Navios Maritime Partners L.P. (NMM) Q3 FY2025 Earnings Call Transcript & Summary

Thank you for joining us for Navios Maritime Partners' Third Quarter 2025 Earnings Conference Call. With us today from the company are Chairwoman and CEO, Ms. Angeliki Frangou; Chief Operating Officer, Mr. Efstratios Desypris; Chief Financial Officer, Vincent Vandewalle. As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors section of Navios Partners' website at www.navios-mlp.com. You'll see the webcasting link in the middle of the page and a copy of the presentation referenced in today's earnings conference call will also be found there. Now I will review the safe harbor statement. This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Partners. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners' management and are subject to risks and uncertainties, which could cause the actual results to differ materially from the forward-looking statements. Such risks are more fully discussed in Navios Partners' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Partners does not assume any obligation to update the information contained in this conference call. First, Ms. Frangou will offer opening remarks. Next, Mr. Desypris will give an overview of Navios Partners' segment data. Next, Ms. Tsironi will give an overview of Navios Partners' financial results. Then Mr. Vandewalle will provide an industry overview. And lastly, we'll open the call to take questions. Now I turn the call over to Navios Partners' Chairwoman and CEO, Ms. Angeliki Frangou. Angeliki?

Good morning, and thank you all for joining us on today's call. I am pleased with our results for the third quarter and first 9 months of 2025, in which we reported revenue of $346.9 million and $978.6 million, respectively. We also reported EBITDA of $193.9 million and $519.8 million, respectively, and net income of $56.3 million and $168 million, respectively. Earnings per common unit were $1.90 for the quarter and $5.62 for the 9-month period. For the past 5 years, it seems as if we have been addressing constant change in our operating environment driven by geopolitical and other events. Yet we have remained laser-focused on our business, modernizing our fleet. As you can see on Slide 3, our fleet has an average age of 9.7 years compared to an industry average of 13.5 years for our 3 segments. Our reinvestment program puts us in a fortunate position of having a fleet that is almost 30% younger than the average and almost half when you look at our tanker fleet. Please turn to Slide 4. Navios is a leading maritime transportation company, owning, operating and chartering a modern fleet of 171 vessels across 3 segments and 15 asset classes. Our fleet is split about 1/3 in each category by vessel number and vessel value. Vessel values are $6.3 billion in gross value and $3.8 billion in net equity. We also enjoy a low net LTV of 34.5% and have $412 million available liquidity and strong credit ratings of Ba3 by Moody's and BB by S&P. Please turn to Slide 5. We believe that diversification is strength. When embedded in a culture of risk management, we have a business providing significant optionality in our decision-making process. For example, when charter-in, if we are unable to secure long-term charters that provide a reasonable return on our investment, we limit our exposure to short-term waiting for sector opportunity to return. We approach the allocation of capital similarly, patiently observing the market for either opportunistic purchases or acquisitions that can be hedged by long-term charters with a creditworthy counterparty. These activities are accompanied by deleveraging goals. We maintain a strong balance sheet and a target net LTV of 20%, 25%. I would offer that all this works because of our strong risk management culture. We are continuously monitoring and assessing risk. We evaluate and structure our transactions with risk management professionals who are equal partners in all our activities. We also obtained robust insurance coverage for liability and losses, and we have implemented many tools to manage operational risk and crew training. Please turn to Slide 6. Our fleet gross LTV was 40.6% at the end of the third quarter. Net LTV was 34.5%, and we aim to continue to drive net LTV lower. We added $745 million of long-term contracted revenue during the quarter and our revenue backlog is $3.7 billion. Currently, virtually all of the fleet is covered for the fourth quarter of 2025. Please turn to Slide 7. I would like to focus on prospects for 2026, which are shaping up nicely. We have covered 58% of our days and reduced the cash breakeven to $894 per day for the remaining 23,387 open and index days. You can see the breakdown of each segment on the right part of the slide. 92% of our container days and 73% of our tanker days are fixed with dry bulk days representing most of our market exposure by a number of days. Please turn to Slide 8. A few weeks ago, we took the opportunity to offer a $300 million senior unsecured bonds in the Norwegian market. We priced the bond par at a coupon of 7.75% with a 5-year term. The proceeds are used to repay $292.3 million of floating-rate debt and the balance for issuance fees and for general corporate purposes. This transaction has no impact on our leverage rate because the proceeds are used to refinance existing debt, but we believe opportunistic financing reduces interest rate risk by replacing floating rate debt with a fixed interest rate. It also releases collateral, and we have around $1.2 billion of debt-free vessels. Pro forma for this transaction, we have 41% of our debt fixed at an average interest rate of 6.2%. The bond also introduces to the Norwegian market, providing an alternative source of financing. Please turn to Slide 9, where we outlined our return of capital program. As you can see year-to-date, we have returned $42.2 million under the dividend and unit repurchase programs. Today, we purchased almost 5% of the number of units outstanding determined as of the date we launched the program. We have $37.3 million purchase power in May. These purchases have resulted in a $4.6 per unit value accretion, assuming the analyst estimate of NAV of around $138 per unit. Please turn to Slide 10. Navios is a proven platform that has been executing its strategy in a challenging environment. I referenced to the many uncertainties when we started this discussion. Certainly, the geopolitical risk, regional conflict, changing global tariff regime and evolving trade patterns are unprecedented in recent history. We have remained focused and over the past 4 years, we have built a platform with an EBITDA run rate of about $750 million while increasing our book of contracted revenue to $3.7 billion and our vessel value to $6.3 billion. At the same time, we have decreased our net LTV by 33% to 34.5%. We have more to do, but we believe that this proven platform containing a diversified fleet with a risk management culture is the way to do it. I now turn the presentation over to Mr. Stratos Desypris, Navios Partners' Chief Operating Officer. Stratos?

