StealthGas Inc. (NASDAQ:GASS) Q3 2023 Earnings Call Transcript

StealthGas Inc. (NASDAQ:GASS) Q3 2023 Earnings Call Transcript November 21, 2023

Operator: Good day, and thank you for standing by. Welcome to the StealthGas Q3 2023 Results Conference Call and Webcast. This time, all participants are in listen-only mode, with no question-and-answer session. Please note that today’s conference is being recorded. I would now like to hand the conference over to your speaker, Michael Jolliffe, Chairman of the Board of Directors. Please go ahead.

Michael Jolliffe: Thank you very much. Good morning, everyone, and welcome to our third quarter 2023 earnings conference call and webcast. I’m Michael Jolliffe, Chairman of the Board of Directors. And joining me on our call today is Harry Vafias, our CEO, to discuss market and company outlook, and Konstantinos Sistovaris, handling Investor Relations to discuss the financial aspects. Before we commence our presentation, I would like to remind you that we will be discussing forward-looking statements which reflect current views with respect to future events and financial performance. At this stage, if you could all take a moment to read our disclaimer on Slide 2 of this presentation. Risks are further disclosed in StealthGas filing with the Securities and Exchange Commission.

I would also like to point out that all amounts quoted, unless otherwise clarified, are implicitly stated in U.S. dollars. Today, we released our results for the third quarter 2023, announcing the second best quarterly profit ever and best ever nine month results till today. So, let’s proceed to discuss these results and update you on the company’s strategy and the market in general. Turning to Slide 3, we summarize some highlights, starting with fleet and operations update. We first concluded the previously announced sale of two vessels, delivering those in early July. As discussed in the previous quarter, we still have two more vessels to deliver to buyers, and we expect these to be delivered in the first quarter of next year. During the current quarter in October, our joint venture took delivery of one newbuilding medium gas carrier, the Eco Sorcerer, that was deployed immediately on a period charter.

In terms of chartering, we were very active and concluded over nine new period charters, securing over 50% of our fleet days for 2024. Most of these charters were of longer-than-usual tenors of one to three years. We have thus contracted revenues of $195 million for all subsequent periods. Moving to our financial highlights, with an average seven fewer vessels compared to last year, net voyage revenues, that is net of voyage costs, came in at a very strong $34.7 million. Compared to $34.9 million last year, just a 1% increase — decrease, excuse me, in spite of the smaller fleet. Net income for the second quarter was $15.7 million compared to $6.7 million last year, a 134% increase. While for the nine months period, net income was $43 million compared to $26.6 million last year, a 62% increase, which is the highest profit recorded by the company since its inception.

Earnings per share for the nine months were $1.12. Also, worth pointing out that during that period we have halved our debt by paying down facilities of $150 million in just nine months and still maintaining strong liquidity. In October, we also authorized a $10 million increase in the share repurchase program that began in May, making it $25 million in total. The company has repurchased over 3.9 million shares, spending over $19 million so far, and buying back a substantial 10% of the outstanding shares over a short period of time. Let us move on to Slide 4 for our fully-owned fleet employment update as of November. In contrast to the previous call, this time, we announced quite a number of new period charters. During the last couple of months, we saw increased interest from charterers to cover their commitments with inquiries for charters of longer than usual duration.

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Q&A Session

We took advantage, as the rates have been climbing, and fixed a number of vessels in one to three year charters. As a result, we have significantly increased our contracted days for next year to 50%. We have also managed to secure contracted revenues for all periods up to 2027 up to $195 million, more than double what we reported in the previous quarter. Only two of our vessels currently operate in the spot market, one of which already fixed for December. Lastly, in terms of drydocks, we completed the drydock of three of the larger handy size vessels in the previous quarters and have none left for the remainder of the year. For next year, there are seven small LPG vessels scheduled for drydock. In Slide 5, I would like now to provide an update on our two joint ventures comprising of six vessels.

In the first joint venture, we own four small LPG vessels, two of which are trading in the spot market. Two of the vessels completed their drydock this year in quarter two and quarter three. The remaining drydock for the Gas Shuriken should take place in January of next year. The second joint venture currently comprises of two medium-sized gas carriers. Here, as you may recall, one vessel was sold in the first quarter and the proceeds were distributed to the partners. In the current quarter, the joint venture took delivery of one newbuilding medium-sized gas carrier, the Eco Sorcerer, and the vessel was immediately deployed on a period charter and is currently loading in Houston. As previously discussed, the remaining vessel, the Eco Ethereal, is on a very profitable time charter for one year with the charterer’s option to extend one more year and the sale or purchase option all at profitable levels whilst the vessel is mortgage-free as its debt was repaid in June.

In terms of our fleet geography, presented in Slide 6, our company mainly focuses on regional trade and local distribution of gas rather than long distance. This graph is a snapshot of the positioning of the fleet, including the joint venture vessels, as of mid-November. The majority of our fleet, 19 vessels, currently trade in Europe, particularly in the Northwest and in the Mediterranean. We have focused on this area as the freight rates West of Suez continue to command a premium over East of Suez in order to enjoy better rates, although the larger the vessels, the smaller this gap has become recently. Seven vessels are trading in the Middle to Far East, and four vessels trading in the U.S. and Caribbean, and three in Africa. And while our main fleet is focused on local distribution, the larger vessels in our fleet perform more transatlantic voyages.

As an example, this year, all but one of these vessels have loaded cargo in Texas across the Atlantic and unload in Europe and Africa. I will now turn the call over to Konstantinos Sistovaris for our financial performance.

Konstantinos Sistovaris: Thank you, Michael, and good morning to everyone. I will discuss our financial performance for the third quarter of 2023. Let us turn to Slide 7, where we see the income statement for the third quarter and nine months of 2023 against the same periods of 2022. Even though calendar days were reduced by 19% and we had seven fewer vessels, net revenues after voyage expenses came in at $32.3 million for the quarter and $99.5 million for the nine months, an increase of 15% for the quarter and 5% for the nine months compared to last year. So, our fewer vessels generated more revenues comparatively. Total revenues were flat and had reduced voyage expenses. Operating expenses were $12.3 million for the quarter, down 13%, and flat at $40.2 million for the nine months.

As previously stated, we did face inflationary pressures and had cost overruns particularly during the first quarter of this year. In the third quarter, we see a normalization of expenses that are coming down in-line with the fleet reduction. We also note, depreciation costs being reduced significantly as a result of the fleet reduction to $5.6 million and $18.1 million, respectively, for the quarter and nine months. During the third quarter, the company also recognized a non-cash gain on the sale of two vessels that were delivered in July of $4.7 million. As a result, income from operations quadrupled to $16.4 million for the quarter and increased by 60% compared to last year to $36.2 million for the nine months. Interest and finance costs were significantly reduced by 30% over the quarterly period and 12% over the nine-months period, even though rates have more than tripled during those periods.

This is a result of the aggressive debt repayment the company engaged in order to control interest costs and will result in significant savings. For the nine-months period, there was also a considerable increase in the equity income in joint ventures, which is our shares in the profits of our JV structures and our circa $40 million investment there. This income came in at $11.4 million and was mainly attributed to the profits from the sale of one joint venture vessel in the first quarter. As a result of all of the above, we ended the third quarter of 2023 with net income of $15.7 million compared to $6.7 million for the same quarter of last year, a 134% increase. And for the nine-months period, $43 million compared to $26.6 million last year, a 62% increase.