Q1 2024 Pangaea Logistics Solutions Ltd Earnings Call

May 10, 2024

Operator: Good morning. My name is Brittany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pangaea Logistics Solutions first quarter 2024 earnings teleconference. Today's call is being recorded and will be available for replay beginning at 11am EST. The recording can be accessed by dialing 877-856-8964 for domestic and for or 402-220-1608 for international.

Good morning, My name is Britney and I will be your conference operator today at this time I would like to welcome everyone to the Pangaea logistics solutions first quarter 'twenty 'twenty four earnings teleconference. Today's call is being recorded and will be available for replay beginning at 11, a M E. S T.

The recording can be accessed by dialing 8778568964 for domestic and four or four zero to 22016084 International all lines are currently muted and after the prepared remarks, there will be.

Operator: All lines are currently muted, and after the prepared remarks, there will be a live question and answer session. If you would like to ask a question during that Q&A segment, please press star 1 on your telephone keypad. If your question has been answered, you may remove yourself from the queue by pressing star 2. We do ask that you pick up your handset for optimal sound quality. It is now my pleasure to turn the floor over to Stephen Neely of Valum Associates.

A live question and answer session. If he would like to ask a question during the Q&A session. Please press star one on your telephone keypad. If your question husband answered you may remove yourself from the queue by pressing star too we do ask that you pick up your handset for optimal sound quality.

It's now my pleasure to turn the floor over to Steven Neely with Vallum associates.

Stephen Neely: Thank you, operator, and welcome to the Pangaea Logistics Solutions first 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.

Steven Neely: Thank you operator, and welcome to the Pangaea Logistics solutions first quarter 2024 results conference call, leading the call with me today is CEO, Mark filling Housekeep, Chief Financial Officer, Gianni del Signore N C O O mats Petersen.

Stephen Neely: Today's discussion contains forward-looking statements about future business and financial expectations. However, 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 said, I would like to turn the call over to Mark.

Steven Neely: Today's discussion contains forward looking statements about future business and financial expectations.

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.

Steven Neely: Except as required by law, we undertake no obligation to update our forward looking statements.

Steven Neely: 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.

Steven Neely: Yeah.

Mark L. Filanowski: Thank you, Stephan, and welcome to those joining us on the call today. After the market closed yesterday, we issued a release detailing our first quarter 2024 results. Our flexible, cargo-focused business model continued to deliver premium TCE rates over the prevailing market. During the first quarter, it also allowed us to drive improved operating leverage compared to the prior year, which resulted in higher adjusted EBITDA and improved margins year over year. While the first quarter is normally a seasonally soft period for global dry bulk demand, we benefited from elevated long haul voyage demand across our ice class fleet, together with a solid base of premium long term COAs.

Mark L. Filanowski: Thank you Stephanie and welcome to those joining us on the call today.

Mark L. Filanowski: As market rates began to rise later in the quarter, we added to our cargo commitments to increase utilization of our owned fleet and chartered more vessels, which positioned us to optimize our TCE return. When combined, these factors resulted in our TCE rates for the quarter exceeding the benchmark index by nearly 30%. We reported adjusted net income of $6.6 million for the first quarter and adjusted EBITDA of $19.9 million.

Mark L. Filanowski: After the market closed yesterday, we issued a release detailing our first quarter 2024 results.

Mark L. Filanowski: Our flexible cargo focused business model continued to deliver premium TCE rates over the preset prevailing market.

Mark L. Filanowski: During the first quarter. It also allowed us to drive improved operating leverage compared to the prior year, which resulted in higher adjusted EBITDA and improved margins year over year.

Mark L. Filanowski: While the first quarter is normally a seasonally soft period for global dry bulk demand.

Mark L. Filanowski: We benefited from elevated long haul voyage demand across our ice class fleet together with a solid base of premium long term Coa as.

Mark L. Filanowski: As market rates began to rise later in the quarter, we added to our cargo commitments to increase utilization of our owned fleet and chartered in more vessels.

Mark L. Filanowski: Which positioned us to optimize our TCE returns.

Mark L. Filanowski: When combined these factors resulted in our TCE rates for the quarter exceeding the benchmark index by nearly 30%.

Mark L. Filanowski: We reported adjusted net income of $6 6 million for the first quarter and adjusted EBITDA of $19 9 million.

Mark L. Filanowski: Adjusted EBITDA improved by 23% year over year, as our adjusted EBITDA margins strengthened by 400 basis points compared to the first quarter of 2023. Our improved profitability was supported by a 41% year-over-year increase in published market rates for Supermax and Panamax vessels, which also supported the 23% increase in our own earned TCE rates, year-over-year in the first quarter. At a macro level,

Mark L. Filanowski: Adjusted EBITDA improved by 23% year over year as our adjusted EBITDA margins strengthened by 400 basis points.

