Thank you for standing by ladies and gentlemen and welcome to the Costamare Inc. Conference Call on the Third 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 Wednesday, November 01, 2023. We would like to remind you that, this conference call contains forward-looking statements. Please take a moment to read Slide number 2 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.

Thank you and good morning, ladies and gentlemen. During the third quarter of the year, the company generated net income of about $53 million. As of quarter end, liquidity was close to $1 billion. In the containership sector, larger ships continue to enjoy a tight market, while smaller vessels experienced deteriorating conditions. Overall, the market outlook looks uncertain due to the large order book and the insufficient demolition [ph] On the dry bulk side, as part of our strategy to renew the fleet and increase its average size, we acquired two capesize and to one ultramax vessel and at the same time we disposed of two older supramax ships. Our owned dry bulk vessels continue to trade on a spot basis, while the trading platform has grown to a fleet of 59 vessels. Having invested $200 million in the dry bulk operating platform, we are long-term committed to the sector whose fundamentals we view positively. Regarding Neptune Maritime Leasing, the platform has been steadily growing on a prudent basis, having concluded leasing transactions for 17 ships in total, which are complemented by a healthy pipeline extending over the coming quarters. Finally, during the quarter, we continued our surpasses program, and we bought $10 million worth of common shares, highlighting our strong belief that the share price is heavily undervalued, considering both the Company's performance and prospects. Moving now to the slide presentation. On Slide 3, you can see our third quarter results. Net income for the quarter was roughly $53 million or $0.45 per share. Adjusted net income was around $54 million or $0.46 per share. Our liquidity stands at roughly $1 billion. Slide 4, you can see an update on our share repurchase program. Since our Q2 earnings release, we purchased approximately 900,000 common shares for $10 million worth.…

Thank you very much. [Operator Instructions] And your first question comes from the line of Chris Wetherbee from Citigroup. Please go ahead.

Thanks, guys. Thanks for taking the question. I guess maybe I wanted to start on the container side and just get maybe a general sense of your view of, I guess, demand in the market for any terms. So I guess I'm just trying to get a sense of - we understand the weakness that's out there and obviously the capacity that is entering the market. But as you think about the opportunities for employment, can you just sort of talk us through what you're seeing in the market and what your thoughts are on activity in the rechartering side?

Yes. We've seen that, I mean, in general, if you compare tenor of previous fixtures a year ago. And now I think on average, you can say that where we have a shorter-term fixtures for the containerships. And the charter rates have been going down, which is something expected. And to some extent, you can argue that its healthy [ph] because you cannot have a market going up every single year after COVID. So for example, the panamax vessel is now at - for a year, the traditional panamax is now at around between $17,000 to $19,000 per day. Prior to that, it was between 20 to 22. And also the pictures [ph] we've seen now there for a year or so in the past we could see pictures at higher levels for longer periods. Especially for the smaller vessels, you can see the trend that the tenor of the charter party agreements, they tend to become shorter and shorter. Having said that, however, still, I think we need to know that the market is holding up relatively well and much better than people thought 6 months ago. Although we can see a downward trend, still the charter rate levels, they are at very healthy levels. So they are very healthy. And we can see that, especially for the larger ships, market rates are still quite profitable. So we do have a large order book that needs to be absorbed. It's highly questionable whether demand is going to be in order to digest all the order group. And at the same time, the demolition levels are quite low. So going forward, I think where the market will be heading, I don't think that the supply and demand dynamics we experienced during COVID are going to be there. Quite the opposite, I would say, we do see a downward trend, which is something expected. At the same time, this means more opportunities when sort of asset prices, together with charter levels and also new building prices come at, let's say, more logical levels. This is a time when we, as Costamare, we would be ready to enter the market again. As you know, we didn't put any bidding orders at the peak of the market over the last years. So we do expect for the market to find its average rate levels. And then this may become more interesting.

