VictoryShares International Free Cash Flow Growth ETF

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00:50 Slide 2. Let me please refer you to Slide number 2 with the forward-looking statement disclaimer.

On this call, we will make certain forward-looking statements, including statements regarding our future financial and operating performance. These statements include information regarding future time charter contracts, outlooks for the drybulk markets, and other operating matters.

These statements are based on the beliefs and expectations of management as of today. 01:24 Our actual results may differ materially from our expectations.

Investors should read carefully the risks and uncertainties described in this slide presentation and in yesterday’s press release, as well as the risk factors included in our annual reports and our other filings with the SEC. We assume no obligation to revise or update forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

01:55 In addition, during this call, we will be discussing certain non-GAAP financial measures. Additional disclosures relating to these non-GAAP financial measures, including reconciliation to the most directly comparable GAAP measures, please see yesterday’s press release and Pages 24 to 26 of the slide deck, which is posted on our website and our filings with the SEC.

02:25 Please turn to Slide 4 for an overview of our fourth quarter and year-end 2021 financial results. Grindrod Shipping enjoyed overall record financial results during the fourth quarter and full-year 2021 taking full advantage of the improved drybulk market conditions, as well as our operational model.

For the fourth quarter and full-year 2021, adjusted net income was $54.6 million, or $2.88 per ordinary share, and $122.4 million or $6.39 per share respectively. 03:10 In addition, we enjoyed adjusted EBITDA of $73.2 million and $206.9 million for the respective periods.

Executing under our share repurchase program, we accelerated our repurchases during the fourth quarter at highly accretive levels to our financial metrics per share with a total of $10.2 million or 700,491 ordinary shares repurchased in the open market on NASDAQ and the JSE at an average price of $14.58 per share. 03:46 For the full-year 2021, we repurchased a total of $11.9 million or 825,163 ordinary shares in the open market on NASDAQ and the JSE at an average price of $14.39.

As of December 31, 2021, we have materially enhanced our liquidity and finished the year with cash and equivalents of $104.2 million and restricted cash of $9.5 million. 04:25 Now, please turn to Slide 5 to look at our fourth quarter operational highlights and recent developments.

We exercised our options to extend the firm charter-in period of the 2014-built supramax bulk carrier IVS Naruo for 12 months at $13,000/day, starting from January 21, 2022. This has two additional one-year options to extend at $13,000 per day, at each extension year.

04:56 The purchase option of this ship is exercisable in Q4 2022 subject to contract terms and conditions. As a reminder, Grindrod Shipping has high remaining purchase options, which you will find on Slide 22 of this presentation in our charter-in fleet update providing the value of our long-term charter and vessels and associated purchase options.

05:20 Regarding our recent developments on February 16, 2022, our Board of Directors declared an interim quarterly cash dividend of $0.72 per ordinary share payable on or about March 22, 2022, to all shareholders of record as of March 11, 2022. Together with the $10.2 million of shares repurchased during the fourth quarter 2021, which is equivalent to a further $0.55 per ordinary share, Grindrod Shipping will return capital equivalent to a total of $1.27 per ordinary share to shareholders.

05:58 The Board elected to maintain the same dividend per share as the third quarter, despite materially higher share repurchases during the quarter, due to the continued extraordinary strength in our financial results and our strong balance sheet. 06:12 Now, I’ll pass the floor over to Steve Griffiths, our Chief Financial Officer, who will go over the financial highlights and performance for the fourth quarter of 2021.

Steve?

06:22 Thank you, Martyn. Turning to Slide 7, during the fourth quarter of 2021, we continued to achieve strong results due to the robust market conditions and the earning power of our expanded earned fleet following the acquisition of the remaining portion of our IVS Bulk subsidiary.

06:43 In this context, revenue increased to $142.5 million for the three months ended December 31, 2021, compared to $55.7 million in the same period 2020. Gross profit increased more than 10-fold to $66.7 million in Q4 2021, compared to $4.5 million for the same period 2020.

07:11 Net profit attributable to earnings of the company for Q4 2021 increased to $52.9 million or $2.79 per ordinary share, compared to a loss of $6.2 million or a loss of $0.33 per ordinary share for the same period 2020. On the right hand side of Slide 8, we got the full-year 2021.

