Pangaea Logistics Solutions, Ltd. (PANL) Q3 2026 Earnings Report, Transcript and Summary

Good morning. My name is Chelsea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pangaea Logistics Solutions Third Quarter 2026 Results Conference Call. Today's call is being recorded and will be available for replay beginning at 11:00 A.M. Eastern Standard Time. The recording can be accessed by dialing 800-839-3740 domestically or 402-220-7239 internationally. All lines are currently muted, and after the prepared remarks, there will be a live question-and-answer session. If you would like to ask a question during the Q&A segment, please press star one on your telephone keypad. If you find your question has been answered, you may remove yourself from the queue at any time by pressing star two. We do ask that you please pick up your handset for optimal sound quality. It is now my pleasure to turn the floor over to Stefan Neely with Vallum Advisors.

Thank you, Chelsea, and welcome to the Pangaea Logistics Solutions Third Quarter 2026 Results Conference Call. Leading the call with me today are our CEO, Mads Petersen, and our Chief Financial Officer, Gianni Del Signore. 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 Mads.

Thank you, Stefan, and welcome to those joining us on the call today. Our third quarter results were the strongest in Pangaea's history, with Adjusted EBITDA and adjusted net income both reaching record quarterly levels. Higher freight rates, strong execution across our operating platform, and peak seasonal activity in our Arctic trade drove substantial improvement in profitability compared to last year. Our specialized ice-class fleet and our broader cargo-based business performed well together, and the quarter is a good illustration of the operating leverage in Pangaea's model when both are contributing at the same time. Our TCE rates averaged $20,414 per day in the quarter, up 31% year-over-year and 13% above the prevailing market for the Panamax, Supramax, and Handysize vessels. That premium reflects strong pricing in our long-term COAs, our niche ice-class capability, and our ability to leverage our commercial platform. Adjusted EBITDA was $52.4 million, and we generated $57 million of operating cash flow during the quarter. That cash generation further strengthened our balance sheet and gives us the flexibility to invest in fleet renewal as well as our logistics platform while continuing to return capital to shareholders. Total shipping days increased 8% year-over-year to 6,339 days. Our own fleet of 38 vessels was supplemented by an average of 31 chartered-in vessels, which allows us to serve our long-term customer commitments while adjusting capacity to the opportunities in front of us. The flexible nature of the chartered-in fleet allowed us to expand margins during the quarter, a key feature of our strategy. Our onshore logistics platform also had a strong quarter. Terminal and stevedore revenue increased 73% year-over-year, reflecting the contribution of the port operations we have brought online over the past year, as well as growth in our existing terminals. Dry bulk tons handled across our terminal network increased 65% compared with the third quarter of last year. These facilities deepen our relationship with customers beyond ocean freight and further integrate Pangaea into their supply chains. Turning to the market, demand for our shipping services and terminal operations remained firm, while freight rates improved through the third quarter. Our commercial focus remained unchanged. We aim to capitalize on these favorable conditions to expand our contract base in key backhaul trades and optimize vessel positioning while maintaining operational and financial flexibility as market conditions evolve. Today, we have booked 5,040 shipping days at a TCE of $21,423 per day for the fourth quarter. Late-season Arctic voyages continue to contribute in October. As the Arctic seasons wind down, the contribution from those trades moderates, and our fourth quarter results will reflect prevailing freight rates and the positioning of the broader fleet. Our approach to fleet renewal remains disciplined. We continue to evaluate opportunities to add modern, efficient vessels that fit our cargo base and customer requirements and to divest older non-core assets when the economics are attractive. Every decision is measured on the returns we can generate and its strategic fit within our operating platform, and we will remain opportunistic as market conditions warrant. Shortly after quarter end, we completed a refinancing that lowers our borrowing margin, simplifies our capital structure, and brings our four post-Panamax ice-class 1A vessels into outright ownership. The new $145 million facility replaced higher-cost debt and financing obligations, and it reflects our continued focus on managing our cost of capital and keeping the balance sheet well capitalized. Gianni will walk through the details shortly. Our priorities are consistent with what we have outlined on prior calls: continue to execute on our customer commitment, expand our integrated logistics capability, renew our fleet selectively, and maintain balance sheet flexibility. With a stronger cash position and lower leverage, we are well-positioned to pursue each of these while continuing to return capital to shareholders. With that, I'll turn the call over to Gianni to walk through our third quarter financial results.