Okay. Okay. That's helpful. I appreciate that color. And then on the dry bulk platform, if you could give us a sense of maybe how you think fourth quarter or maybe early first half looks in terms of vessels you plan to charter in. Obviously, this is a little bit of a difficult one for us to model. I want to get a sense of how you're thinking about your capacity in that so we can get a better sense of how revenue and profitability could look either – the very at least in the next quarter, but maybe a little bit further beyond that?

Yes, you're right about it. This is a very difficult business model, I would say, because it's volatile and because it's chartering in vessels, entering into Boeing [ph] charters, entering into vessel relays, cargo relays. And we also have an FFA book in order to complement our exposure. First of all, on the modeling side, we can have and offline discussion, then we can discuss how this can be more streamlined and how we can assist each other. Now the company has grown quite substantially since it started beginning of the year. It's a 59 ships charter-in. We're going to grow depending on market conditions. We have put the whole infrastructure in place. This company runs with zero debt. It's 100% equity funded because it's levered by itself. And we don't need to grow this. But if we take the view that the market conditions justify growing further, we will push the accelerator. In general, to have a healthy operator, this operator is also to have size, and I don't think that we have yet reached the desired size levels. But the timing, it will also be dictated by market conditions. So overall, we are long-term committed to that business. Our goal is to grow this further, and we will. But the timing, I'm afraid we need to have a better view of market and we're going to be evaluating on a quarter-by-quarter basis.

Okay. All right. No, I appreciate we can take some of those stuff offline and get into a little bit more detail. Thanks for the time. Appreciate it.

Sure. Thank you.

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

Thank you. Hi, good afternoon.

Hi, good afternoon.

Thank you, morning. I just wanted to follow up on Chris' question, just about the dry bulk platform. And it sounds like you maybe in your response here just now was kind of talking about maybe the CBI portion of it. Yes, I wanted to just ask, obviously, you have the nearly $1 billion of liquidity, you have the $2.7 billion backlog. You did - or you continue to build out the fleet - the owned fleet with the latest cases in the ultramax. I wanted to ask, how do you see that going forward? Are you looking to continue building it out from here, the actual asset ownership side and is it a case that you would be focused on further? Or is it just simply you're looking to renew bringing in some bigger ships and selling some of the older, smaller ones. Kind of how do we think about the fleet expansion from here?

Sure. What like our strategy now is first of all to grow the dry bulk owned platform. And what we have been doing, we have been selling smaller and on average, all the ships. The last one we sold that were 2006-built. And we have been buying larger vessels, capes and one ultramax, younger vessels, let's say 2011-built. So going forward, of course, assuming that this makes sense that the numbers work out well, our strategy would be to increase the average size of the dry bulk owned fleet first and also break down the average age. It's those two things. And we have started with buying those capes and selling the smaller vessels. Going forward, assuming that we find transactions that make sense is what we're going to be doing. So the goal ideally would be to - in a reasonable amount of time to dispose of the smaller handies and replace them with younger and larger ships as mostly ultramax and capes. Of course, again, I have to put [indiscernible] here depending on market conditions and depending on asset prices.

Got it. Thanks for that. And just sort of thinking about that and how you look to build out the owned fleet. How do you see that business working with the trading platform? I think I may have asked this in the past, but are they complementing each other at the moment? Or are they still kind of completely separate businesses?

First, I mean, they are being run by different management teams with something that makes sense. So there are two standalone businesses, all both under the Costamare Inc. umbrella with the shareholder. At the same time, you can argue that they complement each other a lot. But they are being run by different people, different management teams. In the first business we are 100% owners. The CBI in the platform, we are charterers. We also do relays. We would do cargo relays. We have an FFA book. It's a different business, but they definitely complement each other. Now what's going to be happening in the future? I cannot predict, again, it depends on market continues. But for the time being, I think it works out relatively well. So we leave it as it is, and there are a lot of synergies and complements, correct.

