Euroseas Ltd.

Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas Conference call on the second quarter 2026 financial results. We have with us Mr. Aristides Pittas, Chairman and Chief Executive Officer, and Mr. Tasos Aslidis, Chief Financial Officer of the company. At this time, all participants are in 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 to Mr. Pittas, I would like to remind everyone that in today's presentation and conference call, Euroseas 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 would like to pass the floor to Mr. Pittas. Please go ahead, sir.

Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. I'd like to apologize for the 10-minute delay, but I was caught in another very important phone call. Sorry about that. Together with me is Anastasios Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the three- and six-month period ended June 30, 2026. Please turn to slide three of the presentation for our quarterly financial highlights. For the second quarter of 2026, we reported total net revenues of $56.5 million and the net income attributable to controlling shareholders of $33.2 million or $4.74 per diluted share. Adjusted net income for the quarter was $32.9 million or $4.70 per diluted share. Adjusted EBITDA for the period was $40.1 million. Please refer to the press release for a conciliation of adjusted net income and adjusted EBITDA net income. Our CFO, Tassos Aslidis, will go over our financial highlights in more detail later on in the presentation. We are pleased to announce that our Board of Directors has declared another quarterly dividend of 80 cents per share for the second quarter of 2026 as part of the company's common stock dividend plan. Based on current share price levels, the distribution reflects an annualized yield between 4.2 and 4.5 The launch of our 20 million share repurchase program in May 2022, we have repurchased 480,000 shares in the European market from August 13th of 2026, representing approximately 6.8% of our outstanding shares. and others. This is slide 4 for an overview of our recent developments, covering key activities across vessel sale acquisitions, chartering and fleet operations. On the S&P front, as announced in mid-June, we entered into an agreement with Nansong Pacific of Shogun Engineering in China for the construction of two additional 1,800 TEU gear-less containers. to the two we ordered in April 2026, with expected deliveries in December 2028 and March 2029. Total consideration for these vessels is approximately $64.5 million, which will be financed with a combination of debt, aiming at 60 to 65 percent, and equity. Motovessel Thrillos. The vessel is scheduled for delivery in Q1 2028. Under the terms of the agreement, NRP investors will acquire a 49% stake for approximately $12.2 million, with the transaction assuming at least 60% debt financing. Their first capital contribution has already been paid. On their chartering side, Both vessels are fixed for a minimum of 24 to maximum of 26 months at a daily rate of $25,500 per day, providing earnings visibility through at least the first quarter of 2028. We had no technical or commercial of higher days this period. Now please turn to slide 5. Our operating fleet consists of 21 vessels with a combined carrying capacity of approximately 61,000 TEU and an average age of 13 years. This includes six intermediate container ships with a carrying capacity of 25,500 TEU and an average age of 18 years, alongside 15 feeder container ships with a combined carrying and another a date of 9 years. We have 12 new building vessels on order, 8 feeders and 4 intermediate containers, with deliveries scheduled 2023-2027 through Q1-2029. Upon completion of our new building program, our fleet will expand to 33 vessels, with a total carrying capacity of approximately 97,000 TEUs. positioning us with one of the youngest feeder and intermediate containers of cleats in the market. Please turn to slide 6 for a further update on our fleet employment and forward coverage. Our chartering coverage spans at 96% for 2026, 81% for 2027, and 47% for 2028 at highly attractive average daily rates for 2026, 31,700 for 2027, and 32,300 for 2028. This insulates our earnings even if market rates soften when current charges expire. Moving on to slide 8, let me walk you through the market key developments that shaped the container subsector over the second quarter of 2026. The chain of shipping markets continued their upward trajectory through the whole of Q2 and Q3 to date, driven by robust mainland demand and supply disruptions tied to the Middle East geopolitical tensions. Starter rates reached the highest level since before the COVID-19 pandemic, while freight rates extended their momentum, posting multiple gains through July. On the asset side, second-hand vessel prices held steady during the second quarter, compared with the first, despite ongoing geopolitical uncertainties. The fundamentals remain solid. High supply of available donuts and strong competition for prompt charter-free vessels continue to underpin valuations. New building prices also moved higher, up approximately and others across the