07:34 Gross profit increased to $176.9 million for the full-year 2021 versus $4.1 million for the same period 2020. Net profit attributable to owners of the company for the full-year 2021 increased to $122.1 million or $6.38 per ordinary share versus a loss of $32.7 million or $1.72 per ordinary share for the same period 2020.

08:08 Turning to Slide 8, we are able to materially – we were able to materially enhance our cash and liquidity during the full-year of 2021, as cash and restricted cash increased by $63.2 million, while simultaneously reducing our debt of $32.7 million, or while adding a previous long-term chartered ship to our own fleet at a favorable level. We believe Grindrod Shipping is well-positioned to pursue its growth and capital return strategies.

08:41 On Slide 9, we provide our bank loans and other borrowings repayment profile at December 31, 2021. Limited debt maturities until 2025 combined with a conservative amortization profile provide us with optimal balance sheet flexibility going forward.

08:58 Overall, we maintain low leverage, especially on a net debt basis and this is even lower when you take into consideration the market value of our fleet, which is comprised mainly of modern Japanese built eco vessels. 09:11 Slide 10, we will now briefly discuss results in the drybulk business for the fourth quarter of 2021.

Handysize TCE per day was $28,842 for the three months ended December 31, 2021 versus $8,395 per day for the same period 2020. For the 12-months ended December 31, 2021 Handysize TCE per day was $21,336 versus $6,629 for the same period 2020.

09:50 Supramax/ultramax TCE per day was to $30,089 per day for the three months ended December 31, 2021 versus $10,937 per day for the same period December 31, 2020. For the 12-months ended December 31, 2021, Supramax/ultramax TCE per day was $23,608 versus $10,072 per day for the same period 2020.

10:23 As of February 14, 2022, we have contracted approximately 1,103 operating days at an average TCE of $21,911 per day for our Handysize and approximately 1,474 operating days at an average TCE of $24,374 per day for ultramax’s. 10:51 The average long-term charter-in cost per day for the Supramax/ultramax fleet for the first quarter of 2022 is expected to be approximately $13,057 per day.

11:04 Now, turning to Slide 11. The scale of rise in the drybulk freight rates is easily demonstrates versus our historical results.

During the full-year 2021, approximately 90% of our fleet was predominantly trading either on index-linked cargo contracts, short-term time charters, or in the spot market, leaving our company exceptionally well-positioned to take advantage of the strong freight rate environment. 11:28 To put this into context, every thousand dollars change in TCE per day equated to approximately $10.8 million of TCE revenue during the full-year 2021, and that's for our core fleet.

Just want to add, you have seen we’ve got Q1 2022 environment compared to the second half of 2021, we are still well above market rates for the same period last year, and our secured days for Q1 are trades above the indices to-date in the quarter. 12:04 Now, turning to Slide 12, it shows the core fleet cash breakeven analysis for the full-year 2021.

Our owned fleet breakeven was $11,121 per vessel per day, while the core drybulk breakeven was $11,910 per vessel per day, including long-term charter in vessels. The cash breakeven rate per day includes operational expenses, net G&A, interest expense, and debt repayment.

You can contrast these figures to the daily TCE rates in the previous life to assist the robustness of our profitability. 12:43 With that, I would like to return the call back over to Martyn.

12:48 Thanks, Steve. Now, please turn to Slide 14 to look at the fundamentals of the drybulk sector and how they have been developing against the new market environment.

2021 saw a material pickup in coal demand driven by global energy shortages, together with strong minor bulk demand closely correlated to global GDP and reflected the global economic recovery from widespread COVID-19 lockdowns in 2020. 13:18 2022, the expectation is for minor bulk and grain trade growth to outpace the growth seen in the coal and iron ore sectors as coal trade growth normalizes from the very strong growth seen in 2021.

13:32 Handysize and supramax’s continue to be helped by congestion in the container shipping business, which is leading to certain bagged and break bulk cargoes like scrap steel returning to bulk carriers. 13:43 Now, please turn to Slide 15.

As the slide depicts, iron ore trade slowed in 2021, versus the prior year, due to Chinese steel production restrictions. However coal rebounded nicely while grain demand lagged 2020 levels.

14:01 Minor bulk demand, which is our main focus is we bag materially driven partly by the steel forestry cement, nickel ore and alumina trades. demand in 2022 and 2023 is expected to be led by minor bulk cargoes and grains, key targets for the Handysize and supramax sectors.

