United Maritime Corp Q1 FY2023 Earnings Call

Thank you for standing by ladies and gentlemen. And welcome to the United Maritime Corporation Conference Call on the First Quarter Ended March 31, 2023. Financial Results. We have with us Mr. Stamatios Tsantanis, Chairman and CEO, and Mr. Stavros Gyftakis, Chief Financial Officer of United Maritime Corporation. At this time, all participants are in a listen-only mode. There will be a question-and-answer session. Please be advised that this conference call is being recorded today Thursday, May 18, 2023. The archived webcast of the conference call will soon be made available on the United Maritime website, www.unitedmaritime.gr. Many of the remarks today contain forward-looking statements based on current expectations. Actual results may differ materially from the results projected in those forward-looking statements. Additional information concerning factors that can cause the actual results to differ materially from those in the forward-looking statements is contained in the first quarter-ended March 31, 2023, earnings release, which is available on the United Maritime website again, www.unitedmaritime.gr. I would now like to turn the conference over to one of your speakers today, the Chairman and CEO of the company, Mr. Stamatios Tsantanis. Please go ahead.

Good morning or good afternoon. I'd like to welcome everyone to United Maritime's earnings conference call, where we're going to discuss our financial performance for the first quarter of 2023 as well as our main corporate and commercial developments. As a general reminder, United Maritime was established less than a year ago, with a main focus to take advantage of market opportunities in the mainstream shipping sectors. We've been very successful in our actions delivering $37 million in profits in 2022 in less than six months of operations. Following the highly profitable sale of three of our tankers by the end of last year, our average fleet size in Q1, 2023, was reduced to less than three ships, including our remaining tanker vessel, which underwent its special survey drydock for most of the first quarter. During this transitional period for our company, our average daily time charter equivalent rate was $10,300. We generated net revenues of $2.8 million and adjusted EBITDA of minus $1.5 million and adjusted net loss of $3.7 million. However, since the beginning of the current quarter, our tanker has resumed its time charter of $40,000 a day, while capesize rates have recovered sharply since March. Despite the temporary weak performance, we are declaring another dividend for the first quarter in continuation of our exceptional shareholder returns since our inception. This will bring the total cash dividends declared in the last six months to $1.15 per share, which represents a cash yield of about 40%, compared to the recent closing price of our stock. The total cash dividends amount so far to $8.7 million, which combined with the $6 million of buybacks of common shares, aggregate to $14.7 million in several other rewards, or 62% of our market cap as of May 16, 2023. We have also swiftly executed transactions to regrow our fleet through the acquisition of six dry bulk vessels for approximately $126 million. We have fully funded these transactions without diluting our shareholders. On a fully diluted basis, our fleet's market value is estimated at about $185 million versus debt and leasing liabilities of about $90 million, leading to a fleet net asset value of approximately $95 million based on our current market capitalization of $25 million. We believe that our shares are significantly undervalued. Moving on, let's share some highlights and corporate developments that have taken place since our last quarterly update before our CFO Stavros Gyftakis discusses our financial results in more detail. Firstly, during the first quarter, we took delivery of four newly acquired dry bulk vessels. In February, the good ship and trader ship, both capsize vessels built in Japan, entered our fleet and continued their employment under their existing floating rate time charters. As a reminder, the vessels were acquired for an aggregate price of $36.25 million and were financed by a $15.2 million loan facility and cash on hand. In March and April, we took delivery of two Kamsarmax vessels previously agreed to be acquired for a total of $39.2 million. The Oasea, the Kamsarmax vessel built in 2010, entered our fleet in March while the delivery of the 2009-built Cretansea was completed in April. Both vessels have entered employment at index-linked time charters for about 12 months. The purchase price was funded using cash on hand and a $24.5 million sale and leaseback structure. Furthermore, in February, with the delivery of the Chrisea, a 78,000 deadweight Panamax vessel built in Japan in 2013, we have agreed to charter the vessel under a bareboat agreement for 18 months, with a purchase option at the end of the charter period, which brings the total acquisition cost to approximately $23.4 million. Lastly, in April, we agreed to charter in for 12 months one more Panamax bulk carrier built in 2015, under a similar arrangement. The total cost consideration, including the purchase option, is expected to reach approximately $27 million. We expect to take delivery of this Panamax that will be renamed Synthesea during the third quarter of 2023. Finally, on our commercial and fleet update, our remaining tanker, the Epanastasea, underwent its drydock survey for most of Q1 and has resumed employment under its time charter at a fixed rate of $40,000 a day. Moving on to our dry bulk, we exercised certain options to convert the floating index-linked rates to fixed time charters on two vessels. On the Panamax vessel Chrisea, we fixed the second quarter of 2023 at the charter rate of $15,500, and on the capsize vessel Gloriuship, we fixed the charter rate until the end of 2023 at the level of a daily rate of $17,600. We intend to make use of these options more opportunistically to achieve higher retention of capital. More specifically, for the second quarter of the year, so far, we have achieved 71% coverage of our owner's days at an average TCE of $18,860 per day. So we estimate our daily time charter equivalent to average over $17,900. To put it into perspective, we are opening about 75% higher average time charter equivalent rates over a double size fleet. On that note, I'd like to pass the call to Stavros to discuss the financials, and it will be transferred back to me for the concluding remarks. So, Stavros, please go ahead.

