Euroseas Ltd.'s Q3 2025: Contradictions Emerge on Fleet Utilization, Charter Rates, and New Ship Payments

Date of Call: None provided

Financials Results

• Revenue: $56.9M, up 5.1% YOY (Q3 2025 vs Q3 2024 $54.1M)
• EPS: $4.25 per diluted share (Q3 2025) vs $3.95 in Q3 2024

Guidance:

• Quarterly dividend of $0.70 per share declared, payable ~Dec 16, 2025; share buyback program renewed (466k shares repurchased ≈$10.5M to date)
• Contract coverage: 75% of 2026 at ~$31,300/day; 52% of 2027 at ~$33,500/day; 29% of 2028 at ~$35,500/day
• Four newbuilds: two deliveries 2H2027, two in 1H2028; remaining newbuild payments ≈$200M; delivery-year payment ~55% (implied ≈$65M per pair)
• Scheduled loan repayments: ~$5.4M Q4 2025; ~$19.5M in 2026; ~$36.8M in 2027 (incl. $20M balloon)
• Cash-flow breakeven ≈$12,000/vessel/day; target leverage ~50% (flexible ±10–15%)

Business Commentary:

* Strong Financial Performance: - Euroseas reported total net revenues of $56.9 million for Q3 2025, representing a 5.1% increase over the previous year. - The company's net income was $29.7 million, reflecting a 24% increase compared to the previous year. - This growth was driven by higher average charter rates and strong demand in the third quarter.

• Fleet Expansion and Charters:
• Euroseas completed the sale of the motor vessel Marcos V for $50 million and extended charters for several vessels, including the Jonathan P and Synergy Oakland.
• Four new buildings were chartered upon delivery, securing contracts at rates of $35,500 per day for a minimum of 4 years.

• These strategic decisions were made to capitalize on strong demand and ensure future cash flow visibility.

• Market Conditions and Rate Environment:

• The 1-year time charter rates remained firm at elevated levels due to tight vessel supply and limited availability.
• However, there was a decline in freight rates towards the end of the quarter due to increased competition and geopolitical risks.
• Despite this, rates rebounded in October and November, reflecting the market's resilience and capacity constraints.

• Sustainability and Environmental Strides:
• Euroseas installed energy-saving devices on the motor vessel Emmanuel P, resulting in over 20% fuel savings.
• The company emphasized its commitment to reducing environmental impact through technology integration.
• This initiative aligns with broader industry trends towards sustainability and regulatory pressures to reduce emissions.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management reported Q3 net revenues $56.9M (up 5.1% YOY) and net income $29.7M; board declared a $0.70 quarterly dividend and renewed the buyback program. They highlight strong contract coverage (75% of 2026) and a charter-adjusted fleet market value ~ $680M (NAV ≈ $85/share vs stock ~ $60). Adjusted EBITDA and EPS increased YOY, and new long-term charters at ~$35k/day were cited as confirmation of market demand.

Q&A:

• Question from Mark La Reichman (NOBLE Capital Partners): What are your expectations for scheduled off‑hire/dry‑dock days for Q4 and the remainder of 2026? Also, given ordering in the smaller sector and potential supply; how do you view forward rates versus the 2015–2020 period and going forward?
  Response: No scheduled dry docks in Q4; fleet utilization runs >99% (minimal off‑hire). On market outlook, management said past oversupply (2015–20) and pandemic/Geopolitical events explain cycles; future rates are hard to predict but recent long‑term charters (~$35k/day) signal counterpart willingness to lock healthy levels.

• Question from Tate Sullivan (Maxim Group): Why are charters willing to book ships so far forward and what is your remaining newbuild commitment/payment schedule?
  Response: Charterers are booking far forward because the sub‑6,000 TEU fleet is aging and demand for smaller regional tonnage is strong; remaining contracted newbuild payments ≈$200M, with next 10% payments starting ~mid‑next year (steel cutting) and several subsequent 10% installments prior to delivery.

