Q2 2023 United Maritime Corporation Earnings Call

Thank you for sending violators, and gentlemen, and welcome to United Maritime Corporation Conference call on the second quarter ended June 30th two.

123 financial results.

What does for sure stay modest Santana, Chairman and CEO and Mr. Starr Rose just talk as 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 at which time, if you would like to ask a question.

Please press star one on your telephone keypad and you will then hear an automated message advise your hand is Reyes. Please be advised this conference call is being recorded today Thursday August 3rd 2023.

The archived webcast of the conference call will soon be made available under United Maritime website, Www dot United in Maritime and thought she or under the investors section.

Operator: Many of the remarks today contain forward-looking statements based on current expectations. Actual results may differ materially from the results projected from 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 Q2 and at 30 June 2023 earnings release, which is available on the United Maritime website, again, www.unitedmaritime.gr. I will now turn the conference over to one of your speakers today, Chairman and CEO of the company, Mr. Stamatis Tsantanis. Please go ahead, sir.

Many of our remarks today contain forward looking statements based upon current expectations actual results may differ materially from the results projected from those forward looking statements additional information concerning factors that could cause the actual results to differ materially from those in the forward looking statements.

Contained in the second quarter ended June 30th 'twenty to 'twenty three earnings release, which is available under United Maritime website, again, Www Dot Tonight and Maritime G. R O.

I would now like turn the conference over to one of your speakers today, Chairman and CEO of the company. Mr. Stay modest Santander. Please go ahead Sir.

Okay.

Stamatis Tsantanis: Good afternoon. I would like to welcome everyone to United Maritime's Earnings Conference Call, where we're going to discuss our financial performance for Q2 2023, as well as our main corporate and commercial developments. In Q2 of the year, we agreed to sell our last remaining product tanker vessel, concluding our first investment cycle focused in the tanker sector. The very strong sale price of $37.5 million reflects a return on equity of more than 400% on just this particular ship. Over the past 12 months, the combined profit from the purchase and sale of the four tankers was approximately $48 million net of all expenses, resulting in a remarkable rate of return on the approximately $16 million of equity employed, or 302%.

Good afternoon I.

I would like to welcome everyone to United My Times Earnings Conference call, where we're going to discuss our financial performance for the second quarter of 2023 as well as our main corporate and commercial development in the cell.

Quarter over the year, we agreed to sell our last remaining product tanker vessel, concluding our first investment cycle, focusing the tanker sector.

The very strong sale price of $37 5 billion.

Reflects our return on equity for more than 400% on just this particular ship over.

Over the past 12 months, the combined profit from the purchase and sale of the four tankers was approximately $48 million net of all expenses, resulting in a remarkable rate over time on the approximately $60 million of equity.

Employed or 302%.

Stamatis Tsantanis: We have used the proceeds from the sales, firstly, to regrow our fleet, focusing on the dry bulk segment through a total investment of $144 million spread across seven vessels, and secondly, towards significant shareholder distributions, differentiating United Maritime from other shipping spinoff vehicles. For Q2 of 2023, our board of directors has approved another dividend of $0.075 per share, while the total dividends declared and/or paid have been cash, at $1.23 per share, or $9.4 million. We have also recently completed share repurchases for an aggregate amount of $200,000 at an average price of $2.90 per share. In total, over the past 12 months, we have repurchased 3.4 million common shares at an average price of $1.80. That's significantly below where we're trading today. Overall, we have committed more than $15 million in shareholder rewarding initiatives or approximately two-thirds of our current market capitalization.

We have used the proceeds from the sales firstly to regrow our fleet focusing on the dry bulk segment through a total investment of $144 million spread across seven vessels and secondly towards significant shareholder distributions differentiating United Maritime from other shipping spinoff.

Vehicles.

For the second quarter of 2023, our board of Directors has approved another dividend of $7.05 per share while the total dividends declared and paid have been cash at dollar and 23 cents per share or $9 4 million.

We have also recently completed share repurchases for an aggregate amount of $200000 at an average price of $2 $9 per share in.

In total over the past 12 months, we have repurchased three 4 million common shares at an average price of $1.80, that's significantly below where we're trading today.

Overall, we have committed more than $15 million in shareholder rewarding initiatives or approximately two thirds of our current market capitalization, having said this as of the end of the quarter, United Maritimes net asset value is estimated to be more than three times, our current market capitalization and therefore.

