Navios Maritime Partners L.P. Q3 FY2025 Earnings Call

Thank you for joining us for Navios Maritime Partners' Third Quarter 2025 Earnings Conference Call. With us today from the company are Chairman and CEO, Mr. Angeliki Frangou, Chief Operating Officer, Mr. Efstratios Desypris, Chief Financial Officer; Mrs. Erifili Tsironi and Chief Trading Officer, Mr. Vincent Vandewalle. As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors section of Navios Partners' website at www.navios-mlp.com. You'll see the webcasting link in the middle of the page and a copy of the presentation referenced in today's earnings conference call will also be found there. Now I will review the safe harbor statement. This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Partners. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners' management and are subject to risks and uncertainties which could cause actual results to differ materially from the forward-looking statements. Such risks are not fully discussed in Navios Partners' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Partners does not assume any obligation to update the information contained in this conference call. The agenda for today's call is as follows: First, Ms. Frangou will offer opening remarks. Next, Mr. Desypris will give an overview of Navios Partners' segment data. Next, Ms. Tsironi will give an overview of Navios Partners' financial results. Then Mr. Vandewalle will provide an industry overview. And lastly, we'll open the call to take questions. Now I turn the call over to Navios Partners' Chairwoman and CEO; Ms. Angeliki Frangou.

Good morning, and thank you all for joining us on today's call. I am pleased with the results for the third quarter and first 9 months of 2025, and we reported revenue of $346.9 million and $978.6 million, respectively. We also reported EBITDA of $193.9 million and $519.8 million, respectively, and net income of $56.3 million and $168 million, respectively. Earnings per common unit was $1.90 for the quarter and $5.52 for the 9-month period. For the past 5 years, it seems as if we have been addressing constant change in our operating environment due to geopolitical issues and other factors. Yet, we have remained laser-focused on our business, modernizing our fleet. As you can see on Slide 3, our fleet has an average age of 9.7 years compared to an industry average of 13.5 years across our 3 segments. Our reinvestment program puts us in a fortunate position of having a fleet that is significantly younger than the industry's average. Please turn to Slide 4. Navios is a leading maritime transportation company that owns and operates a charter and modern fleet of 171 vessels across 3 segments, and 15 asset classes. It is roughly split about 1/3 in its category by vessel number and vessel values. Vessel values stand at $6.3 billion in gross value and $3.8 billion in net equity. We also enjoy a low net LTV of 34.5% and have $412 million in available liquidity along with a strong credit rating of Ba3 by Moody's and BB by S&P. Please turn to Slide 5. We believe that diversification is a strength when embedded in the culture of risk management, as we have a business that provides significant optionality in our decision-making process. For example, concerning charter-in, if we are able to secure long-term charters that provide a reasonable return on our investment, this will limit our exposure to waiting for sector opportunities to return. We approach the allocation of capital similarly, patiently observing the market for opportunistic purchases or acquisitions that can be supported by long-term charters with quality counterparties. These activities are accompanied by deleverage costs as we maintain a strong balance sheet and target a net F&D of 20-25%. Our strong lease management case anchors this approach, as we continuously monitor and assess transactions with risk management professionals who are equal partners in all our activities. We have also obtained robust insurance coverage for liabilities and losses and implemented many tools to manage operational risk and crew training. Please turn to Slide 6. Our gross LTV was 40.6% at the end of the third quarter. Net LTV was 34.5% and we aim to continue to drive net LTV lower. We added $745 million of long-term contracted revenue during the quarter, and our net revenue backlog stands at $3.7 billion. Currently, virtually all of the fleet is covered for the fourth quarter of 2025. Please turn to Slide 7. I would like to focus on prospects for 2026, which are shaping up nicely. We have covered 58% of our days, induced a cash breakeven of $894 per day for the remaining 23,387 open and index days. You can see the breakdown of each segment on the right part of the slide, where 92% of our container base and 7% of our tanker fleet are fixed. Please turn to Slide 8. A few weeks ago, we took the opportunity to offer a $300 million senior secured bond in the Norwegian market. We priced it at par with a coupon of 7.75%. The proceeds were used to pay down $292.3 million of floating rate debt, finance issuances fees, and for general corporate purposes. This transaction has no impact on our leverage rate as the proceeds were used to refinance existing debt, but we believe opportunistic financing reduces interest rate risk by replacing floating rate debt with a fixed interest rate. It also releases collateral, and we have around $1.2 billion in debt-free vessels. Pro forma for this transaction, we have 41% of our debt fixed at an average interest rate of 6.2%. Additionally, this move introduces us to the Norwegian market, providing a targeted source of financing. Please turn to Slide 9 where we outlined a term capital program. To date, we have returned $42.2 million under the dividend and unit repurchase program. We have purchased almost 5% of the units outstanding since the start of the program. We have $37.3 million in purchase power available. These purchases have resulted in $4.6 per unit value creation, based on an estimated annual NAV of around $138 per unit. Please turn to Slide 10. Navios is a proven platform that has been executing its strategy in a challenging environment. I refer to the many uncertainties that we started this discussion with, including geopolitical risk, regional conflict, changing global tariff regimes, and evolving trend patterns, which are unprecedented in recent history. We have remained focused for the past 4 years, building a portfolio with an EBITDA run rate of about $750 million while increasing our contracted revenue to $3.7 billion and vessel value to $6.3 billion. At the same time, we have decreased our net LTV by 33% to 34.5%. We have more to do, but we believe that this proven platform, along with a divisive freight fleet and strong risk management, is key to our success. I now turn the presentation over to Mr. Efstratios Desypris, Navios Partners' Chief Operating Officer.

