Good morning. My name is Todd and I will be your conference operator today. At this time, I would like to welcome everyone to the Pangaea Logistics Solutions Fourth Quarter and Full Year 2023 Earnings Teleconference. Today's call is being recorded and will be available for replay beginning at 11 a.m. Eastern time. The recording can be accessed by dialing 800-839-5630 for domestic users or 402-220-2557 for international. All lines are currently muted and after the prepared remarks there will be a live question and answer session. [Operator Instructions] It is now my pleasure to turn the floor over to Stefan Neely with Vallum Advisors. Please go ahead.

Thank you, operator. And welcome to the Pangaea Logistics Solutions fourth quarter and full year 2023 results conference call. Leading the call with me today is CEO, Mark Filanowski; Chief Financial Officer, Gianni Del Signore; and COO, Mads Petersen. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. At the conclusion of our prepared remarks, we will open the line for questions. With that, I would like to turn the call over to Mark.

Thank you, Stefan, and welcome to those joining us on the call today. After the market closed yesterday, we issued a release detailing our fourth quarter and full year 2023 results. Our results were a good finish to the year as we continued to achieve a consistent TCE rate premium above our benchmark indices. While the fourth quarter is generally a slower period for Pangaea as we exit the peak of our Arctic trade season, ongoing geopolitical trade disruptions have led to increased demand within our traditional trade routes, contributing to increased shipping days in the period, together with a corresponding increase in freight rates. We reported adjusted net income of $7.4 million for the fourth quarter and $31.4 million for the year. For the fourth quarter in 2023, our adjusted EBITDA of $19.7 million, though strong, declined on a year-to-year basis, even as our TCE rate exceeded our benchmark BSI Index by 27%. Market rate volatility can be impactful over quarterly periods, but our business model smooths the effects over longer periods. Our markets in the current quarter are showing surprising strength on a seasonal basis as global trade disruptions have led to persistent market inefficiencies, a dynamic supportive of a structurally higher freight rate environment. With supply growth limited by worldwide shipbuilding capacity to produce new ships in our segments, we think there is a long runway for continued strong performance. Beyond the favorable dynamics being created by geopolitical disruption, we continue to see strong demand growth in the core trades that we serve, specifically construction aggregates, cement, and iron ore and iron products. Through today, we've booked over 3,500 shipping days at an average TCE rate of $17,430 per day versus a market rate of approximately $13,000 per day in the first quarter 2024. Given these favorable…

Thank you, Mark, and welcome to all of those joining us today. Our fourth quarter financial results continue to emphasize the flexibility of our business model. As we were able to deliver premium returns amid market volatility, strong year-over-year growth in shipping days, all while reducing our vessel operating expenses per day. Fourth quarter TCE rates were approximately $17,684 per day, a premium of 27% over the average published market rates for Supermax and Panamax vessels in the period, which is supported by ice class performance early in the quarter, as well as our long-term COAs and forward bookings, which lock in rates for future cargo performance. Our adjusted EBITDA declined year-over-year to $19.7 million. Our adjusted EBITDA margin also declined year-over-year to 14.9%, given volatility in rates which negatively impacted our charter and expenses. We also recognized an unusually high canal transit fee during the quarter resulting from environmental disruptions at the Panama Canal. This fee resulted in a $1 million negative impact to our adjusted EBITDA during the fourth quarter and a reduction in our overall TCE earned. During the fourth quarter, we saw year-over-year increase in chartered-in days, which increased 33% due to increased demand from our customers and our ability to supplement our fleet with chartered-in vessels. However, in accordance with our short-term chartered-in strategy, we recognized higher spot chartered-in rates in comparison to our overall TCE, resulting in margin compression, which may happen during times of rising rate environment. Through today, we've booked approximately 1,400 chartered-in days at an average cost of $17,100 per day in the first quarter of 2024. Furthermore, this dynamic was offset by lower vessel operating expenses net of technical management fee which decreased by 4% year-over-year from an average of $6,200 per day last year to $5,900 per day in…

[Operator Instructions] Our first question comes from Liam Burke with B. Riley. Please go ahead.

Yes, good morning, Mark. Good morning, Gianni.

Hi, Liam.

Mark, can we discuss the charter hire, charter-in expenses that sort of squeezed your margin during this quarter? Flexing your fleet using leased vessels, chartered-in vessels as part of your overall strategy, was this a short-term anomaly in terms of the margin squeeze and does that make you think about your longer-term strategy about chartering vessels?

