Genco Shipping & Trading - Q4 2025

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited Q4 2025 Earnings Conference Call and presentation. Before we begin, please note that there will be a slide presentation accompanying today's conference call. That presentation can be obtained from Genco's website at www.gencoshipping.com. To inform everyone, today's conference is being recorded and is now being webcast at the company's website, www.gencoshipping.com. We will conduct a question and answer session after the opening remarks. Instructions will follow at that time. A webcast replay will also be available via the link provided in today's press release, as well as on the company's website. At this time, I will now turn the conference over to the company. Please go ahead.

Peter Allen (CFO)

Good morning. Before we begin our presentation, I note that in this conference call, we've been making certain forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements use words such as anticipate, budget, estimate, expect, project, intend, plan, believe, and other words of similar meaning in connection with the discussion of potential future events, circumstances, or future operating or financial performance. These forward-looking statements are based on management's current expectations and observations.

For a discussion of factors that could cause results to differ, please see the company's press release that was issued yesterday, the materials relating to this call posted on the company's website, and the company's filings with the Securities and Exchange Commission, including, without limitation, the company's annual report on Form 10-K for the year ended December 31, 2024, and the company's reports on Form 10-Q and Form 8-K, subsequently filed with the SEC. At this time, I would like to introduce John C. Wobensmith, Chairman and CEO of Genco Shipping and Trading Limited.

John C. Wobensmith (Chairman and CEO)

Good morning, everyone, and welcome to Genco's Q4 2025 conference call. I will begin today's call by reviewing the progress we've made executing our comprehensive value strategy since its implementation in 2021, and then we'll review our Q4 2025 and year-to-date highlights. We will then provide additional details on our financial results for the quarter, as well as provide an update on the industry's current fundamentals before opening the call up for questions. For additional information, please also refer to our earnings presentation posted on our website. Starting on slide 5, 2025 marked the 5th year since our board and management team formulated and began implementing our comprehensive value strategy centered around dividends, financial deleveraging, and opportunistic fleet growth.

When we launched the strategy in April of 2021, we set out to accomplish three main objectives: transform Genco into a low-leverage, high-dividend company, maintain significant flexibility to grow the fleet, and pay a sizable quarterly dividend through the cycles based on an established dividend formula. Five years later, we are pleased to have made notable success executing against each of these objectives. Among our accomplishments, we fortified our balance sheet to effectively operate in diverse rate environments, provided shareholders with sizable returns, and invested in our fleet to further expand our earnings power and dividend capacity. Specifically, over this time, we have invested $347 million in high-quality, modern vessels, distributed $270 million in dividends to shareholders, and paid down $249 million of debt.

Moving to slide 6, we continued to advance our value strategy in the Q4, ending the year with strong momentum going into the Q1 We declared our 26th consecutive dividend, representing an annualized yield of 9% on our current share price, our highest dividend level since Q4 2022, and the longest period of uninterrupted dividends in our dry bulk peer group. Heading into the quarter we took important steps to maximize fleet-wide utilization in a strong freight rate environment with the completion of 90% of our 2025 dry docking schedule and delivery of a high-quality, modern Capesize vessel early in the quarter. During the Q4, these proactive measures enabled us to generate the highest levels of both EBITDA and TCE for the year at $42 million and $20,064 per day, respectively.

Additionally, in November, we agreed to purchase two 2020-built, high-quality, premium-earning Newcastlemax vessels that we expect to take delivery of in March. Importantly, these well-timed investments further increase our operating leverage and expand our presence in a key sector with compelling supply and demand fundamentals. We also ended the Q4 with an industry-low net loan to value of 12%. As depicted on slide 7, we achieved multiyear highs across key metrics in Q4 and have significant momentum going into Q1 2026. Building on our success, generating TCE and EBITDA levels that were the highest in three years, estimated Q1 TCE of approximately $18,000 per day for 80% of the quarter represents a strong start to the year in what is typically a seasonally slower period.

