Euroseas Ltd. (NASDAQ: ESEA, the “Company” or “Euroseas”), an owner and operator of container carrier vessels and provider of seaborne transportation for containerized cargoes, announced today its results for the three-month period and full year ended December 31, 2022.

Fourth Quarter 2022 Financial Highlights:

• Total net revenues of $42.9 million.
• Net income and net income attributable to common shareholders of $20.3 million or $2.87 and $2.86 earnings per share basic and diluted,
• Adjusted net income attributable to common shareholders1 for the period was $17.7 million or $2.50 per share basic and
• Adjusted EBITDA1 was $22.9
• An average of 18.0 vessels were owned and operated during the fourth quarter of 2022 earning an average time charter equivalent rate of $29,399 per day. Refer to a subsequent section of the Press Release for the definition and method of calculation of time charter equivalent
• Declared a quarterly dividend of $0.50 per share for the fourth quarter of 2022 payable on or about March 16, 2023 to shareholders of record on March 9, 2023 as part of the Company’s common stock dividend
• As of February 14, 2023 we had repurchased 251,685 of our common stock in the open market for a total of about $5.3 million, under our share repurchase plan of up to $20 million announced in May
• On December 29, 2022 we announced the sale of M/V Akinada Bridge, a 5,610 teu intermediate containership vessel built in 2001, at a gross price of $14.2 The vessel was delivered to its buyers on January 9, 2023.

Full Year 2022 Highlights: 

• Total net revenues of $182.7

• Net income and net income attributable to common shareholders of $106.2 million or $14.79 and $14.78 earnings per share basic and diluted,

• Adjusted net income attributable to common shareholders1 for the period was $95.0 million or $13.23 and

$13.21 per share basic and diluted, respectively.

• Adjusted EBITDA1 was $114.4
• An average of 17.12 vessels were owned and operated during 2022, earning an average time charter equivalent rate of $31,964 per day. Refer to a subsequent section of the Press Release for the definition and method of calculation of time charter equivalent

Recent developments

• Continental Shipping Line, Singapore (CSL), the charterers of M/V Aegean Express, in January 2023 repudiated its charter as the vessel was completing its scheduled The Company is pursuing legal action and entered into negotiations seeking a replacement charter.

Aristides Pittas, Chairman and CEO of Euroseas commented:

“During the fourth quarter of 2022, containership markets dropped more than 80% from their end-September levels as a result of reduced demand for trade and the reversal of port congestion and other transportation system inefficiencies. In early 2023, market rates gave up a bit more ground and they seem to have stabilized, for now, at levels still better than their levels before the COVID pandemic. However, with a large orderbook, at 29% of the existing fleet looming, we expect the markets to remain at low levels over the next couple of years. Fortunately for Euroseas, the majority of our vessels are fixed through 2024. Also, most of the orderbook is for larger vessels not competing directly with our ships. The orderbook for the feeder and intermediate size classes which we compete in is notably smaller, at around 15%, which coupled with the higher average age of ships in these size segments could even result in supply decreases. Yet, it is undeniable that the larger vessels set the tone of the markets.”

“Our focus over the next two years remains on ensuring smooth operations of our existing fleet to serve our current charter contracts with contracted revenues in excess of $425 million over the next three years. We are also focused on the prompt delivery of our nine-vessel orderbook program and, of course, the chartering of the newbuild vessels. The first of our newbuilds is to be delivered towards the end of next month and it is scheduled to immediately commence its $48,000/day three-year charter while its sistership is expected to be delivered in June of 2023 commencing a similar $48,000/day three-year long charter.

“In parallel, we intend to continue rewarding our shareholders with our quarterly dividend and share repurchase program. We also continuously evaluate investment opportunities as our balance sheet strength allows us to pursue those accretive to our earnings and beneficial to our shareholders.”

Tasos Aslidis, Chief Financial Officer of Euroseas commented: “Our revenues for the fourth quarter of 2022 are comparable to the same period of 2021 as a result of the Company’s action to charter all of its vessels, at the very profitable rates of last year, for periods extending up to three years or more. Net revenues amounted to $42.9 million for the fourth quarter of 2022 compared to $38.3 million for the fourth quarter of 2021. The Company operated an average of 18.00 vessels, versus 15.01 vessels during the same period last year. On average, during the fourth quarter of 2022, our vessels earned approximately the same time charter equivalent rates compared to the fourth quarter of 2021.”

“Total daily vessel operating expenses, including management fees, general and administrative expenses, but excluding drydocking costs, were higher by 3.0% during the fourth quarter of 2022 compared to the same quarter of last year. The increased operating expenses for the fourth quarter of 2022 are mainly attributable to the increase in hull and machinery insurance premiums and the higher prices paid for the supply of lubricants, spare parts and stores for our vessels, as a result of the war in Ukraine.

Adjusted EBITDA during the fourth quarter of 2022 was $22.9 million compared to $26.2 million achieved in the fourth quarter of last year, reaching $114.4 million versus $52.7 million in the respective twelve-month periods of 2022 and 2021.”