Thank you, Mads, and welcome to those joining us on the call today. Our third quarter financial results reflected higher TCE rates, a modest increase in shipping days, and the seasonal contribution of our specialized ice-class fleet. Total revenue was $219 million. Our TCE rates averaged $20,414 per day, an increase of 31% compared to the third quarter of 2025, and a premium of 13% over the average published market rate for Panamax, Supramax, and Handysize vessels in the period. Our Adjusted EBITDA for the third quarter increased 81% year-over-year to $52.4 million, a quarterly record for Pangaea. The significant increase in profitability reflects the earnings contribution of higher TCE rates and the operating leverage of our business. Our total charter hire expenses increased by 50% year-over-year due to an increase in chartered-in vessels used to augment our own fleet, as well as an increase in the market rates to charter in vessels. Our charter-in cost on a per-day basis was approximately $17,632 in the third quarter, and through today, we've booked 2,487 days at $20,086 per day for the fourth quarter. Vessel operating expenses on a per-day basis through the third quarter of 2026, including technical management fees, was $6,320 per day, a 4% increase from the prior year. Third quarter general and administrative expenses decreased to $7.6 million from $9.9 million. The decrease was primarily due to the timing of variable incentive compensation year-over-year and classification of management fees of our wholly owned technical management operations as general and administrative expenses in the prior year, which are now recorded in vessel operating expenses. Our reported GAAP net income for the third quarter was $38.3 million, or $0.59 per diluted share, up from $12.2 million, or $0.19 per diluted share in the prior year. Our GAAP net income included an unrealized gain of $5 million resulting from our hedging strategy on bunker fuel exposure, given the volatility in fuel prices we've experienced in recent months. We utilize bunker swaps and options to selectively hedge our exposure to the market on our long-term cargo contracts and forward cargo bookings, keeping our fuel cost management aligned with our actual physical consumption. When excluding the impact of the third quarter unrealized gain from derivative instruments, as well as other non-GAAP adjustments, our reported adjusted net income was $33.6 million, or $0.52 per diluted share. Turning to cash flow and balance sheet, we generated $57 million of operating cash flow during the quarter and ended the quarter with $145 million in unrestricted cash and cash equivalents. Total debt, including finance lease obligations, was $340.9 million, and our ratio of net debt to trailing 12-month Adjusted EBITDA was 1.4x. Subsequent to the quarter end, we closed on a six-year, $145 million senior secured term loan facility priced at SOFR plus 1.6%. The proceeds were used to refinance $134 million of higher-cost debt and sale-leaseback financing obligations, consolidating seven vessels under one facility. This transaction lowers our borrowing margin, will reduce cash interest expense by approximately $2 million next year, and simplifies our financing arrangements. We will continue to evaluate opportunities to manage our cost of capital while preserving financial flexibility. Looking ahead, our capital allocation priorities remain focused on maintaining financial flexibility, supporting investments in our integrated logistics platform and fleet, and returning capital to shareholders. We will continue to assess growth opportunities based on their expected returns and their contribution to our customer offering and long-term earnings. With that, we will now open the line for questions.

Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. Once again, that is star one to ask a question. Our first question will come from Liam Burke with B. Riley Securities. Please go ahead.

Yes. Good morning, Mads. Good morning, Gianni.

Hi, Liam.

Can we talk about fleet renewal? I know asset prices in the bulker space are high, but are you looking at opportunities, or is that something that you're just waiting for assets to come in on?

I think we're always looking, right? Fleet renewal considerations are constant in any shipping company. The ships that we are looking for are popular other places as well, so we are trying to be selective and opportunistic when the right candidates are there, and not sort of jump on anything that comes across our screens. We try to be selective. It has to be the right type of vessel. It has to be the right fit for business, and of course, it has to be priced right.

Fair enough. On your charter rates that were extremely strong, was that just generally the market, or was it the fact that you were able to get more activity out of the ice-class vessels during the summertime or during the thaw period up north?

It's a bit of both, to be honest. The underlying market was strong, of course, and we have the majority of our Arctic summer season happening in Q3. In addition to those two things, I think my main takeaway from the quarter is also how we were able to take advantage of especially the strong spot market and how we were able to use both our own fleet, but also our chartered-in fleet to sort of make the most of a very, very strong market. So, it's a bit of both, really.

Great. Well, thank you, Mads.

No problem.

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

Hey, good morning. First question, Gianni, did you change or modify the way you calculate your TCE rates?

No, we did not. The TCE is we calculate it the same. The only thing that is in this quarter is some of the unrealized gains on bunkers and other derivative instruments are flowing through our operating income. That portion is being backed out, so it conforms to the TCE calculation as we've been doing it historically.

Okay. Yeah, because the math didn't work, so I had to go back, and it looked like that was about $830 a day from $5.2 million, $5.3 million. Did you back that?