Notably, estimated Q1 2026 TCE is our highest Q1 level since 2024... and over 50% above Q1 2025 levels. Based on our firm fixtures to date and the continued execution of our value strategy, we expect a higher dividend in Q1 on a year-over-year basis. Turning to slide 8, Genco has one of the lowest cash flow breakeven rates in our peer group. This key differentiator is directly related to our industry-low net loan to value, as well as not having mandatory debt amortization, which further reduces our cash flow breakeven rate compared to peers. As our TCE increased from approximately $12,000 per day in Q1 2025 to $20,000 per day in Q4, our overall profitability and dividend capacity increased as well.

As can be seen from the chart, our estimated Q1 TCE also compares favorably to our low breakeven rate on a cash basis. Turning to slide 9, through the execution of our value strategy, Genco has paid compelling quarterly dividends to shareholders across cycles. Notably, we have paid 26 consecutive quarterly dividends to shareholders in diverse rate environments, having distributed between $0.15 and $0.50 a quarter over the past three years. In addition to the Q4 dividend being the highest since Q4 2022, it also represents a 233% increase over the Q3 2025 dividend. Supporting our dividend and complementing our low breakeven rate is our balanced approach to fleet composition, which we present on slide 10.

In addition to the two Newcastlemax vessels we agreed to acquire, we own a fleet of 17 Capesize vessels, as well as 15 Ultramax and 11 Supramax vessels. We continue to balance the high beta and upside potential of the Capesize sector, along with steadier earnings stream of our minor bulk ships. On a vessel ownership basis, our splits are 40% Capes and 60% Ultra Supras. However, when viewed on a net revenue basis over the last 2 years, we are 50% weighted towards Capesize vessels. With just 20% of our overall fleet fixed for the year, Genco is uniquely positioned relative to some in the peer group to benefit from a strengthening freight rate environment, providing us with meaningful upside exposure to the current strong spot market. Our high operating leverage is balanced against our low financial leverage, which is shown on slide 11.

This provides Genco with significant financial flexibility in various freight market conditions. In strong markets, Genco generates meaningful cash flow with its industry-low breakeven rate and scalable fleet. In market downturns, Genco's low financial leverage and undrawn revolver availability allow the company to take advantage of countercyclical growth opportunities. Specifically, as demonstrated on slide 12, Genco has taken advantage of our strong liquidity position for opportunistic acquisitions of modern, high-specification, premium-earning vessels at attractive values, including 6 Capesize and Newcastlemax vessels since 2023. I emphasize the positioning of the fleet today is not an artifact of history or chance. It is the result of the steady execution of our plan to optimize the fleet, which began in 2023.

At that time, the management team and the board formed a specific strategy focused on the compelling supply and demand fundamentals of the Capesize sector, which had the lowest order book among the major dry bulk sectors, with long-haul ton mile expansion on the horizon. Since 2023, our strategy has been built upon this thesis, and over this time, Capesize vessels have been the best-performing dry bulk class from an earnings and an asset value appreciation perspective. Notably, our Capesize vessels have increased in value by nearly $40 million, despite several years of age depreciation. Furthermore, we have generated an IRR of over 30% on these ships since acquisition.

In 2025 alone, we agreed to purchase 3 2020-built Capesize and Newcastlemax vessels, growing our pro forma fleet by 20% on an asset value basis and significantly increasing our earnings and dividend capacity in 2026 and beyond, while reducing the average age of our fleet. On slide 13, both Genco's pro forma 45-vessel fleet and Cape fleet provide significant operating leverage for shareholders. Every $1,000 fleet-wide increase in TCE equates to $16 million of incremental annualized EBITDA, or $0.37 per share. Furthermore, our 19 Newcastlemax and Capesize vessels, every $5,000 increase equates to $34 million or $0.77 per share of incremental earnings and dividend capacity.

Our fleet strategy has been very successful since we implemented it in 2023, and as you see in these figures, has well-positioned the company to continue creating shareholder value going forward. Lastly, turning to slide 14, Genco continues to prioritize strong corporate governance, which is another key differentiator for the company relative to the peer group. Specifically, Genco is the largest U.S.-headquartered dry bulk shipping company, and we are also a U.S. public company subject to robust SEC and New York Stock Exchange disclosure regimes. We are also the only listed dry bulk shipping company with no related party transactions. We have a diverse and independent board of directors and observe U.S. public company governance best practices, such as having a lead independent director.

