Good morning. My name is Katie, and I will be your conference operator today. At this time I would like to welcome everyone to the Pangaea Logistics Solutions Second Quarter 2022 Earnings Teleconference. Our hosts for today's call will be Mr. Mark Filanowski, Chief Executive Officer; Mr. Gianni Del Signore, Chief Financial Officer; and Mr. Mads Boye Petersen, Chief Operating Officer. Today's call is being recorded and will be available for replay beginning at 11 AM Eastern. The recording can be accessed by dialing 800-938-2490 domestic, or 402-220-9028 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, operator. And thank you for joining us for this morning's second quarter 2022 earnings conference call for Pangaea Logistics Solutions. With us today from the company are CEO, Mr. Mark Filanowski, CFO, Mr. Gianni Del Signore, and COO, Mr. Mads Boye Petersen. 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 last evening's release, which is available on the Investors section at pangaeals.com under company filings or on SEC website at sec.gov. Now, I would like to turn the call over to Mr. Mark Filanowski. Mark?

Thank you, Emily, and thanks to all who have joined us today for Pangaea's second quarter 2022 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 our second quarter financial results. We will then open the line for questions. After the market closed yesterday, we issued a release and accompanying presentation highlighting our record second quarter results. We continue to demonstrate strong execution on our long-term strategy that emphasizes profitable growth within niche, higher margin dry bulk shipping and logistics markets. An elevated TCE environment, together with more owned shipping days from our expanded fleet contributed to significant year-over-year growth in revenue, net income, adjusted EBITDA and free cash flow during the second quarter. Total revenue increased 34% to $195 million in the second quarter. Net income increased 30% to $25 million and adjusted EBITDA increased 107% to a record quarterly result of $44.2 million. Our cash position also reached an all-time high of $102 million providing us with the balance sheet optionality to support the ongoing growth of the business and to continue our dividend policy. While the macro environment remains volatile, our delivery of a unique integrated shipping and logistics model positions us to support our customers with a more complete supply chain offering, ensuring reliability and on time delivery. We continue to focus on higher margin niche markets, including ice class where cargo requirements are highly specific for our customers. Given the high level of specialization required, we experienced excellent customer retention together with longer duration's DOAs. Our four Post Panamax Ice Class 1A vessels built by us and delivered during 2021. We're fully deployed in Q2 and all four will be fully utilized…

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 a few recent transactions and highlight our results for the quarter. This year, we have taken steps to deploy our capital, focus on issues and capitalize on the dry bulk market to generate and return shareholder value. We have used cash from operations to renew our owned fleet, which as Mark mentioned, we completed the sale of the Bulk Pangaea after taking delivery of the Bulk Concord earlier this year. Renewing our bauxite shuttle fleet and generating $8.4 million of cash from the sale of the Bulk Pangaea. Reduced debt as scheduled paying $9.6 million in long term debt and finance lease obligations, and consistently pay dividends reflecting our continued confidence in the outlook of our business. We believe that our business model and operating leverage position us favorably to maximize our profitability through the cycle. And as Mark mentioned, our ability to deploy capital in a prudent via opportunistic manner has been integral to our track record of value creation. In what remains a volatile market, we believe a balanced approach to capital deployment is appropriate, one that includes a consistent return of capital program together with debt reduction and investment in high return organic growth investments, reflecting our continued confidence in the outlook for our business. Turning now to our second quarter financials, starting on Page 6 of our presentation. You will see a year-over-year increase in our total revenues driven by a 29% increase in our achieved TCE rate to $27,139 per day, which represented a 4% premium to the average published market rates. Voyage revenues increased approximately 48% to $173.2 million and charter revenues decreased approximately 21% to $22.4 million as our fleet…

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

Thank you. Our first question will come from Liam Burke with B. Riley. Your line is now open.

Thank you. Good morning, Mark. Good morning, Gianni.

Hi, Liam. Nice to hear from you this morning.

Thank you. It's nice hearing the results. You opportunistically added the four ice class vessels last year. You essentially swapped out the new acquisition with the sale of an older vessel. As we look forward, rates remain attractive how are you balancing chartered in versus possibly adding fleet assets?

