Costamare Inc. (NYSE:CMRE) Q1 2023 Earnings Call Transcript May 15, 2023

Costamare Inc. misses on earnings expectations. Reported EPS is $0.38 EPS, expectations were $0.46.

Operator: Thank you for standing by ladies and gentlemen and welcome to the Costamare Inc. Conference Call on the First 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 Monday, May 15, 2023. We would like to remind you that this conference call contains forward-looking statements. Please take a moment to read slide number two of the presentation which contains the forward-looking statements. And I will now pass the floor to your speaker today, Mr. Zikos. Please go ahead sir.

Gregory Zikos: Thank you and good morning ladies and gentlemen. During the first quarter of the year, the company generated net income of $142 million. As of the quarter end liquidity was about $1 billion. In the containership market charter rates are on a rising trend with high demand across the board, while fixture periods are increasing in duration. The order book, however, remains the principal threat to the market. We have covered nearly 100% of our containership open days for 2023 and we have proactively arranged long-term employment on a forward basis for a number of containerships coming off charter between 2023 and 2025, having secured for our fleet contracted revenues of $3.1 billion and a TEU weighted duration of four years.

On the dry bulk side, our owned dry bulk vessels continue to trade in the spot market while the trading platform has been growing with a fleet of about 50 ships already fixed under period charters. Having agreed to invest up to $200 million, our goal is to grow the dry bulk operating platform business on a prudent basis and thus realize healthy returns for our shareholders. Finally, during the quarter we became the leading investor in Neptune Maritime Leasing, a growth-oriented maritime leasing platform, having agreed to invest up to $200 million. Considering current asset values, we believe the Neptune Leasing investment is a favorable employment of the Company’s increased liquidity. This new venture is synergetic to the existing ship owning platform and is expected to further enhance the strong relationships built over the last decades with shipowners and commercial lenders in the ship financing sector.

Moving now to the slide presentation. On Slide 3, you can see our first quarter results. Net income for the quarter was roughly $142 million or $1.60 per share. Adjusted net income was $46.5 million or $0.38 per share. Our liquidity is up over $400 million year-over-year to more than $1 billion. Slide 4, the first quarter of 2023 was the first full operational quarter of CBI. We have fixed 51 period vessels with a majority of the fleet being on index linked charter-in agreement. 39 of the period vessels have been already delivered and are running. Slide 5, we have become the leading investor in Neptune Maritime Leasing having agreed to invest up to $200 million. Neptune is a favorable opportunity for the deployment of the company’s excess capital.

In this slide, you can also see an update on our financing arrangements, which amounted to roughly $95 million without any material increase in leverage. Those deals have been capitaled with extension of maturities and improvement of our funding cost. Slide 6, we continue to charter all our dry bulk vessels in the spot market having entered into more than 60 chartering agreements since our last earnings release. On the containership side, our revenue days are essentially 100% fixed for 2023 and 86% fixed for 2024 while our contracted revenues are roughly $3.1 billion with TEU-weighted remaining duration of 4.1 years. Turning into Slide 7, during the first quarter of 2023, the estimated combined net capital from SAP activity stood at approximately $85 million gain.

We sold and have agreed to sell in total two containerships and three dry bulk vessels. Following the conclusion of the transactions with your capital, the company will own 100% of one vessel versus initial combined ownership of 98% on two vessels. Turning to Slide 8, because then as the charter market has shown an upward trend with high demand across the board, while fixed periods are increasing in duration. The dry bulk market remains volatile, while for the remainder of 2023, the FFA market indicates strengthening on the segments where we own vessels. Finally, we continue to have a long uninterrupted dividend track record boosted by strong sponsor support. Slide 9. Our liquidity has increased significantly year-over-year, starting at about $1 billion.

This liquidity gives us the ability to look for opportunity to grow the company on a healthy basis. Slide 10. Charter of the containerships are on a rising trend with high demand across the board. The latest containership fixtures have been for longer periods. The idle capacity is at a level of 1.4%. Slide 11, which is the final slide, here you can see the recent dry bulk market trends in the spot and forward market. The order book starts at 6.9% of the total fleet, and new ordering continues to remain subdued. With that we can conclude our presentation and we can now take questions. Thank you. Operator, we can take questions now.

Q&A Session

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

Operator: The next question comes from Omar Nokta with Jefferies. Please go ahead.

Supramax: At the same time, of course, there are synergies. Those people talk to each other. We have a full view of the whole market. We have our internal research, which is utilized within the whole company. So there are a lot of synergies. However, it’s two different teams of people managing each business, and I think this is how it should be. And the trading platform has a lot of Capes, which as a ship owner, we don’t own. Initially we didn’t buy Capes because we didn’t like this volatility. However, in the trading platform, Capes have to be there because they are by default a more volatile asset.

Operator: [Operator Instructions] Your next question comes from Ben Nolan with Stifel. Please go ahead.

Costamare: Now regarding the dry bulk owned vessels, which I think what you are referring to, in that case the result was affected because we did a lot of repositioning in the first quarter due to market conditions. So this is not something that I think in general it is something that we would expect to take place in the next quarters as well, although I can never predict the market, but normally we don’t sort of assess during the same quarter. So normally this is not something that should be happening over the next quarter, something that happened in the quarters before. So I would normally treat it as a one off item, those repositioning costs. Now in our adjusted EPS, we didn’t adjust for it. We have treated it from an accounting and like presentation perspective as like something which is not extraordinary, but practically, I wouldn’t expect this to be a recurring item over the next quarters, normally because the dry bulk owned vessels they are trading on spot.

So we follow the sport market and of course we try to be as efficient and as profitable as possible.

Operator: This concludes our question-and- answer session. I would like to turn the conference back over to Mr. Zikos for any closing remark.

Gregory Zikos: Thank you very much for dialing in today and for your interest in Costamare Inc.. We look forward to speaking to you again during our next quarter results call. Thank you.

Operator: Thank you. That does conclude our conference for today. Thank you all for participating. You may now disconnect.