We provide detailed disclosures on company performance and initiatives while striving to provide a clear and thoughtful strategy to shareholders as we execute our disciplined approach to capital allocation. We are also consistently ranked in the top quartile on corporate governance among public shipping companies by Webber Research. Our corporate governance is a core part of Genco's identity and reflects our board's commitment to upholding the highest standards of fiduciary duty and governance excellence. I will now turn the call over to Peter Allen, our Chief Financial Officer.

Peter Allen (CFO)

Thank you, John. On slide 16 through 18, we highlight our Q4 financial results. Genco recorded net income of $15.4 million or 35 cents basic and diluted net earnings per share. Adjusted net income is $17.3 million or 40 cents and 39 cents basic and diluted earnings per share, excluding other operating expense of $1.9 million for shareholder-related expenses. Adjusted EBITDA for Q4 totaled $42 million, an increase of 94% as compared to Q3, and bringing the full year 2025 total to $85.9 million. Our cash and debt positions as of December 31, 2025, were $55.5 million and $200 million, respectively. Our undrawn revolver availability at year-end was $400 million.

During March of 2026, we expect to take delivery of two 2020-built Newcastlemax vessels. We have approximately $131 million of remaining CapEx for these acquisitions, which we expect to fund primarily through proceeds from our revolver. As part of our existing $600 million credit facility, we plan to utilize the accordion feature for $80 million and pledge these two vessels as collateral. This would increase our pro forma borrowing capacity to $680 million in total, with expected post-acquisition debt outstanding of $330 million and undrawn borrowing capacity of $350 million. Our lenders participating in this revolving credit facility upsizing include Nordea, DNB, ING, and SEB.

With our full revolving credit facility structure, we will continue to actively manage our cash and debt positions to reduce interest expense while maintaining access to capital to quickly act on growth opportunities, as we have demonstrated in recent years. Moving to slide 19, we highlight the sequential increases in our quarterly EBITDA throughout the year, culminating in a strong Q4 performance and an EBITDA increase of 94% from Q3 2025, and also the highest quarterly level since 2022. As outlined on slide 20, we believe that Genco is in a highly advantageous position. With a current fleet of 43 high-quality, modern dry bulk vessels, our significant operating leverage, combined with low financial leverage, a sub-$10,000 cash flow break-even rate, and $400 million of undrawn revolver availability, collectively provide a compelling risk-reward balance for shareholders.

Furthermore, we continue to reward shareholders through our quarterly dividend policy, which targets a distribution based on 100% of operating cash flow, less a voluntary reserve, as described on slide 21. For Q4, our board of directors declared a $0.50 per share dividend based on operating cash flow of $41 million and a voluntary quarterly reserve of $19.5 million, marking our highest payout in 3 years. Looking ahead to Q1 2026, we currently have 80% of owned available days fixed at approximately $18,000 per day, as compared to our anticipated cash flow break-even rate, excluding dry docking-related CapEx, of approximately $9,715 per vessel per day. Importantly, Q1 2026 TC is on pace to increase over 50% year-over-year.

On the expense side, we anticipate Vessel Operating Expense to marginally increase in Q1 compared to Q4 levels due to the timing of crew-related expenses. However, we expect vessel OpEx to revert to levels similar to Q4 moving forward during the year. I will now turn the call over to Michael Orr, our Dry Bulk Market Analyst, to discuss the current industry landscape.

Michael Orr (Dry Bulk Market Analyst)

Thank you, Peter. Beginning on slide 23, the dry bulk freight rate environment meaningfully improved in the second half of 2025, reaching its height in Q4, led by the Capesize sector. The Baltic Capesize Index averaged nearly $29,000 per day in Q4 and approached $45,000 per day in early December, driven by all-time high Brazilian iron ore shipments. Supramax rates were also firm, supported by augmented coal shipments to China, as well as firm grain exports. Turning to slide 24, China reported strong levels of iron ore imports in recent months, led by increased seaborne supplies together with the restocking of iron ore inventories. Specifically, the country's iron ore imports in Q4 rose by 7% year-over-year, and for the second half of the year, China's iron ore imports rose by 12% as compared to first half levels.

