Costamare Inc.

Thank you for standing by, ladies and gentlemen, and welcome to the Kosmari, Inc. Conference Call on the First Quarter 2022 Financial Results. We have with us Mr. Gregory Zekos, Chief Financial Officer of the company. At this time, all participants are in a listening 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 then one on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today, Thursday, May 5th, 2022. We would like to remind you that this conference call contains forward-looking statements. Please take a moment to read slide number two of the presentation, which contains the forward-looking statements. And I will now pass the floor over to your speaker today, Mr. Zicos. Please go ahead, sir.

Thank you, and good morning, ladies and gentlemen. During the quarter, the company delivered strong results. Revenues more than doubled to approximately $270 million, and net income reached $115 million, compared to $60 million for the same period of last year. As of quarter end, liquidity stood at $640 million. Fundamentals and strong charter rates for the container market remain unchanged. a commercially fully employed container fleet with no vessels available on short notice. Congestion shows no signs to eating, while recent events are in fact contributing to further increases. In such an opportune market environment, we have covered all of our container ship open days for 2022, and we have about 95% coverage for 2023. Contracted revenues for the container ship fleet in the water amount to 3.3 billion, with the remaining time charted duration of 4.1 years. On the dry bulk side, the market continues to be strong, with smaller ships earning a premium to the larger ones, also benefiting from container spillover. Supply and demand dynamics remain healthy, underpinned by a historically low order book. Moving now to the slide presentation. On slide three, you can see our first quarter results, which was the best Q1 since our listing. Net income was $115 million, or $0.93 per share. Adopted net income was around $105 million, or $0.84 per share. Our liquidity is up over $400 million year-over-year to more than $640 million. Moving to the next slide. For 2022, our container ship revenue days are 100% fixed, and for next year, we're about 95% covered, locking in 3.3 billion in contracted revenues over the next four years. At the bottom of the slide, you can see some spot fixtures for our dry bulk fleet. During slide five, we continue to be active in the sale and purchase market. We took delivery of our last dry bulk vessel, Norma, and sold one dry bulk ship for a solid profit. We also concluded the sale of the Messini for a capital gain of around 18 million. On slide 6, you can see an update on our liquidity and financing arrangements. During Q1, we concluded two new facilities for over 160 million. We have concluded another handing license of 120 million that gives us additional file power and executed a 40 million loan to refinance four drywall vessels with a leading European bank. At the same time, we continue to maintain a strong balance sheet with liquidity of over 640 million and market value-based leverage at around 20%. Slide 7. The contingency chart of the market continues to perform well. The dry bulk market has rebounded from its seasonal lows in February, and the order book remains low. We also continue to have a long uninterrupted dividend track record, boosted by today's payment of a special dividend and strong sponsor support. Moving on to the next slide. Looking at our leverage development in more detail on slide 8, you can see again our liquidity continues to trend upwards while our leverage trends down. As already mentioned, it's at the modest level of about 20%. In the next slide, you can see our first quarter 2022 snapshot. We had an average of around 170 investors during Q1, up 87% year-over-year, and our adjusted net income was 84 cents per share. Our best first quarters is going public. Our adjusted figures take into consideration the following non-cash items, accrued other revenues, accounting gains from asset disposals, and other non-cash items. On slide 10, you can see some information of the container ship market. Charter rates continue to remain high, while the average duration of time charter speaks is also well above historical averages. Turning to slide 11, you can see that while box rates have declined during the seasonally week first quarter, they do remain healthy while the commercial contingency fleet is fully employed. On the last slide, slide 12, we are discussing the drive-out market, where rates have rebounded from their seasonal lows in February And rates for the sizes of buses we own are up 36% year-over-year in April. Finally, the order book remains at slightly below 7%, which is expected to reduce fleet growth at least for the next two to three years. This concludes our presentation, and we can now take questions. Thank you. Operator, we can take questions now.

Thank you. As a reminder, if you would like to ask a question, please press star then one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star then two. That's star then one to ask a question. And the first question is from Chris Weatherby with Citi. Please go ahead.

Hey, thanks. Good morning, guys. Eli on for Chris. If we can just start with liquidity. Good morning. Good morning. So your liquidity stepped up. Leverage goes down 5.5%. What are the plans that you guys see to continue growth with investment of some of this liquidity going forward?

