United Maritime Corporation

Thank you for standing by, ladies and gentlemen, and welcome to the United Maritime Corporation conference call on the fourth quarter in the year under December 31st, 2023 financial results. We have with us Mr. Stamatis Santonis, Chairman and CEO, and Mr. Stavros Gistakis, Chief Financial Officer of United Maritime Corporation. At this time, all participants are in listen-only mode. There will be a question and answer session, at which time, if you would like to ask a question, please press star one and one on your telephone keypad, and you will then hear an automated message advising your hand is raised. Please be advised that this conference is being recorded today, Tuesday, February 20th, 2024. The archived webcast of the conference call will soon be made available on the United Maritime website www.unitedmaritime.gr under the Investors section. Many of the remarks today contain forward-looking statements based on current expectations. Actual results may 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 fourth quarter and year-ended December 31, 2020 free earnings released, which is available on the United Maritime website again, www.unitedmaritime.gr. I would now like to turn the conference over to one of your speakers today, the Chairman and CEO of the company, Mr. Stamatis Santonis.

Please go ahead, sir. Good afternoon.

Welcome to United Maritimes conference call regarding our financial results for the fourth quarter and full year period of 2023, as well as our recent corporate developments. Following the profitable sale of our last tanker vessel in the third quarter of 2023, the fourth quarter marked our first period operating purely as a dry bulk company. On this note, we are pleased with the timing of our transition towards larger gearless bulkers as we are recently witnessing the strongest first quarter for the dry bulk market of the past decade. Even though 2023 served as a transitional year for our company, We marked a three-fold increase of the book value of our fleet by investing $144 million to acquire seven ships, including the implied value of the bare-bottomed vessels with purchase options. All this was accomplished organically and avoiding any equity offering dilution for our shareholders. We also marked another profitable year generating adjusted EBITDA of $18.9 million and net income of $0.2 million. At the same time, we are fully consistent with our commitment to reward our shareholders both through cash dividends as well as share buybacks. Since November 2022, we have declared approximately $10.7 million or $1.38 per share in cash dividends, including the cash dividend of $0.75 approved for the fourth quarter of 2023. This represents approximately 45% of our market capitalization. Additionally, on our share buyback plan since the beginning of Q4, we have repurchased 84,813 common shares at an average price of $2.4 per share. We always evaluate the best way to return capital to our shareholders in conjunction with the company's liquidity needs and our aim is to continue to engage in share buybacks by means of stabilizing the share price. Regarding our investment activity, we have been actively evaluating opportunities to grow our fleet and in this manner we have acquired a high-quality Kamsar Max dry bulk vessel built in 2016 in Japan through an 18-month bare boat charter with a purchase option at the end of the charter period. Commenting on the commercial performance of our fleet, all our vessels operate on index-linked time charters, providing direct exposure to the positive fundamentals of the dry bulk market. For the first quarter of 2024, we exercised our options to fix daily earnings under these time charters on about half of our operating days at an average gross rate of about $14,300. It appears that our hedging was a bit premature, but we aimed to provide downside protection against the seasonal weakness of the dry bulk market in the first quarter of the year. Based on the current FFA values, we expect to achieve a total net time chart equivalent of about $14,200 across our fleet. Given the recent strength in freight futures, we have started to fix some of our second quarter operating days at considerably higher levels. As a brief commercial guidance for 2024, Since the start of the fourth quarter, we have experienced robust dry bulk market conditions given by healthy commodity demand and limited fleet supply. For the Panamax market, low water levels in the Panama Canal and increased congestion at Brazil loading ports played an important role in reducing effective vessel supply, while the Red Sea tensions since December have introduced further inefficiencies in the world trading fleet. In the Cape Sight segment, we have witnessed high demand for iron ore and bauxite imports, coinciding with increased Brazilian iron ore exports that contributed to high Atlantic basin activity, therefore leading to a very strong market both in Q4 2023 as well as in the first quarter of 2024. Looking ahead into the next two years, net dry bulk fleet growth is expected to be lower than 2% per year, which we believe forms a sound basis for market conditions going forward. We are very encouraged by the strong demand for iron ore, coal, grains and bauxite, which have not shown any signs of slowing down in the first months of 2024. Given the strong demand for metals and energy, driven mainly by manufacturing and infrastructure investments globally, it is worth noting that we expect the seaborne volume of related cargoes to continue to increase. Reduce fleet deliveries in combination with steady demand growth should provide a very positive backdrop for the dry bulk market over the next years. In its current form, I am confident that United Maritime presents investors with a very potent platform to benefit from the positive fundamentals of the dry bulk market, continuing to deliver a profitable performance with high capital returns and significant shareholder rewards. That concludes my summary of the fourth quarter updates, and I pass the floor to Stavros for a more detailed update on the financials of our company. Stavros, please go ahead.

