Good morning. My name is Ashley and I will be your conference operator today. At this time, I would like to welcome everyone to the Pangaea Logistics Solutions Third Quarter 2021 Earnings Teleconference. Our host for today's call are Mr. Mark Filanowski, Interim Chief Executive Officer, and Mr. Gianni Del Signore, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 11 a.m. Eastern Standard Time. The recording can be accessed by dialing 800-839-5492 domestic or 402-220-2551 international. All lines are currently muted. And after the prepared remarks, there will be a live question-and-answer session. It is now my pleasure to turn the floor over to Ms. Emily Blum with Prosek Partners. Please go ahead.

Thank you, Ashley, and thank you for joining us for this morning's third quarter 2021 earnings conference call for Pangaea Logistics Solutions. With us today from the company are Interim CEO, Mr. Mark Filanowski, and Chief Financial Officer, Mr. Gianni Del Signore. Before I turn the call over to Mark, I'd like to read the Safe Harbor statement. This conference could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Pangaea Logistics Solutions. Forward-looking statements are statements that are not based on historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Pangaea Logistics Solutions' management and are subject to risks and uncertainties, which could cause the actual results to differ from the forward-looking statements. Such risks are more fully discussed in Pangaea Logistics Solutions' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Pangaea Logistics Solutions does not assume any obligation to update the information contained in this conference call. Also, please recall that a supplemental slide presentation will accompany this call. Those slides can be found attached to the 8-K that was filed with the last evening's release, which is available on the Investors section of www.pangaeals.com under Company Filings or on the SEC’s website at sec.gov. Now, I would like to turn the call over to Mr. Mark Filanowski. Mark?

Thank you, Emily. Hello to all who have joined us today for Pangaea's third quarter 2021 earnings call. This morning, I will provide an update on our operations and the overall market before turning the call over to Gianni, our CFO, to provide a more detailed overview of the third quarter 2021 financials. We will then open the line for questions. First, I'm happy to report that Ed Cole, our Chief Executive Officer, who is out on sick leave, is recovering well. We're in constant touch with him. And I can tell you he was proud of our performance this quarter. The timing of his return to the office is not yet determined, but I can tell you, we all greatly missed his presence here. We hope you've had time to review our press release and the accompanying presentation issued last evening. Our third quarter results reflect both rising freight levels not seen in over a decade and the additional ship capacity that came onstream for us this year, including the three new building ships delivered to us and the three secondhand ships purchased. During the third quarter, which is seasonally one of our strongest, we saw the average published market rates for Supermax and Panamax vessels increase over 200% from an average of $10,286 per day in the third quarter of 2020 to $32,033 per day in the same period of 2021. This boosted our earnings. Further, the arrival of the summer ice season allows us to deploy the full strength of our ice class capabilities to provide our clients with specialized services required for demanding conditions. Our average net TCE earned of $28,770 per day increased over 100% compared to the third quarter of 2020. We report adjusted EBITDA of $33 million and adjusted net income of $21.7…

Thank you, Mark. And thank you all for joining us on today's call. Before walking through our financials, I'd like to expand on capital initiatives and highlight our results for the quarter. This year, we have taken steps to deploy our capital, focus on niches and capitalize on an improving drybulk market to generate and return shareholder value. We have used cash from operations to renew our own fleet, decreasing the average age of the fleet by 25% to less than 9 years; increase our short-term chartered in-fleet which requires significant working capital investment with high charter rates and bunker prices; reduce debt as scheduled; and pay dividends. Turning to our third quarter financials starting on page 6 of our presentation. The continued improvement in the market during the third quarter drove increases in both voyage revenues and time charter revenues. Voyage revenues increased approximately 90% to $186.4 million and charter revenues, which are opportunistic and more closely tied to market rates, increased approximately 372% to $26.7 million. The optionality of our chartered in strategy allows us to expand or contract our chartered in fleet and in turn selectively release excess ship days into the market under spot time charter arrangements. Our TCE rates earned increased 116% to $28,770 for the third quarter of 2021 compared to $13,316 for the same period of 2020. Charter expenses paid to third-party ship owners increase to $103.7 million from $35 million, a 197% increase due to increases in market rates to chartered in vessels and an increase in charter in days as part of our flexible charter in strategy, allowing us to supplement our own fleet with short-term chartered in tonnage at prevailing market prices when needed to meet cargo demand. Unrealized gain on derivative instruments was $5.3 million for the third quarter…

Thank you, Gianni. We thank our customers, business partners and shareholders for their continued commitment and partnership. And we look forward to updating you further in coming quarters. I will now open the floor for questions.

. And we'll take our first question from Liam Burke with B. Riley.

Mark, on the drybulk side, iron ore, with Chinese steel production declining over the last several months, has been moderating. And iron ore is an important commodity that you transport. But looking at the fourth quarter current rates that you're earning, it doesn't seem to be affecting the business. Is there something different that's going on in your iron ore demand?

