Pangaea Logistics Solutions Ltd.

Good morning. My name is Chelsea and I will be your conference operator today. At this time I would like to welcome everyone to the PennDAM Logistics Solutions first quarter 2025 earnings teleconference. Joe's call is being recorded and will be available for replay beginning at 11am Eastern Standard Time. The recording can be accessed by dialing -215-1487 genetically or -220-4938 internationally. All lines are currently muted and after the prepared remarks there will be a live question and answer session. If you would like to ask a question during the Q&A segment, please press star 1 on your phone. If your question has been answered, you may remove yourself from the queue at any time by pressing star 2. We do ask that you please pick up your handset for optimal sound quality. It is now my pleasure to turn the floor over to Stefan Yuli with Valorant Advisors.

Thank you, Operator, and welcome to

the PennDAM Logistics Solutions first quarter 2025 results conference call. Leading the call with me today is CEO Mark Chalunowski, Chief Financial Officer Gianni Rassignore, and COO Maz Peterson. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. At the conclusion of our prepared remarks, we will open the lines for questions.

With that, I'd like to turn the call over to Mark. Thank you, Stefan, and welcome to those joining us

on the call today. After the market closed yesterday, we issued a preclude detailing our first quarter 2025 results. Our first quarter performance reflects the continued disciplined execution of our cargo-focused business model. Despite seasonal softness early in the quarter, we delivered TCE rates that were 33% above the prevailing market, demonstrating the strength and differentiation of our commercial strategy. This outperformance was supported by our long-term contractual appraisal, which provided pricing stability through the winter months and allowed us to effectively manage market volatility later in the quarter. For the first quarter of 2025, we reported an adjusted net loss of approximately $2 million and adjusted EBITDA of $14.8 million, as average market pricing declined 37% compared to the prior year period. Despite this pressure, our results benefited from our countercyclical positioning and integrated suite strategy. Total shipping days rose .6% -over-year, primarily driven by the addition of SSI handy-free vessels. On a comparable basis, shipping days increased by 41%, underscoring the meaningful contribution of the acquisition to our operational scale. Importantly, we completed 160 days of planned off-hire for vessel dry docking during the quarter, taking advantage of softer demand to complete a significant portion of our 2025 dry docking schedule. With only four dockings remaining for the rest of the year, we are well positioned to optimize fleet availability during periods of stronger demand. Since the beginning of the year, our teams have made substantial progress integrating the SSI fleet into our operating platform. Integration efforts are proceeding as planned, and that we only align the new vessel for our existing routes. We expect to unlock further operating efficiencies and enhance returns across our broader fleet. We have seen vessel operating expenses decrease in areas like insurance, where our larger footprint reduces premiums and allows us to assume some added risks, and we are working on other operating cost energies available as we exchange ideas with new relationships. By year-end, we hope to have implemented cost savings of at least $2.5 million annually. We have successfully expanded the capabilities of the handy fleet, both geographically and cargo-wise. Looking at the market environment, the dry bulk sector continues to experience elevated levels of volatility and uncertainty. While our operations are not directly impacted by proposed tariffs, including recently discussed port fees for Chinese built or controlled vessels, we are closely monitoring potential indirect effects. Based on our review of the revised U.S. Trade Representative port fees proposal, we do not expect any material impact to our own fleet, given our geographic focus and operating model. However, broader market dislocations could occur as global vessel deployment patterns shift in response to the evolving landscape. It's important to note that over 95% of our tonnage is tied to non-agricultural bulk, including iron ore, coal, cement, and aggregate, primarily across Atlantic, European, and Caribbean trade routes. This unique footprint continues to insulate us from some of the demand and policy volatility facing many other dry bulk operators. Turning to the second quarter, demand trends have remained steady across our key routes, though pricing continues to reflect global macro and trade policy uncertainties. As of today, we have booked 4,275 shipping days for the second quarter, generating a CCE of $12,524 per day. As we advance through 2025, we remain focused on a prudent capital allocation. As we announced yesterday, our Board of Directors has authorized a new share purchase program of up to $15 million, in addition to a declaration of a five-cent dividend. This approach gives us added flexibility to return capital to shareholders through open market repurchases of Panjaya shares, which we feel are undervalued after recent share price movements. In light of the recent pressure on the dry bulk market and ongoing trade uncertainty, we are maintaining a disciplined capital allocation strategy, prioritizing balance sheet strengths, while continuing to deliver long-term value through shareholder returns. We will also continue to opportunistically evaluate street strategic fleet transactions that support long-term efficiency, extend asset life, and preserve a competitive age profile. At the same time, we are investing in our support and logistics business, which remains a critical contributor to our margin profile. Our expansion at the Port of Tampa is progressing on schedule, and new operations in Port Charles, Louisiana and Port of Aransas, Texas, demonstrate our commitment to the exciting supply chain expansion of our business offerings. With that, I'd like to turn the call over to Johnny to review our first quarter financial results.

