CatchMark Timber Trust, Inc. Class A

Good morning and welcome to the Catchmark Timber Trust first quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press stars and one on your touchtone phone. To withdraw your question, please press stars and 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 first quarter 2022. 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 Rice. 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 2021 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 first quarter 2022 Earnings Release and Financial Supplement, which are posted on our website, and on Form 10-Q filed with the SEC yesterday, May 5, 2022. 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.

Thank you, Ursula, and good morning, everyone. We appreciate you joining us today for our review of first quarter 2022 results. We had an exceptional start to the year. In the first quarter, Catchmark again demonstrated how our business model delivers consistently strong operating results. We are now focused on owning prime timberlands entirely in leading U.S. south mill markets, where our delivered wood sales, supplemented by opportunistic stumpage sales, again generated superior pricing, well above market averages, and registering significant year-over-year increases. Our net timber sales prices increased by 30% for salt timber year-over-year, a company record. Pulp wood pricing also increased a solid 8% year-over-year. We continue to achieve significant timber sales pricing premiums above market averages, 47% higher for salt timber and 37% higher for pulpwood. As a result, we generated 17% higher timber sales revenue year-over-year in the U.S. South, despite lower planned harvest volumes. And our industry-leading harvest productivity per acre held steady on an annualized basis as compared to our three- and five-year averages. These are great operating results. Retail land sales also made a major contribution to our first quarter results, and we are well on our way to meeting full-year guidance for timberland sales. From 11 retail land sales during the quarter, we received a total of $6.1 million in proceeds, more than 35% of our total timberland sales targets for the year. Demand has been strong, and we have been able to get strong pricing for acreage with stocking and productivity characteristics below our portfolio averages. Lower year-over-year investment management results were due to lower asset management fees associated with the Triple T exit as the related transition services agreement expired at the end of the quarter. But we continue to recognize income from the Dawsonville Bluffs joint venture, which is capitalizing on strong demand for its wetlands mitigation credits. Since 2017, when we acquired Dawsonville Bluffs, The market price for its mitigation credits has risen from approximately $30 per credit to $94 as of the first quarter, a 210% increase. For the quarter, we realized $3.2 million of net income, or 7 cents per share, achieved adjusted EBITDA 15% above the prior year quarter and produced a 34% increase in cash available for distribution year over year. Yesterday, we declared a cash dividend of $0.75 per share for common stockholders of record as of May 31, 2022, payable on June 15. We anticipate performance momentum in our operations from the first quarter to carry into coming quarters, especially in terms of salt timber pricing. For the full year, we now expect to achieve salt timber pricing approximately 20% above 2021 levels. based on strong demand for new housing, even in the rising interest rate environment. Although the economy presents a mixed picture of low unemployment and wage growth, countered by high inflation and rising interest rates, demand for new housing hasn't wavered despite increased mortgage rates. Builder backlogs are at or near all-time record highs, and new building permits and housing starts have not let up. Repair and remodeling activity has also remained resilient, This activity helps fuel saw log demand, particularly in our U.S. south markets, where new and expanding mills continue to come online as the regional population increases and requires more housing. On the supply side, tighter supply has resulted from various supply chain issues, including trucking availability and labor constraints. This challenging market environment has favored Catchmark since we reliably have been able to meet our mills' customer supply needs through our delivered wood sales models. Taking into account first quarter results and by increasing our soil timber mix to meet market demand, we are now on track to register a full-year weighted average pricing increase of 15% to 20% for our blended harvests up from the previous expectations of 10% to 15%. Our pulpwood pricing may pull back from recent highs as some mill customers have upgraded facilities to better utilize chip and saw instead of merchandising pulpwood. but we continue to expect to register price levels well above market averages for the PowerPoint category. In coming quarters, we also expect to make significant progress on our acquisition initiatives to help maximize both near-term cash flow potential and the long-term value of our timberlands. At present, we are primed to execute on accretive acquisitions, benefiting from our improved balance sheet and strong liquidity positions. we have focused on smaller bolt-on acquisitions in and around our existing markets where we can take advantage of our market presence to secure prime quality acreage. That enables us to find good value while enhancing our local footprint and market position. It also fits with our business strategy to expand ownership and operations in leading mill markets where we can better serve our customers and gain further efficiencies with our contractors. More than 60% of our timberlands are now in the top three markets, and 100% are in the top seven. So far, we have entered into purchase and sale agreements to buy more than 2,400 acres in two separate transactions, totaling about $5 million. The properties are located within existing operating footprints in two states, Alabama and South Carolina. These properties fit our acquisition target objectives with long-term accretive attributes. They will be funded with cash on hand and are expected to close by early in the third quarter. These timberlands have characteristics that feature a high allocation of pine plantations and good value compared to our underwriting metrics. We will continue to be deliberate and prudent in identifying acquisitions, whether under our small track program or larger acquisition strategy. We also continue to build our pipeline of environmental initiatives involving wetlands mitigation banking, carbon sequestration, and solar. With regard to wetlands mitigation banking, we are identifying properties for acquisition as well as looking to create new mitigation banking opportunities on our existing properties, similar to Dawsonville Bluffs. Meanwhile, we have identified 5% to 10% of our existing timberlands to be part of our carbon offset program. and we are pointing to a carbon credit issuance in the second half of the year. As previously detailed, we have signed a 4,000-acre lease with a solar developer and have option agreements on almost 8,000 acres with other solar developers. Taking our operating performance outlook and growth initiatives together, Catchmark continues to be very well positioned for successful 2022 performance. Overall, we are meeting our objectives, our prime timberlands, and leading U.S. south mill markets are continuing to generate superior pricing. We're executing on our discipline acquisition strategy, and we are moving forward to create additional revenue streams from environmental initiatives. These activities are designed to work together to grow durable cash flow and further enhance stockholder value. As I said, the year is off to a very good start for Catchmark. Now, Ursula will provide more detail on the first quarter results and discuss our capital position.