EuroDry Ltd.

Thank you for standing by, ladies and gentlemen, and welcome to the Eurodry Limited conference call on the third quarter 2023 financial results. We have with us today Mr. Aristides Pitas, Chairman and Chief Executive Officer, and Mr. Tazos Aslitis, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session At which time you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today. Please be reminded that the company announced its results with a press release that has been publicly distributed. Before passing the floor to Mr. Piedas, I would like to remind everyone that in today's presentation and conference call, your drive will be making forward-looking statements. These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to slide number two of the webcast presentation, which has the full forward-looking statement, and the same statement was also included in the press release. Please take a moment to go through the whole statement and read it. And now I would like to pass the floor to Mr. Peters. Please go ahead, sir. Adjusted EBITDA for the quarter was $3.1 million.

Please refer to the press release for reconciliation between the adjusted net loss and adjusted EBITDA. Passers will go over our financial highlights in more detail later on in the presentation. The vessels are also sister ships to our main MV Alexandros P, which was built at the same yard in 2017 by ourselves. These acquisitions further expand our modern fleet cluster at a time that we believe is supportive of a healthy market over the next 2-3 years. with high-quality units of a known design. We expect these vessels to make significant contributions to Arabida in the coming quarters and years. On October 26, we announced a strategic partnership with NRP Project Finance, a leading project manager of direct investments within shipping and offshore, to co-invest with some Norwegian investors which we hope we will be able to further develop. Please start slide four. which is continuing after the delivery. The consideration was partly paid by cash at hand and partly financed with a sustainability-linked loan for $10.5 million with Eurobank SA. the remaining below. have recovered to approximately $14,060 per day, reflecting decisional market strength during September, but have slid by about 15% to $11,950 per day as markets have reacted to the slower world economy. Please now turn to slide 9. remaining well below the historic average of 3.8 The slowdown is more prolonged. a slightly slower global growth expectation. Uncertainty about future fuels and fine new building prices has led to a low order book. As of November 2023, the order book as a percentage of total fleet is only 8.1%, remaining one of the lowest in history. remains at current or lower levels. Please turn to slide 12, where we summarize our outlook for the dry bulk market. thousands of people on social media. Persistency remains over the scale