sector. Fleet utilization remains remarkably tight, idle capacity excluding vessels under repair of just 200,000 TEU for almost 6% of the global fleet as of early July. This remains at historic lows and underscores the structural supply tightness seen during this market cycle. Finally, recycling activity has been notably subdued etc. with only 10 vessels, accounting for 25,000 TEU sent to scrap through July. This further reflects the high-value environment for tonnage and limited incentive to recycle. Meanwhile, the fleet grew by 2.6% YTD. Please turn to slide 9, which illustrates the development Across all vessel classes, from smaller feeders through the larger intermediate container segment, current charter rates remain notably above both their respective 10-year historical averages and median levels. These smaller vessel classes play an essential role in maintaining network flexibility and supporting regional and intra-regional trade flows, a role that has become increasingly critical a major political uncertainty and supply chain of disruptions. With scarce available tolerance and underlying demand holding firm, the conditions supporting elevated time charter rates appear broadly intact for now. Listen to slide 10, where we review the global macroeconomic backdrop and its implications for container shipping demand. According to the IMF July 2026 World Economic Outlook, global growth is projected at 3% in 2026, recovering to 3.4% in 2027, broadly unchanged cumulatively from April's forecast. The outlook is a mix. Elevated energy prices and geopolitical tensions, particularly in the Iran conflict and Ukraine-Russia war, etc., arriving inflation and interest rates higher. However, AI-driven investment is supporting growth in technology-integrated countries. Meanwhile, global disinflation has stalled, with the inflation shock pushing the yield on the 10-year U.S. Treasury to approximately 4.7 percent. The U.S. economy has remained comparatively resilient at 2.3 percent. and others, but declined to a just 4.1% growth in 2027, when the Aegean Fire region is projected to slow to 4.1% in 2026, before recovering to 4.3% growth in 2027. The volume is projected to moderate from 4.6% growth in 2025 to just 3.7% in 2026, reflecting target impacts and slower global growth overall due to the geopolitical disruptions. Growth is expected to remain subdued at 3.4% in 2027, For container shipping specifically, containerized freight measured in TEU miles is projected to grow by approximately 3.6% in 2026. However, we anticipate a normalization effect in 2027, with TEU mile demand projected to decline by 4.8%, reflecting expectations for freight routes and sailing distances etc. Turning on to slide 11, you can see the total fleet age profile and container ship order book. Starting with the age profile in the upper left, the overall container ship fleet remains relatively young, with a majority of vessels under 15 years of age, and only about 15% of the fleet over 20 years old. However, this aggregate view is totally different when examining the feeder and intermediate segments in isolation, which we will explore in greater detail over the next several slides. Going to vessel deliveries, the top right chart illustrates scheduled new deliveries as a percentage of the existing fleet. Deliveries are projected at approximately 5.5% for 2026, 9.4% for 2027, and 24.2% for 2028 tournaments, although actual fleet growth is expected to be somewhat lower due to slippage and future demolition activity. The bottom chart puts the current outlook in historical context, at approximately 39.8% of the fleet as of August 2026. and others. The supply here tells a markedly different story from the quarter market. The age profile here is striking. Approximately 24 percent of the fleet is between 15 and 19 years. and the rest of the fleet is over 20 years old, meaning more than half of the feeder fleet is at or approaching scrapping age. As environmental regulations tighten and compliance costs rise, a meaningful portion of this older porridge will likely exit the market over the coming The trading activity in the sub-3000 EU segment remains significantly restrained. As of August 2026, the order extends at 17.6%, substantially below the broader market, which is 9.8%, with scheduled deliveries of just 3.1% for 2026, 6.8% for 2027, and 8.1% for 2028 and beyond. Let's move to slide 13 to focus on the intermediate segment, the agricultural segment of our fleet. As of August 2026, the agricultural segment stands at approximately 28% of the existing fleet. While higher than the feeder segment, this remains modest relative to the large mainline vessel classes, where new building activity has been considerably more active. is the age profile. About 36% of the fleet is between 15 to 19 years old, while 30% of vessels in this range are over 20 years of age, meaning roughly two-thirds of the fleet is either at or approaching an age where retirement decisions become likely. Casual deliveries are projected at 3.8% for 2022. etc., rising to approximately 7.8% in 2027 and 15.9% for 2028 and beyond. However, when weighed against potential accelerated scrapping