No, the strategy is still solid, Liam. This isn't unusual for us in times of where we book cargo forward today and we don't perform until a month from now. Things can happen in the market that cause the chartered-in fleet to be a bit more costly as market rates rise. When they go the other way, it becomes cheaper for us to bring in ships. So we're careful on the cargo we book and the timing we take to charter in ships. But when we have a big spike like we did in December, unexpected, it can temporarily cause a little disruption. We're also -- it depends a little bit on where, if you're comparing to the charter-in cost to the market, it depends a little bit on where that increase in market rates occurred, if it occurred in the places where we are active, say the North Atlantic, that North Atlantic did spike a bit more than the rest of the world. So if you're comparing our charter-in cost to the worldwide rates, then we're a little bit higher than if you compare to just the North Atlantic market.

Great. And, Liam, If I could just add, it's Gianni, just to add, it's not necessarily -- when we look at it on a quarterly -- a quarter by quarter basis, we'll see these -- potentially these reductions in margin or expansion in margin. And for example, Q1 of ‘22, we were in a similar situation. The chartered-in fleet did have a negative margin for the first quarter of ‘22. But -- so we look at it quarter by quarter, and then these spikes in market rates can result in that margin squeeze. But for the full year, just to say it, for the full year of 2023, the margin on our chartered-in fleet was around $1,800 a day. So it was a positive, and it continues to be. So I don't think there's any -- it is unfortunate for the quarter, but when we look at it on a long-term basis, it's consistent with what we want to accomplish.

Yeah, we do look at the pieces, what it costs us to charter in ships versus and what those charter-in ships produce against our charter -- cargo book or spot cargoes. But the concept here is that we free up tonnage on our own ships that can then participate in a higher market. So although we do look at the pieces, we're really trying to make the whole work better.

Great. Thank you, Mark. On the first quarter partial fixtures, sequentially it's almost flat, where typically you'd expect it to be down with first quarter being a seasonally slow quarter. Is that primarily the Panama Canal or there are other things in there that's giving you a -- really it looks like a seasonally strong, I mean, a strong, seasonally slow first quarter?

Yeah. Hi, Liam. It’s Mads here.

Hi, Mads.

The Panama Canal of course has an effect, but I think the main driver is also the fact that we were able to put cargo in Q4 that we are now executing on in Q1 at what are historical pretty attractive levels. So of course, it's a result of the general strengthening, but also the fact that we were able to secure some pretty decent paying forward cover.

Great. Thank you, Mads. Thank you, Mark. Thank you, Gianni.

Yep. Thanks, Liam.

Thank you. Our next question comes from Poe Fratt with Alliance Global Partners. Please go ahead.

Good morning, Mark. Good morning, Gianni. Good morning, Mads. Good to see you on Monday. Hey, can we just dig a little deeper in the charter hire expense? It was roughly $34 million for the quarter. Do you have -- I'm calculating that your charter-in days were about 1700 -- 1750. And so I'm calculating a chartered-in expense in the fourth quarter of just over $19,000. Is that -- are those numbers close or can you give us an idea of those?

Yeah, I can give you the numbers, Poe.

That'd be great.

So yes, and actually in my prepared -- in our remarks earlier in the call, I did also mention what the charter-in cost is for the first quarter, what we've sort of booked and encouraged so far. So you have that as well. But for the fourth quarter, the charter-in cost was $17,986 per day. The charter-in days were approximately 1,800 charter-in days.

Okay, great. And then looking at that forward chartered-in cost of 1,300 days at $17,100, how many -- can you give me an appreciation for sort of how the whole quarter might look like? Will the chartered-in days be close to what they were in the fourth quarter? And the cost should be a little bit lower just because maybe you can avoid that spike that you saw in December?

Well, we're pretty close to the end of the quarter here, so I don't expect significant changes to what we said. But you're right, the fleet remains around, we're still around 45 to 50 vessels. Q4, we had about 44 total fleet. So yeah, I think as far as volume of activity, it's relatively similar. And then since we are pretty close to the end, I think the numbers that we gave there are a very good indication of what it will be for the full quarter.

Okay, great. And then, Mads, are you -- or I guess another thing on just the forward cover, I mean, do you have -- for the rest of the year, are you -- can you give me an idea of sort of how your forward cover looks for the rest of the year and then your chartered-in costs? Are you willing to sort of look beyond just this quarter or this exact date and time?

