TaskUs Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2023

There are 5 speakers on the call.

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas Conference Call on the Q3 2023 Financial Results. We have with us Mr. Aristides Pittas, Chairman and Chief Executive Officer and Mr. Tassos Aslidis, Chief Financial Officer of the company. At this time, all participants

Speaker 1

are in

Operator

a listen only mode. There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today. Please be reminded that the company announced their results with a press release that has been publicly distributed. Before passing the floor to Mr.

Operator

Pittas, I would like to remind everyone that in today's presentation and conference call, Euroseas will be making forward looking statements. These statements are within the meaning of the federal securities laws. Matters discussed may be forward looking statements, which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to Slide number 2 of the webcast presentation, which has the full forward looking statement and the same statement was also included in the press release. Please take a moment to go through the whole statement and read it.

Operator

And now, I would like to pass the floor to Mr. Pittas. Please go ahead, sir.

Speaker 2

Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the 3 9 month period ended September 30, 2023. Let's turn to Slide 3 of the presentation I'll go over our income statement highlights. We are very pleased with our 3rd quarter results, Having reported total net revenues of $50,700,000 and a net income of $32,200,000 of $4.65 per diluted share.

Speaker 2

Adjusted net income for the period was 28 $200,000 or $4.07 per diluted share. Adjusted EBITDA for the period was $34,500,000 Please refer to the press release for a reconciliation of the adjusted Net income and EBITDA. As part of the company's common stock dividend plan, our Board of Directors Declared a quarterly dividend of $0.50 per common share for the Q3 of 2023, which will be payable on or about December 16 to shareholders of record on December 9. The annualized dividend yield based on the current share price is about 8%. This is the 7th consecutive quarter of paying substantial dividends Since we reinstituted paying them and something that we believe we will be able to continue for the quarters and years ahead.

Speaker 2

As part of our share repurchase program of up to $20,000,000 which was announced in May 2022 And extended for another year, we have repurchased a total of 410,000 shares of our common stock in the open market for about $8,200,000 This represents about 6% of our total outstanding shares. Our CFO, Tasos, will go over the financial highlights in more detail later on in the presentation. Please now turn to Slide 4, where we discuss our recent sale in Texas chartering and operational developments. As previously announced, on slide 6, 2023, we took delivery of our 2nd newbuilding vessel, MV Terataki, an Eko EDI Base 3 2,800 EU feeder containership newbuilding from Shundai, Mipodogia in South Korea. On the chartering side, motor vessel Exane was fixed for a minimum of 3 to 4 months until December 2023 at $9,000 per day.

Speaker 2

Additionally, Motor Vessel's synergy outlook was fixed for approximately 40 to 60 days at $18,250 per day and thereafter there was an option which was declared by the charters for another As previously announced also, the Emmanuel P and their MEP commenced their new charters in August 2023 At the daily rate of $21,000 per day for a minimum of 20 to a maximum of 24 months, following the mutually determination of the previously existing charters. We had no idle or commercial of hire vessels during this quarter. Please turn to Slide 5 for an update on our current fleet profile. Euroseas current fleet is comprised of 19 vessels in the water, which includes 12 feeder container ships and 7 intermediate container carriers, with a total carrying capacity of just under 60,000 TEU and a TEU adjusted average age of just below 16 years. Turning to Slide 6.

Speaker 2

After taking delivery of the first two of the 9 new eco feeder After the delivery of the 7 feeder containership new buildings in 2024, our fleet will consist of 26 vessels And the total carrying capacity will be in excess of 75,000 TEU.

Speaker 1

Let's now turn

Speaker 2

to Slide 7 for a graphic depiction of our vessels' employments. As you may see, we have very strong charter coverage throughout the next 2 years With about 97.5 percent of our fleet being fixed for 2023, almost 65% for 2024 And more than 25% for 2025. This very high charter coverage at quite profitable rates for the remainder of The year, but also for 2024, suggests that we should continue recording profitable Let's turn to slide Now to review how the 6 to 12 month time charter rates have developed over the last 10 years. During the Q3 of 2023, containership markets were down across all segments compared to June 2023. For the sector we primarily operate in, charters rates are about 28% lower year to date.

