Euroseas Ltd. Q3 FY2025 Earnings Call

Thank you for standing by, ladies and gentlemen, and welcome to Euroseas Conference Call on the Third Quarter 2025 Financial Results. We have with us today Mr. Aristides Pittas, Chairman and Chief Executive Officer, and Mr. Anastasios Aslidis, Chief Financial Officer of the company. I must advise you that this conference is being recorded today. Please be reminded that the company announced their results in a press release that has been publicly distributed. Before passing the floor over to Mr. Pittas, I would like to remind everyone that in today's presentation and conference call, Euroseas will be making forward-looking statements. These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements, which are based on current management expectations, involve risks and uncertainties, and may result in such expectations not being realized. I kindly draw your attention to Slide #2 of the webcast presentation, which has the full forward-looking statement. The same statement was also included in the press release. Please take a moment to go through the whole statement and read it. And now I would like to pass the floor over to Mr. Pittas. Please go ahead, sir.

Good morning, ladies and gentlemen, and thank you for joining us today for our scheduled conference call. Together with me is Anastasios Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the 3 and 9 months period ended September 30, 2025. Please turn to Slide 3 of the presentation for our quarterly financial results. For the first quarter of 2025, we reported total net revenues of $56.9 million and net income of $29.7 million, or $4.25 per diluted share. Adjusted net income for the quarter was $29.6 million, or $4.23 per diluted share. Adjusted EBITDA for the period was $38.8 million. Please refer to the press release for a reconciliation of adjusted net income and adjusted EBITDA. Anastasios Aslidis will go over our financial highlights in more detail later on in the presentation. We are pleased to announce that our Board of Directors has declared another quarterly dividend of $0.70 per share for the first quarter of 2025, payable on or about December 16 to shareholders of record as of December 9. Based on current price levels, the distribution reflects an annualized yield of approximately 5%. In addition, since launching our $20 million share repurchase plan in May 2022, we have repurchased 466,000 shares of our common stock in the open market for a total of approximately $10.5 million. This plan was renewed in May 2025. We remain committed to utilizing this program thoughtfully and strategically deploying it to support and enhance long-term shareholder value. Now please turn to Slide 4 where we review our recent developments, including updates on our sales and operational highlights. During the third quarter, we completed the sale of the motor vessel Marcos V for $50 million. The vessel has delivered to her new and affiliated owners on October 20, and we recorded an estimated gain of $9.3 million on the transaction. On the employment front, we extended the charter for motor vessel Jonathan P for a minimum of 11 months and up to 12 months at a daily rate of $25,000 per day. The earliest delivery under this contract is in October 2026. Motor vessel Synergy Oakland was extended just yesterday for a further 36 months following the end of the current charter at $33,500 per day. Finally, also yesterday, our 4 new buildings, motor vessels Elena, Thrylos, Nikitas G, and Socrates Ch were chartered upon the expected deliveries in the second half of '27 and first half of '28 for a time period of 4 years at a daily rate of $35,500 per day or a 5-year period at $32,500 per day at the charterer's option, which is declarable by November 2026. Turning to operations, the motor vessel Emmanuel P successfully completed its scheduled dry docking, resulting in an off-hire period of approximately 39 days. As part of this repair, we installed energy-saving devices that are expected to deliver fuel savings in excess of 20%. We experienced low or commercial off-hire time during Q3. Now please turn to Slide 5. Our current fleet on the water consists of 21 vessels with a total carrying capacity of 61,000 TEU and an average age of about 12 years. This includes fixed intermediate vessels with a combined carrying capacity of 25,500 TEU and an average age of around 17 years, as well as 15 feeder vessels with a combined carrying capacity of 35,600 TEUs and an average age of 8.4 years. In addition, we have 4 intermediate vessels under construction, each with a capacity of 4,484 TEU. Two of these are expected to be delivered in the second half of 2027, while the remaining 2 in the first half of 2028, adding a further 17,000 TEU of capacity to our fleet. On a fully delivered basis, our fleet will grow to 25 vessels with a carrying capacity of approximately 78,300 TEU. Please turn to Slide 6 for a further update on our fleet employment. We