Q1 2025 Pangaea Logistics Solutions Ltd Earnings Call
Chelsea: Good morning. My name is Chelsea and I will be your conference operator today. At this time, I would like to welcome everyone to the Pangaea Logistics Solutions first quarter, 2025 earnings teleconference.
Chelsea: Today's call is being recorded and will be available for replay beginning at 11 a.m. Eastern Standard Time.
Chelsea: The recording can be accessed by dialing 888-215-1487 domestically or 402-220-4938 internationally.
Chelsea: 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 the Q&A segment, please press star one on your phone.
Chelsea: If your question has been answered, you may remove yourself from the queue at any time by pressing star two. We do ask that you please pick up your handset for optimal sound quality. It is now my pleasure to turn the floor over to Stefan Neely with Valiment Visors.
Stefan Neely: Thank you, Operator, and welcome to the Pangea Logistics Solutions 4th Quarter 2025 Results Conference Call. Leading the call with me today is CEO Mark Filanowski, Chief Financial Officer Gianni Delsignore, and COO Mads Pedersen.
Stefan Neely: Today's discussion contains forward-looking statements about future business and financial expectations.
Mark Filanowski: At the conclusion of our prepared remarks, we will open the line for questions. With that, I'd like to turn the call over to Mark.
Mark Filanowski: Our first quarter performance reflects the continued disciplined execution of our cargo-focused business model.
Mark Filanowski: Despite seasonal softness early in the quarter, we delivered TCE rates that were 33% above the prevailing market, demonstrating the strength and differentiation of our commercial strategy.
Mark Filanowski: This outperformance was supported by our long-term contracts of affraidment, which provided pricing stability through the winter months and allowed us to effectively manage market volatility later in the quarter.
Mark Filanowski: For the first quarter of 2025, we reported an adjusted net loss of approximately $2 million and adjusted EBITDA of $14.8 million, as average market pricing declined 37% compared to the prior year period.
Mark Filanowski: Despite this pressure, our results benefited from our counter-cyclical positioning and integrated fleet strategy.
Mark Filanowski: Total shipping days rose 24.6% year-over-year, primarily driven by the addition of SSI handy fleet vessels.
Mark Filanowski: On a comparable basis, shipping days increased by 41%, underscoring the meaningful contribution of the acquisition to our operational scale.
Mark Filanowski: Importantly, we completed 160 days of planned off-fire for vessel dry dockings during the quarter.
Mark Filanowski: taking advantage of softer demand to complete a significant portion of our 2025 dry docking schedule. With only four dockings remaining for the rest of the year, we are well positioned to optimize fleet availability during periods of stronger demand.
Mark Filanowski: Since the beginning of the year, our teams have made substantial progress integrating the SSI fleet into our operating platform.
Mark Filanowski: integration efforts are proceeding as planned and as we fully align the new vessels with our existing routes, we expect to unlock further operating efficiencies and enhance returns across our broader fleet.
Mark Filanowski: We have seen vessel operating expenses decrease in areas like insurance, where our larger footprint reduces premiums and allows us to assume some added risks, and we are working on other operating cost synergies available as we exchange ideas with new relationships.
Mark Filanowski: By year end, we hope to have implemented cost savings of at least $2.5 million annually.
Mark Filanowski: We have successfully expanded the capabilities of the Handy Fleet both geographically and cargo-wise.
Mark Filanowski: Looking at the market environment, the dry bulk sector continues to experience elevated levels of volatility and uncertainty. While our operations are not directly impacted by proposed tariffs,
Mark Filanowski: including recently discussed port fees for Chinese built or controlled vessels we are closely monitoring potential indirect effects.
Mark Filanowski: Based on our review of the revised U.S. Trade Representative Port Fees Proposal, we do not expect any material impact to our own fleet, given our geographic focus and operating model.
Mark Filanowski: However, broader market dislocations could occur as global vessel deployment patterns shift in response to the evolving landscape.
