NAVIGATOR HOLDINGS LTD. 2026 Q2 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- Navigator Gas reported exceptional Q2 2026 results with record net income of $53.0 million or $0.86 per share, surpassing previous records.
- Average TCE rates reached a record high of nearly $34,000 per day, up 20% from Q2 2025, with utilization above 90%.
- Morgan's Point ethylene export terminal throughput hit a record 374,278 tonnes in Q2 2026, contributing $7.1 million in equity method investment income.
- The company completed the sale of Navigator Pegasus for approximately $31 million with a book gain of $15.3 million and signed a definitive agreement to divest eight unit gas pool vessels for $183 million, expecting a net book gain of $65 to $70 million.
- Financing for all six newbuild vessels is secured at competitive terms, including a $121.8 million secured term loan for two coral ammonia newbuild vessels at 135 basis points plus SOFR.
- Cash and equivalents were $274 million at June 30, 2026, increasing to $362 million by August 3, 2026, after drawing $57 million from a new build vessel financing facility.
- Adjusted EBITDA was a record $86.4 million for Q2 2026, up from $65 million in Q1 2026 and $60.1 million in Q2 2025.
- Net debt to last 12 months adjusted EBITDA fell to 2.2 times at June 30, 2026, down from 2.5 times at March 31, 2026, with a loan to value ratio around 31%.
- The company returned 35% of net income to shareholders in Q2 2026 via a $0.07 per share dividend and share buybacks, and plans to increase the fixed dividend to $0.08 per share from Q3 2026.
- Navigator's fleet consists of 54 vessels with an average age just over 12.5 years and average size of just over 21,000 cubic meters, excluding the unit gas vessels which are being sold.
- The company continues to upgrade vessels with energy-saving technologies and AI programs to improve efficiency.
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Transcript
Preview the first fifteen paragraphs, organized by speaker.
Good morning and good afternoon, thank you very much for joining this Navigator Gas earnings call for Q2 2026. Before we get into the results, let me just say a few words about the Middle East. We continue to have no vessels operating in or transiting the Hormuz Strait, and we don't see any material operational impacts. As I'll touch on shortly, and though it's on a sad background, the conflict continues to create real commercial tailwinds for us. Please turn to slide number four. Q2 2026 was an exceptional quarter, I mean that in the most literal sense. We set all-time records for net income, for EBITDA, for EPS, and average TCE rate, all at the same quarter. For a company that's been operating for over 25 years, that is quite special. Let me walk you through a couple of the highlights.
On the commercial side, TCE rates hit a record high of almost $34,000 per day. This is up significantly from Q1 and up 20% from the same period last year. Utilization came in above our 90% benchmark. These are strong numbers across the board. Our ethylene export terminal at Morgan's Point delivered yet another record, 374 tons in the quarter. That follows from previous record that we set just one quarter ago. Demand from Europe and Asia for U.S. ethylene continues to grow, driven by high naphtha prices and structural changes to how global crackers are sourcing their feedstock. We've also signed a fourth new offtake contract in the quarter, and discussions for further contract remain active. On portfolio management, we completed the sale of Navigator Pegasus in April for approximately $31 million and a book gain of over $15 million.
In July, we signed the definitive agreement to divest the eight Unigas pool vessels for a combined $183 million. That's a significant transaction, and we expect most of those sales to complete during Q3. We expect a net book gain on this transaction of $65 million-$70 million, and this again underscores the value of our vessel portfolio. We have indeed been quite consistent in booking net gains on our vessel sales. Financing for all six new-build vessels are now in place, both the four Panda ethane ethylene carriers and the two Coral ammonia new builds. Completing that financing package is a real milestone, and it was done at the most competitive terms ever for Navigator. The balance sheet is healthy. Available cash at quarter end was $226 million after significant debt repayments, shipyard payments, and capital returns.
Our investment in Azane Fuel Solutions is developing towards a final investment decision to build three ammonia bunkering terminals along the west coast of Norway. It's supported by a significant Enova grant from the Norwegian government upon reaching final investment decision. On capital return, we are again delivering on our commitment. The board has declared a dividend of $0.07 per share for Q2. Together with buybacks, we will return 35% of net income to shareholders in line with our improved capital return policy. From Q3, we are raising the fixed cash dividend element to $0.08 per share. Now on the outlook. Q3 is expected to see some normalization in TCE rates and terminal volumes. That's also consistent with the seasonal patterns and a tighter arbitrage on ethylene.
The underlying demand picture, though, driven by the growing U.S. natural gas liquids production, remains fully intact. The Hormuz Strait situation continues to support demand for U.S. commodities across LPG, ethane, and petrochemicals. On the supply side, the Handysize order book stands at just 11% of the fleet, while 17% of vessels are over 25 years old. The math on the fleet renewal continues to work in our favor. With that, I'll pass on the word to Gary, and please go ahead with a little bit more detail on the financials.
Go ahead, Gary. Thanks, Mads, and hello, everyone.