On the seaborne supply side, we saw Brazilian iron ore shipments rise by 26%, second half over first half. Turning to slide 25, we highlight the long-haul iron ore and oxide trade growth expected from Brazil and West Africa in the coming years. Given the scale of the projects, these volumes could absorb potentially over 200 Capesize vessels, which is more than the current Capesize new building order book. Supply constraints and Capesize new building activity, combined with added long-haul trading distances, are two key catalysts for the sector. We expect West African iron ore flows to ramp up in 2026 after first shipments were made in 2025. In terms of the grain trade, as detailed on slide 26, China has reportedly fulfilled their 12 million ton quota from the U.S. as part of the October agreement.

However, further reports highlight additional purchases of up to 8 million tons of U.S. soybeans in the coming months.... With the onset of South American grain season at the end of Q1, attention is likely to shift to Brazilian soybean volumes. Regarding the supply side outline on slide 27, net fleet growth in 2025 was 3%, split between 1.5% net fleet growth for Capesize and 4 to 5% net fleet growth for Panamax down to Handysizes. Importantly, 2025 marked the fourth straight year of sub-3% net fleet growth for Capesize, which is the first time on record this low a level has materialized for this long.

Additionally, as scrapping has remained low in recent years, the age of the global fleet has risen to nearly 13 years old, the highest average age of the global dry bulk fleet since 2010. This has increased the pool of potential scrapping candidates, with 11% of the on-the-water fleet is 20 years or older, which is nearly identical to the global dry bulk order book as a percentage of the fleet of 12%. This implies net replacement of tonnage over time as opposed to any material net fleet growth. While we expect volatility in the freight market to persist, the foundation of a low supply growth picture provides a solid basis for our positive view of the dry bulk market going forward. I'll now turn the call back over to John to conclude the call.

John C. Wobensmith (Chairman and CEO)

Thank you, Michael. Turning to slide 29, we have made outstanding progress executing our comprehensive value strategy, providing shareholders with sizable returns and investing in our fleet to further expand Genco's earnings power. With our high quality and modern fleet, leading commercial operating platform, strong balance sheet, and significant operating leverage, we remain well-positioned to create meaningful value for shareholders in 2026 and beyond. As we progress through the year, our unrelenting focus will be on continued capital return for shareholders, further growing our high-specification, premium-earning fleet, as well as maintaining our industry-leading leverage profile and strong corporate governance standards. Before we turn the call over to Q&A, I'd like to briefly address our announcements from last month regarding a non-binding, indicative proposal we received to acquire all outstanding shares of Genco.

As detailed in our previous press releases, our board thoroughly reviewed the proposal with the assistance of external advisors and determined the proposal significantly undervalued Genco. As part of its review, our board did determine that a differently structured transaction, one organized as an acquisition by Genco, would create value for all shareholders. We sought to engage privately on an alternative structure, but our offer to engage was turned down. Our management and board are focused solely on delivering maximum value for shareholders. With that said, the purpose of today's call is to discuss our Q4 and full year 2025 results and the opportunities ahead for Genco. The company is performing very well today, and we are very excited and confident in the future. We ask that you please keep your questions focused on results, performance, and industry trends. Thank you for that in advance.

This concludes our presentation, and we would now be happy to take your questions.

Operator (participant)

Thank you. Ladies and gentlemen, we'll now conduct the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Omar Nokta with Clarksons. Your line is open. Please go ahead.

Omar Nokta (Managing Director and Lead Shipping Analyst)

Thank you. Hi, guys. Good morning.

John C. Wobensmith (Chairman and CEO)

Good morning.