Over the next four slides, I will give you an overview of our financial highlights for the third quarter and nine months of 2023 and compare them to the same periods of last year. For that, let's turn to slide 15. For the third quarter of 2023, the company reported total net revenues of 10 million, representing a 36.7% decrease with a total net revenue of 15.8 million during the third quarter of last year, and that decrease was the result of the lower number of vessels we operated in the third quarter of 2023 versus last year, and the lower time charge rates that our vessels earned this year compared to last. We reported net loss for the period of half a million, as compared to a net income of 6.2 million for the same period, the third quarter of 2022. Interest and other financial costs for the third quarter of 2023 amounted to $1.6 million, compared to about $1 million for the same period of last year. Interest expense during the third quarter of this year was higher, mainly due to the increased underlying interest rates, software or LIBOR, that our loans were charged during the period, compared again to the same period of last year. Adjacent EBITDA for the third quarter of 2023 was 3.1 million, compared to 9.5 million we achieved during the same period of 2022. Basic and diluted loss per share for the third quarter of this year was 19 cents, calculated on about 2.8 million basic diluted weighted average number of shares outstanding, compared to earnings per share of 2.2 11 basic and $2.10 diluted, calculated on about 2.9 million basic and diluted weighted average number of shares outstanding for the third quarter of 2022. Excluding the effect on the loss for the quarter of the unrealized gain on derivatives, the adjusted net loss for the quarter ended September 30, 2023, would have been 24 cents loss per share basically diluted compared to adjusted earnings of $1.94 basic and $1.93 diluted respectively for the same period of last year. We do this adjustment because typically security analysts do not include the above items in their published estimates of earnings per share. Let's now look at the numbers for the corresponding nine-month periods ended September 30, 2023, and compare them to the same period of last year. For the first nine months of 2023, the company reported total net revenues of $31.7 million, representing a 42.4% decrease over total net revenues of $55.1 million during the first nine months of 2022. Again, this was the result of the decreased number of vessels we operated and the lower time charter rates our vessels earned. The company reported net loss for the period of 3.3 million as compared to a net income of 27.3 million for the same nine-month period of 2022. Interest and other financing costs for the first nine months of 2023 amounted to 4.4 million compared to 2.4 million for the same period of last year. Again, the interest expense for the period was higher, mainly due to the increased underlying interest rates or loans paid this year. Adjusted EBITDA for the first nine months of 2023 was 8 million, compared to 35.9 million achieved during the first nine months of 2022. Basic and diluted loss per share for the first nine months of 2023 was $1.17, calculated on 2.8 million basic and diluted weighted average number of shares outstanding, compared to earnings per share of $9.43 basic and $9.34 diluted for the same period of last year. Again, excluding the effect of the unrealized loss on derivatives, the adjusted net loss for the nine-month period ended September 30, 2023, which has been $0.57 per share, compared to adjusted earnings of $8.69 basic and $8.60 diluted for the same period of last year. Let's now turn to slide 16 to review our fleet performance. We'll start our review as usual by looking at our fleet utilization rates for the third quarter of this year and compare them the same period of 2022. Again, as we do all the time, our fleet utilization rate is broken down to commercial and operational. During the third quarter of 2023, Our commercial utilization rate was 99.4%, while our operational utilization rate was 99.5%, compared to a 100% commercial and 98.9% operational for the same period, the third quarter of 2022. On average, 10 vessels were owned and operated during the third quarter of this year, earning an average time charter equivalent rate of $12,126 per day, compared to 11 vessels we operated in the same period of 2022, which earned on average $20,637 per day. Our total daily operating expenses, including management fees, averaged $6,680 per vessel per day during the third quarter of 2023, compared to $6,593 per vessel per day for the third quarter of last year. General and administrative expenses per day per vessel amounted to $677 the third quarter of this year, compared to $700 for the third quarter of 2022. If we move further down on this table, we can see our cash flow break-even rate, which takes into account dry docking expenses, interest expenses, and loan repayments. As we can see, during the third quarter of 2023, our daily cash flow break-even rate was $12,640 per vessel per day, compared to $13,978 per vessel per day for the third quarter of last year. If we move to the right side of this slide, we can review the same figures for the nine-month periods of this year and last year. During the first nine months of 2023, our commercial utilization rate was 99.1%, and our operational utilization rate was 98.1%, compared to 99.8% commercial and 99.2% operational for the same periods the same period of 2022. On average, we only operated 10 vessels during 2023, earning an average time charter equivalent rate of $11,644 per vessel per day, compared to 10.5 vessels during this same period of last year, which earned $22,876 per vessel per day on average. Our vessel operating expenses, again, including management fees, averaged $7,095 per vessel per day during the first nine months of this year and compared to $6,587 per vessel per day for the same period of 2022. General and administrative expenses per day per vessel amounted to $813 this year compared to $750 for the first nine months of 2022. As we did for the three-month figures, we can look at our cash flow break-even levels for the nine-month period at the last line of this slide, which also take into account, as I mentioned earlier, direct expenses, interest expenses, and loan repayments. In the first nine months of 2023, we had $13,319 per vessel per day break-even level, cash flow break-even level, compared to $12,955 per day per vessel for the same period of last year. Let's now turn to slide 17 to review our debt profile. As of September 30, 2023, we had outstanding bank debt of about $75 million. repayments for the remaining of 23 amount to 2.6 million. As I mentioned earlier, we assumed additional debt to finance the acquisition of the three vessels we bought, and that debt amounted to 32.5 million, and that additional debt is reflected in the repayments shown in the top left part of the chart. In 2024, our total debt repayments, including balloon payments, amount to 18.05 million, while they are set to decrease to 9.7 million approximately, both in 2025 and 2026. Another point worth mentioning in this slide is that it relates to the average margin of our debt, which is about 2%. Assuming a software rate of about 5.41%, the rate as of October 6th, on the top of that, and including the cost of the portion of our debt covered by our interest rate swap, we estimate the total cost of our senior debt to be around 7.75%. At the bottom of this slide, we can see our projected cash flow break-even level for the next 12 months broken down to its various components. Overall, we expect our cash flow break-even level to be around $13,303 per vessel per day. And also on the same table, you can see what would be the break-even rate for our EBITDA to be on the positive side. So we would need to earn $7,000 $830 per vessel per day, to register a positive EBITDA result for the next 12 months. And that rate would include our operating expenses, G&A expenses, and dry token costs. Let's now move to the next slide, slide 18, where we can see some highlights from our balances in a rather simplified way. This slide offers a snapshot of our assets and liabilities. As of September 30th, 2023, CAS and other tangible assets on our balance sheet stood at about 42 million. The book value of our vessels, including the 6.5 million advance payment we made during the quarter for the acquisition of the three Ultramax vessels, were approximately 148 million, resulting in total book value for our assets of about 109 million. On our liability side, our debt as of September 30th, as I mentioned earlier, stood at about $75 million, representing about 40% of the book value of our assets, while other liabilities amounted to $5.6 million, or about 3% of the book value of our assets. And that calculation results in a book value of shareholders' equity of about $109.4 million, translating to a book value of $39.2 per share. However, based on our own estimates and market transactions, we estimate that the market value of our vessels was above the book value and stood, including the advances I mentioned earlier, at about 182 million, representing approximately a 23% higher value compared to the book value of the vessels, and resulting in a net asset value per share in excess of $51. I would like to close this presentation noting that our share price is lately trading around $15, and thus, if you compare this to our net asset value, it represents a steep discount, traded a steep discount to it, which should offer significant appreciation potential for our shareholders and investors. And with that, I would like to turn the floor back to Aristides to continue the call.

