Pangaea Logistics Solutions Ltd. Reports Record Financial Results for the Three Months and Year Ended December 31, 2022

About this update from Pangaea Logistics Solutions Ltd.

NEWPORT, R.I. , March 15, 2023 /PRNewswire/ -- Pangaea Logistics Solutions Ltd. ("Pangaea" or the "Company") (NASDAQ: PANL), a global provider of comprehensive maritime logistics solutions, announced today its results for the three months and year ended December 31, 2022 . FOURTH QUARTER 2022 RESULTS (As compared to the Fourth Quarter 2021) Net income of $15.5 million , or $0.34 per diluted share, remained unchanged y/y. Adjusted net income attributable to Pangaea Logistics Solutions Ltd. of $14.3 million , or $0.32 per diluted share, a decline of 43% y/y. Adjusted EBITDA of $26.9 million , a decrease of 29% y/y Operating cash flow of $32.9 million , an increase of 73% y/y Time Charter Equivalent ("TCE") rates earned by Pangaea of $20,023 per day, a premium of 41% over the prevailing market rate Cash and cash equivalents of $128.4 million , an increase of $72.2 million y/y Ratio of net debt to trailing twelve-month Adjusted EBITDA of 1.25x FULL YEAR 2022 RESULTS (As compared to the year 2021) Net income attributable to Pangaea Logistics Solutions Ltd. of $79.5 million , or $1.76 per diluted share, an increase of 17% y/y Adjusted Net Income attributable to Pangaea Logistics Solutions Ltd. of $82.1 million , or $1.82 per diluted share, an increase of 29% y/y Adjusted EBITDA of $140.9 million , an increase of 34% y/y Operating cash flow of $134.8 million , an increase of 118% y/y Time Charter Equivalent ("TCE") rates earned by Pangaea of $24,434 per day, a premium of 22% over the prevailing market rate For the fourth quarter ended December 31, 2022 , Pangaea reported non-GAAP adjusted net income of $14.3 million , or $0.32 per diluted share, on total revenue of $127.9 million . Fourth quarter TCE rates declined 38.5% on a year-over-year basis, while total shipping days, which include both voyage and time charter days, declined 29.2% to 3,681 days, when compared to the year-ago period. The TCE earned was $20,023 per day for the three months ended December 31, 2022 , compared to an average of $32,563 per day for the same period in 2021. During the fourth quarter 2022, the Company's average TCE rate exceeded the benchmark average Baltic Panamax and Supramax indices by approximately 41%, supported by Pangaea's long-term contracts of affreightment ("COAs"), specialized fleet, and cargo-focused strategy. Total Adjusted EBITDA decreased by 29% to $26.9 million in the fourth quarter due to fewer total shipping days and lower market rates, partially offset by the benefit of more owned ship days from a larger owned fleet and a decline in charter-hire expenses. Adjusted EBITDA margin increased by 480 basis points to 21.0% in the fourth quarter 2022, when compared to the year-ago period, supported by sustained execution on the Company's chartered-in strategy amid lower market rates. As of December 31, 2022 , the Company had $128 .4 million in cash and equivalents. Total debt, including lease finance obligations was $303 .9 million at year-end 2022. At the end of the fourth quarter 2022, the ratio of net debt to trailing twelve-month adjusted EBITDA was 1.25x, versus 2.43x in the prior-year period. During the three months ended December 31, 2022 , the Company paid $4.4 million of cash dividends and repaid $7.2 million of long-term debt and other long-term liabilities. Subsequent to the end of the fourth quarter, the Company entered into an agreement to sell the m/v Bulk Newport for $9.2 million . The vessel was delivered to the buyer on March 3, 2023 . As previously announced on Feb 15, 2023 , the Company's Board of Directors declared a quarterly cash dividend of $0.10 per common share, to be paid on March 15, 2023 , to all shareholders of record as of March 1, 2023 . STRATEGIC UPDATE Pangaea remains committed to developing a leading dry bulk logistics and transportation services company of scale, providing its customers with specialized shipping and supply chain and logistics offerings in commodity and niche markets, which drive premium returns measured in time charter equivalent per day. Leverage integrated shipping and logistics model. In addition to operating the largest high ice class dry bulk fleet of panamax and post-panamax vessels globally, Pangaea also performs stevedoring services, together with port and terminal operations capabilities. During the fourth quarter, the Company continued to expand its logistics offering to new and existing customers; including participation in various infrastructure projects in the US Gulf and US East Coast ; providing freight and stevedoring services, handling cement, construction aggregate, and pig iron for new and existing clients. In addition, we executed