StealthGas (GASS) Q2 2026 Earnings Call Transcript

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DATE

Wed., Sept. 2, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer - Harry N. Vafias
• Chairman - Michael G. Jolliffe
• Investor Relations - Konstantinos Sistovaris

TAKEAWAYS

• Revenue -- $42.8 million in the second quarter, representing a decrease from the record $47 million reported in the second quarter of the previous year.
• Net Income -- $17.3 million, representing an improvement from the $15.9 million achieved in the first quarter of 2026.
• Earnings Per Share -- $0.46 for the second quarter, contributing to a total of $0.89 for the first half of 2026.
• Total Liquidity -- Over $250 million currently, reflecting cash from operations and the settlement of the EchoWizard insurance case.
• Cash and Short-term Investments -- $168.3 million as of June 30, 2026, which is a 70% increase from the $99 million held at the beginning of the year.
• Insurance Settlement -- $77 million, received following the successful conclusion of the EchoWizard insurance case.
• Debt Balance -- Zero outstanding leverage, following the prepayment of $350 million in debt over the last few years.
• Share Repurchases -- Approximately $21 million spent since 2023, though management halted buybacks in the second quarter due to the appreciation of the share price.
• Vessel Sales -- 13 vessels sold since the beginning of 2023 for approximately $170 million, reducing the fleet from 40 to 25 vessels.
• Future Revenue Backlog -- $90 million in total secured revenues for all future periods up to 2029.
• Remaining 2026 Coverage -- 60% of fleet calendar days secured for the remainder of 2026, representing $50 million in expected revenue.
• 2027 Revenue Guidance -- $30 million in secured revenue for 2027, with forward coverage standing at 45%.
• Voyage Expenses -- $7.2 million, driven by higher bunker expenses and additional insurance premiums for vessels operating in the Persian Gulf.
• Operating Expenses -- $12.8 million for the quarter, or $5,110 per vessel per day.
• Net Profit Margin -- 40% for the second quarter, with every dollar of revenue converting to $0.40 of profit.
• Financial Gains -- $1 million, resulting from a reduction in interest costs and an increase in interest income.
• Sale and Purchase Gains -- $1.3 million, generated from vessel trading activity during the quarter.
• Time Charter Equivalent Rate -- $15,700 per vessel per day across the fleet.
• Global LPG Exports -- 8% decline in global exports during the first half of 2026, primarily due to the conflict in the Persian Gulf.
• US LPG Exports -- 2.9 million barrels per day in May 2026, setting a record as more product was sourced from the United States.
• MGC Order Book -- 40% of the existing fleet, representing a significant number of new vessels scheduled to enter the market.

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RISKS

• Jolliffe stated, "if the situation persists in the longer term, it could lead to demand destruction," referring to the ongoing geopolitical conflict in Iran and the Middle East.
• Vafias noted that "the passage is dangerous again as both sides target vessels going through," regarding the transit of the Strait of Hormuz.
• Jolliffe warned that the MGC order book sitting around 40% of the existing fleet "could prove detrimental to rates in the future if demand does not keep pace."

SUMMARY

Management reported a quarter of high profitability despite a reduction in total revenue compared to the previous year, driven by the strategic downsizing of the fleet and a debt-free balance sheet. The company has focused on selling older tonnage to capitalize on high asset prices while maintaining a 40% profit margin. The conflict in the Middle East has disrupted traditional trade routes, leading to an 8% drop in global LPG exports from the region while increasing tonne-miles as cargoes shift to the United States. Management indicated that current liquidity of over $250 million provides flexibility for future fleet renewal and opportunistic expansion.