continue to benefit from strong forward coverage. For the first quarter of 2025, 100% of our available days have already been secured at an average rate of approximately $30,345 per day. Looking ahead in 2026, we have already covered 75% of our volume to date at an average rate of around $31,300 per day. In 2027, coverage stands at an even higher average rate of around $33,500 per day. And even in 2028, it stands at 30% with an average rate of around $35,000 per day. Our disciplined strategy provides us with high visibility of future cash flows and will support profitability within the next couple of years, even if the market were to correct. Moving on to Slide 8, let's review the market highlights for the third quarter of 2025. Around the third quarter, 1-year time charters remained firm at elevated levels supported by tight vessel supply and limited availability. This environment encourages charters to secure coverage early in the season. However, towards the end of the quarter, the freight market softened as concerns over available supply and increased competition among carriers began to weigh on sentiment. By late September, the container freight index declined to its lowest level in nearly 2 years. However, during October and early November, we witnessed stabilization and even a strong uptick by 20%. The average secondhand price index rose by about 4.4% in the third quarter versus the second quarter, supported by limited vessel availability, geopolitical tensions, and strong buyer interest. Meanwhile, newbuilding prices remained stable quarter-over-quarter, with a gradual increase in prices relative to Chinese yards. Idle capacity continued to be practically nonexistent. Also, recycling activity remains subdued with only 11 vessels totaling 6,000 TEUs scrapped year-to-date. Scrap prices have dropped slightly to around $425 per lightweight ton. Overall, the global fleet has expanded by a significant 6% year-to-date. Please turn to Slide 9 for our broader market overview, focusing on the development of 6- to 12-month time charter rates over the past 10 years. The slide illustrates that charter rates across all major containership segments remain significantly elevated compared to the 10-year average levels. U.S. growth is projected at 2% in 2025 and 2.1% in 2026, a modest revision from model forecasts reflecting smaller-than-expected effects from tariffs and more favorable financial conditions. In late October, the Federal Reserve reduced the market range for the federal funds rate by 25 basis points, bringing it to between 3.75% and 4%. The Fed has not ruled out additional rate cuts, although they remain on hold as inflation remains high. The broader outlook remains fragile with downside risks stemming from persistent uncertainty, potential protectionist measures, and ongoing labor market constraints. Among emerging markets, India is forecast to expand by 6.6% in 2025 and 6.2% in 2026, supported by strong domestic investment and resilient agriculture and vibrant services sector. The ASEAN economy is also expected to post solid growth of around 4.2% in 2025 and 4.1% in 2026, underpinned by healthy regional demand and continued industrial activity. China's economic outlook is expected to remain positive but at a decelerating pace, reflecting a widening gap between industrial supply and weak domestic demand as well as ongoing trade tensions with the United States. As a result, China's growth is projected to moderate to 4.8% in 2025 and 4.4% in 2026, following the front-loaded exports and remaining fiscal support. Despite these domestic headwinds, the Chinese economy is still being supported by strong performance in regions such as Southeast Asia and India, along with a resilient manufacturing sector. We analyze global growth data carefully as it directly affects trade volumes. Specific factors affecting trade create slight fluctuations around GDP growth. On containerized trade, estimates expect demand growth for 2025 to expand by 3.2%, signaling a strong correlation with expected GDP growth. Predictions, however, point to a dip of 0.7% growth in 2026 and a further decline of 6% in container trade growth in 2027. These expected declines largely reflect the winding down of extraordinary routing patterns and temporary disruptions that boosted volumes in previous years. The influx of capacity recently ordered will likely, at some point, outpace demand growth, especially if geopolitical disruptions were to suddenly resolve, allowing for a return to more efficient routing. Turning to Slide 11, we consider the total fleet age of container support. The top left chart shows that the global containership fleet is relatively young, with most vessels under 15 years old and only 12% of the fleet over 20 years old. The top right chart shows new deliveries as a percentage of the existing fleet, projected at 6.9% for 2025, 5.1% for 2026 and 8.3% for 2027, with actual fleet growth expected to be slightly lower due to slippage