Mark L. Filanowski: Compared to the first quarter of 2023, our improved profitability was supported by a 41% year over year increase in published market rates for Supermaxilla Panamax vessels, which also supported the 23% increase in our own earned T.

Mark L. Filanowski: TCE rates.

Mark L. Filanowski: Year over year in the first quarter.

Mark L. Filanowski: At a macro level.

Mark L. Filanowski: Global demand for dry bulk remains strong, and the supply of vessels remains constrained. These dynamics give us confidence in both the near-term and long-term outlook for our business. Specifically, in the near term, geopolitical disruptions have resulted in an increase in ton-mile demand for certain shipping channels. We are also seeing regionally strong demand in key bulk trades associated with the current level of infrastructure investment in North America. On the supply front, the number of new ships coming into service remains limited relative to historical levels, which will continue to put pressure on dry bulk capacity.

Mark L. Filanowski: The global demand for dry bulk remain strong and the supply of vessels remains constrained.

Mark L. Filanowski: These dynamics give us confidence in both the near term and long term outlook for our business.

Mark L. Filanowski: Specifically in the near term geopolitical disruptions have resulted in an increase in ton mile demand with certain shipping channels.

Mark L. Filanowski: We are also seeing regionally strong demand in key bulk trades associated with the current level of infrastructure investment in North America.

Mark L. Filanowski: On the supply front, the number of new builds coming into service remains limited relative to historical levels, which will continue to put pressure on dry bulk capacity.

Mark L. Filanowski: In combination, we see the supply and demand factors for dry bulk being structurally supportive of higher market rates for the remainder of 2024 and beyond. With that said, volatility will continue to be a prevailing theme, but one that our cargo-focused business model uniquely positions us to successfully navigate. While certain aspects of the dry bulk markets have seen pricing moderate since late in the first quarter, others have continued to progressively improve.

Mark L. Filanowski: In combination, we see the supply and demand factors for dry bulk being structurally supportive for higher market rates for the remainder of 2024 and beyond.

Mark L. Filanowski: With that said volatility will continue to be a prevailing theme, but one that our cargo focused business model uniquely positions us to successfully navigate.

Mark L. Filanowski: While certain aspects of the dry bulk markets have seen pricing moderate since late in the first quarter others have continued to progressively improved.

Mark L. Filanowski: Through today, we've booked over 2,890 shipping days at an average TCE rate of $16,200 per day versus a market rate of approximately $15,000 per day so far in the second quarter of 2024. Strategically, we continue 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 on capital program, as demonstrated by our consistent quarterly cash dividend.

Mark L. Filanowski: Through today, we've booked over 2890 shipping days at an average TCE rate of 16200 per day versus a market rate of approximately $15000 per day, so far in the second quarter 2024.

Mark L. Filanowski: Strategically, we continue to prioritize capital investment and fleet expansion and renewal.

Mark L. Filanowski: While continuing to scale, our onshore logistics capabilities.

Mark L. Filanowski: In addition to these organic and inorganic investments, we will seek to further fortify our balance sheet, all while continuing to support a consistent return of capital program has demonstrated by our consistent core.

Mark L. Filanowski: Orderly cash dividend.

Mark L. Filanowski: Regarding our current fleet of owned vessels, we have been focused on refreshing our fleet to keep an average vessel age of approximately 10 years while continuing to ensure that we are able to meet the unique cargo needs of our customers. We continue to strategically evaluate additional vessel acquisitions and divestitures through this lens. Last night, we announced we had entered into an agreement to purchase two 58,000 deadweight tons sister ships built in 2016. We are purchasing these ships for a combined price of $56.6 million, and we expect to take delivery during the third quarter of this year.

Mark L. Filanowski: Regarding our current fleet of owned vessels, we have been focused on refreshing our fleet to keep an average vessel age of approximately 10 years, while continuing to ensure that we are able to meet unique cargo needs of our customers.

We continue to strategically evaluate additional vessel acquisitions and divestitures through this line and last night, we announced we had entered into an agreement to purchase 258000 deadweight ton sister ships built in 2016.

Mark L. Filanowski: We are purchasing these ships for a combined price of $56 $6 million and we expect to take delivery during the third quarter of this year.