Stamatis Tsantanis: Having said this, as of the end of the quarter, United Maritime's net asset value is estimated to be more than three times our current market capitalization, and therefore, our shares continue to be significantly undervalued. As a brief market commentary, 2023 has been so far quite volatile as reduced vessel congestion raised the efficiency of the fleet and the release of a significant number of Panamax and Kamsarmax vessels from the grain corridor in the Black Sea increased the effective vessel supply. Despite vessel demand growing at a healthy pace driven by strong seaborne iron ore volumes and high demand for coal and grains, the growth of the effective fleet supply by more than 5% so far exerted significant pressure on charter rates.

Our shares continue to be significantly undervalued.

As a brief market commentary.

<unk> has been so far quite volatile as reduce the vessel congestion and raise the efficiency of the fleet and the release of a significant number of Panamax and capesize vessels from the grain corridor in the Black Sea and crispy effective vessel supply.

Despite vessel demand growing at a healthy pace driven by strong seaborne iron ore volumes and high demand for coal and grains. The growth of the effective fleet supply by more than 5%, so far exerted significant pressure on charter rates.

Stamatis Tsantanis: Port congestion and idle vessels are at historical low levels, leaving hopefully the worst behind us, while the order book for new vessels remains at multi-decade lows. As vessel ton-miles continue to grow, I'm optimistic that it's only a matter of time before the market turns positive again. Let's take a few minutes to expand on United's activity over the past few months. In April, we agreed to charter in a 2015-built Japanese Panamax vessel, which will be renamed Synthesea. The bareboat charter will have a duration of 12 months and a purchase option at the end of the charter, which if exercised, should bring the total acquisition cost to about $27 million, including all scheduled payments.

Port congestion and idle vessels are at historical low levels living hopefully the worst behind us while the order book for new vessels remains at multi decade lows.

As vessel ton miles continue to grow Im optimistic that is solely a matter of time before the market turns positive again.

Now, let's take a few minutes to expand on United's activity over the past few months.

We agreed to charter in 2015, built Japanese panamax vessel, which will be renamed Silversea. The bareboat charter it will have a duration of 12 months and the purchase option at the end of the charter, which if exercised would bring the total acquisition cost to about $27 million, including all scheduled pay.

Stamatis Tsantanis: The Synthesea was delivered to United two days ago on 1 August, and will now enter a floating rate on a time charter basis with a global commodity trading company with a duration of 14 to 16 months. In April, we also took delivery of the Cretansea, a 2009-built Japanese Kamsarmax vessel acquired earlier this year, and entered an index-linked time charter until April 2024 at a minimum. In June, we entered an agreement to acquire a 2011-built Panamax vessel that will be renamed Exelixsea for the purchase price of $17.8 million. Delivery of the vessel to our fleet is expected to take place around the end of August, beginning of September 2023. As mentioned earlier, in May, we agreed to sell our remaining LR2 tanker, the Epanastasea, for a price of $37.5 million, with the vessel scheduled to be delivered to its new owners by mid-August.

<unk> the sympathy was delivered to United two days ago on August 1st and we will now enter a floating rate on a time charter basis with a global commodity trading company the duration of 14 to 16 months.

In April we also took delivery of the courtesy.

And the mine built Japanese comes out of Max vessel acquired earlier this year.

And index linked time charter until April 12 to 24 at a minimum in June we entered an agreement to acquire 2011 built panamax vessel that will be renamed <unk> for the purchase price of $17 8 million delivery of the vessel to our fleet is expected to take place around the end of August beginning of.

September 2012 as mentioned earlier in May we agreed to sell our remaining alert to tanker it'd be a philosophy for a price of 37 $5 million with a vessel scheduled to be delivered to its new owners by mid August .

Stamatis Tsantanis: The accounting profit of about $12 million will be recorded in Q3 of the year when the vessel will be delivered to her new owners. Upon the completion of all the transactions planned for the next couple of months, we will operate eight ships split between five Kamsarmax and Panamax vessels and three Capesize vessels. At this point, I would like to highlight that the approximately $55 million equity portion of our $144 million of investments on seven vessels since the beginning of the year has been funded entirely by the proceeds of the tanker sales and cash from operations without resorting to capital raising transactions, which would dilute our shareholders. I am optimistic that the positive prospects of the dry bulk market will put us in a position to generate high returns on equity and reward our shareholders accordingly.

