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

Hello, and welcome, everyone joining today's Navios Maritime Partners Q2 2026 Earnings Call. [Operator Instructions] Please note, this call is being recorded, and we are standing by if you should need any assistance. With us today from the company are Chairman and CEO, Ms. Angeliki Frangou; Chief Operating Officer, Mr. Efstratios Desypris; Chief Financial Officer, Mrs. Erifili Tsironi and Chief Trading Officer, Mr. Vincent Vandewalle. As a reminder, this conference call is being webcast. To access the webcast, this close to the Investors section of Navios Partners' website, 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 actual results to differ materially from the forward-looking statements. Such risks are not fully discussed in Navios' Partner's 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 this information contained in this conference call. The agenda for today's call is as follows: first, Ms. Frangou will offer opening remarks. Next, Mr. Desypris will give an overview of Navios Partners' segment data. Next, Mrs. 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 second quarter and first 6 months of 2026, we reported net income of $167.9 million and $274.3 million, EBITDA of $275.2 million and $487.8 million. Earnings per common unit of $5.78 and $9.42. We also announced a $0.06 distribution per unit for the quarter. We continue to operate in a world map with uncertainty and conflict. With the war between Russian and Ukraine remains unresolved. The persistent attacks in the Strait of Hormuz and more recent ones in the Red Sea have caused persistent disruptions of global trade flows. Against this backdrop, trade has been surprisingly resilient and energy prices while volatile remained relatively muted. These conflicts are causing the lasting implications for global trade partners, countries and companies are reassessing their exposure for critical resources to maritime choke points. There are placing greater value on supplying the resilience, looking to diversify to alternative suppliers, routes, storage capacity and transportation infrastructure. This trend may have a net effect of creating longer non-call routes. As you see on Slide 3, our fleet has an average age of 8.7 years compared to an industry average of 13.7 years. Our banking fleet with an average age of 5 years is particularly stands relative to the broader tanker market. Overall Navios fleet modernization program has created a fleet with almost 40% younger the industry average and about 65% youngest in comparison to the global tanker fleet preparing us for the future. We believe the use of our fleet provides a competitive advantage through among other things, lower operating cost, better fuel efficiency and higher charter reference. Please turn to Slide 4. Navios is a leading maritime transportation company owning, operating and covering a modern fleet of 176 vessels across 3 segments and 15 asset classes. Our fleet -- into search by driving with about 1/3 in each of the tanker dry bulk and container segment. The overall value of our fleet including a new building program is $10.2 billion. Our fleet in the water had $4.9 billion in net vessel equity value. We continue to make headway in reducing a net LTV towards a target of 20%, 25%. At the quarter end, we had a net LTV of 27.9%. Our balance sheet is strong with $625 million available liquidity and credit ratings of Ba3 from Moody's and BB from S&P. Please turn to Slide 5. Diversification is the core strength of Navios and our platform provides optionality across markets. We will complement this flexibility with a disciplined recent management also, continuously monitoring and assessing our exposure diligently evaluating and structuring transactions and maintaining robust insurance coverage, particularly important in a low risk environment. Please turn to Slide 6. Since the beginning of the year, we have acted to capitalize on a robust tanker market and reposition our VLCC fleet for both the current cycle and the years ahead. We initially sold two 16 years VLCCs for an aggregate amount of $136.5 million. The sale prices were approximately 18% above the prior historical peak for versus of this age. We subsequently acquired 7 new building VLCCs for an aggregate purchase price of $844 million, including the 1 vessel that remains subject to ongoing discussions, we have entered into period charters, these vessels for an average period of 6.1 years at an average net daily rate of $45,224. These transactions allow us to rebuild our VLCC fleet with modern tonnes supported by long-term employment. The associated charter arrangements are expected to generate approximately $700 million of revenue while reducing our digital value exposure measure at the end of the initial charters stood to roughly 40% below the 20-year historical average. Across the entire tanker segment, we have secured a total of $922 million of contracted revenue from 14 vessels with an average charter duration of approximately 5 years. Of this total, $893 million relates to 11 newbuilding tankers. This strategy enhances cash flow visibility modernizes the fleet and positions the company to benefit fleet from the current target market strength while retaining substantial upside to the next cycle. Turning to our dry bulk segment. There, we are systematically rotating to larger, more fuel-efficient vessels while increasing the volatile visibility of our contracted cash flows. We sold 2 panamax vessels with an average age of 18 years for aggregate proceeds of $22.8 million. We then invested in 3 new building capesize vessels for an aggregate purchase price of $204 million. Two of these capesize new buildings have been fixed on 5-year charters providing a minimum of $86 million in contracted revenue in addition to profit sharing contract sharing. After dry bulk fleet we have secured $125 million of minimum contracted revenue from 4 vessels with an average charter duration of approximately 3 years. In container ships, our focus is on harvesting the value of contracted backlog reserving flexibility for future capital allocation. We sold two 4,730 vessels with an average age of 19 years for an aggregate proceeds of $64.5 million. The remaining fleet continues to provide meaningful cash flow visibility with $194 million of contracted revenue secured across 6 vessels with an average remaining charter duration of approximately 3 years. Overall, we have been monetizing mature assets at attractive values while building and maintaining corrective earnings and optionalities as starter markets and asset values evolve. Please turn to Slide 7, where we outline additional developments. For the same quarter, revenue was $410.2 million. EBITDA was $275.2 million. Net income was $167.9 million. Earnings per common unit were $5.78. In terms of our balance sheet, Net LTV was 27.9%, half of our total debt of $1.3 billion has no LTV covenants. 43% of our total debt is fixed rate. Our debt has cited maturity profile with no -- refinancing clear. Of $1.9 billion of debt-free vessels values across 55 vessels, representing potential incremental financing capacity. Available equity totaled $625 million. Contracted revenue backlog was $4.4 billion, extending through 2037. For the second half of 2026, contracted revenue exceeded projected cash operating cost by $151 million. As of August 12, 2026, now discussed 6,250 open or index linked days in 2026, preserving participation in a stronger spot market while maintaining a substantial contracted earnings base. Please turn to Slide 8. Navios Partners announced a new 200 million common unit repurchase authorization, double the size of our current program. We view this program as an important tool for creating value for our own unit holders particularly when a unit trade at a meaningful discount to underlying NAV. In allocating capital to a unit repurchase program, we consider the relative attractiveness of alternative uses of capital, including the availability on the investments that can enhance long-term cash flow generation, the preservation of liquidity, maintaining prudent leverage and safeguarding benefit strength. All this must be considered in the context of an industry that suffers change quickly. Since the guidance program become in the second quarter of 2024, the company has reported 1.9 million common units for $92.6 million, including 135,846 units for $9.8 million in the second quarter of 2026. During the last 12 months, we returned $46 million of capital to our unitholders, of which $6 million was cash distribution in addition to $14 million of units in purchases. Overall, the program has created $6.30 per unit of accretion. Common units outstanding declined by about 6% from $30.2 million before the program to $283 million as of August 12, 2026. Please now turn to Slide 9. Navios has been executing its strategy through a challenging environment. We are focused on building a platform of excellence. Over the past 5 years, we have grown contract revenue by more than 30% to a record high of $4.4 billion. We have an EBITDA run rate of over $900 million and have expanded our fleet value, including a new build program to $10.2 billion. Importantly, we have not sacrificed financial distance in achieving these goals. In this process, we reduced our net loan to value by 38% to 27.9%. We recognize that there is more work ahead. But in an uncertain world, we believe that our proven platform, combining a diversified fleet with a disciplined risk management action, position us to continue delivering clients through any market condition. I now turn the presentation over to Mr. Efstratios Desypris, Navios Partners Chief Operating Officer. Efstratios?