Mark Filanowski: It's important to note that over 95% of our tonnage is tied to non-agricultural bulks, including iron ore, coal, cement, and aggregates, primarily across Atlantic, European, and Caribbean trade routes.
Mark Filanowski: This unique footprint continues to insulate us from some of the demand and policy volatility facing many other dry bulk operators.
Turning to the second quarter.
Mark Filanowski: Demand trends have remained steady across our key routes, though pricing continues to reflect global macro and trade policy uncertainties.
Mark Filanowski: As we announced yesterday our board of directors has authorized a new share repurchase program of up to $15 million. In addition to declaration of a five cent dividend.
Mark Filanowski: This approach gives us added flexibility to return capital to shareholders through open market repurchases of Pan J S shares, which we feel are undervalued after the recent share price movements.
Mark Filanowski: In light of the recent pressure on the dry bulk market and ongoing trade.
Mark Filanowski: Uncertainty.
Mark Filanowski: We are maintaining a disciplined capital allocation strategy prioritizing balance sheet strength, while continuing to deliver long term value through shareholder returns.
Mark Filanowski: We will also continue to Opportunistically evaluate street strategic fleet transactions that support long term efficiency extend asset life and preserve our competitive age profile.
Mark Filanowski: At the same time, we are investing in our core.
Mark Filanowski: And logistics business, which remains critical.
Mark Filanowski: Critical contributor to our margin profile.
Mark Filanowski: Our expansion at the Port of Tampa, Tampa is progressing on schedule and new operations in Port Charles Louisiana, and part of our ranches in Texas demonstrate our commitment to this exciting supply chain expansion of our business offerings.
Mark Filanowski: With that I'd like to turn the call over to Gianni to review, our first quarter financial results.
Gianni: Thank you Mark and welcome to those joining us on the call today.
Gianni: Our first quarter financial results reflect continued TCE outperformance relative to the broader market.
Gianni: First quarter TCE rates were $11390 per day, a premium of approximately 33% over the average published market rates for Panamax, Superman and handy size vessels in the period.
Gianni: Driven by strong execution across our core contracts and the expanded scale of our own fleet.
Gianni: While total shipping days increased year over year by 41% to 5210 TCE rates earned declined by 33, 36%, reflecting the decline in average market year over year.
Gianni: Our adjusted EBITDA for the first quarter was $14 8 million a decrease of approximately $5 2 million relative to the prior year period.
Gianni: Total charter hire expense decreased by 35% year over year, primarily due to a 37% decrease in prevailing market rates, partly offset by a 14% increase in chartered in days.
Gianni: Our chartering cost on a per day basis was 10108 in the first quarter of 2025 and through today, we've booked approximately 1795 days at $11472 per day for the second quarter of 2025.
Gianni: Vessel operating expenses net of technical management fees increased by approximately 75% year over year.
Gianni: Primarily due to the acquisition of the Ssi fleet, which increased total owned days by 61% to 3690.
Gianni: On a per day basis vessel operating expenses net of technical management fees increased by only 4% from an average of $5300 per day last year to $5528 per day in the first quarter of 2025.
Gianni: In total our reported GAAP net loss attributable to Pangaea for the first quarter was approximately $2 million or a loss of three cents per diluted share compared to net income of $11 7 million or 25 cents per diluted per diluted share in the first quarter of last year.
Gianni: When excluding the impact of the unrealized losses from derivative instruments as well as other non-GAAP adjustments our reported adjusted net loss attributable to Pangaea during the quarter was $2 1 million or a loss of three cents per diluted share.
Gianni: Impaired to adjusted net income of $6 6 million or 14 cents per diluted share in the first quarter of last year.
Gianni: Turning to cash flow and liquidity total cash from operations decreased by $13 2 million year over year to net cash used in operations of $4 3 million due to a decrease in operating earnings and a $5 2 million dollar increase in dry docking cost year over year.
Gianni: We repaid over $11 million in long term debt and finance lease obligations and our interest expense was $6 1 million, an increase of $2 $3 million due to the new debt facilities entered into during the second half of last year and.
Gianni: And the assumed debt and finance leases associated with the Ssi acquisition.