Fleet assets for us, when we add them, they're a little bit opportunistic, a little bit planned. In fact, right now, we're taking advantage of an opportunistic deal that we've been involved with for a while. We've got to ship on charter again for about a year and it's -- I guess, it's a little bit -- it's about the average age of our current fleet, but what the plan would be is to acquire this vessel from its owners who want to sell it. They've come to us on a private basis. And we're in the final negotiations of purchasing that ship with probable plan to sell an older vessel that's due for docking in about six months. So fleet renewal, like I said, is constantly ongoing, but that wouldn't be a net new addition to our fleet. Pretty happy with right now with the size of the existing owned fleet and we charter in for needs when cargo opportunities come along. So we're about where we have been over the past year in terms of chartered in fleet and owned fleet right now and look to stay there for the remainder of the year profitably (ph).

All right. Fair enough. The rates are really attractive even when we're looking at the partials for third quarter. They're a little off sequentially, but then having said that, they're very, very high. Directionally, how do you see rates going through the balance of the year?

Yes, we see mostly blue skies with a few thunderstorms on the horizon. hopefully they pass us by. But if they do, we think any decrease in demand or any pressure on demand think it will be only temporary in our segments. Spot market has been pretty good. As you said, the rates are high compared to historical numbers, not as high as they were a few months ago, but everybody I think in our business is comfortable with rates where they are today and maybe we see a little bit more upside than downside.

Great. Thank you, Mark.

Thank you. Our next question will come from Mike Heim with Noble Capital Markets. Your line is now open.

Good morning. Thank you for taking my question. Let me talk about the other side of the organic growth and that's returning proceeds to stakeholders. You do have a lot of debt that looks like it’s come due in 2024. Can you just talk about your thoughts about paying that down or restructuring or refinancing that?

Hey, Mike. I don't think we have any really significant balloons coming up. We do have a couple of ships that are coming up for renewals and we'll probably renew those financings when time comes, whether it's with same lenders or in different packages and get some opportunity to roll that forward. Companies always looking at ways to return capital to shareholders. As I mentioned, we were looking at this ship, it's financeable and maybe even with its financial sale of another ship, we can generate some cash from that purchase and sale opportunity. We're looking at other organic investments in our logistics business today that would be low double-digits but had profitable operations. Working capital is always a little bit of a concern for us because rates can move and bunker prices can move very fast and very hard. So we always like to have a little bit of cushion there. On dividends, we're paying a consistent dividend. We've increased it twice this year already. We're always looking at other alternatives too.

It seems like some of your counterparts have gone to a fixed dividend policy, is that something you'd ever think about?

Their business model is a little bit different than ours and we look for consistency and performance, we look for consistency and distributions to our shareholders, a formula dividend doesn't really fit our business model right now that Board has decided.

Okay. All right. Thank you.

Thank you. Our next question will come from Poe Fratt with Alliance Global Partners. Your line is now open.

Good morning, Mark. Good morning, Gianni. Good morning, Mads. I had a couple of questions. First of all, just to follow-up on the dividend. You had increased the dividend in the previous two quarters and you didn't change it this quarter. Your dividend is still fairly low relative to your earnings. record quarter. Can you just talk about the outlook for the dividend and more in the context of what you did this quarter?

Pro, I think it's our Board's approach to have a consistent, sustainable dividend. And one quarter doesn't mean we can increase the dividend and keep it going for a long time. So I think that the Board has a little longer term approach and wants to look at dividends that way not try to increase it every quarter because there may come a quarter where we've got to decrease it. And afraid of this shock of any decreased dividend might have on everyone's perception.

Seems a little unlikely, but who knows. can you -- so Mark, will we be looking at sort of an annual dividend review or is it just a quarter-to-quarter and more sporadic, I mean that just tends to bring into a little less credit that you'd get for a dividend if you don't have sort of a more consistent policy?

The Board discusses dividends and other ways to get capital back to shareholders at every meeting. Especially active discussions when we have results like this. So I can't, say we have an annual plan, but have we discussed it at every Board meeting.

Great. And you talked about the fleet renewal in the context of this potential opportunity. Before you said that, you said, you potentially were chartering in something for a year. Is this the same situation or can you just talk, clarify that statement a little bit?

Yes, I'm sorry. It is a shift we've had on charter for a year. So we know the ship pretty well. We know the performance. We know what we can do with the ship. And the owner opportunistically wants to sell the ship now. And so we said we'd be interested in buying the ship and we've arranged that with the owner. We're in the final negotiations for the -- under terms of the purchase and hope to sign something in the next few days.

And my assumption is because you've chartered in for longer than average (ph) period that it's part of one of your longer term COAs. Is that sort of the case where you're matching your COA book with owned assets?

