EuroDry Ltd. (EDRY) Earnings

Management highlights

### Fleet Composition and Expansion - Current fleet consists of 11 owned vessels with an average age of 13.8 years and total carrying capacity of ~707 thousand metric tons - Added 2 new 82 thousand deadweight ton Kamsarmax vessels to the existing orderbook, joining 2 previously ordered 63.5 thousand DWT Ultramax vessels; the new Kamsarmax vessels will be built to EDI Phase III environmental standards at Hengli Shipbuilding, with total contract value of ~$74 million, delivery scheduled for 2028, and financing via a combination of debt and equity, conditional on receiving an acceptable bank refund guarantee - Once all 4 ordered vessels are delivered, the total fleet will expand to 15 vessels with a combined carrying capacity of ~1.05 million DWT, and the fleet will be almost entirely composed of modern, purpose-built ships ### Chartering and Operations - As of the call, 4 vessels are employed on index-linked charters set at 115% of the average 10-time charter index, retaining exposure to market upside while maintaining operational flexibility; 7 vessels are on short-term time charters (1 to 3+ months), with only the MV Kalisti on a longer-term charter through December 2026 - No idle or commercial off-hire periods occurred during Q1 2026; the MV Xenia completed 28 days of scheduled dry-docking between December 2025 and January 2026 - The company hedged exposure for the equivalent of 1 vessel each for Q2 2026 (at $19.1 thousand per day), Q3 2026 (at $17.2 thousand per day), and Q4 2026 (at $17.1 thousand per day) via FFAs; hedges are out of the money as spot rates have outperformed management forecasts - Current fixed-rate charter coverage for the remainder of 2026 stands at 23.5%, excluding index-linked vessels; coverage is 49% in Q2, declining to 15% in Q3, with very low fixed coverage in Q4, reflecting management's expectation of ongoing market strength ### Capital Return and Balance Sheet - The $10 million share repurchase program, originally announced in August 2022 and extended through August 2026, has repurchased 348 thousand shares for a total of $5.6 million to date; repurchases are executed in a disciplined, measured manner to preserve stock liquidity - As of March 31, 2026, total outstanding debt was $109 million, with an average all-in cost of 5.63%; scheduled debt repayments are $12.2 million in 2026, $20.1 million in 2027, $17 million in 2028, and $28.8 million in 2029 - Total assets were $209.1 million, with total liabilities of $105.8 million (51% of total assets); book value shareholders' equity is $93.8 million ($32.45 per share), while management estimates an adjusted net asset value of over $52.77 per share after marking the fleet to current market value, indicating a substantial discount to NAV at current share prices ### Drybulk Market Fundamentals - Panamax spot rates improved from $13.3 thousand per day average in Q1 to ~$22.3 thousand per day as of mid-May 2026; 1-year time charter rates for standard Panamax vessels hit $18 thousand per day as of May 15, still slightly below spot levels - The global drybulk orderbook stands at 13.2% of the existing fleet as of May 2026, which remains among the lowest historical levels, supported by limited shipyard capacity, high newbuilding costs, and regulatory uncertainty around future fuel and environmental rules - Clarksons projects drybulk trade growth of 2.5% in 2026 and 1.3% in 2027; scheduled gross fleet growth is projected at 4.5% in 2026, 4.1% in 2027, and 5.6% from 2028 onward, with actual net growth expected to be lower due to delivery slippage and scrapping activity

Guidance

- The 2026 drybulk market has outperformed expectations, with resilient earnings through the typically soft seasonal first quarter, and average Supramax/Panamax rates up 8% since end-2025 to their strongest levels in two years - Management expects the 2027 market environment to be moderately softer than 2026, as fleet growth is projected to outpace trade growth, though multiple factors could keep the market relatively balanced - At current forward rates as of mid-May 2026, management indicates the company could achieve an annualized 2026 EBITDA of ~$34 million; a $1 thousand per day change in average TCE rates would change full-year estimated EBITDA by ~$2.2 million - Management expects Q2 2026 to be a strong quarter based on current market conditions - The company is evaluating adding additional fixed-rate coverage for 2027 (via either longer-term time charters or FFAs) in response to expectations of a weaker market next year, but plans to keep coverage levels modest

