Euroseas Ltd.

Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas Conference Call on the fourth quarter 2022 financial results. We have with us Mr. Aristides Petas, Chairman and Chief Executive Officer, and Mr. Tasos Aslitis, chief financial officer of the company. At this time, all participants are on a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today. Please be reminded that the company announced their results with a press release that has been publicly distributed. Before passing the floor over to Mr. Pataf, I would like to remind everyone that in today's presentation and conference call, ULCs will be making forward-looking statements. These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to slide number two of the webcast presentation, which has the full forward-looking statement, and the same statement was also included in the press release. Please take a moment to go through the whole statement and read it. And now I'd like to pass the floor over to Mr. Patas. Please go ahead, sir.

Good morning, ladies and gentlemen, and thank you. Together with me is Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the quarter ended and full year December 31st, 2022. Tasos will go over our financial highlights in more detail Our income statement highlights are shown here. For the fourth quarter of 2022, we reported total net revenues of $42.9 million and net income attributable to common shareholders of $20.3 million, or $2.86 per diluted share. Adjusted net income attributable to common shareholders was $17.7 million, or $2.50 per diluted share. Adjusted EBITDA for the period stood at $22.9 million. Please refer to the press release for the reconciliation of adjusted net income as available to common shareholders and adjusted EBITDA. As part of the company's common stock dividend plan, our Board of Directors declared a quarterly dividend of $0.50 per common share for the fourth quarter of 2022, which will be payable on or about March 16th to the shareholders As of February 14, 2023, we had repurchased 251,685 of our common stock in the open market for a total of about $5.3 million. For the full year of 2022, our net revenues were $183.3 million, and net income attributable to common shareholders was $106.2 million, or $14.78 per share diluted. Adjusted net income attributable to common shareholders for the period was $95 million, or $13.23 million, Adjusted EBITDA for the period stood at $114.4 million. Our CFO, Tasos, will go over the highlights in more detail later on. Please turn to slide 4, where we discuss our recent sale and purchase, chartering, and operational developments. Following the announcement to sell the motor vessel at Inada Bridge, price of $14.2 million, the vessel was delivered to its buyers on January 9, 2023. Moving on to our more recent chartering developments. Motor Vessel Joanna's charter was extended for five to seven months at $14,500 per day. Unfortunately, we had one incident whereby the charters of one of our vessels, Motor Vessel Adrian Express, as the vessel was completing the scheduled dry dock. The charterer is Continental Shipping Line . While we are pursuing legal action, we have also entered into negotiations to find a replacement charter for the vessel. There were no idle or commercial off-hire periods this quarter. On the dry dock in France, two vessels passed their and the rent repairs from mid-October to the beginning of February 2023. The other version undergoing dry dock during the quarter was motor vessel patches for a period of approximately 29 days. Please turn to slide 5, where you can see our current fleet profile. You will see this current fleet is comprised of 17 vessels on the of 17 and a half years. Turning to slide 6, we present our vessels under construction, which consists of nine echo feed containers expected to be delivered during 2023 and 2024, the first of which is expected to be delivered by the end of next month. while three will have a carrying capacity of 1,800 TEU each. The nine feeder containers will have a capacity of 22,200 TEU. After the delivery of these new buildings, the fleet will consist of 26 vessels with a total carrying capacity of about 75,000 TEU. Let's now turn to slide 7 to see our vessel employment chart. As you may see, we have a strong chart of coverage throughout the next two years, with about 80% of our fleet being fixed for 2023, and almost 54% for 2024. These figures have also taken into consideration the first two new building deliveries, which have been fixed at $48,000 per day from the date of their respective deliveries. Turning now to slide nine, we review how the six to 12 month time chart In the last two years, the container market registered an all-time high in terms of time charter rates, owing to a combination of shifting of demand patterns and preferences, and also a tight supply situation, which in turn prompted significant spikes. Following this market strength, the container subcharter market started softening, dropping significantly since their peak levels in the summer of 2022. As the graphs clearly show, with a feeder size rate close to the 10-year average rate, while intermediate sizes are currently even below historical rate averages. Rates in all categories are still higher than their 10-year median level. Let's move to slide 10, where we go over the main underlying market themes. During the fourth quarter, one-year time During the last couple of weeks, rates seem to be stabilizing at still profitable levels. The second-hand price index, the as a major microeconomic uncertainty and weak demand trends diminished appetite for any investments. The new building price index decreased by just 1.2% in the fourth quarter of 2022 over the previous quarter, confirming that despite the negative market sentiment, the cost of building ships can easily move lower. The ice container ship fleet as of January 16 stood at about 2.2% of the fleet and has been gradually increasing since the middle of last year. There was a lockpick in the container ship recycling activity towards the end of the year, which is expected to increase in 2023 and 2024 amid weaker market conditions, supply pressure Despite scrapping prices softening in the fourth quarter of 2022 to about $515 per lightweight ton, they are still about 35 percent above the $219 average. Finally, the containers in fleet grew by approximately 4 percent in 2022, without accounting for high diversions or activation of further idling, etc. This was slide 11. The IMF revised its global growth projections for 2023 and 2024, signaling some positivity in world economic growth and greater than expected