and future demolition activity. The bottom chart indicates the order book continues to increase rapidly, reaching approximately 32% of the fleet as of November 2025. Turning to Slide 12, we go over the fleet age profile and order book specifically for vessels in the 1,000 to 3,000 TEU range, which is quite different from the overall picture. As of November 2025, the order book for vessels below 3,000 TEU stands at a modest 8.1% of the fleet. According to market reports, deliveries in this size range remain limited, with newbuilding additions projected to return only 2.1% of the fleet in 2025, followed by 2% in 2026, 3.4% in 2027, and 2.7% in 2028. About half of the fleet is over 15 years old, making them likely candidates for scrapping when the market corrects. Moving to Slide 13, let's examine the supply outlook for the 3,000 to 8,000 TEU segment, another sector in which we currently operate. As of November 2025, the order book stands at 12% of the fleet, a modest level compared to the larger main classes. Meanwhile, the age profile of this segment is notably advanced, with 27% of vessels over 20 years old and another 38% between 15 and 19 years. With a limited newbuilding pipeline, net fleet growth in this segment is expected to remain contained, if not negative, over the next few years. Turning to Slide 14, this chart places those dynamics in perspective across the entire containership sector. What stands out is the concentration of newbuilding activity in the larger vessel classes. New Panamax and Post-Panamax vessels saw order books representing 40% to nearly 80% of their existing fleet, reflecting significant capacity being built for the main lanes. In contrast, the feeder and intermediate segments have significantly smaller orders, ranging from just 4% to 12%, depending on size, even though a substantial portion of these fleets, between 20% and 40%, are already over 20 years old. This widening gap between newbuilding activity in the large vessel segment and the limited replacement in the smaller segment highlights why our core fleet remains structurally well-positioned with minimal risk of oversupply. Now please turn to Slide 15. Looking at the container sector outlook, conditions across the container shipping sector remain mixed. Charters continue to hold firm, supported in part by Red Sea rerouting, even if the container ship rate index has steadily declined. Overall, charter rates remain elevated due to limited near-term supply and steady demand across most societies. In 2026, U.S. trade policy and broader geopolitical developments will be key drivers of trade volumes and route patterns. Recent tariff agreements raising from 10% to 50% have provided some short-term stability, although uncertainty surrounding U.S.-China relations persists. The fourth quarter of 2025 has been emblematic of this uncertainty. The U.S. recently controlled big ships, only for China to reciprocate shortly thereafter, leading to a series of discussions between leaders. Additionally, the recent ceasefire between Israel and Hamas suggests potential easing of disruptions in the Red Sea. Shipping companies are adopting a cautious wait-and-see stance with no immediate changes yet. In 2027, backed by an increase in container ship orders, even for smaller vessels, if demand does not surprise on the upside, the market may enter a more challenging phase. Regarding the energy transition, while it continues to be a key factor in the balance of container trade, the recent non-approval of the IMO's net zero framework has substantially slowed the process. The ambition may have been overreaching initially, and although the transition to more environmentally friendly fuels will continue, it will likely proceed in a more disciplined and realistic manner. Let's turn to the last slide of this section, Slide 16. The left-hand graph shows the cycle of the 1-year time charter rate for 2,500 TEU container ships over the past 10 years. As of November 14, 2025, the 1-year time charter rate stands at $25,750 per day, well above historical averages. This favorable rate environment is reflected in asset values as well. Newbuilding vessels are now valued at $45 million compared with a 10-year average of $35 million. Likewise, 10-year-old secondhand vessels are currently valued at $20 million, significantly higher than the 10-year median of $14 million. In this environment, owners like us are generally reluctant to buy vessels at today's prices unless a charter can be secured that would bring the residual values down to more normalized prices. However, many charters, fearing potential loss of market share, are securing charters for smaller newbuilding vessels even with 2028 deliveries. Unfortunately, until that trend ceases, we will continue to see the order book swelling, which will ultimately result in market capacity. And with that, I will pass the floor to our CFO, Anastasios Aslidis, to go over our financial highlights in further detail.

Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen. Over the next 5 slides, I will give you my usual overview of our financial highlights for the quarter and the 9-month period of 2025 and compare them to the same periods of last year. For that, let's turn to Slide 18. For the third quarter of 2025, the company reported total net revenues of $56.9 million, representing a 5.1% increase over total net revenues of $54.1 million during the third quarter of last year. On a per vessel per day basis, our vessels earned a 10.7% higher average charter rate in the third quarter of this year compared to last year. We reported a net income for the period of $29.7 million as compared to a net income of $27.6 million for the third quarter of 2024. Total interest and other financing costs for the third quarter of 2025 amounted to $3.7 million compared to $4.2 million for the previous year. The decrease is due to the lower interest rate we paid in the third quarter of this year compared to last year for our debt. Adjusted EBITDA for the third quarter of 2025 increased to $38.8 million compared to $36.1 million achieved during the third quarter of 2024, primarily due to the increase in revenue. Basic and diluted earnings per share for the third quarter of 2025 were $4.27 and $4.25, respectively, based on about 7 million basic diluted weighted average number of shares outstanding compared to $3.97 and $3.95 basic and diluted, respectively, for the same period of last year. The adjusted earnings per share for the quarter is $4.26 and $4.23 basic and diluted, respectively, adjusted for unrealized gains on derivatives compared to adjusted earnings of $3.94 basic and $3.92 diluted for the same period of last year. Let's now look at the numbers for the corresponding 9-month period ended September 30 and convert them. For the first 9 months of 2025, we reported total net revenues of $170.5 million, representing a 6.8% increase over total net revenues of $159.6 million that we earned during the first 9 months of last year, mainly as a result of the higher number of vessels we owned and operated and higher average earnings. We reported a net income for the period of $96.5 million as compared to a net income of $88.4 million for the first 9 months of last year. Total interest and other financing costs for the first 9 months of 2025 amounted to $11.7 million compared to $10.7 million for last year. This increase is due to the increased amount of debt we held on average during the respective 9-month period of this year compared to last, partly offset by the lower interest rates we paid. Adjusted EBITDA for the first 9 months of 2025 was $115.2 million, compared to $102.9 million for the first 9 months of last year, a 12% increase. Basic diluted tenants per share for the first 9 months of this year were $13.90 and $13.84, respectively, compared to $12.75 and $12.66 for the first 9 months of 2024, calculated on approximately 7 million basic diluted weighted average number of shares outstanding. The adjusted earnings per share for the 9-month period ending September 30 of this year would be $12.25 basic and $12.19 diluted compared to $11.57 basic and $11.49 diluted for the same period of 2024. Let's now turn to Slide 19 to review our fleet performance. I will not go through the utilization rate figures as I did in the previous calls, and they are near 100%, but I will move to discuss the rest of the table. In the third quarter of this year, 22 vessels were owned and operated, earning an average time charter equivalent rate of $29,284 per day compared to 23 vessels that we operated in the third quarter of 2024, earning an average of $26,446 per day. Our total daily operating expenses, including management fees and G&A expenses but excluding dry docking costs, were $7,246 per vessel per day during the third quarter of this year compared to $7,247 per vessel per day for the same period of 2024. If we move further down this table, you can see the cash flow breakeven levels which account for, in addition to the above expenses, as well as drydocking expenses, interest expenses, and loan repayments. Thus, for the third quarter of 2025, our daily cash flow breakeven level was $13,073 per vessel per day compared to $13,629 per vessel per day for the same period of last year. Below the breakeven line, you can see our dividend distribution expressed in dollars per vessel per day basis, which for the third quarter of this year amounted to $2,410 compared to $2,013 for the same period of 2024. Let's now move to discuss similar figures for the 9-month period, keeping again the discussion on the utilization rates. We can report that we owned and operated an average of 22.6 vessels during the first 9 months of 2025, earning an average time charter equivalent rate of $28,735 per day, compared to 21.3 vessels that we owned and operated in the