Euroseas(ESEA) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2024, total net revenues were $54.1 million, a 6.9$50.7 million in Q3 2023, primarily due to a higher number of vessels operated [43] - Net income for Q3 2024 was $27.6 million, or$3.95 per diluted share, with adjusted net income at $27.4 million, or$3.92 per diluted share [6][7] - Adjusted EBITDA for Q3 2024 increased to $36.1 million from$34.5 million in Q3 2023 [45] - For the first nine months of 2024, total net revenues were $159.6 million, a 13.7$140.3 million in the same period of 2023 [48] Business Line Data and Key Metrics Changes - The average time-charter equivalent rate for Q3 2024 was $26,480 per day, down from$30,074 per day in Q3 2023, while the average number of vessels operated increased from 19 to 23 [55] - Total operating expenses per vessel per day decreased to $7,249 in Q3 2024 from$7,692 in Q3 2023 [56] Market Data and Key Metrics Changes - In Q3 2024, the six-month to twelve-month charter rate for 2,500 TEU container ships reached approximately $30,750 per day, more than triple the$9,270 per day recorded at the end of 2023 [19] - One-year time charter rates saw a 40% increase compared to Q2 2024, driven by tightening supply in larger vessel sizes [20] - The idle fleet stood at 0.2 million TEU, or 0.7% of the fleet, a significant decrease from 0.8 million TEU in February 2023 [23] Company Strategy and Development Direction - The company has signed contracts for the construction of two LNG-ready eco-design fuel-efficient containerships, scheduled for delivery in Q4 2027, with a total investment of approximately $60 million per vessel [10][11] - The company aims to enhance long-term shareholder value through a share repurchase program, which has been extended for another year [9] Management's Comments on Operating Environment and Future Outlook - Management noted a robust recovery in container ship charter rates across all segments, with expectations for continued strong demand driven by geopolitical factors and trade dynamics [35] - The company anticipates some headwinds in 2025 due to potential easing of disruptions in the Red Sea, but expects elevated charter rates to persist [36][37] - The energy transition within the containership sector is progressing, with growing demand for eco-friendly vessels expected to drive a premium in charter rates [38] Other Important Information - The Board of Directors declared a quarterly dividend of$0.60 per common share for Q3 2024, maintaining an annualized dividend yield of around 5.7% [8] - The company has repurchased 414,000 shares for about 8.8 million since initiating the repurchase program in May 2022 [9] Q&A Session Summary Question: What rates are required for the new vessels to achieve breakeven? - Management indicated that rates below 20,000 per day would be profitable, but they hope to achieve better rates [72] Question: What are the expectations for the vessels with expiring charters? - Management expects to fix the vessels at levels between $13,000 and$20,000 for one to one and a half years [73] Question: Why expand the new-build effort to larger class ships? - The decision is based on the analysis showing that a significant portion of the existing fleet is over 15 years old, indicating a need for more economical and environmentally friendly vessels [78] Question: What is the financing plan for the new builds? - The financing is expected to be structured with 60-65% debt and the remainder equity, with the first installment due in 2026 [72] Question: What are the expectations for the new builds' marketing? - Management is comfortable waiting until closer to delivery to secure contracts, but will consider good offers if they arise [116] Question: Is there an appetite to raise dividends in the future? - Management regularly discusses dividends and aims to provide a good yield to shareholders, with discussions planned for the next Board meeting [118]