Thank you, Angeliki, and good morning, all. Please turn to Slide 10, which details our operating free cash flow potential for the remaining 6 months of 2026. We fixed 77% of available days at a net average rate of $28,100 per day. Contracted revenue exceeds estimated total cash operating cost by $115.2 million, and we have 6,250 remaining open or index days, offering meaning upside. Moving to Slide 11. Our contracted revenue backlog provides strong earnability in an uncertain market. Taking advantage of the current strong rate environment, we continue to grow contracted revenue. In Q2 and Q3 quarter-to-date, we added approximately $666 million, $439 million from [indiscernible], $38 million from 2 dry bulk vessels and $129 million from 4 container ships. Total contracted revenue reached a record high of $4.4 billion, $2 billion for tankers, $2.1 billion for container ships and $0.3 billion for dry bulk. Charters are standing through 2037 with an average group of quality counterparties. Slide 12 summarizes the fleet developments for Q2 and Q3 quarter to date. During the period, we agreed to acquire 3 new building VLCCs for $362 million, we really expected in the second half of 2028 and 2029. We also agreed to acquire 1 scrubber-fitted capesize vessel for $70 million. The vessel is expected to be delivered in the second half of 2029. We also sold 119-year-old 4,730 TEU containership for $34.5 million. Additionally, we took deliver 1 newbuilding aframax/LR2 vessel which is chartered-out for about 5 years at a net daily rate of $27,420. We continue to actively renew our fleet to maintain a young age profile. We have 29 new building vessels delivering to our fleet through 2029, representing $2.5 billion of investment. Based on our financing, both [indiscernible] process, we have about $290 million of equity remaining to be paid. We have mitigated the residual value of risk of our new building program with long-term credit -- expected to generate about $1.8 billion in contracted revenue over a 5-year average [indiscernible] ratio. Moving to Slide 15. Our diversified fleet provides revenue visibility and market exposure. For the year, we have 53,546 available days, of which 88% are fixed and 12% are open or index. I would note that while we generally favor long-term charters until the recently [indiscernible] in the dry bulk sector as the rates were weak for a prolonged period of time. That's about 24% of our driver fleet please open index. I'll now pass the call to Erifili Tsironi, our CFO, who will take you through the financial highlights. Eri?