Well, that's always part of the puzzle, right? We've got a fixed amount of cargo on the book. and we need to manage the fleet properly in order to serve those contracts most efficiently. This particular ship was chartered in on an index basis. So we've been able to put it in and out of our COA business as we saw -- as we see fit and do any active spot business additionally with that ship. So ships under the COAs except for the ice class business they're not specifically identified to any contracts. We use the ship that's most available and that's suited for that contract. And if one of ours doesn't fit, we try to win in from the market, if that gives us a better result.

Okay, great. And then in the context, Mark, you've emphasized that you have pretty efficient fleet, you've renewed it. But in the press release you were talking about studying ways to make your fleet even more efficient. Can you highlight some of those measures that you take, how much capital it would entail and then also the timing of that energy efficiency boost

Sure. Some of the efficiencies come out of the way we operate the ships, the tracks we take, the speed into – the speed at which we performed the cargo movement. And those things can be optimized with software and study of weather and there's more interaction between our operations department and the people who are performing, the voyage is on the ship. And even when we consider business, we might be able to do a better job of assigning a shift, one shift versus another for a particular cargo to take maybe more cargo and therefore make the whole movement more efficient. So there are a lot of different ways to improve your performance in small measures. and that's done mostly with use of data. You get weather data, you get data back from the ships and then you access that data to make your ship, make your voyages a little more efficient. So that's not a lot of capital investment in those ships, maybe some software investment and maybe the way we do that business in house. There are other ways we might take advantage of a ship in a dry dock to add some better paint systems on the ship that reduce friction that maybe some -- that's not a significant increase, but those paints are more expensive. There are ways that you can try to make a propulsion more efficient by channeling one more and more efficiently to and from the propeller area. Those opportunities do take a little bit of capital, talking hundreds of thousands, not millions. But that takes a little bit of planning. It's usually done when the ship is in dry dock. So you don't take a lot out of service time. So those are some of the things that can be done with the existing fleet that can make measurable but small improvements in the way the ships perform.

Okay, great. And just two quick ones. One is that the Nordic Bulk acquisition of the additional third interest was structured $15 million cash and then $7.5 million over three years. It looks like in the last two years you've pretty much said that you're going to pay off the remaining $5 million in the third quarter. Can you just highlight the decision to do that and is there any carrying cost there you're avoiding or you just have enough cash where you're comfortable getting rid of that obligation right now?

Yes, Poe, I think where the two aspects to that is, one, it's one of our floating rate facilities. So the rate is locked through September, but after that it gets reset. So we see an opportunity to pay down one of our floating rate, we call it, loan facilities. And we have the cash that we decided to instead waiting for another year and letting the interest rate reset, we'll just pay the entire amount off. And it also cleans up some legacy agreements around Nordic Bulk Holdings. So it'll put that basically to bet.

Got you. And is that part of the reason you paid down the 240,000 of related party to or…

Yes. That one is somewhat just balance sheet cleanup. It's noise on our balance sheet having related party payable for that amount of money, $240,000 was -- it was about time that went away.

Okay. Great. And then you added the brand new assets before JV assets. Any way Gianni to quantify that, the impact in the second quarter in your operating results? Was that a major driver for brand new assets or more efficient than the rest of your fleet? Any way to give us color on how that potentially impacted the quarter?

Well, I think the performance of the vessels we fully consolidate the entities. So you'll see the EBITDA generated by those vessels in our quarterly results. You'll see that the implications of the debt, the interest, all of that flows 100% into our results. I think we'll also see those vessels more impactful in the third quarter as they actually are now starting the and trade in the summer season. So to quantify it, I think we get the full benefit of their performance. We have the EBITDA increases based on their trading. And they're within the fleet to separate four specific vessels out of 60 or even four out of the 24 owned vessels. It's harder to provide that color to you. But what we can say is that they are performing, they're earning and they're -- we're getting what we believe is more of the benefit out of those vessels.

Okay. Sorry, just one quick one. As far as your forward cover, 3,026 days already booked in the quarter, in 256 (ph) roughly. Can you -- I took a stab and I calculated that potentially is about 60% of your third quarter days. Is that in the ballpark? And then where are you booking days right now? I assume it's a little bit lower than that 256?