Mark L. Filanowski: Within our port and logistics business, we've made strides to organically expand that business in the US Gulf Coast region through strategic joint operations, partnerships, and site leases. During the first quarter, we executed a long-term lease agreement at the Port of Tampa to handle dry bulk commodities that are complementary to those carried on our fleet vessels. In conjunction with signing this lease, we also committed investment capital to some port operations infrastructure part in partnership with JB Partners at the port.

Mark L. Filanowski: Within our port and logistics business, we have made strides to organically expand that business in the U S. Gulf Coast region through strategic joint operations partnerships and site leases.

Mark L. Filanowski: During the first quarter, we executed a long term lease agreement and the part of Tampa to handle dry bulk commodities that are complementary to those carried on our fleet vessels.

Mark L. Filanowski: In conjunction with signing this lease we also committed investment capital and some port operations infrastructure Park in partnership with JV partners at the Port.

Mark L. Filanowski: This investment will allow us to expand our ability to offer a wider scope of cargo-focused services across the strategically important Gulf Coast region to both new and existing customers. Additionally, the investment will provide a meaningful growth avenue for our terminal and stevedore business, which we expanded into Florida in June of last year. In summary, our cargo-focused business model continues to deliver strong premium returns, which we are strategically investing in key growth opportunities, both in our logistics business and in our own vessel fleet.

Mark L. Filanowski: This investment will allow us to expand our ability to offer a wider scope of cargo focused services across the strategically important Gulf coast region to both new and existing customers.

Mark L. Filanowski: The investment will provide a meaningful growth Avenue for our terminal in stevedore business.

Mark L. Filanowski: We expanded into Florida in June of last year and.

Mark L. Filanowski: In summary, our cargo focused business model continues to deliver strong premium returns, which we are strategically investing in key growth opportunities both in our logistics business and in our owned vessel fleet.

Mark L. Filanowski: Coupled with a supportive macro environment for dry bulk rates, we believe that we are well positioned to continue to deliver attractive shareholder returns through opportunistic capital deployment. I'll now hand it over to Gianni for a discussion of our first quarter financial results.

Mark L. Filanowski: Coupled with the support of macro environment for dry bulk rates, we believe that we are well positioned to continuing.

Mark L. Filanowski: To continue to deliver attractive shareholder returns through opportunistic capital deployment.

Mark L. Filanowski: I'll now hand, it over to Johnny for a discussion of our first quarter financial results.

Gianni Del Signore: Thank you, Mark, and welcome to all of those joining us today. Our first quarter financial results continue to emphasize the flexibility of our business model as we were able to deliver premium returns despite a year-over-year reduction in total shipping days. Our results highlight the value that our chartered-in strategy and cargo focus model creates within the context of our overall operating leverage. First quarter TCE rates were approximately $17,697 per day. Our premium of approximately 29% over the average published market rates for Supermax and Panamax vessels in the period, which is supported by long haul ice class performance early in the quarter and forward bookings, which locked in rates for cargo performance. Our adjusted EBITDA increased by nearly 23% year-over-year to $19.9 million.

Johnny: Thank you Mark and welcome to all those joining us today.

Johnny: Our first quarter financial results continue to emphasize the flexibility of our business model as we were able to deliver premium returns. Despite a year over year reduction in total shipping days.

Johnny: Our results highlight the value that our chartering strategy and cargo focus model creates within the context of our overall operating leverage.

Johnny: First quarter TCE rates were approximately $17697 per day.

Johnny: Premium of approximately 29% over the average published market rates for Super Max and Panamax vessels in the period.

Which is supported by long call ice class performance early in the quarter and forward bookings, which locked in rates for cargo performance.

Johnny: Okay.

Our adjusted EBITDA increased by nearly 23% year over year to $19 9 million.

Gianni Del Signore: Our adjusted EBITDA margin also improved year over year to 19% as we managed our vessel utilization in accordance with the prevailing market rates to maximize our TCE rate returns and operating leverage. While our chartered-in days decreased by 14% year-over-year, our total charter hire expense increased by 20% compared to the first quarter of 2023 due to the 41% increase in the prevailing market rate. Our charter cost on a per day basis was $17,580 in the first quarter of 2024. And through today, we've booked approximately 1,400 days at approximately $16,700 per day.

Johnny: Our adjusted EBITDA margin also improved year over year to 19% as we managed our vessel utilization in accordance to the prevailing market rates to maximize our TCE rate returns and operating leverage.

Johnny: While our chartered in days decreased by 14% year over year.

Johnny: Total charter hire expense increased by 20% compared to the first quarter of 2023 due to the 41% increase in the prevailing market rates.

Johnny: Our charter in costs on a per day basis was $17580 in the first quarter of 2024.

Johnny: And through today, we've booked approximately 1400 days.