Got it. Okay. And then maybe just one final one. And I know you mentioned in the release, you committed at the $200 million to CBI. If I recall, the business was loss making in the first half, just the trading side of it. You mentioned that rates of order, we've obviously seen quarter-to-date average in the fourth quarter relative to what we've seen this year. But just in general, any color you can give on how the platform performed in the third quarter? And maybe how it's sort of looking here in the fourth?

Yes. Look, the platform the fixed - the first 6 months, there have been a lot of initial average set up course. And it is a company that started operating from zero, reaching 60 vessels within a certain amount of time. In order to put all the systems in place, hire people and have the whole infrastructure supporting the business. So it's something normal to be sort of losing money the first 6 months, and we didn't expect to enter into this business within the first month or like a year to be highly profitable. So I think this is more or less the case in all similar platforms. Now going forward, regarding Q3, we're going to be releasing the numbers with our 6-K filings pretty soon. For year-end, I don't know what the - how the platform is going to be performing. But I can tell you that this is not a short term or even medium term deal here. We talk about the long-term commitment to the sector, which is complementing, as we mentioned, the dry bulk owned fleet. So we're not going to be taking a short sighted view because that it is doing well, the first half of the year or that after the company was set up the first year or like the first 6 months, it has not been highly profitable. We take a long-term view, and I think this is how it should be viewed because we need to have a minimum size. We need to have a minimum size of the book in terms of cargo book as well. And based on that, we're going to be trading. So the long-term view, this is sort of - this remains to be seen, but the company has been very well capitalized. We are supporting it, and we will continue supporting it. And as mentioned earlier, it has no debt. So it's all equity in order to make sure that it's going to be operating freely of any debt restrictions.

Perfect. Okay. Thanks, Greg, very helpful. I'll turn it over.

The next question comes from Ben Nolan with Stifel. Please go ahead.

Thanks. So just a follow-up on the CBI stuff. I'm just – just as I'm trying to get my head around what causes things to move, Greg, maybe if you could, in September and in the first part of October, we saw a real sharp turn-up in the capesize rates they've subsequently come down. Can you maybe frame in what that kind of a move does to the profitability, if anything? Or just trying to see where the sensitivities are with respect to rate movements and profitability?

Look, it's difficult to say. I mean it's - there's also some commercial restrictions here. We have an FFA book on capes. And we also have fronthaul voyages on capes as well. So since we charter in and then we enter into a Voyage charters. So regarding the volatility in capes, we do try to take advantage of it, both with the FFA book and with the positioning of the vessels and it's 37 of those. I'm afraid I cannot get into more detail on that because it's like telling you how like we run our capes business during Q4, which it's difficult for me to explain now in an open call. But I can tell you that the first like priority is to monitor downside and then opportunistically capitalize on this capes volatility, especially in the last two to three weeks, charter rates in the capes market has been very volatile and the same applies for the FFAs, and we try to take advantage of it. The panamax market at the same time, it's much more stable. So it doesn't offer a lot of volatility-driven opportunities. But I'm afraid I cannot get into more detail on that. It's like revealing what we do and what our long or short position on capes and to panamaxes now, which it's difficult for me to enter into.

Okay. Well, I appreciate the commercial sensitivities around that. Maybe just from a broader perspective, as we're thinking about how - again, what the drivers for profitability are. Is it fair to assume that there'll be long periods of time where there aren't any major shifts in profitability and then small episodes of substantial upside? Is that how we should think about what the revenue and profitability format would look like?

Yes. Look, if you are referring to CBI because this is the most volatile...

Yes...

Sort of business portfolios. I can tell you that based on the backlog of our container contracted revenues, $2.7 billion contracted revenues at sort of very healthy rates. Based on the low breakeven cost of the dry bulk owned vessels, which we bought at a very good time and they have a very low leverage. And based on the predictability and profitability, although at lower levels of like the Neptune Maritime Leasing, which is a very stable business, I think any sort of short-term volatility in terms of profitability at the CBI level can be very easily absorbed by the whole company. Otherwise, we wouldn't be doing this. So I mean, in a nutshell, I think we can digest any short-term downturn of the market, which is something that is part of the business. You cannot avoid it. However, the upside, it's very substantial. So the downside based on the rest of the business we hold, it's something manageable. So otherwise, we would enter into that business if we didn't have the containership backlog, et cetera. And there is a lot of upside. So this is how we look at it. At the same time, this is a business that it is complementing our dry bulk owned vessels, which makes sense for us. So it is a calculated risk, if I can say. That based on the backlog of contracted revenues, low leverage at the Costamare Inc. level, high liquidity, attractive long-term charters in the containership sector, very stable business, the leasing business. So I mean, this is how we view it.