“As of December 31, 2022, our outstanding bank debt (excluding the unamortized loan fees) was $108.0 million, versus restricted and unrestricted cash of approximately $31.4 million. As of the same date, our scheduled debt repayments over the next 12 months amounted to about $56.0 million (excluding the unamortized loan fees). The

working capital deficit of the Company as of December 31, 2022, is $26.8 million. We intend to fund this deficit from cash flows from operations, debt refinancing and equity offerings, among other options.”

Fourth Quarter 2022 Results:

For the fourth quarter of 2022, the Company reported total net revenues of $42.9 million representing a 12.1% increase over total net revenues of $38.3 million during the fourth quarter of 2021, which was the result of the increased average number of vessels operating in the fourth quarter of 2022 compared to the corresponding period of 2021. The Company reported a net income and net income attributable to common shareholders for the period of $20.3 million, as compared to a net income and a net income attributable to common shareholders of $22.8 million for the fourth quarter of 2021. On average, 18.0 vessels were owned and operated during the fourth quarter of 2022 earning an average time charter equivalent rate of $29,399 per day compared to 15.01 vessels in the same period of 2021 earning on average $30,068 per day.

Vessel depreciation for the fourth quarter of 2022 increased to $5.3 million from $2.4 million in the fourth quarter of 2021, as a result of the increased number of vessels operated and the fact that the new vessels acquired in the fourth quarter of 2021 and in the second quarter of 2022, have a higher average daily depreciation charge as a result of their higher acquisition price compared to the remaining vessels.

For the fourth quarter of 2022, voyage expenses amounted to $1.6 million as compared to voyage expenses of $0.04 million for the same period of 2021. This increase is mainly attributable to bunkers consumption by one of our vessels that had suffered unrepaired damages and was consequently sold for scrap. Vessel operating expenses for the same period of 2022 amounted to $10.2 million as compared to $8.3 million for the same period of 2021. The increased amount is mainly due to the higher number of vessels owned and operated in the last three months of 2022 compared to the same period of 2021, as well as due to the increase in hull and machinery insurance premiums and the higher prices paid for the supply of lubricants, spare parts and stores for our vessels, as a result of the war in Ukraine.

Drydocking expenses amounted to $3.3 million during the fourth quarter of 2022 comprising the cost of two vessels passing their special survey with drydock. For the same period of 2021 drydocking expenses amounted to $1.2 million comprising the cost of one vessel completing her special survey with drydock. Related party management fees for the three months ended December 31, 2022 were $1.3 million compared to $1.1 million for the same period of 2021, as a result of the higher number of vessels in our fleet and the increase in daily vessel management fee for inflation, partly offset by the favorable movement of the euro/dollar exchange rate. General and administrative expenses increased to $1.7 million in the fourth quarter of 2022, as compared to $1.2 million in the fourth quarter of 2021, mainly due to the increased cost of our stock incentive plan. The operating income for the fourth quarter of 2022 relates to an “unrepaired damage” claim agreed with the hull and machinery underwriters and loss of hire insurance in relation to M/V Akinada Bridge. No such case existed in the fourth quarter of 2021.

Interest and other financing costs for the fourth quarter of 2022 amounted to $1.6 million compared to $0.8 million for the same period of 2021. This increase is due to the increased amount of debt and the increase in the weighted average LIBOR / SOFR rate in the current period compared to the same period of 2021.

For the three months ended December 31, 2022 the Company recognized a $0.2 million gain on its interest rate swap contracts, comprising a $0.04 million unrealized gain from the mark-to-market valuation of our outstanding interest rate swaps and a $0.20 million of realized gain. For the three months ended December 31, 2021 the Company recognized a $0.5 million loss on its interest rate swap contracts, comprising a $0.4 million unrealized loss and a $0.05 million realized loss.

Adjusted EBITDA1 for the fourth quarter of 2022 decreased to $22.9 million compared to $26.2 million for the corresponding period in 2021.

Basic and diluted earnings per share attributable to common shareholders for the fourth quarter of 2022 were $2.87 and $2.86 calculated on 7,081,776 and 7,100,432 basic and diluted weighted average number of shares outstanding, respectively, compared to basic and diluted earnings per share of $3.16 and $3.14 for the fourth quarter of 2021, calculated on 7,210,466 basic and 7,244,042 diluted weighted average number of shares outstanding, respectively.

Excluding the effect on the income attributable to common shareholders for the quarter of the unrealized gain on derivatives, the amortization of below market time charters acquired and the vessel depreciation on the portion of the consideration of vessels acquired with attached time charters allocated to below market time charters, the adjusted earnings attributable to common shareholders for the quarter ended December 31, 2022 would have been $2.50 per share basic and diluted, compared to an adjusted earnings of $3.19 and $3.18 per share basic and diluted for the quarter ended December 31, 2021. Usually, security analysts do not include the above items in their published estimates of earnings per share.