Speaker 2

However, they are still significantly higher than the pre pandemic levels. As of November 3, The 6 to 12 month charter rate for the 2,500 TEU container ship stood at $12,500 per day, which is higher than the historical median of $9,500 per day, but lower than the 10 year average rate of $15,500 per day. The comparisons to median and average rates are similar across the smaller and larger The loan charter rates are driven by a progressively large number of deliveries, A reduction of inefficiencies caused during the pandemic and the considerable drop in demand growth. Moving on to slide 10, we go over some further market highlights. During the 3rd Quarter of 2023, 1 year time charter rates saw declines across all segments and have further Declined since by approximately 20% in November 2023 alone.

Speaker 2

Average rates during the Q3 were down by about 18% compared to the previous quarter, as shown on the table. The average secondhand containership index has decreased in line with the market decline. 2nd hand containership prices have been gradually dropping throughout the 1st 11 months of 2023, but are still high nevertheless. The newbuilding price index remained roughly unchanged in the Q3 of 2023 over the previous quarter, Whilst newbuilding prices generally stayed at elevated levels due to cost inflation and extended yard forward cover. While new building contracting has eased from the aggressive levels seen during COVID-nineteen, It still remains fairly strong historically, with a large line of operators continuing to place orders for larger vessels, mainly equipped with dual fuel capability engines.

Speaker 2

The idle containership fleet, Including vessels under repairs stood at about 1.6% of the fleet as of October 23, 0.45000000 TEU. The idle fleet peaked in February 2023 at 48,000,000 TEU and was trending downwards until July, but has increased again since September. Recycling activity edged higher during the Q3, with 68 vessels having been scrapped year to date, Accounting for about 130,000 TEU, demolition remains at low levels compared to historical standards due to the stronger markets earlier in the year and the good charter coverage across the sectors. The figure is anticipated to increase for the remainder of this year and 2024 as it is driven by weaker markets and increasing environment Scalping prices have softened during the Q3 to about $5.50 per lightweight ton, which is still about 33% above the 2019 average. Overall, The containership fleet has grown by approximately 6.5% year to date Without accounting for IV vessels reactivations, which is quite a high number.

Speaker 2

Please turn to Slide 11. With its latest update in October 2023, the IMF forecasts show that the global economy is still slow and uneven, remaining well below the historic coverage of 3.8 percent growth between 20,021,019. Global GDP growth is estimated to slow from 3.5% in 2022 to 3% this year and 2.9% in 2024. Global inflation is forecast to decline steadily Starting from 2024 due to tighter monetary policy, aided by lower international commodity prices. Slow economic recovery has been dominated by post pandemic geopolitical shocks, Including the war in Ukraine, the latest Israeli Hamas conflict, U.

Speaker 2

S.-China relations and the Chinese property sector crisis, as well as the effects of monetary policy tightening to reduce inflation. However, important divergences The slowdown is more pronounced in advanced economies than in emerging markets and developing economies. Among advanced economies, the U. S. Has been revised up due to resilient consumption and investment, While the euro area has been revised down, a stricter monetary policy and the energy crisis have taken a toll.

Speaker 2

Diversus is also evident among emerging markets and developing economies, with China facing growing headwinds and now expected to grow only by 4.2% in 2024, while Brazil, India and Russia have been revised after recently by the IMF. According to Clarkson's estimates, container trade will continue to subdued demand for the remainder of the year due to slow global economic growth combined with the geopolitical events that are creating new challenges to a non ready for agile economic recovery. As such, container trade growth is expected to grow by a low 1.2%, which has been revised upwards from the 0.9% growth predicted only a month ago. For 2024, demand is expected by Clarksons to return to a decent trade growth level of about 3.8%. Now please turn to Slide 12, where you can see the total fleet age profile and containership order book.

Speaker 2

The containership fleet is relatively young with most vessels under 15 years old and only 10% of the fleet over 20 years old, The largest percentage of which though lies within feeder vessels, suggesting high potential recycling for this type of ships. The order book as a percentage of total fleet stands at a high of 20 Turning on to Slide 13, we also go over the fleet age profile and order book for ships in the 1,000 to 3,000 TEU range, which is where our newbuilding program is focused. The order book here stands at 10.8% as of November 2023. According to Clarkson's new deliveries, including what has already been delivered for 2023, are estimated at 9.4%, 6.2% in 2024 and just 1.8% in 2025. Additionally, over 50% of the fleet is over 15 years old, indicating good fundamentals for this sector As we can expect, a decline of the size of the fleet in the next few years.