Johnny: Approximately $16700 per day.

Gianni Del Signore: As I mentioned, we pushed some of our cargo commitments forward toward charter hire vessels intra-quarter in the face of higher market rates, which allowed us to maximize our returns on our total fleet in accordance with our short-term charter-in strategy. Furthermore, our improved profitability for the first quarter was bolstered by lower vessel operating expenses, net of technical management fees, which decreased by 6% year over year from an average of $5,632 per day last year to $5,300 per day in the first quarter of 2024. The decrease continues to highlight the success of our efforts to manage vessel operating costs.

Johnny: As I mentioned, we pushed some of our cargo commitments forward.

Charter hire vessels intra quarter in the face of higher market rates, which allowed us to maximize our returns on our total fleet in accordance with our short term charter in strategy.

Johnny: Furthermore, our improved profitability for the first quarter was bolstered by lower vessel operating expenses net of technical management fees, which decreased by 6% year over year from an average of $5632 per day last year to $5300 per day in the first quarter of 2024.

Johnny: The decrease continues to highlight the success of our efforts to manage vessel operating cost.

Gianni Del Signore: 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 booking. 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 first quarter, our reported net income reflects an unrealized gain of approximately $5.1 million relating to mark-to-market adjustments on bunker swaps, forward freight agreements, and our interest rate cap.

Johnny: As we have mentioned in the past, we utilized for trade agreements and bunker swaps to selectively hedge our exposure to the market on our long term cargo contracts in forward bookings.

Johnny: 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.

Johnny: Given the market volatility during the first quarter.

Johnny: Our reported net income reflects an unrealized gain of approximately $5 $1 million relating to mark to market adjustments of bunker swaps forward freight agreements and our interest rate cap.

Gianni Del Signore: In total, our reported GAP net income attributable to Pangaea for the first quarter was $11.7 million or $0.25 per diluted share, compared to $3.5 million or $0.08 per diluted share in the first 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 $6.6 million, or $0.14 per diluted share, an increase of $1.5 million, or $0.03 per diluted share, versus the first quarter of last year.

Johnny: In total our reported GAAP net income attributable to Pangaea for the first quarter was $11.7 million or 25 cents per diluted share compared to $3 5 million or <unk> <unk> per diluted share in the first quarter of last year.

Johnny: 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 $6 6 million or <unk> 14 per diluted share an increase of $1 5 million or three cents per diluted share.

Johnny: There versus the first quarter of last year.

Gianni Del Signore: Moving on to cash flows, total cash from operations decreased by 2.6 million year over year to $9 million as the improvement in profitability was offset by the timing of customer receipts and supplier payments reflected in net working capital. At quarter end, the company had $95.9 million in cash and total debt, including finance lease obligations of approximately $258 million. Of the $258 million in debt, approximately $20 million represents a balloon payment that is due this month at the maturity of the loan.

Johnny: Moving onto cash flows.

Johnny: Total cash from operations decreased by $2 6 million year over year to $9 million as.

Johnny: Is the improvement in profitability was offset by the timing of customer receipts and supplier payments reflected in net working capital.

Johnny: At quarter end, the company had $95 $9 million in cash and total debt, including finance lease obligations of approximately $258 million.

Johnny: Of the $258 million in debt approximately $20 million represents a balloon payment that is due this month at maturity of the loan.

Gianni Del Signore: This credit facility is currently locked in at a fixed rate of 3.96%. Once paid, the Bulk Pride, Bulk Independence, and Bulk Endurance will be debt-free vessels in our fleet. And we are actively working with a new lender to refinance the Bulk Endurance only, which will generate approximately $15 million of cash. It is expected to be finalized in the coming week. During the quarter, we continued to see a relatively muted impact from higher interest rates due to our fixed rate and cap rate debt, as well as benefits from interest-yielding deposits, which generated nearly $1 million in interest income. At the end of the first quarter, the ratio of net debt to trailing 12-month adjusted EBITDA was two times.

Johnny: This credit facility is currently locked in at a fixed rate of 396%.

Johnny: Once paid the bulk pride bulk independence and bulk endurance will be debt free vessels in our fleet and.

And we are actively working with a new lender to refinance the bulk endurance, only which will generate approximately $15 million of cash is expected to be finalized in the coming weeks.

Johnny: During the quarter, we continued to see relatively muted impact from higher interest rates due to our fixed rate and cap rate that as well as benefits from interest yielding deposits, which generated nearly $1 million in interest income.

Johnny: At the end of the first quarter the ratio of net debt to trailing 12 months adjusted EBITDA was two times.