14:21 Now, turning to Slide 16. The drybulk order book continues to shrink to multi-decade lows.

The order book is estimated at only 6.8% of the fleet with approximately of the drybulk fleet 15 years or older, and approximately 7% of the drybulk fleet 20 years or older. 14:42 Despite strong market conditions, new ordering remains constrained by uncertainty relating to engine technology and emissions.

2022 and 2023 supply growth for the drybulk fleet overall is far forecast to be around 2% and 0.2% respectively, while Handysize and supramax total order books continue to be the smallest in the drybulk fleet at 4.7% and 6% respectively. 15:12 Now, turning to Slide 17, while we saw Handysize and supramax Spot TC rates decrease at the end of 2021 and early 2022, we are now seeing the market strengthening as we have passed the Chinese near holidays and as we approach the end of the Winter Olympics in Beijing.

15:32 The chart on the right hand side, Handysize, Supramax asset prices increased materially over the course of 2021 and have remained largely flat over the last six months, while Handysize prices have continued to rise. 15:48 Slide 19.

Let’s turn to Slide 19 for our conclusions and strategy. Let's start with our achievements in 2021.

As reported earlier, the strong drybulk market conditions in 2021 led to our highest financial results since our spin-off and listing while our commercial strategy has demonstrated its potential with material profits generating from both our long and short-term charter-in vessels along with in the money purchase options in the future. 16:19 On the corporate side, we implemented a new dividend and capital return policy in the third quarter, resulting in cash dividends for the year of $1.44 per share and $11.9 million in highly accretive share repurchases.

16:34 Also in 2022, we completed our first secondary offering, which has benefited all shareholders through materially increased daily trading liquidity, a strong U.S. institutional shareholder base, more equity research coverage, and increased market float in the U.S., which has now reached over 40% of shares outstanding as of January this year.

16:58 Now, looking ahead, drybulk freight rates declined from exceptional levels to merely strong levels late in the fourth quarter of 2021 and early into 2022. They have started to rebound again in recent weeks.

The smallest new building order book indicates supports market recovery due to constriction in vessel growth as demand continues to recover. 17:21 Due to a record amounts of new containership orders thus far in 2021 even if drybulk orders were to become materially, limited shipyard spec capacity means that most of the orders could not hit the water, until 2024 at the earliest.

17:37 To the extent that demand continues to grow, even moderately, the lack of available supply growth combined with EEXI environmental regulations in 2023 is expected to lead to an attractive potential multi-year window for the drybulk market. 17:53 With this, I thank you all for joining our call today.

And looking forward to reporting further progress on Grindrod Shipping. 18:01 With that, we'd like to open up for questions.

Operator?

18:54 Howdy, Martyn and Steve, it’s Randy Giveans from Jefferies. How's it going?

18:59 Pretty well. You don’t have to introduce yourself Randy, with the howdy, we get it, we know who you are.

19:05 No, I’m following instructions. They said, introduce yourself.

Trying to be compliant over here. Anyway, congrats again, great quarter, another big dividend, share buybacks, doing the right thing.

You’ve clearly had an incredible year, accomplished a lot, so where does the company look to go from here? Are there any appetite for, maybe second-hand acquisitions outside of those in the money purchase options or what are the plans going forward?

19:34 Well, obviously, we're in a very fortunate position and we you rightly say, we capitalized to the full extent on the market. Second-hand pricing is interesting, because it has reached pretty fruity levels and with our five, six purchase options on our existing ships at incredibly attractive levels, we view that as the prudent way to maybe sell a couple of our older hand, especially ahead of EXI in 2023.

And basically where we can be selling hand is, and with the proceeds, buying – exercising purchase options and buying for cash, modern Ultramax’s. 20:16 We think that's the smart way to go.

So, never say never, but it's – some of these prices are getting pretty high and we want to keep a modern fleet. And if you start looking at modern ships, but as usual Randy, with dry cargo it's looking good, but to be gambling, I think we put ourselves in such a good position like a lot of owners now great balance sheet, loads of cash, reduced down debt.

I think it really is a time and with our operating model, the ability to take ships on from our Japanese friends for period. I think that's where the value is going to lie.

20:55 Sure. And then looking at your… go ahead.