Segment performance

EuroDry operates as a single-segment drybulk shipping company with no separate reported product segments. For the first quarter ended March 31, 2026, the firm reported total net revenues of $12.79 million, a 38.9% increase from $9.21 million in Q1 2025. Net income attributable to controlling shareholders was $260 thousand ($0.09 diluted earnings per share), compared to a net loss of $3.7 million in the prior-year period. Adjusted net income was $330 thousand ($0.12 diluted EPS), while adjusted EBITDA was $4.87 million, up from a negative $1.02 million in Q1 2025. Operational utilization hit 99.7% and commercial utilization reached 100% in Q1 2026, up from 99% operational and 98.4% commercial utilization in Q1 2025. The average time charter equivalent (TCE) rate per vessel day was $14.4 thousand, more than double the $7.17 thousand per vessel day reported in Q1 2025. Total operating expenses (including management and G&A, excluding dry-docking) were $7.08 thousand per vessel day, down slightly from $7.3 thousand per vessel day in the prior year. The 12-month all-in cash flow breakeven rate (including operating expenses, G&A, interest, and scheduled loan repayments) as of Q1 end was estimated at $12.3 thousand per vessel day.

Risks & headwinds

- Downside risks to global growth dominate the macroeconomic outlook, driven by potential broadening of the Middle East conflict, uncertainties around AI productivity gains, and renewed global trade tensions, any of which could weaken drybulk demand - Inflationary pressures remain, leading to a more hawkish than expected interest rate path from the Federal Reserve, with rate cuts on hold until inflation shows sustained easing - Asian growth is projected to be lower than previously expected due to Middle East energy shocks, geopolitical trade fragmentation, and fading export momentum - Structural economic imbalances in China continue to pose a downside risk to Chinese demand for drybulk commodities, specifically uncertainty around iron ore demand amid administrative limits on steel output - Geopolitical developments that disrupt trade routes and reduce operational efficiency are cited as the single largest key unknown for the drybulk market; a prolonged conflict involving Iran could significantly lower global GDP growth and drybulk demand - Emerging bottlenecks at the Panama Canal, driven by increased priority access for higher-paying tankers shifting trade routes due to geopolitical conflict, have squeezed out drybulk tonnage, creating additional supply-side tightening but also disrupting voyage scheduling - While secondhand vessel values are currently extremely firm, management is reluctant to acquire secondhand tonnage at current elevated prices - Clarksons forecasts a 2% decline in global coal volumes in 2026, which could weigh on drybulk demand

Analyst Q&A

• Q: Analyst asks for details on the financing strategy for the newly ordered Kamsarmax vessels, the balance between share repurchases and fleet expansion, and potential sales of older Panamax vessels at current elevated secondhand prices. /

  A: Management plans to secure 60% delivery financing for the new Kamsarmax vessels, with ample bank financing currently available. The firm is balancing share repurchases (to capitalize on the large discount to NAV while preserving stock liquidity) with the 4-vessel newbuilding program; no further fleet expansion is currently planned. Older 21-year-old Panamax vessels are currently earning strong TCE rates around $20 thousand per day, so management will hold them to build cash reserves, and will evaluate a potential sale of one vessel in Q3 2026.

• Q: Analyst asks about the company's hedging strategy, 2026-2028 CapEx for newbuildings, actions to close the NAV discount, and exposure to rising bunker and insurance costs. /

  A: Management hedged a portion of upcoming rates because they expected a weaker market, but current market rates are higher than hedged levels, and hedging strategy is reviewed weekly with potential for additional hedges via time charters or FFAs. Exact CapEx figures will be shared separately after the call. The share price has already risen substantially from $12-$13 to $21, and the buyback program remains active with small recent purchases, but management will remain cautious to preserve stock liquidity. Bunker costs are borne by charterers for all vessels on time charter, and the firm avoids trading in high-war-risk zones, so it is not impacted by higher war insurance premiums.

• Q: Analyst asks if elevated repositioning voyage days in Q1 will be an ongoing occurrence or a one-time event, and asks for comment on Panama Canal bottlenecks as an emerging dynamic. /

  A: Management confirms the elevated Q1 repositioning and associated one-time gain from bulk fuel sales was a special situation, and does not expect it to be a regular quarterly occurrence. Panama Canal bottlenecks are an emerging dynamic: increased demand for access from tankers (due to trade route shifts from the Iran conflict) that pay premium fees has squeezed drybulk vessels out of available slots, creating ongoing supply-side tightening for drybulk shipping.

• Q: Analyst asks when management will consider increasing 2027 fixed-rate coverage given expectations of a weaker market next year. /

  A: Management confirms they are actively evaluating adding fixed coverage for 2027. Current FFA rates for 2027 are lower than 2026 spot rates, and management is considering either fixing a small number of vessels to longer-term time charters or adding FFA hedges, but will not pursue aggressive coverage, only modest additional protection.