Pangaea Logistics Solutions Ltd. (PANL) FY 2025 MD&A

Results of Operations

Fiscal Year Ended December 31, 2025 Compared to Fiscal Year Ended December 31, 2024

Revenues

Total revenue for the fiscal year ended December 31, 2025 was $632.0 million, compared to $536.5 million for the same period in 2024, representing an increase of $95.5 million, or 18%. The increase was primarily driven by an increase in total shipping days from 17,407 days in 2024 to 23,329 days in 2025, reflecting the expansion of the Company’s fleet and increased vessel availability during the period. The increase in shipping days contributed approximately $182.4 million of additional revenue year over year. This increase was partially offset by lower market charter rates during the period, which reduced revenue by approximately $86.9 million, as evidenced by a 4% decline in the Baltic Dry Index (BDI) and a 9% decline in average rates for Panamax, Supramax and Handysize vessels.

Components of revenue are as follows:

Voyage Revenues: Voyage revenues increased by 17% to $577.5 million for the fiscal year ended December 31, 2025, compared to $494.1 million for the same period in 2024. The increase was primarily attributable to a 30% increase in voyage days, from 15,669 days in 2024 to 20,322 days in 2025, resulting from the acquisition of the SSI vessels at the end of 2024. This increase was partially offset by lower market rates as discussed above.

Charter Revenues: Charter revenues increased to $39.3 million from $30.3 million, or 29%, for the year ended December 31, 2025 compared to the same period in 2024. The increase was primarily driven by a significant rise in time charter days, which increased 73% to 3,007 days from 1,738 days in the prior-year period. The average time charter rate declined to $13,056 per day from $17,450 per day due to timing of entering into certain time charter arrangements in early 2025 at lower market rates, however the higher number of charter days more than offset the rate decrease, resulting in overall revenue growth. The optionality of our chartering strategy allows the Company to selectively release excess ship days, if any, into the market under time charter arrangements.

Terminal & Stevedore Revenues: Terminal & Stevedore revenues increased by 26% for the twelve months ended December 31, 2025 compared to the same period in 2024 due to the addition of 2 new port operations in the current year.

Operating and Business Expenses

The Components of our expenses are as follows:

Voyage Expenses: Voyage expenses for the fiscal year ended December 31, 2025, were $283.7 million, a 19% increase from $237.5 million for the year ended December 31, 2024. This increase was primarily driven by a 30% rise in voyage days to 20,322 days from 15,669 days in the prior year, reflecting the Company’s expanded fleet. Correspondingly, total bunker, port, and canal costs increased in line with the higher level of operating activity.

Charter Hire Expenses: Charter hire expenses for the fiscal year ended December 31, 2025 were $129.7 million compared to $130.8 million for the same period in 2024, representing a slight decrease year over year. Chartered-in days increased to 9,046 days for the fiscal year ended December 31, 2025, compared to 8,523 days in the prior year. This increase in chartered-in activity was largely offset by lower market charter rates for chartered-in vessels during the period.

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The average published market rates for Supramax, Panamax and Handysize vessels declined approximately 9%, from an average of $13,314 in 2024 to $12,090 in 2025. Consistent with the Company's charter-in strategy, the Company supplements its owned fleet with short-term chartered-in tonnage at prevailing market rates when necessary to meet cargo demand.

Per-day charter hire expenses were $14,342 for the fiscal year ended December 31, 2025, compared to $15,342 for the same period in 2024.

Vessel Operating Expenses: Vessel operating expenses for the year ended December 31, 2025, totaled $94.9 million compared to $55.5 million recorded for the same period in 2024. Ownership days increased to 14,757 days in 2025 compared to 9,107 days in 2024, reflecting the expansion of the Company’s owned fleet following vessel acquisitions during the period. Vessel operating expenses per ownership day increased to $6,434 in 2025 from $6,099 in 2024. Technical management fees totaled $7.4 million in 2025 compared to $4.7 million in 2024, reflecting, in part, the transition of technical management for eight vessels from Bernhard Schulte Shipmanagement (“BSM”) to Seamar, the Company’s wholly owned subsidiary.

Terminal & Stevedore Expenses: Terminal and stevedore expenses increased to $12.2 million for the twelve months ended December 31, 2025, up from $9.3 million for the same period in 2024. This increase was primarily driven by the addition of 2 new port operations in the current year.

General and Administrative Expenses: For the fiscal year ended December 31, 2025, general and administrative expenses were $31.1 million, compared to $24.6 million for the same period in 2024. The increase was primarily attributable to (i) higher compensation-related costs, including a $1.3 million increase in stock-based compensation expense primarily due to a higher stock price and the acceleration of vesting schedules as the Company transitioned from five-year to four-year and subsequently three-year vesting periods over the past three years; and (ii) an approximately $5.1 million increase in payroll-related expenses, driven mainly by overall payroll increases and the acquisition of Strategic on December 30, 2024, which increased headcount and added a new office location in Connecticut.