So we're still looking at better line voyages that on average generate a higher return on that. So the numbers we saw didn't include all of our better line activity for the quarter. And yes, when we are in certain parts of the market, the number is probably lower than that, but then we also have a cargo book that also gives us a good cushion and balances out with cargo set up booked in the last six months, which obviously has higher churn than the spot market. So that sort of is the model, right? We unwind as part of the chartered in fleet and consistent their booking cargo with our customers. And of course, the cargo we booked three, four months ago, are in the money now. So I don't foresee a wild change. It's a different number for that reported for the rest of the quarter to be honest.

Okay. Great. Thanks for your time.

Thank you, Paul.

Thank you. Our next question will come from Climent Molins with Value Investors Edge. Your line is now open.

Good morning and thank you for taking my questions. Despite your strong operational performance, you're trading at one of the biggest discounts in the sector. And I was wondering, following up on the capital allocation questions, is there any appetite to pursue share repurchase at prevailing pricing and considering trading liquidity could become an elimination, is it under offer something that could potentially considered?

Climent, like I said, the Board is constantly talking about the best use of capital for any excess cash we have and people do mention stock buybacks. We talk about dividends all the time. And as management, we're concerned about ongoing operation and reinvestment of the fleet. So it's an active discussion all the time. Board has made no decision at all on share buybacks, but like I said, this is an active discussion.

All right. Thank you for the color. The margin on the trading business seems to be expanded from a quarter-over-quarter basis. Could you provide some shipping insight on these and whether we should expect similar contribution going forward or was this more off an one off given the operating environment?

I think I talked a little bit about the impact of the new ships on the quarter, on a quarter-to-quarter basis. Last year, at this time, we had one, maybe two ships in operation for only part of the second quarter, those four new buildings this year. We've got all four active in the second quarter. So those additional owned ship days are adding to our EBITDA performance,

But also to add a little color, I think your part of the question was quarter versus Q1, ‘22 versus Q2. And I think what you're seeing in the margin expansion is just really our chartering strategy in practice and showing the results, the market declined in that type of environment. We reset -- we have the opportunity to reset the cost of our own -- excuse me, our chartered in fleet. So we delivered vessels and we'll charter in new ones. So if there is decline, it also presents opportunities to us. Yes, our TCE earned may decline slightly, but also our charter in per day cost declines and that with a book of fixed cargo and some forward bookings does provide a margin expansion in that type of environment.

That's very helpful. Thank you. That's all for me. Thank you for taking my questions and congratulations for this quarter.

Thank you.

Thank you.

Thank you. Our next is follow-up from Poe Fratt with Alliance Global Partners. Your line is now open.

Sorry, two more questions. One is, can you just highlight the drydocking scheduled for the next two quarters in 2022? And then maybe give us a preview for 2023 drydocking activity?

So we have no further drydocking activity schedule this year. We have one ship coming up in the first part of next year.

Okay. Which one is that Matt?

It's about new, Poe.

Okay, great. And then Mark, in your comments you've talked about customers coming to you with the desire to lock in longer term agreements. Is this something that on the margin as you're seeing more of? Can you just highlight expand on that comment and just how you potentially could structure long term agreements where you don't take the -- where you have some risk mitigation measures?

So, Poe, the way we -- I think we saw this playing out was that in a very sort of in a pool market that is continuously rising and going into maybe on the spot levels into the 30s during past of last year and this year as well. The customers tend to also look at this sort of historical view, right? And maybe not as inclined to go out and take -- make those contracts at those higher levels, especially not the long term ones. We see more interest than we see generally on bigger exceptions towards doing that at levels where we are today, plus or minus a little bit. We're still in historically we presented pretty good, pretty good value for us, right? So I think that part sort of is the mental aspect from our customer side makes it a little bit more likely than it happened in this type of rate environment versus at the peak we've seen in the last 18 months or so. And in terms of the risk, because we do have a pretty big owned fleet that is mainly to service those contracts. The main risk we have essentially is on the fuel pricing, right, when we either use bunder adjustment cost is to sort of reset the freight rates according to whatever we're buying the fuel at the time of reform, alternatively hedge using bunker swaps typically, right? So that's the way we look at that.

Great. That's helpful. Thanks, Mark.

Thank you. It appears there are no further questions at this time. I would now like turn the program back over to our presenters for any additional or closing remarks.

Thanks everybody for attending today, we like this active discussion and we hope to have better news -- even better news next quarter. Thanks again.

Thank you. Ladies and gentlemen, this concludes today's event. You may now disconnect.