Thank you, Tasso. I'm opening now up the floor for any questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from the line of Christopher Skee with Arctic Securities. Please proceed with your question.

Hello, gentlemen. How are you? Hello. Yeah, congrats on a quarter of a minor beef, so that's good. I was just wondering if you could tell us a bit more about the rationale for growing your fleet through the joint venture. what's the rationale for this and is such a platform something you would consider to use more as a means to expand or how should we think about this?

The board had initially decided to acquire two vessels, and we were looking to find them. We then found a group of three vessels, and we said that it would be best and more conservative not to acquire it on our own, with our own equity, although we could. But we wanted to maintain a strong balance sheet. And we had started some discussions with NRP regarding potential cooperation, and finally we thought that it's a good idea. Why not? They are looking to find something to invest in for their investors. Why not do something together in a joint venture? And the discussions led to an agreement, and we are very happy to have done it because we opened up our company to the Norwegian market, which is a very knowledgeable shipping market and a strong shipping market. And hopefully we will be able to do more stuff with the same investors or other investors.

Thank you. And with regards to asset values, obviously they are still quite high in a historical perspective, and it doesn't seem like they're coming down anytime soon, although rates are not supporting it. With that in mind, would you consider selling some of your older vessels

We will definitely be at some point replacing the older vessels with newer vessels. This transition has to happen, and at some point it will happen. When we think the time is right, we will do it. Hopefully within the next couple of years we will see a stronger market, which will make it more interesting for us We will see. The transition has to happen at some point. We bought the three ultramaxes, I think, at the lowest point of values within this year at least. The prices were softening throughout the summer. Then after we concluded the deal to acquire the ships, the markets in September and October we found a right time within the year to affect this expansion. We have to see how next year develops, and we'll take it from there.

Okay. Thanks. That's all from me. Thanks a lot. Thank you.

As a reminder, if you would like to ask a question, press star 1 on your telephone keypad. Our next question comes from the line of Tate Sullivan with Maxim Group. Please proceed with your question.

Hi. This is Brian Yu on the line for Tate Sullivan. Hi. I just wanted to ask, in terms of, like, the market demand for China, what are some indicators you guys are seeing that helps indicate that the demand for 2024 is going to be moderate in terms of seasonality? We think that generally seasonality will persist, right? So there will be the periods when there's a lot of demand for grain or the factories want to restock and all that stuff, which usually happens.

So seasonality will be an issue again next year. China is a question mark for us right now. There are some positives and some negatives regarding them. I think that China has always managed to, you know, when people difficulties to come up with the right measures which result in keeping the economy rather strong. So we are optimistic that despite the fact that we've seen, well, we've actually seen a big increase in the coal imports, we've seen significant iron ore imports as well, despite the very poor market on the construction side. We are optimistic that China will, you know, will manage to continue delivering this 5%, 5.5% growth, which is sufficient to hopefully maintain rates at good levels.

Okay, got it. Thank you.

A final reminder, if you would like to ask a question, press star 1 on your telephone keypad. One moment, please, while we re-poll for any additional questions. Mr. Peters, it appears we have no further questions at this time. I would like to turn the floor back over to you for closing comments.

Thanks everybody for standing by and listening to our today's conference call. We will be back to you within three months' time with the results of the end of the year.

Thanks everybody for listening to us.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.