Thank you, Stamati. A warm welcome also from my side. Let me start by reviewing the main highlights of our financial statements for the fourth quarter and the 12-month period that ended on December 31st, 2023. Starting with the fourth quarter, net revenue was $11.6 million, based on a time charter equivalent of $15,900. The corresponding figures for the same period last year were $14.9 million and $32,200 respectively. The figures for 2022 are largely driven by the earnings of the tanker vessels through a very strong tanker market. Our adjusted EBITDA in the fourth quarter was 4.6 million, while a net loss of 0.7 million was recorded. The respective figures in 2022 were 42.3 million and a net income of 36.5 million, primarily attributed to the sale of three of our previously owned tankers. For the 12-month period, net revenue reached $36.1 million based on a time charter equivalent of $15,400, while adjusted EBITDA and net income for the full year 2023 were equal to $18.9 million and $200,000 respectively. Profitability in the year was impacted by low freight rates in the dry bulk space in the first nine months of the year and the gradual deliveries of the seven dry bulk vessels through the year resulting in reduced operating days and additional one-off expenses related to the takeover of these vessels with the market having already rebounded and the rather optimistic outlook for the period ahead as discussed by We expect profitability to improve in the coming quarters following the full deployment of our dry-bulk fleet. Yet, it is important to note that we have decided to hedge some of our freight exposure in the first quarter of 2024 early by fixing about half of our ownership days at an average fixed rate of 14,300. On the expense side, we have managed to reduce our daily operating expenses and daily cast GNAs on a per vessel basis and expect further optimization going forward as United will be navigating its second full 12-month period of operations. Now moving on to our balance sheet, Our cash position at the end of 2023 was 14.5 million. During the year, we increased our fleet with seven new vessels, leading to a fleet book value of 153 million versus a book value of 50 million at the end of the previous year without resorting to any dilutive equity offerings. At the same time, outstanding debt, which includes liabilities under our bare-bottom transactions, stood at 96 million, translating to a loan-to-value of approximately 60%, including the bare-bottom liabilities. Debt and the proceeds from our tanker sales have been the financing sources for our investment strategy during 2023. This year we are focusing on improving our overall financing profile given the fact that United has now, two years after its inception, enhanced its position within the global shipping financing spectrum. In that vein, during the fourth quarter, we concluded the refinancing of our three capes as vessels with a reputable state-owned Chinese lessor. Specifically, we entered into three separate and identical 10 million sale and leaseback agreements for three of our capes. The proceeds have been utilized to refinance the outstanding indebtedness for the respective vessels under the previous loan facility, enhancing as well our liquidity position by around 7 million. Its financing amortizes through 36 consecutive monthly installments of approximately 140,000 and bears an interest rate of 3-month term SOFR plus 3.3% per annum. Considering the forward SOFR curve, the transaction is expected to reduce our interest expense in the following quarters. Meanwhile, the company has continuous options to repurchase the vessels at predetermined prices starting 6 months after the commencement date. At the end of each bare boat period, United has the obligation to repurchase its vessel for 5 million. In addition, over the past few days we have reached an agreement which is currently subject to definitive documentation with a third party in Japan for the refinancing of Exelixi through a sale and leaseback structure. As discussed briefly previously by Stamatis, we have recently agreed to acquire a high-quality Kamsar Max Dry Park vessel built in 2016 in Japan through an 18-month Berbo chartering agreement with a purchase option at the end of the charter period. Regarding the specific details of the deal, which remains subject to definitive documentation, it includes an initial pay down of 7.5 million, a daily chartering rate of 8,000 and a purchase option for 16.6 million. Finally, before turning the call back to Stamati, I would like to remind once more that all this significant flip growth last year was achieved without any dilution of our investors while being consistent on our dividend distributions and our share buyback program. I would now turn the call back to Stamatis for his concluding remarks. Stamati?

