Seanergy Maritime Holdings Corp. (NASDAQ:SHIP) Q4 2023 Earnings Call Transcript

Seanergy Maritime Holdings Corp. (NASDAQ:SHIP) Q4 2023 Earnings Call Transcript March 15, 2024

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Operator: Thank you for standing by, ladies and gentlemen, and welcome to the Seanergy Maritime Holdings Corp. Conference Call on the Fourth Quarter and Year Ended December 31, 2023 Financial Results. We have with us today Mr. Stamatis Tsantanis, Chairman and CEO; and Mr. Stavros Gyftakis, Chief Financial Officer of Seanergy Maritime Holdings Corp. [Operator Instructions] Please be advised that this conference call is being recorded today, Friday, March 14, 2024. The archived webcast of the conference call will soon be made available on the Seanergy website, www.seanergymaritime.com. To access today’s presentation and listen to the archive audio file visit the seanergy website following the webcast and presentation section and on the investor relations page.

Please now turn to slide two of the presentation. Many of the remarks today contain forward-looking statements based on current expectations. Actual results may differ materially from the results projected from those forward-looking statements. Additional information concerning factors that can cause the actual results to differ materially from those in the forward-looking statements is contained in the fourth quarter and year ended December 31, 2023 earnings release, which is available on the Seanergy website again, www.seanergymaritime.com. I would now like to turn the conference over to one of your speakers today, the Chairman and CEO of the company, Mr. Stamatis Tsantanis. Please go ahead, sir.

Stamatis Tsantanis: Thank you, operator. Hello. I would like to welcome everyone to our conference call. Today, we are presenting the financial results for the fourth quarter and full year period of 2023, together with an update on our main corporate developments. Let’s move into slide number three. 2023 was one of the most volatile year for the Capesize market. We experienced a wild range of freight rates that bottomed at 2,200 per day in Q1 and peaked at almost $55,000 a day in Q4. Despite this extreme volatility Seanergy was very well placed to take advantage of a stronger rebound in the Capesize market that transpired in the fourth quarter of 2023. As a result, we delivered another profitable year building on our robust commercial performance, our hedging activities and the investments we have made in improving our vessels efficiency over the years.

In doing so, we have successfully navigated the extreme freight rate and stability and achieved a healthy mix of fleet growth, accretion and cash dividends. We ended the fourth quarter of 2023 with a net income of approximately $10.8 million, which compares very favorably with a net income of $0.5 million reported in the fourth quarter of 2022. Following a strong 2023 fourth quarter, the Capesize market is currently undergoing the best first quarter since 2011. This is a result of higher raw material trade flows, limited fleet growth over the past year, as well as disruptions in key areas. Consistent with our commitment to reward our shareholders, our board of directors declared a total cash dividend of $0.10 per share consisting of a special dividend of $0.075 on top of the $0.025 regular dividend for the quarter.

This results in a dividend payout ratio exceeding 100% for the full year period of 2023. While we’re currently evaluating our options to further increase capital returns to our shareholders, provided that the underlying conditions allow. In addition to our cash dividend distributions, since 2023, we have completed 2.5 million in share buybacks, or about 2% of our shares outstanding at an average price of $5.12, which is about 44% lower than the current market price. Additionally, in December we repaid the 3.2 million outstanding balance under our convertible note, addressing a long-standing legacy overhang over our share price while simplifying our capital structure. Apart from this, during 2023 we refinanced approximately 53.8 million of indebtedness and following these transactions, there are no other debt maturities until the second quarter of 2025.

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Q&A Session

We are pleased to see Seanergy making parallel progress in our strategic objectives of rewarding shareholders, taking advantage of growth opportunities and maintaining a strong balance sheet. I would like to add that we view our balanced capital allocation as the best way to serve the long-term interests of our shareholders. Moving on to slide number four, here we illustrate our priority in capital returns to our shareholders. Since March 2022, we have declared a total of approximately $26.4 million, or $1.45 per share, through a mix of regular and special cash dividend distributions that represents about 16% of our current share price. In terms of buybacks, the total securities repurchased, including common stock, convertible notes and warrants, amount to approximately $41 million.