Yes. Understood. And I was just speaking on the CBI level on a standalone basis, just trying to think through what the normal path to profitability looks like, just sort of stable-ish at kind of modest levels and then every once in a while, you see big moves. That's how you frame it.

More specifically. You can have like a bigger move which does not translate into cash in the mark-to-market of the FFAs, like unrealized losses or gains which, however, do not have a cash impact, but it is profitability in brackets affecting EPS. There may be moves there. From the pure operation of the business, charter in, charter out, enter into pocket charters, et cetera, and settlements of FFAs leaving aside unrealized exposure. For the whole size of Costamare, this is not something that would change the fundamentals of our profitability.

Sure. Yes. No, and I appreciate that. The last question for me is just on the buybacks, obviously, you see the common buybacks. And curious, I mean, first of all, it's been exclusive to the common and not to the preferred. So I know it can be either curious how you're thinking about that. And in terms of the common buybacks, I mean, is this - the $10 million, that this is sort of what you think is a good run rate per quarter?

Yes. Look, I cannot predict the future. I cannot tell you like whether we're going to be doing any more buybacks in Q4 or if we do, what's going to be the size of it, et cetera, it depends. But we bought back common, as you rightly said and not like preferred because we think that the common is definitely undervalued. However, you look at it in terms of NAV, in term of profitability. However, you look at it. We did some buybacks of preferred in the past when it was trading at $15, $16. Now it's trading or at par or likely slightly above par, we have $150 million there to buy back. But we have been focusing on the common up to now, which does make sense. However, I cannot predict what like we're going to be doing the next quarters. We put back in total $60 million worth of common shares. We have a program for 30 more but this program can be easily extended, we'll see. We take it quarter-by-quarter.

Yeah. All right. I appreciate. Thank you.

Thank you, Ben.

The next question comes from Climent Molins with Value Investors Edge. Please go ahead.

Good morning. Thank you for taking my questions. I would like to start by asking...

Good morning.

Good morning. I would like to start by asking about the change in reporting. You previously provided a breakdown on a segment-by-segment basis, which was really helpful. But the aforementioned breakdown was not provided for this quarter. Should we expect this change to be permanent?

The breakdown we had in the previous quarter was of no use at all because in any case, you can find the numbers in the 6-K filing. So I'm afraid I will have to refer you to the 6-K filing, where like you're going to be able to see the breakdown. It didn't provide with any value. It has made the press release longer. This is the reason we took it out.

Right. Makes sense. Chris, Ben and Omar already asked about CBI, but could you provide some additional insight on how your owned dry bulk vessels performed during the quarter, for example, the TCE you realized on that side of the fleet?

Look, the profitability of the dry bulk vessel is going to be again part of our 6-K filing. We have a mixed number of - since we have right handies [ph] We have now a couple of capes, we have panamaxes. I think overall, based on the fleet that we have, it has performed fine, it has performed well. But I don't want to go into more detail what was the TCE of the of the handies xyz and then what was the rating of every vessel, et cetera. Most of the vessels or like all of them actually with some - with very few exceptions, they are trading on the spot market. So we do follow the index.

Makes sense. Thanks for the color. That's all from me. Thank you for taking my questions.

Thank you.

Thank you. This concludes our question-and-answer session. I would now like to pass the floor to Mr. Zikos for his closing remarks.

Thank you very much for dialing in, in today's call. We are looking forward to speaking with you again in the next quarterly results call. Thank you.

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