Seanergy Maritime Holdings Corp.

Thank you for standing by, ladies and gentlemen, and welcome to the Synergy Maritime Holdings Corp conference call on the second quarter ended 30th June 2023 financial results. We have with us Mr. Stamatis Tantanis, Chairman and CEO, and Mr. Stavros Giftakis, Chief Financial Officer of Synergy Maritime Holdings Corp. At this time, all participants are in listen-only mode. There will be a presentation followed by the question and answer session, at which time, if you would like to ask a question, please press star 11 on your telephone keypad, and you will then hear an automatic message advising your hand is raised. Please be advised that this conference call is being recorded today, Wednesday, 2nd of August, 2023. The archived webcast of the conference call will soon be made available on the Synergy website, www.synergymaritime.com. To access today's presentation and listen to the archived audio file, visit Synergy website following the webcast and presentation section under the investor relations page. Please now turn to the slide two of the presentation. Many of the remarks today contain forward-looking statements based on the current expectations. Actual results might differ materially from the results projected from those forward-looking statements. Additional information concerning factors that can cause the actual results to differ materially from those in the forward-looking statements is contained in the second quarter and the 30th of June, 2023 earnings release, which is available on the Synergy website again, www.synergymaritime.com. I would now like to turn the conference over to one of your speakers today, the chairman and CEO of the company, Mr. Stamatis Santanis. Please go ahead, sir.

Thank you, Operator. Hello, I would like to welcome everyone to our conference call. Today we are presenting the financial results for the second quarter and first half of 2023, while also announcing the distribution of another cash dividend. I am very pleased to report a profitable quarter for Synergy, with our daily time-shutter equivalent outperforming the market index. we achieved a daily time shutter equivalent of $18,700, or 20% above the index average for the quarter, leading to a quarterly net revenue of $28.3 million and net income of $700,000. This represents a sequential improvement compared to the first quarter of 2023, whereby revenue was $18 million and net loss came in at $4.2 million. In the second quarter, the Cape Size market recovered from the seasonal weakness seen in the start of the year, with the Baltic Cape Size Index averaging at $15,600, up from $9,100 in the first three months of the year. Demand for seaboard transportation remains strong, but charter rates came under pressure as historically low congestion, as well as higher deadweight adjusted vessel speeds, have resulted in a temporary effective vessel oversupply. It is encouraging to see strong increased ton-mile demand for key raw materials and I am very optimistic that the negative effects of the low congestion have already peaked. During the quarter, we remained consistent with our shareholder distribution strategy while looking to expand our fleet through accretive opportunities. As we will discuss in more detail, we agreed to acquire a new Castlemax vessel at a great price while we also repurchased about 2% of our common shares in the open market at a significant discount over the current stock price. Lastly, we continue to optimize our balance sheet through 54 million of refinancing transactions that will reduce our interest rate margins and help neutralize a portion of the increase in benchmark interest rates. Our overall liquidity increased by around $15 million through these transactions, and I'm glad to report that there are no currently loan maturities until 2025, which provides a clear runway for more shareholder distributions. Let's now move to slide number four to discuss our shareholder rewards initiatives. Our board has authorized the distribution of another regular quarterly dividend of two and a half cents per share for the second quarter, which brings our total distributions since the commencement of our dividend program to $23.9 million or about a dollar and 33 cents per share. This represents a 23% of current price levels. Moreover, during the quarter, we repurchased about $1.6 million worth of our common shares at an average price of $4.35 per share, which is 25% lower than our current price levels. We always monitor our shares' valuations combined with the liquidity, and we may emphasize share buybacks over dividends in the future quarters. In any case, the total capital returned to our shareholders since the start of the program amounts to about $64 million. And I'm confident that this will continue to be the top priority for synergies management. Moving on to slide number five, this is an overview of our commercial developments. As you can see, our fleet has performed better than the Cape size market since the start of 2022, that's 18 months ago. In the past six months particularly, our TCE was 20% higher than the BCI. This is a result of our robust commercial performance, our hedging activities, as well as the investments made in improving our vessel's efficiency over the years. In addition to energy-saving devices, about three-fifths of our ships are scrubber fitted, allowing them to earn fuel spread premiums. Currently, about 25% of our ownership days in the third quarter are fixed at an average daily rate above $21,000 a day. and 21% of our days for the rest of the year are fixed at an average rate of 22,000. In terms of TCE guidance for Q3, we expect our TCE to be equal to about $16,100, and this is assuming that our ships will earn the current FFA rate. This is 22% higher than $13,200 average of the BCI in the third quarter to date. As regards to vessel transactions, in May, we agreed to add to our fleet, our first new Casper Max class vessel, which was built in 2011 at the Max shipyard in China. The vessel delivery is estimated to take place on about October 2023, initially through a 12-month verbal team charter, while Synergy has a purchase option at the end of the charter period. The total cash outlay, assuming exercise, of the purchase option next year will be 30.5 million. Upon delivery, we expect the vessel to be deployed in an index-linked time-chatter at a significant premium to the BCI. Lastly, on our commercial developments, we extended the duration of three of our time-chatters at the same or better terms as before. Since April, the Championship extended its existing time-chatter for a period of 24 to 30 months with a higher premium over the index, and a new fuel spread profit-sharing scheme for Synergy, receiving the majority split. In June, the charter of the partnership exercised the second optional period, with the extension period starting between August and November of this year, and also here a higher fuel profit-sharing scheme for Synergy. The same charter elected to extend the time charter of the Lordship, in direct continuation of the previous agreement. The extension will commence in October of 2023 and last until August 2024, with an increase in the Scrabble profit share accruing for Synergy. That concludes my rundown of this quarter's highlights, so I'm going to pass the floor to Stavros, our CFO, before returning for a brief market commentary.