Thank you, Efstratios, and good morning all. I will briefly review our unaudited financial results for the second quarter and the first half of 2026. 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 second quarter of 2026 increased by 25% to $410 million compared to $328 million for the same period in 2025 due to higher combined time charter equivalent rate despite lower available days. Our combined TCE rate for the second quarter of '26 increased by 24% to $28,512 per day, while our available days decreased by 2% to 13,152 days compared to Q2 2025. In terms of sector performance, our TCE rate per day was higher by 53% to $23,682 for our bulkers and by 25% to $33,159 for our tankers. Our Q2 2026 TCE rate per day for our container ships was in line with 2025 levels at $31,191 per day. EBITDA, net income and earnings per common unit for the second quarter and the first half of 2026 were adjusted as explained in the press release and in the slide footnote. Adjusted EBITDA for Q2 2026 increased by $70 million to $242 million compared to Q2 '25. The increase was primarily driven by the increase in revenue and a $2 million decrease in vessel operating expenses due to a decrease in OpEx base. Fleet OpEx delayed was in line with 25 levels at $7,152. Adjusted EBITDA was negatively affected by $14 million increase in time charter and voyage expenses primarily reflecting additional insurance premiums reinvested by charterers. Adjusted net income for Q2 '26 increased by $71 million to $135 million. Adjusted earnings and earnings per common unit for the second quarter of '26 or $4.65 and $5.78, respectively. Total revenue for the first half of '26 increased by 21% to $767 million compared to $632 million for the same period '25 due to higher combined time charter equivalent rate despite lower available days. Combined TCE rate for the first half of '26 was increased by 22% to $27,098 per day while an available days decreased by 2% to $26,256 days compared to the first half of '25. In terms of sector performance, our TCE rate per day was high in all 3 sectors as follows: 47% increase to $20,672 for our bulkers, 24% increase to $32,694 for our tankers and 2% increase to $31,444 for our container ships. Adjusted EBITDA for the first half of '26 increased by [indiscernible] compared to the first half of '25. The increase was primarily driven by the increase in revenue and a $2 million decrease in vessel operating expenses due to a decrease in OpEx days. Fleet OpEx daily rate was 2% higher than 25 levels at $7,174. Adjusted EBITDA was negatively affected by a $15 million increase in time charter and voyage expenses, primarily reflecting insurance premiums reimbursed by charterers and a $3 million increase in general and administrative expenses mainly due to higher euro-dollar exchange rate prevailing during the first half of '26. Adjusted net income for the first half of '26 increased by $121 million to $233 million. Adjusted earnings and net earnings per common unit for the first half of '26 were $8 and $9.42 respectively. Turning to Slide 16. I will briefly discuss some key balance sheet data. As of June 30, '26 cash and cash equivalents, including restricted cash and time deposits in excess of 3 months were $469 million. In addition, we had $156 million available under 2 revolving credit facilities. During the first half of '26, we paid $190 million under our new building program, net of debt, and we concluded the sale of 4 vessels for $123 million, adding about $99 million cash after debt repayment. Long-term borrowings, including the current portion and the senior secured bond, net of [indiscernible] increased by $103 million to $2.26 billion following the delivery of 5 new buildings during the first half of the year. Net debt to book capitalization improved to 30.6%. Slide 16 highlights our debt structure. At quarter end, we had 55 debt-free vessels including 19 vessels securing unutilized revolving credit facilities. We have a diversified financing base, consisting of leasing structures in Japan and China more than 15 active banking relationships and a $330 million senior secured bond trading in the Oslo Bors. In addition, 43% of our debt is fixed at an average interest rate of 6.3%, while 50% carries no loan-to-value carbon. We have also partly mediated higher interest rate costs by lowering the average margin on our floating rate debt and bareboat liabilities for the -- in the water fit to 1.7%. And I would like to note that the average margin for the committed floating rate debt of our new building program is 1.5%. Our maturity profile stagger with no significant values due in any single year until 2030 when the bond matures. Finally, in July, we concluded the financing of our newbuilding capesize vessel under a 10-year bareboat in contract with purchase options with an implied financing amount of $64.6 million and a 6% fixed interest rate. I'll now pass the call to Vincent Vandewalle, Navios Partners' Chief Trading Officer, to take you through the industry section. Vincent?