Omar Nokta (Managing Director and Lead Shipping Analyst)

Solid quarter, obviously. Hey, John. Yeah, the, you know, the dry bulk market ended 2025 on a pretty strong note and as shown in your results, obviously, and, you know, so far this year, things are progressing quite nicely. You've upsized your facility by the $80 million, and you're going to take delivery of those two new Newcastlemaxes next month. Obviously, you have plenty of flexibility. Asset values look like they're on the rise and, or at least have risen a good amount here over the past few months. Where does that leave Genco kind of strategically? I know you touched on this a bit at the end of your comments, John, but how are you thinking about Genco strategically, you know, capital allocation, as we look ahead here for the rest of 2026?

John C. Wobensmith (Chairman and CEO)

Look, in terms of the capital allocation, you know, dividend, dividends and the value strategy is top of the list. We will endeavor to continue to cycle out some of the older vessels and redeploy those funds on more modern, fuel-efficient ships, such as we've done, or such as we did last year. So I don't think much has changed, but you're correct. Values continue to move up. We're actually in a situation where they're moving up almost weekly at this point, which is obviously very positive basis the timing of the acquisitions that we did last year. But you know, it... Look, it makes newer tonnage more expensive, but it also makes our older tonnage, you know, more firm in what we can get.

So, you know, dividends and value strategy is the first, and as part of that value strategy, we have a fleet replacement and growth element.

Omar Nokta (Managing Director and Lead Shipping Analyst)

... Thanks, John. And maybe just as a follow-up, as we referenced asset values having risen, I wanted to ask you – so how are you thinking about the term charter markets? Or what are you seeing there, you know, as you kind of think about it from, say, the crude tankers, just as what we've seen there, VLCC values have risen, and there's been a lot of charter interest. Are you seeing something similar in the Cape market, and how do you feel about deploying ships on term charter today?

John C. Wobensmith (Chairman and CEO)

I think, well, there has not been as much liquidity in the dry bulk TC market as you just mentioned in the tanker sector. I think a lot of that has to do with the optimism as we look at the supply side and demand growth for the rest of 2026, but then, you know, certainly going into 2027, as West African iron ore really starts to ramp up. So I think it's more of a function of, I believe, owners not wanting to lock in currently because of the optimism, again, low supply, demand growth coming. Having said that, you know, there have definitely been some 1-3-year deals done. I think there was a three-year deal done on a new...

at least one, maybe two new Newcastlemaxes from an iron ore major, you know, excess $30,000 a day. Those are, those are firm rates, and, clearly, the market is, is indicating a bullish stance and, and positive sentiment. You know that, that we, from time to time, have taken exposure off the table, particularly in the Capesize sector. We really do look at it as a, as a portfolio approach, but we, we spend a lot of time and analysis, you know, looking at whether we want to lock in. And there could easily come a time this year where maybe we take some exposure off the table. But, for the time being, we're, we're, we're gonna continue to trade spot, and I think it's one of the unique things about Genco.

We really only have 20% of this year fixed. So with a rising market, we are fully exposed. Well, 80% exposed to that positive market and sentiment.

Omar Nokta (Managing Director and Lead Shipping Analyst)

Yeah. Yeah. Well, very good. Thank you, John. I'll turn it back.

John C. Wobensmith (Chairman and CEO)

Thanks, Omar.

Operator (participant)

Your next question comes from the line of Liam Burke with B. Riley Securities. Your line is now open. Please go ahead.

Liam Burke (Managing Director and Senior Equity Research Analyst)

Thank you. Good morning, John. Good morning, Peter.

John C. Wobensmith (Chairman and CEO)

Good morning, Liam.

Liam Burke (Managing Director and Senior Equity Research Analyst)

John, in the past, discussions on asset acquisitions, you always like the flexibility of the Capes versus the Newcastlemaxes. Has there anything changed in trading patterns that makes you favor more the Ultramaxes vis-a-vis a Cape?

John C. Wobensmith (Chairman and CEO)

I'm sorry, the Ultramaxes or the Newcastlemaxes?

Liam Burke (Managing Director and Senior Equity Research Analyst)

Newcastlemaxes, excuse me.