Thank you, Angeliki, and good morning all. Please turn to Slide 11, which details our operating free cash flow potential for Q4 of 2025 and 2026. For Q4 2025, we fixed 88% of our available days at a net average rate of $24,871 per day. Contracted revenue exceeds estimated total cash operating costs by about $86 million, and we have 1,594 remaining open or index-linked days that should provide additional cash flow. For 2026, we have fixed about 58% of available days at a net average rate of $27,088 per day, generating about $860 million in revenue. This almost covers our total cash operating cost for the year, resulting in a breakeven of $894 per day on our 23,387 open index days. Please turn to Slide 12. We are constantly renewing our fleet to maintain a young profile. We reduced our carbon footprint by modernizing our fleet, benefiting from new technologies and advanced environmental trading features. During Q3, we acquired 4 new building 8,800 TEU vessels for a total of $460 million. These vessels have already been chartered out for a period of over 5 years at a net rate of $44,145 per day, generating revenues of $336 million. We have delivered 25 new building vessels into our fleet since 2020, representing $1.9 billion in investment. Based on our financing processes, we have about $250 million of equity remaining to be paid. In container ships, we have 8 vessels to be delivered with a total acquisition price of about $0.9 billion. We have mitigated the residual value risk with long-term contracts expected to generate about $0.6 billion in revenue over a 5-year average duration. In tankers, we have 17 vessels to be delivered for a total price of $1 billion. We have chartered out 11 of these vessels for an average period of 5 years, expected to generate aggregate contracted revenue of about $0.6 billion. We also continue to opportunistically sell older vessels. In 2025, we sold 12 vessels, comprising 6 dry bulk, 3 tankers, and 3 containerships, with an average age of over 18 years for a total of about $275 million. Moving to Slide 13. We continue to maintain a strong backlog of contracted revenue that creates visibility in an uncertain environment. During the quarter, we added $745 million of contracted revenue—$595 million from containerships, including the $336 million on the 4 new building vessels, $138 million from tankers and $12 million from dry bulk vessels. Total contracted revenue amounts to $3.7 billion—$1.3 billion relates to our tankers fleet, $0.2 billion to our dry bulk fleet, and $2.2 billion to our containerships. Charters are extending through 2037 with a diverse group of quality counterparties. I now pass the call to Erifili Tsironi, our CFO, who will take you through the financial highlights.

