Eagle Bulk Shipping Inc.

Greetings and welcome to the Eagle Bulk Shipping Third Quarter 2021 Results Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question at that time, please put star then one on your touch-tone telephone. As a reminder, today's conference call is being recorded. I will now turn the call over to Gary Vogel, Chief Executive Officer, and Frank DiCosanzo, Chief Financial Officer of Eagle Bulk Shipping. Mr. Volvo, you may begin.

Thank you, and good morning. I'd like to welcome everyone to Eagle Folks' third quarter 2021 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 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 adjusted net income 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 now turn to slide six. Tribal freight rates continued to strengthen during the third quarter on the back of robust commodity demand, which was further supported by the ongoing container spillover trade as well as elevated congestion due to the ongoing supply chain bottlenecks and COVID-related port restrictions around the world, but in particular in and around China. The Baltic Supermax Index rose by almost 34% during the quarter to average approximately 34,000, representing a 13-year high. Given our active management approach to trading the fleet and our significant operating leverage, we generated record earnings for the quarter with net income totaling $78 million for $6.12 per share. Not only does this represent the highest net income we have achieved in a single quarter, it also eclipses the company's best ever annual result. Following our recent announcement on the institution of a cash dividend policy equal to a minimum of 30% of EGLE's net income, our board of directors declared a cash dividend based on the third quarter's result of $2 per share. Separately, and as previously reported, we executed on a comprehensive refinancing on October 1st, which has allowed us to significantly simplify our capital structure, lower our interest costs, and extend our bank debt maturity to 2026. Please turn to slide seven. Our record financial results were driven by our ability to improve TCE performance by 35% quarter on quarter, resulting in a net TCE achieved of $29,088. As we've discussed previously, given the rapidly rising market environment we experienced through the third quarter is an inherent lag effect between our TC performance and the BSI as the majority of our fleet is employed on voyages lasting anywhere from 30 to 60 days and sometimes longer. Looking ahead into Q4, freight rates have come off with the BSI currently trading under 30,000, which is still very conducive to cash generation. For Eagle, As of today, we have fixed about 75% of our available days for the fourth quarter at a net TCE of $32,400 per day. Bear in mind that our cash break-even level through the first nine months of the year is at around $11,000. On this basis, notwithstanding the recent pullback in rates, we are on track for exceeding this quarter's performance in Q4. Please turn to slide eight. In terms of operating performance, we produced a record $91 million of EBITDA, or $19,400 per ship per day for the three months ending September 30. This represents an increase of 45% compared to the prior quarter. Given the fixed cost nature of our business, we maintain significant operating leverage with essentially all incremental net revenue generated flowing to the bottom line. Please turn to slide nine. Asset prices have also continued to increase in recent months, with values for 10-year-old supermaxes up around 17% on the quarter and approximately 115% year-to-date. It's interesting to note that this price strength has occurred on the back of a record number of transactions. Year-to-date, almost 840 dry bulk vessels have been bought and sold, totaling $14 billion in volume. Please turn to slide 10. In terms of sale and purchase, we took delivery of our final pending acquisition last week, the motor vessel Valencia Eagle. We estimate that the nine vessels which we acquired between November of last year and May of this year have increased in value by over $80 million. Separately, we sold and delivered the motor vessel Turn, a 2003-built Supermax, and our oldest vessel in the fleet just ahead of our statutory dry dock. Our fleet currently totals 53 ships averaging nine years of age with 89% being fitted with exhaust gas cleaning systems or scrubbers. As a result of the growth and renewal of the fleet, our fuel efficiency has also increased significantly over the last five years. As always, we will continue to evaluate vessel S&P and M&E deals and look to execute on an opportunistic basis. With that, I would like to turn the call over to Frank, who will review our financial performance.

