Ladies and gentlemen, greetings, and welcome to the Pangaea Logistics Solutions Third Quarter 2022 Results Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Noel Ryan from Vallum Advisors. Please go ahead.

Thank you, operator, and welcome to Pangaea Logistics Solutions Third Quarter 2022 Results Conference Call. Leading the call with me today is CEO, Mark Filanowski; Chief Financial Officer, Gianni Del Signore; and COO, Mads Petersen. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. At the conclusion of our prepared remarks, we will open the line for questions. And with that, I'd like to turn the call over to Mark.

Thank you, Noel, and welcome to those joining us on the call today. After the market closed yesterday, we issued results for the 3 months and 9 months ended September 30, 2022. During a period of broader market volatility, our diverse portfolio of stable, long-term transportation contracts, leading positions in higher-margin ice-class trade routes and larger owned fleet culminated in a strong third quarter performance, one highlighted by significant year-over-year growth in operating cash flow and adjusted EBITDA, together with another consecutive quarter of profitability, as our realized TCE rates outperformed the market index by 41%. As the largest owner and operator of vessels globally, we have the scale, technical capabilities and contractual relationships to support consistent above-market returns that regularly exceed those of less demanding trades. During the third quarter, all 10 of our modern Ice Class 1A vessels were active within premium rate Arctic ice trades. While most drybulk trades experienced typical levels of seasonal softness during the summer months, demand within our core Ice Class contract routes was solid, resulting in a strong third quarter performance. While the current geopolitical environment remains volatile, it has created new opportunities for our businesses. Our usual ice -- Baltic ice trade is export from Baltic areas. This year, we may import commodities to non-Russian ports in this area. Coal imports to European ports and other commodities worldwide are shipped from longer distances. We anticipate that the continued disruption of many drybulk trades may result in more ton-mile demand, especially in the sub-capesize markets where we operate. We are seeing increased demand for shipping and cargo handling of commodities such as cement and aggregates moving into U.S. ports to support infrastructure spending. With our customer-focused, agile approach and efficient fleet, we are in a great position to take advantage of new…

Thank you, Mark, and welcome to all of those joining us today. Our third quarter financial results continue to emphasize the durability of our business model as we were able to recognize sizable margin expansion from our expanded fleet of owned ships during the peak arctic ice season. Third quarter TCE rates were $24,107 per day, a premium of more than 40% to the average published market rates for supramax and panamax vessels, which is supported by our long-term COAs and the seasonal Ice Class demand during the quarter. Despite TCE rates declining on a year-over-year basis, adjusted EBITDA grew $4.9 million to $38.5 million during the third quarter. The growth was driven by an increase in adjusted EBITDA margins even as total revenue declined by $28.6 million or 13% versus the prior year. The decline in revenue was more than offset by lower charter hire expenses, which declined by $53 million year-over-year to $50.6 million during the quarter driven by a decrease in charter in days due to the expansion of our owned fleet and our flexible charter-in strategy, allowing us to supplement our own fleet with short-term chartered-in tonnage at prevailing market rates when needed to meet cargo demand. The decline in charter hire expenses was partially offset by a 30.7% increase in vessel operating expenses mainly due to an increase in owned days from the acquisition of our 4 Ice Class 1A post-panamax new building vessels during 2021; and the Bulk Concord, which delivered in Q1 of 2022. On a per day basis, net of technical management fees, vessel operating expenses for the 9-month period were up 8.75% to $5,667 per day. As we've discussed in the past, we utilize forward freight agreements and bunker swaps to selectively hedge our exposure to the market on our long-term…

[Operator Instructions]. Our first question comes from the line of Poe Fratt from Alliance Global.

Another solid quarter in reasonably good market conditions in the third quarter, but the fourth quarter, your forward cover looks reasonably good at about 8,800 for, I'm calculating about 63% of the days if you're running 55 vessels right now. Is that -- will you comment on that, please?

Yes, that's about right, Poe. As we book voyages earlier in the quarter, they're performed later in the quarter, and that's how we take this measurement. So you're about right in those estimates.

And then you mentioned charter-in costs had come down in the third quarter. You're chartering in about 30 vessels right now because your own fleet is back up to 25. Can you just give us a flavor for what your charter-in cost is right now? Is it more along the lines of the market in the $15,000 range or so? Or can you just give us an idea of sort of how the -- maybe the higher cost chartered in over the course of the last couple of quarters has fallen off, and now you're chartering in at current rates?

Hi, Poe. It's Mads here. You're absolutely right. I mean the business model is sort of flexible in that sense, as the markets drop, we can redeliver the chartered in part of the fleet and replace that with cheaper tonnage. So that trend, for sure, is what we are seeing as we have progressed through the quarters, and of course, our chartered-in cost now is probably a little bit hard to say what it is on average. It's very sort of positional and depending on the route you need to ship for, but in the 15,000 to 20,000 range depending on the trade. Yes. That's probably right.