Thank you, Stratos, and good morning all. I will briefly review our unaudited financial results for the third quarter and the 9 months ended September 30, 2025. The financial information is included in the press release and is summarized in the slide presentation available on the company's website. Moving to the earnings highlights on Slide 14. Total revenue for the third quarter of 2025 increased by 1.8% to $347 million compared to $341 million for the same period in 2024 due to higher fleet combined time charter equivalent rates despite lower available days. Our combined TCE rate for the third quarter of 2025 increased by 2.4% to $24,167 per day, while our available days decreased by 0.8% to 13,443 days compared to Q3 '24. In terms of sector performance, TCE rates for our combined container and tanker fleet increased by 3.7% and 1.7% to $31,832 and $26,238 per day, respectively. In contrast, our TCE rate for our dry bulk fleet was 3.5% lower at $17,976 per day. For the third quarter and first 9 months of '25, adjusted EBITDA decreased by $1.4 million to $194 million compared to Q3 2024. The decrease was primarily driven by a $4.5 million decrease in other income, mainly due to the drop in foreign exchange gains, and a $3.2 million increase in vessel operating expenses due to a $3.4 million increase in operating expenses and a $2 million increase in general and administrative expenses in accordance with our services agreement. This decrease was partially mitigated by a $6.1 million increase in time charter and voyage revenues and a $2.2 million decrease in time charter and voyage expenses, mainly due to the drop in bunker expenses as a result of lower freight volume in Q3 '25. Our average combined OpEx rate was $6,798 per day, just $10 more than Q3 '24. Adjusted net income for Q3 '25 was $84 million compared to $97 million in Q3 '24. The decrease is primarily due to a $9 million increase in depreciation and amortization and a $2 million increase in interest expense. Adjusted earnings per common unit for the third quarter '25 were $2.8 and $1.9, respectively. For the first 9 months of '25, revenue decreased by $33 million to $979 million, adjusted EBITDA decreased by $29 million to $520 million, and adjusted net income decreased by $67 million to $196 million compared to the same period in 2024. Our combined TCE rates for the first 9 months of '25 were lower than in the previous year. In terms of performance, the TCE rate for our containers increased by 3.1% to $31,213 per day compared to the same period in '24. In contrast, our dry bulk and tanker TCE rates were approximately 9.2% and 3.5% lower, respectively. TCE rates for our dry bulk vessels were $15,369 per day and for our tankers $26,290 per day for the first 9 months of '25. Our average combined OpEx rate was 2.4% higher compared to the first 9 months of '24 at $6,161 per day, also as a result of the change in the composition of our fleet. Adjusted earnings per common unit for the first 9 months of '25 were $6.6 and $5.60, respectively. Turning to Slide 15. I will briefly discuss some key balance sheet data. As of September 30, '25, cash and cash equivalents, including restricted cash and time deposits in excess of 3 months, were $382 million. During the first 9 months of '25, we paid $178 million for our building programs, net of debt. We concluded the sale of 6 vessels for $75 million, which added about $49 million cash after debt repayment. Long-term borrowings, yielding the current portion, net of deferred fees, increased to $0.2 billion following the delivery of 6 vessels during the first 9 months of the year. Net debt to book capitalization improved to 33.8%. Slide 16 highlights our debt profile. With our recent $300 million senior unsecured bonds, we further diversified our funding sources in addition to bank debt and leasing structures. The bond has a fixed interest rate of 7.75%, and pro forma for the bond, 41% of our debt is fixed at an average rate of 6.2%. We have also mitigated the increased interest rate costs by reducing the average margin for our floating debt and bareboat liabilities for our in-water fleet to 1.8%. I would like to note that the average margins for the completed undrawn floating rate debt of our new building program are 1.5%. Our maturity profile is well-targeted with no significant amounts due in any single year until 2030 when the bond matures. In Q3 '25, Navios Partners completed 3 facilities for a total of $246 million, and an additional facility of $68 million was signed in October.

I now pass the call to Vincent Vandewalle, Navios Partners' Chief Trading Officer, to take you through the investor section.

Thank you, Eri. Please turn to Slide 18. Geopolitical developments continue to shift worldwide trading routes caused by the tariff war, restricted Suez Canal passages, the Ukraine war, and port fee impositions by the U.S. and China. These factors are not expected to have a significant effect on tankers and dry bulk trade apart from steel. Tariff impacts on grain and container ships are expected to reduce following the recent trade deal between the U.S. and China. The Red Sea entrance leading to the Suez Canal continues to operate at restricted transit levels for most vessel types. Since the Gaza ceasefire, Houthis announced that they have ceased their attacks on shipping, but there were several piracy incidents off the coast of Somalia at the beginning of November. The Ukraine war is shifting trading patterns, limiting grain exports out of the Black Sea and benefiting exports out of Brazil and the USA. Russian crude and product exports are adjusting to sanctions on Russian oil producers like Rosneft and LUKOIL, elevating rates for non-sanctioned vessels. U.S. Treasury Department port fees on Chinese vessels and the similar Chinese port fee on U.S. vessels have been put on hold for the year while the two countries negotiate a more permanent solution. Please turn to Slide 20 for the review of the dry bulk industry. Demand growth for dry bulk has been relatively stable over the last 25 years at about 4% average annual ton-mile growth. The current order book stands at about 11% of the total fleet and will remain low due to high newbuilding prices, uncertainty about new fuel regulations, and overall market outlook. The fleet is aging quickly with 39% of the vessels being 15 years or older. As the older vessels continue to be scrapped, supply should be constrained over the medium term. Please turn to Slide 21. The main driver of dry bulk demand will be strong Atlantic basin iron ore growth over the next several years, with new projects in Guinea and Brazil. The biggest new project is Simandou in Guinea, which is starting now and will ramp up to 120 million tons by 2027. Additionally, Vale in Brazil has 3 new projects totaling 50 million tons expected to commence exporting by the end of 2026. This totals 170 million tons, all long-haul ton-mile trades, creating demand for an additional 234 capes—while the current order book stands at only 173 capes, further tightening predictions for supply and demand are expected, benefiting rates. Overall, the dry bulk market looks positive based on steady long-term demand growth and a constrained supply of vessels. Please turn to Slide 23 for the review of the tanker industry. Reviewing the supply side just like in dry bulk, we see a relatively low tanker order book of 6%, with 51% of the fleet already over 15 years old, a trend that is rising quickly in the next few years. With existing vessels outpacing new deliveries and upcoming deliveries projected for 2028, supply is set to be tight for several years. Please turn to Slide 24. The U.S. Office of Foreign Asset Control, the EU, and the U.K. continue to sanction Russian, Venezuelan, and Iranian oil revenues affecting the vessels carrying their crude and products. These tighter sanctions have two main effects: sanctioned oil volumes from these three countries are having difficulty finding buyers, raising demand for compliant barrels and nonsanctioned vessels to transport that oil. Secondly, with 785 tankers now sanctioned, the fleet has already seen a significant reduction of about 14% of total capacity. The tanker market also looks positive over the medium term based on a low order book, an aging fleet, and a reduced fleet due to sanctions. Please turn now to Slide 26 for a review of the container industry. After the COVID pandemic, containership ordering has focused mainly on the biggest units, with fleet expansion in large vessels set to continue from high levels this year into next. Currently, 80% of the order book is for bigger ships with a capacity of 9,000 TEU or greater, while only 70% of the order book is for vessels with a capacity of 2,000 to 9,000 TEU, where Navios is most active. Smaller segments of the fleets are well positioned to take advantage of shifting trading patterns. Growth in non-Mainland trades far exceeds traditional trades primarily to the U.S. and Europe due to tariffs and higher growth in developing economies. Shipping routes in the Southern Hemisphere, typically served by smaller-sized vessels, are expected to experience continued growth as trade shifts. Overall, Navios' fleet is well positioned within the container market and continues to benefit from long-term commitments with high-quality charters. This concludes our presentation, and I would now like to turn the call over to Angeliki Frangou for her final comments.

