Good morning. My name is Shelby, and I will be your conference operator today. I would like to welcome everyone to the Pangaea Logistics Solutions Third Quarter 2024 Earnings Teleconference. Today's call is being recorded and will be available for replay beginning at 11:00 a.m. Eastern Standard Time. You can access the recording by dialing (800) 839-9374 or (402) 220-6087. All lines are currently muted, and there will be a live question-and-answer session after the prepared remarks. It is now my pleasure to turn the floor over to Stefan Neely with Vallum Advisors.

Thank you, operator, and welcome to the Pangaea Logistics Solutions third quarter 2024 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 shared a release outlining our third quarter 2024 results. Throughout the third quarter, we continued to execute our value creation strategy through a mix of targeted fleet expansion, strong operational performance, and beneficial inorganic growth, all while consistently delivering strong financial results during a seasonal peak in Arctic dry bulk demand. As we mentioned in September, we have reached a definitive agreement to merge 15 handysize dry bulk vessels owned by M.T. Maritime into our dry bulk fleet, which will total 41 ships following the transaction. This strategic acquisition enhances both our net asset value and our adjusted EBITDA. Once finalized, we expect the MTM transaction to contribute significantly to our annualized adjusted EBITDA. We anticipate completing the MTM transaction by year-end, pending approval from our shareholders, which will enable Pangaea to offer an expanded portfolio of services to a growing customer base in the coming year. Additionally, two weeks ago, we acquired the remaining 50% interest in our post-panamax ice class 1A vessels from a joint venture partner, reinforcing our position in this niche. Alongside these two transactions, during the quarter ending September 30, we took delivery of two 58,000 deadweight ton sister ships built in 2016, bringing our fleet to 26 vessels. We also progressed in expanding our terminal and stevedoring operations in the Port of Tampa. With the scale provided by these transactions, we expect to significantly increase our shipping days and logistics operations at both new and existing ports over the next year, in line with our integrated shipping and logistics model. Our asset-light, cargo-centric approach continues to utilize a mix of owned and chartered vessels, aligned with our long-term strategy. Given the fluctuations in global dry bulk capacity and demand, we believe our model offers superior durability, cost efficiency, and scalability throughout the economic cycle, with a focus on free cash generation and profitable growth. For the third quarter of 2024, we reported adjusted net income and adjusted EBITDA of $11.1 million and $23.9 million, respectively. Our adjusted EBITDA declined by about $4 million year-over-year due to lower market volatility affecting margins. However, higher realized TCE rates and increased shipping day activity helped to mitigate this decline. Our third quarter typically represents the seasonal peak in activity within our Arctic trade routes, and our ice class fleet was fully utilized during this period, leading us to achieve TCE rates that surpassed the market average by 19%. On a broader scale, global demand for dry bulk remains strong and has displayed resilience despite ongoing geopolitical disruptions and economic slowdowns in certain areas. Nevertheless, as the supply of newbuild vessels continues to be limited, we anticipate upward pressure on dry bulk rates in the near to intermediate future. Looking toward the fourth quarter, we expect the usual seasonal decline in dry bulk demand. Importantly, due to wetter and warmer conditions in the Arctic regions we operate in, we foresee that Arctic demand in the fourth quarter will be lower than what we encountered last year. To date, we have booked 3,378 shipping days and achieved a TCE of $16,629 per day for the fourth quarter. As we approach 2025, we will persist in maintaining a balanced, return-focused strategy for capital allocation. Our recent vessel acquisitions, fleet consolidation, and joint venture buyout reflect our commitment to deploying cash in ways that generate sustainable returns on capital. Simultaneously, we are dedicated to upholding a stable, recurring quarterly cash dividend as part of our long-standing capital return program. Importantly, we believe our dividend policy is sustainable through various economic cycles. With that, I'll turn it over to Gianni to discuss our financial results for the third quarter.

