Thank you for joining us for Navios Maritime Partners Second Quarter 2023 Earnings Conference Call. With us today from the company are Chairwoman and CEO, Ms. Angeliki Frangou; Chief Operating Officer, Mr. Efstratios Desypris; Chief Financial Officer, Ms. Eri Tsironi; and Vice Chairman, Mr. Ted Petrone. As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors section of Navios Partners' website at www.navios-mlp.com. You'll see the webcast link in the middle of the page, and a copy of the presentation referenced in today's earnings conference call will also be found there. Now, I will review the Safe Harbor statement. This conference call could contain forward-looking statements within the meaning the Private Securities Litigation Reform Act of 1995 about Navios Partners. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners management, and are subject to risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements. Such risks are more fully discussed in Navios Partners' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Partners does not assume any obligation to update the information contained in this conference call. The agenda for today's call is as follows: first, Ms. Frangou will offer opening remarks; next, Mr. Desypris will give an overview of Navios Partners segment data; next, Ms. Tsironi will give an overview of Navios Partners' financial results; then, Mr. Petrone will provide an industry overview; and lastly, we'll open the call to take questions. Now, I turn the call over to Navios Partners' Chairwoman and CEO, Ms. Angeliki Frangou. Angeliki?

Good morning to all of you joining us on today's call. I am pleased with the results for the second quarter of 2023, in which we reported a revenue of $346.9 million and net income of $112.3 million. We are pleased to report a net earnings per common unit of $3.65 for the quarter. Navios Partners is a leading publicly-listed shipping company, diversified in 15 asset classes in three sectors, with an average vessel age of about 9.8 years. We have 175 vessels, split roughly equally into three sectors based on a charter-adjusted value. The macro environment is challenging. Trade partners continue to be impacted by the war in Ukraine. China has experienced anemic economic growth since it exited the pandemic and currently appears to be addressing potential deflation. The West, while relatively healthy, is dealing with inflation while fearing recession. Whether dry, container or tanker, there's a great deal of uncertainty about future prospects. We continue to focus on things that we can control, such as reducing our leverage rate. Our stated goal is to reduce leverage so that our net LTV falls within the range of 20% to 25%. This past quarter, net LTV picked up slightly because of some deterioration in [steel value] (ph). However, our accumulated cash offset most of this decline. I mentioned this [so maybe] (ph) -- so that you can understand how important we view this single metric. Please turn to Slide 7. As you can see, we have $270 million of cash on our balance sheet, an increase of approximately $57 million per last quarter. We are investing our net cash through our treasury function and earning about 5% on an annualized base in the second quarter of 2023. We secured $350 million of new financing in the second quarter of 2023.…

Thank you, Angeliki, and good morning all. Please turn to Slide 9, which details our strong operating free cash flow for the second half of 2023. We fixed 71% of available days at an average rate of $25,459 net per day. Our contracted revenue exceeds expected total cash expense for the remaining six months of 2023 by about $65 million. We have 8,146 open and index-linked days that will provide additional profitability. Slide 10 demonstrates our diversified platform in action. We aim to benefit from counter-cyclicality by redeploying cash flows from well-performing segments into assets in underperforming segments. We believe a diversified asset base moves volatility on our financial statements. You can see this dynamic playing itself out in our asset base. As of the second quarter of 2023, container values dropped by 4% and drybulk and tanker volumes decreased by 1%, respectively, compared to, say, to the fourth quarter values. In sum, the net change to our fleet value is a decrease of approximately 2%. Multiple segments also allow us to optimize chartering. In segments with attractive returns, we can enter into period charters. In other segments, we can be patient. Our containerships are 100% fixed at $38,200 net per day, our tankers are 89% fixed at $26,088 net per day, and our drybulk fleet is 66% fixed at $14,620 net per day. As you can see from the chart on the bottom, overall we fixed 80% of our 13,779 total available days for the third quarter of 2023 at the net average rate of $24,543 net per day. Please turn to Slide 11. We are always renewing the fleet so that we maintain a young profile, benefiting from newer technologies and more carbon-efficient vessels. We have $1.4 billion remaining investment in 22 newbuilding vessels, delivering to our fleet…