Speaker 2

Let's move to Slide 14, where we discuss our outlook As we said, charter rates continue to face renewed pressure due to weak demand, leading to the 20% decrease in higher rates since the Q3. The substantial accumulation of available tonnage in smaller feeder sizes is notably contributing to the downward trend in the charter rates for the smaller vessels. While the container freight index has seen some improvement since July, It remains significantly lower at 8.80% below its peak in January 2022 and has roughly returned to about the pre COVID-ten year average. Container trade volumes Grew by 6.6% year on year in September and are still above pre pandemic levels. For the remainder of 2023, there are still considerable challenges ahead.

Speaker 2

Downward pressure has reemerged in the 4th quarter As supply growth accelerates and an increasing number of charter vessels are redelivered. Slower speeds are expected to play a key role going forward in absorbing some of the excess tonnage. Economic developments amidst the Q1 remain very uncertain. Therefore, 2024 will probably be quite a difficult year as well. Market conditions will remain challenging as the rates may decline even further towards the lowest point of the cycle You are second due to the 2nd consecutive year of substantial fleet expansion.

Speaker 2

Market performance We remain sensitive to capacity management, vessel speed and a range of other inefficiencies like congestion That could alleviate pressure to some extent. The energy transition also has continued to gain traction in the containership sector. Whilst it's evident that the shift is taking place, the long term outcome is still very uncertain. One thing is obvious though, that the spread between charter rates achieved by ECHO vessels compared to conventional ones is expected to further increase as charters become even more sensitive to greener transport. For 2025, supply and demand fundamentals seem to suggest that we could see a leveling off in the market and some stabilization.

Speaker 2

If enough scrapping materializes within the next 2 years, demand remains relatively resilient And new orders are disciplined, we could possibly see a turning point sometime then. Moving on to Slide 15. The left chart shows the evolution of 1 year time charter rate to containers with a capacity of 2,500 TEU since 2010. 1 year time charter rates are far below their In early 2022, and as I have previously mentioned, the current 1 year time charter rate stands at $12,500 per day, which is still at a high enough and profitable level, higher than the historical median. At the same time, the right hand chart shows the historical range for newbuilding and 10 year old containerships with a capacity of 12,500 TEU.

Speaker 2

Prices are still significantly higher than the 10 year median despite the severe drop. Despite our expectations for the proved market next year, as discussed above, We believe that we are largely insulated from developments in the chartered market during 2024 Due to our contracted revenue backlog of more than $400,000,000 which we have developed during 2021 2022, Our liquidity buildup will allow us to take delivery of the 7 remaining containership newbuildings, while keeping leverage low at around 60%. It will also allow us to continue paying A substantial dividend and executing on our stock repurchase program as our price continued to hover at levels below 50% of our NAV. At the same time, we will be left with ample free cash to acquire further vessels when we deem the timing appropriate. And with that, I will pass the floor to Tasos to go over the financial highlights in further details.

Speaker 1

Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen. Over the next four slides, I will give you an overview of our financial highlights for the Q3 9 months of 2023 and compare them to the same period of last year. For that, let's turn to Slide 17. For the Q3 of 2023, the company reported total net revenues of 50,700,000 representing a 10.3% increase over total net revenues of $46,000,000 during the Q3 of last year, which was mainly the result of the higher average charter rates of vessels churn in the Q3 of 2023 compared to last year.

Speaker 1

The company reported a net income for the period of $32,200,000 as compared to a net income of $25,200,000 for the Q3 of 2022, a 27.7% increase. This quarter, There are two points that I would like to make regarding entry that affect our financials. The first relates to termination of the charters Those charters came with the vessels when we bought them and because of the time they were below market, We recorded the vessels with increased book value corresponding to the below market value of the charters. And at the same time, We started recognizing that below market charter value over the life of the charters as per U. S.

Speaker 1

GAAP guidelines. When these charters were terminated, we had to recognize the remaining recognized portion of them. Thus, The $16,000,000 gain on charter termination that you see in our income statement. Incidentally, These charters were terminated with mutual agreement with the charter and replaced by charters with higher rates. The second point that I would like to make relates to recording an impairment charge for our vessel, MV Jonathan P.