Thank you, Gary. Please turn to slide 12 for a summary of our third quarter financial results. The continued significant improvement in the charter rate environment drove our top-line growth in Q3, with revenue net of both voyage and charter hire expenses totaling $142.4 million, and net income coming in at $78.3 million, representing a more than eight-fold increase as compared to the prior quarter. Earnings per share for the third quarter was $6.12 on a basic basis and $4.92 on a diluted basis. Please note the diluted share count now includes 2.9 million shares from the convertible bond. Adjusted net income, which excludes non-cash unrealized gains on derivatives of 6.3 million, came in at 72.1 million for the third quarter, or $5.63 per share on a basic basis. As Gary mentioned earlier, adjusted EBITDA came in at 91 million for the third quarter. Let's now turn to slide 13 for an overview of our balance sheet and liquidity. Total cash, which includes 25.6 million of restricted cash, was 125.6 million at the end of Q3, representing an increase of 41.8 million as compared to the end of the second quarter, and an increase of 36.8 million from year end. The change in cash versus prior quarter in year end was driven by cash generated from our strong operating results, offset in part by the $25 million RCF pay down, vessel acquisitions, and debt service. I will cover the movements in greater detail on the cash walk slide. Total liquidity improved by 51.8 million from the prior quarter to 191.6 million. Total liquidity is comprised of total cash of 125.6 million and 66 million of undrawn revolving credit facilities. Total gross debt, excluding debt issuance costs at the end of Q3, was $472.8 million. As previously reported, we executed a new $400 million credit facility on October 1st, replacing our Norwegian Bond UltraCo Bank credit facility in the Holdco RCF. The new facility includes a $300 million term loan and a $100 million revolver, of which $50 million was drawn on closing. However, as reported yesterday, we have now fully paid down the revolver and have $100 million of undrawn availability. Please now turn to slide 14 for an overview of our cash flow from operations for the third quarter. Net cash flows provided by operating activities was $90.3 million in Q3. The chart highlights the timing-driven variability that working capital introduces to cash from operations. as depicted by the difference between the dark blue bars, which are the reported cash from ops numbers, and the light blue bars, which strip out changes in operating assets and liabilities, primarily working capital. Although, as the chart demonstrates, the volatility caused by working capital largely evens out over time. The difference between the two bars in this quarter can be explained by a significant amount of cash collections in late September. Please turn to slide 15 for a Q3 cash walk. Let's focus on the top chart, which covers the cash movements in Q3. The revenue and operating expenditure bars are a simple look at the operations, with the net of these two bars coming in at $91 million, the same as our adjusted EBITDA. Moving to the right, the $18 million for vessel S&P bar represents the $26.9 million cost for the acquisition of two vessels, in part offset by the proceeds of $9.2 million on the sale of one vessel. You can also see that we paid $25 million on our RCF and $12 million in debt service in the quarter. The bottom chart covers cash movements year-to-date. Please note, in the appendix of this presentation, we include information on the cash and debt movements for the October 1st global refinancing. Let's now review slide 16 for our cash breakeven per ship per day. Vessel expenses, or OPEX, was $5,401 per ship per day, excluding one-time non-recurring expenses related to vessel acquisitions and sales, the termination of our relationship with the crewing agency. We are consuming additional lubes given vessels are steaming at faster speeds. and the prices have increased on the back of the rise in base oils. In addition, due to the COVID-19 pandemic, we continue to face higher operating expenses across several areas, including lodging and transportation costs related to crew changes, along with the costs related to the procurement of stores and spares. Finally, we have increased our spending on spares to preemptively limit off-hire as much as possible in what is a very strong rate environment. Dry docking came in at $917 per ship per day in Q3, $560 higher than prior quarter as we completed two dry docks with an additional two in progress. It is worth noting that there are significant challenges regarding COVID protocols and quarantine requirements for ships going into facilities for dry docks and the installation of ballast water systems. We do not see this abating in the near term and therefore will likely increase off-hire times for these events for the foreseeable future. Cash G&A came in at $1,527 per ship per day in Q3, marginally lower as compared to Q2. It is worth noting that our G&A per ship calculation is based on our own 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 to about $1,363. Cash interest expense came in at $1,387 per ship per day in Q3, which was marginally lower quarter over quarter, driven by an increase in ownership days and a decrease in interest expense. Finally, cash debt principal payments came in at $1,780 per ship per day in Q3. This concludes my comments. I will now turn the call back to Gary.