Costamare Inc. (NYSE:CMRE) Q4 2023 Earnings Call Transcript

Costamare Inc. (NYSE:CMRE) Q4 2023 Earnings Call Transcript February 7, 2024

Costamare Inc. beats earnings expectations. Reported EPS is $0.68, expectations were $0.62. CMRE isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Thank you for standing by ladies and gentlemen and welcome to the Costamare Inc. Conference Call on the Fourth Quarter 2023 Financial Results. We have with us Mr. Gregory Zikos, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today Wednesday, February 7, 2024. We would like to remind you that, this conference call contains forward-looking statements. Please take a moment to read Slide number 2 of the presentation which contains the forward-looking statements. And I will now pass the floor to your speaker, Mr. Zikos. Please go ahead, sir.

Gregory Zikos: Thank you, and good morning, ladies and gentlemen. 2023 has been a growth year for Costamare. The company had revenues of $1.5 billion and generated net income of about $660 million. Liquidity stood at around $1 billion as of yearend. Following our strategic decision in 2021 to enter into the dry bulk segment at an opportune time in the cycle, we have grown during 2023 our newly established trading platform to an operator managing a fleet of 61 dry bulk vessels. Having invested $200 million in the new venture we have a long-term commitment to the sector whose fundamentals we view positively. Regarding Neptune Maritime Leasing, the platform has been steadily growing on a prudent basis throughout 2023 having now concluded leasing transactions for 23 ships with a total value of about $250 million.

We are committed to fastly growing the leasing business on the back of a healthy pipeline extending over the coming quarters. On the owned dry bulk fleet side, we are executing our strategy to renew the dry bulk fleet and increase its average size. During the year, we took the decision to dispose of 12 smaller size vessels and have agreed to acquire three capesize and two ultramax vessels. Subject to market conditions, our goal is to continue our expansion in the dry market. In the containership market, recent events have been contributing positively to the supply and demand dynamics pushing up box and charter rates. Those recent developments are mitigating the effects of oversupply in the containership market as tonnage is expected to remain tight at least until the Chinese New Year.

We have however proactively secured employment for 95% and 78% of our open days for 2024 and 2025 respectively, putting our contracted revenues for the containership vessels at $2.5 billion with a remaining time charter duration of about 3.6 years. Moving now to the slides presentation. On Slide 3 you can see our annual results. Net income was about $350 million or $2.95 per share. Adjusted net income was around $250 million or $2.07 per share. Our yearend liquidity stands at roughly $1 billion. Slide 4, regarding CBA, – CBI, we have chartered in the periods 51 vessels with a majority of the fleet being on index linked agreements. On our leasing platform, we have already invested around $120 million. Since inception, NML has financed 23 assets through sale and leaseback transactions and has a very healthy pipeline going forward.

Slide 5. We have now acquired York’s equity interest on a fleet of containership at a – containerships and have now agreed to acquire one capesize dry bulk vessels. In parallel, we have concluded the sale of two supramax and three handysize ships while we have agreed to sell three more handysize and two supramax dry bulk ships. Slide 6. During the fourth quarter, we have financed the acquisition of one dry bulk vessel through a new hunting license facility while we have roughly available $132 million for financing of further vessel acquisitions. We do continue to charter all our dry bulk vessels in the spot market, having entered into more than 40 chartering agreements since our last earnings release. On the containership side, as already mentioned, our revenue days are fixed 95% for ‘24 and 78% for ‘25 while our contracted revenues are $2.5 billion with a TEU weighted average remaining duration of 3.6 years.

Moving to Slide 7. During 2023, we have purchased approximately $6.3 million of common shares for a total consideration of $60 million. In addition, we continue to have a long uninterrupted dividend track record boosted by strong sponsor support. Slide 8. As mentioned already, our liquidity stands at roughly $1 billion. This liquidity gives us the ability to look for opportunities to grow the company on a healthy basis. Moving to Slide 9. Charter rates in the containership markets have been rising daily across all segments having benefited from the Red Sea prices. The idle capacity remains at low levels at 0.8%. And moving to the last slide, on Slide 10, you can see the recent dry bulk market trends in the spot and pore up markets. Charter rates remain volatile having deteriorated from the highs of Q4 2023.

Today’s order book is up 8.5 of the total fleets. With that, we can conclude our presentation, and we can now take questions. Thank you. Operator, we can take questions now.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from Chris Wetherbee with Citigroup. Please go ahead.