Gianni: We ended the quarter with $63 $9 million in cash and total debt, including finance lease obligations of approximately $390 million.
Gianni: In the near term our capital allocation strategy will remain focused on preserving balance sheet optionality.
Gianni: Sustainable shareholder return program, along with targeted capital light investments and our stevedoring and logistics operations and ongoing renewal and modernization of our Drybulk fleet.
Gianni: Additionally, we remain committed to a consistent and sustainable return of capital strategy.
Gianni: With that we will now open the line for questions.
Gianni: Thank you.
Gianni: At this time, if you would like to ask a question. Please press star one on your telephone keypad.
Remove yourself from the queue at any time by pressing star two.
Gianni: And we ask that you. Please remember to pick up your handset for optimal sound quality.
Speaker Change: And our first question will come from Liam Burke with B Riley Securities. Please go ahead.
Speaker Change: Thank you and good morning, Marc Good morning, Johnny Good morning, Mark.
Speaker Change: Good morning Liam.
Speaker Change: Mark you.
Speaker Change: You modified your returning cash to shareholders strategy by adding a buyback.
Speaker Change: Our dividend now has five versus 10 cents a quarter.
Speaker Change: Do you plan on it.
Speaker Change: The board evaluates it every quarter, but is that a dividend you would expect to pay through the cycle or are you going to go into more of a variable model there.
Speaker Change: Liam we haven't talked about the variable model, yet we've talked a lot about different ways to get at.
Speaker Change: Returns to shareholders my favorite is too.
Speaker Change: Reinvest in the business and.
Speaker Change: <unk>.
Speaker Change: Yeah.
Speaker Change: And <unk>.
Speaker Change: Productive people unproductive assets to the organization and then eventually the stock market will recognize the inherent value in the operation and the shares but sometimes stock market doesn't agree with me.
Speaker Change: We paid down.
Speaker Change: Pretty nice dividend.
Speaker Change: Over the years.
Speaker Change: Last few years.
Speaker Change: And that was one way to get a return to shareholders. We also have been talking with people like you and other shareholders about the wisdom of a drop of a stock buyback.
Speaker Change: With this share value.
Speaker Change: Dropping substantially over the past couple of months.
Speaker Change: We thought it was time to try a buyback and see if we can return.
Speaker Change: The value to shareholders.
Speaker Change: That way.
Speaker Change: We have new directors on the board.
Speaker Change: New opinions.
Speaker Change: So I think we'll go another quarter see how this yeah.
Speaker Change: Shares react what what are how investors react regarding.
Speaker Change: Good.
Speaker Change: New dividend rate right and.
Speaker Change: And may take it quarter by quarter and see how we are.
Speaker Change: Great. Thank you still yielding four 5% even at the new <unk> per quarter.
Speaker Change: You called out.
Speaker Change: And expense reduction program by the end of the year is that.
Speaker Change: Integration savings with the fleet or is that just ongoing review of the operations being able to pull out excess costs.
Speaker Change: It's a little bit of both Liam we didn't enter the Ssi transaction looking for a significant cost savings, but but there are some easy targets two to attack when you've got a larger fleet and a larger operation that scale just gives you a little bit more.
Speaker Change: Hi.
Speaker Change: Power two to drive cost decreases.
Speaker Change: One one area was our insurance, where we we looked at P&I.
Speaker Change: We looked at the hall, and we went to market a little more aggressively than we were able to in the past and drove some cost decreases.
Speaker Change: We'll we'll we're learning from each other and regarding purchasing.
Speaker Change: And other ways.
Speaker Change: To save money in real life.
Speaker Change: With a larger fleet and a larger operation and it's working out.
Speaker Change: Great. Thank you Mark.
Speaker Change: Thank you.
Speaker Change: Our next question will come from Paul Frat with AGP. Please go ahead.
Paul Frat: Hey, good morning.
Speaker Change: What.
Speaker Change: Can you just help me Mark help me understand the dividend cut.
