Good morning. My name is Todd, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pangaea Logistics Solutions Fourth Quarter and Full Year 2023 Earnings Teleconference. Today's call is being recorded and will be available for replay beginning at 11 a.m. Eastern time. The recording can be accessed by dialing 800-839-5630 for domestic users or 402-220-2557 for international. All lines are currently muted, and after the prepared remarks, there will be a live question and answer session. It is now my pleasure to turn the floor over to Stefan Neely with Vallum Advisors. Please go ahead.

Thank you, operator. And welcome to the Pangaea Logistics Solutions fourth quarter and full year 2023 results conference call. Leading the call with me today is CEO, Mark Filanowski; Chief Financial Officer, Gianni Del Signore; and COO, Mads Petersen. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. At the conclusion of our prepared remarks, we will open the line for questions. With that, I would like to turn the call over to Mark.

Thank you, Stefan, and welcome to everyone joining us on the call today. After the market closed yesterday, we issued a release detailing our fourth quarter and full year 2023 results. Our results were a good finish to the year as we continued to achieve a consistent TCE rate premium above our benchmark indices. While the fourth quarter is generally a slower period for Pangaea as we exit the peak of our Arctic trade season, ongoing geopolitical trade disruptions have led to increased demand within our traditional trade routes, contributing to increased shipping days in the period, together with a corresponding increase in freight rates. We reported adjusted net income of $7.4 million for the fourth quarter and $31.4 million for the year. For the fourth quarter in 2023, our adjusted EBITDA of $19.7 million, though strong, declined on a year-to-year basis, even as our TCE rate exceeded our benchmark BSI Index by 27%. Market rate volatility can be impactful over quarterly periods, but our business model smooths the effects over longer periods. Our markets in the current quarter are showing surprising strength on a seasonal basis as global trade disruptions have led to persistent market inefficiencies, a dynamic supportive of a structurally higher freight rate environment. With supply growth limited by worldwide shipbuilding capacity to produce new ships in our segments, we think there is a long runway for continued strong performance. Beyond the favorable dynamics being created by geopolitical disruption, we continue to see strong demand growth in the core trades that we serve, specifically construction aggregates, cement, iron ore, and iron products. Through today, we've booked over 3,500 shipping days at an average TCE rate of $17,430 per day versus a market rate of approximately $13,000 per day in the first quarter of 2024. Given these favorable underlying demand conditions and our expanding cargo book, we intend to prioritize capital investment in fleet expansion and renewal while continuing to scale our onshore logistics capabilities. In addition to these organic and inorganic investments, we'll seek to further fortify our balance sheet, all while continuing to support a consistent return of capital program as demonstrated by our consistent quarterly cash dividend. At a strategic level, we remain focused on providing a growing base of integrated shipping and logistics solutions that address the unique demands of our customers. To that end, following the acquisition of three marine port terminal operations in Florida and Maryland in mid-2023, we've been actively working to expand our onshore relationships with new and existing customers. During 2024, we will expand our footprint across the US Gulf Coast and in Florida through strategic joint operations, partnerships, and site leases. We believe this approach is a lower-cost, less capital-intensive method of entering a market, albeit one that allows us to build stronger relationships with current and potential customers and is centered on building around our ocean transport offerings. This accelerating dry bulk demand growth, limited volume of new-build dry bulk vessels scheduled to enter service over the coming years, and a focus on expansion of our fleet and port terminal operations sets up for a favorable strategic success in 2024 and beyond. With that, I'll turn it over to Gianni for a deeper discussion of our fourth quarter financial results.

