Eagle Bulk Shipping Inc.

Greetings and welcome to the EcoVolk shipping fourth quarter 2020 results conference call. At this time, all participants are in a 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'll need to press star 1 on your telephone. If you require any further assistance, please press star 0. As a reminder, this conference call is being recorded. I would now like to hand the call over to Gary Vogel, Chief Executive Officer, and Frank DiCostanzo. Chief Financial Officer of Eagle Bolt Shipping. Mr. Vogel, you may begin.

Thank you, and good morning. I'd like to welcome everyone to Eagle Bolt's fourth quarter 2020 earnings call. To supplement our remarks today, I would encourage participants to access the 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 a reconciliation to the most comparable GAAP financial measures. Before we begin our presentation, I'd like to take this opportunity to once again thank our crews for going above and beyond in dealing with all of the challenges they have faced as a result of the restrictions and disruptions caused by the outbreak of COVID-19. last year. We're pleased to see the wider community paying attention to seafarer welfare and understanding their importance to global commerce. We're strong advocates for all seafarers and are proud signatories to the Neptune Declaration, which seeks to improve their standing. We have and will continue to make seafarer welfare a priority at EGLE with a constant goal of continuing to maintain zero seafarers working beyond their contractual employment periods. Please turn to slide five. On the back of an improving macroeconomic landscape, freight environment, and overall capital markets, I'm pleased to report that we raised $25 million in growth equity this past December. We immediately put this money to work and acquired a total of seven vessels at what we consider to be very attractive levels. The total purchase price consideration is about $86 million in cash and 542,000 Eagle shares. These acquisitions are comprised of four modern, high-spec, scrubber-fitted Sedaris 64 Ultramaxes built at Chengzi Shipyard and three 2011-built Crown 58 Supermaxes built at Dayang Shipyard. We've taken delivery of two of the vessels thus far, with the remaining expected to deliver between March and May. Please turn to slide six. Pro forma for our acquisitions, our fleet currently totals 52 ships all within the Supermax Ultramax segment. Forty-five of our vessels, or 87 percent of our fleet, are fitted with scrubbers, giving us exposure to the recently widening fuel spreads. Since starting to execute on our fleet renewal and growth initiative, we've now turned over more than half our fleet, acquiring 27 vessels and selling 19. These sale and purchase transactions have vastly improved our fleet makeup in terms of age, size, and emissions. Please turn to slide seven. Our markets continued to trade up during the fourth quarter, with the BSI ending December at $11,424 per day and averaging $10,749 for the full period, representing an 8 percent increase as compared to the prior quarter. We believe the improving trend in markets is reflective of the continued recovery in global GDP post the economic shock caused by COVID-19, as well as a normalization in certain dry bulk flows. In particular, the fourth quarter was supported by a number of factors, including increased demand for agricultural products as China continued to build back their pig population, increased purchase of construction materials such as steel, cement, clinker, and other minor bolts, and increased thermal coal shipments as China increased purchases of Indonesian coal on the back of greater domestic demand and restrictions on Australian imports. And finally, India also saw a normalization of coal demand to pre-COVID levels. As depicted in the chart, Eagle generated a net TC for the fourth quarter of $11,190 per day, up 16% quarter on quarter, representing a beat of roughly $1,000 compared to market. As we've discussed in previous calls, it's challenging to catch and beat a rapidly rising market, as a percentage of days are fixed in advance and where voyages average about 45 days in duration. In addition, given the weakness in the markets back in early 2020, 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 the prudent thing to do and was more than offset by the positive contribution from our platform methodology as well as operating scrubbers on the majority of our fleet. It's also worth noting that as of the end of 2020, those defensive hedges were completely closed. For the full year 2020, our TCE outperformance was $1,964 per ship per day, equating to approximately $37 million in incremental annual cash flow based on current fleet size. We entered Q1 well positioned with roughly 70% of our fleet next to open in the Atlantic where the market has been particularly strong. The BSI, which was around 11,400 at the start of the year, has rallied since. As of today, We have fixed about 93 percent of our available days for the first quarter at a net TCE of $15,085 per day. Please turn to slide eight. Turning back to the fourth quarter, the top-line growth we experienced contributed to an improved operating performance for the period reflected by $22 million of EBITDA, the highest level in two years. With that, I'd now like to turn the call over to Frank, who will review our financial performance.