Thank you, Efstratios, and good morning all. I will briefly review our unaudited financial results for the second quarter and first half year ended June 30, 2023. The financial information is included in the press release and is summarized in the slide presentation, available on the company's website. Moving to the earnings highlights in Slide 13. Total revenue for the second quarter of 2023 increased by 24% to $346.9 million compared to $280.7 million for the same period in 2022. Time charter revenue for the period is understated by $7.5 million because of U.S. GAAP -- because U.S. GAAP rules require the recognition of revenue for our charters with de-escalating rates on a straight-line basis. Available days increased by 20.4% to 13,572, compared to 11,269 for the same quarter last year. Our average time charter equivalent rate was $23,900 per day, in line with Q2 2022 levels. In terms of sector performance, both tankers and containers enjoyed improved rates compared to the same period last year. TCE rates for our tankers increased by 89% to $30,947 and for our containers by 12% to $35,466 per day. In contrast, our drybulk TCE rate was 36% lower compared to the same period last year at $15,715 per day. EBITDA for Q2 2023 increased by 23% to $201.6 million compared to $163.5 million for the same period last year. Our EBITDA includes a $10.2 million gain related to the sale of four vessels. Net income for Q2 2023 decreased by 5% to $112.3 million compared to $118.2 million in Q2 2022, mainly as a result of a $16.3 million increase in our net interest expense due to the increase in our debt levels and interest rate costs. Our average interest cost increased from [4.27%] (ph) in Q2 2022 to 7.44% in Q2 2023.…

Thank you, Eri. Please turn to Slide 20 for the review of the tanker industry. While GDP is expected to grow 3% in both 2023 and 2024, based on the IMF's July forecast, there is an 85% correlation of world oil demand to global GDP growth. In spite of economic uncertainties and the Ukraine crisis, the IEA projected 2.2 million barrels per day or a 2.2% increase in world oil demand for 2023 to 102.2 million barrels per day and a 1 million barrels per day increase in 2024. Chinese crude imports continue to rise, averaging 11.3 million barrels per day through July, a 12% increase over the same period last year, assisted by a record 12.7 million barrels per day imported in June. Following a very strong Q1 across all asset classes, tanker rates softened only slightly in Q2, but remained well above long-term averages on the back of strong supply and demand fundamentals. Minimal fleet growth and shifting trading patterns resulting in longer haul routes, especially for Suezmax and Aframax. The recent OPEC cut, although less than the headline numbers, and seasonality have put downward pressure on VLCC rates, particularly out of the Middle East Gulf. Turning to Slide 21. As previously mentioned, both crude and product rates remain strong across the board due to previously mentioned supply and demand fundamentals. Product tankers are also aided by healthy refinery margin and discounted Russian crude exported to the Indian Ocean and the Far East returning to the Atlantic as clean product. 2023 crude and product ton mile growth is expected to increase by 6.6% and 11.9%, respectively, with continued ton mile growth in 2024. Turning to Slide 22. VLCC net fleet growth is projected at 2.2% for 2023 and negative fleet growth of 0.9% for 2024. This decline can…

Thank you, Ted. This concludes our formal presentation. We'll open the call to questions.

[Operator Instructions] And our first question will come from Omar Nokta with Jefferies.

Thank you. Hi. Good afternoon. Thanks for the update. Always very detailed across the business and the industry. I did want to ask just about kind of -- clearly, you guys have been very active in terms of deploying your capital, I would say, wisely. You've been selling ships on the older end and you've been investing in your new buildings. And I wanted to ask you, you highlighted and you've talked about this for several quarters is the net LTV trying to get that down into the 20% to 25% range. Given you're a bit above that at the moment and we can see visibly the path to get there over the next couple of years, but in the interim, how are you thinking about deploying the capital today for getting the newbuildings that you've got and for getting [indiscernible] selling ships, how are you thinking about deploying capital for second-hand ships on the water today? Do you see opportunities there given the pullback we've seen definitely in drybulk and in containers? And as you mentioned, some uncertainty ahead just overall, do you think there's opportunities to deploy capital in acquiring second-hand tonnage at discounted prices?

