Life360 Inc

NASDAQ:LIF

Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited First Quarter 2025 Earnings Conference Call and Presentation. Before we begin, please note that there will be a slide presentation accompanying today's conference call. That presentation can be obtained from Genco's website at www.gencoshipping.com. To inform everyone, today's conference is being recorded and is now being webcast at the company's website, www.gencoshipping.com. [Operator Instructions] A webcast replay will also be available via the link provided in today's press release as well as on the company's website. At this time, I will now turn the conference over to the company. Please go ahead.

Good morning. Before we begin our presentation, I note that in this conference call, we will be making certain forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements use words such as anticipate, budget, estimate, expect, project, intend, plan, believe and other words in terms of similar meaning in connection with the discussion of potential future events, circumstances or future operating or financial performance. These forward-looking statements are based on management's current expectations and observations.

For a discussion of factors that could cause results to differ, please see the company's press release that was issued yesterday, the materials relating to this call posted on the company's website and the company's filings with the Securities and Exchange Commission, including, without limitation, the company's annual report on Form 10-K for the year ended December 31, 2024, and the company's reports on Form 10-Q and Form 8-K subsequently filed with the SEC. At this time, I would like to introduce John Wobensmith, Chief Executive Officer of Genco Shipping & Trading Limited.

Good morning, everyone. Welcome to Genco's First Quarter 2025 Conference Call. I will begin today's call by reviewing our Q1 2025 and year-to-date highlights. Additionally, we will provide an update on our value strategy, highlight our new share repurchase program and discuss our financial results for the quarter as well as the industry's current fundamentals before opening the call up for questions. For additional information, please also refer to our earnings presentation posted on our website. Beginning on Slide 5, despite the seasonally softer first quarter and consistent with our success providing dividends to shareholders through market cycles, we continue to prioritize our quarterly dividend policy.

Specifically, we declared a $0.15 per share dividend, extending our track record of providing 23 quarters of consecutive dividends and marking the longest stretch of uninterrupted dividends in our dry bulk peer group. Over this period, Genco has declared $6.765 per share of dividends, representing 50% of our current share price. Notably, for the first quarter of 2025, our dividend formula, including a voluntary reserve of $19.5 million, would not have produced a dividend. However, management and the Board chose to reduce the reserve from $19.5 million to $1.1 million for the quarter, resulting in the $0.15 per share dividend. This highlights our commitment to our dividend and returns to shareholders as well as our favorable view of the long-term fundamentals of the dry bulk industry and the improving freight environment in Q2 so far.

We have paid sizable dividends to shareholders in different freight environments over the past 6 years, as highlighted on Page 6, and we are pleased to build upon this strong track record by putting in place a $50 million share repurchase program. We believe that significant equity market volatility has resulted in a disconnect between our share valuation and the underlying fundamentals of our business. We have long held the view that when this extreme dynamic materializes, it is the appropriate time to put in place a share repurchase program. This is a capital allocation tool that we have extensively evaluated throughout the cycle and view this as a compelling and opportunistic way to capture shareholder value if we continue to experience downward volatility.

Importantly, the share repurchase program is incremental to our quarterly dividend policy, which we intend to maintain as our primary method of returning cash to shareholders. Turning to Slide 7. With an industry low net loan-to-value ratio of 6%, a low cash flow breakeven rate and over $320 million in undrawn revolver availability, we believe Genco remains in a highly advantageous position to successfully operate in the current volatile geopolitical environment and continue to differentiate ourselves from our dry bulk peer group. Going forward, we remain focused on executing on the 3 pillars of our value strategy, dividends, deleveraging and capitalizing on accretive growth and fleet renewal opportunities. We also intend to act opportunistically in carrying out our new share repurchase program to create long-term shareholder value.

From a dry bulk market perspective, in January and February, the freight rate environment experienced typical seasonal factors as weather conditions in key export regions reduced seaborne volumes, temporarily misaligning the supply and demand balance, resulting in pressure on freight rates. However, in March, freight rates rallied as some of these temporary factors dissipated. We saw cap rates rise from under $6,000 a day to nearly $24,000 a day in a matter of weeks, highlighting the significant operating leverage inherent in the business. As we look forward with added long-haul tons hitting the market towards the end of 2025 and into 2026, together with a historically low Capesize order book, the potential catalysts are clear.