Depreciation and Amortization: The Company depreciates its vessels on a straight-line basis over their estimated useful lives, which range from 25 to 30 years from the date of initial delivery from the shipyard to the original owner. Depreciation is calculated based on the vessel’s cost less its estimated residual value. The residual value is determined using an estimated scrap rate per lightweight ton (“lwt”). Effective January 1, 2026, the Company revised certain depreciation estimates for its dry bulk vessels. The estimated useful life range was updated from 25–30 years to 25 years, and the estimated scrap rate was increased from $300 per lwt to $400 per lwt, supported by historical demolition prices over the past 15 years.

Depreciation and amortization expense increased by $12.1 million, or 40%, primarily due to an increase in ownership days, which rose to 14,757 days in 2025 from 9,107 days in 2024 as a result of vessel acquisitions.

Gain on sale of vessels: In the year ended December 31, 2025, the Company recorded a gain of $3.0 million related to the sale of two vessels. No gain on sale of vessels were recorded for the year ended December 31, 2024.

Unrealized (Loss) Gain on Derivative Instruments: The Company evaluates risks related to fluctuating future freight rates and bunker prices and, when appropriate, actively hedges identified economic risks that may impact the operating income of long-term cargo contracts through forward freight agreements or bunker swaps. The use of these derivatives may result in period-to-period fluctuations in the Company's reported operating results.

The Company recorded an unrealized loss on derivative instruments of $1.4 million for the year ended December 31, 2025, compared to an unrealized loss of $1.0 million in the year ended December 31, 2024. For further details, refer to Note 7, Margin Account, Derivatives, and Fair Value Measures, in the consolidated financial statements.

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Liquidity and Capital Resources

Liquidity and Cash Needs

The Company has historically financed its capital requirements with cash flow from operations, the issuance of common stock, proceeds from non-controlling interests, and proceeds from long-term debt, financing obligations and finance leases. The Company has used its capital primarily to fund operations, vessel acquisitions, and the repayment of debt and the associated interest expense. The Company may consider debt or additional equity financing alternatives from time to time. However, if market conditions deteriorate, the Company may be unable to raise additional debt or equity financing on acceptable terms or at all. As a result, the Company may be unable to pursue opportunities to expand its business.

At December 31, 2025 and 2024, the Company had working capital of $87.7 million and $82.9 million, respectively. The increase was primarily attributable to higher cash and cash equivalents, partially offset by increases in accounts payable and deferred revenue.

In assessing its ability to continue as a going concern, management considered the Company’s history of generating positive operating cash flows ($53.7 million in 2025, and $65.7 million in 2024), its cash and restricted cash balances relative to current maturities of secured debt, financing obligations and finance leases, and its contract employment strategy through contracts of affreightment (“COAs”). Management believes that projected operating cash flows, together with cash on hand and available borrowings under existing credit facilities, will be sufficient to meet operating and capital requirements for at least the next twelve months. see Part II. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Results of Operations.

The table below summarizes our primary sources and uses of cash for the fiscal years ended December 31, 2025 and 2024.

Operating Activities

Net cash provided by operating activities during the year ended December 31, 2025 was $53.7 million, compared to net cash provided by operating activities of $65.7 million during the year ended December 31, 2024. The decrease was primarily attributable to lower net income during the period, partially offset by higher non-cash expenses, including depreciation and amortization.

Non-cash adjustments included depreciation and amortization of $42.5 million in 2025 compared to $30.4 million in 2024, reflecting a full year of operations from vessels acquired in connection with the Strategic Shipping Inc. acquisition completed at the end of 2024. Drydocking costs also increased during the year as a result of higher drydock activity across the fleet.

Changes in operating assets and liabilities provided $6.2 million of cash in 2025 compared to $1.6 million in 2024. The increase was primarily driven by changes in inventory balances and deferred revenue during the period, partially offset by an increase in accounts receivable. Accounts receivable increased primarily due to higher voyage activity and an increase in voyages in process associated with the Company’s higher shipping days. The increase was also impacted by the timing of customer billings and collections near period end.

Investing Activities

Net cash provided by investing activities was $11.4 million for the year ended December 31, 2025, compared to net cash used in investing activities of $67.7 million in 2024. The year-over-year improvement was primarily driven by $17.2 million of proceeds from vessel sales in 2025 and significantly lower capital expenditures, as no new vessels were acquired during the year compared to vessel acquisitions and other capital improvements in 2024.

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Dividends received from equity method investments increased to $4.1 million in 2025 from $1.9 million in 2024. Cash used for the acquisition of a non-controlling interest totaled $2.7 million in 2025, related to the purchase of the remaining ownership interest in Seamar, which became a wholly owned subsidiary during the year.

Financing Activities

Net cash used in financing activities was $48.6 million for the year ended December 31, 2025, compared to $10.2 million in 2024. The increase in cash used was primarily driven by significantly lower debt proceeds in 2025, as vessel-related financings completed in 2024 were not repeated in the current year.