Speaker Change: You've consistently said in previous presentations that you wanted to maintain a dividend over the cycle that's sustainable.
Speaker Change: That dividend was <unk> 10 cents a quarter.
Speaker Change: Now you're changing it to five cents a quarter.
Speaker Change: And now you're saying, it's sustainable over the cycle.
Speaker Change: What changed.
Speaker Change: Well a lot of things change.
Speaker Change: Paul as I explained we have the dip.
Speaker Change: <unk> thought process on that on the board regarding.
Speaker Change: The viability of the share buyback, we are we want to keep a consistent dividend.
Speaker Change: And it doesn't necessarily mean, a consistent amount.
Speaker Change: It is.
Speaker Change: Our operation does.
<unk> produced cash flow that's available for different ways to to.
Speaker Change: To return capital to shareholders.
Speaker Change: And.
Speaker Change: Yes.
Speaker Change: That's what we're trying to do is come up with.
Speaker Change: Prudent approach to two two.
Speaker Change: Address the need for shareholders to have some kind of return on their shares we saw an opportunity here of a potential opportunity to do something good for shareholders.
Speaker Change: Announcing the share buyback.
So.
As I mentioned theres different wasted.
Speaker Change: Provide a return and.
Speaker Change: We're trying a couple of different ways. This time.
Speaker Change: So can you tell me how you know.
Speaker Change: The share buyback will work are you going to be in the market every quarter.
Speaker Change: Mind, you know the the difference $3 2 million that youre going to save on paying the dividend.
Speaker Change: A lot of companies announce share buybacks, but never followed through with them could you just talk about how you're going to approach the stock buyback.
Speaker Change: Where are where were approaching at least a one bank. This week. After this call to to set up a program.
Speaker Change: Paul.
Speaker Change: Board has asked us to review with them.
Speaker Change: In advance any any potential share buybacks based on price availability of capital et cetera.
Speaker Change: So it will be lumpy.
Speaker Change: Constant.
Speaker Change: Rolling.
Speaker Change: Program it'll be when the board feels it's the right time to purchase shares in the market.
Speaker Change: And then mark in the context.
With Ssi transaction do you now have that large shareholder that also large shareholders represented IV stand the board, but they also bought shares in early April do you are you concerned at all about.
Speaker Change: The increased concentration and ownership I mean, one of the things that the market often has said is that your public float is limited.
Speaker Change: And can you just talk about how that was considered in this decision.
Speaker Change: Yeah.
The $15 million.
Speaker Change: Isn't it.
Speaker Change: A large share of.
Speaker Change: Our outstanding float, we estimate our float to be around 40%.
Speaker Change: And we think there is.
Speaker Change: Opportunity there to buy shares without.
Speaker Change: Without <unk>.
Speaker Change: Decreasing the float substantially.
Speaker Change: And regarding the.
Speaker Change: <unk> of the largest shareholder who now has 28% there is a cap there of 30%.
Speaker Change: Yes.
Speaker Change: It came it came about as a result of the negotiations regarding that deal. So.
Speaker Change: I don't think it will go up substantially as a result of that.
Speaker Change: Of any share buyback we might do.
Speaker Change: Great and then Gianni you often in previous quarters, you had talked about not only your forward cover that.
Speaker Change: Talked about you booked 40 40 70.
Speaker Change: Vessels at 12500, roughly where it will shipping days ending with the second quarter sort of what what percentage of your shipping days expected shipping days in the second quarter had been booked.
Speaker Change: Yeah. So I think we gave out the indications so far for the quarter, we had 4275 days at <unk>.
Speaker Change: 12, five I think our total fleet right now is somewhere around.
Speaker Change: <unk> 65 vessels.
Speaker Change: Total.
Speaker Change: And I think that's been right around where we've been for the quarter. So the 65 vessel average fleet over the quarter is that our projected total.
Speaker Change: For this quarter.
Speaker Change: So you are like 80% booked for the quarter.
Speaker Change: Yeah. So.
Speaker Change: In previous quarters, <unk> see any at least the last couple of quarters, you've talked about your <unk>.