Gianni Del Signore: As Mark mentioned, our capital allocation focus for 2024 is investing in growth by expanding our onshore footprint and owned vessel capacity, and our current balance sheet and liquidity profile allows us the flexibility to deploy capital in ways that maximize overall returns on investment. Importantly, I would reiterate that we continue to prioritize a consistent return on capital strategy. We believe that our current dividend is one that can be sustained through the market cycle. With that, we will now open the line to questions.

Johnny: As Mark mentioned, our capital allocation focus in 2024 is investing in growth by expanding our onshore footprint and one vessel capacity and our current balance sheet and liquidity profile allows us the flexibility to deploy capital in ways that maximize overall returns on investment.

Johnny: Importantly, I would reiterate that we continue to prioritize a consistent return of capital strategy. We believe that our current dividend is one that can be sustained through the market cycle.

Speaker Change: With that we will now open the line for questions.

Operator: At this time, if you would like to ask a question, please press star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star and one if you would like to ask a question. And we'll take our first question from Liam Burke with Be Riley. Your line is now open.

Speaker Change: At this time, if you would like to ask a question. Please press the star and one on your telephone keypad you may remove yourself from the queue at any time by pressing star to once again that is star one if you would like to ask a question.

Speaker Change: Our first question from Liam Burke with B Riley. Your line is now open.

Liam Dalton Burke: Yes, good morning, Mark. Good morning, Gianni. Good morning, Mads.

Yes, good morning.

Liam Dalton Burke: Mark Good morning, Johnny Good morning, Matt.

Liam Dalton Burke: Okay.

Unknown Executive: Hiya, Liam. Thanks for joining us.

Hi.

Speaker Change: Thanks for joining us.

Mark L. Filanowski: Mark, in the first quarter, you chartered in about 17 vessels, which is way, way on the low end of typically when you flex your fleet. Typically, I think of vessels in the 20 ish range, but then Gianni gave us a sort of a partial number of vessels to be chartered for the second quarter. Do you anticipate charting in more than 17 vessels in the quarter? And is that reflective of end user demand?

Speaker Change: Mark.

Speaker Change: In the first quarter you chartered in about 17 vessels, which is way way on the low end of typically when you flex your fleet typically I think of vessels in the Twentyish range, but.

Speaker Change: And then Johnny gave us a sort.

Speaker Change: A partial chartered in number for the second quarter do you anticipate chartering in more than 17 vessels in the quarter and is that reflective of the end user demand.

Mark L. Filanowski: Thanks for the question, Liam, but yes, you have it right. In the first quarter, you know, early in the quarter, the market didn't look so great to us, and we slimmed down the fleet. But toward the end of the quarter, the market started to come back, and we started to expand the chartered-in fleet. So looking forward, yes, the chartered-in base should go up as the market moves up.

Johnny: Thanks for the question Liam, but yes, you have it right.

Speaker Change: In the first quarter we.

Speaker Change: Early in the quarter the market.

Speaker Change: Wasn't it didn't look so great to us and we slimmed down the bleep.

But towards the end of the end of the quarter. The market has started to come back and we started to expand the charter in fleet. So looking forward yesterday. The chartered in days should should go up as the market is.

Speaker Change: The market moves up.

Mads Rosenberg Boye Petersen: Gianni quoted a price quarter to date on your chartered day rates, and they were lower than the first quarter. So is that trend continuing, where we could see a little margin lift there?

Speaker Change: And.

Speaker Change: Johnny quoted a price quarter to date on your chartered in day.

Speaker Change: Day rates and they were lower than the first quarter. So.

Speaker Change: Is that trend continuing where we can see a little margin lift there.

Mads Rosenberg Boye Petersen: Yeah, hi Liam, and Mads here. You know, we hope so, of course.

Speaker Change: Yes.

Speaker Change: We hope so of course, it is a reflection of where we take the ship if you take the ship on the far East and you move it into the Atlantic has different cost and when we pick them up in Atlanta. So I don't know if there is a.

Mads Rosenberg Boye Petersen: It is all a reflection of where we take the ship. If you take the ship out of the Far East and move it into the Atlantic, it has a different cost than when we pick it up in the Atlantic. So I don't know if there's a real trend there that you can project, unfortunately. It's all very specific to the individual opportunity.

Speaker Change: A real trend there that you can that you can grab to.

Speaker Change: Project. Unfortunately.

Speaker Change: The specifics of the individual opportunity.

Liam Dalton Burke: Great

Gianni Del Signore: Great, thanks, Mads. And then, really quickly, you bought the two new vessels that will be delivered in the second half. You have a balloon payment, and you have a large cash balance that can address, you know, your refinancing. You refinance only one vessel. I presume that refinancing will go to the acquisition of the two new vessels.