Speaker 1

Based on our impairment test results, it was determined that its carrying amount was not recoverable. Consequently, We booked an impairment charge of $13,800,000 to reduce Todecil's book value to its market value. I would like to stress that the vessel has been a great contributor to our bottom line. Since we bought it in October 2021, The vessel has been chartered on a highly profitable charter of $26,667 per day net of commissions for 3 years until September 2024 and has already contributed up to the end of last quarter $14,400,000 of EBITDA In the remaining year of each charter, it's expected to contribute about another $7,000,000 of EBITDA. Thus, the impairment charge In any event, Both of the above items are not included in the adjusted earnings per share that I will refer to a little later in my presentation.

Speaker 1

Interest and other financing costs for the Q3 of 2023 amounted to $1,800,000 After deducting capitalized imputed interest of $900,000 which relates to the self financing of the pre delivery cost of our newbuilding program for a total interest and other financing cost of 2,700,000 compared to $1,600,000 for the same period of 2022, a period during which the imputed interest was only 200,000 This increase is due to the increased amount of debt that we carry during the Q3 of this year and increased benchmark rates, LIBOR and software that our loans had to pay compared to the same period of 2022. Adjusted EBITDA for the Q3 of 2023 increased to $34,500,000 compared to $26,200,000 achieved during the Q3 of last year, an increase of about 32%. Basic and diluted earnings per share for the Q3 of 2023 were $4.67 $4.65 respectively, calculated on about $6,900,000 basic and diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $3.5 for the Q3 of 2022, calculated about $7,200,000 based on the diluted weighted average number of shares outstanding. Excluding the effect On the income for the quarter of the unrealized gain on derivatives, the amortization of the fair value of below market charters acquired, the vessel depreciation on the portion of the consideration of the vessels acquired with attach time charters allocated to the below market charges, the gain from the termination of the below market charges and the impairment charge, The adjusted earnings attributable to common shareholders for the quarter ended September 30, 2023, which have been $4.08 basic and $4.07 diluted compared to $2.90 basic and diluted for the same quarter of last year.

Speaker 1

Secured items typically don't include the above items in the public segments of earnings per share, That's why we are making the adjustments ourselves. Let us now look to the right part of the slide and review the numbers for the corresponding 9 month period ending September 30, 2023 and compared with the same period of last year. So for the 1st 9 months of this year, the company reported total net revenues of 140,300,000 representing a 0.4% increase of our total net revenues of $139,800,000 during the 1st 9 months of 2022. We reported a net income for the period of $89,800,000 as compared to a net income of $85,900,000 for the 1st 9 months of last year, an increase of 4.6%. I will not repeat here the same points I made earlier regarding the entries that were in our income statement, but they apply for the 9 month period as well.

Speaker 1

Interest and other financing costs for the 1st 9 months of 2023 amounted to 3,900,000 After deducting capitalized interest of $3,200,000 related to the self financing of the pre delivery cost of our newbuilding program, resulting in a total interest and other financing costs, net of the included interest of $7,100,000 compared to $3,800,000 for the same period of 2022, a period during which we had a capitalized interest of $200,000 Again, this increase is mainly due to the higher interest rates, benchmark interest rates we paid and the higher level of debt we paid. Adjusted EBITDA for the 1st 9 months of 2023 was $91,100,000 compared to $91,500,000 for the 1st 9 months of 2022. Basic and diluted earnings per share for the 1st 9 months of 2023 were $12.95 Basic and $12.90 diluted, calculated on $6,900,000 7,000,000 respectively, basic and diluted weighted average number of successor outstanding compared to $11.91 basic and $11.86 diluted for the 1st 9 months of 2022. Again, excluding the effect on the income statement of the items I mentioned before, the adjusted income For the 9 months ended September 30, 2023, which have been $11.37 Basic and $11.33 diluted compared to adjusted earnings of $10.71

Speaker 2

basic

Speaker 1

Let's now turn to Slide 18 to review our fleet performance. As usual, we will start our review by looking at our fleet utilization rates for the Q3 of 2023 and compare them to the same period in the Q3 of 2022. Our fleet utilization rate is broken down to commercial and operational. During the Q3 of 2023, Our commercial utilization rate was 100%, while our operational utilization rate was 99.2% compared to 100% commercial 99.5 percent operational for the Q3 of 2022. On average, we owned and operated 19 vessels during the Q3 earning another time charter equivalent rate of $30,074 per vessel per day compared to owning and operating 18 vessels in the same period of last year, earning another time charter equivalent rate of $30,893 per vessel per day.