Thank you, Angeliki, and good morning, all. Please turn to Slide 11, which details operating free cash flow potential for Q4 of 2025 and 2026. For Q4 2025, we fixed 88% of our available days at a net average rate of $24,871 per day. Contracted revenue exceeds estimated total cash operating cost by about $86 million, and we have 1,594 remaining open or index-linked days that should provide additional cash flow. For 2026, we have fixed about 58% of our available days at a net average rate of $27,088 per day, generating about $860 million in revenue. This almost covers our total estimated cash operating cost for the year, resulting in a breakeven of $894 per day on our 23,387 open index days. Please turn to Slide 12. We are constantly renewing our fleet in order to maintain a young profile. We reduced our carbon footprint by modernizing our fleet, benefiting from new technologies and advanced environmental friendly features. During Q3, we acquired 4 newbuilding, 8,850 TEU containerships for a total of $460 million. These vessels have already been chartered out for a fair period of over 5 years at a net rate of $44,145 per day, generating revenues of $336 million. We have 25 newbuilding vessels delivering to our fleet through 2028, representing $1.9 billion of investment. Based on our financing, both agreed and in process, we have about $230 million of equity remaining to be paid. In containerships, we have 8 vessels to be delivered with a total acquisition price of about $0.9 billion. We have mitigated the residual value risk with long-term creditworthy charters expected to generate about $0.6 billion in revenue over a 5-year average charter duration. In tankers, we have 17 vessels to be delivered for a total price of approximately $1 billion. We charter out 11 of these vessels for an average period of 5 years, expected to generate aggregate contracted revenue of about $0.6 billion. We also continue to opportunistically sell older vessels. In 2025, we sold 12 vessels, 6 dry bulk, 3 tankers and 3 containerships with average age of over 18 years for a total of about $235 million. Moving to Slide 13. We continue to maintain a strong backlog of contracted revenue that creates visibility in an uncertain environment. During the quarter, we added $745 million of contracted revenue, $595 million from containerships, including the $336 million on the 4 newbuilding vessels, $138 million on tankers and $12 million on dry bulk vessels. Total contracted revenue amounts to $3.7 billion. $1.3 billion relates to our tanker fleet, $0.2 billion relates to our dry bulk fleet and $2.2 billion relates to our containerships. Charters are extended through 2037 with a diverse group of quality counterparties. I now pass the call to Erif Tsironi, our CFO, who will take you through the financial highlights. Erif?