Thank you, Savro. After successfully completing our tanker investment cycle in the third quarter of 2023, which delivered very strong returns for our shareholders, we have regrown our fleet to eight dry bulk vessels by investing $144 million to acquire seven ships without having to engage in dilutive capital raisings. So far, we have declared total cash dividends of $1.38 per share, or $10.7 million since November of 2022, representing approximately 45% of United's maritime capitalization. United Maritime has a strong balance sheet with high-quality index-linked fleet and proven commitment to shareholder rewards. I am confident that we are very well placed to navigate a strong dry bulk market environment and offer robust total returns throughout the next shipping cycles. At this point, I would like to turn the call over to the operator and answer any questions you may have. Operator, please take the call. Thank you.

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. Once again, please press star 1 and 1 on your telephone and wait for your name to be announced.

Please stand by while we compile the Q&A roster. We are now going to proceed with our first question. And the questions come from the line of Tate Sullivan from Maxim Group. Please ask your question.

Your line is opened.

Great. Thank you. Good to hear from you again. How are you both? And thank you. Hello, Tate. Good morning.

We're all well. Thank you.

Good. Is this, just looking back at the historic growth of UC's fleet, is this the second bare boat charter in the fleet, the one you're undergoing finalization of the terms with the Japanese counterparty?

The one we just announced now is going to be the third one.

The third one. Okay. And then all those, can you go in a little bit what will make you decide to exercise the purchase option or not at the end of those charters?

Well, for us, it's a given that we're going to exercise the purchase option. So for us, it's pretty much more like an obligation, even though it's written as an option. So we expect, in all cases, to exercise the purchase option, which in any case, all deals, and we expect the third one as well, are considered to be upon the date of the exercise to be excellent deals for the company.

Okay. And were the other two with the Japanese counterparty as well, too?

Yes, yes, all three with Japanese counterparts, correct.

And then for the G&A in the quarter declined sequentially to about 2.2 million, 2.7 million. Was that, I mean, is that the run rate going forward or what was the G&A in the prior quarter attributed to? Or is that change in stock-based comp mostly?

I think... state that the levels that you've seen for the fourth quarter is the levels that we're targeting going forward, around 2.5 to 3 million, and we're confident that we're going to achieve such levels. Now, in some cases, when there is, as you know, the equity incentive plan is front-loaded, and it's usually issued in the beginning of the year, so usually in the first quarters of the year, you will see some additional non-caste expense burdening the GNAs. But otherwise, in terms of cost expenses, we don't expect increases. And given that the fleet size of the company increased, the GNA on a per vessel, per day basis, we're going to be reducing steadily going forward.

And then, do you still have the warrants that you have outstanding? Is it still about, if you mind sharing this, about $7 million? And does the exercise price adjust lower with each dividend you pay, or was it just the dollar special dividend?

No, these warrants do not have any adjustment provisions for regular dividends. They adjust only with one of dividends. So the quarterly dividends that we're now paying are not affecting the price of the warrants, which remains at 2.25. And we have currently around 6.9 million of those outstanding.

And then with the forage strategy, so going forward, we're expecting less of a percent of the days after 2Q to be fixed. Can you reiterate your comments there, please?

Yeah, that's correct. I mean, back in December and November, we decided to fix forward in order to cover the Q1, which is traditionally the quickest quarter of the year. Of course, when we saw levels at 14,000 for Q1, when the same thing was in single digits a few months ago, of course, that was an opportunity that we had to take in order to reduce our exposure and minimize loss for the company. So it was a risk control. Of course, we didn't know at the time that Q1 of 2024 would be the strongest Q1 of the last 10, 15 years. So, you know, we did cut losses and we, of course, you know, did a very good risk control. But at the same time, we have kind of cut the profits of the company for Q1. However, Q2 and going forward, we are now examining our options. And if we decide to proceed, it's going to be at substantially higher levels to fix the the regs going forward.

Oh, and one last one. Is it correct for the timeline if you would decide to order a new dry bulk ship, whether a Cape or Cams or Panamax? Would it be, I mean, at this point, based on other company announcements, second half of 27, the earliest delivery? Or have you seen opportunities to order before that timeline?

That's pretty accurate, Nate, yes. For Cape sizes, we're talking well into 2027. For camps or marches, there might be some scattered slots here and there, even in 2026, but we're talking about minimal opportunities here. But the cave size, which is the most significant, we're talking about well into 2027, so that's a very accurate statement. Okay, well, thank you for answering my question. Thank you, Tate. Nice to hear from you. Thank you.

We have no further questions at this time. I will now hand back to you for closing remarks.

Excellent. Thank you very much, operator, and thanks, everyone, for participating in our Q4 and full year 2023 results. Thank you very much. You now may disconnect your phones.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by. Thank you.