Euroseas Ltd.
Q4 2020 Earnings Call Transcript

Published: 27 Feb 2021

[Operator:]

Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas Conference Call on the Fourth Quarter 2020 Financial Results. We have with us Mr. Aristides Pittas, Chairman and Chief Executive Officer; and Mr. Tasos Aslidis, Chief Financial Officer of the company. I must advise you that this conference is being recorded today. Please be reminded that the company announced their results with a press release that has been publicly distributed. Before passing the floor to Mr. Pittas, I would like to remind everyone that in today's presentation and conference call, Euroseas will be making forward-looking statements. These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements, which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized.

[Aristides Pittas:]

Good afternoon, ladies and gentlemen, and welcome to our scheduled conference call for today. Together with me, Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the year-end and quarter ended December 31, 2020. Let us turn to Slide 3 to see our income statement highlights. For the full year of 2020, we reported total revenues of $53.3 million. Net income was $4 million, and net income attributable to common shareholders after the $0.7 million dividend on the Series B preferred shares was $3.3 million or $0.58 per share basic and diluted. Adjusted EBITDA was $11.8 million, and the adjusted net loss attributable to common shareholders for the year after adjusting mainly for vessels that were sold was $0.1 million or $0.02 per share basic and diluted. For the fourth quarter of 2020, we reported total net revenues of $12 million. Net income was $0.6 million, and net income attributable to common shareholders after the $0.2 million dividend and Series B preferred shares was $0.4 million or $0.07 earnings per share basic and diluted. Adjusted EBITDA was $2.1 million, and there was an adjusted net loss attributable to common shareholders for the period of $1 million or $0.16 per share basic and diluted. Tasos will review our financial highlights in more detail later on in the presentation. Please turn to Slide 4 to view in detail our recent chartering, operational and sale and purchase developments. The charter of motor vessel Synergy Busan declared a 4 to 6 months option as of February 2021 at $12,000 per day. Motor vessel Synergy Antwerp was extended for a period from September to December 2023 at $18,000 per day starting January -- retroactively from January 1, 2021. The EM -- motor vessel EM Astoria, was extended for up to February 2022 at $18,650 as from December 2020. Moreover, Evridiki G was fixed for up to December 2021 at $15,500 a day as from December 2020. The charterer of EM Spetses declared the 5 to 7 months option at $8,100 per day as from December 2020. Additionally, Aegean Express was fixed up to April 2022 at $11,500 per day as from December 2020 again. Finally, note that in early October, the EM ISRA was fixed for the period of 3 to 7 months at $7,200 per day. Today, the going rate will be close to $10,000 per day more. This shows how much the market has moved up in the last 4 to 5 months. We should mention here that the EM Corfu suffered damage on its tail shaft and was idle since early December 2020 for 2 months for repairs in dry dock and resumed operations on February 10. All the costs of the repair will be covered by insurance.

[Tasos Aslidis:]

Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen. I will now take you through the next 4 slides to give you an overview of our financial results for the fourth quarter and full year of 2020 and compare them to the same results of 2019. For that, let's turn to Slide 15.

[Aristides Pittas:]

Thank you, Tasos. Let us now open the floor to any questions that we may have.

[Operator:]

Our first question for today is from Tate Sullivan from Maxim Group.

[Tate Sullivan:]

Can you just provide more detail on the core food damage, what is the usual timing of the insurance receipt of the insurance proceeds? And does this kind of circumstance usually extend the time charter? Is it still scheduled to expire in September?

[Aristides Pittas:]

Good question. The time for the proceeds we expect to get in this quarter the most of it, maybe some of it next quarter. The charter can be extended. It's their option to extend. And obviously, we expect them that they will extend it for the 2 months that the vessel was off higher. So that will mean that we will probably run for 2 additional months at the charter rate that we had in this current charter, which was 10,200, if I remember well.

[Tate Sullivan:]

Okay. Okay. And then how early with the backdrop of the positive market -- And I'm looking at your fleet profile with multiple ships with the time charter coming due this year, how early can you start to discuss with these customers, either extending or securing a new time charter contract? Is it a month before the current exploration? Or can that change, please?

[Aristides Pittas:]

The usual is about a month before the expiration. That is the usual. We can and we are thinking of approaching charter earlier. But if you approach them earlier, obviously, you have to be prepared to get a little bit of a lower rate. So we might talk on several vessels earlier than that, but we might go up to about a month before we deliver.

[Tate Sullivan:]

Okay. And last one for me. And you gave a lot of good macro backdrop for demand from urgency for the customers for container ships, and we've read a lot of examples of disruptions to the market. But from where your ships have been, can you just provide a specific example of, I mean, a port that has some disruption of no available ships or inventory building, if you have an example ready?

[Aristides Pittas:]

Yes. I can get you information on that. I don't have it on hand, but there have been delays on various ships because of concession. If you want I can get you some information. I will get back to you on this.

[Operator:]

Our next question is from Poe Fratt from NOBLE Markets.

[Poe Fratt:]

Yes. Just a follow-up on that first question about the insurance. What is the insurance amount that you're looking to recover Aristides?

[Aristides Pittas:]

About $1 million.

[Poe Fratt:]

Okay...

[Tasos Aslidis:]

This is above $1 million.