Speaker Change: Charter hire expenses were running do you do you have a figure for how many days you.
Speaker Change: Chartered in for the quarter.
Speaker Change: That was yes, I can absolutely.
Speaker Change: I had mentioned it.
Speaker Change: In my prepared remarks earlier.
Speaker Change: But we booked.
Speaker Change: 1795 days at 11472, so we still have about.
Speaker Change: Yeah, our margin on our chartered in fleet is around a thousand dollars 52.
Speaker Change: Our 105 to our margin on our chartered in fleet.
Speaker Change: Great sorry, I missed that.
Matt: And then Matt.
Speaker Change: Yeah.
Speaker Change: Can you talk about the operating efficiencies that were mentioned in the press release about it.
Speaker Change: Integrating the handy is can you.
Speaker Change: Beyond the insurance could you just talk about whether there are additional operating efficiencies that you're sort.
Speaker Change: Sort of the nature of those.
Speaker Change: And then also where do you stand at sports that $2 5 million.
Are you a quarter of the way towards realizing that or or are we going to see that over the rest of the year, the $2 5 million of cost savings.
Speaker Change: Yeah, so on the on.
Speaker Change: On the on the on the trading synergies I think it's mostly outside what Mark mentioned.
Speaker Change: On the cost side, which is a question of a continuous process across all the shifts in the bit you're always trying to optimize that.
Speaker Change: It's mainly around the commercial synergies, where we have been able to use the.
Speaker Change: The handy vessels in and some of the trades, we have we have historically done on them.
Speaker Change: Especially our Super fleet and so that's both geographically in terms of trading in our main areas.
Need a little bit of a ice experience all its a commodity all.
On the other geographical focus that's primarily one of them.
Speaker Change: Well the the.
The synergies have come in the store.
Speaker Change: Which is also you know what what would the.
Speaker Change: Gulf of Mexico, which was the primary driver right. It was it wasn't it wasn't a cost reduction.
Speaker Change: Ambition only if it was really to grow the top line rather than just reduced cost, but we are trying to do that in it.
This will technical management and operations as a lot. Many many components goes into that everything is being scrutinized.
Speaker Change: As we always did but of course, the fact that we have access to.
Speaker Change: Small experience launch.
Speaker Change: Put a pool and.
Speaker Change: Additional resources makes it.
Speaker Change:
Speaker Change: That that makes that sort of synergy and cost of some I would say, it's impossible, but it's a continuous process and that it will at some of these things are bigger and bigger.
Speaker Change: Big undertaking to take a little bit longer to realize but some of them were working on crystallizing in the filter horizon.
Speaker Change: Great and then on the terminal side, you're talking about the expansion of the.
Speaker Change: Tampa and then Dennis taxes could you just maybe quantify what that could mean to the second quarter I'm sorry second half operating results is it going to move the needle on the Terminalling revenue or is it just you know.
Speaker Change: Incremental add on that that will add maybe 10% to revenues.
Speaker Change: Yes, I think the highly dependent on the start date, we're still projecting.
Speaker Change: Within this year Q late.
Speaker Change: <unk> Q3.
Speaker Change: Q4 start.
Speaker Change: So it will be incremental to this year it will add.
Speaker Change: About 150 200 of EBITDA.
Speaker Change: For this year.
Speaker Change: Really that's going to be a project that will be in full swing for 2026.
Speaker Change: In Tampa, and then also in Texas, and that's where we'll see the real contribution for that.
Speaker Change: And then anything else on the horizon on the terminated business too.
Speaker Change: Further expand.
Speaker Change: No.
Speaker Change: Power.
Speaker Change: We will add.
Speaker Change: Tampa Lake Charles in Porter Ranch this terminals this year.
We found is that once we're in a place.
Speaker Change: More stuff comes to us so.
Speaker Change: We have no nothing on the books in addition to those three for this year, but.
Speaker Change: Once they are up and running business kind of shows up.
Speaker Change: Additive business.
Speaker Change: Great. Thanks for your time.
