GENCO SHIPPING & TRADING LTD 2026 Q2 Earnings Call

Before we begin our presentation, I note that in this conference call, we've been making certain forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements use words such as "anticipate," "budget," "estimate," "expect," "project," "intend," "plan," "believe," and other words in terms of similar meaning in connection with a discussion of potential future events, circumstances, or future operating or financial performance. These forward-looking statements are based on management's current expectations and observations.

For a discussion of factors that could cause results to differ, please see the company's press release that was issued yesterday, the materials relating to this call posted on the company's website, and the company's filings with the Securities and Exchange Commission, including, without limitation, the company's annual report on Form 10-K for the year ended December 31st, 2025, and the company's reports on Form 10-Q and Form 8-K subsequently filed with the SEC. At this time, I would like to introduce John Wobensmith, Chairman and CEO of Genco Shipping & Trading Limited.

Good morning, everyone. Welcome to Genco's second quarter 2026 conference call. I will begin today's call by reviewing the progress we've made executing our comprehensive value strategy. Then we will review our Q2 2026 highlights and dividend outlook for the remainder of the year. We will provide additional details on our financial results as well as an update on the industry's current fundamentals before opening the call up for questions. For additional information, please also refer to our earnings presentation posted on the website. Starting on slide five, during the second quarter, we continued to make meaningful progress executing our comprehensive value strategy, which is generating compelling returns for shareholders. Since 2021, we have been executing our well-defined capital allocation strategy and have successfully transformed Genco into a low-leverage, high-dividend company, supported by a fleet of premium-earning assets, industry-low break-even levels, and a leading commercial operating platform.

Today, our shareholders are continuing to see the benefits of our strategy. We have fortified our balance sheet to effectively operate and grow in various rate environments and provide shareholders with consistent and sizable dividends. We have invested $557 million in high-specification modern vessels with a focus on sectors with compelling supply and demand fundamentals and distributed $308 million in dividends to shareholders since 2021. We have also paid down $119 million in debt, significantly reducing our cash flow break-even rate and further enhancing our earnings power and dividend capacity. Moving to slide six, following a strong first quarter, we are pleased to have carried this positive momentum into Q2 2026. During the second quarter, we generated strong cash flow. This was driven by a time charter equivalent rate of over $24,200 per day, our highest quarterly TCE rate since 2022, resulting in adjusted EBITDA of nearly $57 million.

These strong results exceeded expectations for the quarter as the dry bulk market continued to strengthen and we further capitalized on our growing fleet of premium-earning assets across the main sectors in which we operate. We declared a Q2 dividend of $0.80 per share, more than double our first quarter dividend and 433% higher on a year-over-year basis. Notably, our Q2 dividend is the highest we've declared since the inception of our comprehensive value strategy in 2021. This also marks our 28th consecutive quarterly dividend paid to shareholders, the longest uninterrupted period in our dry bulk peer group. Our strong financial performance reflects the deliberate steps we have taken to increase our earnings power and dividend capacity for the benefit of our shareholders. The second quarter marked the first full quarter in which all of our 2025 vessel acquisitions operated for an entire quarter.

These well-timed acquisitions, which grew our asset base by approximately 20%, directly and significantly contributed to our strong earnings and dividend during the quarter. Later this month, we are set to further strengthen our fleet as we expect to take delivery of a 2019-built Capesize vessel, the Genco Volunteer. This will bring our total investment in Capesize and Newcastlemax vessels to $408 million since 2023, a period in which these vessel types have vastly outperformed all others in the dry bulk sector. Importantly, we have achieved an IRR of over 30% to date on these acquisitions. As we have done with the other vessels we added to our fleet in 2026, we anticipate trading the Genco Volunteer in the spot market and expect the vessel to earn a significant premium to the Baltic Capesize Index given its high specifications.

As depicted on slides seven and eight, we achieved multi-year highs for the Q2 dividend, TCE, and EBITDA, and expect to exceed those metrics going into Q3. Including our Q2 dividend of $0.80 per share, we will have paid $8.715 per share in quarterly dividends over the past seven years. With the growth of our premium earning assets, our spot-focused commercial strategy, and our considerable operating leverage in a strengthening dry bulk market, we project a Q3 dividend to achieve another record level. Based on our Q3 fixtures to date of $28,600 per day for 66% of our available days, and assuming the current FFA curve for the balance of the quarter, we project a third quarter dividend of over $1 per share.