Look, it's a lot of things. This has to do with the, you know, more generic capital allocation question. Depending on market conditions, and we try to be counter-cyclical, assuming that we feel that asset prices make sense, we will continue expanding our fleet base. However, as you've noticed, for the time being, we haven't done recently any transactions in container ships. And also we have, you know, paused in the dry bulk vessels. Of course, As mentioned, subject to market conditions, we have the liquidity. We have access to commercial bank debt. We also have a hunting license, as mentioned. And should we feel that the prices are justified, we may very well continue expanding the fleet at prices that we feel make sense. Now, apart from that, in the previous quarters, we authorized a share buyback program for which can't be, in theory, utilized. And paying back more debt, in today's market we have a 20% leverage, which is generally low, and the dry bulk vessels, which are on spot trading, they have a leverage of below 50%. So I'm not sure whether it would be optimal to further reduce leverage commercial back debt. So it's going to be either expansion, assuming market conditions justify that, share buyback, and then we'll see. The debt repayment is also an option, but it might not be the optimal one today.

That makes sense. Thank you. So I guess one more on rates and understanding you don't have a crystal ball, but the congestion out of Shanghai and East Asia, and the flow back over to the west coast of the United States, what is the cadence of that in your view right now, out through the rest of the year into 23, and how does that relate to the rate expectations? Understandably, you guys are saying that they're going to be high, but what does that look like from your seat?

Look, generally we don't predict the market. You're right that we don't hold a crystal ball, and generally we're very cautious in predicting the market. We know that the congestion is still the case. There are some concerns regarding labor negotiations coming up in the west coast of the U.S. But we cannot possibly tell you that the charter rates for Panamax in a year's time or end of this year, it's going to be at those levels. I can tell you that now we have less fixtures. compared to the fixtures we used to have. Of course, it is a fact that there are less ships available for prompt delivery. However, some charterers now, they may be adopting a wait-and-see approach, which I feel that from their side makes sense, and also some owners may be adopting a similar approach. I cannot tell you more than that simply because we never predict the market. But today, the latest pictures we've seen, especially for the larger vessels, reflect the charter rates, which are definitely at the historically high levels.

Okay. Thank you.

And again, as a reminder, if you'd like to ask a question, please press star then 1. The next question is from Ben Nolan with Stifel. Please go ahead.

Hi, good morning. This is Michaela Rogers on for Ben. Congrats on the quarter and thanks for taking our questions. Thanks. On the container side, would you be able to provide any color around the two container ship orders that were canceled and if there's any chance that they might be reinstated at some point down the road?

I'm afraid this is something, I'm afraid that I cannot comment on that. And make predictions, this is even more difficult. I think we have, in a filing of ours, we have stated the reasons that those have been cancelled. This is something we are currently working on, but I cannot say something more than that, I'm afraid.

Sure. Thank you. That makes sense. And if I can maybe just squeeze in one more on that note, kind of piggybacking off the dry bulk assets and maybe some capital allocation plans. You mentioned kind of maybe waiting for asset prices to get a bit cheaper before buying more on the dry bulk side. Could you maybe provide any insight about how you're thinking about what might be an acceptably cheaper range?

Look, it's difficult for me to put down numbers for, you know, that type of vessel, that amount, because it depends on the vessel specifications, delivery dates, a lot of things. But as you know, last year, beginning from the second quarter of 2021, we started buying dry bulk ships, and in total we bought 46 vessels. mainly up to Panamax, but many smaller versions. Since then, the market has improved a lot. And that's why we have moved up. So all those acquisitions today, one by one, they're all in the money. I cannot provide specific figures, but as mentioned earlier, we try to be counter-cyclical. And seeing asset values today, we have a wait-and-see approach Of course, there is always opportunities. We do inspect vessels. We are active. But this is something that we're thinking twice. So I'm not saying that we're not going to be exporting. All I'm saying is that we definitely want to make sure that the equity we put into work is going to be invested in assets. whose values today make sense. This is pretty much it. But I cannot make any predictions. And if we find something that still today we feel makes sense, of course we're going to go for that. The same applies for the containerships, but where asset values are today for the containerships, I think it would have been very difficult to find views that, you know, we feel do make sense.

Great. Thank you, and congrats again on the quarter.

Thank you.

Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Mr. Zikos for any closing remarks.

Thank you for your interest in and for dialing in today. We're looking forward to speaking with you again during our next quarterly resource call. Thank you.

Thank you, sir. That does conclude our conference for today. Thank you all for participating. You may now disconnect.