We currently are in an operating environment characterized by compelling dry bulk supply and demand fundamentals, but also an ever-changing geopolitical landscape. During times like these, we focus on what we can control, which is our capital structure and our asset base, maintaining low financial leverage and in turn, a low cash flow breakeven enables Genco to not only continue to pay dividends in periods of downward volatility, but also to take advantage of accretive growth opportunities with a wide variety of capital allocation tools at our disposal. We believe this capital allocation strategy works well in all operating environments, will enable Genco to be nimble as markets develop and offer a compelling risk-reward balance for our investors. I will now turn the call over to Peter Allen, our Chief Financial Officer.

Thank you, John. On Slides 9 through 11, we highlight our first quarter financial results. Genco recorded a net loss of $11.9 million or $0.28 basic and diluted net loss per share. EBITDA for Q1 totaled $7.9 million. On Slide 12, we show the trajectory of our debt outstanding and our continued voluntary debt repayments. Since inception of our value strategy, we have paid down 80% of our debt or nearly $360 million, which has resulted in a net loan-to-value of 6%. Specifically, over the last 1.5 years, we have voluntarily paid down $110 million of debt under our revolving credit facility, the benefits of which we're seeing in interest expense year-over-year, which was $1.5 million lower, equating to $6 million annualized or approximately $400 per vessel per day on our cash flow breakeven rate.

Voluntarily paying down debt highlights the importance and significant flexibility that our current 100% revolver structure offers us and that we can pay down debt to actively manage interest expense without losing borrowing capacity to capture accretive growth opportunities as markets develop. Turning to Slide 13. We present a current snapshot of Genco's financial position as of March 31, 2025. We have a cash and debt balance of $31 million and $90 million, respectively, resulting in a net debt position of $59 million and an industry low net loan-to-value of 6% on our 42 vessel fleet. Additionally, we have $324 million of undrawn revolver availability, which we can utilize to further invest in our fleet to capture accretive growth opportunities among other uses.

Moving to Slide 14. We highlight our quarterly dividend policy, which targets a distribution based on 100% of operating cash flow less a voluntary reserve. For the first quarter, our Board of Directors declared a $0.15 per share dividend based on operating cash flow of approximately $8 million and a voluntary quarterly reserve of $1 million. Looking ahead to Q2 2025, we currently have 68% of owned available days fixed at a rate of approximately $14,000 per day as compared to our anticipated cash flow breakeven rate, excluding dry docking-related CapEx of $8,750 per vessel per day. Q2 TCE estimates are currently 18% higher than the actual Q1 TCE, which highlight the freight rate improvement seen in March that carried over into April.

This improvement has been led by our Capesize vessels, which in Q2 to date are currently fixed at approximately $18,700 per day, an increase of over 40% from $13,000 per day in Q1, further highlighting the significant operating leverage of the sector. We note that Genco, like much of the industry, has a large-scale dry docking program in 2025. We completed dry docking on 4 vessels during the first quarter with another 3 vessels that entered the yard in Q1. We plan to continue to front-load these dry dockings during the first half of the year as we seek to maximize fleet-wide utilization in the second half of the year, which tends to be seasonally stronger from a freight rate perspective.

Lastly, regarding capital allocation, over the course of this dry bulk market cycle, we have prioritized strengthening our balance sheet through voluntary debt repayments, modernizing our fleet and returning cash to shareholders through quarterly dividends, which have proven to be prudent strategies. Going forward, we remain focused on these 3 pillars while adding an additional capital allocation tool in the new share repurchase program as we continuously evaluate various uses of capital to drive shareholder value. I will now turn the call over to Michael Orr, our dry bulk market analyst, to discuss industry fundamentals.

Thank you, Peter. Beginning on Slide 16, the dry bulk freight rate environment was impacted by seasonal factors, including weather-related disruptions in Brazil and Australia, reducing cargo availability, the front-loaded nature of the newbuilding deliveries as well as the timing of the Chinese New Year. After averaging over $20,000 per day for 14 consecutive months from October 2023 to November 2024, the Baltic Capesize Index averaged approximately $10,000 per day from December to February, bottoming at $5,900 on February 12. However, within weeks, the BCI rose over 300% to nearly $24,000 per day by mid-March, highlighting the significant upside potential of the sector.