[Poe Fratt:]

Okay. And then when you look at the conversation about the core 0 and the downtime and potentially extending it, does the current fleet profile use an assumption that will be extended for 2 months? Or is that 2 months in addition to time charters for September of 2021?

[Aristides Pittas:]

It should be 2 months in addition to the period indicated in our current chart. The charters have not exercised it yet, but I presume they will, of course.

[Poe Fratt:]

Yes. I mean, considering it's a 10,200 and the current rates are well above that, you would assume. And I assume -- but I assume they'll wait probably to see how the market develops in the third quarter before doing that?

[Aristides Pittas:]

Yes, I would think so.

[Poe Fratt:]

Okay. And then when you look at the upcoming renewals, are you looking to extend out 1 to 2 years, even 3 years? Or can you just sort of talk about your chartering strategy in the context of how many or how much of the fleet's already extended out into 2022?

[Aristides Pittas:]

Yes. As you see, what we have -- the 7 vessels that we have extended, they've all been between 1 to 3 years. And the intention is to do something similar, always keeping somehow staggered opening of our vessels, so that not all ships open up at the same time. But we are looking for minimum 1 year and going up to 3 years, and we will see how that will go depending on the rate of the charter as well. Yes.

[Poe Fratt:]

And that's helpful. And then just to clarify on the Oakland, it is -- you're only one that's on an indexed rate. And in the presentation, you indicate that its current rate is roughly 24,918, and then you put minus 10%. I'm just trying to clarify is the fixed rate through April 21, 24,918? Or is that less 10%?

[Aristides Pittas:]

It's 24,918, less 10%. And this is the formula. We are getting the index rate minus 10%. And every 3 months, we look at what the index is. So next time we will look at it, is on the 24th of April. And whatever that rate will be, we will be getting 10% less from that.

[Poe Fratt:]

Yes. I was going to say it was a good rate, but then I noticed that the current rates are 31,000. But that's ...

[Aristides Pittas:]

This would definitely happen. What's important for this particular city is what the rate will be on the 24th of April because that will set the rate for the upcoming 3 months.

[Poe Fratt:]

Great. That's helpful. And then Tasos, you talked about the operating costs and the breakeven. In the fourth quarter, it looked like OpEx were about $6,600, but you're forecasting for the next 12 months about $6,050. Can you talk about what might have moved up the fourth quarter OpEx and what you're seeing looking into 2021 from an OpEx standpoint?

[Tasos Aslidis:]

Yes. This was partly due to one-time costs or quarter second to be in the fourth quarter, some crew replacement, the majority of the increase has to do with crew replacement costs because we had due to the pandemic certain additional costs for that. And a couple of vessels were trading in areas that require more lubricants, more consumption, get more attention because of the difficulty of the trade, which we expect not to be the case in the coming year. And if you look at the annual results, the level of OpEx was very comparable to last year, to 2019, I mean, indicating that the fourth quarter was a statistical outlier.

[Poe Fratt:]

Yes, more of an aberration. And then when you look at your cash management from a standpoint of how you're going to decide whether you pick the preferred dividend, can you just sort of walk us sort of how you're thinking on that, the 100 basis point higher dividend to ticket? And then also, in the context to Tasos, you talked about a net asset value and you think your stock is well under that. Does that mean that the ATM will be inactive over the course of -- until the stock moves up higher? Or can you just sort of talk about your cash management over the next couple of months?

[Tasos Aslidis:]

The first regarding the cash management, we have the intention to pay the dividend on our preferred stock in cash, given that we have the liquidity, sufficient liquidity. We have the option to reserve to pay in kind if there is -- if the circumstances change. But our intention is to keep banking cash. I think even saving the 1% is significant. Plus, I believe, as Aristides mentioned, if things develop the way we expect them -- we hope them to develop and renew our vessels at higher rates, we will have the capacity to make significant reductions both in our preferred equity and our bank debt. Your other question was regarding the...

[Poe Fratt:]

Yes, the ATM and store's activity, it looks like January, February still stuck at a little under $9. And if my math is correct, and I was just wondering sort of how you look at that relative to your comments about the stocks undervalued?

[Tasos Aslidis:]

We want to stay as close to what we believe the net asset value of our fleet is. That's not the sole condition, the sole consideration. It depends on other needs for cash. But generally, we try not to dilute our shareholders, and that was our strategy and our objective all the past years, and we'll try to use fundraising in ways that increase the value of the share rather than the trade.

[Poe Fratt:]

And then in the past couple of calls, you've highlighted that certain vessels are less encumbered than others and you had a certain amount of availability. Have you updated your current fleet toward what potentially you have as far as borrowing capacity?

[Tasos Aslidis:]

I mean, if you look -- very simply, if you look at Slide 18, where we sort of put next to each other, the market value of the vessels, charter adjusted because, as Aristides mentioned, there are some of our charges below market now. And the bank debt, you can see we are, I think, even below 50% -- at or below 50%. I think we're at 45% leverage now. And again, the market values were even -- might be even below 40%. So we have -- I estimate that we have at least a $20 million even more lending capacity if we releverage -- we choose to relever our existing fleet.

[Operator:]

There are no further questions. I'll hand back to the speakers for closing comments. Thank you.

[Aristides Pittas:]

Thank you all very much for participating in this call. We'll talk again in 3 months' time. Bye.

[Tasos Aslidis:]

Thanks for attending.

[Operator:]

Thank you, everyone, for joining. You may now disconnect.