same period of 2024, earning an average of $28,624 per vessel per day. Our operating expenses, including management fees and G&A expenses, averaged $7,386 during the first 9 months of 2025, compared to $7,452 per vessel per day for the same period of last year. Again, at the bottom of this table, you can see the breakeven level: the cash flow breakeven level, which includes, as we said, interest expenses, dry docking expenses, and loan repayments, was $13,833 per vessel per day compared to $14,743 for the same period of last year. And finally, let's now turn to Slide 20. We reduced this slide this time around to provide a better perspective of the depth of our contract coverage especially in light of the recent forward charters concluded that Aristides mentioned at the beginning of the presentation. The table shows the development of our fleet ownership days over the period from 2026 to 2028 with an estimated breakdown of how many days are available for hire and how many days are already contracted. It incorporates assumptions about delivery dates for vessels under construction, scrapping days for older ships, estimated dry docking timing and duration, utilization rate assumptions going forward, we used a quite conservative one of 98%, and estimates for contracted dates and average contractor rates. Please note that the data in this table is only estimates that we use for our modeling purposes for future time charter equivalent revenues, and the actual figures will be different. However, I hope this can provide some appreciation of our revenue and earnings visibility. As Aristides mentioned earlier, our contract coverage currently stands at 75% for 2026, 52% for 2027, and 29% for 2028. Average contracted rates are, respectively, $31,300, $33,500, and $35,500 for each of the 3 years. Assuming a rate for uncontracted days, one can easily estimate our overall revenues for the respective year. I hope this is helpful for our investors and analysts that cover us in their own analysis of our future profitability. Let's now move to Slide 21 to review our debt profile. As of September 30, 2025, our total outstanding bank debt stood at about $224 million with an average interest rate margin of about 2%, which based on a 3-month LIBOR rate of 3.87% results in the cost of our debt of about 5.9%, which is well within the prevailing gains for our segment and peers. For the fourth quarter of 2025, we expect loan repayments of approximately $5.4 million with no balloon payments during the remainder of the year, which accordingly, will reduce our year-end balance. In 2026, scheduled loan repayments amount to approximately $19.5 million with no balloon payments during the year. In 2027, we expect repayments of about $16.8 million, together with a $20 million balloon payment, making total scheduled repayments for 2027 approximately $36.8 million. Similarly, we can see in the chart the scheduled payments for the period from 2028 to 2030. At the end of 2030, remaining outstanding debt, assuming no refinancing, would be about $76 million. This calculation does not include debt we expect to draw to finance the construction of our 4 new buildings, estimated to be in the range of $140 million to $150 million. At the bottom of this slide, as always, we show our cash flow breakeven estimate for the next 12 months, broken down by its key components. Based on this, our total cash flow breakeven level for the next 12 months stands at approximately $12,000 per vessel per day, a level well below the average earnings of our fleet. In making the comparison, understanding our fleet's performance provides insights into the cash flow generation potential of our vessels. To sum up my presentation here, let's move to Slide 22 to review some highlights from our balance sheet. As of September 30, 2025, cash and other current assets in our balance sheet totaled approximately $126.4 million. We have already made $35.9 million of advances for our newbuilding program. On our asset side, the book value of our vessels, including Marcos V, which is held for sale, stood at about $512.5 million, for a total book value of our assets of about $675 million. On the liability side, as I mentioned in the previous slide, we had debt amounting to $224 million, with other liabilities of about $24 million, resulting in book shareholders' equity of roughly $427 million. However, the market value of our fleet, that is the charter-adjusted market value for our vessels, is significantly higher than their book value. According to our latest estimates, our fleet is valued at approximately $680 million, which translates into a net asset value for our company of about $595 million or roughly $85 per share. With our last closing price and the recent trading rates at around $60 per share, our stock trades at almost a 30% discount to its charter-adjusted net asset value.