• The company relocated a smaller vessel from the Far East to Northwest Europe during the summer, as rates west of Suez were reported to be approximately 30% higher.
• CEO Vafias reported that a larger vessel previously stranded in the Persian Gulf safely exited the Strait of Hormuz during the summer, though the passage remains hazardous.
• Chairman Jolliffe indicated that US LPG exports currently account for 55% of the world supply, with US propane exports increasing 9% in the second quarter.
• Demand for LPG in major Asian markets registered significant declines, with India seeing a 20% drop and China seeing a 29% fall in imports during the second quarter.
• Chairman Jolliffe noted that drought conditions caused by El Niño have led to increasing fees and potential restrictions for vessels passing through the Panama Canal.
• Management completed four of five scheduled dry dockings for the year during the first half, with one vessel remaining for the second half of 2026.

INDUSTRY GLOSSARY

• cbm: Cubic meters, the standard unit of measurement for the capacity of LPG carriers.
• Handysize: LPG carriers with a capacity typically between 15,000 and 25,000 cubic meters.
• LPG: Liquefied petroleum gas, a mixture of flammable hydrocarbon gases including propane and butane.
• MGC: Medium gas carrier, typically ranging between 30,000 and 45,000 cubic meters in capacity.
• S&P: Sale and purchase, referring to the activity of buying and selling secondhand vessels.
• TCE: Time charter equivalent, a shipping industry standard used to calculate the average daily revenue performance of a vessel.
• VLGC: Very large gas carrier, the largest class of LPG ships with capacities often exceeding 70,000 cubic meters.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the StealthGas Second Quarter 26 Results Conference Call and Webcast. At this time, all participants are in listen-only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Harry N. Vafias.

Harry N. Vafias: Good morning, everyone, and welcome to our second quarter 2026 earnings and conference call. This is Harry Vafias, the CEO, and joining me today is as usual our Chairman, Mister Jolliffe, and Sistovaris from Investor Relations. Before we commence the presentation, I would like to remind you that we will be discussing forward-looking statements which reflect current views with respect to future events and financial performance. And are subject to material risks and uncertainties. So if you could all take a moment to read our disclaimer on Slide 2. Risks are further disclosed in our filings with the Securities and Exchange Commission. Let's proceed on Slide 3 for an overview of the quarter and our strategy implementation.

While the market for the second quarter was relatively stable, for the smaller ships and strengthening for the larger ones, our company managed to achieve revenues of 42.8 million similar to the previous quarter, but somewhat reduced from the record of 47 million achieved last year. The company continued to generate superior returns with profits of 17.3 million for the quarter, improving on the $15.9 million achieved in the previous quarter. Thus far in 2026, the performance has been very strong, reporting earnings per share of $0.46 for the second quarter and $0.89 for the first half, underlying the fact that the company stock is very attractive on a price to earnings multiple.

Our focus has been on delivering on our strategic principles. In terms of our commercial strategy, that means keeping visible revenue stream and reducing our exposure to the volatile spot market. Currently, 45% of the fleet calendar days are covered by the time charters and total secured future revenues are 90 million. The company has also made prudent use of its capital by mostly paying down its debt over 350 million of debt prepaid over the last few years. Being 1 of the few public shipping companies having achieved zero leverage. While at the same time allocating funds for a share repurchase program and having spent about $21 million in buyback since 2023.

But as the share price has appreciated, we would not buy back any shares during the second quarter. it is also part of our strategy to sell older tonnage while the market is high in order to crystallize returns and improve the averages of the fleet. With 13 vessel sales excluding JV vessels, since the start of 2023 but have amounted to approximately a 170 million. We have reduced the overall fleet from approximately 40 vessels at the start of 2023 down to 20-5 vessels. With the last latest exits, vehicle was a direct and just this week, the delivery of the Echo Royalty.

We will continue to sell older and smaller tonnage although the market for LPG vessels is not very liquid in that respect. This has also allowed us to raise cash and improve the liquidity of the company. As of June 30, the cash position was 168 million. Since then, through our operational cash flow and especially the money received after successful conclusion of the EchoWizard insurance case, of over 77 million. So current liquidity has grown to over $250 million. With our cash sitting at an all-time high no outstanding issues, the market being firm, in a favorable position to deploy some of the liquidity. We have always been patient and conservative in deploying funds.