Thank you, Mark, and welcome to all of those joining us today. Our fourth quarter financial results continue to emphasize the flexibility of our business model. As we were able to deliver premium returns amid market volatility, strong year-over-year growth in shipping days, all while reducing our vessel operating expenses per day. Fourth quarter TCE rates were approximately $17,684 per day, a premium of 27% over the average published market rates for Supermax and Panamax vessels in the period, which is supported by ice class performance early in the quarter, as well as our long-term COAs and forward bookings, which lock in rates for future cargo performance. Our adjusted EBITDA declined year-over-year to $19.7 million. Our adjusted EBITDA margin also declined year-over-year to 14.9%, given volatility in rates which negatively impacted our charter and expenses. We also recognized an unusually high canal transit fee during the quarter resulting from environmental disruptions at the Panama Canal. This fee resulted in a $1 million negative impact to our adjusted EBITDA during the fourth quarter and a reduction in our overall TCE earned. During the fourth quarter, we saw year-over-year increase in chartered-in days, which increased 33% due to increased demand from our customers and our ability to supplement our fleet with chartered-in vessels. However, in accordance with our short-term chartered-in strategy, we recognized higher spot chartered-in rates in comparison to our overall TCE, resulting in margin compression, which may happen during times of a rising rate environment. Through today, we've booked approximately 1,400 chartered-in days at an average cost of $17,100 per day in the first quarter of 2024. Furthermore, this dynamic was offset by lower vessel operating expenses net of technical management fees, which decreased by 4% year-over-year from an average of $6,200 per day last year to $5,900 per day in the fourth quarter of 2023. The decrease continues to highlight the success of our efforts to manage vessel operating expenses. As we have mentioned in the past, we utilize forward freight agreements and bunker swaps to selectively hedge our exposure to the market on our long-term cargo contracts and forward bookings. This approach helps us lock in future cash flows and minimize the impact of market volatility but can lead to fluctuations in our reported results on a period-to-period basis. Given the market volatility during the fourth quarter, our reported net income reflects an unrealized loss of approximately $5.7 million relating to the mark-to-market adjustments of bunker swaps, forward freight agreements, and our interest rate cap. In total, our reported GAAP net income attributable to Pangaea for the fourth quarter was $1.1 million or $0.02 per diluted share compared to $15.5 million or $0.34 per diluted share in the fourth quarter of last year. When excluding the impact of the unrealized losses from derivative instruments that I mentioned, as well as other non-GAAP adjustments, our reported adjusted net income attributable to Pangaea during the quarter was $7.4 million, or $0.16 per diluted share, a decrease of $6.9 million, or $0.16 per diluted share versus the fourth quarter of last year. Moving on to cash flows, total cash from operations decreased by $9 million year-over-year to $23.9 million due to a decrease in TCE rates. At quarter-end, the company had $99 million in cash and total debt, including financial lease obligations of approximately $268 million. Of the $268 million in debt, approximately $20 million represents a balloon payment that is due in May of this year. This credit facility is currently locked at a fixed rate of 3.96%, and we are currently evaluating numerous refinancing partners as well as the potential of paying off the debt and owning the underlying vessels outright. During the quarter, we continued to see relatively muted impact from higher interest rates due to our fixed rate and capital rate debt as well as benefits from interest- yielding deposits which generated nearly $1 million in interest income. At the end of the fourth quarter of 2023, the ratio of net debt to trailing 12-month adjusted EBITDA was 2.1 times. As Mark mentioned, our capital allocation focus in 2024 is investing in growth by expanding our onshore footprint in owned vessel capacity. Our current balance sheet and the strong cash flow profile of our business gives us the flexibility to be thoughtful about the most advantageous ways to finance our growth plans. Importantly, I would reiterate that we continue to prioritize a consistent return of capital strategy. We believe that our current dividend is one that we can sustain through the market cycle.

Our first question comes from Liam Burke with B. Riley. Please go ahead.

Yes, good morning, Mark. Good morning, Gianni.

Hi, Liam.

Mark, can we discuss the charter hire, charter-in expenses that sort of squeezed your margin during this quarter? Flexing your fleet using leased vessels, chartered-in vessels as part of your overall strategy, was this a short-term anomaly in terms of the margin squeeze, and does that make you think about your longer-term strategy about chartering vessels?