John C. Wobensmith (Chairman and CEO)

Yeah. No, okay. That's... Yeah. No, I wouldn't say anything has drastically changed, though. Certainly, you know, on the Brazilian trade, those Newcastlemaxes have always been filled up to their capacity. Over the last several years, that may have not been true with Australia loadings, but that, that's really changed. And we certainly have seen the bauxite trade develop as well as out of West Africa, so that bauxite can go on Newcastlemaxes. So we like, we like the Newcastlemaxes we bought. We like our Capesize fleet. The Newcastlemaxes that we bought are no doubt premium-earning assets with very high specifications and low fuel consumption. I think 2020 Bulkers did a fantastic job ordering and kitting out those ships, so we're very happy to be taking delivery of those.

But, you know, we're gonna continue to look at Capes, and Newcastlemaxes, and, you know, that's where I think you'll see growth for us. And we'll stay steady with our Ultra Supermax fleet, probably do a little bit of fleet renewal on the Supers.

Liam Burke (Managing Director and Senior Equity Research Analyst)

Okay, just as a follow-on, you just mentioned the Supers. Is there any opportunity or is there any interest in adding to that part of the fleet, when you're discussing renewal, or is it just selling older vessels on elevated asset values?

John C. Wobensmith (Chairman and CEO)

Well, it certainly would be selling older vessels. You know, I again, we're, we're focused on the larger ships in terms of redeploying capital, though I, I'm not gonna rule out that we wouldn't, you know, buy a, buy an Ultramax. I mean, that, that market's doing pretty well. As you know, these, these are all correlated. It's just the Capes have certainly more upside potential, you know, based on higher beta and, and volatility. And if you look at, again, the supply side on the Capes is the most favorable in the dry bulk sector, and demand growth that is coming is Newcastlemax and Capesize oriented.

Liam Burke (Managing Director and Senior Equity Research Analyst)

Super. Thank you, John.

John C. Wobensmith (Chairman and CEO)

Thanks, Liam.

Operator (participant)

Your next question comes from the line of Chris Robertson with Deutsche Bank Securities Inc. Your line is now open. Please go ahead.

Chris Robertson (VP and Senior Equity Research Analyst)

Hi, good morning, John and Peter. Thanks for taking my questions.

John C. Wobensmith (Chairman and CEO)

Good morning.

Chris Robertson (VP and Senior Equity Research Analyst)

John, just on the back of Omar and Liam's questions around the S&P market, I just wanted to touch on last year it was reported that a large number of Chinese buyers of dry bulk vessels were active in the market. I was wondering if you could comment: is that trend still continuing? And where do you see kind of the activity being driven in the S&P market for potential asset sales?

John C. Wobensmith (Chairman and CEO)

Yeah, I think the Chinese continue to be very active. I would put them as the number one buyer right now, particularly of older assets. Not necessarily on the modern eco side, but the older assets, they are very active on. You know, China is the largest importer of dry bulk commodities, right? So seeing the Chinese go long tonnage, I think that's a positive, yeah, a vote of confidence in the market going forward. You know, and you've seen it across the board. I mean, they certainly have been active in older Capes, but they've also been buying some of the older Supramaxes as well, and I'm sure they see the same thing that we see.

Again, the low supply growth on the Capes, the age of the fleet, and I think most importantly, there are additional cargo volumes that are gonna be coming both on the bauxite side, but more importantly, on the iron ore front out of West Africa.

Chris Robertson (VP and Senior Equity Research Analyst)

Got it. Makes sense. My second question is just related to kind of reevaluating the geopolitical environment and the disruptions that we've seen across various shipping segments over the last few years. So where do things stand in terms of the disruption levels related to dry bulk? And let's say if there was a reversal, whether it's the Red Sea or Russia-Ukraine, et cetera, where do you see kind of puts and takes around some of those themes?