Thank you, Vincent. This concludes our formal presentation, and we'll now open the call to questions.

We'll take our first question from Omar Nokta with Jefferies.

Slide 11 has a really nice summary that shows by 2026, how you have 42% of your available days open to the spot market or index rates. Given how much coverage you have, you only need $894 to breakeven on those ships. Clearly, a great place to be, gives you plenty of flexibility. With that, how does that shape your interest in fixing your vessels going forward, at least into 2026? Do you keep what's available now to the spot market to maintain that flexibility, or do you want to continue to contract these ships?

Let me take you through this. One of the things we are doing is utilizing maximum flexibility. You will see that the vessels that are open for 2026 are primarily dry bulk. Many of these vessels have index-based agreements with premiums. We are comfortable with how we are approaching the market. This is a strong position in which the majority of our container vessels have been fixed, and we see a lot of upside potential there. We are also observing fixed opportunities for dry bulk that we haven't seen in a long time. I'd like Efstratios to add a bit more context.

Regarding 2026, we have a situation where the container ships are covered, providing exposure mainly in the dry bulk sector, which has shown strong strength lately, with healthy rates across all dry bulk sectors. Additionally, with the forward contracts looking robust, we believe the exposure we currently have provides great upside opportunities.

As a follow-up, it seems like we are witnessing a healthy containership chartering market, and you've been able to take advantage of strong liner interest to build ships against contracts. You've been fairly active in recent years in that 5,000 to 9,000 TEU range. Recently, it feels like there's been a shift where liner interests are starting to look more at the feeder size, particularly the sub 2000 TEU size range. This is not currently a major focus for your fleet. Do you see any opportunities there? Are there opportunities to build these smaller ships against contracts, or is that merely speculation at this juncture?

There are always projects on the horizon, and we see significant activity across all segments. What’s crucial is understanding the counterparties and the contract duration because newbuilding prices remain high. There is indeed increased market activity, and we are witnessing inefficiencies that indicate smaller vessels may offer more flexibility to lines adapting to the changing trading patterns. We can expect new opportunities frequently as trade agreements evolve, especially as we see the momentum in U.S.-China relations.

That makes sense. Additionally, you had a successful $300 million bond issue last month with a good rate. How do you plan to employ those proceeds?

As mentioned, addressing the market was vital. It had been nearly 10 years since the maritime sector has had access to such a market. We achieved a fixed interest rate of 41% at 6.2%, diversifying our sources of funding while maintaining our net debt level. This gives us about $1 billion in debt-free vessels, which provides us with significant operational flexibility.

Thank you.

And now I will turn the call back to Angeliki for final comments.

Thank you, this concludes Q3 results.

Thank you, ladies and gentlemen. This does conclude today's program. Thank you for your participation, and you may disconnect at any time.