Eagle Bulk Shipping Inc.

Ladies and gentlemen please stand by, your conference call will begin momentarily. Once again ladies and gentlemen please stay on the line. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Greetings and welcome to Eagle Bulk Shipping fourth quarter 2021 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. As a reminder, this conference is being recorded. If you require any operator assistance, please press star zero. I will now turn the call over to Gary Vogel, Chief Executive Officer, and Frank DiCasanzo, Chief Financial Officer of Eagle Bulk Shipping. Mr. Vogel, you may begin.

Thank you, and good morning. Good morning. I'd like to welcome everyone to Eagle Bolt's fourth quarter 2021 earnings call. To supplement our remarks today 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 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 a reconciliation to the most comparable GAAP financial measures. Now, please turn to slide six. We experienced a strong market during the fourth quarter, with the Baltic Supermax Index averaging around 30,500. Although rates were down by 11 percent from Q3, it represents the second best quarterly index performance since 2009. On the back of this, EGLE generated record results for the quarter, with net income totaling $87 million, or $6.79 per share. In line with our capital allocation objectives, I'm very pleased to report that EGLE's Board of Directors has declared a fourth quarter cash dividend of $2.05 per share, equal to 30 percent of net income. Since instituting our dividend program this past October, we've now declared cumulative dividends of $4.05 per share over just two quarters. 2021 was truly a phenomenal year for the company. Given our active management approach to trading the fleet and our significant operating leverage, we generated a record $185 million of net income for 2021. The nine vessels which we acquired ahead of the market run-up have appreciated by approximately 57% or $80 million. This, along with our strong operating performance, helped drive significant NAV per share growth in 2021. The robust market, along with our successful execution on both strategic and operational levels, has put us in the strongest financial position in Eagle's history. We estimate our net leverage at just around 25 percent and total liquidity, inclusive of cash and undrawn revolver, of 186 million. Furthermore, the comprehensive refinancing, which we executed in October, allowed us to simplify our capital structure, lower our interest costs, and meaningfully extend duration. with our bank debt now maturing in 2026. Please turn to slide seven. Despite the BSI ending the year at $25,188, we were able to achieve a net TCE of $29,407 for Q4, representing a slight increase over the prior period, but an impressive 163 percent increase over the same period in 2020. Not surprisingly, the market was fairly weak in January in what is typically the weakest seasonal period. Nonetheless, we have to date fixed about 95% of our available days for the first quarter of 2022 at a net TC of $27,200 per day. We're also seeing significant interest in tonnage for the balance of the year at elevated rates. As an example, just this week we fixed the Stockholm Eagle, one of our ultra maxes, on a TC at a rate of $36,500 per day for a duration of minimum of five months. These types of fixtures, combined with a forward curve at around $26,500 per day for the balance of the year, bode well for EGLE in 2022. 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 eight. In terms of operating performance, we produced a record $91.6 million of adjusted EBITDA in Q4, which accounts for unrealized mark-to-market gains on our hedges and certain non-cash items related to our financing. Gross EBITDA came in at $108 million or over $20,000 per vessel. For the full year 2021, we generated approximately $276 million in adjusted EBITDA. Please turn to slide nine. As alluded to earlier in the call, ship values have increased significantly over the past year, thanks to the rise in both spot and forward rates, which have been driven by improved supply-demand fundamentals and forward expectations. It's interesting to note that price strength has occurred on the back of a record number of transactions. Almost 1,000 dry bulk vessels were bought and sold in 2021, representing about 7.5% of the total on-the-water fleet. Mid-age Supermax vessels rose by 95% in 2021 to reach $21 million, the highest level since 2010. Although prices came off somewhat in Q4, we're seeing values bid again and trading at or near recent peak levels. We estimate Eagle's current fleet has appreciated in value by approximately $470 million since the beginning of 2021, equating to $36 per share. Going forward, we believe there's further upside to values given where secondhand ships are priced relative to new buildings and where spot and forward rates are trading. Please turn to slide 10. As indicated earlier on the call, we were very active in terms of S&P during 2021. And since we started executing on our fleet growth and renewal strategy back in 2016, we've now completed 49 transactions, acquiring 29 modern ships and divesting of 20 of our oldest and least efficient ships. This has resulted in a fleet which is 20% larger today and 12% more efficient. Our fleet currently totals 53 ships, averaging 9.3 years of