Our board is reviewing all the options with a focus on the long term benefit of our company and its shareholders. On slide 4, we see our fleet employment as of September. Charging activity was relatively consistent over the past few months. We did conclude 4 new pure charts of 3 months or longer. 1 of those was for 2 years, 1 for 1 year, and the other 2 were for 6 months extensions. That leaves 4 ships operating in the spot market including 2 of the handy sizes. As we enter the winter months, we expect to find more opportunities to secure more time charters. Overall, we continue to maintain high period coverage, albeit lower than in the past.

As of September, for the remainder of 2026, we have secured 60% of the fee days bringing about 50 million in revenues for the remainder of the year. for 2027, we have secured about 30 million in revenues. 1 year forward coverage stands at 45%. The total revenue secured for all future periods up to 2029 are about 90 million. Which is slightly below where we would like, but with the market being historically high, and the uncertainty surrounding the geopolitical situation, some charters are hesitant to commit to longer term business at historically high day rates. In term of dry docking, 5 ships were scheduled during this year. So far, 4 of these were completed.

During the first half, and 1 vessel remains to be dry docked in the remainder of the year. Looking at the geographical allocation of the fleet, on slide 5, our company mainly focuses on regional trade and local distribution of gas, while the larger ships mostly engage in inter intercontinental voyages like loading in the in the US. Produced discharge in Europe. We continue to position the majority of our fleet, 2-thirds West of Suez, particularly in Europe and the Med, where rates can be about 30% higher than in the East and with the more active spot market.

The 1 smaller ship we had in the Far East, we decided to relocate West during the summer as it faced increased of highs and is now trading in Northwest Europe. East of Suez, we only have 1 of our vessels remaining. The larger vessel that was stranded for some time inside the Persian Gulf, Harry in the summer, when there seemed to be a lot of hostilities, that vessel managed to safely exit the Hormuz Strait. The ceasefire, unfortunately, proved to be brief, and now the passage is dangerous again as both sides target vessels going through. Yet, as we hear in the news, there are still corridors being used in some vessels still managed to make this passage.

I am now handing you over to Mister Sistovaris for the financial performance.

Konstantinos Sistovaris: Thank you, Harry. Starting with slide 6 where we have a snapshot of the income statement for the second quarter against the same period of 2025. The second quarter was a very profitable quarter that would rank amongst the 4 best quarters on record, both in terms of revenue generation and overall profitability. However, when compared to last year, the reduced number of operational vessels in the fleet as well as an increase in idle time for the 3 of the smaller vessels operating in the spot market showed a reduction in revenues to the level of 42.9 million which was same as the previous quarter, the first quarter of 2026.

Voyage expenses were higher at 7.2 million mainly as a result of increased bunker expenses and some additional insurance premiums related to the Persian Gulf. That would give a time charter equivalent rate of $15.7 thousand per vessel per day. Operating expenses were flat at 12.8 million for the quarter albeit with a smaller fleet as there was that there were cost pressures, particularly related to crew expenses. That being said, with an average of operating expenses around $5.11 thousand per vessel per day, the company continues to run amongst the most efficient shipping operators in terms of cost structure.

This quarter, only 1 vessel was dry docked towards the end of the quarter, so we may have some spillover next quarter. Another item that influenced the results this quarter positively was a small gain of 1.3 million from the S&P activity. Also note that we benefited by an increase in financial gains of $1 million as we saw both a reduction in interest costs and an increase in interest income compared to last year. As the company no longer pays any loan interest following the debt extinguishment and has considerably increased its cash balances. Net income for the second quarter was 17.3 million, 15% below the 20.4 million achieved last year.

Earnings per share for the quarter were $0.46, on an adjusted and non-adjusted basis. The company continues to operate on a very high profit margin of 40%, meaning for every dollar of revenue, is converted to $0.40 of profit. Looking at the balance sheet at the next slide, 7, as of 6/30/2026, the most important point to consider is the fast growth in the company's cash position. In the space of 6 months, the company grew its liquidity consisting of cash and short term investments by 70% from 99 million to 168.3 million. This 70 million increase in the liquidity position was achieved through the sale of 2 small vessels and a $40 million improvement in operational cash flow.