Currently, the BCI and BSI are at levels of $15,000 and $10,000 per day, respectively. Turning to Page 17, we point to China steel complex. Specifically, the country's iron ore imports fell by 8% year-over-year during the first quarter, impacted by the reduction of seaborne supplies. China's iron ore port inventories have been drawn down by 7% from earlier year high and are now 3% lower on a year-over-year basis to supplement the downward move in imports. Importantly, China steel production has increased year-over-year by 1%, with March being the strongest month of output since May 2024. China continues to export over 10% of the steel producers, mostly going to other Asian nations as well as the Middle East, with its proportion of exports to steel output growing over recent years.

China's excess steel has remained a point of contention, prompting protectionist measures from various countries. We believe that if China's exports come under pressure, the country will have to boost demand domestically to achieve growth targets, which could result in augmented demand for raw materials. Turning to Pages 18 and 19, we highlight the long-haul iron ore and bauxite trade growth expected from Brazil and West Africa in the coming years. While growth this year is expected to be marginal, there are significant growth volumes expected in 2026 and 2027 that can absorb potentially over 200 Capesize vessels, which is more than the current Capesize newbuilding order book. Supply constraints in Capesize newbuilding activity, combined with added long-haul trading distances are 2 key catalysts for the sector.

In terms of the grain trade as detailed on Page 20, we are currently in peak South American grain season. China has been aggressive in purchasing Brazilian soybeans this season as uncertainty lingers over U.S.-China trade. Currently, current tariffs on U.S. agricultural products make them uncompetitive relative to other exporters. However, volumes to China are traditionally lower in Q2 and Q3 than what would ordinarily be seen during peak North American grain season, which ramps up in Q4.

Regarding the supply side outlined on Slide 21, net fleet growth in the year-to-date is 3.3% on an annualized basis, split between 2% net fleet growth for Capesizes and 3% to 5% net fleet growth for Panamaxes down to Handysizes. The Capesize segment continues to have the smallest order book among the dry bulk sectors at 8% of the fleet. Specifically, only 11 Capes delivered in Q1, the least amount of Q1 Cape deliveries in over 15 years. Furthermore, there are currently over -- only 28 more Cape deliveries expected this year.

Additionally, as scrapping has remained low in recent years, the age of the global fleet has risen to nearly 13 years old, the highest average age of the global dry bulk fleet since 2010. This has increased the pool of potential scrapping candidates as over 10% of the on-the-water fleet is 20 years or older, which is identical to the global dry bulk order book as a percentage of the fleet. This implies net replacement tonnage over time as opposed to any material net fleet growth. While we expect volatility in the freight market, the foundation of a low supply growth picture provides a solid basis for our constructive view of the dry bulk market going forward. This concludes our presentation, and we would now be happy to take your questions.

[Operator Instructions] And your first question comes from the line of Omar Nokta with Jefferies.

Just a couple of questions on my end. And maybe, John, you opened with this or touched on this in some good detail, but just wanted to ask if you could maybe just explain a bit more on the share buyback. Obviously, it's a big number, I would say, relative to the market cap and the float. Maybe just how did you come about this disagreement on the buyback? And how do you see yourselves putting it to work? And I guess just a reminder, how does that work with the dividend policy currently in place?

Okay. So let me take the dividend policy first. I can't stress enough this is a bolt-on. It is incremental to the dividend policy. It will not affect not only our ability, but our decision to pay dividends going forward. The formula is the same. And obviously, if there is downward volatility, we will continue to pay dividends as we have this quarter as well as we had a couple of quarters in 2023. So incremental, I would say that it is -- it was put in place for very opportunistic reasons. It's -- I don't look at it as we're going to consistently be in the market buying shares.

It's really to protect and take advantage if we see the extreme volatility downwards that we saw a few weeks ago. And you'll also probably notice there's no expiration date on the share buyback program. So it's something that we plan to have in place for the foreseeable future. In terms of sizing it, we looked at what others have done, not only in shipping, but also across several other industries. And as a percentage of market cap, we think it's the right number.

John, that makes a lot of sense. And I guess maybe just in that context in terms of, I guess, there's 2 parts to kind of the share valuation. There's the buyback perhaps in response to these aggressive moves in the market. And then there's also just, say, the underlying discount valuation that the stock currently has relative to asset values. Maybe just as you think about asset values specifically, how are you thinking about those values? Or what are you seeing from your vantage point in terms of where pricing is? They seemed to have held up a bit better than we would have anticipated just given all the macro. But just wanted to get your perspective on what's behind sort of this market remaining buoyant as it has been?

