Euroseas Ltd.(Marshall Islands) 2026 Q2 Earnings Call

Please go ahead, sir. Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call.

I'd like to apologize for the 10-minute delay, but I was caught in another very important phone call. Sorry about that. Together with me is Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the three- and six-month period ended June 30th, 2026. Please turn to slide 3 of the presentation for our quarterly financial highlights. For the second quarter of 2026, we reported total net revenues of $56.5 million and a net income attributable to controlling shareholders of $33.2 million or $4.74 per diluted share. Adjusted net income for the quarter was $32.9 million, or $4.70 per diluted share. Adjusted EBITDA for the period was $40.1 million.

Please refer to the press release for the reconciliation of adjusted net income and adjusted EBITDA to net income. Our CFO, Tasos Aslidis, will go over our financial highlights in more detail later on in the presentation. We are pleased to announce that our board of directors has declared another quarterly dividend of $0.80 per share for the second quarter of 2026 as part of the company's common stock dividend plan. Based on current share price levels, the distribution reflects an annualized yield between 4.2% and 4.5% based on the recent range of our share price. Since the launch of our $20 million share repurchase program in May 2022, we have repurchased 480,000 shares in the open market through August 13th of 2026, representing approximately 6.8% of our outstanding shares for a total consideration of around $11.4 million.

We remain committed to executing the program in a disciplined and opportunistic manner, allocating capital prudently while enhancing long-term value for our shareholders. Please turn to slide 4 for an overview of our recent developments, covering key activities across vessel sale acquisitions, charter, and fleet operations. On the S&P front, as announced in mid-June, we entered into an agreement with Nantong CIMC Sinopacific Offshore & Engineering in China for the construction of two additional 1,800 TEU TLS container ships, sisters to the two we ordered in April 2026, with expected deliveries in December 2028 and March 2029. Total consideration for these vessels is approximately $64.5 million, which will be financed with a combination of debt aiming at 60% to 65%, and equity. On May 4, we entered into a joint venture with NRP Project Finance for our first intermediate newbuilding, motor vessel Piraeus.

The vessel is scheduled for delivery in Q1 2028. Under the terms of the agreement, NRP investors will acquire a 49% stake for approximately $12.22 million, with the transaction assuming at least 60% debt financing. The first capital contribution has already been paid. On the chartering side, we have secured multi-year charter extensions for motor vessel Pepi Star and motor vessel Stephania K. Both vessels are fixed for a minimum of 24 to maximum of 26 months at a daily rate of $25,500 per day, providing earnings visibility through at least the first quarter of 2028. We had no technical or commercial off-hire days this period. Now, please turn to slide 5. Our operating fleet consists of 21 vessels with a combined carrying capacity of approximately 61,000 TEU and an average age of 13 years.

This includes six intermediate container ships with a carrying capacity of 25,500 TEU and an average age of 18 years, alongside 15 feeder container ships with a combined carrying capacity of 35,600 TEUs and an average age of nine years. We have 12 new building vessels on order, eight feeders and four intermediate containers, with delivery schedules Q3 2027 through Q1 2029. Upon completion of our new building program, our fleet will expand to 33 vessels with a total carrying capacity of approximately 97,000 TEU, positioning us with one of the youngest feeder and intermediate container ship fleets in the market. Please turn to slide 6 for a further update on our fleet employment and forward coverage.

Our chartering coverage stands at 96% for 2026, 81% for 2027, and 47% for 2028 at highly attractive average daily rates of approximately $30,900 per day for 2026, $31,700 for 2027, and $32,300 for 2028. This insulates our earnings even if market rates soften when current charters expire. Moving on to slide 8, let me walk you through the market key developments that shaped the container ship sector over the second quarter of 2026. Container shipping markets continued their upward trajectory through the whole of Q2 and Q3 to date, driven by robust mainland demand and supply disruptions tied to the Middle East geopolitical tensions. Charter rates reached the highest level since before the COVID-19 pandemic, while freight rates extended their momentum, posting multiple gains through July. On the asset side, secondhand vessel prices held steady during the second quarter compared with the first, despite ongoing geopolitical uncertainties.

The fundamentals remain solid, high supply of available tonnage and strong competition for prompt charter fleet vessels continued to underpin valuations. New building prices also moved higher, up approximately 2% quarter-over-quarter, reflecting robust demand across the sector. Fleet utilization remains remarkably tight. Idle capacity, excluding vessels under repair, was just 200,000 TEU or 6% of the global fleet as of early July. This remains at historic lows and underscores the structural supply tightness we are seeing during this market cycle. Finally, recycling activity has been notably subdued year-to-date, with only 10 vessels accounting for 25,000 TEU sent to scrap through July. This further reflects the high-value environment for tonnage and limited incentive to recycle. Meanwhile, the fleet grew by 2.6% year-to-date. Please turn to slide nine, which illustrates the development of 6-12 month time charter rates over the past decade.

Across all vessel classes, from smaller feeders to the larger intermediate container segment, current charter rates remain notably above both their respective 10-year historical averages and median levels. These smaller vessel classes play an essential role in maintaining network flexibility and supporting regional and interregional trade flows, a role that has become increasingly critical amidst geopolitical uncertainties and supply chain disruptions. With scarce available tonnage and underlying demand holding firm, the conditions supporting elevated time charter rates appear broadly intact for now. Please turn to slide 10, where we review the global macroeconomic backdrop and its implications for container shipping demand. According to the IMF July 2026 World Economic Outlook, global growth is projected at 3% in 2026, recovering to 3.4% in 2027, broadly unchanged cumulatively from April's forecast.

The outlook is elevated energy prices and geopolitical tensions, particularly the Iran conflict and Ukraine-Russia war, are driving inflation and interest rates higher. However, AI-driven investment is supporting growth in technology-integrated countries. Meanwhile, global disinflation has stalled, with the inflation shock pushing the yield on the 10-year U.S. Treasury to approximately 4.7%. The U.S. economy has remained comparatively resilient at 2.3% growth. China is projected to grow 4.6% this year, supported by infrastructure investment and high-tech exports, but decline to just 4.1% growth in 2027, while Asia five region is projected to slow to 4.1% in 2026, before recovering to 4.3% growth in 2027. On container trade, as measured in TEUs Volume is projected to moderate from 4.6% growth in 2025 to just 3.7% in 2026, reflecting tariff impacts and slower global growth overall due to the geopolitical disruptions.

Growth is expected to remain subdued at 3.4% in 2027, as the effects of the current disruption will take longer to dissipate. For container shipping specifically, containerized trade measured in TEU-miles is projected to grow by approximately 3.6% in 2026. However, we anticipate a normalization effect in 2027, with TEU-miles demand projected to decline by 4.8%, reflecting expectations of trade routes and sailing distances to return to historical patterns. Turning on slide 11, you can see the total fleet age profile and container ship orderbook. Starting with the age profile in the upper left, the overall container ship fleet remains relatively young, with a majority of vessels under 15 years of age and only about 15% of the fleet over 20 years old.

However, this aggregate view is totally different when examining the feeder and intermediate segments in isolation, which we will explore in greater detail over the next several slides. Turning to vessel deliveries, the top right chart illustrates scheduled new deliveries as a percentage of the existing fleet. Deliveries are projected at approximately 5.5% for 2026, 9.4% for 2027, and 24.2% for 2028 onwards, although actual fleet growth is expected to be somewhat lower due to slippage and future demolition activity. The bottom chart puts the current order book in historical context. At approximately 39.8% of the fleet as of August 2026, the order book has climbed to levels not seen in over 15 years, a development that warrants close attention as we think about the medium-term supply outlook for the sector.