Eagle Bulk Shipping Inc.

Thank you. Thank you. Greetings and welcome to the Eagle Bulk Shipment Third Quarter 2020 Results Conference Call. At this time, all participants are in the listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. To ask a question during the session, you would need to press star 1 on your telephone. Should anyone require any further assistance, please press star 0. As a reminder, this conference call is being recorded. I would now like to turn the call over to Gary Vogel, Chief Executive Officer, and Frank DiCostanzo, Chief Financial Officer of Eagle Bulk Shipping. Mr. Vogel, you may begin.

Thank you, and good morning. I'd like to welcome everyone to Eagle Bolt's third quarter 2020 earnings call. To supplement our remarks today, I would encourage participants to access a slide presentation that is available on our website at eagleships.com. Please note that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and are inherently subject to risk and uncertainties. You should not place undue reliance on these forward-looking statements. Please refer to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties that may have a direct bearing on our operating results, our performance, and our financial condition. Our discussion today also includes certain non-GAAP financial measures, including EBITDA, adjusted EBITDA, and TCE. Please refer to the appendix in the presentation and our earnings release filed with the Securities and Exchange Commission for more information concerning non-GAAP financial measures and reconciliation to the most comparable GAAP financial measures. Please turn to slide five. As we have discussed before, this year, seafarers endured a great deal due to COVID-19. Government-imposed travel restrictions, which were put in place in order to curtail the spread of the virus, created substantial challenges with respect to being able to effect crew changes and repatriation. requiring many seafarers to work well past their contractual employment periods. While many hurdles still exist, thankfully, travel restrictions have eased in some countries, allowing for crew changes to take place. However, it's estimated that more than 300,000 seafarers are still waiting to go home, and as I've spoken to before, this is simply not acceptable. At EGLE, it has been a strategic priority to relieve our seafarers which were overdue, And in this regard, I'm pleased to report that we have now been able to change over the vast majority of our crew, where today only 26 seafarers out of about 1,000 are beyond their contractual working period. Of course, we remain focused on getting this number down to zero. In order to achieve this result, we had to divert some of our ships and or incur additional off-hire, which came at a cost. During the past quarter, we incurred approximately 40 incremental off-hire days related to such crew changes, equating to almost $400,000 in lost revenue. And in addition, crew changes have been costing about 50% more than normal due to such things as extended hoteling, COVID testing, and more expensive travel costs. This impacted our OPEX by about $187 per day during the quarter, given both the cost mentioned and the elevated number of crew changes affected. These costs notwithstanding, we felt it was our obligation to Eagle seafarers and simply the right thing to do. Please turn to slide six. Our markets continued on a recovery path during the third quarter, with the BSI ending September at 10,943 and averaging 9931 per day for the full period, representing an increase of 81 percent as compared to the prior quarter. We believe the recovery trend is reflective of the normalization in trade demand, as well as the result of general easing important trade restrictions. The market's been further supported by general stimulus measures in China, as well as a robust grain trade, which we'll discuss later on in the call. Eagle generated a net TCE for the third quarter of $9,620 per day, up $400 per day from the level communicated during our earnings call in August, and up 20% quarter on quarter. representing a small beat against the market. As we have discussed in previous calls, it's challenging to catch and beat a rapidly rising market due to the fact that a number of days are fixed in advance and where voyages average about 45 days in duration. In addition, as we've spoken about previously, given the volatility and weakness in the markets earlier on in the year and lack of visibility due to COVID-19, we increased our hedge position for the second half of 2020 in order to provide us with appropriate downside protection. While this negatively affected our performance for the quarter, we believe it was a prudent thing to do and it was more than offset by the positive contribution from our platform methodology as well as operating scrubbers on the majority of our fleet. As we have always advocated, performance is best measured over multiple quarters. In this regard, inclusive of Q3, Our last 12 months average outperformance stands at $2,101 per ship per day, equating to approximately $37 million in incremental cashflow on an annualized basis based on our current fleet size. Additionally, while the outbreak of COVID-19 and the OPEC price water negatively impacted fuel spreads, by our calculations, we've generated more than $23 million on our scrubber investment in just the first nine months. Looking ahead, As of today, we have fixed about 73% of our available days for the fourth quarter at a net TCE of $11,275 per day, which as of today represents a significant outperformance once again. Please turn to slide seven. The top line growth we experienced in the third quarter contributed to an improved operating performance for the period as represented by EBITDA, which totaled $11.5 million. Please turn to slide eight. As part of our ongoing fleet renewal program, we have reached agreements to sell three of our vintage supermaxes, the Osprey, Shrike, and Skua, all built between 2002 and 2003. Gross proceeds total $15.4 million, with all three sales expected to close during the fourth quarter. It is important to note that each of these sales were affected just months ahead of their statutory dry docks and installation of ballast water treatment systems, saving a total of about $4.2 million in related dry dock and capex costs. Inclusive of the above, over the past four years, we have renewed 43% of our fleet, having acquired 20 Ultramaxes and sold 18 Supermax vessels. These S&P transactions have vastly improved our fleet makeup. The average size of our ships has increased, the average age of our fleet has remained fairly static over the period, and As illustrated in the graph on the lower right-hand corner of the slide, our fleet emissions profile has significantly improved as measured by fuel consumption per deadweight ton. We plan to continue to execute on our fleet renewal and growth program on an opportunistic basis. With that, I'd like to turn the call over to Frank, who will review our financial performance.