Speaker Change: Great. Thanks, Matt and then just real quickly you you bought the two new vessels that will be delivered in the second half.

Speaker Change: You have a balloon payment you have a large cash balance that can address your refinancing.

Speaker Change: Refinance only one vessels I presume that refinancing will go to the acquisition of the two new vessels.

Gianni Del Signore: Oh, yeah. So I think that the balloon comes due next week, actually. So, like you said, we are in a position where we will pay off the balloon. And, and then we are refinancing just the bulk endurance. So we'll add the bulk independence and the bulk pride as debt-free vessels in the fleet. And yeah, we'll use a portion of that to offset some of the equity on the two new vessels.

Speaker Change: Oh go ahead.

Speaker Change: Yes, so I think.

Speaker Change: The balloon comes due next week actually so we are like you said we are in a position we will we will pay off the balloon and then we are refinancing just the Balkan Darrin. So we'll add the bulk independence in the bulk pride as debt free vessels in the fleet.

Speaker Change: And yeah, we will use a portion of that too.

Speaker Change:

Speaker Change: To offset some of the equity on the on the two new <unk>.

Gianni Del Signore: But we do intend to finance the new vessels as well, but delivery is looking like sometime in Q3. So we have a little bit of time to plan how we want to handle that, but I expect we'll also finance a certain level on those vessels as well.

Speaker Change: Vessels, but we do intend to finance.

Speaker Change: The new vessels as well.

Speaker Change: But delivery is looking like sometime in Q3.

Speaker Change: So we have a little bit of time too.

Speaker Change: <unk>, how we want to handle that but I expect we'll also finance.

Speaker Change: Certain level on those on those vessels as well.

Liam Dalton Burke: Great, thank you.

Speaker Change: Great. Thank you.

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

Speaker Change: Thank you we'll take our next question from Poe Frat with a G. P. <unk>. Your line is now open.

Charles Kennedy Fratt: Good morning. Can you give us a little more detail on the acquisitions? You know, what's the vintage on the two sister ships?

Charles Kennedy Fratt: Hey, good morning.

Charles Kennedy Fratt: Can you give us a little more detail on the acquisitions.

Charles Kennedy Fratt: On the two thank you chip.

Unknown Executive: Sure. They were built in 2016. Unknown Speaker, Unknown Attendee, Gianni Signore, Mads Petersen, Pangaea, Unknown

Charles Kennedy Fratt: Sure.

Charles Kennedy Fratt: Built in 2016.

Speaker Change: And so that is typically.

Speaker Change: Seven to 10 year range that is why we have historically done most of our secondhand acquisitions. So we feel that these ships are a great fit for our business model is not often that show sister ships come out like that.

Speaker Change: <unk> also.

Speaker Change: We are pretty excited about that transaction and we cant wait to put them to work in all business.

Mads Rosenberg Boye Petersen: And then Mads, will these be, you know, essentially substituted for charter gain tonnage, or do you think it's more expansionary?

Speaker Change: And then he will.

Speaker Change: B.

Speaker Change: Substituting for charter in.

Speaker Change: Or do you think it's.

Speaker Change: More expansion.

Mads Rosenberg Boye Petersen: Well, I think, you know, we did sell a ship in December of last year, right? So, there's a bit of a sort of a big renewal maintenance part of it. But, I don't think we don't anticipate, you know, a one to one reduction in the number of children in the fleet. It's that the two things shouldn't be that closely closely linked.

Speaker Change: Well I think as you know.

Speaker Change: We did sell a ship.

Speaker Change: I think it was December of last year right. So that's a bit of Uh huh.

Speaker Change: Great renewal maintenance.

Speaker Change: But I don't think we don't anticipate.

Speaker Change: One to one reduction of the of the Omnichannel didn't treat it.

Speaker Change: The two things shouldnt be that closely closely linked.

Unknown Executive: It's a continual cycle, Paul, you know; a larger fleet gives us a little bit more ability to find more cargo commitments, which allows us to leverage the own fleet with more chartered ships. So there is a little bit of growth element to this and a little bit of fleet replacement element.

Speaker Change: Its a continuous cycle.

Speaker Change: Larger fleet gives us a little bit more.

Speaker Change: Little ability to bind more more cargo commitments, which allows us to leverage the own fleet with with more charter in ships.

Speaker Change: It is there was a little bit of growth element to this in a little bit of fleet replacement element.