Speaker 1

Our vessel daily operating expenses, including management fees, were $7,192 per vessel per day for the Q3 of this year compared to $6,601 per day during the same period of 2022. General and administrative expenses amounted to $500 during the Q3 of this year compared to $5.79 for the same period of 2022. If we move further down on this table, We can see the cash flow breakeven rate for the Q3 of this year, which also takes into account drydocking expenses, interest costs and loan repayments. Thus, for the Q3 of 2023, our cash flow breakeven rate was $13,005.94 per vessel per day compared to $14,466 per vessel per day during the Q3 of 2022. In the last line of this table, We can see the common dividend paid expressed in per vessel per day units.

Speaker 1

In the Q3 of 2023, the dividend we paid amounted to $2,012 per vessel per day compared to $2,177 per vessel per day for the same period of last year. Let's now look at the right part of this table and review the figures for the 1st 9 months of 2023. During the 1st 9 months of 2023, our commercial utilization rate was 99.4% And our operational utilization rate was 98.9% compared to 99.9% commercial 99.6 percent operational for the same period the 1st 9 months of last year. On average, We owned and operated 18 vessels during the 1st 9 months of 2023, earning another time charter equivalent rate of 29,000 dollars 8.43 per day compared to 16.8 vessels in the same period of 2022, earning an average of 32 $1,814 per day. Our vessel operating expenses, again, including management fees, were $7,210 per vessel per day in the 1st 9 months of this year compared to $6,770 per vessel per day for the same period of last year.

Speaker 1

General and administrative expenses for the two periods amounted to $6.48 $6.35 respectively. Let us again move further down Interest and loan repayments. Thus, for the 1st 9 months of 2023, our cash flow breakeven rate was $13,852 as compared to $14,052 per vessel per day during the same 9 month period of 2022. At the bottom of the table, again, we can see The contribution to the cash flow breakeven from our dividend payments and for the 9 months of 2023, that amounted $2,134 per vessel per day and in the corresponding 9 month period, which includes 1 dividend payment less, And that amount contributed added $15.30 to our cash flow breakeven rate for the period. Let's now move to Slide 19 to review our debt profile and our forward cash flow breakeven level.

Speaker 1

As of September 30, 2023, our total debt stood at about 138,400,000 On the top of the slide, you can see a snapshot of our current debt repayment profile over the next several years. We have already made $61,600,000 of loan repayments in 2023. In the remaining of the year, We have to make another $7,400,000 in loan repayments. For 2024 2025, Our loan repayments dropped to about $31,000,000 $35,000,000 respectively, including balloon payments, which the latter should be able to refinance if we choose to do so as we did in the past. The debt legend that I mentioned earlier refers to the debt that is on the fleet on our fleet in the water.

Speaker 1

As previously stated, we intend to partly finance The remaining of our newbuilding program with debt and thus we expect to assume an additional Approximately $165,000,000 of debt over 2024 and nearly 2025. A quick point on the cost of our debt. The average margin of our current debt stands at about 2.32% And assuming a softer rate of about 5.41%, the cost of our senior debt is approximately 7.73%. This figure, if we include in that figure The cost of our interest rate swaps, it is brought down to about 7.44% Yes, about 15% of our current debt is hedged at a short rate of around 3.4%. I would like to draw your attention now at the bottom of the slide where we present the level and components of our expected cash flow breakeven for the next 12 months.

Speaker 1

And we show a couple of levels of cash flow breakeven. First, for the Our EBITDA breakeven level is around $9,260 per vessel per day. You can see that in the middle of the bars. And in total, including interest and loan repayments, our cash flow breakeven level over the next 12 months is expected to be around $15,100 per day, per vessel per day. This level reflects the number of vessels planned to be dry topped next year and the work that is expected to be done on that.