Frank Moyer Thank you, Gary. Please turn to slide 10 for a summary of our third quarter 2020 financial results. The improvement in the underlying spot market drove top-line growth in Q3, with revenue net of both voyage and charter hire expenses totaling $43.5 million, an increase of 50% from the prior quarter. In Q3, our TCE came in at $9,620, which is $191 above the adjusted net BSI of We incurred a net loss of $11.2 million for the third quarter, equating to a loss per share of $1.09, both basic and diluted. Please be reminded that we have completed a one-for-seven reverse stock split effective September 15, 2020. The earnings per share number is reflective of the reverse stock split. As a reminder, our hedge positions, excluding the interest rate swaps, do not receive hedge accounting treatment, and as such, the mark-to-market changes flow through the income statement as other expenses. As would be expected, adjusted EBITDA improved in Q3, coming in at a positive 11.5 million. It is worth noting that our profitability in the quarter was reduced by 3 million as a result of changes in our derivative hedge book. Let's now turn to slide 11 for an overview of our balance sheet and liquidity. Total cash, inclusive of $1.9 million of restricted cash, was $85.3 million at September 30, 2020, representing a decrease of $13.3 million as compared to the end of the second quarter. The decrease in cash was primarily a result of the repayment of $20 million of the revolver and principal repayments of $7.8 million on the new ultra-co-debt facility. along with CapEx spending of $2.9 million, in part offset by proceeds of $4.6 million from the sale of the vessel GoldenEye and $12.8 million of operating cash generated. Total liquidity increased to $105.3 million at the end of Q3. Liquidity is comprised of total cash of $85.3 million and $20 million of undrawn availability on the UltraCo revolving credit facility. Total gross debt excluding debt issuance costs at the end of Q3 was $522.4 million. I would note that our UltraCo term loan three-month LIBOR floating rate exposure is fully hedged via interest rate swaps at a blended average of 58 basis points. Please turn to slide 12. for an overview of our cash flow from operations for the third quarter of 2020. At the top of the slide, you can see that net cash provided by operating activities was $12.8 million in Q3, representing a material improvement over the prior two quarters. The chart demonstrates the timing-driven variability that working capital introduces to cash from operations as depicted by the differences between the dark blue bars which are reported cash from ops numbers, and the light blue bars, which strip out changes in operating assets and liabilities, primarily working capital. I believe it is more meaningful to evaluate cash from ops from a year-to-date perspective, which smooths out some of the noise. Cash flows used in operating activities were $12.3 million for the year to date. You will note from the graph that working capital changes have evened out over the nine-month period. Please now turn to slide 13 for a Q3 and year-to-date cash walk. The cash at the top of the slide lays out the changes in the company's cash balance during Q3. Revenue and operating expenditures are a simple look at the operations. The net of the two large bars on the left is positive 14 million, which is close to our adjusted EBITDA number. To the right, you will find a bar covering the $4 million of dry docking costs in capex of $2.9 million. The $20 million bar represents the repayment of funds drawn from our UltraCo revolving credit facility. And finally, the bar totaling $12 million represents the debt principal and interest paid in the quarter. The chart on the bottom half of the slide displays the changes in the company's cash for the first nine months of 2020. Let's now review slide 14 for our cash break-even per ship per day. Cash break-even per ship per day came in at $10,644 in the third quarter. The quarter-on-quarter increases in OPEX, dry docking costs, and G&A were in part offset by a decrease in debt principal repayment. Vessel expenses, or OPEX, came in at $4,784 per ship per day in Q3, $337 higher than the prior quarter. The increase in OPEX per day was a result of the incremental costs related to the increase in crew changes in the quarter that Gary noted. Dry docking came in at $936 per ship per day in Q3, $628 higher than the prior quarter. The increase was a result of an increase in the number of dry docks. Cash G&A came in at $1,596 per ship per day in Q3, up $268 from Q2. The increase was attributable to the office-based employees returning to the office in the quarter, along with a decrease in owned days due to the sale of the GoldenEye. It is worth noting that our G&A per ship calculation is based on our owned vessels, whereas we operate a larger fleet, including our chartered-in tonnage. In this regard, if we were to include the chartered-in days in our calculation, G&A per ship per day would be $1,428 for the quarter. Cash interest expenses came in at $1,611 per ship per day in Q3, which was flat quarter over quarter. Cash debt principal payments came in at $1,718 per ship per day in Q3, $765 lower than the prior quarter. The decrease is attributable to amortization repayments on our Norwegian bond debt, which are paid semiannually in Q2 and Q4. This concludes my comments. I will now turn the call back to Gary.