Moving on to slide number five, here we review the commercial performance of our fleet. First, I would like to point out that we generally overperform the BCI index in a highly volatile cape size market our 2023 TCE performance of $17,500 exceeded about the Capesize index average of $16,400 approximately. This makes two consecutive years of us overperforming the BCI index. In addition, we have focused on acquiring high quality vessels to our fleet comprised of Japanese vessels from the most reputable yards with significantly improved fuel efficiency characteristics. The qualitative improvement of our fleet that leads to increased earnings capacity is a continuous priority for us. Looking ahead to 2024 against the promising backdrop of the first quarter, we believe that our performance will remain solid.

Assuming current FFAs, we expect our first quarter 2024 daily time charter equivalent to be equal to approximately $23,200. We have also taken advantage of the recent upswing in freight futures and hedged approximately 58% of our second quarter ownership days at a fixed gross rate of approximately $28,300. Concerning our fleet growth initiatives, during the fourth quarter, we took delivery of a first Newcastlemax vessel, vessel, which we had agreed to charter in on a bareboat basis. The underlying acquisition price is well in the money, and since its delivery, the vessel commenced employment under an index link time charter at a significant premium to the BCI. Furthermore, in the first quarter we agreed to acquire a Capesize built in 2013 in Japan and we expect to take delivery by the end of the second quarter.

Both transactions have been very well timed. This concludes my recap of our developments in the fourth quarter and to date, and I’m now passing the floor to Stavros before returning to discuss the outlook of the Capesize market. Stavros, please go ahead.

Stavros Gyftakis: Thank you, Stamatis. Welcome everyone to our earnings call. Let us start with slide six by reviewing the main highlights of our financial statements for the fourth quarter and the twelve months period that ended on December 31, 2023. We actually had a great fourth quarter on the back of a very robust Capesize freight market and our effective operating platform. Our net revenues was equal to $39.4 million, 38% higher than the respective period last year based on a time charter equivalent of 24,900. Our adjusted EBITDA and our net income were also significantly improved year-on-year, amounting to $23.9 million and $10.8 million, respectively. On an annual basis, our net revenues was equal to $110.2 million, slightly lower than last year due to the slower than expected Capesize market recovery in the first nine months of 2023, however, we recorded an average time charter equivalent of $17,500 outpaying once again, the BCI by approximately 7%.

Our adjusted EBITDA was equal to $53 million and our net income reached $2.3 million, reflecting the challenges faced earlier in the year. Moving on to our balance sheet, our cash position remains strong in 2023 at $24.9 million, or approximately $1.5 million per vessel. This is despite consistent dividend payments, securities buybacks and hefty data monetization schedule. In slide seven, it is evident that despite the weaker than expected Capesize market during the first nine months of the year, we achieved another profitable year with an adjusted EBITDA of $53 million. This can be attributed to our effective hedging strategy throughout the year, which helped us hedge against some of the downward market pressures. Additionally, our solid operating leverage allowed us to capitalize on the strength of the market in the fourth quarter.

On the expense side, we retain our daily OpEx per vessel at practically the same levels with the previous year, despite the inflationary pressures. This reflects our strategic decision to increase the number of vessels managed on our in-house management platform. With all these actions, our adjusted EBITDA margin for the year remains strong at 48%, closely aligning with the previous year’s performance. Moving on to slide eight, we discussed our debt optimization and overall leveraging efforts throughout 2023. Starting with our debt structure, our debt outstanding at the end of 2023 was equal to $235 million. This includes loans, finance, leases and remaining payments under our bareboat in vessels, including respective purchase options, and corresponds to approximately 13.9 million per vessel, almost half of the average market value of our vessels as per the end of last year.

Our debt repayments reduced our corporate leverage to 47% during 2023, with more than 90% of our debt covered by the scrap value of the fleet based on current scrap prices. Here, it is worth mentioning that Seanergy achieved another significant milestone this year by fully repaying the last outstanding convertible note totaling $11.2 million. During the year, we successfully concluded $53.8 million of refinancing’s, reducing the underlying pricing in overall terms while also adding $15 million in liquidity at that time. Equally importantly, we have now addressed all loan maturities until the second quarter of 2025. Meanwhile, we are in advanced discussions with a potential lender for the financing of our latest Capesize acquisition as Stamatis mentioned earlier.