.

Okay. But at some point in time, probably over the next two years, those are sale candidates or retirement candidates....

Of course. If the market corrects and the drydock becomes due, it might not make sense to skip another drydock. So that's really when we sell a ship.

Okay. And then Tasos, you talked about the forward-looking OpEx and breakeven levels. Are you seeing any major changes in any of the cost categories? Is there any inflation, whether it's insurance or any other areas, looking into 2025? Nothing, not worth that I can report. I mean, there is some cost inflation obviously in every aspect of our lives, including in maintaining the ships. But to the best of my understanding, nothing sticks out, as we prepare our analysis. Certain insurance cost, although not vessel related like D&O insurance fluctuates and lately has been trading down, for example, but I mean these things could change.

Thank you. Our next questions are from the line of Climent Molins with Value Investor's Edge. Please proceed with your questions.

Hi, good afternoon. Most has already been covered, but I wanted to follow-up on the recent new build additions. Could you talk a bit about how you expect to market the vessels? Do you expect to secure a contract in the near term or are you comfortable waiting until closer to delivery?

We are very comfortable waiting until closer to delivery. If, however, we are offered a good rate for a big period, we would proceed with such a charter. But we are very, very comfortable waiting closer to delivery. It's still quite far away the delivery.

Makes sense. Yes, that's helpful. And after recent contract additions, you have solid earnings visibility throughout 2025 and even into 2026. Could you talk a bit about how you think about your dividend? Is there any appetite to potentially raise it going forward?

Yes. We discuss dividends regularly in our Board meetings and we will have a discussion on that again during our next Board meeting when we look at the final results of the year. And we will decide at that time. Generally, we always want to give a good dividend, a good dividend yield to our shareholders. We think it's important. So as long as our financials allow that, we do that. Of course, you have to always balance the growth of the company, the new acquisitions, the share repurchase program, which we have in place because we feel that we are trading at a discount. So there are quite a few things that one can do with the liquidity and we will discuss again next quarter.

Thank you, you may have just answered it, but with the rate environment remaining positive, so should Euroseas' cash-flow outlook. So I was just going to ask Tasos if he could maybe discuss the capital allocation priorities for 2025. Like you mentioned that balancing between investing in the business, paying out dividends, funding buybacks, et cetera.

I think Aristides answered that question, I think we always look at all of these components of our distribution and capital allocation policy and we try to provide, as Aristides said, a good yield for our dividend. Of course, chartering more ships at attractive rates would be positive in deciding to look more positively at growing the dividend. But it's decisions to be taken at the next Board meeting. And I refer to what Aristides described earlier.

Thank you, everyone, for listening-in and we'll be together with you in three months' time to discuss how this very good year for Euroseas ended up finally.

Thank you to everyone who joined us today. This does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines at this time.