Thank you, Mark, and welcome to those joining us on the call today. Our first quarter financial results reflect continued CCE outperformance relative to the broader market. First quarter CCE rates were $11,390 per day, a premium of approximately 33% over the average published market rates for PanaMax, SuperMax, and hand-sized vessels in the period, driven by strong execution across our core contracts and the expanded scale of our own fleet. While total shipping days increased -over-year by 41% to 5,210, CCE rates earned declined by 36%, reflecting the decline in average market -over-year. Our adjusted EBITDA for the first quarter was $14.8 million, a decrease of approximately $5.2 million relative to the prior year period. Total charter hire expense decreased by 35% -over-year, primarily due to a 37% decrease in prevailing market rates, partly offset by a 14% increase in chartered-in days. Our chartering cost on a per-day basis was $10,108 in the first quarter of 2025, and through today we've booked approximately 1,795 days at $11,472 per day for the second quarter of 2025. Vessel operating expenses net of technical management fees increased by approximately 75% -over-year, primarily due to the acquisition of the SSI fleet, which increased total owned days by 61% to 3,690. On a per-day basis, vessel operating expenses net of technical management fees increased by only 4%, from an average of $5,300 per day last year to $5,528 per day in the first quarter of 2025. In total, our reported gap net loss attributable to CanGear for the first quarter was approximately $2 million, or a loss of $0.03 per day rooted share, compared to net income of $11.73, or $0.25, per day rooted share in the first quarter of last year. When excluding the impact of the unrealized losses from derivative instruments, as well as other non-gap adjustments, our reported adjusted net loss attributed to CanGear during the quarter was $2.1 million, or a loss of $0.03 per day rooted share, compared to adjusted net income of $6.6 million, or $0.14, per day rooted share in the first quarter of last year. Turning to cash flow and liquidity, total cash from operations decreased by $13.2 million year over year to net cash used in operations of $4.3 million, due to a decrease in operating earnings and a $5.2 million increase in dry gawking costs year over year. We repaid over $11 million in long-term debt and final lease obligations, and our interest expense was $6.1 million, an increase of $2.3 million due to the new debt facilities entered into during the second half of last year, and the assumed debt and final leases associated with the SSI acquisition. We ended the quarter with $63.9 million in cash in total debt, including final lease obligations of approximately $390 million. In the near term, our capital allocation strategy will remain focused on preserving balance sheet optionality, a sustainable shareholder return program, along with targeted capital right investments in our stevedoring and logistics operations, and ongoing renewal and modernization of our dry bulk fleet. Additionally, we remain committed to a consistent and sustainable return of capital strategy. With that, we will now open the line for questions.

Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2, and we ask that you please remember to pick up your handset for optimal sound quality. And our first question will come from Liam Burke with B Riley Security. Please go ahead.

Thank you. Good morning, Mark. Good morning, Gianni. Good morning, Mots. Good

morning, Liam.

Mark, you modified your returning cash to shareholder strategy by adding the buyback. Your dividend now is five versus 10 cents a quarter. Do you plan on, I mean, I know the board evaluates it every quarter, but is that a dividend you'd expect to pay through the cycle, or are you going to go to more of a variable model there?

We haven't talked about the variable model yet. We've talked a lot about different ways to get returns to shareholders. My favorite is to reinvest in the business and add productive people and productive assets to your organization, and eventually the stock market will recognize the inherent value in the operation and the share. But sometimes the stock market doesn't agree with me. We've paid a pretty nice dividend over the years, over the past few years, and that was one way to get returns to shareholders. We've also been talking with people like you and other shareholders about the wisdom of a stock buyback. So with the share value dropping substantially over the past couple of months, we thought it was time to try a buyback and see if we can return value to shareholders in that way. We have new directors on the board, have new opinions, and so I think we'll go another quarter, see how the shares react, how investors react regarding these new dividend rates, and take it quarter by quarter and see how we go.

Great, thank you. You're still yielding .5% even at the new 5 cents per quarter. You called out an expense reduction program by the end of the year. Is that integration savings with the SSI fleet, or is that just ongoing review of the operations being able to pull out excess costs?