Speaker Change: Thanks, Paul.
Speaker Change: Thank you.
Speaker Change: As a reminder, that is star one to ask a question.
Speaker Change: And our next question will come from Michael Nathanson with Sidoti <unk> Company. Please go ahead.
Michael Nathanson: Congratulations on your performance in a difficult quarter.
Speaker Change: Thank you Michael.
Speaker Change: I just have a couple of questions first in Q1 long term contracts really helped you out in a difficult TCE environment what percent of Q2 and onward is already booked on a long term basis.
Speaker Change: Yeah.
Speaker Change: Got it.
Speaker Change: Yes, so when we look at the balance of the year. It really our contract cover kicks in during ice season, the summer ice season in Q3.
Speaker Change: So we're we're heading into that in Q3 and that covers our ice class vessels.
Speaker Change: And then on average we've discussed our contract cover on average for the year across our own fleet and averaged around 30%. So when we look.
Speaker Change: Over a longer period of time, that's typically the contract cover that will have on our fleet and I think that remains true for.
Speaker Change: For for this year as well.
Speaker Change: Okay great.
Speaker Change: Looking at uses of cash we've already talked about dividends versus buybacks. It's clear what your strategy is there.
Speaker Change: Of course, you're also consistently paying down debt and we expect further debt pay downs or to dividends and share buybacks take priority.
Speaker Change: No I think we as far as our debt paydown the $11 million. We paid in Q1 that that is a pretty consistent number for the next.
Speaker Change: Almost two years right through the end of 2026, our first meaningful balloon payment is in.
Speaker Change: Early 2027.
Speaker Change: I think we're amortizing debt.
Speaker Change: A decent rate, we have well priced debt.
Speaker Change: On our fixed rate facilities, and and others that are capped so I think we're pretty comfortable with our debt.
Speaker Change: Payment profile going forward and I don't I don't see us really going after anything in a meaningful way until that balloon payment comes it comes due.
Speaker Change: Great well, thank you and good luck.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: We do have a follow up question from Poe Frat with ADP. Please go ahead.
Speaker Change: Jeremy could you just.
Speaker Change: Clarify that last comment on the 30% of your capacities generally sold.
Speaker Change: We're committed is that 30% of your owned fleet or 30% of what you typically run quarter to quarter. When you include the chartered in capacity.
Speaker Change: No well, we think when we think about long term contract cover.
Speaker Change: On the owned fleet.
Speaker Change: That 30% number is on the on the owned fleet.
Speaker Change: Only and then the <unk>.
Speaker Change: <unk> presents arbitrage opportunities they're traded too.
Speaker Change: Make the owned fleet more efficient to position vessels appropriately.
Speaker Change: But when we think about long term contract cover Thats. That's on the owned fleet as the number where we're discussing.
Speaker Change: Yes, just wanted to clarify that and then mark going back to your prepared remarks, when you talked about the dividend and stock buyback.
Speaker Change: You indicated that your preference is growth.
Can you talk about the S&P market right now and how.
Speaker Change: You're viewing the S&P market.
Speaker Change: Yes, second hand prices are still pretty extensive poe in relation to what the market returns today.
So we've held off buying.
Speaker Change: Any new ships until that equation gets a little more favorable to owners.
Speaker Change: We just added.
Speaker Change: 15 ships at the end of the year, So it's time to sort of.
Speaker Change: Catch our breath and wait for the market to make a turn one way or the other.
Speaker Change: Great that's helpful.
Speaker Change: Thank you.
Speaker Change: And at this time there are no further questions in the queue. So I'd like to turn the call back over to Mark <unk> for any closing remarks.
Speaker Change: Thanks, everyone for joining us today.
Speaker Change: For interesting times flexibility and adaptability are the key to success in this environment and we're pretty good at that.
Speaker Change: So please feel free to contact us with any further questions that investors ask Pan J L. S Dot com. Thanks again.
Speaker Change: Thank you ladies and gentlemen, this concludes today's program and we appreciate your participation you may disconnect at any time.
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