resilience in a number of economies. The IMF now projects world growth to slow from 3.4% in 2022 only to 2.9% in 2023, and Russia's war in Ukraine appears to be working without leaving the world to the previously feared recession. The rapid spread of COVID-19 in China dumped on the growth in the second half of 2022, but a recent reopening has paved the way for a faster rebound with a projected GDP growth of 5.2% in 2023 and 4.5% in 2024. economy. Overall, the European growth forecast for 2023 is up by 0.2% from the previous IMF report, expected at a still positive 0.7% for the year, thanks in part to signs of resilience to high energy costs, a milder than expected winter, and gradual tightening of the ECB's monetary policy. A growth rebound of 1.6 percent is expected in 2024. Growth in emerging and developing countries is expected to bottom out at still positive levels during 2023, at lower levels than in 2022, and recover in 2024. For 2024, it is not expected to recover to 2.1 percent. India is expected to grow at the fastest pace by 6.1 percent in 2023 and 6.8 percent in 2024, while Brazil's economy is not projected to According to Clafson's estimates, containerized trade demand reacted aggressively downwards, contributing to the market's slowdown in the second half of 2022. Containerized trade is also expected to be marginally negative in 2023, but a significant rebound of 3.1% is expected Trade and growth projections are being continuously revised as the effects of geopolitical tensions between Russia and Ukraine on world growth and trade are being continuously assessed and changed. Please turn to slide 12, where you can see the total fleet age profile and order book data. The container ship fleet is relatively young. The ROE per book as a percentage of total fleet stands at 28.8% as of February 2023, up 2.7% from the previous quarter. Demolition volumes look likely to pick up in 2023-2024, with an impetus from the softer charter market and the upcoming environmental regulations. Turning now to slide 13, We will also go over the fleet age profile and order book for containers in the 1,000 to 3,000 TEU range, which is quite different than for the total. These sizes of vessels are the backbone of our operations and the primary focus of our new building program. About 23% of the 1,000 to 3,000 TEU fleet is over age, meaning many of these will be scrapped and help lower the order book. The order book, as a percentage of the fleet, stands at only 13.2% as of February 2023. So the balance is quite good at this point and seems to be quite good for this size range. Let's move to slide 14. Political and economic insecurity affected containers above the pre-COVID 10-year average. The container shipping market is under clear pressure, with trade volumes falling by 9.4% year-on-year. This pressure has been amplified by excess retail inventories, which have reduced new shipments, alongside underlying economic headwinds and impacts on consumer activity. At the same time, port congestion that grew during the pandemic years has reversed significantly, increasing effective supply. In 2023, market conditions are generally expected to soften further, with rates expected to continue towards and potentially below typical historical average levels, while new vessels that will be delivered into the market From 2024 onwards, though, the outcome of a number of issues could significantly affect the overall demand for container supply. Firstly, the geopolitical developments around the Ukraine-Russia war and its aftermath, as well as other global tensions. Secondly, the economic conditions resulting across the globe. And thirdly, the new environmental regulations about greenhouse emissions, which will probably result in more slow steaming within 2023 and 2024, effectively removing capacity from the market, therefore improving market fundamentals. The spread between chartering Finally, the smaller-sized vessels in the range of 1,000 to 5,000 TEU are expected to perform relatively better due to their healthier supply situation. As mentioned, many over-ranged ships will be scrapped and the order book is much slower. Without doubt, of course, the flow of larger vessels to trades currently served by this size group could mitigate any differences to an extent. Let's move to slide 15. The left side of the slide shows the evolution of one-year time shorter rates for containers with a capacity of 2,500 TEU since 2010. It is reasonably clear that the one-year time shorter rates have continued to slide gradually as the rates have come down from an average of about right-hand side of the slide shows the historical price range for new building and 10-year-old container ships with a capacity of 2,500 EU. Prices, of course, are still at levels which can't be considered with this bargain. However, it is uncertain if they will direct significantly further on during the year. Especially new building prices due to the inflationary environment and the gradual fall of the dollar's value, may even increase. Having taken the full advantage of the rise of charter rates over 2021 and the first half of 2022, we have secured the revenue stream of $450 million, fund our eco-new building program, and still have sufficient liquidity to pursue other attractive opportunities that will arise in the upcoming 18 months. And with that, I will pass on the floor to Tasos to go through our finances in more detail.

Thank you very much, Aritidis. Good morning from me as well, ladies and gentlemen. As usual, over the next four slides, I will give you an overview of our financial highlights for the fourth quarter and full year of 2022 and compare them with our results in the equivalent periods of 2021. Let's start by turning to slide 17. For the fourth quarter of 2022, the company reported total net revenues of 42.9 million, representing a 12.1% increase over total net revenues of $38.3 million during the fourth quarter of 2021. That increase was the result of the higher average number of vessels we operated in the fourth quarter of last year compared to the fourth quarter of the year before. The company reported a net income attributable to common shareholders for the fourth quarter of 2022 of 20.3 million as compared to a net income attributable to common shareholders of 22.8 million during the fourth quarter of 2021. Interest and other financing costs for the fourth quarter of 2022 amounted to 1.6 million compared to 0.8 million during the same period of 2021. This increase is due to the increased amount of debt and the increase in the average LIBOR rate that we paid in the most recent period compared to last year.