Pangaea Logistics Solutions, Ltd. Q1 FY2026 earnings call

Overall Financial and Operating Performance

• Delivered a strong start to 2026 with year-over-year growth across revenue and profitability, driven by higher activity, strong market fundamentals, and the benefits of Pangaea's flexible operating model
• Earned a 20% TCE rate premium over prevailing benchmark indices for Panamax, Supramax and Handysize vessels, reflecting the value of the company's operating platform, long-term customer relationships, and effective market risk management across trade routes
• Used chartered-in capacity to complement the owned fleet, enabling the company to capture market upside while retaining long-term operational flexibility
• GAAP net income for Q1 was $13.3 million ($0.21 per diluted share); adjusted net income (excluding unrealized derivative gains and non-GAAP adjustments) was $7 million ($0.11 per diluted share)

Expansion and Strategic Initiatives

• Began port operations in Aransas, Texas and Lake Charles, Louisiana, with Tampa, Florida operations expected to launch in June 2026; these investments deepen supply chain service integration and create recurring non-ocean freight revenue
• Advanced fleet renewal strategy: entered an agreement to sell the Bulk Xaymaca for $9.6 million, with closing expected in May 2026; this transaction aligns with the goal of maintaining an efficient, customer-aligned fleet that meets commercial and environmental standards
• Maintains a disciplined approach to capital allocation, with a strong balance sheet that supports fleet modernization, port expansion, and shareholder returns; ended Q1 with unrestricted cash of approximately $90 million, total debt (including finance leases) of ~$359 million, and paid $3.9 million in dividends during the quarter

Market Environment

• Near-term dry bulk fundamentals for the company's minor bulk mix remain supportive, with stronger Chinese iron ore imports and improving Indonesian coal exports creating a firm seasonal backdrop and healthy medium-term demand
• Limited effective vessel supply growth and sustained strong ton-mile demand support a positive overall market outlook
• The company's flexible model allows it to quickly capitalize on unexpected market opportunities, such as the Jones Act suspension-enabled voyage for a long-standing customer in Q1

1. Ocean Freight: First quarter TCE rates averaged $15,252 per day, a 20% premium over the average published market rates for Panamax, Supramax and Handysize vessels. Total shipping days increased 14% year-over-year, with chartered-in fleet up 54% year-over-year. Total TCE earnings grew 34% year-over-year. Adjusted EBITDA for the first quarter was $25.2 million, an increase of approximately $10 million year-over-year. Total charter hire expenses increased 122% year-over-year due to more chartered-in vessels and higher market charter rates, with per-day chartered-in cost at $14,488. Vessel operating expenses decreased 7% year-over-year in absolute terms due to fewer owned vessel days from 2025 vessel sales, with per-day vessel operating expenses (net of technical management fees) at $5,644, a 2% year-over-year increase. 2. Terminal, Stevedoring and Port Services: The segment recorded record EBITDA contribution for the second consecutive quarter. In Q1 2026, the segment hit a near-30% gross margin, with $200,000 to $300,000 of incremental income driven by new port operations and high dry bulk activity at Port Everglades. An additional $484,000 in other income from the segment's joint ventures was recognized in the quarter.

• Management maintains a positive outlook entering the seasonally stronger second half of 2026, with solid visibility and healthy customer demand
• As of the call, 4,051 Q2 2026 shipping days have already been booked at an average TCE of $18,808 per day, with average TCE for the remaining unbooked Q2 days expected to be around this level or slightly higher
• 1,550 Q2 chartered-in days have been booked at an average rate of $16,880 per day
• For terminal and stevedoring operations, Q2 2026 income is expected to see a ~$200,000 sequential decline from Q1's record level, with Q3 and Q4 expected to return to around Q1's run rate; the near-30% gross margin achieved in Q1 is expected to be sustainable for the second half of 2026
• Excluding the noncash $1.7 million first-quarter stock compensation expense, the remaining G&A run rate is expected to hold for the balance of 2026, though variable incentive compensation will create some quarterly fluctuations
• The company expects to become more active in purchasing secondhand vessels for fleet expansion and renewal over the next 12 months, as attractive valuations remain available even at current market price levels

• Forward-looking statements are inherently uncertain, and actual results may differ materially from projections due to various unforeseen risks, as disclosed in the company's periodic SEC filings
• Geopolitical instability in the Arabian Gulf has created indirect industry risks, including shifting global trade flows and increased fuel price volatility, though Pangaea has no direct exposure to the region
• Bunker fuel hedging activities create periodic volatility in reported GAAP earnings due to mark-to-market unrealized gains and losses on derivative instruments, even when the hedges effectively lock in underlying cash flows for long-term contracts and forward bookings
• Dry bulk shipping markets are cyclical and subject to sudden changes in supply and demand fundamentals that could impact future profitability

Q: With the 54% year-over-year increase in chartered-in vessels aligned with the cargo-first flexible strategy, is there pressure to add more owned vessels instead of continuing to expand chartered-in capacity? / A: Management states there is no meaningful pressure to shift away from chartered-in expansion. The company is always evaluating potential owned vessel acquisitions, but the core purpose of the chartered-in fleet is to act as an arbitrage complement to the owned fleet. This strategy will not change regardless of the size of the owned fleet, and the company will continue to leverage chartered-in capacity to capture upside in strong markets, as it has done historically.

Q: What is the expected run rate of G&A expenses for the rest of 2026 after backing out the noncash Q1 stock compensation expense? / A: The $1.7 million noncash stock compensation is a one-time Q1 impact that does not reflect ongoing run rate. Backing out this amount gives an accurate underlying run rate for the remainder of the year. Variable annual incentive compensation will create small fluctuations across remaining quarters, but the underlying base G&A level will hold near the adjusted run rate.

Q: The Jones Act suspension opportunity mentioned in prepared remarks: will this become a meaningful contributor to full-year 2026 earnings? / A: The opportunity was purely opportunistic, serving an existing long-term customer. Management would be open to pursuing similar opportunities if they remain available, but does not expect the activity to make a sizable contribution to 2026 earnings at this time.

Q: After the year-over-year decrease in absolute vessel operating expenses, is this lower run rate sustainable going forward? / A: The absolute decrease is driven entirely by the sale of two owned vessels in 2025, which reduced total owned vessel days. On a per-day basis, operating expenses saw only a mild 2% year-over-year increase, which was in line with management's full-year expectations. The current trend is expected to continue for the rest of 2026.