a specialized project in our Sabine Pass, Texas Terminal , providing heavy lift stevedoring services, handling one of the world's largest capacity cranes. Continue to drive strong fleet utilization. In the fourth quarter Pangaea's twenty-five owned vessels were fully utilized and supplemented with an average of fifteen chartered-in vessels to support cargo and COA commitments. Utilizing its nimble fleet approach, the Company reduced its exposure to the market by redelivering chartered-in vessels and reducing its average chartered-in fleet from 26 vessels in Q3 22 to 15 vessels in Q4 22. Continue to upgrade fleet, while divesting older, non-core assets. In January of 2023, the Company entered into an agreement to sell the Bulk Newport, a 2003 Shin Kurushima Toyohashi shipyard-built 52,587 dwt dry bulk vessel, for $9.2 million . With this sale, Pangaea now owns 24 ships, while continuing to operate a total fleet of approximately 40-60 vessels in worldwide trades. The sale of the Bulk Newport is consistent with the Company's strategy of maintaining an average fleet age of less than 10 years, amid tightening global emission regulations. Looking ahead, the Company intends to opportunistically manage its fleet with the purpose of maximizing TCE rates, while continuing to support client requirements on an on-demand basis. MANAGEMENT COMMENTARY "Our record full-year operating cash flow and profitability demonstrate the durability of our vertically integrated shipping-logistics model in a volatile shipping market environment," stated Mark Filanowski , Chief Executive Officer of Pangaea Logistics Solutions . "During the first half of the year, we capitalized on a strong demand and rate environment by fully utilizing our fleet, including our four, new-build 1A Ice-Class Post-Panamax vessels, together with the five vessels purchased in the prior 24-months. While market conditions deteriorated during the latter half of 2022 and into the first quarter 2023, our long-term transportation contracts and flexible, chartered-in fleet positioned us to perform well in excess of lower spot market levels." "During the fourth quarter, our chartering strategy drove positive arbitrage in a falling-rate market," continued Filanowski. "While the TCE earned declined 38.5% on a year-over-year basis in the fourth quarter, our average TCE rate exceeded the average benchmark by 41% in the period. Our premium rate model, which leverages the integrated benefits of specialty cargo carriage and on-shore supply chain solutions, contributed to an Adjusted EBITDA margin expansion in the fourth quarter, when compared to the prior-year period. First quarter 2023 to-date, our TCE booked for 3,970 ship days is $15,065 per day." "Our cargo-centric business plan delivered significant value creation for shareholders in 2022," noted Filanowski. "We generated nearly $100 million in free cash flow, positioning us to pursue a balanced, self-funded approach toward organic and inorganic growth investments, together with a robust and consistent dividend program. This year, our capital allocation priorities will include fleet renewal and careful expansion; widening our logistics platform, particularly as it relates to complementary, immediately accretive onshore opportunities; further debt reduction; and continued support of our quarterly cash dividend which on an annualized basis results in more than $18 million in distributions to shareholders." "In 2023, we anticipate that a post-pandemic reopening in China and stable economic activity in the West should provide incremental support for global dry bulk demand," continued Filanowski. "On the supply-side, global dry bulk shipping capacity is constrained for the foreseeable future, given the combined impact of low new-build activity and the recent introduction of new, IMO-mandated emissions-reduction regulations that will impact older, less efficient fleets and will further restrict newbuilding orders. In recent years, we have invested heavily in upgrading and refreshing our fleet with younger vessels, ensuring we are well positioned to capitalize on the IMO transition." FOURTH QUARTER 2022 CONFERENCE CALL The Company's management team will host a conference call to discuss the Company's financial results on Thursday, March 16, 2023 , at 8:30 a.m. ET . Accompanying presentation materials will be available with the Company's Securities and Exchange Commission Filing, and in the Investor Relations section of the Company's website at https://www.pangaeals.com/investors/ . To participate in the live teleconference: Domestic Live: 1-800-225-9448 International Live: 1-203-518-9708 Conference ID: PANLQ422 To listen to a replay of the teleconference, which will be available through March 23, 2023 : Domestic Replay: 1-800-283-9429 International Replay: 1-402-220-0871 