And with that, let me pass the floor back to Aristides to continue our call. Thank you, Anastasios. Let me open up the floor for any questions we may have.

Our first question is from Mark Reichman with NOBLE Capital Partners.

There are two areas I wanted to focus on. The first is what your expectations are for the scheduled off-hire days for the fourth quarter and the remainder of 2026. If I look at your slide deck, it seems like you're anticipating a very light dry-docking schedule over the next 12 months, so a little clarity there would be appreciated.

I think this is correct. We have not many dry dockings over the next 12 months. Our off-hire for Q4, just like the previous quarter, will be almost 0. For modeling purposes, we use a 2% off-hire to model it. But typically, we run our fleet north of a 99% utilization rate.

Okay. So if they were 39 days in the third quarter, do you think that the fourth quarter would be lower than that? If you've got 0 in terms of order.

In terms of scheduled dry docks, we don't have any scheduled dry docks in the fourth quarter to the best of my knowledge. We have all signed off on water surveys.

Okay. And so surveys. I think in the third quarter, the number of days came maybe in a little higher than what we were expecting. But we might have just had a special survey built in. But do you think it would be greater than 5 or 10 days for the fourth quarter?

It's hard to predict, but I would say not even that many. In the third quarter, we had a minor that underwent dry docking. We have no scheduled dry docks in the fourth, and the next scheduled dry dock will be in the third quarter of next year.

Okay. Tasos. The second area is that if containership ordering has accelerated even in the smaller sector, which could increase supply, you've mentioned that you think that could pressure rates from 2027 on. You're pretty well covered in 2027 with 52% locked in. But looking at your Slide 9 where you're showing kind of the rates, it seems to me the median is pretty severe. I mean I would probably look at it by taking the standard deviation of the rates and maybe putting a plus or minus 1 standard deviation around the average. But you're also looking at a couple of time series here. If you were to plant a flag and say 2020, what differences do you see in the market, pre-2020 and maybe the last 10 years versus the next 10 years? I mean, there’s an aging fleet and increasing environmental standards. Obviously, the fleet is going to get replenished. Rates could likely go up based on the newer vessels, and efficiencies could go down or could go up as you've got more fuel-efficient vessels. So could you flesh that out a little bit in terms of your expectations? And are there differences in the overall market? I mean, is it too simplistic to look at this slide from 2015 to 2025 and draw conclusions? Or are there some other factors that may have a bearing on rates going forward?

The main reason why the years 2015 to 2020 saw very low markets, as you can see, is that there was a huge order book nearly 100% back in 2007 and 2008 that got delivered. We had a fleet oversupply of vessels, which was the reason why charter rates between 2015 and 2020 were extremely low. Then of course, we had the pandemic, resulting in a significant increase in tonne miles for vessels, which resulted in a huge boom during the pandemic. After that, the market started to correct, and rates dropped again to a much more reasonable level. Then we had the war between Palestine and Israel, which closed the Suez Canal and led to an increase in the market that we have seen. These are the three main factors. Of course, there are many other things influencing the market, but these are the main reasons. I don't think we can see rates as low as what we saw between '15 and '20 again, also due to significant inflation resulting in newbuilding prices increasing substantially over the last 5 to 6 years. If newbuilding ships cannot get much cheaper, shipyards will lose money, which places a floor on secondhand values as well. It's a very complicated equation and extremely difficult to predict.

But it's not unreasonable to expect that the rates could be higher than your average going forward. There's probably going to be some volatility, but looking ahead, your breakeven rate is actually pretty good; you have a pretty good cost structure. So I just wanted to provide a little perspective on the forward numbers.

It does give us a bit of color on what has happened, but predicting what will happen is much harder.

Another indication, Mark, of what the market thinks is reflected in the charters we just concluded. Obviously, we have concluded these charters at levels reflecting that the market believes that locking in $35,000 per day for our 4,400 TEUs is appropriate, which might provide additional insights into market expectations.

Our next question is from Tate Sullivan with Maxim Group.

You provided a lot of good descriptions on why you're willing to book your newbuilds well forward, at a longer timeline to delivery than almost all your other newbuilds. Can you talk about the charters' willingness to book the ships that far forward? Are they trying to avoid sudden spikes in the market like they had post-COVID? I would love to hear your thoughts on that, please.