John C. Wobensmith (Chairman and CEO)

Well, well, I mean, let's take the Russia-Ukraine situation. If there is a conclusion to that and the Black Sea reopens fully, you know, clearly that's potential for more grains and to a smaller degree, iron ore. So that would be a net positive for dry bulk shipping. In terms of the Red Sea, you know, we're well aware that there are some container companies that have started operating through Suez and the Red Sea. We're still cautious, and we're still not putting our ships through that area. But having said that, you know, it's maybe 1 to 2% max in terms of number of ships that would actually go through the Red Sea. So deviating around Africa is it, it's not a big factor in dry bulk.

It certainly is in containers, but it's not for dry bulk.

Chris Robertson (VP and Senior Equity Research Analyst)

All right, great. That's clear. Thank you, John. I'll turn it over.

John C. Wobensmith (Chairman and CEO)

Thank you.

Operator (participant)

Your next question comes from the line of Sherif El-Maghrabi with BTIG. Your line is now open. Please go ahead.

Sharif Al-Mograbi (Senior Analyst)

Hey, good morning. A couple questions on operating costs here. It looks like the cost of charter hire in Q4 roughly doubled sequentially. So I'm wondering, does the current strength in spot rates change how you think about augmenting your fleet with outside tonnage?

John C. Wobensmith (Chairman and CEO)

Well, in terms of... Again, in terms of growth, we're definitely focused on the larger ships, and hopefully that this is gonna be answering your question. If it's not, please feel free to clarify. But when you look at where rates have really moved up, it is in the larger ships, which again, that's been our strategy of growing that fleet since 2023. And you can definitely see that in the revenue side. It's driven quite a bit of the upside in revenues. Did that answer your question?

Sharif Al-Mograbi (Senior Analyst)

I was asking about the chartered-in fleet.

John C. Wobensmith (Chairman and CEO)

Oh, okay.

Chris Robertson (VP and Senior Equity Research Analyst)

Yeah. Hey, Sharif. Yeah, in terms of the chartered-in fleet, you know, that is a very opportunistic part of the business. You know, a lot of the times the guys will take forward cargoes, and if it makes more sense in the moment to charter in a vessel to create an arbitrage, you know, they'll do that, and that's something that the guys are, have been really good over the years of assessing whether they can make, you know, whether it's $100,000 plus on a particular cargo. A lot of the times in the Q1, you'll see that because we'll look forward cargoes, the market will come off relative to Q4, and we'll be able to get that arb. But, you know, it's a very opportunistic play.

You know, some quarters, you'll see higher than others. But certainly, you know, in a strengthening market, you know, being on the longer side and having the spot focus that we have is certainly where you want to be right now.

John C. Wobensmith (Chairman and CEO)

What you're not gonna see us do is speculative long-term time charter ends. It'll either be-

Chris Robertson (VP and Senior Equity Research Analyst)

Right

John C. Wobensmith (Chairman and CEO)

... short term, backed up by a piece of cargo, as Pete said, but we're not gonna just, you know, go, go naked on chartering a Capesize or an Ultramax for that matter, long term into the, into the company. That's not part of the strategy.

Sharif Al-Mograbi (Senior Analyst)

Okay. Yes, that's very clear. And then, just looking back at the presentation, slide 8, highlights your remarkably stable, cash break-even, which has remained below $10,000 a day for a few years now. So is there anything you're doing, obviously, besides keeping leverage low, to manage break-even costs, while some other owners have seen operating cost inflation?

John C. Wobensmith (Chairman and CEO)

Look, we've seen operating cost inflation, there's no doubt, particularly on the crew side, and when you look at spares and stores, just from an inflationary standpoint. We certainly manage to a budget that we set every year, though I want to emphasize, you know, particularly with the larger ships, the bar keeps getting raised, calling Australia. So we, you know, we need to make sure that we are keeping our ships well-maintained so that we do not have any issues trading anywhere in the world. So there is a little bit of inflation. We certainly manage and pay very close attention to OpEx, but we're not gonna be penny-wise, pound-foolish.

Sharif Al-Mograbi (Senior Analyst)

All right. Thanks for taking my questions.

John C. Wobensmith (Chairman and CEO)

Thank you.

Operator (participant)

As there are no further questions at this time, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.