Good morning, Omar. I think you have seen how we are looking. I mean the macro environment, we see the challenges, and they can be from Ukraine -- the continued war in Ukraine, the Chinese -- the unexpected Chinese anemic growth and Western countries that are between inflation and recession, nobody knows exactly if and when. So, we try to be conservative. We see on the container segment, we have done [a renewal] (ph) of our fleet were 100% fixed, so we are sitting in a position to watch the market. On the tanker segment, as you very well said, we are optimistic on the market. We see that longer ton miles both on crude and products to be here and remain. We see -- and what we have done, we sold all the vessels. We sold about 25% of our fleet, replaced with high-quality vessels, which we also charter out on quality counterparties, providing a 12%, 13% return and basically limiting our residual values. This is on -- and then -- so this is a position where we continue and we chartered out our vessels at very attractive rates. Now on the dry, we are -- we have done a replacement of our fleet. We are opportunistically fixing our vessels on strength, and we are working. On any year, we will have 10% of our fleet replaced, more or less, depending on the position and the replacement. Our guidelines on what we are trying to achieve, you can see very clearly from our actions. Now, looking on our targets, we have been articulating what is liquidity you want to have per vessel, about $2 million per vessel, and our target LTV -- net LTV. And this is two areas where I think is fundamental to us. As we never know what will happen in next year, this is very fundamental on how we focus on this.

.:

Yes. And this is something you have heard that previously from us. It is a very -- it is basically calculated on the net LTV. So...

Okay. And then maybe just on a follow-up. You highlighted the MR newbuildings, you ordered two late last year, you just ordered another two. You fixed the initial ones on a five-year charter, where your residuals really come down -- residual risk is really low. And just in thinking about the latest two orders, do you think -- is the plan or is the thought process to also secure those two newbuildings similar to the first two on these five-year charters? And also, can you give a sense of whether the charter of the first two given indications of interest on wanting more?

I mean we see quality counterparties. I mean we see top-end users that they like this kind of vessels. We are talking about by replacing this, getting the older vessel out and getting these new MR2, we have substantially reduced cargo footprint, less consumption. So, this is -- we see a high demand for quality price. And securing this specification, I mean we think that we will be able to fix on these vessels, the second two vessels, in attractive charters, not necessarily to the same counterpart, but we are not eliminating that possibility.

Okay. Got it. And then maybe just finally on just the overall, you have the newbuildings in the container ships. And in the tankers, you just took delivery of your final Cape newbuilding. In terms of further new buildings as opportunities arise, do you think there's something to do in drybulk? Or do you look maybe to perhaps balance out the portfolio that given that is where your biggest footprint is, at least in terms of vessel count? Or is drybulk also an opportunity for newbuildings if there's -- if you see things that makes sense?

Efstratios always have this nice graph in the past where basically the newbuilding prices are on drybulk and [Indiscernible] at this point. We have -- but we are always open on possibilities of vessels, investing in the water. We are looking and we are doing our math all along on every segment. We are trying to be as disciplined buyer. Don't forget we bought over 10 drybulk vessels, which we already have completed and put them on charters -- five-year charters. And that was done -- the last one was in this quarter, I think. So, basically, this is the position we already have taken, and we did it -- we have [indiscernible] since in 2020 also -- some time ago, 2021.

Yes. Okay. Very good.

[indiscernible]

Yeah. Definitely. Okay. Well, thanks Angeliki. I'll turn it over.

Thank you. [Operator Instructions] And our next question will come from Chris Wetherbee with Citi.

Good morning, good afternoon. It's Rob on for Chris this morning.

Good morning, Rob.

Could you give an update -- good morning. We've seen some nice uptick in terms of the [freighters] (ph) pricing Mainland China to U.S. West Coast in the past couple of months. We've also seen a little bit of an improvement off some lows in terms of Mainland China to Europe. Could you give us an update in terms of what you're seeing within your customer base as we think about peak and looking out to next year for the container market?