Yeah, so there was $5.2 million of that's right. There was $5.2 million of unrealized gains on derivative instruments that were in operating income. If you look at, in our Q, note seven, we disclose the components of our derivative instruments, both realized and unrealized. The unrealized portion we are removing as it's not reflective, right? Because if we look at our hedging strategy, we're hedging future bunker physical requirements on our cargoes and forward commitments. So, having that run through our operating P&L, obviously, we want to back that out when we calculate our TCE and our other margins that are more reflective of actual quarterly results. So, when those unrealized positions ultimately settle and the realized gains or losses, whatever they may be in those future periods, that component will remain in our operating profit. But the unrealized is backed out to calculate TCE.

Got you. Yeah, of course, I read the footnotes. Can you look at the overall, where you stand for the fourth quarter, a little more than 5,000 days? That's a fleet size of roughly 55. What do you think you'll run for the quarter in total fleet?

That's a good question because we don't know for sure, because of timing, where we will end up in terms of numbers. We will probably, I think, would be flat compared to Q3 when everything is said and done.

Okay, so like a fleet of 69 then, Mads?

Somewhere around there. It's really hard to say because it depends on the timing of when we will fix the ships and when we will load the cargo.

Yeah

That would be my estimate at this point.

That is typically higher than what you have run in other fourth quarters, isn't it?

Yeah, maybe a little bit, but I think it is a feature in the model that when there is strength in the market, we can take advantage of that optionality we have when we fix in ships and we have better opportunities for maybe fixing ships in a short period when we are starting our backhaul trades and things like that. So, it might be maybe a little bit higher than what it has been, but I think it is reflective of how we operate the platform when the markets are strong.

Yeah, it is a good thing. Then, did I hear you sort of caution as far as looking in that for cover of $21,400? There may have been some ice-class voyages that were booked in the third quarter but ended in the fourth quarter, so that is helping that average, and so maybe not run that out for the full quarter?

Yeah, I think it is pretty in line with the historical that the last 30%-40% of the ice-class season happens in Q4. So, that is not really much different. I think it is reflective of where we are at this point in time. There is still some time to go in the quarter, of course. It is a blended TCE across all three segments we have. So, it has a Handysize element as well that, of course, is trading at a different level than Arctic Panamax voyages.

Okay. Then, Gianni, on the refi, you took out a term loan. You also took out, what, four of the sale-leasebacks? Do you have sort of an absolute number as far as cost savings looking at 2027?

Yeah. So, we refinanced effectively two facilities. The first one was a $38.7 million facility that is referenced in our financials as the $50 million senior secured term loan facility. That $38.7 million was at price, that SOFR +2.5%, that was refinanced. Then the four post-Panamax vessels in aggregate was $96.3 million, and those four facilities were on lease structures with a Chinese lessor. So, that complication plus the pricing, which that facility was pricing at SOFR +3.55%. So, that aggregate was refinanced at SOFR plus 1.6%. So, I think from an interest perspective, it is about a $2 million savings next year on margin. The amortization of the new facility from a debt repayment profile is roughly the same. We are probably saving about $200,000 annually. Sorry, $200,000 quarterly in debt amortization from a cash break-even perspective. But from an interest perspective, it is about $2 million next year, and then obviously, as we pay down debt, that number will be a little bit less each year.

Okay. Then, it looked like your lease payments were running like $7 million a quarter before this. Do you have a go-forward lease payment number?

It's actually going to shift, right? Because now the lease repayment schedule will decline by about $2.1 million per quarter.

So, about $5 million going forward?

Yeah. But some of that, remember, will shift up because the total quantum of liability between debt and leases remains relatively consistent. The incremental borrowing was about $8.5 million that we'll see come into the fourth quarter. So, from a repayment perspective, it's just a shift up from lease and maybe a little bit more into our debt, secured debt repayments. But yeah, the lease component will reduce by about $2 million per quarter.

Okay. Yeah, break it out in the cash flow statement. You brought up a good point. It adds another $8.5 million cash to the balance sheet. You're going to probably be positive cash flow in the fourth quarter. You're probably not the same tune you were in the third quarter. Why have so much cash? Why carry so much cash on the balance sheet? What's your thinking as far as your cash management going forward?

Yeah, I think we've been consistent in our return of capital program. We want to continue that. We want to be opportunistic in asset acquisitions when we see them. We do have other debt facilities on the balance sheet that we'll probably look to, that are priced a little bit higher than we would like in the current market, so we may go after those. But I think we're in a good position. I think you bring up a great point that the company is in a strong financial position. We have a strong balance sheet, and we want to use it to grow.

Yeah, I mean, the way I look at it, you might have more than $175 million, $180 million fourth quarter in cash, and a lot of that's at the corporate level, not stuck in the JV. When you look at it, you have maturing debt, about $30 million over the next 12 months, two different facilities. Will you refi those, or do you think it's paying them off in cash, or sort of what's your thinking on the March maturity and then the December maturity?