• Question from Climent Molins (Value Investor's Edge): Is there appetite to add more tonnage alongside long‑term contracts or are you comfortable with current positioning; any medium‑term leverage target?
  Response: Company may consider additional orders but is comfortable with current positioning after securing four newbuilds; target leverage is ~50%, with flexibility of roughly ±10–15% depending on market timing.

• Question from Poe Fratt (Alliance Global Partners): On delivery payments, am I correct you'll owe about $65M on the first two newbuilds in 2H2027 and another ~$65M for the last two in 1H2028? Also, why structure the charters with a 1‑year option after year four, and any plan to sell older feeders if the fleet grows?
  Response: Yes — expect ~55% of contract price paid in delivery year (≈$65M per pair); the 4‑year at $35.5k with a 1‑year option/5‑year alternative was a negotiated trade‑off (implied lower rate for year five); proactively, they may scrap older vessels instead of performing special surveys if the market weakens.

Contradiction Point 1

Fleet Utilization and Drydocking

It directly impacts the operational efficiency and maintenance costs of the company's fleet, affecting financial performance and strategic decision-making.

What are your expectations for off-hire days in Q4 and 2026? - Mark La Reichman(NOBLE Capital Partners)

20251118-2025 Q3: We have not many dry dockings over the next 12 months, and the of-hire for Q4 is almost 0. We use a 2% off-hire in our modeling, but we typically run our fleet above 99% utilization rate. - Anastasios Aslidis(CFO)

Will drydocking expenses be light over the next 12 months? - Mark La France Reichman(NOBLE Capital Markets)

2025Q2: Yes, we had two vessels that drydocked in the first part of the year, and our schedule is lighter for the next 6 or 12 months. - Aristides J. Pittas(CEO) and Anastasios Aslidis(CFO)

Contradiction Point 2

Charterers' Willingness to Book Ships Far Forward

It influences the company's ability to secure long-term contracts and plan its financial outlook, impacting investor confidence and strategic planning.

Are charterers currently willing to book ships far forward? - Tate Sullivan(Maxim Group)

20251118-2025 Q3: The fleet below 6,000 TEU is aging, with 25% older than 20 years. Charterers are securing tonnage due to high demand for regional trade and competition among charters. - Aristides Pittas(CEO)

Given most of your contracts are for a year, do your containership contracts have voyage-based rate variations or are they all fixed? - Tate H. Sullivan(Maxim Group)

2025Q2: All our contracts are fixed rate contracts, and there is no dependence on the voyage. - Anastasios Aslidis(CFO)

Contradiction Point 3

Charter Rates and Market Conditions

It highlights differing views on charter rates and market conditions, which are crucial for forecasting revenue and profitability.

Can you discuss charterers' willingness to book ships far forward based on recent charters? - Tate Sullivan (Maxim Group)

20251118-2025 Q3: The fleet below 6,000 TEU is aging, with 25% older than 20 years. Charterers are securing tonnage due to high demand for regional trade and competition among charters. - Aristides Pittas(CEO)

Would you expect similar rates for the Emmanuel and the Rena as the M/V Oakland? - Mark Reichman (Noble Capital Markets)

2024Q4: The current market rate is $35,500, which is what we did on the Synergy and Synergy vessels, not $42,000. - Aristides Pittas(CEO)

Contradiction Point 4

New Ship Payments and Financial Commitments

It involves differing information on financial commitments for new ships, impacting the company's liquidity and financial health.

What are the remaining financial obligations for the new ships, and how will these be funded? - Tate Sullivan (Maxim Group)

20251118-2025 Q3: Contracted prices for the new ships are approximately $240 million. About $36 million has been paid, leaving around $200 million to be paid. - Anastasios Aslidis(CFO)

Can you provide the amount you will spend on newbuilds in 2025, 2026, and 2027? - Poe Fratt (Alliance Global Partners)

2024Q4: We have no payments in 2025, $12 million for both vessels in 2026, and the remaining in 2027, $6 million per vessel in 2026. - Tasos Aslidis(CFO)