We have strong prospects in Q4 as well, which we project another dividend north of $1 per share based on the FFA curve. This would bring a projected full-year dividend of over $3.15 per share. The foundation of Genco's strong earnings power and dividend capacity, and what we believe drives valuation in public markets, is rooted in strong corporate governance and capital allocation decisions. Our strategy is outlined on the next several slides. Moving to slide 9, Genco continues to maintain industry-leading corporate governance, which has underpinned our shareholder-focused outperformance. We are consistently ranked in the top quartile on corporate governance among public shipping companies, and we are the only U.S.-listed dry bulk shipping company with no related party transactions. Turning to slide 10, Genco has one of the lowest cash flow breakeven levels in our peer group.

This is directly related to our industry-low net loan-to-value, as well as having no mandatory debt amortization. In addition to significantly increasing our Q2 and Q3 TCE to date on a year-over-year basis, we continue to markedly exceed our low cash flow breakeven rate. Specifically, our Q3 TCE to date of nearly $29,000 per day is approximately $19,000 per day above our breakeven rate prior to maintenance CapEx of approximately $10,000 per day. On slide 11, we highlight the strategic benefits of our balanced fleet composition. Following the expected Cape delivery in August, we will own a fleet of 20 Capesize and Newcastlemax vessels, as well as 24 Ultramax and Supramax vessels. Importantly, we continue to balance the upside potential of the Capesize sector, along with the steadier earnings profile of minor bulk ships. On a vessel ownership basis, our splits are 45% Capes and 55% Ultramax, Supramax.

However, when viewed on a net revenue basis over the last two years, we are over 50% weighted towards the larger Capesize vessels, putting us in a unique position in our peer group to benefit from the strengthening freight rate environment. On slide 12, we highlight the current operating leverage provided by our pro forma fleet of 44 vessels. Every $1,000 fleet-wide TCE increase equates to $16 million of incremental annualized EBITDA, or $0.36 per share. Every $5,000 increase in TCE for our 20 Newcastlemax and Capesize vessels equates to $36 million, or $0.81 per share of incremental earnings and dividend capacity. Turning to slide 13, we also continue to balance our high operating leverage with our low financial leverage, providing us with flexibility to operate across various freight market conditions. In stronger markets, we generate meaningful cash flow with our industry-low breakeven rate and scalable fleet.

In market downturns, Genco's low financial leverage and undrawn revolver capacity enable us to pursue counter-cyclical growth opportunities. Importantly, Genco is well-positioned today to drive value for our shareholders and play offense in any type of dry bulk market. I will now turn the call over to Peter Allen, our Chief Financial Officer.

Thank you, John. On slides 15 through 17, we highlight our strong second quarter financial results, which are driven by our sizable operating leverage, growing fleet, and industry-low breakeven levels. For the second quarter, Genco recorded net income of $16.6 million, or $0.38 and $0.37 basic and diluted earnings per share. Adjusted net income is $29.2 million, or $0.67 and $0.65 basic and diluted earnings per share, excluding a gain on sale of vessel of $1.9 million, other operating expenses of $13.1 million, impairment on vessel assets of $1.2 million, and an unrealized fuel loss of $2 million. Other operating expenses primarily relate to shareholder and proxy expenses incurred during the quarter, including financial advisory costs associated with inadequacy opinions received for outstanding tender offers at the time.

Such opinions are connected to tender offers and served as important information for both the company to determine that the offers were inadequate and for shareholders in making their own determinations regarding the offers. Adjusted EBITDA for Q2 totaled $56.7 million, an increase of approximately 300% year-over-year. This was led by a time charter equivalent rate of $24,273 per day, which rose by 78% as compared to Q2 2025, while the cost structure was similar on a year-over-year basis, highlighting the operating leverage inherent in our fleet. Our first half of 2026 adjusted EBITDA totaled $92.9 million, which already exceeds the full year 2025 level and is on pace to be our highest earnings year since the 2021-2022 period. We continue to generate meaningful cash flow and maintain significant financial flexibility. Our cash and debt positions as of June 30th, 2026 were $74 million and $330 million respectively.