Matthew Hortopan: Hey. Good morning. This is Matt on for Chris. Thanks for taking the question.

Gregory Zikos: Hi, good morning, Matt.

Matthew Hortopan: Good morning, yeah. Just wanted to touch a little bit more on CBI. Last quarter you mentioned having a fixed fleet of 59 dry bulk vessels on period charters, but this quarter 51. So we are just wondering if you could provide a little bit more detail and sort of what drives that variability on the platform from quarter to quarter? And how that can affect profitability levels as well as a magnitude of potential shift in that process? And I think that would be great to start.

Gregory Zikos: Yeah. Thanks for the question. First of all, you are right, it was close to 59 ships chartered in the previous quarter. We mentioned 92 now, it has nothing to do with our intention to grow the company further. It is a transact during third quarter specifically. So there were some – which was coincided altogether and we are – like we are now in the process of chartering in additional vessels. Now, at the same time, I need to remind you that we also employ FFA, so I mean, instead of chartering in a vessel at some point, if you cannot sign – asset in the market you come back some type of pay days for capes or for panamaxes. So the smaller amount of ships charter in has absolutely no bet and this would be misconclude as our willingness to stream the business right the opposite this is a long term strategic decision and we are committed to the dry bulk sector both through CBI and also through our own dry bulk ships.

So, it is a market hopefully deliveries that have coincided where the market is we may be buying FFAs instead of chartering in ships. And in this business, we need to be opportunistic. More ships will be chartered and when we will find the right assets also at the right price.

Matthew Hortopan: Okay. Interesting. Okay. Thank you for the further granularity. And just as a follow-up. Wanted to touch a little bit more too on the topic of share repurchases. You’ve been holding off on buying back your stock over the last few months and just given the current plan that you guys have outstanding in terms of $30 million for common shares and $150 million for preferred, what was your plan moving forward with that and sort of how do you think about how share count can move moving forward?

Gregory Zikos: Yeah. First of all, the share repurchases like the common – like the common stock dividends this is a Board decision. And these are subject to part of the Board discussion every quarter. But leaving that aside for the time being, we are the majority of voters the founding $5 million of 60%. So both dividends and share repurchases at a healthy stock price we are all like – the stock price go higher. We are 100% aligned. At the same time, regarding the optimal capital allocation, we need to be tap new opportunities like there are. So we bought back common stock worth of $60 million during the years also June last year and we are looking some parts of this in the past seven years ago. I am not saying that we sort of excluded this Board decision and those is how discussed.

But I am not ready to tell you that we are going to be buying more stock like in next quarter or in two quarters time. This is all subject to market condition and this is subject to the view we take regarding the optimal capital allocation of the company. So I cannot be more specific on that, simply because this is an ongoing discussion and for the time being we feel that this is something that could happen in the next quarter or the quarter after or like during ’24. But I am not in a position to give you an exact timing. It depends on market conditions.

Matthew Hortopan: Got it. Got it. Understood. So it would be fair to assume that for the foreseeable future at elevated stock prices. It’s unlikely that repurchases are going to be executed. Correct?

Gregory Zikos: No, I didn’t say that because I believe that the stock is up to five to ten. If you look at some NAV calculations, you would see that the stock prices also considering the value of the containerships and also the dry bulk vessels and the contracted revenues for the containerships and the net debt. I think on an – like NAV basis, the stock is all of much more than the ten or like $11. So the fact that we are not buying back shares it’s not because we don’t believe that the stock is undervalued. We definitely believe that the stock is undervalued however, we still may – we may find it optimal to use that cash in order buy ships or in order to boost the CBI or Neptune Maritime Leasing. But it doesn’t mean that we conclude on buying back shares.

We don’t feel that the stock is undervalued while the opposite. The stock has been undervalued for quite some time now. As is in most of the cases, this is what’s happening with shipping stock. So we are definitely that below NAV.

Matthew Hortopan: Understood. Thank you very much for all of the further color. I’ll turn it over on that.

Operator: The next question comes from Ben Nolan with Stifel. Please go ahead.

Ben Nolan : Good morning, Greg. Hi, I had a couple. But I wanted to start with the asset sales that you guys did. I know that you – in a relationship at after debt repayment. But could you get the gross proceeds from the asset sales?