The Company continued to make scheduled repayments on long-term debt, financing obligations and finance leases, partially offset by refinancing proceeds received during 2025. In addition, the Company repurchased $3.0 million of ordinary shares and paid $16.3 million in common stock dividends during 2025, reflecting a lower quarterly dividend rate compared to 2024. Payments to non-controlling interests recorded as a long-term liability in 2024 did not recur in 2025 following the acquisition of the remaining ownership interest.

Capital Expenditures

Capital expenditures primarily relate to vessel acquisitions, ownership interests in vessels and capital improvements that enhance fleet efficiency, safety and regulatory compliance.

As of December 31, 2025, the Company’s consolidated fleet consisted of 39 dry bulk vessels, including nine Panamax vessels (six Ice Class 1A), eight Supramax vessels, four Ultramax vessels (including two Ice Class 1C), four Post-Panamax Ice Class 1A vessels and fourteen Handysize vessels.

In addition to vessel acquisitions that the Company may undertake in future periods, its other major capital expenditures include funding its program of regularly scheduled drydockings necessary to maintain and improve its vessels and to comply with international shipping standards and environmental laws and regulations. The Company has some flexibility regarding the timing of drydockings; however, the total cost of these expenditures is unpredictable.

In addition to potential vessel acquisitions, major capital expenditures include regularly scheduled drydockings necessary to maintain and improve vessels and comply with international shipping and environmental regulations. The Company expects to perform thirteen special surveys in 2026 at an aggregate cost of approximately $15.7 million and two intermediate surveys at an aggregate cost of approximately $3.0 million. Offhire related to these surveys is expected to range from ten to twenty days per vessel. These expenditures are expected to be funded from operating cash flows.

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosures. Certain estimates involve a higher degree of judgment and complexity because they require management to make assumptions about matters that are inherently uncertain.

We consider an accounting estimate to be critical if the estimate requires significant judgment and if different assumptions could materially affect our financial condition or results of operations. Management evaluates its estimates on an ongoing basis using historical experience, current market conditions and other factors believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Vessel Asset Impairment

Vessels represent the most significant component of the Company’s total assets. The evaluation of vessel impairment requires significant judgment due to the cyclical and volatile nature of the dry bulk shipping industry and fluctuations in vessel market values and charter rates.

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The Company reviews its vessels for impairment when events or changes in circumstances indicate that the carrying value of a vessel or vessel group may not be recoverable. Possible indicators of impairment may include events or changes in circumstances affecting the legal environment, the business climate, market value, extent or manner of use, and physical condition of the vessel asset. When such events or changes in circumstances exist, the Company evaluates its vessel assets for impairment by comparing undiscounted future cash flows expected to be generated over the life of each vessel asset to the respective carrying amount. If the Company’s estimate of undiscounted future cash flows for any vessel asset for which indicators of impairment exist is lower than the vessel asset’s carrying value, and the vessel’s carrying value is greater than its fair value, the carrying value is written down, by recording a charge to operations, to the vessel asset’s fair value as provided by third parties.

Estimating future cash flows requires management to make significant assumptions regarding future time charter equivalent (“TCE”) rates, vessel utilization, operating costs, drydocking expenditures and residual values. Because these assumptions are influenced by global shipping demand, vessel supply and broader economic conditions, they are subject to significant uncertainty.

Future TCE rates represent the most significant assumption in the impairment analysis. For periods covered by existing charters or contracts, contracted rates are used. For periods beyond existing contracts, the Company estimates future TCE rates based on historical performance, current market conditions and industry outlook.

For the years ended December 31, 2025 and 2024, the Company concluded that no impairment indicators were identified and therefore no impairment testing or impairment charges were required.

Changes in assumptions, particularly future charter rates or vessel market values, could materially affect the Company’s impairment analysis and could result in impairment charges in future periods.

Revenue Recognition – Voyages in Process

Revenue from voyage charters is recognized over time as the performance obligation is satisfied, generally from the commencement of loading through the completion of discharge. As of each reporting period, the Company estimates the proportion of voyages in process to determine the amount of revenue to recognize.

Estimating voyage progress requires management to make assumptions regarding the stage of completion of voyages at the reporting date. These estimates affect the amount of revenue recognized during the reporting period as well as related balances such as accounts receivable and deferred revenue.

Changes in estimates of voyage progress or voyage duration could affect the timing of revenue recognition between reporting periods.

Borrowing Activities

As of December 31, 2025 and 2024 the Company’s borrowing activities primarily consisted of:

•Long-term secured debt, refer to "Note 9, Secured long-term debt" for detail information

•Financing obligations, refer to "Note 9, Secured long-term debt" for detail information

•Finance leases, refer to "Note 10, Finance leases" for detail information

Related Party Transactions

Refer to "Note 8, Related party transactions"

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as of December 31, 2025 or 2024.