As we noted, the fleet of vessels below 6,000 TEU is very old. Approximately 25% are older than 20 years, and a significant portion is older than 15 years. Charterers are competing to secure these vessels because they know they are necessary for regional trade as larger ships become fully booked. I think we are seeing this potential lack of availability and a rush to secure tonnage.

Do you get any market indications if they're willing to book such long-term contracts that they have dormant vessels sitting in ports waiting for voyages in the current market?

No, the current market is one of full employment. There might be occasional delays or small waiting times due to various reroutings, but no significant dormant capacity exists.

Regarding your newbuild commitments for the new ships, is your remaining commitment about $200 million? Is that fair?

Yes, that's correct. The total contracted prices are approximately $240 million. We have made payments amounting to about $36 million, so roughly $200 million remains to be paid.

Will there be one installment payment every year or two every year?

The next payment will be made when the steel cutting occurs, which should be about 12 months before the ship's delivery. So we will start making additional 10% payments in the middle of next year, and there will be 3 more 10% payments before the final payment.

Our next question is from Clement Molins with Value Investor's Edge.

Most has already been covered, but I wanted to delve a bit into your fleet positioning. You have a clearly dated fleet between legacy and modern tonnage. Considering you recently fixed for new Wilson orders at solid rates, is there any appetite for additional tonnage alongside long-term contracts? Or are you comfortable with your current positioning?

There is always a possibility to order more. We are looking at various opportunities. I can't guarantee anything will develop, but securing the last 4 vessels gives us significant safety and comfort to explore additional options.

Makes sense. Final question from me: pro forma for the sale of the Marcos V and considering the CapEx on the new builds, are you sitting in a solid financial position? Is there a medium-term leverage target you plan to meet going forward? Or is it a moving target?

Generally, our strategy is to maintain leverage around 50%. We might move 10% or 15% above or below that depending on the circumstances and market timing. We believe a decent leverage in a business that generates more than 6%, which is our cost of capital, makes sense. However, we want to avoid excessive exposure because we are aware of what happens in poor market conditions. This gives you an idea of our general leverage strategy.

Our final question is from Poe Fratt with Alliance Global Partners.

Looking at the delivery payments, I'm estimating in the second half of 2027 you're going to owe about $65 million on the first 2 newbuilds. And then in the first half of '28, you're going to owe about $65 million for the last 2 newbuilds. Is that correct?

That's probably right. You should consider that about 55% of the contract price will be paid in the year of delivery or in the half-year prior. So something like $65 million for the first pair and $65 million for the second pair sounds accurate.

That's what I was guessing. And then just a nitpicky one: How did you decide to offer the charter the 1-year option after the fourth year? If you look at the way the time charters are structured on the 4 new builds, 4 years at 35.5% and then years at 32.5%, it seems like you're giving up a lot on that last year of extra coverage. Can you just talk about that?

We discussed various options for the charters, ranging from 3 years to 5 years, with different combinations of rates and durations. We ended up focusing on the 4-year duration at $35,500, but they requested an option to extend for the 5-year deal, which provides them with a year to decide. That implies a low 20s rate for the fifth year compared to the first four years at $35,500. We felt that this was an appropriate trade-off to make.

I calculated $20,500. On your Slide 20, it seems like you're implying that even with the new builds coming in, the fleet will decline in '26 and '27 and '28. Can you discuss your strategy on selling some of the older assets, mainly the feeders that don't have as much contract cover?

We are taking a conservative approach, assuming the market may decline significantly. Instead of conducting special surveys on our two older vessels, we may opt to scrap them. This reflects our conservative projections.

It looks like the Jonathan P would be one of the two candidates for scrapping if the market does go the way you expect?

Yes, one vessel in our fleet is under consideration.

With no further questions, I would like to turn the conference back over to management for closing remarks.

Thank you very much, everybody, for listening in. We will be back to you at the beginning of the year with the full year results. Thank you.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.