Thank you, Stamatios. And welcome everyone to the earnings call. Let us start by reviewing the main highlights of our financial statements for the first quarter of 2023. Net revenue for the quarter was equal to $2.8 million, while we recorded a negative adjusted EBITDA of $1.5 million and an adjusted net loss of $3.7 million. These figures reflect our decreased TCE for the quarter, which stood at $10,300. The key causes behind this, as Stamatios mentioned earlier, was a significant softening of the capesize market, which averaged around $9,000 during the quarter, and the drydock survey of our only time-chartered vessel, the Epanastasea, which kept us out of service for approximately 50 days of the quarter. Based on the recent improvements in the dry bulk market, the Epanastasea has resumed service, and with the full integration of our new vessels, we anticipate returning to profitability in the next quarter. With regards to our balance sheet, we ended the first quarter of 2023 with $20 million of cash and cash equivalents and $69.5 million in senior debt and liabilities. The reduction in our costs came mainly as a result of our fleet growth strategy through acquisitions, which have already proven to be accretive and will allow us to retain our shareholder rewarding initiatives going forward. Most importantly, our growth has been funded without resorting to diluted equity raisings. As of March 31, 2023, shareholders' equity was $62 million, while the book value per fleet stood at $117 million, including the advanced payment for the acquisition of the Cretansea, which was delivered in the second quarter. On the debt front, we have retained leverage at modest levels this quarter, despite the significant growth of our fleet, with the loan-to-value ratio at the end of the quarter standing at 50%. This ratio includes our liabilities under the bareboat investments and the remaining bareboat payments and the purchase option amount. Taking into consideration the current appreciation of vessel values in the dry bulk segment, we expect leverage ratios to remain at similar levels, if not decrease, in the next quarter. As regards to new financing, we entered into a $24.5 million sale and leaseback transaction provided by a European lessor to finance part of the acquisition cost of the two Kamsarmax vessels. The financing amount for each vessel is $12.25 million, with the first advance drawn at the end of the first quarter and the second one in April. The financing bears an interest rate of 4.25% so far. We have the option to repurchase the vessels at any time during the respective variable periods and the purchase obligation at the price of $6.4 million per vessel at maturity. Moreover, I would like to add some more details on the bareboat charter agreement for the Synthesea mentioned earlier by Stamatios. The bareboat charter is for 12 months. The structure of the bareboat agreement is similar to that of the Chrisea and features a downpayment of $7 million advanced in two installments: the first at signing, which already took place, and the second one at the delivery of the vessel, which is estimated to be within the third quarter of the year, a daily bareboat rate of $8,000 and a final payment of $17.1 million if we choose to exercise the purchase option. Given our prudent financing strategy, we have managed to retain our cash breakeven at relatively moderate levels. Our daily debt service rate for the rest of the year is estimated at approximately $1,000. Here, it will be insightful to remind that upon reaching $40,000 per day, while we have also fixed the Gloriuship for the rest of the year at $17,600 per day, and the Chrisea at $15,500 per day for the second quarter. Therefore, we are confident that we are well positioned to cover our obligations in any market environment and are able to take advantage of any opportunities that may arise going forward. This concludes my review. I will now turn the call back to Stamatios for his concluding remarks.

Thanks, Stavros. After successfully turning over our initial fleet that has generated tremendous returns to our shareholders, we have now grown our fleet without diluting our shareholders. We have an optimum position to take advantage of another rising market cycle driven by a strong demand for raw materials over the historically low investment in new vessels. Closing this call, I would like to say once again that United Maritime will continue to be a unique value play in the public sector space, aiming high and immediate shareholder returns through well-timed transactions. From here, I would like to turn the call over to the operator and Stavros, and I will be available to answer any questions you may have. So, operator, please take the call.

Thank you, operator. Once again, I would like to thank everyone for participating in our call. And looking forward to providing some additional updates and news in the next few weeks. So thanks very much. Everyone, have a great day. Thank you. And this concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please standby.