20:59 Randy, yeah, if I can add to what Martyn said, in terms of, talk about allocation of cash at this stage rather than the previous difficult market as where is the cash coming from. As we said, we have fixed our balance sheet and improved liquidity with these strong earnings and obviously we're going to be, it's about dividend and capital return policy, we look to return cash to shareholders by way of dividends and share buybacks.

21:26 And then also Martyn has mentioned that they exercise that these repurchase options on our long-term fleet. We want to start doing that now, not all at once, but over a period.

The total cost of all of those ships is 108 million. So, certainly, we can put our money to work and then of course, we are looking to pay down some debt so we can get our daily tax breakeven down.

21:51 Got it. Yes, that makes sense.

And then looking at your fleet here, and your operations, clearly strong quarter to date rates, especially during the seasonal soft 1Q. I guess, where is the market maybe currently today, it might be a little higher than your quarter-to-date rates?

And then longer-term, I was looking at the forward curve and one-year time charter rates this morning. Have you looked into booking some vessels on a medium or one-year plus time charters?

22:22 Yes, we obviously, we benefited and we've had a very January into February. As rates are now picking up with the forward paper, I mean, March is being quoted at 27,000.

It will always be a bit of a struggle to actually go through, but I think that the whole Q1 figures are going to be pretty good. I mean, at the average at the moment, the BSI is averaging a tick over 20,000, obviously, we're well ahead of that so far.

And the hand is below, just below 19,000, sorry just below 20,000. But I think we're well placed there and then we'll go forward.

22:59 It's looking good. Obviously, starting this year as it is, I mean it's great to actually have a profitable Q1.

It's been an awful long time since anyone in dry cargo shipping reported that. And again reasonably predictable with China signaled with blue skies for the Beijing Olympics, slow things down, and it's now interesting, of course, literally as Chinese New Year starts, you start to see a pickup in demand.

23:26 China has relaxed credit rules and is encouraging more spending on real estate and infrastructure allied to the fact that they took a bit of a to iron ore prices, which is always quite positive for their buyers. And going forward , it's an interesting one, yes, because, of course one year rates are looking attractive.

23:53 So, it's not something we've done up to now. The ships we have been putting out tended to be four months to six months, , but it is something as we move forward.

We will start to look at, especially view our cost base is so low, and again, it's always the case of the right signature and people that we trust to pay, but I think we might start looking at a little bit more cover, having basically run naked to the market last year, although we do have our core business index linked. 24:25 So, we operate around that, but as this market develops, of course, common sense dictates that we should be locking-in, potentially looking-in some earnings.

24:37 That’s a fair balance. That's it for me.

Congrats again. Thank you.

24:41 Thanks, Randy. Appreciate it.

24:53 Great. Good afternoon, Martyn; Good afternoon, Steve.

This is Poe Fratt from Noble Capital Markets. I need more of an introduction than .

You know, Randy covered a lot of the ground, but he didn’t ask about, you know specifically the option that you have that expires at the end of the year. You know, can you just talk about how you're looking at that and especially with the options that you have below market rates?

Are we looking to similar scenario to what happened last year with a situation where you might be able to buy this at a pretty significant discount even with the purchase options stated at ?

25:49 Yes. That actually purchase option runs through.

And if we don't declare it next year, we can declare the year after or the year after. So, that ship sits there.

We have one other that – the charter expires this year. So, we will be looking at that purchase option, but again Steve on the financial figures, if these ships are very cheap and we actually buy them and pay cash for them, obviously, it comes on to book at very, very attractive levels reduces our whole cost of the fleet down, it's a great position to be in an especially if we're able to sell some of our older and with that cash, basically buy 5, 6 year old ships.

26:35 It's very positive. It's a great position to be in.

We had a very positive board meeting yesterday and it's nice to be able to discuss this. And I think it's now just a matter of timing when we want to pull the trigger.

26:49 Alright. And then if we could talk about the dividend policy, and you know, it’s – you paid out well over the stated minimum on your reported earnings per share, and you even more than made up the share purchase and kept the cash portion at $0.72, how should we be looking at 2022 as far as the dividend?

It doesn't seem like share buybacks at this point in time, as likely as they were in the fourth quarter. So, how should we be looking at the cash dividends in 2022, especially over the first half of the years, when you do have that seasonal weakness?

27:41 I'll let's Steve answer this one. I'm sorry.