Thank you, Stamati, and welcome everyone to our second earnings call for 2023. Let us start by reviewing the main highlights of our financial statements for the second quarter and six-month period that ended on June 30, 2023. Amid a weaker than expected capesize market, our financial performance was satisfactory with net revenue for the quarter reaching $28.3 million. Net revenue for the first half of the year was equal to $46.4 million. These figures are lower than the respective period of 2022, albeit once again in terms of TCE we outperformed the BCI by approximately 20%. Meanwhile, our adjusted EBITDA in the second quarter was equal to 15.7 million and 19.6 million in the first half of the year. The respective figures for last year were 17.3 million and 34.2 million, respectively. Nevertheless, in the second quarter of 2023, we returned in profitability, recording a net income of 700,000, trimming the net loss for the year so far to 3.5 million. With the bottom of the market now in the rare mirror, we are optimistic that we will continue on a profitable trajectory for the rest of the year. Moving on to our balance sheet, despite the volatile market, the increased interest rates as well as our continuous efforts to return capital to our shareholders through dividend distributions and buybacks, we retained a solid cash position of approximately 22.5 million or 1.4 million per vessel. On the debt front, we retained a moderate debt ratio of 50%, while we achieved to even reduce our net debt since the beginning of the year by approximately 7%. The net debt at the end of the first half of the year stood at $212 million, a figure fully covered by the scrap value of our fleet based on current scrap prices. I will return to discuss our debt profile further in a moment. Let us now turn to slide 7 to discuss our profitability performance. As I mentioned before, we outpaced the market benchmark in both the second quarter and first half of 2023. In specific, we achieved a PCE of $18,700 per day in the second quarter and $14,760 per day for the first six months of 2023. Our efficient commercial strategy and our decision to hedge part of our freight exposure for the second quarter have helped us to perform better than the market. As a result, we recorded an adjusted EBITDA of $19.6 million for the first half of the year, with an improved margin in a period that CapeSide's freight rates remained overall subdued. With an improved market outlook for the rest of 2023, we expect our financial performance to strengthen further. Meanwhile, our average daily operating expenses, excluding pre-delivery expenses, were $6,900 per day in the first half of the year, a figure very close to the levels recorded in 2022. The elevated OPEX are attributed mainly to price inflation in goods and services across the shipping sector as well as the global economy. Cash DNA, i.e. general and administrative expenses adjusted for certain non-cash items in the first half of the year, were 4.6 million. However, this figure includes administrative expenses incurred by Synergy in managing United Maritimes operations in exchange of which we have received in fees approximately $1.3 million in the same period. On that basis, our actual cash GNA was approximately $3.2 million or $1,100 per ownership day, which is very competitive compared to our listed peers. Let's now move to slide 8 to discuss our debt profile. Debt at the end of the second quarter was $235 million, including convertible notes which are expected to be fully repaid by the end of the year. Given this number, the debt per vessel should have $14.7 million basically unchanged from the end of 2022. During the first half of 2023, we concluded 53.8 million of refinancings which benefited Synergy in numerous aspects. As discussed in detail during our first earnings call some months ago, we refinanced three of our vessels through two sale and leaseback agreements and the new sustainability-linked loan. The interest margin of the two sale and leaseback facilities are lower than the previous financings by 120 basis points and 50 basis points, respectively. In addition, with the refinancing of the championship sale and leaseback, We have addressed all loan maturities until the second quarter of 2025, removing any potential pressure from the company, even if market recovery is slower than expected. Finally, we added approximately 15 million of extra liquidity, which came to support our shareholder rewarding initiatives and the acquisition of the Titan ship, as discussed previously by Stamatis. Lastly, it is worth mentioning here that our leverage remains practically unaffected at around the 50% mark. Our overall debt strategy has allowed us, as you can see in the second graph, to retain a scrap coverage of total debt for another quarter above 90%. The market value of our fleet at the end of the second quarter was 443.3 million or 27.7 million per vessel, almost two-fold the debt per vessel levels. Finally, as regards to our cash interest expenses, these were increased in the first half of 2023, which was inevitable given today's interest rate environment. However, our refinancing strategy did partly offset the steep increase in base rates through the last 15 months. Let's now turn to slide 9. Our EBITDA guidance for the year is expected to surpass the 45 million mark even if the market in the second half of the year averages at 15,000 per day. Based on our current operational capacity, even a small increase in the expected freight rates of the second half would lead to an EBITDA above the 50 million mark. Here it is worth mentioning that we have already fixed 21% of our ownership days at an average rate that exceeds 20,000. In addition, our new Newcastle MAX is expected to be employed at a significant premium over the BCI index. Given all these actions, and with a potential market rebound in progress, we expect that we will be able to increase our profits, enhance further synergies value and continue our shareholder rewards initiatives. This concludes my review. I would now turn the call back to Stamatis, who will discuss the market and industry fundamentals.