A little bit of both, Liam. We didn't answer the SSI transaction looking for significant cost savings, but there are some easy targets to attack when you've got a larger fleet and a larger operation. That scale just gives you a little bit more power to drive cost decreases. One area was insurance, where we looked at P&I, we looked at Hull, and we went to markets a little more aggressively than we were able to in the past and drove some cost decreases. We're learning from each other regarding purchasing and other ways to save money with a larger fleet and a larger operation, and it's working out. Great,

thank you,

Mark. Thank you. Our next question will come from Joe Fratt with NDP. Please go ahead.

Hey, good morning. Can you first help me, Mark, help me understand the dividend cut? You've consistently said in previous presentations that you've wanted to maintain a dividend over the cycle that's sustainable. That dividend was 10 cents a quarter. Now you're changing it to 5 cents a quarter, and now you're saying it's sustainable over the cycle.

What change?

Well, a lot of things change. Paul, as I explained, we have a different thought process on the board regarding the viability of a share buyback. We want to keep a consistent dividend, and it doesn't necessarily mean a consistent amount. Our operation does sustainably produce cash flow that's available for different ways to return capital to shareholders. And that's what we're trying to do is come up with a prudent approach to address the need for shareholders to have some kind of return on their shares. We saw an opportunity here, a central opportunity to do something good for shareholders by announcing the share buyback. So, like I mentioned, there's different ways to provide a return, and we're trying a couple of different ways this time.

So, can you, Mark, tell me how the share buyback will work? Are you going to be in the market every quarter, buying the difference, 3.2 million that you're going to save on paying the dividend? You know, a lot of companies announce share buybacks but never fall through with them. Could you just talk about how you're going to approach the stock buyback?

We're approaching at least one bank this week after this call to set up a program. The board has asked us to review with them in advance any potential share buybacks based on price availability of capital, etc. So, it won't be a constant rolling program. It will be when the board feels it's the right time to purchase shares in the market.

And then, Mark, in the context of, you know, with SSI's transaction, you now have a large shareholder. That also large shareholder is, you know, represented obviously on the board, but they also bought shares in early April. Are you concerned at all about the increased concentration in ownership? I mean, one of the things that the market often has said is that your public float is limited. And, you know, can you just talk about how that was considered in this decision?

Yeah, the $15 million isn't a large share of our outstanding float. We estimate our float to be around 40 percent. And we think there's an opportunity there to buy shares without decreasing the float substantially. And regarding the concentrations of the largest shareholder, who now has 28 percent, there is a cap there of 30 percent. That came through as a result of the negotiations regarding that deal. So, I don't think it will go up substantially as a result of any share buyback we might do. Great.

And then, Johnny, you often in previous quarters have talked about not only your forward cover of, you know, that you talked about, you know, you booked 47 vessels at $12,500 roughly. Where will shipping days end in the second quarter? Sort of what percentage of your expected shipping days in the second quarter has been booked?

Yeah, so I think we gave out the indications so far for the quarter. We have 4,275 days at $12,500. I think our total fleet right now is somewhere around 65 vessels total. And I think that's been right around where we've been for the quarter. So, the 65 vessel average fleet over the quarter is our

projected total for this quarter. Thank you. So, you're like 80 percent booked for the quarter.

You also, in previous quarters, Johnny, at least the last couple of quarters, you talked about how your chartered hired expenses were running. Do you have a figure for how many days you've, you know, chartered in for the quarter and the cost? Yep,

I can absolutely. I think I mentioned it in my prepared remarks earlier, but we booked 1,795 days at 11,472. So, we still have about a, you know, our margin on our chartered in fleet is around $1,000 and 52, or 1,052, a margin on our chartered in fleet. Great, sorry I missed that.

And then, Matt, can you talk about the operating efficiencies that, you know, were mentioned in the press release about, you know, integrating the handies? Can you, you know, beyond the insurance, can you just talk about whether there are additional operating efficiencies that you're, you know, and sort of the nature of those? And then also, where do you stand as far as that 2.5 million is, are you a quarter of the way towards realizing that, or are we going to see that over the rest of the year, the 2.5 million of cost savings?

Yeah, so on the trading synergies, I think it's mostly outside what Mark mentioned on the cost side, which is a continuous, you know, process across all the ships in the fleet, we're always trying to optimize that. It's mainly around the commercial synergies, where we have been able to use the handiwork in some of the trades we have historically done on, especially our super fleet. And so that's both geographical and some trading in areas where you need a little bit of ice experience, or it's a commodity, or another geographical focus that's primarily where the synergies have come, and sort of, which is also, you know, what was the, as Mark mentioned, was the primary driver, right? It wasn't a cost deduction, and basically, it was really to grow the top line, not only just the good cost line. But we are trying to do that, and it's, you know, it's, you know, technical management and operations is a lot. Many, many components go into that, and everything is being scrutinized, as we always did. But of course, the fact that we have access to more experience, larger, you know, pool of crew, and more additional resources makes it, you know, that makes that sort of synergy and cost optimization possible. But it's a continuous process, and it will, some of these things are bigger, bigger undertaking, that take a little bit longer to realize, but for some of them, we're working on crystallizing the initial horizon. Great.

