Eagle Bulk Shipping Inc.

Good day and thank you for standing by. Welcome to the Eagle Bulk Shipping fourth quarter 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Gary Vogel, Chief Executive Officer. Please go ahead.

Thank you, and good morning. I'd like to welcome everyone to Eagle Bulk's fourth quarter 2022 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 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. Please turn to slide six. We cemented a record annual profit in 2022, achieving net income of $248 million, or $19.09 per share basic. These extraordinary results are reflective of the many actions we've taken over the past years, including our vessel sale and purchase strategy, encompassing 55 transactions, our segment-leading focus on scrubbers, our differentiated active management approach to trading ships, and our efforts to optimize the balance sheets. For Q4, revenues and earnings came off versus the prior quarter as freight rates continued to weaken through the end of the year, and costs came in higher due to expenses relating to recent vessel purchase activity, general inflationary pressures, and certain year-end non-cash impacts. Net income totaled $23.3 million for the fourth quarter, or $1.79 per share basic. Adjusting for non-cash mark-to-market changes on our FFA hedges and other non-cash items, net income came in at $35.9 million, or $2.76 per share. As we've stated previously, we believe that adjusted net income more accurately reflects the underlying business in any given period. Based on this result and consistent with our stated capital allocation strategy, Eagles Board of Directors declared a cash dividend of $0.60 per share, equating to 34% of net income. This is our sixth consecutive quarterly dividend, bringing total shareholder distributions to $139 million, or $10.65 per share, since we adopted our capital allocation strategy just 18 months ago. On the sale and purchase front, we continue to act opportunistically and recently acquired three high specification vessels. We purchased the 2015 built Ultramax for $24.3 million. The vessel has been renamed the Gibraltar Eagle and was delivered into our fleet in February. Yesterday, we also announced the acquisition of two 2020 built scrubber fitted Ultramaxes for $30.1 million each. Both ships are expected to be delivered to Eagle during the second quarter and will be renamed the Halifax Eagle and the Vancouver Eagle. Lastly, we sold the Jaeger, a 2004-built Supermax, which was the oldest vessel in our fleet, just ahead of our statutory dry dock. This transaction is expected to close in March. It's noteworthy that the Jaeger represents the 22nd and last vessel to be sold as part of our initial fleet renewal program, which began almost six years ago. Performer for these transactions are fleet totals 55 ships averaging 9.1 years of age, with more than 90% being scrubber fitted, and importantly, now with no vessel exceeding 14 years of age. Please turn to slide seven. For Q4, we achieved a net TCE of $22,062, which represents a decrease of 21% quarter-on-quarter on a headline basis, but a meaningful increase in relative outperformance versus the benchmark BSI index, equating to roughly 53%, or $7,689 per shift per day. For the full year 2022, we achieved a net TC of $26,923, a company record which represents a significant outperformance of 27% relative to the BSI index. As we look to the first quarter, spot rates weakened considerably during January and into mid-February. We will discuss market fundamentals later on the call. But as of today, we have fixed approximately 92% of our owned available days for the first quarter at a net TCE of $13,335. Please turn to slide eight. Adjusted EBITDA was down for the quarter, coming in at 55.6 million after adjusting for unrealized P&L impact on our hedges and certain other non-cash items. For the full year 2022, we achieved a record 328 million in total EBITDA. Before we move to the financials, as most of you know, Frank will be stepping down at the end of March. So before I turn the call over to him, I wanted to take a moment and thank him for his leadership as Eagle CFO. Frank has been instrumental in Eagle's development over the past six years and wish him well and all the best in his next chapter and his future endeavors. Frank?