among the old atonments, net fleet growth in this segment is expected to remain contained over the coming years. The interplay between a maturing fleet and the Mezzos New Building Pipeline continues to create a structurally supported environment for intermediate container support operators, despite an avoidable cascade effect, which of course will also take place. Then, slide 14. This chart places the dynamics we've discussed in broader context. These segments carry order books of 40% to 87% of their existing fleet, reflecting the significant capacity directed towards major mainland trades. These are the segments facing the most acute oversupply risk. By contrast, figures on intermediate segments exhibit significantly lower order book activity, ranging from 14% to 28%, depending on vessel size. is occurring against an Asian fleet backdrop. The gap between the wave of new buildings in larger vessel classes and limited fleet renewal in feeders and intermediate segments points to a structurally more favorable supply outlook for the sizes in which Eros is operating. Now, this is a slide 15 where we summarize around. Markets have gained meaningful momentum through July, with rates at decade highs supported by strong east-west demand and mid-east disruptions. A limited 2026 supply is supporting the near-term balance, though we do expect some of the moderation towards the end of the year. Looking ahead to 2027, the supply-demand picture sits. Accelerated scrapping and slow steaming could help absorb incremental supply. Geopolitical uncertainty also complicates the timing of any normalization. Finally, the impact of tariffs has been more muted than feared. Though U.S. trade policy remains a variable, we are continuing to monitor flows. The charts illustrate the strength of the carbon cycle. One-year time charter rates for 2,500 EU container ships stand at $38,250 per day, substantially above the 10-year historical average of $24,000 and median of $8,000 or $16,000 per day. was a 10-year-old vessel and is valued at $41 million compared to a historical average of $22.5 million and a median of $18.75 million. These elevated second-time valuations, particularly without the best employment, present a less competitive risk-reward profile This conviction has driven our decision to expand our order book expansion to 12 vessels. Building on the 9 vessels we completed in early 2025, this strategic position, combined with our strong balance sheet and substantial liquidity, puts us in an enviable position, well capitalized to pursue attributable opportunities when they arise, minor fleet benefits from lower operating costs, environmental and environmental advantages that differentiates us competitively. I will now turn the call over to Tasos, who will go over our financial results for the second quarter and first half of 2026 in more detail.

Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen. Over the next five slides, I will give you the usual overview of our financial highlights for the second quarter and first half of 2026 and compare those results to the same periods of last year. For that, let's turn to slide 18. For the second quarter of 2026, the company reported total net revenues of $56.5 million, representing a 1.3% decrease over total net revenues of $57.2 million during the second quarter of 2025. This was the result of the lower average number of assets we owned and operated this quarter, this past quarter, in 2026, compared to the same second quarter of 2025, and was partly offset by the increase in the time chart rates that we earned on average in the respective period. The company reported a net income of 32.6 million, a net income attributable to controlling shareholders of 33.2 million for the second quarter of 2026, as compared to a net income attributable to controlling shareholders of 29.9 million for the same period, the second quarter of 2025. and laws attributable to not controlling shareholders of 0.6 million in the second quarter of 2016 that present the 49% ownership of the entities owning our new building, Envy Freelance, which are represented by NRP investors. To interest, another financing cost for the second quarter of 2016 amounted to 2.7 million etc. compared to $4 million for the second quarter of 2025. This decrease is due to the decreased amount of debt and the decreased interest rate of our loans in the current period compared to the same period last year. If we account for interest income, the respective amounts become $1.3 million and $3.7 million, for the second quarter of 2026 and 2025 respectively. And these are the figures shown in the net interest line, the table on the slide. As part of our liquidity management strategy, we entered into investments in equity and debt securities in the first quarter of 2026. For the three months ended June 30th, 2026, the company recognized a zero point and Anastasios Aslidis. At the same time, we acquired debt securities with an initial cost of 20 million, classified as available for sale under U.S. regard, for which the fair value decreased between quarters and others, resulting in an unrealized loss of approximately $0.24 million during