Unknown Executive: And if anything, I think it's also a reflection of the belief we have in our model and the demand that we're experiencing from across the business that we want to make sure that we have good ships that we can serve our customers with as their volumes grow.

Speaker Change: And if anything I think it's a reflection in the belief we have an hour.

Speaker Change: Our model and the demand that we're experiencing.

Speaker Change: From a gross.

Speaker Change: Across the business that we want to make sure that we have good shifts that we can serve our customers with <unk>.

Speaker Change: Their volumes grow.

Unknown Executive: And then, you know, that sort of ties into what Mark said earlier in the call that you flexed down your fleet early in the quarter just because you didn't like what you saw or you thought the market was soft. And just to clarify, on the cargo side, you just didn't see the cargo volume to support chartered-in vessels, or it certainly wasn't from a rate perspective, right? You're looking more from the end cargo, you know, volume.

Speaker Change: Understood and then.

Speaker Change: I think the.

Speaker Change: Mark earlier in the call that good.

Speaker Change: Flex down your fleet early in the quarter, just because you didn't like what you saw or you thought the market was soft and just to clarify was that on the cargo side, we just didn't see the cargo volume.

Speaker Change: Support chartered in vessels or.

Speaker Change: It certainly wasn't from a rate perspective, right youre looking more from the <unk> and.

Speaker Change: In cargo volume.

Unknown Executive: Really, it's the opportunities we see when we're out looking at cargo. We didn't see that much opportunity for us to expand the fleet and and make money and position the ships that we were chartering in the right places to make a profit on them. So, it's it's a constant daily study of what the market is, where the market is, and what we can do with it.

Speaker Change: Really it's the opportunities we see win win we're out.

Speaker Change: We're looking at cargo.

Speaker Change: So we.

Speaker Change: We didn't we didn't see much opportunity for us to to expand the fleet and make money and and to position. The ships that were chartering in in the right places.

Speaker Change: The profit on them.

Speaker Change: So it's that.

Speaker Change: It's a constant daily.

Speaker Change: A study of what the market, where the market is and what we can do with it.

Speaker Change: Understood and then.

Speaker Change: If you could talk about your forward cover.

Speaker Change: This board cupboard.

Speaker Change: <unk> 2890 days at 16.

Speaker Change: 300.

It's a pretty meaningful drop from the first quarter TCE accurate Tc TCE rate average can you just talk about sort of the context of how we should look at the rest of the quarter and sort of where your average TCE for the quarter might end up.

Unknown Executive: (inaudible) might end up?

Unknown Executive: Yeah, I think that's a good question, Paul. And just going back to what Mark said earlier about the previous question about growing the chartered infleet. So the way that we historically do this is when we grow that part of the business, we have some ships that are doing backhauls. So we will have some ships that are doing backhaul voyages. And of course, that is not as high a number as when they do sort of our traditional Atlantic business or front haul, right? So there's an element to that, and the quarter is not finished yet. So we like to think that, you know, over the year, these backhaul investments we're making now will contribute positively.

Speaker Change: Yes, I think that's a good question, Paul and just going back to what Mark said earlier about.

Speaker Change: With the previous question.

Speaker Change: About about growing the chartered in fleet.

Speaker Change: So the way that we historically do this is by by when we grow them then that part of the business is through <unk>. So we will have some ships that are doing.

Speaker Change: Banco largest enough cost that is not as high a number as when they do sort of all traditional amazing business all in front of all right. So that's one element to that in the quarter is not finished so we.

Speaker Change: We like to think that over the year for sure.

Speaker Change: Banco investments, we're making now will contribute positively.

Unknown Executive: Okay, yeah, I mean, should I be concerned that you're chartering in at $16,700, and you're booking at $16,300?

Speaker Change: Okay.

Speaker Change: I mean should I be concerned that your charter amendment 16700, and you're booking at 16300.

Unknown Executive: We do it every quarter, yeah, you should, but that's not what we anticipate going forward for sure, right, you know. This is the result mostly of A, you know, we have some cargo on the books that were fixed at different levels, but also a pretty meaningful investment in positioning voyages in the quarter.

Speaker Change: And we do it every quarter.

Speaker Change: But.

Speaker Change: That's not what we anticipate going forward for sure right. This is.

Speaker Change: We saw mostly of a well you know we have some some cargo on the books at both fixed at different levels, but also.

Speaker Change: A pretty meaningful investment and positioning voyages in the quarter.

Charles Kennedy Fratt: Okay, and then Gianni, working capital is pretty negative for the quarter. Could you just talk about, you know, will that balance out over the second quarter or just the rest of the year, sort of how we should look at working capital in the second quarter? And then if you could just give us a snapshot of where your mark to market, you know, on all your derivatives looks right now, that'd be helpful.