I just want to let everyone know that Mads Petersen from our Copenhagen office, Managing Director of our Copenhagen office, is on the line for questions also. So, if you have any questions about that fleet that's managed out of Copenhagen, Mads will be able to answer those. But in answer to your question, Liam, about the iron ore prices, the physical market has dropped over the past couple of weeks. The numbers that I mentioned in the conference call were for voyages that have been shipping dates that have been performed so far this quarter. So, I think we were still feeling the strength of that market when we look at those numbers. But looking forward, we see continued strength in the physical market, but not as strong as it was. One of the reasons is some tamping of demand for iron ore, but there's a strong demand for coal, on the other hand. So, we don't see that the iron ore market will really drag spot rates going forward, but there will be some tempering of the volatility.

On the rates, spot rates have been pretty healthy. Has there been any interest on your customers' part to come to you and say, hey, we'd like to fix some of these rates on a longer term duration rather than operating or operating in the spot market?

Late in the third quarter, going into the fourth quarter, we have seen some activity, particularly in our ice business, people coming to us to try to fix the first, second quarter, maybe offer us cargoes through the rest of 2022. So, yes, there's been a little bit of activity as the rates have dropped a little bit, but people still see a pretty good market going into 2022 and a little beyond that.

. We'll go next to Poe Fratt with Noble Capital Markets.

If you would, please pass along my regards to Ed and here's hopes to a speedy recovery. One, just if we could look at the forward cover or the days that you booked for the quarter. Do you have a guess or an estimate on what you're going to see in shipping dates for the quarter? And in the context of what you talked about booking, it seems like that potentially is less than half of the quarter that you might see in shipping days. And I'm just trying to understand what's going on, whether you're not booking that far in advance or just can you give me some context on that?

Well, we do book some stuff in advance. The numbers that we put down are the days that have been performed up to November 8. So, those are the voyages in process and voyages can take anywhere from 10 days to 40 days. So, we're in the middle of some of the voyages. We're at the beginning or at the end of others. So, that's just a snapshot in time that we disclosed. In terms of what we see for the rest of the quarter, our fleet has dropped just a little bit since the third quarter. So, there won't be quite as many shipping days in the fourth quarter. The third quarter is our busiest of the year traditionally. Fourth quarter is usually pretty good, too. So, with the market rates where they are today, they seem to be – have reached some kind of plateau here. And we don't expect they'll be substantially different than the first five weeks of the quarter.

So that's a hard stop, Mark, as far as looking at November 8. So, it looks like you're running a fleet of about 51 right now.

Yes.

Can you give me an idea of sort of what your last day of booking was relative to that $33,000 a day of the TCE?

Poe, when you say the last day of booking, what exactly are you referring to?

Well, I'm sorry. So, you have an average right now that you've booked for the fourth quarter. Can you give me an idea of sort of what the range of that has been so far in the quarter?

In our business, we're performing contracts, forward bookings and then, from time, we're also doing – participating in the spot market. So what we're seeing so far in the fourth quarter is a runoff of the business that we priced in the third quarter or completion of trade, which extends into the fourth quarter. So, what we try to show in that graphic is basically what voyages we've performed through November 8 that are basically a spillover of the third quarter going into the fourth. There could be some voyages in there that were priced towards the end of the third quarter that performed early in the fourth quarter. But it's a pretty wide range how we execute on both the contracted business, the spot bookings and the forward bookings. So, it's really difficult to pinpoint the exact time of booking those voyages. What we're really trying to show is what is going on with our TCE earnings as we entered in the fourth quarter. And really, we would expect that increase. In a rising market, we tend to lag as the market rises. I think Liam had said that it was higher rate going into the fourth quarter, which settled a bit pricing wise, but, fortunately, we're executing on business that we're pricing a few months or longer in advance.

I guess I should have just asked. Do you think that the rest of the quarter will be at the same level that you're seeing right now, that $33,000? Or do you think it will be higher or lower for the rest of the quarter?

Well, spot rates have moved down some. Physical spot rates have moved down some from where they were at the end of the third quarter. So, I would say if there's a trend for the market, trending downwards, but still well above where it was a year ago.

Again, I just didn't want to have people have the impression that you're going to be able to book a full quarter $33,000. If you do that, then you're your numbers look even stronger than they did in the third quarter. So, I was just trying to make sure that people were on the same page. Gianni, congratulations on the new acquisition. It's the first quarter of . Have you thought about how you're going to finance that right now?

We're actively looking at it. I think our history of the previous acquisitions will hold true. So, we're looking at various relationship banks and other sources. And, yeah, we're pretty confident we'll be able to achieve in line with what we've done earlier this year. So we're actively working on it. And as we approach the first quarter and closer to delivery, we'll certainly be in a comfortable position.

Any thoughts, Mark, on selling some of the older assets? Or are you going to sort of ride out the market and see what happens into 2022?