Vessels held for sale as of June 30 was $10 million with the proceeds expected to boost the cash position in Q3. The book value of the 20-4 vessels in the fleet was 473 million, reduced by 3.7%. Current assets were steady at 81.5 million with a large part the 64 million being the book value and related expenses of the medium gas carrier, as this was resolved in the next quarter the company received all the proceeds and more, based on the market values and this will be moved to the cash in the next quarter.

On the liability side, we want to show again that debt remains zero debt and the total liabilities of the company are a mere 28 million. All current, mainly trade payables from its operations and deferred income from monthly hires. In a very short time, the company has achieved 1 of the healthiest balance sheets in the shipping space. Shareholders' equity increased over the 6 month period by 36.4 million to 726 million. A 5% increase. Moving on to slide 8, where we repeat how StealthGas achieved its strategic goal of deleverage. The company in the past always relied on moderate leverage to finance its capital requirements.

Since the beginning of 2023, in a little over 2.5 years, our cash flow improved, it, it aggressively repaid about 350 million and became, in July 2025, A little over a year ago, for the first time, a debt free company. The elimination of bank debt enhanced dramatically the financial flexibility of the company. When the time comes for expansion. While at the same time achieving significant savings in interest costs with no debt amortization or interest payments the cash flow breakeven for the fleet is significantly reduced.

Enhancing the fleet competitiveness while at the same time and also due to S and P activity, liquidity has been improving every quarter and is at the highest point it has ever been. I will now hand you over to our Chairman, Mister Michael Jolliffe, for some insights on the market.

Michael Jolliffe: Good morning. At the forefront, of course, is the conflict with Iran. And the closure of the straits. 1-third of LPG supply came from The Middle East and the majority going through the Straits of Hormuz. As a result of the conflict in the Persian Gulf, global exports of LPG in the first half of 2026 fell by 8%. This is certainly a large number, and would have led to significant downward pressure in rates were it not for the increase in tonne miles. Instead, rates for VLGCs hit new records and continue to remain at very high levels as more product was sourced from The US.

It was reported that US LPGX exports hit a record of 2.9 million barrels per day in May, while EIA data show that propane ex exports were up by 9% in the second quarter. Many vessels previously trading in Middle East have been repositioned to The US, and many of these, once loaded, returned to the Far East taking the longer route via the Cape of Good Hope. A 45-day journey adding significant ton miles to the equation. We also read reports lately of increasing Panama Canal fees and possible restrictions in the number of vessels passing through there, due to low water levels, result of drought caused by El Nino.

This ramp up of US exports is an ongoing theme. As exports from The US have been rising consistently for many years, and The US currently accounts for 55% of the world's air FPG supply. As previously discussed, the expansion of terminals in The US will continue with projects running into the early 2030s, and the more recent news on that front was that Energy Transfer announced in June another project to increase export capacity from Netherland. On the other side of the Atlantic, Europe remained well supplied with US product. As more propane cargoes entered the continent, the propane and naphtha differential induced petrochemical producers to favor the former keeping the market active.

In addition, 2 crackers in Ternes Inn and Sea Nest came back online after a long absence supporting petrochemical demand. On the other hand, residential demand weakened as a result of lack of heating needs during the summer. There may be premature expectation of the conflict resolution seen in backward dated future prices also discouraged stock building. So while Europe remained well supplied the situation in the Strait of Hormuz has not changed. Asian countries imported 46% of their LPG supply from that area, before the conflict began.