the second quarter of 2026. We did not share such investments in the expected quarter of last year. It is worth noting that these investments are intended to protect maturity, and as such, the loss is purely accounting in nature, and there is no cash impact. In fact, these holdings continue to generate regular Dividend Income, which partially offset any short-term valuation fluctuations. Adversity deduct for the second quarter of 2026 was $40.1 million, compared to $39.3 million during the same period of last year. Basic and diluted earnings per share attributable to controlling shareholders for the second quarter of the year were $4.77 and 4 dollars and 74 cents, basically diluted, calculated an approximately 7 million of the greatest average number of such outstanding, compared to basic and diluted accounts attributable to controlling shareholders of 4 dollars and 32 and 4 dollars and 29 cents per share, basically diluted respectively, for the second quarter of last year. Excluding the effect on the net income attributable to controlling shareholders for the quarter of the unrealized gain on investments in equity securities, the adjusted earnings attributable to controlling shareholders for the second quarter of 2026 would have been $4.73 basic and $4.17 daily. Compared to adjusted earnings attributable again to controlling shareholders, for $4.23 basic and $4.20 diluted for the same period of last year. Let's now look at the numbers on the same slide and look at the numbers corresponding to the six-month period and the June 30th and compare them to the same period of last year. For the first half of 2026, the company reported total net revenues of 112.3 million, representing a 1.1% decrease over total net revenues of $113.6 million during the first half of last year. The same reasons the tax reduced to the quarter decline applied here. The company reported a net income for the period of $65.1 million, a net income attributable to controlling shareholders of $65.7 million, as compared to net income attributable to controlling shareholders of 66.8 million for the same period, the first half of 2025. Total interest and other financing costs for the first half of 2026 amounted to 5.7 million. Total interest for financing costs for the first half of 2025 amounted to 7.9 million. The decrease, again, due to the lower levels of debt on average and the lower interest rate paid. The Karmiri interest income for the respective amounts becomes $2.44 million and $3.63 million for the first half of 2026 and 2027. These are the two figures shown on the slide. And they include the net interest that we are talking about. Advocacy deduct for the first half of 2026. was $81 million compared to $76.4 million for the same period of last year. Basic and diluted earnings per share, attributable to controlling shareholders for the first half of 2026, were $9.44 basic and $9.39 diluted, compared to $9.63 basic and $9.60 diluted for the same period The adjusted earnings per share, attributable to controlling shareholders for the six months ended June 30, 2026, would have been $9.45 basic and $9.40 diluted, compared again to adjusted earnings for the same period of last year of $7.99 basic and $7.97 diluted. And let's now turn to slide 19 to review our FLIP performance. We'll start our review by looking at the FLIP utilization rate for the second quarters of 2026 and 2025. As a user, our FLIP utilization rate is broken down into commercial and operational components. During the second quarter of 2026 and 2025, commercial utilization was for both periods 100%, while operational utilization was 99.9%. On average, 21 vessels were owned and operated in the second quarter of 2026, earning an average contract equivalent rate of $30,306 per day, compared to 22 vessels for the period of one year, earning on average $29,420 per day. Our total daily Operating expenses include G&A expenses, but excluding diverting costs, were $8,036 per version per day in the second quarter of this year, compared to $7,394 per version per day in the second quarter of 2025. If we move further down on this table, we can see, as always, the daily cash flow rate even level, which takes into account, in addition to the operating expenses, the Dry Docking Expenses, Interest Expenses, and Loan Repayments without accounting for Balloon Repayments. And all of those are expressed on a per-dollar per-day basis, on a per-vessel per-day basis. For the second quarter of 2026, thus, our daily cash flow break-even rate was $3,233 per vessel per day, as compared to $13,206 million for the same period The second quarter of 2025. At the very bottom of this table, you can see the dividend we paid expressed in dollars per vessel per day. In the second quarter of 2026, this amounted to $2,916, compared to $2,275 in the same period of last year. The increase reflecting the increase in the actual amount of dividend paid and the reduction in the number of vessels. Let's now look at the right-hand side of this table and review the same metric for the first half period. During the first half period for 2026, both operational and commercial utilization rates were at 100%, while