And then on the terminal side, you know, you're talking about the expansion of the, you know, Tampa and then in Texas, could you just maybe quantify what that could mean to second quarter, I'm sorry, second half operating results? Is it going to move the needle on the termly revenue, or is it just, you know, an incremental add-on that will add, you know, maybe 10% of revenue?

Yeah, I think

the,

highly dependent on the start date, we're still projecting within this year, late Q3, Q4 start. So it will be incremental to this year. It will add about 150, 200 EBITDA for this year. Really, that's going to be a project that will be in full swing for 2026 in Tampa, and then also in Texas, and that's where we'll see the real contribution for that.

And then anything else on the horizon on the terminating business to, you know, further expand?

No, you know, Paul, we'll add the Tampa, Lake Charles, and Port Aransas terminals this year. What we found is that once we're in a place, more stuff comes to us. So we have nothing on the books in addition to those three for this year, but once they're up and running, business kind of shows up. Yeah, that's a good business.

Great. Thanks for your time. Thanks, Paul.

Thank you. And as a reminder, that is star one to ask a question. And our next question will come from Michael Matheson with the Doty Company. Please go ahead.

Congratulations on your performance in the difficult quarter.

Thank you, Michael.

I just have a couple questions. First, in Q1, long-term contracts really helped you out in a difficult CCE environment. What percent of Q2 and onwards is already booked on a long-term basis?

So when

we look at

the

balance of the year, really our contract cover kicks in during ice season, the summer ice season in Q3. So we're heading into that in Q3, and that covers our ice class vessels. And then on average, we discussed our contract cover on average for the year, and across our own fleet, it averages around 30%. So when we look over a longer period of time, that's typically the contract cover that we'll have on our fleet, and I think that remains true for this year as well.

Okay, great. Looking at uses of cash, we've already talked about dividends versus buybacks. It's clear what your strategy is there. Of course, you're also consistently paying down debt. Can we expect further debt paydowns, or do dividends ensure buybacks take priority?

Well, I think we, as far as our debt paydowns, the $11 million we paid into Q1, that is a pretty consistent number for the next almost two years, right through the end of 2026. Our first meaningful balloon payment is in early 2027. I think we're amortizing debt at a decent rate. We have well-priced debt on our fixed rate facilities and others that are capped. So I think we're pretty comfortable with our debt payment profile going forward, and I don't see us really going after anything in a meaningful way until that balloon payment comes through.

Great. Well, thank you, and good luck. Thank you.

Thank you. We do have a follow-up question from Hovrout with ADP. Please go ahead.

Yeah, Gianni, can you just clarify that last comment on the 30% of your capacities, you know, GEMD sold or committed? Is that 30% of your own fleet, or 30% of what you typically run, you know, quarter to quarter, when you include the chart and bin capacity?

No, when we think about long-term contract hover, it's on the own fleet. That 30% number is on the own fleet only. And then, you know, the chartering fleet presents arbitrage opportunities, and they're traded to make the own fleet more efficient, to position vessels appropriately. But when we think about long-term contract hover, that's on the own fleet is the number we're discussing. Great. Yeah, I just wanted to clarify that.

And then, Mark, going back to your prepared remarks, or, you know, when you talked about the dip end and the stock buybacks, you

indicated

that your preference is growth. Can you talk about the S&P market right now, and how, you know, you're viewing the S&P market?

Yeah, second hand prices are still pretty tentative, though, in relation to what the market returns today. So we've held off buying any new ships until that equation gets a little more favorable to owners. We, you know, just added 15 ships at the end of the year. So it's time to sort of catch our breath and wait for the market to make a turn one way or the other.

Great. That's helpful.

Thank you. And at this time, there are no further questions in the queue. So I'd like to turn the call back over to Mark, who will now speak, for any closing remarks.

Thanks, everyone, for joining us today for interesting times, flexibility and adaptability, how to keep it's excess in this environment, and we're pretty good at that. So please feel free to contact us with any further questions at investorsat anjayals.com. Thanks again.

Thank you, ladies and gentlemen. This concludes this program, and we appreciate your participation. You may disconnect at any time.