age, with 89% of those ships fitted with scrubbers. As always, we'll continue to evaluate vessel S&P and M&A deals and look to execute on an opportunistic basis. With that, I would now 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 fourth quarter financial results. The improvement in our TCE rate achieved in an increase in available days drove our top line growth in Q4 with revenue net of both voyage and charter hire expenses totaling $149.8 million and net income coming in at $87.5 million representing a 12% increase as compared to prior quarter. Earnings per share for the fourth quarter was $6.79 on a basic basis and $5.40 on a diluted basis. The diluted share count includes approximately 3 million shares from our convertible bond. Adjusted net income, which excludes non-cash unrealized gains on derivatives of $24.1 million and a $6 million loss on debt extinguishment, came in at $69.3 million for the fourth quarter, or $5.38 per share on a basic basis. As Gary mentioned earlier, adjusted EBITDA came in at $91.6 million for the fourth quarter. Let's now turn to slide 13 for an overview of our balance sheet and liquidity. Total cash came in at $86.2 million at the end of Q4, Cash at 1231 was driven by our strong operating results, offset by the repayment of 71.5 million of debt, vessel acquisitions and vessel improvements, and our Q3 dividend payment of $26 million. I will cover the movements in greater detail on the cash walk slide. Total liquidity came in at 186.2 million for the year ending 2021. Total liquidity is comprised of total cash of 86.2 million and 100 million of fully undrawn revolving credit facility availability on our global ultra-co debt facility. Total gross debt excluding debt issuance costs at the end of Q4 was 401.7 million, a decrease of 71.1 million from the prior quarter. $9 million of the decrease is due to the global refinancing, which closed on October 1st. Post the refinancing in Q4, we paid $50 million drawn on our new global refinancing revolver and the first amortization payment of $12.45 million on the refinancing. At the time of the global refi in early October, we entered into interest rate swaps to move the interest rate exposure for the $300 million term loan from floating to fixed. As a result of these swaps, our interest rate exposure is fully fixed. Please now turn to slide 14 for an overview of our cash flow from operations for the fourth quarter of 2021. Net cash provided by operating activities was $88.3 million in Q4. The chart highlights the timing-driven variability that working capital introduces to cash flow operations as depicted by the difference between the dark blue bars, which are the reported cash from ops number, 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 this quarter can be explained by a significant amount of cash collections just over quarter end in early January. Please turn to slide 15. for a Q4 2021 cash walk. Let's focus on the top chart, which covers the cash movements in Q4. The revenue and operating expenditures bars are a simple look at the operations, with the net of these two bars coming in at $92 million, the same as our adjusted EBITDA result. Moving to the right, the $19 million for vessel S&P bar represents the acquisition costs for the Valencia Eagle which was delivered in October, and vessel improvements related to ballast water treatment systems. Next, you will see the global refinancing activity, which helped in our deleveraging process, the pay down of the RCF, and our first dividend. The bottom chart covers cash movements for the full year 2021. Let's now review slide 16 for our cash breakeven per shift per day. The cost pressure we experienced in Q4 will begin to ease in Q1. Some of the one-time Q4 OPEX costs, such as vessel acquisition and crewing company termination costs, will fall away in Q1. We see COVID-related cost pressure, which we experienced in Q4, persisting as we continue to face challenges in areas such as crew repatriation, In addition, we are experiencing similar COVID-related issues with ships and dry dock, which is putting pressure on costs and related off hire. G&A was impacted by one-time legal costs in Q4, but should also move lower in Q1. Finally, our net debt service costs per ship per day will move lower as significant interest expense savings will more than offset the increase in amortization under the new global credit facility. More specifically, we expect the following per ship per day in Q1. OPEX to decline to about 5,300. CASH G&A is expected to come in around 1,700. It is worth noting that this figure is based on owned ships only. If we include our chartered-in fleet, G&A per ship per day is expected circa 1,400. Cash interest expense will decline to $759, down by $615 from the full year 2021 result. Cash debt amortization expense will increase to $2,610, up by $380 from full year 2021. In addition, there will also be a material change to non-cash interest expense, which will decline by approximately $1.2 million per quarter to $400,000, as an accounting standard update no longer requires the company to bifurcate the equity component of the convertible bond. In 2022, non-cash interest expense will consist of the amortization of debt issuance costs on the convertible bond and the new global ultra-co debt facility. This concludes my comments. I will now turn the call back to Gary.