No decisions yet, Poe. The acquisition of this Panamax will give us a little bit of flexibility with our fleet that's dedicated to our bauxite trade in Jamaica. So that's all we're trying to do, is get a little bit more flexibility, read the market a little and decide what to do with the older assets and when to do it.

The last new build is either close to getting delivered or might have been delivered by now. Gianni, can you give us an idea of how much CapEx is going to be recognized in the fourth quarter on that asset?

Fortunately, our JV partner will be contributing their final capital commitment to take delivery. So, there will be the final delivery installment from our partners that will sort of make the cash impact of that delivery relatively neutral. There will be some delivery costs, around $750,000, maybe $1 million of delivery costs to us. But fortunately, a lot of this was – we tried to have it as buttoned up as possible when we entered into these contracts for these newbuilds. So, yeah, considering the capital coming in from our JV partners, it'll be a pretty small capital outflow for us in the fourth quarter

When we look at derivatives book or your FSA book at the end of the quarter or September 30, it looks like it was $10.9 million as far as an asset in the balance sheet. When will that runoff? Can you give us an idea of sort of the aging of that FSA book right now?

Some of our positions settle October and November and December, but we're covering – it runs out up until and through 2023. So, there is a bit of a runway there on final settlement of these positions. It does create noise on our P&L, the way we recognize it, right? We recognized this year a substantial unrealized gain on FSAs. We've also realized some gains through the P&L as a reduction of charter hire throughout this year. But looking at point in time, it certainly adds some volatility there to the P&L as we mark it to market. So, as we've seen the market decline, we will see a reduction in that position, both from settlements of the near-term conditions or the near-term months of, like, October, November, and December, but we'll also see the mark-to-market, wherever the market may be December 31, will certainly impact our P&L as we recognize that potential reduction in the value of that position.

Just squeeze in one last one, if you wouldn't mind. How have charter higher expenses looked for the quarter? Mark said that you're going to run probably a little less shipping days in fourth quarter than third quarter partly because of seasonality. Can you give me an idea of how charter hire expenses look for the fourth?

Charters and the rates have decreased along with the market. We're not directly correlated with the average market because we take ships all over the world at different places in different positions. So, we don't really look at charter hire expense as a number itself. It is what it is based on the ships that we need to move our cargo. But those chartering rates have moved down along with the general market.

We'll take our next question from Charles Porter, private investor.

You've really been killing it. I'm a retail investor. So, my question is a little beyond the quarter. And thanks for taking my call. I'm just curious, I've heard a lot of news, just macro shifters concerned about the emission requirements for boat engines going forward next few years. And I was just curious how, for a relatively smaller firm, you guys are going to meet those challenges, especially since it seems like your fleet seems to be pretty new, but may be impacted by additional requirements in the US and EU?

It's a really good question. We're talking about it an awful lot these days. Mads Petersen has been watching those developments from Europe. So, why don't I ask him to try to answer that question.

The main thing, I think, to look about when you look at our own fleet in our company is that the core of it is relatively young and actually are combined with the first round of regulations coming in 2023, meaning that we will meet those requirements. But further out than that, we fully, of course, acknowledge that the industry needs to do its part in terms of improving and reducing our emissions. However, the real good solution is still not available. What we're doing in the meantime is we're spending a lot of energy on how we run our ships, how we maintain our ships and essentially are using various new tools in terms of optimizing our maintenance program, for instance, to reduce drag on the ships by . We are using various machine-learning based algorithm in terms of optimizing the route. And all of that goes into reducing our carbon footprint. But in in terms of the alternative fuels, the solution is simply not there other than potentially a power reduction, which will apply to essentially most ships less than 12 years old or something like that, come 2023 which in the short term would be the way to comply. But, of course, we are looking at – trying to follow all the technological advances that are being made in various directions. But right now, we don't have a solution. Not us, but no one really has that at the moment.

I guess I can add two points. One is that when we were looking at building our new ships back in 2019, the answer generally was, oh, LNG will be the fuel of the future. I think that's been discounted by the world that LNG isn't really the answer. We didn't do it at that time because of the restrictions of the Arctic trade. We were not able to fuel the ships with LNG in the Arctic. So, we didn't make that step. I think it ended up to be the right step for those ships. But the other comment I'd like to make is that efficient transportation is good for the world. And it's also good for shipping companies. So we're trying to make our ships as efficient as possible, so that we do burn less fuel and we do emit less harmful emissions to the world.

But the key takeaway I got this, the whole industry is just going to have to wait until standards and technology meet with, I guess, this ESG push, right? We won't be able to upgrade something that hasn't been invented yet. Got it. Thank you.

And there are no further questions. I will now turn the call back over to Mark Filanowski for any final thoughts.

Well, thank you for participating in the conference call today. We hope to continue our progress and our performance throughout the rest of the year. I look forward to our next conference call. Thank you very much.

Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect at any time.