Speaker Change: Okay and then.

Speaker Change: Jamie.

Speaker Change: Working capital was pretty negative for the quarter could you just talk about you know.

Jamie: With that Bob.

Jamie: Over the second quarter, it's just the rest of the year.

Jamie: Look at working capital in the second quarter event.

Jamie: Could just give us a snapshot on where your mark to market.

Jamie: The Caribbean look right now that would be helpful.

Bob: Yes, so working capital the largest impact there has been the recognition of the balloon payment on the <unk>.

Gianni Del Signore: So working capital, the largest impact there has been the recognition of the balloon payment on the debt that comes due next week. And that's sort of been there since, you know, we were anticipating that for a while. But the cash balance is remaining strongly, you know, even if it continues to be.

I mean, the debt that comes due.

Bob: Next week and that's that's sort of been there since we.

Bob: We were anticipating that for a while but.

Bob: Cash balances is remaining strong.

Speaker Change: No even if it continues to.

Unknown Executive: Unknown Attendee, Gianni Signore, Mads Petersen, Pangaea

Speaker Change: To maintain and grow so we're we're allocating it.

Speaker Change: Chartering ships towards building up.

Speaker Change: Got it towards acquisitions et cetera. So.

Speaker Change: Once we once we handle the <unk>.

Speaker Change: <unk> payments.

Speaker Change: We refinance I think we'll see we'll see it.

Speaker Change: As far as that working capital ratio, we'll see that improve.

Charles Kennedy Fratt: Okay, and then how do your directives look so far in the quarter, you know, relative to the, you know, the unrealized gains that you had in the first quarter? Flat. Should we expect some unrealized losses or, you know, how does the derivative book look right now?

Speaker Change: Okay.

Speaker Change: How do your direct look so far in the quarter.

The.

Speaker Change: Unrealized gains that you had in the first quarter.

Speaker Change: Should we expect some unrealized losses or.

How does how does the derivative book look right now.

Gianni Del Signore: Yeah, well, there are three of that mark to market gain, right? There are three components to that.

Speaker Change: Yeah, well, there's three of that mark to market gain right. There's three components to that there's the interest rate cap.

Gianni Del Signore: There's the interest rate cap, there's the there's bunker derivatives, and then there's FSA. Interest rate cap, you know, what happened? At the end of last year, we knew there was some negative pressure on the cap because of what expectations were for interest rates, but that didn't materialize. So we did see a, you know, pickup in value from year end to the first quarter. And then bunker derivatives and FFAs, I think they've retained, they've remained relatively flat. So, and even looking ahead with the interest rate cap, I think that also has remained relatively flat. So I don't expect significant volatility when it comes to our derivative book for Q2.

Speaker Change: There is the there is bunker derivatives and then there's FSA is.

Interest rate cap.

Speaker Change: It happened.

Speaker Change: At the end of last year, we knew there was some maybe negative pressure on on.

Speaker Change: On the cap because of what expectations were on interest rates.

Speaker Change: That didn't materialize and we did see a pick up in value.

From year end to the first quarter there.

Speaker Change: And then poker during phase I think they've they've remained relatively flat so.

Speaker Change: Looking ahead with the interest rate cap I think that also has remained relatively flat so I don't expect.

Speaker Change: Significant.

Speaker Change: <unk> volatility when it comes to our derivative book for Q2.

Charles Kennedy Fratt: That's really helpful. Thank you.

Speaker Change: Great that's really helpful. Thank you.

Speaker Change: Okay.

Mark L. Filanowski: We have no time, so I will turn the program back over to Mark Filanowski for any additional or closing remarks.

Speaker Change: Thank you we have no further questions on the line at this time, well turn the program back over to Mark Philadelphia for any additional or closing remarks.

Mark L. Filanowski: Once again, thank you for joining our call. Should you have any questions, please feel free to contact us at investors@pangaea.com, and a member of our team will follow up with you. This concludes our call today. You may now disconnect.

Mark L. Filanowski: Once again, thank you for joining our call should you have any questions. Please feel free to contact us at investors and Penn J L. S Dot com and a member of our team will follow up with you. This.

Mark L. Filanowski: This concludes our call today you may now disconnect.

Mark L. Filanowski: Okay.

Operator: And once again, this does conclude today's program. Thank you for your participation. You may disconnect at any time.

Mark L. Filanowski: And once again this does conclude today's program. Thank you for your participation you may disconnect at any time.

unknown: [inaudible]

Mark L. Filanowski: Sure.