Speaker 1

To sum up our presentation, let's move to Slide 20 to review our balance sheet. In this slide, we provide a simplified snapshot of our assets and liabilities. As of September 30, Our assets include cash and other current assets amounting to about $69,000,000 also include advances that we paid for program amounting to about $67,800,000 and the book value of our vessels, which is around $276,600,000 resulting in total book value for our assets of about 400 dollars 8,900,000 On the liability side, our debt as of September 30, As previously mentioned, stood at about $138,400,000 representing Amounting about 33.8 percent of the book value of our assets, the share value of our remaining Below market charters acquired is about $8,400,000 or about 2.1 percent of our assets and other liabilities of about $9,300,000 amounting to about 2.3% of the book value of our assets. However, it should be noted that the market value of our fleet is much higher than its book value. Based on our own internal valuations In comparable market transactions, the charter adjusted values for our fleet and newbuilding contracts are about $396,000,000 which translates to a net partial value for our company of about $385,300,000 for a bit more than $55 per share.

Speaker 1

Recently, our shares have been trading around $25 per share. Thus, in that letter, it represents a significant discount to our net asset value and suggest that there is a good appreciation potential for our shareholders and investors. With that, I would like to turn

Operator

Thank you. At this time, we will be conducting a question and answer session. It may be necessary to pick up your handset before pressing the star keys. Our first question is from Tate Sullivan with Maxim Group.

Speaker 3

Hello. Good day. Thank you. Tasos, can you start by just a little more detail on the impairment of the Jonathan P. Was that impairment triggered based on the timing of the acquisition of Jonathan P?

Speaker 3

And what might it imply for the rest of your vessels,

Speaker 1

Tom? Yes. I think we continue to do a test to see whether the book value of the vessels is recoverable Based on certain assumptions about the future rates, we did when we bought Jonof and P, we said the vessel Was it the market? The market was pretty healthy, but also we've got a very healthy charter rate at that street. We recognized significant profits over the last 2 years from the charter rate, but the book value has been depreciated down over the remaining of the life of the vessel.

Speaker 1

So it was depreciated much less than the earnings contribution that Jonathan provided to us. And if you do the test using historical average rates for the period after the charter, you get An indication that the vessel needs to be impaired. As you know, these are really accounting requirements And the fundamental business evaluation of the investment remains as it was when we decided to pursue it.

Speaker 3

And did you say do you every quarter test all your vessels for impairments or periodically do so? Okay.

Speaker 1

Every quarter, we test all our vessels whether they need to be impaired or not.

Speaker 3

Thank you. And then on the new builds, can you comment on the new builds coming to market, comment to your fleet for next year, it appears, or On schedule with your previous timelines, can you give an update on are you looking at are there other new companies getting intermediate sized newbuilds Delivered here in the near term that you're really looking at? Or what's the contract outlook for the 2024 deliveries at this point?

Speaker 2

Our own newbuilding program is going according to schedule. So we do expect to get the ships in 2024. The last few months, we haven't seen new orders being placed, but there exist other orders That are being built right now. I think that the order book For the ships between 1000 to 3000 TEU that will be delivered next year is around 6%. Of course, the average age of the fleet is extremely high with 50 253 percent of the fleet being older than 15 years old.

Speaker 2

So We expect that if in 2024 the market is poor, which is highly likely, we will see ships In that size that are being redelivered by the charters at the end of the charters And will be scrapped. So that's why we say that overall, we think that in this size bracket, We will probably see a declining market, a declining number of vessels available within the next 2 to 3 years.

Speaker 1

In fact, if I can add, I will tell you the older book as percent of the fleet for the feeder sector has come down for about 18% a year earlier, Down to almost less than 11% now. So there is less new ordering being placed for that segment as opposed to the overall fleet where the ordering Sort of continues.

Speaker 3

Not to get too up top, but with the larger ships away from Larger containerships and Maersk's announcement in the last couple of weeks of cutting 10% of its workforce. Is there any I mean, is this more reflective of weakness in China that your feeder sector could benefit from working at smaller ports outside of China? Or is there any Can you comment on the Maersk announcement too?

Speaker 2

I'd leave Merck to comment on their own announcements. But I think that Merck generally I believe that the next couple of years are going to be softer. Of course, let us not forget the huge profits that all these liners have been making during the last year. So they are all Tremly wealthy companies, they are not worrying us at all about You know the status. It's just that when the need was huge, they grew.

