Good morning, my name is Brittany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pangaea Logistics Solutions First Quarter 2024 earnings teleconference. Today's call is being recorded and will be available for replay beginning at 11:00 a.m. EST. The recording can be accessed by dialing (877) 856-8964 for domestic and or (402) 220-1608 for international. [Operator Instructions] It is now my pleasure to turn the floor over to Stefan Neely with Vallum Associates.

Thank you, operator, and welcome to the Pangaea Logistics Solutions First Quarter 2024 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 first quarter 2024 results. Our flexible cargo-focused business model continued to deliver premium TCE rates over the prevailing market. During the first quarter, it also allowed us to drive improved operating leverage compared to the prior year, which resulted in higher adjusted EBITDA and improved margins year-over-year. While the first quarter is normally a seasonally soft period for global dry bulk demand, we benefited from elevated long-haul voyage demand across our ice-class fleet together with a solid base of premium long-term COAs. As market rates began to rise later in the quarter, we added to our cargo commitments to increase utilization of our owned fleet and chartered in more vessels, which positioned us to optimize our TCE returns. When combined, these factors resulted in our TCE rates for the quarter, exceeding the benchmark index by nearly 30%. We reported adjusted net income of $6.6 million for the first quarter and adjusted EBITDA of $19.9 million. Adjusted EBITDA improved by 23% year-over-year as our adjusted EBITDA margins strengthened by 400 basis points compared to the first quarter of 2023. Our improved profitability was supported by a 41% year-over-year increase in published market rates for Supramax and Panamax vessels, which also supported the 23% increase in our own earned TCE rates year-over-year in the first quarter. At a macro level, the global demand for dry bulk remains strong and the supply of vessels remains constrained. These dynamics give us confidence in both the near-term and long-term outlook for our business. Specifically, in the near term, geopolitical disruptions have resulted in an increase in ton-mile demand with certain shipping channels. We are also seeing regionally strong demand in key…

Thank you, Mark, and welcome to all of those joining us today. Our first quarter financial results continue to emphasize the flexibility of our business model as we were able to deliver premium returns despite a year-over-year reduction in total shipping days. Our results highlight the value that our chartered-in strategy and cargo-focused model creates within the context of our overall operating leverage. First quarter TCE rates were approximately $17,697 per day, a premium of approximately 29% over the average published market rates for Supramax and Panamax vessels in the period which is supported by long haul ice class performance early in the quarter and forward bookings, which locked in rates for cargo performance. Our adjusted EBITDA increased by nearly 23% year-over-year to $19.9 million. Our adjusted EBITDA margin also improved year-over-year to 19%, as we managed our vessel utilization in accordance to the prevailing market rates to maximize our TCE rate returns and operating leverage. While our chartered-in days decreased by 14% year-over-year, our total charter hire expense increased by 20% compared to the first quarter of 2023 due to the 41% increase in the prevailing market rates. Our charter-in cost on a per day basis was $17,580 in the first quarter of 2024. And through today, we've booked approximately 1,400 days at approximately $16,700 per day. As I mentioned, we pushed some of our cargo commitments forward toward charter hire vessels intra-quarter in the face of higher market rates, which allowed us to maximize our returns on our total fleet in accordance with our short-term charter-in strategy. Furthermore, our improved profitability for the first quarter was bolstered by lower vessel operating expenses, net of technical management fee, which decreased by 6% year-over-year from an average of $5,632 per day last year to $5,300 per day in the first…

[Operator Instructions] And we will take our first question from Liam Burke with B. Riley.

Mark, in the first quarter, you chartered-in about 17 vessels, which is way, way on the low end of typically when you flex your fleet, typically, I think of vessels in the 20-ish range. But then Gianni gave us a sort of a partial chartered-in number for the second quarter. Do you anticipate chartering in more than 17 vessels in the quarter? And is that reflective of the end user demand?

Thanks for the question, Liam. But yes, you have it right. In the first quarter, early in the quarter, the market wasn't -- it didn't look so great to us and we slimmed down the fleet. But toward the end of the quarter, the market started to come back and we started to expand the chartered in-fleet. So looking forward, yes, the chartered-in base should go up as the market as the market moves up.

And I mean, Gianni quoted a price quarter-to-date on your chartered-in day rates, and they were lower than the first quarter. So is that trend continuing where we could see a little margin lift there? .

Liam, Mads here. We hope so, of course. It is all a reflection of where we take the ship. If you take the ship out in the Far East and you move it into the Atlantic, it has a different cost than when we pick them up in the Atlantic. So I don't know if there's a real trend there that you can project, unfortunately. Very specific to the individual opportunity.

Great. And then just real quickly, you bought the 2 new vessels that will be delivered in the second half. You have a balloon payment. You have a large cash balance that can address your refinancing. You refinance only 1 vessel. I presume that refinance will go to the acquisition of the 2 new vessels.