Yes. It's not only buoyant, but it's actually moved up to some degree over the last couple of months. There -- first of all, there's just not a lot of newer tonnage that is being let go is being put on the market for sale. A lot of the -- most of the tonnage and the liquidity in the S&P market is coming from older ships. But the newer vessels clearly are holding value. They've increased a little bit. And I think all you have to do is look to the price of newbuildings right now. There's certainly a correlation and a link to that. And those prices continue to remain firm. And as we all know, when you're ordering today, you're really talking about late 2028, early 2029 delivery at this point. So that I think that also keeps -- has been keeping these prices firm.

Your next question comes from Liam Burke with B. Riley Securities.

The question I had is when we're looking at the minor bulks, I mean, you parsed up the bauxite and iron ore trade and the grain trade. How are you viewing coal and their influence on the non-Capesize vessels?

So coal, just like every other commodity ebbs and flows. We certainly saw softness in the beginning of the first quarter, but I would say that coal has come back into the market. It's -- I wouldn't call it booming, but it's certainly there, slow and steady. I think if you look at the minor bulks, you have a few things going on. One, there's a front-loaded delivery schedule, which is the case in most years. So there's been 5% annualized net fleet growth so far this year. That's an annualized number, just to be clear. Q1, we're in between grain season, South American versus U.S. Gulf. But I also think it's -- there's some questions around how much soy and corn will actually come out of the U.S. Gulf as we get into the season later this year. just because China has been buying a lot from Brazil.

We obviously know the trade battle that is going on between the U.S. and China. And I think you can go back to 2018 time periods and see what happened as a result of the back and forth. There was also a lot of uncertainty around USTR and who was going to be paying port fees and who wasn't. And that definitely stopped the market for a few weeks as people were trying to figure out how to build language into charter parties so that it did not become the responsibility of the shipowners. So things slowed down significantly. In fact, I would tell you, there was a 3-week stretch there that there was really no new business being done. The only business that was being done was contractual in nature and had already been booked. So I think that also put pressure on the minor bulks in the first quarter.

Great. And no matter how you look at it, your leverage is exceedingly low. Is net debt 0 an objective anymore or just moderate leverage and which will allow you to pursue your capital allocation program?

Yes. Look, net debt 0 is still a goal. We could easily get there by the end of this year, all things remaining equal right now. Having said that, it doesn't mean that if an acquisition comes up and it's accretive to earnings, cash flows and dividends, that we won't lever up a little bit. But you're not going to see us in the 50%, 60% kind of leverage. It maybe it goes up as high as 30%, but then we bring it back down, just like we have in the past. And I think, again, the company is just so well set up to do those types of things. And that's why we think we've got the best risk/reward position right now.

Your next question comes from Poe Fratt with Alliance Global Partners.

Can you expand on the U.S. trade decision? You put a little bit of a comment in your 10-Q about the exemption for less than 80,000 deadweight tons, I think. But can you expand on whether you think you're going to be impacted, if at all, by the port fees?

Yes. So the short answer is we do not see any impact. We will be exempt for our U.S. trading. You pointed out the less than 80,000 deadweight tons. So that covers our minor bulk fleet going in and out of the U.S. And then our Capes, there's also an exception that you're not charged port fees if you come to the United States in ballast. And that's the only way that our Capes have traded in the U.S. We don't do a lot of U.S. trade, just to be clear with our Capes. But the Capes come empty. They usually pick up coal in either Baltimore or Norfolk, Hampton Roads Rose area and then leave full. So that type of trade would be exempt as well. So just going back, we don't see impact at this point.

That's really helpful. And then the 2 parts of the fleet profile enhancement, buying newer tonnage, but also selling some of the older tonnage. Could you update us on sort of what the tone of the market is for selling some of the smaller, older tonnage that you have?

Yes. I think it's fairly good right now. If you'd asked me a month ago, I would have a different answer. But with USTR providing not just clarity, but some -- what I would say is some sensible thoughts on it. People are buying and selling ships again. So I would say it's a pretty liquid market on the older ships. And I still believe that the market overall, there's an optimistic view, which is why you're seeing these older ships being bought.

As there are no further questions at this time, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.