Thank you, Mark, and welcome to those joining us on the call today. Our third quarter financial results are highlighted by sustained TCE premiums relative to the prevailing market and strong free cash flow generation amid peak demand within our niche Arctic trade routes. Third quarter TCE rates were approximately $16,324 per day, a premium of approximately 19% over the average published market rates for supramax and panamax vessels in the period, which was driven by strong fleet utilization within Arctic trade routes. Our adjusted EBITDA for the third quarter was $23.9 million, a decline of $4 million relative to the prior year period. Our adjusted EBITDA margin decreased 15.6% as higher charter hire expenses offset higher market rates and growth in total shipping days year-over-year. Our total charter hire expense increased by more than 40% when compared to the third quarter of 2023 due to a 7% increase in total chartering days and a 30% increase in the prevailing market rates for panamax and supramax vessels. Our charter-in cost on a per-day basis was $14,494 in the third quarter of 2024. And through today, we've booked approximately 1,651 days at $14,271 per day. Vessel operating expenses net of technical management fees decreased by approximately 3% year-over-year from an average of $5,706 per day last year to $5,520 per day in the third quarter of '24. For the 9-month period, vessel operating expenses net of technical management fees remained relatively flat at $5,686 per day. In total, our reported GAAP net income attributable to Pangaea for the third quarter was $5.1 million or $0.11 per diluted share compared to $18.9 million or $0.42 per diluted share in the third quarter of last year. When excluding the impact of the unrealized losses from derivative instruments as well as other non-GAAP adjustments, our reported adjusted net income attributable to Pangaea during the quarter was $11.1 million or $0.24 per diluted share compared to $14.4 million or $0.32 per diluted share in the third quarter of last year. Moving on to the cash flow statement. Total cash from operations increased by $12.1 million year-over-year to approximately $28.5 million due to improved cash generated by net working capital. At quarter end, the company had $93.1 million in cash and total debt, including finance lease obligations of approximately $293 million. During the quarter, our overall interest expense increased 6.6% due to new debt facilities entered into during the period to finance the Bulk Brenton, the Bulk Patience, and the Bulk Prudence vessels. At the end of the third quarter, the ratio of net debt to trailing 12-month adjusted EBITDA was 2.5 times. In the near term, our capital allocation focus will continue to be on investing in our stevedore and logistics operations, expanding and refreshing our dry bulk fleet, and repaying our debt. We are also continuing to prioritize a consistent return of capital strategy as evidenced by our consistent dividend, which we believe can be sustained through the market cycle. With that, we will now open the line for questions.

And we'll take our first question from Liam Burke with B. Riley. Your line is open.

Thank you. Good morning, Mark, Gianni, Mads.

Hi, Liam.

Mark, you outdistanced the relative indices by 19% in the third quarter. If you can look forward, and I don't want to anticipate a merger, but let's say we add the 15 handysize, is there any transition period? Or can you consistently outperform adding that many assets at one time?

Thanks, Liam. We've thought a lot about this, and we're planning already to try to get those ships into our business plan as quickly as possible. It won't be immediate. Those ships will be on voyages when we do take over the fleet. We'll finish off those voyages and we'll begin to fix those ships that are already being fixed into businesses that are trying to match ours. But yeah, it will take a little bit of time to transition into our business, and the way we operate the ships is a little bit different than the way they are operated today.

In the fourth quarter, you're outperforming the relative indices by 38%, even though there's a slight decline compared to last year. You mentioned that the market conditions are not bad but not great. How do you anticipate the second half of the quarter will unfold?

I think it's generally trending down. The market is trending down, and we're seeing that a little bit in the fixtures that we're making. If you look at the numbers we put out there, they're not going up in the first half. They're about flat with the third quarter, but the general market is trending down a little bit toward that first quarter that's always a little bit lower than the fourth quarter.

Great. Thank you, Mark.

Thank you. We'll take our next question from Poe Fratt with AGP. Your line is open.

Good morning. I have a couple of questions. First, can I follow up on the transition period as you add the 15 handys? Can you provide more details on whether this will result in lower profitability in the first quarter as you integrate those handys into the fleet?

No, I don't believe it has affected profitability, Poe. I don't think we can expect to integrate 15 ships directly into our operations, which generate a lot of premium business right away. These ships are currently on other voyages and have other customers to serve. We need to familiarize ourselves with those customers and introduce them to our capabilities. However, we hope that in a short time, we will be able to start achieving returns on those ships that are above the market, similar to how we do with our panamax fleet and our supra and ultra fleets.

Okay. And then, Gianni, there's always something in the quarter that it's hard to calibrate. This quarter, it seemed like the TCE revenue was lower than expected not because of gross revenues, but because of voyage expenses being higher. Was there anything in particular in voyage expenses that hit during the quarter?