Pangaea Logistics Solutions Ltd. Consolidated Statements of Operations Three months ended December 31 , Twelve months ended December 31 , 2022 2021 2022 2021 (unaudited) (unaudited) Revenues: Voyage revenue $ 117,339,854 $ 202,503,619 $ 640,033,668 $ 614,482,101 Charter revenue 10,583,556 32,054,642 59,673,238 103,622,287 Total revenue 127,923,410 234,558,261 699,706,906 718,104,388 Expenses: Voyage expense 54,214,070 65,265,750 262,088,555 219,623,127 Charter hire expense 28,156,765 114,992,408 222,332,197 334,952,823 Vessel operating expenses 15,380,167 12,693,076 56,859,340 42,715,496 General and administrative 3,907,905 4,289,733 20,103,346 18,966,488 Depreciation and amortization 7,529,397 6,522,946 29,489,810 22,974,249 Loss on impairment of vessels — — 3,007,809 — Loss on sale of vessels — — 318,032 — Total expenses 109,188,304 203,763,913 594,199,089 639,232,183 Income from operations 18,735,106 30,794,348 105,507,817 78,872,205 Other (expense) income: Interest expense, net (3,649,940) (3,334,804) (14,772,164) (10,329,397) Income attributable to Non-controlling interest recorded as long-term liability interest expense (755,563) (409,254) (6,717,414) (1,184,741) Unrealized (loss) gain on derivative instruments 1,192,416 (9,784,274) 682,323 3,886,201 Other income 290,025 327,693 807,142 1,129,436 Total other expense, net (2,923,062) (13,200,639) (20,000,113) (6,498,501) Net income 15,812,044 17,593,709 85,507,704 72,373,704 Income attributable to noncontrolling interests (309,443) (2,443,553) (6,016,291) (5,146,871) Net income attributable to Pangaea Logistics Solutions Ltd. $ 15,502,601 $ 15,150,156 $ 79,491,413 $ 67,226,833 Earnings per common share: Basic $ 0.35 $ 0.34 $ 1.79 $ 1.53 Diluted $ 0.34 $ 0.34 $ 1.76 $ 1.50 Weighted average shares used to compute earnings per common share Basic 44,435,664 44,004,980 44,398,987 43,997,311 Diluted 44,985,969 44,689,309 45,059,587 44,848,997 Pangaea Logistics Solutions Ltd. Consolidated Balance Sheets December 31 ,2022 December 31 ,2021 Assets Current Assets Cash and cash equivalents $ 128,384,606 $ 56,208,902 Restricted cash — — Accounts receivable (net of allowance of $4,367,848 and $1,990,459 at December 31, 2022 and 2021, respectively) 36,755,149 54,259,265 Bunker inventory 29,104,436 27,147,760 Advance hire, prepaid expenses and other current assets 28,266,831 46,347,687 Total current assets 222,511,022 183,963,614 Fixed assets, net 476,524,752 471,912,810 Advances for vessel purchases — 1,990,000 Finance lease right of use assets, net 43,921,569 45,195,759 Other Non-current Assets 5,284,127 3,961,823 Total assets $ 748,241,470 $ 707,024,006 Liabilities and stockholders' equity Current liabilities Accounts payable, accrued expenses and other current liabilities $ 38,554,131 $ 49,154,439 Related party notes payable — 242,852 Deferred revenue 20,883,958 32,205,312 Current portion of long-term debt 15,782,530 15,443,115 Current portion of finance lease liabilities 16,365,075 14,479,803 Dividends payable 626,178 213,765 Total current liabilities 92,211,872 111,739,286 Secured long-term debt, net 98,819,739 105,836,797 Finance lease liabilities 168,513,939 170,959,553 Long-term liabilities - other 19,974,390 17,806,976 Stockholders' equity: Preferred stock, $0.0001 par value, 1,000,000 shares authorized and no shares issued or outstanding — — Common stock, $0.0001 par value, 100,000,000 shares authorized, 45,898,395 and 45,617,840 shares issued and outstanding at December 31, 2022 and 2021, respectively 4,590 4,562 Additional paid-in capital 162,894,080 161,534,280 Retained Earnings 151,327,392 85,663,375 Total Pangaea Logistics Solutions Ltd. equity 314,226,062 247,202,217 Non-controlling interests 54,495,468 53,479,177 Total stockholders' equity 368,721,530 300,681,394 Total liabilities and stockholders' equity $ 748,241,470 $ 707,024,006 Pangaea Logistics Solutions Ltd. Consolidated Statements of Cash Flows Years ended December 31 , 2022 2021 Operating activities Net income $ 85,507,704 $ 72,373,704 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization expense 29,489,810 22,974,249 Amortization of deferred financing costs 1,005,487 920,995 Amortization of prepaid rent 122,343 115,256 Unrealized gain on derivative instruments (682,323) (3,886,201) Income from equity method investee (807,142) (1,129,436) Earnings attributable to non-controlling interest recorded as interest expense 6,717,414 1,184,741 Provision for doubtful accounts 2,377,389 1,559,378 Loss on impairment of vessels 3,007,809 — Loss on sales of vessels 318,032 — Drydocking costs (6,019,126) (8,075,813) Share-based compensation 1,767,726 2,102,897 Change in operating assets and liabilities: Accounts receivable 15,126,727 (26,666,490) Bunker inventory (1,956,676) (11,181,513) Advance hire, prepaid expenses and other current assets 19,086,893 (24,935,427) Accounts payable, accrued expenses and other current liabilities (8,939,313) 16,983,215 Deferred revenue (11,321,354) 19,405,751 Net cash provided by operating activities 134,801,400 61,745,306 Investing activities Purchase of vessels and vessel improvements (35,740,482) (194,620,582) Proceeds from sale of vessels 8,400,000 — Acquisition of non-controlling interest — — Advances for Vessel Purchases / Investment in newbuildings in-process — (1,990,000) Purchase of equipment and internal use software (653,452) (42,963) Contributions to non-consolidated subsidiaries (515,162) (1,138,835) Net cash used in investing activities (28,509,096) (197,792,380) Financing activities Proceeds from long-term debt 8,500,000 79,150,000 Payments of financing and issuance costs (466,544) (2,046,450) Payments of long-term debt (15,443,115) (61,960,469) Proceeds from finance leases 15,000,000 141,166,978 Payments on finance lease obligation (15,834,059) (9,919,514) Payments on other long-term liability (5,000,000) (2,500,000) Dividends paid to non-controlling interests (5,000,000) (3,333,334) Common stock accrued dividends paid (13,414,984) (5,535,261) Cash paid for incentive compensation shares relinquished (407,898) (150,015) Contributions from non-controlling interests — 9,182,423 Payments to non-controlling interest recorded as long-term liability (2,050,000) (195,598) Net cash (used in) provided by financing activities (34,116,600) 143,858,760 Net increase in cash and cash equivalents 72,175,704 7,811,686 Cash and cash equivalents at beginning of period 56,208,902 48,397,216 Cash and cash equivalents at end of period $ 128,384,606 $ 56,208,902 Supplemental cash flow items: Cash paid for interest $ 14,906,972 $ 9,088,684 Pangaea Logistics Solutions Ltd. Reconciliation of Non-GAAP Measures (unaudited) For the three months ended For the twelve months ended December 31 ,2022 December 31 ,2021 December 31 ,2022 December 31 ,2021 Net Transportation and Service Revenue Gross Profit $ 22,700,870 $ 35,102,473 $ 129,050,037 $ 97,938,881 Add: Vessel Depreciation and amortization 7,471,538 6,504,554 29,376,777 22,874,061 Net transportation and service revenue $ 30,172,408 $ 41,607,027 $ 158,426,814 $ 120,812,942 Adjusted EBITDA Net Income $ 15,812,044 $ 17,593,709 $ 85,507,704 $ 72,373,704 Interest expense, net 4,405,503 3,744,058 21,489,578 11,514,138 Depreciation and amortization 7,529,397 6,522,946 29,489,810 22,974,249 EBITDA 27,746,944 27,860,713 136,487,092 106,862,091 Non-GAAP Adjustments: Loss on impairment of vessels — — 3,007,809 — Loss on sale of vessels — — 318,032 — Share-based compensation 309,754 367,939 1,767,726 2,102,897 Unrealized (gain) loss on derivative instruments, net (1,192,416) 9,784,274 (682,323) (3,886,201) Adjusted EBITDA $ 26,864,282 $ 38,012,926 $ 140,898,336 $ 105,078,787 Earnings Per Common Share Net income attributable to Pangaea Logistics Solutions Ltd. $ 15,502,601 $ 15,150,156 $ 79,491,413 $ 67,226,833 Weighted average number of common shares - basic 44,435,664 44,004,980 44,398,987 43,997,311 Weighted average number of common shares - diluted 44,985,969 44,689,309 45,059,587 44,848,997 Earnings per common share - basic $ 0.35 $ 0.34 $ 1.79 $ 1.53 Earnings per common share - diluted $ 0.34 $ 0.34 $ 1.76 $ 1.50 Adjusted EPS Net income attributable to Pangaea Logistics Solutions Ltd. $ 15,502,601 $ 15,150,156 $ 79,491,413 $ 67,226,833 Non-GAAP Add: Loss on impairment of vessels — — 3,007,809 — Loss on sale of vessels — — 318,032 — Unrealized (gain) loss on derivative instruments, net 1,192,416 (9,784,274) 682,323 3,886,201 Non-GAAP adjusted net income attributable to Pangaea Logistics Solutions Ltd. $ 14,310,185 $ 24,934,430 $ 82,134,931 $ 63,340,632 Weighted average number of common shares - basic 44,435,664 44,004,980 44,398,987 43,997,311 Weighted average number of common shares - diluted 44,985,969 44,689,309 45,059,587 44,848,997 Adjusted EPS - basic $ 0.32 $ 0.57 $ 1.85 $ 1.44 Adjusted EPS - diluted $ 0.32 $ 0.56 $ 1.82 $ 1.41 INFORMATION ABOUT NON-GAAP FINANCIAL MEASURES . As used herein, "GAAP" refers to accounting principles generally accepted in the United States of America. To supplement our consolidated financial statements prepared and presented in accordance with GAAP, this earnings release discusses non-GAAP financial measures, including non-GAAP net revenue, non-GAAP adjusted EBITDA and non-GAAP Adjusted EPS. These are considered non-GAAP financial measures as defined in Rule 101 of Regulation G promulgated by the Securities and Exchange Commission . Generally, a non-GAAP financial measure is a numerical measure of a company's historical or future performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use non-GAAP financial measures for internal financial and operational decision making purposes and as a means to