And Mads, will you -- sorry, I should have said hello, but would you -- is there any impact of the ice season in the fourth quarter or is that just specific to the third quarter? My understanding is it generally goes into sort of the October time frame.

So there is like -- actually sort of it's the start of the winter season. We start to collect a little bit of premium on that business already from mid-November, early December, especially for the business that we're doing in the St. Lawrence on the Canadian -- in the eastern part of Canada. And of course, the sort of the voyages that are completing during late October and November, of course, also has a premium component to it as well. So there is a little bit of Q4 premium there.

Okay. Great. And then, Mark, you highlighted the balance sheet strength, the buildup in cash, the dividend going up. Can you just talk about a couple of things? One is your investment opportunities, you've highlighted sort of in the past the areas like stevedoring and port logistics to create more stability versus the drybulk market. And then secondly, how should we be looking at dividend -- your dividend policy going forward? Is it -- I know you've said in the past it's quarter-to-quarter, can you give us an idea of sort of how you're thinking about the dividend and whether there's a target payout ratio? Or just sort of any color on the dividend policy would be helpful.

Why don't I address the dividend. It's always been our approach with the dividend to put out a sustainable dividend number through good markets and bad markets. Throughout the years, we've been pretty consistent in terms of performance of the company in good markets and not so good markets. We've consistently outperformed market indexes and continually reported profit. So when it comes to dividend, I think we have the same approach, cautious, but we want to share some of the cash we're generating with shareholders. So we do it carefully through the dividend. We haven't, to date, wanted to do a formulaic dividend. Maybe we consider that a little bit too volatile against our plan to be a little bit more consistent. And so we've consistently increased the dividend over the past, what, 18 months or so when we restarted it after COVID. And we started out at $0.035, I think, and it's now up to $0.10. We're pretty comfortable with that number right now. But looking forward, if we keep generating the cash we're generating, I'm sure the Board will consider other adjustments. In terms of investments we see going forward, I think we see a little bit of market weakness in the forecast. At least FFA rates are pretty low for 2023. I think we'll sit and wait and look at the market, see which way the S&P values go. And if we see an opportunity, we've got some cash on hand, we'll maybe pick up a ship or 2, depending on where the market is. In terms of logistics, so far, we've done what we've accomplished on the logistics side with relatively little capital investment. We are, today though, focusing on a couple of different projects that would be a little bigger step than us maybe doing something on that side in the next 12 months or so.

[Operator Instructions]. Our next question comes from the line of Poe Fratt from Alliance Global.

I would have kept on asking, but I thought that maybe Liam might have flipped over from the Genco call. What -- can you just talk about -- Mark, you just said you might -- depending on what the S&P market does, might pick off an asset or 2. You have the Newport coming up in the first quarter of 2023 with a survey. Is that a potential sales candidate? Or have you -- can you just tell me what you think you're going to do with the Newport at this point in time?

It is a potential sale candidate Poe, assuming the ship is [indiscernible] cash flow now [indiscernible] when it comes to reinvesting in the ship of that age, we always ask ourselves twice whether, at least twice, whether that's something we want to do, whether it makes sense going forward, especially looking forward at some kind of new propulsion that will become available. Rather than investing in an older ship, maybe we shouldn't hold our cash on hand and wait for -- the chips start to fall in terms of what kind of ship will be the ship of the future or maybe just a more efficient ship, more eco ship that we'd be able to trade a little bit longer.

Okay. And then, Gianni, you gave the 9 months OpEx, it's like $5,700 or just a little bit under that. It looked like the third quarter might have run a little bit higher than that. Can you just talk about sort of what -- either on the fourth quarter basis or what 2023 should look like on the OpEx line?

Yes. Sure, Poe. And I know sometimes I don't like presenting that OpEx on a quarterly basis. It is more, I think, reflective of what we're seeing in cost when we look at it on a year-to-date basis. But the third quarter itself was impacted by some onetime costs. As you know, we changed our technical managers from Sovcomflot to Bernhard Schulte. As part of that changeover, there were some costs that were incurred during the third quarter that drove our operating expenses up. But I think the year-to-date is more reflective. We're certainly seeing some inflationary pressure. I think year-to-date, compared to the prior year, it's about an 8% increase. We're seeing increases in some travel crew changeover. But I think that number year-to-date is more reflective of what we will probably expect for the balance of the year and going into next year. And the number for Q3 is really -- was really affected by some onetime events.

[Operator Instructions]. Since there are no further questions, I would now like to hand the conference over to your CEO, Mark Filanowski, for closing comments.

Thank you all for attending, and have a great rest of the day.

Thank you. The conference has now concluded. Thank you for your participation. You may now disconnect your lines.