Thanks, Poe. I don't believe there's anything specific to highlight. There wasn't a single outlier to identify, so it seems to be just a result of costs for the quarter. However, regarding your question about the 15 handys, I want to emphasize that from a cost perspective, we find these ships currently financed at favorable levels, and their breakeven points are quite reasonable, in some cases even lower than the breakevens of some of our supras and panamaxes. Therefore, from a profitability standpoint, considering the cost structure of those 15 handys, I don't believe it will negatively impact our profitability. We are acquiring ships at very favorable cost levels, both in terms of cash breakeven and P&L. Incorporating them into our trading model may take some time, but we are not adding vessels with higher breakeven points than those in our current fleet.

Okay. Great. And then, Gianni, will there be higher G&A in the fourth quarter because of the transaction? Could you just sort of help me calibrate G&A for the fourth quarter and just the potential impact of the transaction?

No, there won't be higher G&A in the fourth quarter. The timing of the closing looks promising and is currently dependent on the date of our shareholder meeting. Assuming we close in December 2024, the period following the close will be relatively short. If you are referring to costs related to completing the transaction, from an accounting perspective, those costs would be capitalized in the cost of the vessel. Therefore, it would not count as an expense in the fourth quarter. I believe our G&A run rate will remain consistent for Q4, similar to what we've observed so far this year.

Yeah. And the date has been set, right, December 6?

No, it has not been set. We filed a preliminary proxy, and we're just waiting to clear that. Then we would start setting the final dates. That was our preliminary estimate, but we're still...

Still moving around. Yeah, it's still moving, but December 6 was the preliminary date in the proxy that was filed.

Correct.

Okay. And again, the shareholders are not approving this transaction. They're just approving the issuance of stock that allows you to issue the stock to the seller.

Correct. The question being raised is about the issuance of stock, which is what is up for a vote. Clearly, it is linked to this transaction, but the proposal specifically focuses on the issuance of the shares.

Yeah. And then can you just help me understand your dry docking schedule for the fourth quarter of '24 and then looking out into '25?

Hi, Poe, Mads here. We will have four dry dockings in the fourth quarter. Depending on our situation, we could be looking at around six ships for next year.

And spread out pretty evenly, just build them in over the course of the year...

Yeah, that's roughly over the year. That includes a couple of intermediate dockings as well. So does the one of the ones we're doing in Q4. So they are a little bit shorter in nature.

Okay. Great. Thank you, Mads. And then going back to your forward cover, you have 3,378 days booked, and that equates to about 37 vessels, 26 owned and then 11 chartered in to this point in the quarter. What do you think your chartered-in fleet will land for the quarter?

So we're actually coming into the fourth quarter, I think our average fleet is around high 50s going into the quarter. I'm not sure we can calculate that number, Poe. I think that was just performance through yesterday is what we indicated. So that's not for the full quarter, obviously. But so far, yes, we did 3,378 days. We've chartered in 1,651 days for the fourth quarter. But I think the fleet is averaging in the 50s still today, and I think we're expecting that for the balance of the fourth quarter.

Great. And then, Gianni, the comment was made, you had weather potential issues in the fourth quarter, lower demand in Nordic. Also, the third quarter was impacted by lower volatility that flattened margins. Will that lower volatility, that flattened margins still be prevalent in the fourth quarter?

I think what we're referring to is that as we approach the fourth quarter of 2023, our cost for chartering was 10.8%. This figure was relatively low due to the volatility in rates from the third quarter of 2023 heading into the third quarter of 2024. The market was in the low tens, and then it surged into the 16s in the fourth quarter of 2023, which benefited us from that upward trend. In contrast, the second quarter of 2024 heading into the third quarter showed a flat market with minimal volatility. We aimed to highlight that when entering the third quarter last year, we did so from a lower market position, which helped our charter-in fleet. Our charter-in fleet generated a margin of $1,800 per day, based on what we were paying against our average TCE, although this margin decreased from about $4,000 per day in the third quarter of 2023 to approximately $1,800 per day in the third quarter of 2024. Looking ahead, while the market is currently trading flat, which is not unfavorable, it remains at decent levels. Our TCE was reported at 16.6% compared to 16.3% in the third quarter. Mark pointed out that there has been some slowness, but the numbers we have booked so far through yesterday reflect this situation.