Thank you, Stratos, and good morning, all. I will briefly review our unaudited financial results for the third quarter and the 9 months ended September 30, 2025. The financial information is included in the press release and is summarized in the slide presentation available on the company's website. Moving to the earnings highlights on Slide 14. Total revenue for the third quarter of 2025 increased by 1.8% to $347 million compared to $341 million for the same period in 2024 due to higher fleet combined time charter equivalent rate despite lower available days. Our combined TCE rate for the third quarter of 2025 increased by 2.4% to $24,167 per day while our available days decreased by 0.8% to 13,443 days compared to Q3 '24. In terms of sector performance, the TCE rate for our combined container and tanker fleet increased by 3.7% and 1.7% to $31,832 and $26,238 per day, respectively. In contrast, our TCE rate for our dry bulk fleet was 3.5% lower at $17,976 per day. EBITDA for the third quarter and first 9 months of '25 was adjusted as explained in the slide footnote. Adjusted EBITDA for Q3 '25 decreased by $1.4 million to $194 million compared to Q3 '24. The decrease was primarily driven by a $4.5 million decrease in other income net, mainly due to the decrease in foreign exchange gains and a $3.2 million increase in vessel operating expenses, mainly due to a $3.4 million increase in OpEx days and a $2 million increase in general and administrative expenses in accordance with our administrative services agreement. The above decrease was partially mitigated by a $6.1 million increase in time charter and voyage revenue and a $2.2 million decrease in time charter and voyage expenses, mainly due to the decrease in bunker expenses as a result of lower freight voyage days in the third quarter of '25. Our average combined OpEx rate was $6,798 per day, only $10 more than Q3 '24. Adjusted net income for Q3 '25 was $84 million compared to $97 million in Q3 '24. The decrease is mainly due to a $9 million increase in depreciation and amortization and a $2 million increase in interest expense and finance cost net. Adjusted earnings and earnings per common unit for the third quarter of '25 were $2.8 and $1.9, respectively. For the first 9 months of '25, revenue decreased by $23 million to $979 million. Adjusted EBITDA decreased by $29 million to $520 million and adjusted net income decreased by $67 million to $196 million compared to the same period in 2024. Our combined TCE rate for the first 9 months of '25 was $22,825 per day. In terms of performance, the TCE rate for our containers increased by 3.1% to $31,213 per day compared to the same period in '24. In contrast, our dry bulk and tanker TCE rates were approximately 9.2% and 3.5% lower, respectively. TCE rates for our dry bulk vessels stood at $15,369 per day and for our tankers at $26,290 per day for the first 9 months of '25. Our average combined OpEx rate was 2.4% higher compared to the first 9 months of '24 at $6,961 per day, also as a result of the change in the composition of our fleet. Adjusted earnings and earnings per common unit for the first 9 months of '25 were $6.6 and $5.6, respectively. Turning to Slide 15, I will briefly discuss some key balance sheet data. As of September 30, '25, cash and cash equivalents, including restricted cash and time deposits in excess of 3 months were $382 million. During the first 9 months of '25, we paid $178 million under our newbuilding program, net of debt. We concluded the sale of 6 vessels for $75 million, adding about $49 million cash after debt repayment. Long-term borrowings, including the current portion, net of deferred fees, increased to $0.2 billion following the delivery of 6 vessels during the first 9 months of the year. Net debt to book capitalization improved to 33.8%. Slide 16 highlights our debt profile. With our recent $300 million senior unsecured bond, we further diversified our funding sources in addition to bank debt and leasing structures. The bond has a fixed interest rate of 7.75% and pro forma for the bond, 41% of our debt is fixed at an average rate of 6.2%. We also have mitigated part of the increased interest rate cost by reducing the average margin for our floating rate debt and bareboat liabilities for the [ in-water ] fleet to 1.8%. I would like to note that the average margin for the committed undrawn floating rate debt of our newbuilding program is 1.5%. Our maturity profile is staggered with no significant balance due in any single year until 2030 when the bond matures. In Q3 '25, Navios Partners completed 3 facilities for a total amount of $246 million. One additional facility of $68 million was signed in October. I now pass the call to Vincent Vandewalle, Navios Partners' Chief Trading Officer, to take you through the industry section. Vincent?