Speaker 2

Now they need To downsize a little bit.

Speaker 3

Okay. Thank you for commenting. And that's it for me. Thank you.

Speaker 2

Thank you.

Operator

Our next question is from Christopher Jetael with Arctic Securities.

Speaker 4

Hello, gentlemen. Congrats on I was just wondering, can you comment a bit on how the negotiations are going for the The full schedule for delivery in 'twenty four, what levels are being discussed. Can you give some flavor on duration here? Are you seeing any interest from the liners?

Speaker 3

And yes. Thanks.

Speaker 2

Yes. We are talking with the major liners Who won't say we like the ships? They are interesting, but let's discuss closer to the time of delivery About any opportunities to charter because the market right now It's generally rather weak. We'd rather wait to discuss later. If we had the ships today, We would probably be able to fix the $2,800 at the level of around, say, dollars 17,000 dollars a day for the year and the $1800,000 around something between $11,000 $13,000 For a year.

Speaker 2

But since the vessels are not scheduled for delivery till that for at least 3 months, the first one, And 5 months, the second one. People are waiting to see how the market develops before we have discussions. We also don't want to press the liners for something today because If they see somebody being trying to cover now for 3 or 5 months down the road, They will try to impose a much lower rate. So we are not pressing them to come up with A proposal until they feel comfortable about it.

Speaker 4

Thank you. Appreciate it. And in terms of capital allocation, I mean, positive to see that you're still accumulating shares, Which is at a significant discount still to online values. But should you You sort of be able to contract these of investors at the levels that you described? How would you sort of consider capital allocation beyond that?

Speaker 4

Are you willing to increase dividends compared to sort of Buybacks, I mean, liquidity after a while will also be then an issue?

Speaker 2

Well, liquidity is currently not an issue, obviously, and we don't expect it To become any issue within the next, say, 5, 6 quarters, at least based on our contracted revenues, We estimate that we will have a big enough liquidity bucket to allow us to Complete the 7 acquisitions. We are

Speaker 4

I didn't mean liquidity in terms of cash balance. I just meant in terms of share, The liquidity in the stock, sorry, please go ahead.

Speaker 2

Okay. The liquidity in the stock, Yes. The liquidity in the stock has been decreasing. You are right, I think, on that. As it has been decreasing for most Shipping companies, we see that generally the interest in shipping has been reduced during the last 6 months or so.

Speaker 2

This is something of course we follow and May affect our buyback program and how aggressive we are with that because we do want to continue having the High liquidity. The insiders and the family control more than 50 Percent of the company's stock right now. So that reduces liquidity obviously since nobody is a seller. But it's something that we monitor continuously and All I can say is that we won't be very aggressive on the buyback, but it will continue to an extent. Dividends will of course continue and they will continue to be of significance, we want to be giving a dividend yield which is in the area of 7% to 8%, 9%.

Speaker 2

So these are the policy things that Right now, we are following.

Speaker 4

Okay. Thank you very much. And again, congrats on the quarter.

Speaker 2

Thank you.

Operator

We have a follow-up from Tate Sullivan with Maxim Group.

Speaker 3

Thank you for taking my follow-up. And talk to us on the below market charters, And I think you gave some figures of $8,400,000 of assets remaining and other liabilities of 9,300,000 Is it would the same event trigger a gain on those time charter agreement terminations if you entered those agreements? And what's going

Operator

to be Well, actually, for

Speaker 1

a different vessel, the 3rd vessel, Marcos V, that was bought with a below market charter, but Below market charter value is being amortized, is being credited to our earnings during the duration of the charter And the 8.4%, I believe that I mentioned in Slide 20 refers to the remaining unamortized Below market charter value related to Marcos V. The vessel is earning $40,000 in time charter, but of course, because of that, we recognize A higher amount, which we subtract out when we do our adjusted earnings.

Speaker 3

Okay. All right. Thank

Operator

you. We are not receiving further questions at this time, I will turn the floor back to Mr. Pitas for closing remarks.

Speaker 2

Thank you everybody for listening to our today's call. We will be back in 3 months' time. Bye.

Speaker 1

Thanks everybody. Thanks.

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Earnings Conference Call
TaskUs Q3 2023
00:00 / 00:00