Thank you, Gary. Please turn to slide 10 for a summary of our fourth quarter and full-year 2020 financial results. The improvement in the chartering market drove top-line growth in Q4, with revenue net of both voyage and charter hire expenses totaling $50.1 million, an increase of 15 percent from the prior quarter. In Q4, our TCE came in at $11,190, which is $961 above the adjusted net BSI. For the year revenue, net of both voyage and charter hire expenses was $164.3 million, remaining relatively flat as compared to 2019. For the full year 2020, our TCE came in at $9,710, which is $1,964 above the adjusted net BSI and $675 a day lower than prior year. We reported a net income of $115,000 for the fourth quarter versus a net loss of $11.2 million in the third quarter. Basic and diluted earnings per share for the fourth quarter were one cent versus a loss per share of $1.09 for the third quarter of 2020. Adjusted EBITDA improved in Q4, coming in at $22 million as compared to $11.5 million in the prior quarter and $9.8 million in the fourth quarter of 2019. Adjusted EBITDA for the full year 2020 came in at $54.1 million as compared to $48.7 million in 2019. Let's now turn to slide 11 for an overview of our balance sheet and liquidity. Throughout the course of the pandemic, we maintained a strong liquidity position. Total cash inclusive of 18.9 million of restricted cash was 88.8 million at December 31st, 2020, representing an increase of 3.6 million as compared to the end of the third quarter. The increase in cash was primarily a result of proceeds from the sale of three vessels, proceeds raised from the equity issuance in December 2020, and cash provided by operating activities, offset in part by the principal payments on the Norwegian bond and the Ultracode debt, along with the repayment of the Ultracode debt facility revolver, CapEx spending, and deposits paid on the Oslo Eagle and Helsinki Eagle acquisitions. Total liquidity increased to $143.8 million at the end of Q4. Liquidity is comprised of total cash of $88.8 million and $55 million of the undrawn availability on the UltraCo revolving credit facility. Total gross debt, excluding debt issuance costs, at the end of Q4 were $475.6 million, a decrease of $46.8 million from the prior quarter. The decrease is due to the $35 billion we repaid on the UltraCo revolving credit facility, a principal repayment of $7.8 million on the UltraCo debt facility, and a principal payment of $4 million on Norwegian bond. As Gary mentioned earlier, we have acquired seven ships over the past couple of months. The Oslo Eagle, which we took delivery of in January, was slotted into the ShipCo silo and was fully funded by restricted cash on hand. The remaining six vessels are to be funded by a combination of equity issued to the sellers, cash on hand, keeping in mind we had $25 million of which we raised in December. Looking ahead, we may add debt at some point in the future. Please now turn to slide 12 for an overview of our cash flow from operations for the fourth quarter of 2020. Net cash provided by operating activities was $14.9 million in Q4, a $2.1 million increase from $12.8 million in net cash provided by operating activities in Q3 2020. Cash flow was strong in the quarter on improving charter hire rates and a strong commercial platform performance. For the full year 2020, cash flows provided by operating activities were $12.6 million. Please now turn to slide 13 for the Q4 and year-to-date 2020 cash walk. The chart at the top of the slide lays out the changes in the company's cash balances during Q4. Revenue and operating expenditures are a simple look at the operations. The net of these two large bars at the left is positive $21 million, which is very close to our adjusted EBITDA number. We incurred $3 million of dry docking expenses and $3 million of capex expenses in the quarter. The $16 million of vessel S&P represents the proceeds from the sale of four vessels, less deposits paid for two acquired vessels. We repaid the remaining $35 million drawn from our UltraCo revolving credit facility, raised $24 million in net proceeds from the issuance of equity in December, and a total of $21 million represents the debt principal and interest paid in the quarter. The chart at the bottom half of the slide displays the changes in the company's cash for the full year 2020. Let's now review slide 14 for our cash breakeven per ship per day. Cash breakeven per ship per day came in at $11,553 for the fourth quarter. Vessel expenses, or OPEX, came in at 4,718 per ship per day in Q4, $66 lower than prior quarter. The decrease in OPEX per day was primarily a result of the decrease in the number of crew changes in the quarter. Dry docking came in at $784 per ship per day in Q4, $152 lower than prior quarter. The decrease was a result of a decrease in the number of dry docks. Cash G&A came in at $1,824 per ship per day in Q4, up $228 from Q3. The increase was in part caused by a decrease in owned days due to the sale of four vessels. 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. If we were to include the chartered-in days in our calculation, G&A per ship per day would decrease by about $200. Cash interest expense came in at $1,555 per ship per day in Q4, which was slightly lower quarter over quarter, driven by decreases in our total outstanding debt and lower interest rates. Cash debt principal payments came in at $2,673 per ship per day in Q4, $955 higher than the prior quarter. The increase is attributable to amortization repayments on our Norwegian bond debt, which are paid semi-annually in Q2 and Q4. This concludes my comments. I will now turn the call back to Gary.