Business Context and Reporting Period
Company: Navios Maritime Partners L.P.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Date: November 29, 2021
Reporting Period: Three and nine months ended September 30, 2021 (unaudited).
Overview: Navios Partners is an international owner and operator of dry cargo and liquid vessels. The reporting period reflects significant growth following the completion of the merger with Navios Maritime Containers L.P. (NMCI Merger) on March 31, 2021, and the acquisition of control over Navios Maritime Acquisition Corporation (Navios Acquisition) on August 25, 2021. As of November 23, 2021, the fleet consisted of 26 Panamax, 24 Capesize, 4 Ultra-Handymax, 43 Containerships, and 45 Tankers, plus several bareboat charter-in vessels.
Key Financial Metrics
| Metric ($ in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 |
|---|---|---|---|---|
| Time Charter & Voyage Revenues | $445,029 | $157,538 | $227,957 | $64,499 |
| Net Income (Loss) | $394,787 | $(18,374) | $158,195 | $6,991 |
| Net Income Attributable to Unitholders | $398,646 | $(18,374) | $162,054 | $6,991 |
| EBITDA | $426,160 | $48,814 | $177,185 | $29,143 |
| Adjusted EBITDA | $269,828 | $64,294 | $145,234 | $30,923 |
| Operating Surplus | $183,059 | $19,314 | $104,693 | $16,011 |
| Net Cash Provided by Operating Activities | $148,153 | $68,700 | $70,904 | $21,025 |
| Time Charter Equivalent (TCE) per Day | $20,991 | $11,917 | $24,447 | $13,652 |
| Fleet Utilization | 99.1% | 98.7% | 99.2% | 99.4% |
| Total Borrowings (Net of Deferred Costs) | $1,425,231 | $486,857 | N/A | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Nine-month revenues increased 182.5% to $445.0 million, driven by a 62.5% increase in available fleet days and a 76.1% increase in TCE rates due to the NMCI Merger and Navios Acquisition consolidation.
- Profitability: Net income swung from a loss of $18.4 million in the prior year to a profit of $394.8 million. This includes significant non-cash items: an $80.8 million gain on equity in net earnings of affiliated companies (Navios Containers remeasurement) and a $48.0 million bargain purchase gain.
- Expense Increases: Vessel operating expenses rose 73.5% to $118.7 million, and depreciation increased 62.3% to $67.3 million, primarily due to the expanded fleet size.
- Debt Expansion: Total borrowings increased from $486.9 million to $1.425 billion to finance vessel acquisitions and refinance existing indebtedness following the mergers.
- Asset Sales: The company recorded a $30.3 million gain on the sale of seven vessels during the nine-month period.
Guidance, Outlook, and Risks
Management Commentary: Management believes the company has adequate financial resources to meet commitments for at least twelve months. The company intends to operate vessels in the long-term charter market to ensure consistent revenue streams. A quarterly cash distribution of $0.05 per unit was declared for the period ended September 30, 2021.
Outlook: Future results depend on global economic conditions, charter rates, and the ability to reinvest cash accretively in fleet renewal. The company expects to continue expanding its fleet through acquisitions and bareboat charters.
Risks and Contingencies:
- Market Risks: Exposure to fluctuations in charter rates, vessel values, and global trade volumes.
- Operational Risks: Potential disruption from the COVID-19 pandemic, piracy, political events, and vessel maintenance costs.
- Financial Risks: Interest rate risk (floating rate debt based on LIBOR) and the ability to refinance debt on attractive terms.
- Concentration Risk: Singapore Marine Pte. Ltd. represented 14.8% of revenues for the nine months ended September 30, 2021.
Key Facts for Investor Verification
- Merger Impact: Verify the sustainability of earnings excluding the $128.8 million in one-time gains (equity remeasurement and bargain purchase) included in the nine-month net income.
- Debt Covenants: Confirm continued compliance with financial covenants, specifically the EBITDA to interest expense ratio (minimum 2.00:1.00) and minimum net worth requirements, given the significant increase in leverage.
- Charter Expirations: Review the fleet charter expiration schedule; a significant portion of the fleet has charters expiring in 2022, exposing the company to spot market volatility upon renewal.
- Related Party Transactions: Note that vessel operating expenses are entirely through related party transactions (Managers), and significant vessel acquisitions were made from affiliates (Navios Holdings).
- Liquidity: Monitor cash flow from operations against the $262.2 million in capital expenditures incurred during the nine-month period.