Sounds good. I have a question about the balance sheet. I noticed in the quarterly report that there was an item listed under other asset categories called base stevedoring as an investment. Although it's a relatively small amount at $2.9 million, it has increased by over $1 million since the end of last year. Is that related to the Tampa joint venture? Can you clarify what base stevedoring is?

Our base stevedoring business in Gramercy involves discharging bauxite for one of our clients. Base stevedoring is the entity that holds the joint venture for this investment. This year, the income from this joint venture is reflected in our equity method income, which contributes to that investment account. Poe, if you remember, this is fundamentally part of our terminal and stevedoring operations. However, since it's a joint venture that isn't consolidated, we only recognize income based on our proportional share in that base stevedoring account, which falls under our other assets. If we had consolidated this entity, both terminal revenue and terminal expenses would increase, and we would fully recognize the profit and loss. Since it's a non-consolidated joint venture, that account will vary with the joint venture's profitability and consists of undistributed earnings plus the initial capital we invested in the company.

Great. Can you discuss the opportunities in the terminalling business? You mentioned on the call that you are still exploring opportunities with the handy acquisition and that your available resources remain quite high. Can you elaborate on the potential in the terminalling sector as you look toward 2025?

Thank you for your question, Poe. We are very excited about the opportunities ahead. As we grow our presence in this area, we see more projects emerging, both from our freight business and others that come our way. We are putting in considerable effort to widen our portfolio. Next year, we will start our operations in Tampa, which will be a major step, and we are exploring a few other promising options. Our approach remains consistent with what we currently do, and we appreciate the connection between our ocean freight services and stevedoring. We are optimistic about what we are pursuing in this regard.

Great. Thanks a lot.

Thanks, Poe.

We'll take our next question from Climent Molins with Value Investor’s. Your line is open.

Good morning. Thank you for taking my questions. Most has already been covered, but I wanted to ask about the acquisition of NBP. Could you talk a bit about the trade-off between exercising the option now instead of, let's say, in a year? And secondly, is there any potential to do something similar with NBHC?

We appreciate the question, Climent. We recognized an opportunity to engage with the post-panamax ships and improve our balance sheet before year-end. I believe it turned out to be favorable for us. The timing was advantageous for our partner, and we feel it streamlines our operations while consolidating our ice-class trade assets. Regarding the NBHC deal, we believe our partner is very satisfied, as that partnership has been ongoing for over 10 years and has remained profitable. If we identify an opportunity to acquire the additional share, we will consider it, but at the moment, there is nothing pressing that requires us to act.

That's helpful. Thank you. I also wanted to ask a bit about the strategy going forward on the services side. I mean, it's been a strategic priority for you to grow that side of the business. But lately, you've mostly focused on acquiring ships. Is there, let's say, any potential for bolt-on acquisitions going forward? Or should we expect the business to simply grow organically?

We've primarily been growing organically. The acquisition of the host terminals in Port Everglades and Baltimore allowed us to enter areas where we previously had no presence, and we're beginning to see the potential there with limited involvement from our ocean fleet. These terminals are mainly serviced by our handy fleet, and we aim to leverage the strategic fleet more effectively in Baltimore and Port Everglades. We're also working on opening the Tampa facility around this time next year, which will enhance our capacity for both handy and supra voyages. We have already booked around 20 to 25 voyages into Tampa for next year, adding significant value to that segment of our business. We're also exploring opportunities in Texas and hope to secure a long-term contract for stevedoring services for an important customer in Southern Texas soon. Overall, our growth has been largely organic and we have not yet finalized any plans to purchase significant land for expansion, as acquiring land tends to be more costly compared to an asset-light approach using stevedoring licenses or renting space. As Mads mentioned, as we delve deeper into this sector, we identify more opportunities, which could lead to further developments in the future.

Thanks for the color. That’s really helpful. That’s all for me. Thank you for taking my questions.

Thank you.

Thank you. The Q&A has now concluded. I will now turn the program back over to Mark Filanowski for any additional or closing remarks.

Thanks again for joining our call. Should you have any questions, please feel free to contact us at [email protected], and a member of our team will follow up with you. This concludes our call today. You may now disconnect.

Thank you. That concludes today's teleconference. Thank you for your participation. You may now disconnect.