We stopped up your research there a little bit, we apologize for that. I know you'd calculated correctly and what we did, yes, and Steve will answer it, but it's a nice position to be in.

27:59 There is a couple of things here, and hopefully, I'll be able to answer all your questions. First, in this quarter, the board decided it’s due to the strong drybulk markets and our healthy cash and liquidity position that we wouldn't deduct the full amount that we had spent on share buybacks.

And we decided to keep the dividends the same as the previous quarters. 28:17 And again, just for a bit of background, if we had deducted the full amount for the share buybacks, the dividend would have been $0.33, and if we had reversed the full – if we had reversed the full share buyback, the dividend would have been $0.88.

28:31 So, in this quarter, the share purchase amounted the equivalent of $0.55 and with a dividend at $0.72 the two of those adding up together, we did distribute more than what our dividend policies at 30%. This quarter it was 42%, but what we must say is that don't take this is a that if we have share buybacks later in the quarter that we won’t deduct it from our dividends.

This decision will be made based on the circumstances at each quarter. 28:59 And in terms of, are we going to buyback?

Again, it’s all share price dependent. We have the ability to buyback and we just will be watching the share price.

29:12 Great. If you could just expand on the minimum is 30%, if it were all cash right now, you'd still see a pretty big drop in the first quarter dividend – the fourth quarter dividend.

And your liquidity position is likely to get better over the course of 2022, especially even in the first quarter of 2022. So, how should we be looking at the cash dividend?

29:45 I think so, the intention is to stick to that policy. As we said, we're looking to pay down some debt.

And as I say, the first of , even though they are all in the money, the cost of the total of the five option ships is over $100 million. So, we can’t put that money to work and we just want to find a good balance.

30:08 Okay. And then, Martyn, can you just talk about – you were talking about, potentially lengthening the book and you're only booking right now four to six months out in advance and potentially you look at the , but the other thing that's interesting out there is that handy’s are trading quotes to supra’s and ultra’s.

And it sounds like it's more related to the container market congestion and what's going on in the container market. But can you just address that situation and how much longer you expect it to continue?

30:51 try to add, because obviously, we have benefited hugely from what's happening in the container market. But also, if you look at the whole handy fleet, especially when we report, we are basically on the fleet of 33,000 , we have some .

The Baltic Index is premised on the so, we’re actually beating the index on smaller ships. 31:16 And those smaller ships, of course, are very popular and the Q4 last year, basically no handysize’s delivered at all.

And that order book is non-existent and the existing fleet is getting older. So, like everything with emerging markets, and new trade routes and what's happening in the world generally these ships are really coming into their own.

31:41 So, it is obviously massively helped by the liner side, but there is really genuine new trades opening up for these ships that because of deadweight draft the bigger ships can't get into and they need gear. It's very, very exciting.

A size that a few years ago was basically being written off, it is now really coming to its own and with no new ships coming, that really does excite us. And yes, I mean supramax earning the same as handy is and both earning vastly more than , which of course once upon a time it could never happen.

32:17 Now, they stay disconnect and hence supra’s, handy’s yes, it's really, really exciting. And I think a lot of trade has changed and maybe some people are bit slow to actually realize exactly what has happened and the handy’s are, yes, they come into their own and they've got a lot further to go by the look of it.

32:41 So, you would argue it's more structural than just somewhat temporary factors?

32:48 It is a combination, but literally with no new ships delivering and if you actually go back to the bad market, especially 2020, a lot of ships was scrapped. So, I think it's structural as well that we are ending up with a size or a ship that has a definitive market and no new supply coming along.

And the icing on the cake of course is the containers . 33:15 We have a few ships on charter to, what would normally be, kind of container or drybulk operators carrying containers, and I don't think that's going away because obviously the fact that there is a shortage of some of these container ships and by taking bulk carriers, we're very flexible and we can go into certain ports we have the gear.

33:37 It's – you never quite know in shipping, but structurally, something has changed and that is very positive.

33:47 Great. Well, I look forward to seeing what 2022 holds in-store for us.

Thanks for your time.

33:56 Thanks Poe for exciting times. Appreciate it.

34:05 Thank you very much everyone. Thank you for listening to us.

It's great results. So, ourselves, very exciting times and things are looking very, very positive going forward.

So, thank you again for joining our presentations call.

34:20 Yes. Thanks everyone.