evaluate period-to-period comparisons of the performance and results of operations of our core business. Our management believes that non-GAAP financial measures provide meaningful supplemental information regarding the performance of our core business by excluding charges that are not incurred in the normal course of business. Non-GAAP financial measures also facilitate management's internal planning and comparisons to our historical performance and liquidity. We believe certain non-GAAP financial measures are useful to investors as they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and are used by our institutional investors and the analyst community to help them analyze the performance and operational results of our core business. Gross Profit. Gross profit represents total revenue less net transportation and service revenue and less vessel depreciation and amortization. Net transportation and service revenue. Net transportation and service revenue represents total revenue less the total direct costs of transportation and services, which includes charter hire, voyage and vessel operating expenses. Net transportation and service revenue is included because it is used by management and certain investors to measure performance by comparison to other logistic service providers. Net transportation and service revenue is not an item recognized by the generally accepted accounting principles in the United States of America , or U.S. GAAP, and should not be considered as an alternative to net income, operating income, or any other indicator of a company's operating performance required by U.S. GAAP. Pangaea's definition of net transportation and service revenue used here may not be comparable to an operating measure used by other companies. Adjusted EBITDA and adjusted EPS. Adjusted EBITDA represents net income (or loss), determined in accordance with U.S. GAAP, excluding interest expense, income taxes, depreciation and amortization, loss on sale and leaseback of vessels, share-based compensation and other non-operating income and/or expense, if any. Earnings per share represents net income divided by the weighted average number of common shares outstanding. Adjusted earnings per share represents net income attributable to Pangaea Logistics Solutions Ltd. plus, when applicable, loss on sale of vessel, loss on sale and leaseback of vessel, loss on impairment of vessel, unrealized gains and losses on derivative instruments, and certain non-recurring charges, divided by the weighted average number of shares of common stock. There are limitations related to the use of net revenue versus income from operations, adjusted EBITDA versus income from operations, and adjusted EPS versus EPS calculated in accordance with GAAP. In particular, Pangaea's definition of adjusted EBITDA used here are not comparable to EBITDA. The table set forth above provides a reconciliation of the non-GAAP financial measures presented to the most directly comparable financial measures prepared in accordance with GAAP. About Pangaea Logistics Solutions Ltd. Pangaea Logistics Solutions Ltd. (NASDAQ: PANL) provides logistics services to a broad base of industrial customers who require the transportation of a wide variety of dry bulk cargoes, including grains, pig iron, hot briquetted iron, bauxite, alumina, cement clinker, dolomite, and limestone. The Company addresses the transportation needs of its customers with a comprehensive set of services and activities, including cargo loading, cargo discharge, vessel chartering, and voyage planning. Learn more at www.pangaeals.com . Investor Relations Contacts Gianni Del Signore Noel Ryan or Stefan Neely Chief Financial Officer 401-846-7790 [email protected] [email protected] Forward-Looking Statements Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. These forward-looking statements are based on our current expectations and beliefs and are subject to a number of risk factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The Company disclaims any obligation to publicly update or revise these statements whether as a result of new information, future events or otherwise, except as required by law. Such risks and uncertainties include, without limitation, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for dry bulk shipping capacity, changes in our operating expenses, including bunker prices, dry-docking and insurance costs, the market for our vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in such financing arrangements, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessels breakdowns and instances of off-hires and other factors, as well as other risks that have been included in filings with the Securities and Exchange Commission , all of which are available at www.sec.gov . 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