The accounting profit of about $12 million will be recorded in the third quarter of the year when the vessel will be delivered to her new owners.

Upon the completion of all the transactions planned for the next couple of months, we will operate eight ships split between five <unk> and Panamax vessels have three capesize vessels at.

At this point I would like to highlight that we have approximately $55 million equity portion of our $144 million of investments of seven vessels since the beginning of the year has been funded entirely by the proceeds of the tanker sales and cash from operations without resorting.

As to capital raising transactions, which would dilute our shareholders I am optimistic that the positive prospects for the dry bulk market will put us in a position to generate high returns on equity and reward our shareholders Accordingly.

Stamatis Tsantanis: Right now, I would like to pass the call to our CFO, Stavros Gyftakis, to expand on the financials, and the call will return back to me for the conclusions.

Now I would like to pass the call to our CFO established decades to expand on the financials and the call will return back to me for the conclusions.

Stavros Gyftakis: Thank you, Stamatis. Welcome everyone to our earnings call. Let us start by reviewing the main highlights of our financial statements for Q2 2023. Net revenue for Q2 was equal to $10 million, while we recorded adjusted EBITDA of $2 million and an adjusted net loss of $2.1 million. As mentioned by Stamatis in his opening remarks, the dry bulk market in Q2 fell short of our expectations, resulting in a Time Charter Equivalent rate of $16,072 for United, which was nevertheless an important sequential improvement versus the $10,300 earned in Q1. The dry docking of the Tradership due to unforeseen repairs impacted our operational results, reducing our overall utilization for Q2 to 93%. As this metric improves going forward, along with higher day rates, I am optimistic that it will provide a significant tailwind to our financial performance.

Thank you Samantha and welcome everyone to our earnings call. Let me start by reviewing the main highlights of our financial statements for the second quarter of 2023 net revenue for the quarter was equal 10 million, while we recorded adjusted EBITDA of $2 million and adjusted net loss of $2 1 million as mentioned by some.

<unk> in his opening remarks, the dry bulk market in the second quarter fell short of our expectations, resulting in the time charter equivalent rate of $16732 for United which was nevertheless, an important sequential improvement versus the 10300 earned in the first quarter.

The drydocking of the trade issue due to unforeseen repairs impact with our operational results, reducing overall utilization for the quarter to 93% as this metric increase going forward along with higher day rates I am optimistic that it will provide a significant tailwind to our financial performance.

Stavros Gyftakis: In the six-month period, United generated revenues of $12.8 million, adjusted EBITDA of $521,000, and adjusted net loss of $5.7 million. These figures are based on a fleet utilization of approximately 89%, capturing the dry docking of the Epanastasea and the Tradership. Moving on to our balance sheet, we had $7.3 million of cash at the end of the quarter and $78.2 million of debt outstanding, which includes liabilities under our bareboat transactions, i.e., future bareboat hire payments and the underlying purchase options. The book value of the fleet stood at $138 million and shareholders' equity at approximately $59 million. Our cash balance does not reflect the proceeds from the sale of the Epanastasea yet, as we expect to receive those in Q3, elevating our cash position to more than $2 million per vessel after concluding the acquisition of the Exelixsea.

In the six months period, United generated revenues of $12 8 million adjusted EBITDA of 521000, and adjusted net loss of $5 7 million.

These figures are based on a fleet utilization of approximately 89% capturing the drydocking of the financial indicators ship.

Moving onto our balance sheet, we had $7 $3 million of cash at the end of the quarter and $78 2 million of debt outstanding which includes liabilities and there are very routine transactions I E Q2, bareboat hire payments and then deadline purchase options.

The book value of the fleet stood at $158 million in fiscal this equity at approximately $59 million, our cash balance does not reflect the proceeds from the sale of the panacea Seagate as we expect to receive those in the third quarter elevating our cash position to more than 2 million per vessel after concluding.

The acquisition we exceeded.