Following on from where we left off on our last call in May this year, the tailwinds we described as we moved through the second quarter did indeed arrive. As Mads has said, we're pleased to report exceptional second quarter results. This was achieved against a backdrop that included continued disruption across key global shipping corridors, including the Strait of Hormuz, which, having limited direct operational or financial impact on us, has acted as a meaningful demand catalyst, pushing customers towards North American supply chains and benefiting our utilization and rates in the quarter. Øyvind will go more into this shortly.
Turning to more detail on slide six, we're reporting an average TCE of $33,946 for the second quarter of 2026, an all-time high, being more than $4,000 per day higher than the $29,684 in the first quarter of 2026, and over $5,000 per day higher than the $28,216 in the second quarter of last year. Utilization was above our benchmark at 90.8%, compared to 90.6% in the first quarter of 2026 and 84.2% in the second quarter of last year. Voyage expenses are showing higher in the second quarter of 2026, but which are effectively pass-through costs to our customers related to bunker fuel and other such spot voyage costs, and they're reflective of the record total operating revenues that we're reporting this quarter.
Vessel operating expenses of $47.1 million for the quarter were broadly flat in absolute dollar terms, though up on the basis of dollars per vessel per day at $9,554 compared to $8,905. This was mainly driven by higher crewing and logistics costs and the timing of project-related expenses incurred in the quarter. Depreciation was down at $31.5 million compared to the second quarter of last year, reflecting our reduced fleet size following vessel sales. The sale of the Navigator Pegasus in this quarter brought us the gain of $15.3 million on proceeds of $30.5 million. EBITDA for the quarter was an all-time high of $101.6 million, compared to $80.3 million in the first quarter of 2026 and $71.9 million in the second quarter of 2025.
Adjusted EBITDA, also a record, was $86.4 million, up from $65 million in the first quarter of 2026. Significantly higher than the $60.1 million in the second quarter of 2025. As always, Randy will discuss more about our ethylene terminal, but throughput volumes for the second quarter were another record high of 374,278 tons. Our share of the terminal's results reflected in the equity method investment income line of $7.1 million for the quarter, up from $4.8 million in the second quarter of last year. Our income tax line reflects current tax and deferred tax in relation to our equity investment in the ethylene export terminal, in line with the stronger terminal results for the quarter. Net income attributable to stockholders for the second quarter of 2026 was $53.0 million, or $0.86 per share.
The highest Navigator has ever reported, surpassing the previous records set just last quarter. Well above the $21.5 million or $0.31 per share reported in the second quarter of 2025. We continue to actively use, strengthen, and build our balance sheet as shown on slide seven. Our cash equivalents, and restricted cash balance was $274 million at June 30, 2026. This figure was $362 million at close on August 3rd, 2026. In particular, following the $57 million we drew from our recently closed newbuild vessel financing facility. As a precautionary measure in April 2026, when the war in Iran started, we drew down just over $91 million under our revolving credit facilities, given the geopolitical uncertainty seen at that time.
Whilst this of course has not gone away, we expect to repay those revolving facilities in the coming months based on our ongoing assessment of market conditions, as the proceeds from the sale of the Unigas vessel fleet are received. Our healthy liquidity position at June 30, 2026 is after returning $10.6 million to shareholders across dividends and share buybacks, repaying $26.8 million of scheduled loan amortization. Ahead of our agreed sale of the Unigas pool fleet, early repaying $43 million of debt secured against certain of those vessels. We also made $20.8 million of payments towards our newbuild vessels during the quarter. Our share in the Morgans Point ethylene export terminal remains unencumbered. We also own 14 unencumbered vessels at June 30, 2026, eight of which are part of the Unigas fleet to be sold.
With our bond having $60 million of untapped capacity, we continue to retain significant additional liquidity for if and when needed. Looking beyond this quarter, we've paid from our own cash a total of $131.6 million at June 30, 2026 towards the six vessels we have under construction, of which $8.5 million represents capitalized interest under US GAAP. On July 17, we drew $57.6 million, as I referred above, from our new $164 million bridge loan facility, recouping 80% of the pre-delivery installments paid to the shipyard to date for the first of our two Panda newbuild vessels. We continue to press forward in maintaining a balanced capital structure.
On slide eight, across the quarter and with a very supportive banking group and a strong underlying business, we were again able to return cash to shareholders, use funds for the construction of our newbuilds, reward shareholders through buybacks, and continue managing and refreshing our debt to meet our financing needs in an efficient and cost-competitive way. In the respect of the first quarter of 2026, we returned 30% of net income attributable to stockholders, comprising $6.3 million of share buybacks and $4.3 million of cash dividend, representing $0.07 per share. In respect of the second quarter of 2026, our board yesterday approved an increase such that we will return 35% of net income attributable to stockholders.
This will comprise $4.3 million of cash dividend, representing $0.07 per share. We expect the balance will comprise around $14.2 million of share repurchases to take place between now and September 30, 2026. Given the company's strong cash position for the third quarter ending September 30, 2026, yesterday our board also approved an increase in the fixed element of the company's capital return policy to $0.08 per share of the company's common stock while maintaining that the fixed element and the variable element together should equal 35% of net income attributable to stockholders of the company. Note that the declaration of any dividends and the amount of any such dividends, including with respect to the third quarter, do remain subject to approval by the company's board of directors following the conclusion of each quarter as normal.
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