Full Year 2022 Results:

For the full year of 2022, the Company reported total net revenues of $182.7 million, representing a 94.6% increase, over total net revenues of $93.9 million during the twelve months of 2021, as a result of the higher average charter rates our vessels earned as well as the increased number of vessels owned and operated in the twelve months of 2022 compared to the corresponding period of 2021. The Company reported a net income and net income attributable to common shareholders for the year of $106.2 million, as compared to a net income of $43.0 million and a net income attributable to common shareholders of $42.4 million for the twelve months of 2021. On average, 17.12 vessels were owned and operated during the twelve months of 2022 earning an average time charter equivalent rate of $31,964 per day compared to 14.25 vessels in the same period of 2021 earning on average $19,327 per day.

For the twelve months of 2022, voyage expenses amounted to $2.5 million, as compared to voyage expenses of $0.6 million in the same period of 2021. This increase is mainly attributable to bunkers consumption by one of our vessels that had suffered unrepaired damages and was consequently sold for scrap. Vessel operating expenses for the twelve months of 2022 amounted to $37.7 million as compared to $29.7 million for the same period of 2021. This increase in vessel operating expenses is due to the higher average number of vessels operated by the Company in the twelve months of 2022 as compared to the same period of 2021, the increase in hull and machinery insurance premiums and the higher prices paid for the supply of lubricants, spare parts and stores for our vessels, as a result of the war in Ukraine.

Vessel depreciation for the twelve months of 2022 was $18.5 million compared to $7.2 million during the same period of 2021, due to the increased average number of vessels operating in 2022 as compared to the same period of 2021 and the fact that the new vessels acquired in the fourth quarter of 2021 and the second quarter of 2022 have a higher average daily depreciation charge as a result of their higher acquisition price compared to the remaining vessels.

Related party management fees for the twelve months of 2022 were $4.9 million compared to $4.3 million for the same period of 2021 as a result of the higher number of vessels in our fleet and the increase in daily vessel management fee for inflation, partly offset by the favorable movement of the euro/dollar exchange rate.

General and administrative expenses amounted to $4.6 million during the twelve months of 2022 as compared to $3.5 million in the last year. This increase is mainly attributable to the increased cost of our stock incentive plan.

Drydocking expenses amounted to $9.5 million for the twelve months of 2022 (three vessels completed their intermediate survey in water, while five vessels passed their special survey with drydock), compared to $4.1 million for the same period of 2021 (three vessels passed their special survey with drydock).

During 2022 and 2021, we had other operating income of $1.6 million and $1.3 million, respectively. The operating income for the period of 2022 relates to an “unrepaired damage” claim agreed with the hull and machinery underwriters and loss of hire insurance in relation to M/V Akinada Bridge, partly offset by the settlement of accounts with charterers. The operating income for 2021 mainly consists of the proceeds from a claim award related to the sale of one of our vessels, M/V “Manolis P”, for scrap in March 2020 that initially failed to be completed due to COVID-related reasons, with the vessel finally being sold to another buyer within the second quarter of 2020.

Interest and other financing costs for the twelve months of 2022 amounted to $5.1 million compared to $2.8 million for the same period of 2021. This increase is due to the increased amount of debt and the increased LIBOR / SOFR rates of our bank loans in the current period compared to the same period of 2021. For the twelve months ended December 31, 2022 the Company recognized a $4.4 million gain on its interest rate swap contracts, comprising a $4.2 million unrealized gain from the mark-to-market valuation of its outstanding interest rate swaps and a $0.2 million realized gain. For the twelve months ended December 31, 2021 the Company recognized a $0.03 million loss on its interest rate swap contracts, comprising a $0.15 million unrealized gain and $0.18 realized loss.

The results for the twelve months of 2022 include a $10.8 million of amortization of below market time charters acquired and a $4.2 million unrealized gain on derivatives. The results for the twelve months of 2021 include $0.2 million of amortization of below market time charters acquired and $0.2 million unrealized gain on derivatives.

Adjusted EBITDA1 for the twelve months of 2022 increased to $114.4 million compared to $52.7 million during the twelve months of 2021, primarily as a result of higher revenues.

Basic and diluted earnings per share attributable to common shareholders for the twelve months of 2022 was $14.79 and $14.78, calculated on 7,181,561 and 7,190,107 basic and diluted weighted average number of shares outstanding, respectively, compared to basic and diluted earnings per share of $6.07 and $6.06 for the twelve months of 2021, respectively, calculated on 6,976,905 and 6,993,405 basic and diluted weighted average number of shares outstanding.

Excluding the effect on the income attributable to common shareholders for the twelve months of 2022 of unrealized gain on derivatives, amortization of the below market time charters acquired, vessel depreciation on the portion of the consideration of vessels acquired with attached time charters allocated to below market time charters and net loss on sale of vessel (if any), the adjusted earnings attributable to common shareholders for the year ended December 31, 2022 would have been $13.23 and $13.21 basic and diluted, respectively, compared to adjusted earnings of $6.03 and $6.02, per share basic and diluted. As previously mentioned, usually, security analysts do not include the above items in their published estimates of earnings per share.

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