The March maturity is not a unilateral decision because it is within the JV. I think from our perspective, we would likely refinance that, not increase leverage in any way, but just maybe roll it out, refinance it, take advantage of some of the lower-cost facilities we're seeing in the market from a debt perspective. The other facilities that come due, they are on older vessels. We will likely repay them as they come to their maturity, given the age of the vessel and just having more debt-free vessels in the fleet. But the March one is definitely, it's not just our decision. It would be with us and our partners, but the expectation, like I said, I think even at a previous call, was that we would likely roll it out and refinance it and hopefully reduce the margin in a meaningful way.

You actually, I forgot to ask you, on the new term loan, the $145 million, does the security package change at all, or is that term loan secured by the four post-Panamax ice-class 1A and then the, what is it, the Bulk Endurance, Bulk Brenton, and Bulk Patience?

Correct. It is secured by the seven vessels. Our covenant package changes a bit. We have disclosed in our subsequent event footnote the three financial covenants that are in the facility. That changed a bit. We no longer have a debt service covenant included in this facility. It is just leverage and liquidity covenants from a financial perspective. But the security package is the vessels that are securing the facility.

Yeah, and minimum liquidity to $30 million. Great.

Yep.

Mads, you sort of alluded to it, if I could just squeeze one more in, but the overall market, looking not only it sounds like the fourth quarter looks pretty firm, but what are you seeing as far as a little further out into 2027?

Yeah, well, that is the question, obviously. I think we feel pretty confident that the market will stay at sort of looking at historically pretty firm levels. As the fleet, sort of the global fleet will be growing a little bit next year, but so is ton-mile demand expected to. A lot of assumptions, of course, in that, in that there are current disruptions that could be eased. But on balance, on just looking at fundamentals, we feel pretty confident about next year also being pretty strong.

Great. Thanks for your time.

Thanks, Poe.

Thanks, Poe.

Thank you. As a reminder, that is star one to ask a question. Our next question will come from Climent Molins with Value Investor's Edge. Please go ahead.

Hi, good morning, team. Thank you for taking my questions. I wanted to start by asking about the USTR fees. The suspension has been extended, but should still come online in early January. Any insights you can give us? Do you expect the policy to ultimately be suspended?

Do we have any insight as to whether it will be suspended? Sorry, was that the question?

Yeah. Yeah.

I mean,

Whether you have any insights and your expectations.

I don't think we have any insight. Most of that process is playing out in the open in form of the submissions. I think the industry and our customers and other stakeholders universally agree that that suspension would be best. I think we are, in terms of our expectations as to what will happen, we are playing it pretty balanced in a way that we haven't changed dramatically the way we operate the business. We haven't changed our chartering strategy or anything around that. We believe that we will be able to manage that with good vessel scheduling. I think one positive aspect of this is that we have completed most of our drydockings that we had lined up for 2026, and we were still able to do some of those in China, where it's both faster and cheaper. We are looking at it just as everybody else, and I'm sorry I can't give you a better answer, but we are, I guess, cautiously optimistic that it will be suspended.

Okay, that's good to hear. Shifting to the terminal side, performance was very strong during the quarter. Can you comment on whether you have additional ports coming online during 2027? Secondly, I know you don't provide quarter-to-quarter guidance on this front, but should we think about the Q3 performance as a reasonable estimate for Q4?

In terms of 2027, we are working on several interesting things in the pipeline. I can't guarantee that some of that will actually happen in 2027 or not. But Q3 was our best quarter in that business from an EBITDA perspective. We hope to have another strong Q4, but again, it very much depends on timing and where the vessels, will they arrive in December, will they arrive in January? It's too early really to come with some guidance on that.

Makes sense. And final question from me. The board announced a large dividend raise earlier this year. This is obviously a board decision, but from a high level, how do you currently think about deploying capital on dividends versus to buybacks given the incumbent framework?

Yeah, I think our primary return is through our dividend. That's how we've viewed it. We try to be a consistent through-the-cycle payer. Obviously, this is a volatile market, and we do have to react if conditions require us to. But our goal is to be as clear and consistent as we can be. We have used our share buyback program in the past, and that conversation happens, but I think our primary remains our dividend. Then ultimately, like I said to Poe earlier, I think we look at deploying capital and opportunities to grow. Recently, we've sold three ships. We do want to look for adding vessels to the fleet if we can. We want to look to grow our port business. And we have some debt maturing next year that we need to cover or refinancing. But I think we aim to be as consistent as possible to the extent we can, and I think that'll continue.

Makes sense. Thanks for the call. Sorry for the, thank you for taking my questions, and congratulations for the quarter.

Thank you.

Thank you. There are no further questions in the queue at this time, so I'd like to turn the call back over to Mads for any closing or additional remarks.

Thank you. 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.

Thank you, ladies and gentlemen, for your time and participation. You may now disconnect.