Thank you, Gary. Please turn to slide 10 for a summary of our fourth quarter financial results. PCE revenues totaled 102.5 million in Q4 versus 128.9 million in Q3. The decrease was mainly due to lower market rates offset in part by an increase in available days. Net income for Q4 was 23.3 million. Earnings per share for the fourth quarter was $1.79 on a basic basis. On a diluted basis, which primarily includes the shares related to the convertible bond, EPS came in at $1.50. Adjusted net income, which excludes unrealized gains and losses on derivatives and an operating lease impairment, was $35.9 million for the fourth quarter, or $2.76 on a per share basis. On a diluted basis, our adjusted EPS came in at $2.28 for the quarter. Adjusted EBITDA for the fourth quarter was $55.6 million. Let's now turn to slide 11 for an overview of our balance sheet and liquidity. Total cash at the end of Q4 was $189.8 million, a decrease of $7.9 million as compared to Q3 22. The decrease was primarily driven by $23.4 million in dividends paid, $23.4 million paid for the purchase of the Tokyo Eagle, $3.6 million deposit for the purchase of the Gibraltar Eagle, and a $12.4 million quarterly amortization payment on the Global Ultracode Debt Facility, offset in part by $55.8 million of cash generated by operating activities. Total liquidity came in at $289.8 million at the end of Q4. Total liquidity is comprised of total cash of $189.8 million and $100 million available under our fully undrawn revolving credit facility. In addition to this available liquidity, we owned four unencumbered vessels at year end, providing us with additional flexibility to increase our liquidity. In Q1, we took delivery of the Gibraltar Eagle, our fifth unencumbered vessel. Furthermore, we intend to use cash on hand to pay for the Vancouver Eagle, which will provide us with a sixth unencumbered vessel once it is delivered to us in the second quarter. Total debt at the end of Q4 was $341.9 million, a reduction of $12.4 million from Q3, attributable to the Global Ultracode Debt Facility quarterly amortization payment. As a reminder, we entered into interest rate swaps around the time of our global refinancing in early October of 2021 to fix the interest rate exposure on the term loan. As a result of these swaps, which average 87 basis points, the company's interest rate exposure is fully fixed, insulating us from the rising interest rate environment. Please now turn to slide 12 for an overview of our cash flow from operations for the fourth quarter of 2022. Net cash generated by operating activities was 55.8 million in Q4 and 298.3 million for the full year 2022. Our working capital management remains robust. The chart highlights 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. As the chart demonstrates, the volatility caused by working capital largely evens out over time. Please turn to slide 13 for a Q4 2022 cash walk. The chart at the top of slide 13 lays out the company's cash movements during Q4. The revenue and operating expenditures bars provide a simple look at the company's operations. The net of these two bars, which total 55 million, roughly equals our adjusted EBITDA for the quarter. Some of the larger movements to the right include vessel S&P, dividends paid, and debt service. The chart at the bottom of the slide similarly covers the full year cash movements. Let's now review slide 14 for our cash breakeven per ship per day. Cash breakeven per ship per day was $12,078 for the fourth quarter. A quarter-on-quarter increase of $147 is due to higher OPEX and G&A, offset in part by lower dry docking and interest expense. Vessel operating expenses, or OPEX, exclude non-reincurring items, came in at $6,996 per ship per day in Q4, $430 higher than the prior quarter. OPEX overall was elevated due to a number of factors, including takeover costs and dry docking expenses relating to recently acquired vessels, which we run through the P&L versus capitalizing on the balance sheet. Additionally, we incurred an increase in repair costs driven by certain discretionary spend and unscheduled repairs. We also continue to face costs due to temporary housing we have been providing to our Ukrainian seafarers. expenses related to COVID-19, as well as general inflationary cost pressures. We believe OPEX will moderate in 2023, but we will incur incremental costs relating to takeover of newly acquired vessels as we continue to grow our fleet. Dry docking came in at $100 per ship per day in Q4, $403 lower than prior quarter on a decrease in dry docking activity. Cash G&A came in at $2,069 per shift per day in Q4, $368 higher than prior quarter. The change in G&A expense was primarily due to an increase in employee-related costs and professional fees. Note that our cash G&A per shift per day is based solely on our own vessels. If we were to include our chartered-in vessels, cash G&A would improve by $348 to $1,721 per ship per day. Cash interest expense came in at $339 per ship per day in Q4, $245 lower than prior quarter due to an increase in interest income and lower cash interest expense as a result of lower debt outstanding. It is important to note that the improved cash interest expense was achieved in an environment where short-term interest rates have remained at elevated levels. Cash debt principal payments were generally flat at $2,574 per shift per day in Q4. Looking ahead, we expect the following per shift per day in Q1 2023. OPEX is likely to decline to about $6,475. Dry dock is expected to increase to about $975 on higher dry dock activity. DNA is expected to decrease to $1,775. Cash interest expense is expected to come in unchanged at circa $340. Cash debt principal payments are expected to be marginally higher at $2,590. This concludes my comments. I will now turn the call back to Gary.