Yes. So I think the balloon comes due next week actually. So we are -- like you said, we are in a position, we will pay off the balloon. And then we are refinancing just the Bulk Endurance. So we'll add the Bulk Independence and the Bulk Pride as debt-free vessels in the fleet. And yes, we'll use a portion of that to offset some of the equity on the 2 new vessels. But we do intend to finance the new vessels as well, but delivery is looking like sometime in Q3. So we have a little bit of time to plan how we want to handle that. But I expect we'll also finance a certain level on those vessels as well.

We'll take our next question from Poe Fratt with AGP.

Can you give us a little more detail on the acquisitions, what's the vintage on the 2 ships?

Sure. They are built in 2016. So that is typically that 7- to 10-year range that is where we have historically done most of our secondhand acquisitions. So we feel that these ships are a great fit for our business model. It's not often that 2 sister ships come up like that, that fits the build. So we are pretty excited about that transaction, and we can't wait to put them to work in our business.

And then Mads, will these be essentially substituted for charter gaining tonnage? Or do you think it's more expansionary?

Well, I think we did sell a ship in, I think it was December of last year, right? So there's a bit of a sort of a break renewal maintenance part of it. But I don't think -- we don't anticipate one-to-one reduction of the chartered-in fleet, is that's -- the 2 things shouldn't be that closely linked.

I think it's a continual cycle, Poe, a larger fleet gives us a little bit more ability to find more cargo commitments, which allows us to leverage the own fleet with more chartered-in ships. So it is -- there is a little bit of a growth element to this and a little bit of fleet replacement element.

And if anything, I think also, Poe, is a reflection in the belief that we have in our in our model and the demand that we're experiencing across the business that we want to make sure that we have good ships that we can serve our customers with as their volumes grow.

Understood. And then that sort of ties in to, Mark, earlier in the call said that you've flexed down your fleet early in the quarter just because you didn't like what you saw or you thought, the market was soft. And just to clarify, was that on the cargo side? You just didn't see the cargo volume to support chartered-in vessels? Or it certainly wasn't from a rate perspective, right? You're looking more from the and cargo volume.

Really, it's the opportunities we see when we're out looking at cargo, Poe, we didn't see much opportunity for us to expand the fleet and make money and to position the ships that we're chartering in, in the right places to make a profit on them. So it's a constant daily study of where the market is and what we can do with it.

Understood. And then if you could talk about your forward cover, your forward covered 2,890 days and $16,300 that's a pretty meaningful drop from the first quarter TCE average -- TCE rate average. Can you just talk about sort of the context of how we should look at the rest of the quarter and sort of where your average TCE for the quarter might end up?

Yes. I think that's a good question, Poe. And just going back to what Mark said earlier about -- with the previous question about growing the chartered-in fleet. So the way that we historically do this is by when we grow the -- that part of the business is through backhauls. So we will have some ships that are doing backhaul barges. And of course, that is not as high a number as when they do sort of our traditional lending business on fronthaul, right? So there's an element to that in the quarter is not finished. So we like to think that over the year, for sure, these backhaul investments we're making now will contribute positively.

Okay. Yes. I mean, should I be concerned that you're chartering in of $16,700 you're booking at $16,300.

We do it every quarter, yes, you should. But that's not what we anticipate going forward, for sure, right? This is result mostly of [indiscernible]. We have some cargo on the books that were fixed at different levels, but also a pretty meaningful investment in positioning voyages in the quarter.

Okay. And then Gianni, working capital was pretty negative for the quarter. Could you just talk about will that balance out over the second quarter or just the rest of the year. So how we should look at working capital in the second quarter? And then if you could just give us a snapshot of where you're mark-to-market on all your derivatives look right now, that would be helpful.

Yes. So working capital, the largest impact there has been the recognition of the balloon payment on the debt that comes due next week. And that's sort of been there since we were anticipating that for a while. But cash balance is remaining strong. Even if it continues to maintain and grow. So we're allocating it towards chartering ships towards building up -- towards acquisitions, et cetera. So once we handle the balloon payments, we refinance, I think we'll see as far as that working capital ratio, and we'll see that improve.

Okay. And then how do your derivatives look so far in the quarter relative to the the unrealized gains that you had in the first quarter. Flat, should we expect some unrealized losses? Or how does the derivative book look right now?

Yes. Well, there's 3 -- of that mark-to-market gain, right, there's 3 components to that. There's the interest rate cap. There's bunker derivatives and then there's FFAs. Interest rate cap, what happened at the end of last year, we knew there was some maybe negative pressure on the cap because of what expectations were on interest rates that didn't materialize. So we did see a pickup in value from year-end to the first quarter there. And the bunker derivatives and FFAs, I think they've remained relatively flat. So -- and even looking ahead with the interest rate cap, I think that also has remained relatively flat. So I don't expect significant volatility when it comes to our derivative book for Q2.

We have no further questions on the line at this time. We'll turn the program back over to Mark Filanowski for any additional or closing remarks.

Once again, thank you for joining our call. Should you have any questions, please feel free to contact us at investors@pangaeals.com, and a member of our team will follow up with you. This concludes our call today. You may now disconnect.

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