Stavros Gyftakis: I am pleased to see our dry bulk fleet taking shape, only using internally generated cash. I expect that on a fully delivered basis, the company's loan-to-value ratio should remain at sustainable levels below 60%. Given the positive dry bulk market fundamentals, we have adopted a balanced approach to leverage, aiming to maximize the returns on our equity capital and shareholder distributions while retaining liquidity and balancing flexibility. Regarding individual financing updates, on 26 April, we entered into a $12.25 million sale and leaseback agreement with a European lessor to finance part of the acquisition price of the Cretansea. The agreement will mature in five years with a repurchase obligation of $6.4 million. Amortization of the charter hire principal will take place through 60 monthly payments of approximately $100,000 each, while the interest rate will be equal to three-month term SOFR plus 4.25%.

I am pleased to see our Drybulk fleet, taking shape only using 10 of lithium generated cash and expect that on a fully delivered basis, the company's loan to value ratio should remain at sustainable levels below 60%.

Given the positive dry bulk market fundamentals, we have adopted a balanced approach to leverage aiming to maximize the returns on our equity capital and shareholder distributions, while retaining liquidity and balance sheet flexibility.

Gardening individual financing update on April 26, we entered into a $12 $25 million sale and leaseback agreement with a European lessor to finance part of the acquisition price of the latency.

Agreement will mature in five years with repurchase obligation of $6 4 million amortization of a charter high principal will take place through 60 monthly payments of approximately 100000, each while the interest rate will be equal to three months.

Plus 425% I.

Stavros Gyftakis: Adding now some more details on the bareboat charter agreement for the Synthesea, mentioned earlier by Stamatis, the bareboat charter is for 12 months, the structure includes two down payments for a total of $7 million, a daily bareboat rate of $8,000, and a purchase option of $17.1 million at the end of the bareboat charter. Finally, regarding the financing of the Exelixsea, the existing lenders of the recently sold Epanastasea tanker have agreed to substitute this vessel with the Exelixsea under the loan facility, making essentially available a $15 million loan for this vessel. The balance of the purchase price, which is essentially the advance payment, has already been funded by our cash reserves. This concludes my review. I would now turn the call back to Stamatis for his concluding remarks. Stamatis?

Now some more details are available charter agreement for the <unk> mentioned earlier, but the market.

<unk> charter is for 12 months and the structure includes two down payments for a total of $7 million at daily Bareboat rate of 8000, and the <unk> auction of $17 1 million at the end of the bareboat charter.

Finally regarding the financing will be accelerating the existing lenders of the recently sold the Vanessa banking has agreed to substitute with vessel with excel exam, the loan facility, making essentially available a $15 million loan for this vessel is the balance of the purchase price which is essentially.

Advanced payment has already been funded by our cash reserves and.

This concludes my review I will now turn the call back to commodities, which concluding remarks, Steve Murphy.

Stamatis Tsantanis: Thank you, Stavros. After a successful turnover of our initial vessel investment that has generated very strong returns for our shareholders, we have now regrown our fleet without resorting today to diluted capital raisings. We have placed the company in an optimum position to take advantage of another rising market cycle, deriving from 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 shipping space, aiming at high and immediate shareholder returns through optimally timed sale and purchase transactions in the shipping sectors with the strongest supply and demand fundamentals. From here, I would like to turn the call over to the operator and answer any questions you may have. Operator, please take the call. Thank you.

Thank you Sabra.

After a successful turnover of our initial vessel investment that has generated very strong returns for our shareholders. We have now grown our fleet without resorting to date to dilutive capital raises we have placed the company in an optimal position to take advantage of another rising market cycle deriving from a strong demand for our materials.

Over the historically low investment in new vessels closing this call I would like to say once again that unite maritime will continue to be a unique value play in the public shipping space aiming at height and immediate shareholder returns through optimally timed sale and purchase transactions in the shipping sector with a strong.

Supply and demand fundamentals from here I would like to turn the call over to the operator and answer any questions. You may have operator, please take the call. Thank you.

Operator: As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. Please stand by while we compile the attendee roster. Our first question will come from the line of Tate Sullivan from Maxim Group. Your line is open.

As a reminder to ask a question you will need to press star one on your telephone and wait for name to be announced please standby we compile the Q&A roster.

Yeah.

Our first question comes from the line of Sullivan from Maxim Group. Your line is open.

Tate Sullivan: Hello, how are you? Good to talk to you again today.

Hello, how are you good desktop you can say.

Stamatis Tsantanis: Hello, Tate. Good morning.