Right. So, our view is a bit more macro that we're watching the different routes. It's a -- some are up, some are down. You can see the average on the SCFI that we talked about has been pretty good. The U.S. consumer continues to surprise a bit. Remember, we're leasing out these ships to the other charters who are looking at the end users. We see a lot of -- there's some newbuilding overhang, right, but on the lower sizes, below 13,000 deadweight, I think the order book is probably half of what it is of 28%. So, we're very confident going forward that the charterers will be looking at taking on ships. It's like the housing market. Most of the ships have been taken, and if you're looking to get something, there's not much out there. So, some of the time charter rates have been going up and so is the duration, which is a very good sign for us. But it's a challenging year for us and for the market. But I do think you'll see some surprise numbers. And of course, being 100% fixed, we can sit back and watch it objectively.

No, that makes sense. And as we're thinking about next year, kind of how fixed are you guys in the time charter? Can you just kind of remind us where you are with regard to charters coming off over the next couple of years?

Efstratios?

Yes. In next year, we only have around 80%. We have around 80% of our vessels -- containers fixed. And we are starting to get also delivery of the newbuilding vessels coming from the end of this year. So, we will have also the replacement of the cash flows of the vessels that are coming up. But I would say that we are pretty much covered for at least '24 in our fleet in the containership.

That's helpful. Obviously, there's been a lot of noise about climate change and the impact in terms of certain key trade routes. We're seeing very, very low levels in the Panama Canal, which is causing kind of backlogs. Are you seeing that in other trade routes? And maybe you could just kind of talk higher level kind of what the impact you're seeing from congestion and from low water levels is having on just broader demand across the different vessels that you guys operate in?

Yes, that's a very good and very topical. Ted will go through, but a big picture you should think of the following. I mean, we saw the pickup on the waiting for Panama Canal. That is basically a 50% increase from what usually was there. And that is -- it is actually going to be affecting -- it's like congestion. It affects -- it creates longer time at sea, longer ton mile, and they have to divert. That is one charging point. And then -- and it is basically like congestion. So I mean...

Yes. It's such a big topic, the climate change. I think you're going to El Nino now. You're going to have some better grain out of South America, less out of Australia. You have water issues in Europe, which would sort of eliminate some of the takeaway from the biggest ships as the barges go inland. There is the yin and the yang. Also, I think, China was having rain in the wrong places. So it's every year, you're going to be looking at different issues that affect. But I do -- as Angeliki said, the Panama Canal is definitely a freshwater issue, which is related or not to the climate change, but it's going to run through the winter that could bring congestion for bulkers that are going with grain, the containers coming back, some of the [vessels] (ph) coming back from the Pacific. There's a lot of issues here. But really, the macroeconomics ones that we think are more instrumental in driving the market, but it's certainly an issue that we're all watching on the climate chain side.

And Ted, on the bulker with regard to the Panama Canal, are you getting inbound inquiries from some of the container, the vessel operators to really kind of extend trade route, i.e., kind of go around Africa as opposed to through the Panama Canal given where the backlog is of getting through the Panama Canal, or is that not yet something we're seeing?

Yes. No, not yet. I think you're going to see some more congestion as the Gulf grain season opens and clogs that canal more. You'll be seeing some grain vessels going through the Suez going out to the Far East. So, even if congestion stays where it is, I think as Angeliki said, we're probably at about 80 ships normally or about 130 now on the canal four days, not so much. But as that goes up, that may stay there in those numbers. But what you'll be seeing is other ships doing longer routes, which you don't calculate into the canal congestion, right, but it's going to be affecting the routes, and it makes the fleet more inefficient, which is obviously brings the rates up.

Yeah, that makes a lot of sense. Really appreciate the color.

Sure. Thank you.

Thank you. At this time, there are no further questions. So, I would like to turn the call back over to Angeliki for any closing remarks.

Thank you. This completes our second quarter results. Thank you.

Thank you, ladies and gentlemen. This does conclude today's program, and we appreciate your participation. You may disconnect at any time.