Thank you, Eri. Please turn to Slide 18. Strait of Hormuz closure has created a major energy and shipping shock, affecting about 20% of the worldwide crude product and LNG flows. The disruption has tightened tanker availability and driven freight rates sharply higher. Rates for VLCCs hit all-time highs, reaching 602,000 per day and remain elevated with a significant portion of the fleet trucks inside the Gulf. The shortfall has been partially mitigated by an increased crude volumes from U.S.A., Brazil, Venezuela, Guyana, heading to both Europe and Asia, adding more to [indiscernible]. At the same time, renewed disruption in the Red Sea -- the crude to alternative being shipped via the Mediterranean to Asia. Higher fuel cost and security of supply concerns are driving the purchasing and transportation of commodities and finished goods. This has raised rates in the dry bulk sector for both capesizes and Panamaxes, and has continued to support container time charter rates. The conflict in the Ukraine and the recent Panama Canal draft reductions due to El Nino also at on [indiscernible] for most vessel types. With negotiations between the U.S. and Iran, after an impact and the Strait of Hormuz in South Red Sea effectively closed, vessel utilization will continue to run at high levels, supporting elevated freights for the near term. Medium-term trade adjustments depend on how long all prices stay elevated and whether demand for other commodities like coal, rise to substitute for LNG or decreased fertilizer availability affects crop supply later this year. Strategic and commercial crude and product reserves will need to be restocked, we should keep tanker rates elevated over the long term. However, prolonged Hormuz closure could still trigger a global slowdown or recessionary demand shock, which could affect all shipping markets. Please turn to Slide 20 for the review of the dry bulk industry. Demand growth for dry bulk trade has been relatively stable over the last 25 years at about 4% average annual [indiscernible] now growth. The current order book stands at about 14% of the total fleet and is expected to remain low due to high newbuilding prices, uncertainty about new fuel regulations, that availability and general market outlook. The fleet is aging quickly with 39% of the vessels 15 years old with all the vessels far exceeding those on order. Supply should be constrained over the medium term. Please turn to Slide 21. The main driver of driver demand will be strong Atlantic Basin iron ore growth over the next several years with new projects in Vine, Brazil and Iberia. The largest new project is Simandou in Guinea, which started shipments at the end of last year and is expected to ramp up to 120 million tons by '28. Robust year-to-date shipments were about 9 million long-haul tons from 0 last year. Vale in Brazil has 3 new projects totaling 50 million tons expected to start exporting by the end of '26. Liberia adds 10 million tons of exports in '26 million. In total, these 180 million tons are all long-haul ton mile rates, creating demand for an additional 249 capes. With the current order book of only 227 capezise by '28, a further tightening of supply and demand is expected over the next year's 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. As to supply, we see a tanker order book of 26%. About 50% of the fleet is already over 15 years old, rising quickly in the next few years. With older vessels exceeding the order book and are offering first deliveries in May '28 or early '29, supply is set to be tied 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 and Iranian whole revenues and still delivering their crude and product cargoes. U.S. has recently imposed sanctions on 5 Iranian linked VLCCs and 3 product tankers along with sanctions on several individuals and companies, involving trading in Iranian cargoes or aiding payments to Iran. These type sanctions have 2 main effects. Sanctioned oil volumes from these countries have more difficult finding willing buyers raising demand for compliant barrels and nonsanctioned vessel to carry that all. With 875 mostly overage tankers now sanctioned, the fleet has already seen a significant reduction of about 15.3% of total capacity. The tanker market also looks positive over the medium term based on a lower order book compared with an aging and reduced fleet due transactions. Please turn to Slide 26 for a review of the container industry. After the COVID pandemic, container ship orders were mainly for the biggest units with fleet expansions in the large vessels set to continue at high level. Currently, 72% of the order book for ships with 9,000 TEU capacity or greater and only 24 of the order book is for 3,000 to 9,000 TEU capacity where Navios is most active. Note that by '29, more than 50% of the 2,000 to 9,000 TEU fleet will be 20 years old or older. Smaller segments of [indiscernible] well positioned to take advantage of the shifting trading patterns. As shown at the right-hand graph, growth in non-main lane rates far exceeds the traditional mainly trades to the U.S. and Europe due to the tariffs and higher growth in developing countries. Rates involved in the sotheign Hemisphere, mostly served by smaller size vessels and expect to see continued healthy 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 charges. This concludes our presentation. I would now like to turn the call over to Angeliki Frangou for her final comments. Angeliki?