Tate Sullivan: Good morning. You mentioned in the press release your second investment cycle focusing on the dry bulk ships. Do you think this will last through based on the delivery schedules and the bareboat options at the end of the bareboat charter and acquisitions through 2024? Might you shift to another sector eventually as well?

Good morning.

Good morning.

You mentioned in the press release, your second investment cycle, focusing on the dry bulk ships do you think this will last through based on the delivery schedules and the bareboat options at the end of the bareboat charter and acquisitions through 2024 and might you shift to another sector actually as well.

Stamatis Tsantanis: I don't think so right now. We will stick to what we have agreed. We will play in the larger categories of the dry bulk segment, so Panamax, Capesize, and potentially Capes, older Capes, we will see. This is what we believe is the best value proposition right now as an entry point across the mainstream shipping sectors. I don't think we will be seeking anything in the tankers anytime soon because the values are overinflated. Other segments I don't really think that we would be looking at right now. Most likely we're going to stick to what we have already done since the beginning of the year.

Yes.

I don't think so right now we will stick to what we have a grade. So we will play in the larger categories of the dry bulk segment so Panama.

Panamaxes <unk> and potentially capes older Capes will say.

So this is what we believe is the best value proposition right now as an entry point across the mainstream shipping sectors. I don't think we will be seeking anything in the tankers anytime soon because the value is up over inflated.

Other segments had done really things that we would be looking at right now so.

No.

Most likely we're going to stick to what we have already done since the beginning of the year.

Tate Sullivan: Stavros, you may have mentioned the funding. Is the funding that you mentioned for the bareboat charter and acquisitions? Can you fund those acquisitions with debt before exercising the option?

And Capex you may have mentioned.

Funding is the funding that you mentioned.

Sure the bareboat charter in acquisitions can you fund those acquisitions with debt before exercising the option.

Stamatis Tsantanis: The way the bareboat agreements have been structured is that basically the purchase option is a percentage of the value of the ship that we feel comfortable that we can cover purely by raising debt at the time of the exercise of the purchase option. Otherwise, everything is duly funded. We have some maturities coming up early next year on which we are already working, but we are relatively confident that we will not face any issues whatsoever in financing our upcoming obligations.

And the way he's a billboard and a high base.

The way the verbal agreements have been structure is that basically the purchase option is a percentage of the value of the ships that we feel comfortable that we can.

We're purely by raising debt at the time will be exercised the purchase option otherwise everything is fully funded we have some maturities coming up.

Early next year on which we are already working but we are relatively confident that we will not face any issues whatsoever in financing our upcoming obligations.

Tate Sullivan: Yeah, I noticed the comment in there, the footnote that funding with no dilution to shareholders, so to fund the down payments through cash.

I noticed the comment in the footnote.

With no dilution to shareholders.

Stamatis Tsantanis: Exactly. This is something that makes us very proud and differentiates this company from other spin-offs. We have grown and regrown the fleet without diluting the shareholders to date.

But the down payments.

Exactly and briefly something that makes us very proud and differentiates this company from other spinoffs I mean, we have <unk>.

And re growing the fleet without diluting the shareholders to date.

Tate Sullivan: The purchases that you've made in the dry bulk market so far, have they been from different sellers or mostly from Japanese ship owners?

And then Doug.

The purchases that you've made in the dry bulk market. So far have they been from different sellers are mostly from Japanese.

Stamatis Tsantanis: It's a combination. I would say 50% from Japanese sellers, or a little bit more, and some from European sellers. We like to do repetitive deals with the same people. We like doing good quality business with Japan, and we'll likely continue doing so in the future.

Shareholders.

It's a combination so I would say 50% from Japanese sellers.

Or a little bit more and some from European et cetera. So.

We like to do business with repetitive.

The respective deals with the same people, we like doing good quality business with Japan and will likely continue doing so in the future.

Tate Sullivan: Well, great to see the balanced capital allocation between using the cash for the acquisitions, the dividends, and the repurchases. Thank you for all the detail.

Great well, a great CVA balance capital allocation between using the cash for the acquisition the dividends and repurchases.

Stamatis Tsantanis: Thank you, Tate. Thanks.

Thank you for all the detail.

Operator: Thank you. With that, this concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.

Thank you Terry Thanks for thanks.

Thank you.

So with that this concludes today's conference call. Thank you for participating you may now disconnect speakers. Please standby.

Yeah.

Okay.

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