Now we only see a handful of LPG vessels daring to cross the straits while efforts to bypass the straits and export through Oman or the Red Sea produced some additional volumes not enough to cover Asian customers. Recently, the Houthis have started targeting Saudi vessels while in the Red Sea, and if this escalates, it could become another blocked choke point. As a result of the geopolitical turmoil demand in Asia, registered large drops India, the second largest importer of LPG, saw demand fall by 20%. But the establishment of new trading routes is going to have a longer lasting effect once the conflict ends.

Last month, it was reported in the Indian press that there are plans to diversify the sources of LPG and start importing at least 25% from The US through supply contracts with US exporters. To remind you, it was about a year ago during the trade disputes that India had just announced they would increase their LNG imports from The US from nearly 0 to 10%. Similar to the situation in India, China, the world's largest importer of LPG, saw imports fall by 29% in the second quarter.

The temporary reopening of the straits during July saw a temporary surge in imports, but demand remains weaker as a result of continuous low utilization rates from PDH plants, and higher propane prices, and that has an effect on local trading smaller vessels. The conflict in Iran has shown how important it is to have resilient supply chains and the need for strategic reserves. For the time being, it seems the conflict has entered a stalemate. The beneficiaries at this point are The US exporters and shipping, But if the situation persists in the longer term, it could lead to demand destruction.

And longer term investments could be abandoned, be it production facilities in The Middle East like the Qatari projects, or PDH plants in China. After this brief overview of the product market, let us move to how our shipping market has performed over this period. Moving to slide 10 to update you on the commercial side. The spot market in Quarter 2 followed the typical seasonal trend of softening compared to Quarter 1. Although rates have still remained at firm levels compared to the historical average. TCE rates remained relatively flat as the balance between tonnage supply and demand has remained relatively balanced with limited movement of vessels in and out.

There were a handful of new orders for vessels, enough to keep the supply steady at a low pace. I am not worried about the order book as for quite some time now, it has been restrained. While the existing fleet has a large number of older vessels, that will eventually need to be scrapped. Roughly 1-third of the fleet is over 20 years of age but with the firm market, we continue to see only a few vessels being decommissioned. Handysize owners enjoyed a firming spot market in Quarter 2 as the effects of the US Iran war and the Hormuz closure trickled down from the larger sizes.

LPG trading on the handies became more active as the MGCs disappeared from the position lists. On the time charter side, rates are holding at historically very firm levels. Again, there were no new orders for this size of vessel and the current order book sitting close to 10% over the next few years remains very healthy. The MGC spot market got a significant boost in Quarter 2 as the VLGCs shot up to all time highs following the closure of Hormuz and the significant increase in US loadings. To compensate for the AG shortfalls. This led to significant increase in the requirements for transatlantic voyages on the MGCs, with swap rates jumping to levels never seen before.

Time charter rates improved significantly through Quarter 2 and are currently sitting at historically very firm levels. The firming market helped absorb the incoming new buildings as we are now in a period where the vessels previously ordered are starting to enter the fleet. Unlike the VLGC market where once more we saw a larger number of orders being placed over the last 3 months, the MGC order book with no new orders has started coming down. Yet the order book sits around 40% of the existing fleet, And while in the short term, conflicts of increased tonne miles, it could prove detrimental to rates in the future if demand does not keep pace despite the optimism.

To conclude today's presentation, the second quarter was challenging to navigate due to the developing geopolitical turbulence. Through our strong operating platform and solid business, we once more reported superior returns for our shareholders. For the first 6 months of this year, we already recorded earnings per share of $0.89. We are confident that profitability will remain elevated in the second half of the year. After having successfully resolved all major outstanding issues, our attention turns to the optimal utilization of our growing liquidity. That has reached an all time high of over $250 million currently.

Our intention is to invest in renewing the fleet We have placed StealthGas in the very fortunate position of having a fully flexible balance sheet with zero debt and a growing cash pile operating in a niche market with solid fundamentals. We have now reached the end of our presentation. We would like to thank you for joining us at our conference call today We look forward to having you with us again at our next conference call for our third quarter results. Thank you.

Operator: This concludes today's conference call. Thank you. You may now all disconnect. Have a nice day.

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