operational utilization rates in the corresponding period of 2025 was 99.6%, and commercial was, again, 100%. On average, for the six-month period, we only operated 21 vessels, and another time chart equivalent rate of $30,330 per day, compared to 22.83 vessels we operated in the same period of last year, and an average of $28,468 per day. Operating expenses, again, including management fees and G&A expenses, but not their adopting costs, averaged $7,963 per vessel per day this year, compared to $7,454 for the same period, the first half of 2025. The best given levels, again, at the bottom of this table, were $12,290 for the six months of this year, compared to 13,163 for 2025. And the common dividend expressed in dollars per day per session in the first half of this year amounted to 2,839, up 29 percent from 2,196 in the first quarter of last year. Let's now move to the next slide, which are the red numbers and aim to provide a better perspective of the depth of our contract cover that I see discussed in an earlier slide. This study presents the development of fleet ownership days over the period of the next three years, because we have new buildings coming in, and an estimated breakdown of how many days are available for hire and how many days are already contracted. It incorporates assumptions about delivered times for the vessels under construction, scrapping times for older vessels, estimated dry docking duration and timing, utilization rate assumptions going forward, and estimates for contracted days and average contracted trade per day. Please note that the data presented in this table Our internal estimates provided only for indicative purposes, to be used for modeling future time chart retrieval revenues, and of course actual results might differ. Nevertheless, we believe this provides a useful visibility into our forward revenue and earnings profile. Although our contracted coverage has been discussed earlier, just for reference I will mention that the contract coverage currently stands approximately 96% for the remainder of 2026, 81% for 2027, and almost 47% for 2028, while our average contracted rate for those periods are $30,858 for 2026, $31,658 for 2027, and $32,000 for 2028. Let me now take slide 21 to review our debt profile. As of June 30th, our total outstanding bank debt stood at about $208 million, with an average interest rate margin of around 2%. We assume here a three-month shock rate of 3.76%. Our total debt cost amounts to about a little more than 5.75%, which is well within the prevailing rate for our period. Turning to our debt amortization profile on the top left of this slide, we can see that in 2026 total repayments amounted to 19.6 million, consisting of approximately 9.06 million of scheduled loan repayments and 10.49 million of overhead pay loan obligations. In 2027, total debt service increases to approximately 36.85 million, inclusive of a balloon-made payment of $20 million. In 2028, repayments of loans are lowered down to $12 million, and no balloon payments due. And looking further ahead, in 2029 includes total repayments of $40.6 million, which includes $10.6 million of scheduled loan repayments and $30 million balloon. 2030 includes total repayments of $33.8 million, We have been able to finance balloon payments on federal terms and we expect to maintain that capacity of doing it in the future if we choose to do so. These figures reflect our current debt profile and do not include financing that we will assume to finance our new building program. At the bottom of this table, we can show our best-of-the-month 4-hour credit rate, which stands at $13,382 per vessel per day, and you can see the components is broken down. Let me conclude this presentation by returning to slide 22 for a quick review of selected highlights from our balance. As usual, we present our balance in a simplified way, in the form of two bars. On the left bar, we saw the asset side. We have in the current assets, of course, another current asset of approximately of 226 million. We have made approximately 74 million of advances against our new building program. And the book value of our fleet stands at about 453 million, dating the total assets in our balance sheet to 753 million. Moving to the right bar, the liabilities, there we mentioned we had a bank debt of $208 million, and additional liabilities of about $21 million, and a small amount of minority investments, resulting in about $523 million of book shareholder securities. However, the true shareholder securities should be adjusted for the market value power which is higher, significantly higher than its book value. We estimate that our current fleet is valued at approximately $660 million, which translates to an asset value for the company of more than $725 million, or about $103 per share. The current price levels, which although have increased, are still paid below to our net asset value, and this valuation gap presents an opportunity for both our shareholders, but also to investors that want to consider investing in euros. And with that I'll turn the floor back to Artidis to moderate the question and answer period. Thank you, Tasso.