No, the strategy is still solid, Liam. This isn't unusual for us during times when we book cargo in advance and don’t perform until a month later. Market fluctuations can lead to increased costs for our chartered-in fleet as rates rise. Conversely, when rates drop, it becomes cheaper for us to bring in ships. Therefore, we are cautious about the cargo we book and the timing of chartering in vessels. However, a significant spike, like the one we experienced in December, can cause temporary disruptions. The comparison between our charter-in costs and market rates can vary, especially if the increase in market rates occurs in regions where we are active, such as the North Atlantic, which has seen a more significant spike compared to the rest of the world. Thus, when evaluating our charter-in costs against global rates, we may appear slightly higher than when comparing solely to the North Atlantic market.

Great. And, Liam, it's Gianni. I want to emphasize that when we review our performance on a quarterly basis, we may experience fluctuations in margins. For instance, in the first quarter of 2022, our chartered-in fleet reported a negative margin. We analyze our performance quarter by quarter, and changes in market rates can lead to margin pressures. However, I want to highlight that for the entire year of 2023, the margin for our chartered-in fleet was approximately $1,800 per day, which is a positive outcome and remains strong. Although this quarter's performance is regrettable, our long-term outlook aligns with our goals.

We consider the costs of chartering ships compared to the revenue generated from those chartered ships against our existing contracts or spot cargoes. The main idea is that by freeing up capacity on our own ships, we can take advantage of a stronger market. While we analyze the components, our primary goal is to enhance overall performance.

Great. Thank you, Mark. On the first quarter partial fixtures, sequentially it's almost flat, where typically you'd expect it to be down with the first quarter being a seasonally slow quarter. Is that primarily the Panama Canal, or are there other things in there that's giving you a really strong, seasonally slow first quarter?

Yeah. Hi, Liam. It’s Mads here.

Hi, Mads.

The Panama Canal of course has an effect, but I think the main driver is also the fact that we were able to put cargo in Q4 that we are now executing on in Q1 at what are historically pretty attractive levels. So of course, it's a result of the general strengthening, but also the fact that we were able to secure some pretty decent paying forward cover.

Great. Thank you, Mads. Thank you, Mark. Thank you, Gianni.

Yep. Thanks, Liam.

Thank you. Our next question comes from Poe Fratt with Alliance Global Partners. Please go ahead.

Good morning, Mark. Good morning, Gianni. Good morning, Mads. It's nice to see you on Monday. Can we explore the charter hire expense a bit more? It was around $34 million for the quarter. Based on my calculations, your charter-in days were approximately 1,700 to 1,750. This leads me to estimate a chartered-in expense for the fourth quarter of just over $19,000. Are these figures accurate or can you provide additional insights?

Yeah, I can give you the numbers, Poe.

That'd be great.

In my earlier comments during the call, I mentioned the charter-in cost for the first quarter, which we've booked and encouraged. For the fourth quarter, the charter-in cost was $17,986 per day, with approximately 1,800 chartered-in days.

Okay, great. Looking at the forward chartered-in cost of 1,300 days at $17,100, can you provide some insight into how the whole quarter might look? Will the chartered-in days be similar to those in the fourth quarter? And should the cost be slightly lower since you might avoid the spike that occurred in December?

Well, we're pretty close to the end of the quarter here, so I don't expect significant changes to what we said. But you're right, the fleet remains around, we're still around 45 to 50 vessels. In Q4, we had about 44 total fleet. So, yeah, I think as far as the volume of activity, it's relatively similar. And then since we are pretty close to the end, I think the numbers that we gave there are a very good indication of what it will be for the full quarter.

Okay, great. Mads, could you provide an update on your forward cover for the remainder of the year and your chartered-in costs? Are you able to discuss this beyond just this quarter or this specific timeframe?