Thank you, Erif. Please turn to Slide 18. Geopolitical developments continue to shift worldwide trading routes caused by the tariff war, restricted Suez Canal passages, Ukraine war and port fee impositions by U.S. and China. Announced tariffs and the implementation clauses in effect are not expected to have a significant effect on tankers and dry bulk trade apart from steel. Tariff impacts on grain and container ships are expected to reduce following the recent trade deal between U.S. and China. The Red Sea entrance leading to the Suez Canal continues to operate at restricted transit levels, increasing ton miles for most vessel types. Since the Gaza Sease fire, Houthis announced that they have ceased the tax on shipping, but there were several piracy incidents of Somalia at the beginning of November. The Ukraine war is shifting trading patterns, limiting grain exports out of the Black Sea and benefiting exports out of Brazil and U.S.A. Russian crude and product exports are adjusting to tighter sanctions on Russian oil producers, Rosneft and LUKOIL, elevating rates for non-sanctioned vessels. USTR port fees on Chinese vessels and similar Chinese port fee on U.S. vessels have been put on hold for the year, while the 2 countries negotiate a more permanent solution. Please turn to Slide 20 for the review of the dry bulk industry. Demand growth for dry bulk has been relatively stable over the last 25 years at about 4% average annual ton-mile growth. The current order book stands at about 11% of the total fleet and will remain low due to high newbuilding prices, uncertainty about new fuel regulations and availability and general market outlook. The fleet is aging quickly with 39% of the vessels 15 years old and with the older vessels far exceeding those on order. Supply should be constrained over the medium term. Please turn to Slide 21. The main driver of dry bulk demand will be strong Atlantic Basin iron ore growth over the next several years with new projects in Guinea and Brazil. The biggest new project is Simadou in Guinea, starting now, which will ramp up to $150 million by '27. Also, Vale in Brazil has 3 new projects totaling 50 million tonnes expected to start exporting by the end of '26. The total of 170 million tonnes are all long-haul ton-mile trades, creating demand for an additional 234 Capes. With the current order book of only 173 Capes, a further tightening of supply and demand is expected over the next few years, benefiting rates. Overall, the dry bulk market looks positive based on steady long-term demand growth and a constrained supply of vessels. Please turn to Slide 23 for the review of the tanker industry. Reviewing the supply side as in dry, we see a relatively low tanker order book of 6% with 51% of the fleet already over 15 years old, rising quickly in the next few years. With all vessels exceeding the order book and yards offering first deliveries in late '28, supply is set to be tight for several years. Please turn to Slide 24. The U.S. Office of Foreign Asset Control, OFAC, the EU and the U.K. continue to sanction Russian, Venezuelan and Iranian oil revenue and the ships delivering their crude and products. These tighter sanctions have 2 main effects. Sanctioned oil volumes from these 3 countries have more difficulty finding willing buyers, raising demand for compliant barrels and non-sanctioned vessels to carry that oil. Secondly, with 785 tankers now sanctioned, the fleet has already seen a significant reduction of about 14% of total capacity. The tanker market also looks positive over the medium term based on a low order book, an aging fleet and a reduced fleet due to sanctions. Please turn now to Slide 26 for a review of the container industry. After the COVID pandemic, container ships ordering focusing mainly on the biggest units with fleet expansion in large vessels set to continue from high levels this year into next. Currently, 80% of the order book is for bigger ships with 9,000 TEU capacity or greater and only 70% of the order book is for 2,000 to 9,000 TEU capacity, where Navios is most active. Smaller segments of the fleets are well positioned to take advantage of shifting trading patterns. As shown on the right-hand graph, growth non-mainland trades far exceeds the traditional mainly trades to the U.S. and Europe due to tariffs and higher growth in developing economies. Fleets involving the Southern Hemisphere, mostly served by smaller-sized vessels are expected to see continued health growth as this trade shift continues. Overall, Navios Fleet is well positioned within the container market and continues to benefit from long-term employment with our high-quality charters. This concludes our presentation. I would now like to turn the call over to Angeliki Frangou for her final comments. Angeliki?

