Pangaea Logistics Solutions Ltd. 2026 Q2 Earnings Call

Please go ahead. Thank you, operator, and welcome to the Pangaea Logistics Solutions Second Quarter 2026 Results Conference Call.

Leading the call with me today are CEO, Mads Petersen, and 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. We generated strong results in both revenue and profitability during the second quarter. Our financial performance was driven by strong execution across both our owned and chartered in fleet, as well as balanced positioning of our assets to take advantage of stronger overall demand, especially in Asia. Robust markets contributed to a 50% increase in our TCE rates for the second quarter. Notably, our TCE rates averaged 10% above the prevailing market for the Panamax, Supramax, and Handysize indices. This premium reflects the benefits of our fleet positioning strategy, the value of our operating platform, long-standing customer relationships, and ability to manage a volatile market effectively. We generated significant operating leverage from the favorable market environment, with second quarter adjusted EBITDA growing by nearly $20 million year-over-year to $35 million.

Just as important, these results highlight the value of the business model, which allows us to protect and in many cases expand our margins in dynamic market environments. We actively managed volatile fuel markets through hedging and contract terms, while our continued focus on fleet positioning and backhaul trades allowed us to capture arbitrage opportunities. A balanced approach to fleet deployment, including a greater concentration of vessels in the Pacific region, contributed positively. Our increased exposure to shorter term time charters enabled us to benefit from positive developments in our core Atlantic markets. Strong execution across our charter-in business underscores our ability to translate favorable conditions into positive margins. We continue to grow our onshore logistics platform in the second quarter, commencing operations at the Port of Tampa. Tampa joins our operations at Port Aransas and Lake Charles, all under multi-year contract that started operations within the last 12 months.

Terminal and stevedore revenue grew 11% year over year to approximately $4 million. We continue to expect roughly $3 million of incremental EBITDA from these operations on a full year basis. Specifically, this is recurring revenue business that deepens our integration into customer supply chains beyond ocean freight, and it pairs naturally with our Supramax and Handysize fleet. We also advanced our fleet renewal strategy. During the second quarter, we completed the previously announced sale of the 2006-built Bulk Xaymaca for $9.6 million. This follows the sale of the Bulk Freedom late last year, also for $9.6 million, and together these transactions reflect a consistent approach of monetizing older tonnages at attractive values, avoiding the capital and off-hire associated with upcoming drydockings, and steadily improving the efficiency and environmental profile of our fleet.

We will continue to selectively and opportunistically invest in modern, high-quality vessels that fit our commercial model, remaining disciplined on price and transacting only when the returns are clear. Looking at the market, demand for bulk commodities carried positive momentum through the first half of the year, driven by increased trade in both iron ore and grain compared to last year. That strength was broad-based, supporting earnings not only in the larger Capesize segment, but also across the midsize and smaller classes where we are most active. Minor bulk trades, which are central to our cargo book, likewise grew compared to the prior year. Encouragingly, this momentum continued into the third quarter. Our outlook for the balance of 2026 remains positive.

At the market level, we expect moderate fleet growth to be broadly offset by comparable ton mile demand, with the continued disruption and lengthening of trade routes translating massive cargo volume growth into stronger ton mile demand, which is what ultimately drives utilization and freight rates. For Pangaea specifically, the second half carries a well-established seasonal tailwind as our high ice class fleet is most active during the Arctic summer trading season, which peaks in the third quarter and tapers through the fourth, typically driving our strongest utilization and earnings from these specialized higher margin trades. Through today, we have booked 4,873 shipping days at a TCE of $20,258 per day for the third quarter. In summary, our second quarter results highlighted the value of our commercial platform and dynamic fleet positioning.

As we enter the second half of the year, our results will further reflect the strategic advantages of our specialized ice class fleet and long-term contract, which commands a durable premium to the market. Our growing onshore terminal network has a recurring layup earnings with a long runway ahead, and our modern fleet and strong balance sheet lets us fund growth and return capital at the same time. With fundamentals supportive and our strongest seasonal quarters just beginning, we are focused on converting these advantages into sustained earnings growth and lasting value for shareholders. With that, I'll turn the call over to Gianni to walk through our second quarter financial results.

Thank you, Mads, and welcome to those joining us on the call today. Our second quarter financial results were highlighted by sustained TCE premiums relative to the prevailing market. Second quarter TCE rates were $18,153 per day, a premium of 10% over the average published market rate of $16,502 per day for Panamax, Supramax, and Handysize vessels in the period. Our adjusted EBITDA for the second quarter was $35 million, a year-over-year increase of nearly $20 million, driven by a 50% increase in TCE rates. Our total charter hire expense increased by 24% compared to the second quarter of 2025 due to an increase in market rates to charter in vessels. Our charter-in cost on a per-day basis was approximately $16,816 per day in the second quarter. Through today, we've booked 2,200 days at $17,537 per day for the third quarter.

Vessel operating expenses were essentially flat year-over-year. On a per-day basis through the second quarter of 2026, vessel operating expenses, including technical management fees, was $6,247 per day, a 2% increase from the prior year. Total general and administrative expenses increased by 25%, from $7.2 million to approximately $9 million. The increase was primarily due to an increase in incentive compensation expense due to improved results, along with higher compensation costs associated with added headcount across the organization as we grow our business. In total, our reported GAAP net income for the second quarter was $10.2 million, or $0.16 per diluted share. Our GAAP net income included a significant unrealized loss resulting from our hedging strategy on bunker fuel exposure. The decline in fuel prices late in the second quarter decreased the fair value of our bunker derivatives.

Some of these same derivatives translated into significant unrealized gain during the first quarter as fuel prices increased due to the escalation of the conflict with Iran. The first quarter's unrealized gain and the second quarter's unrealized loss essentially offset each other, leaving us in a neutral position for the year. More importantly, all of our hedges are placed against our own bunker requirements over the course of the year, keeping our fuel cost management aligned with our actual physical consumption. When excluding the impact of the second quarter unrealized loss from derivative instruments, as well as other non-GAAP adjustments, our reported adjusted net income was $16.9 million, or $0.26 per diluted share. Moving on to cash flows. Our strong profitability during the quarter resulted in robust operating cash flow.

This, combined with $9.7 million of cash proceeds received from the sale of the Bulk Xaymaca during the quarter, drove our unrestricted cash balance to $105 million. At quarter end, we had total debt, including finance lease obligations, of approximately $350 million. To note, our current portion of long-term debt increased to $40 million due to a $24 million balloon payment, which we expect to refinance in the coming months. We are also pleased to announce an increase in our quarterly dividend to $0.10 per share. This increase reflects the strengthening fundamentals and the balance sheet of the business and underscores our commitment to returning capital to shareholders, consistent with the disciplined capital allocation strategy we have always followed. Looking ahead, we will continue to allocate capital with a focus on preserving financial flexibility, supporting the growth of our integrated logistics platform, and returning capital to shareholders.