Thank you, Vic. This completes the formal presentation. We open the call to questions. .

[Operator Instructions] Our first question today will come from Omar Nokta with Clarkson Securities.

Nice update today, and thank you for the overall market commentary and company update. Clearly, I guess, as we think about things, there continues to be a good amount of uncertainty, as you highlighted across the different markets, but freight rates are very firm across all of your segments, and you've been taking advantage of that and just wanted to ask about the dry bulk fleet as it is now because that seems to be really where there is the most spot exposure call it or at least you do have vessels on charter or on an index-linked basis. And just wanted to get a sense from you as you look ahead with this fleet, in particular, is the idea or the plan to continue deploying these vessels, the way that they are, which is on bottling charters -- or do you start to look to convert some of these on to fixed rate contracts.

Omar, I think this is a good observation. I mean basically, if you see on status slide, there is -- we have about 6,250 days opening mainly our index is a dry bulk base. What we see is a very firm market. We have been able to fix even very, very okay on a 2.5-year duration at healthy rates by historical standards. So you will see some contracted revenue because it is at levels that do [indiscernible]. But we also keep -- you will have part of that on intake. So you will have seen that we added in the contracted revenue and Efstratios can take you through a little bit on the recent deals we did.

Actually, Omar, I mean, as Angeliki said, we have about 25% of our base for the second half of the year, which are indexed on the dry bulk. And this is very important because on index you see the strength of the stock market today, and we are able to capture that 100% basically. And on top of that, we have already fixed another 2 vessels on long duration. It's an average of about 2 years, -- and as Angeliki pointed out, one of the vessel was a 21-year old vessels, which we fixed for 3 year breaking out the age to 23.5%. So this is indication of a very healthy market with good prospects, people feel that this market is there at least for the foreseeable future.

Yes. Got it. Understood. And then maybe just 1 follow-up, and I'll pass it back Obviously, nice to see the share buyback. You've nearly exhausted the original $100 million. You're coming a new $200 million buyback that you announced today. Just a really simple question. Does this new $200 million replace what's left of the $100 million? Or is the plan to finish off the remainder of the $100 million before shifting towards the new one? .

Yes. This is on top of the remaining. So we gave visibility as we coming to the end of $100 million. We bought about 6% of our sales. So we are ready to position the company, dabbling our buyback. .

[Operator Instructions] And we'll move next to Kristoffer Skeie with Arctic Securities.