So we -- Poe, we don't give out beyond the first quarter. But as far as our core business, the sort of core contract that we're operating in our typical long-term cover, we discussed our long-term cover on our own fleet remains the same. But in the near term, we're always booking forward into subsequent quarters and the market is always changing. But we haven't really -- we haven't given out those longer term other than our long term numbers on our long term contracts.

And in terms of the chartered-in fleet, Poe, our approach or strategy around that hasn't really changed. The vast majority of that is short-term in nature, so that will always reprice relatively quickly. We're not looking to add up a significant amount of chartered-in [indiscernible] longer period, for instance. That's not part of the strategy, really.

Yeah, you sort of want to avoid taking market bets other than with your own fleet, right, Mads? You don't want to charter in long term and get exposed to negative moves in the market.

Yeah, 100% correct, right. I mean the chartered-in fleet for us is essentially an arbitrage around the own fleet and a way to employ the entire fleet of the company in a more sort of sensible way rather than ending up ballasting too fast and pick up a cargo just because you don't want to fix it in the ship. So it goes back to what Mark said earlier that you sort of have to look at the whole, not just pick out the charter in because it serves a purpose in the greater picture of things where you will in a quarter like this, you can have a quarter that just in that particular part of the business, looks a little disrupted as Mark said.

Yeah, and I know that you're hesitant to sort of talk about your forward cover book, but has anything changed where you typically have 10 to 12 working -- 10 to 12 ice class vessels working during the ice season over the course of, call it, the summer and early fall?

Yeah, that part of the fleet is owned, primarily so. So we don't expect any huge changes in that part of the fleet, no.

But if we have booked other business that those ships now have to leave to go north into the Arctic, we may, it is a more active part of the season for us, that third quarter, not just because the ships go north, but because then we have to replace, take some ships from the market to participate in moving cargoes that we've booked. We probably have a little higher chartered-in fleet during that period.

Okay. And then, Mads, are you seeing anything on the demand side, changes either positive, negative that you can highlight for the rest of the year?

I think I want to point to what's in Mark's written comments that we are seeing increased amounts in the businesses and in trades where we're pretty busy such as construction material. That is not just across the ships we own or operate but also in our terminals business. So we feel pretty confident about the demand going forward there in those commodities. I mean, we're not a big sort of long haul iron ore owner operator. So there, I think, I read the same data that you do and I think demand-wise, things look pretty good, not fantastic, but okay. And that combined with an attractive supply side, we feel pretty confident about where the market is and where it's heading.

Okay. And then you talked about the terminal business. There was a sequential drop in revenues there. Margins were still healthy, but there's a seasonal drop in -- or a sequential drop in revenue in the stevedore & terminal link. Is that seasonal and we should expect to pick up in this quarter and the rest of the year into the fourth quarter or can you just give me an idea of sort of the cadence of that business?

It depends on demand, ships coming into our terminals. So I don't think the decrease was that much. It could be affected by the number of ships that come into port during that quarter. Our most active port is Port Everglades and there we have, we do container ships, we load ferries, we discharge dry bulk goods, commodities that come in. So it really depends on the schedule of those ships that are visiting the ports. We do have some more active things happening in some of the other ports, So things should move up this year, Paul. The Port Everglades business is new to us from last June. And so I think in the beginning, you'll see a little bit of ups and downs, but not significant. They've been fairly steady.

Okay. And then, Gianni, if you could just highlight where that million dollar transit fee, what part of the expense line did it come in? Was it in voyage expense or charter hire? I know it's nitpicky, but I just wanted to sort of understand where that was recognized.

Yeah, it was recognized through voyage expenses, which obviously impacted our overall TCE. And, I think -- we spoke about this in our last call regarding the situation at Panama Canal, and unfortunately we were there, and we had to bid on a slot to get through and it was a million dollar impact to voyage expenses and reduction -- equivalent reduction in TCE and adjusted EBITDA. So yeah, that's where it's recognized.

Great. Thanks a lot. Very helpful. Have a great day.

Thanks, Poe.

[Operator Instructions] And at this time, I show no further questions in queue. I'll go ahead and turn the call back to Mark Filanowski for any additional or closing remarks.

Thank you for joining us today for our call, and we'll see you next quarter.

This does conclude today's call. We thank you for your participation. You may disconnect at any time.