So, we don't provide guidance beyond the first quarter. However, regarding our core business and the long-term contracts we operate under, our long-term coverage for our fleet remains consistent. In the short term, we are always securing bookings for subsequent quarters, and the market is continuously evolving. We haven't disclosed any longer-term information aside from our long-term figures related to our contracts.

And in terms of the chartered-in fleet, Poe, our approach or strategy around that hasn't really changed. The vast majority of that is short-term in nature, so that will always reprice relatively quickly. We're not looking to add a significant amount of chartered-in vessels for an extended period. That's not part of the strategy, really.

Yeah, you sort of want to avoid taking market bets other than with your own fleet, right, Mads? You don't want to charter in long term and get exposed to negative moves in the market.

Yeah, 100% correct, right. I mean the chartered-in fleet for us is essentially an arbitrage around the own fleet and a way to employ the entire fleet of the company in a more sensible way rather than ending up ballasting too fast and picking up a cargo just because you don't want to fix it in the ship. So it goes back to what Mark said earlier that you sort of have to look at the whole, not just pick out the charter-in because it serves a purpose in the greater picture of things where you will in a quarter like this, you can have a quarter that just in that particular part of the business looks a little disrupted as Mark said.

I understand that you're reluctant to discuss your forward cover book, but has anything changed regarding your typical operation of 10 to 12 ice-class vessels during the ice season over the summer and early fall?

Yeah, that part of the fleet is owned primarily so. So we don't expect any huge changes in that part of the fleet, no.

But if we have booked other business that those ships now have to leave to go north into the Arctic, we may, it is a more active part of the season for us, that third quarter, not just because the ships go north, but because then we have to replace, take some ships from the market to participate in moving cargoes that we've booked. We probably have a little higher chartered-in fleet during that period.

Okay. And then, Mads, are you seeing anything on the demand side, changes either positive or negative that you can highlight for the rest of the year?

I think I want to point to what's in Mark's written comments that we are seeing increased amounts in the businesses and in trades where we're pretty busy, such as construction material. That is not just across the ships we own or operate but also in our terminals business. So we feel pretty confident about the demand going forward there in those commodities. I mean, we're not a big sort of long-haul iron ore owner-operator. So there, I think, I read the same data that you do, and I think demand-wise, things look pretty good, not fantastic, but okay. And that combined with an attractive supply side, we feel pretty confident about where the market is and where it's heading.

You mentioned the terminal business, which experienced a sequential decline in revenues. While margins remain strong, there was a noticeable drop in revenue from the stevedore and terminal link. Can you clarify if this decrease is seasonal? Should we anticipate improvement in this quarter and throughout the remainder of the year, particularly into the fourth quarter? Additionally, could you provide some insight into the typical trends of that business?

It depends on demand, ships coming into our terminals. So I don't think the decrease was that much. It could be affected by the number of ships that come into port during that quarter. Our most active port is Port Everglades, and there we have, we do container ships, we load ferries, we discharge dry bulk goods, commodities that come in. So it really depends on the schedule of those ships that are visiting the ports. We do have some more active things happening in some of the other ports, so things should move up this year, Paul. The Port Everglades business is new to us from last June. And so I think in the beginning, you'll see a little bit of ups and downs, but not significant. They've been fairly steady.

Okay. And then, Gianni, if you could just highlight where that million-dollar transit fee, what part of the expense line did it come in? Was it in voyage expense or charter hire? I know it's nitpicky, but I just wanted to sort of understand where that was recognized.

It was recognized through voyage expenses, which impacted our overall TCE. We discussed this in our last call regarding the situation at the Panama Canal. Unfortunately, we had to bid on a slot to get through, resulting in a million-dollar impact on voyage expenses and a corresponding reduction in TCE and adjusted EBITDA. That's where it's recognized.

Great. Thanks a lot. Very helpful. Have a great day.

Thanks, Poe.

Thank you for joining us today for our call, and we'll see you next quarter. This does conclude today's call. We thank you for your participation. You may disconnect at any time.