Thank you, Vincent. This concludes our formal presentation, and we'll open up for questions.

[Operator Instructions] We'll take our first question from Omar Nokta with Jefferies.

Thanks for the update. Angeli, Slide 11 has a really nice summary that shows in 2026, how you have 42% of your available days open to, say, the spot market or index rates, yet given how much charter cut you have, you only need $894 to breakeven on those ships. Clearly, a great place to be, gives you plenty of flexibility. With that, how does that shape your interest in fixing your vessels kind of going forward from here, at least into '26. Do you keep what's available now to the spot market to keep those free and open given you've got that, say, flexibility? Or do you want to continue to put these ships on contract and fix your coverage out?

Let me take you through, and I think Stratos also would like to add a couple of things. One of the things we are doing is we use maximum flexibility. So you will see that the vessels that are open for 2026, the majority is dry bulk. And basically, those vessels are on -- a lot of them are index based with a premium. So those -- we are actually very comfortable of how we are fixing that quarter forward, depending on what we assume on the market. This is a very nice position we are in. Majority of our container vessels have been fixed. And basically, that is the area where we see a lot of upside. We also are seeing for the first time after quite some period that we see a fixed period for dry bulk that we haven't seen for some time. And with that, I'd like Stratos to give you a little bit of feedback.

Just adding to what Angeliki was saying is that in 2026, as we said the big failure is the containership is covered. So there is no exposure on that sector, which is a sector that has -- people are discussing a lot on the uncertainty. The majority, I would say, more than 50% of the tankers are covered. So the majority of the exposure is indeed on the dry bulk. You see that with the contracted revenue, we only have $20 million to cover for the next year, and we have 23,400 days approximately, which basically is on the dry bulk sector. And we have seen a very big strength in the dry bulk sector recently with rates across all the sectors of dry bulk being very healthy. And we have seen also the forward being very healthy. So the exposure that we have today provides a very good opportunity for us, and it shows how much of the upside you can have on this portfolio today.

Got it. And just a follow-up. Clearly, we're seeing a pretty healthy containership chartering market and you've been able to take advantage of really good strong, we would say, liner interest to build ships against contracts. And you've been fairly active in recent years in that 5,000 to maybe, say, 9,000 TEU range. There's been some focus recently or at least it feels like there's been a shift where liners are starting to look more at the feeder size kind of in that sub-2,000 TEU size range. You don't have a big focus on that in today's -- with your fleet today. But is that something you see an opportunity in? Are there opportunities to build these smaller ships against contracts? Or is that more just talk at this point?

There is always projects, and I will tell you that we see a lot of activity in every side. What you have to be very careful is counterparty and duration because newbuilding prices remain at the levels we have seen. So it's very important, the signature, duration, residual value of the risk. But we see an increased activity. I mean it is quite interesting that there is a focus. We see a lot of inefficiency in the market, the trading patterns. And it seems that the smaller vessels are more -- give more flexibility to the liners in order to achieve this very -- this ever-changing trading patterns, I'd say. It's almost on a yearly basis, you will have new -- I mean, we saw China, United States having a 1-year agreement. And basically, we see that it will happen in a lot of other areas. So you need to be alert and smaller vessels give that flexibility.

That makes sense. Okay. And maybe just finally, you had the successful $300 million bond issue last month, unsecured good rate. How are you thinking about those proceeds in terms of how you plan to deploy them?

As you said, I mean, accessing the market, the unsecured market is quite important. It hasn't been open for quite some time, I think, almost 10 years for the maritime sector. So what we achieved with that is we fixed our interest rate at 41% at 6.2% we've got a diversification in our sources. But also very importantly, we've got $1.2 billion of debt-free vessels. Basically, we -- our net debt is the same before and after. And that gives us about $1 billion of debt-free vessels that gives us the most important thing that we get, optionality. And this is a nice part where we will see how to -- you have $1.2 billion of your vessels of $6.6 billion basically that are free.

Yes certainly. I will turn it over.

And now I will turn the call back to Angeliki for final comments.

Thank you. This concludes our Q3 results.

Thank you, ladies and gentlemen. This does conclude today's program. Thank you for your participation, and you may disconnect at any time.