CatchMark Timber Trust, Inc. Class A

After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ursula Godoy, Chief Financial Officer. Please go ahead.

Good morning, and thank you for joining us for our review of Catchmark Timber Trust results for fourth quarter and full year 2021. I am Ursula Godoy, Chief Financial Officer of Catchmark. Joining me today on the call are Chief Executive Officer Brian Davis and Chief Resources Officer Todd Wright. During this call, Catchmark management will make forward-looking statements. These forward-looking statements are based on management's current beliefs and the information currently available. Catchmark's actual results will be affected by certain risks and uncertainties that are beyond its control or ability to predict and could cause our actual results to differ materially from expectations. For more information about the factors that could cause such differences, we refer you to our 2020 Annual Report on Form 10-K and subsequent reports that we filed with the SEC. Today's presentation includes certain non-GAAP financial measures. Reconciliations of these measurements are included in our fourth quarter 2021 earnings release and financial supplement, which are posted on our website. After our presentation, Brian, Todd, and I will be pleased to answer any of your questions. Now, I turn over the call to Chief Executive Officer Brian Davis.

Thanks, Ursula. Good morning, everyone, and thank you for joining us today for our review of 2021 fourth quarter and full year results. as well as 2022 company guidance. I also want to reiterate yesterday's declaration of a quarterly cash dividend of 7.5 cents per share for Catchmark common stockholders of record as of February 28, 2022, payable on March 15. With hindsight, 2021 will be viewed as a crucially important year for Catchmark. It culminated in a strengthened company with a simplified business model focused on operations, in one of the world's most important and increasingly dominant wood baskets, the U.S. South. We are clearly positioned for success, as powerful macro forces are working to drive sustainable product price appreciation in catchmark markets. Our operating model, based on delivered wood and opportunistic stumpage sales from our prime timberland harvests and premier mill markets, continues to prove out in delivering substantial timber sales pricing premiums. and we continue to achieve the highest productivity per acre among our peer set while maintaining consistent per acre stocking levels. Retail demand for our land sales remains robust. Following the completion of recent strategic large dispositions and the Triple T exit, we have significantly strengthened our balance sheet and have ample capital available to support a disciplined acquisition strategy. We also are pursuing exciting options for solar, carbon sequestration, and wetlands mitigation banking to maximize both the near-term cash flow potential and long-term value of our timberlands. Recently, we signed a 4,000-acre lease with a solar developer and have option agreements on almost 8,000 acres with other solar developers. From a results standpoint, for full year 2021, we realized net income of $58.4 million or $1.20 per share. We met our 2021 guidance for adjusted EBITDA at the higher end of the guidance range. We generated a record $47.2 million of net cash provided by operating activities, 17% higher than 2020. We produced CAD of $34.1 million and paid total cash distributions of $23.3 million to shareholders. The resulting payout ratio was below our historical range of 75% to 85% of cash available for distribution. We achieved full-year U.S. South pricing for pulpwood and salt timber, 17% and 14% higher than in 2020, respectively, driven by strong market fundamentals. And we concluded a major capital recycling program and refocused efforts on U.S. South expansion. Regional household formation and home construction, mill expansions, and ongoing decline of Canadian market competition due to pine beetle infestation and British Columbia harvest deferrals have helped and should continue to help increase demand in the U.S. South and create sustainable pricing tension, particularly in catchmark superior markets where we consistently have outperformed. All indicators point to significant growth in the U.S. South. for the lumber, pellet, and pulp industries, leading to tightening wood markets and price appreciation over time. It's the largest wood market in North America and the only region which is appreciably expanding. The pellet industry is the fastest growing not only in North America, but also globally. And sawmills are also expanding to meet increased demand, especially given longstanding and ongoing population growth in the region. We believe we are strategically concentrating our operations and focusing on prime timberlands and leading mill markets in the right place at the right time. Fourth quarter 2021 results highlight our transition to a simplified, stronger business model, which is bolstered by ongoing product price appreciation. Net income of $33.9 million and earnings per share of 70 cents resulted primarily from the company's exit from the Triple T joint venture. proceeds from which were used to repay debt and further improve the company's capital position. The significant timber sales price increases in our harvest operations cushioned planned lower harvest volume, revenues, and adjusted EBITDA following the Triple T exit and abandoned sale. For the quarter, U.S. South timber sales pricing was 32% and 21% higher than prior year for pulpwood and salt timber, respectively. Our blended pricing for pulpwood and salt timber has increased sequentially for three out of the last four quarters. Lower asset management fees resulted from the Triple T exit, but Dawsonville Bluffs continued to generate fees and incentive base promotes from managing successful wetlands mitigation banking activities. This is an environmental initiative we intend to expand into further as part of our growth strategy. Selling fewer timberlands across the quarter compared to fourth quarter 2020 was due to timing, as most of 2021 sales occurred earlier in the year. During the quarter, we achieved significantly higher pricing year-over-year on acres with lesser stocking levels while contributing to meaningful year guidance targets for timberland sales. We have consistently achieved pricing above market averages on timber sales for both pulpwood and salt timber. and expect this will be a key differentiator in catch mark performance going forward. The results have been and will be directly attributable to our investments in prime timberlands and operations in leading mill markets using delivered and opportunistic stumpage sales. We are very confident about generating predictable, stable cash flow and delivering fully covered dividends within or below our historical payout ratio of 75% to 85% of cash available for distribution. At the same time, utilizing our strengthened balance sheet, we are moving forward to grow through acquisitions of high-quality timberlands and leading U.S. mill markets that can capitalize on our successful model. That means remaining disciplined and prudent in seeking investments that can sustain our industry-leading harvest EBITDA per acre and market pricing premiums. while also maintaining stable per acre merchantable inventory. Opportunities pursuing carbon sequestration, wetland mitigation banking, and solar energy also remain underway. In summary, 2021 marked the end of a transition period of simplifying and strengthening Ketchmark's business model. It marked the end of our capital recycling program, focused on large dispositions, including the successful Bandon sale. and it also marked the end of our involvement with Triple T. We head into 2022 with a clear strategy based on focusing our activities in not only the nation's premier woodbasket, but also one of the leading timberland regions in the world, the U.S. South. The U.S. South, more than any other region in North America, is in the midst of a significant expansion supported by economic drivers that should help ensure steady demand for catchment harvest and support attractive price appreciation. We are taking full advantage of our investments in prime timberlands and leading U.S. south mill markets, utilizing our very successful delivered wood and opportunistic stumpage sales model. Our focus is on continuing to deliver our sizable pricing premiums on timber sales, sustain our timberlands, using superior stewardship practices to maintain their attractive stocking and productivity levels over time. and make new investments that fit our model to grow durable cash flow and shareholder value. Now, Ursula will cover fourth quarter and full year's results in greater detail, as well as review our capital positioning.