Matson, Inc.

Good day and thank you for standing by. Welcome to the first quarter 2022 financial results conference call. At this time, all participants are in a listen only mode. After the speaker presentation, it will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require assistance during the conference, please press star zero. I would now like to hand the conference over to your speaker today, Lee Fishman.

Thank you, Andrea. Joining me on the call today are Matt Cox, Chairman and Chief Executive Officer, and Joel Winnie, Executive Vice President and Chief Financial Officer. Slides from this presentation are available for download at our website, www.matson.com, under the Investors tab. Before we begin, I would like to remind you that during the course of this call, we will make forward-looking statements within the meaning of the federal securities laws regarding expectations, predictions, projections, or future events. We believe that our expectations and assumptions are reasonable. We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements in the press release, the presentation slides, and this conference call. These risk factors are described in our press release and presentation and are more fully detailed under the caption risk factors on pages 13 to 24 of our Form 10-K, filed on February 25th, 2022, and in our subsequent filings with the SEC. Please also note that the date of this conference call is May 3rd, 2022, and any forward-looking statements that we make today are based on assumptions as of this date. We undertake no obligation to update these forward-looking statements. And I'll now turn the call over to Matt.

Okay, thanks Lee and thanks to those on the call this afternoon. I will start on slide three with a quick recap of our first quarter performance. Matson's off to a solid start this year with higher year-over-year operating income in both ocean transportation and logistics. The year-over-year increase in ocean transportation operating income in the quarter was primarily driven by strong demand for our China expedited ocean services. In our domestic trade lanes, we saw higher year-over-year volumes in Alaska and Guam, and in Hawaii, we saw a comparable level of demand compared to the year-ago period. In logistics, the year-over-year increase in operating income was due to strength across all lines of business as we continue to see elevated goods consumption, inventory restocking, and favorable supply and demand fundamentals in our core markets. I'll now go through the individual trade lane services, so please turn to the next slide. Hawaii container volume for the first quarter decreased 0.6% year-over-year, primarily due to lower eastbound volume. Our westbound volume was comparable to the level achieved in the prior year as we continued to see elevated hospitality-related demand. During the first quarter, domestic tourist arrivals were ahead of 2019 levels and there was modest improvement in the international tourist trends. Please turn to the next slide where I'll comment on our current business trends in Hawaii. The chart on the right shows visitor arrivals by air to Hawaii and the state's unemployment rate since the beginning of 2021. During the first quarter of 2022, the unemployment rate continued to improve and visitor traffic driven predominantly by US mainland visitors remain strong. For 2022, we remain cautiously optimistic on further economic recovery in Hawaii. UHERO's March forecast for 2022 shows further improvement in the unemployment rate and continued growth in GDP and construction jobs. Tourism is expected to increase approximately 29% from the 2021 level. With continued strong domestic tourism and meaningful improvement and international visitors later in the year driving total visitor traffic to approximately 90% of the pre pandemic level. So the economic drivers are trending well and expectations are for further economic growth for the year. However, we recognize the risk of incremental waves of COVID-19 variants presenting the possibility of economic slowdowns or disruptions in tourism and the loss of federal stimulus coupled with inflation and higher potential interest rates that may negatively affect discretionary income. Moving to our China service on slide six. Matson's volume in the first quarter of 2022 was 13.4% higher year over year due to five more eastbound voyages than the prior year. Freight demand in the quarter was driven by e-commerce, garments, and other goods. Sustained and elevated consumption trends and low inventory levels led to increased demand for Matson's portfolio of expedited ocean services. Matson continued to realize a significant REIT premium over the Shanghai Containerized Freight Index in the first quarter of 2022 and achieved average freight rates that were considerably higher than in the year-ago period. I'll now comment on the current business trends, so please turn to slide seven. Currently, in the Trans-Pacific trade lane, we're seeing a number of supply and demand factors at play. There are supply chain challenges in China, primarily due to actions to mitigate the spread of COVID-19. There have been factory closures which have impacted the delivery of raw material for production and reduced the volume of goods ready to ship. There have been logistical challenges including shortages of truck drivers in Shanghai, delayed timing for receiving freight, and returning empty containers for customer loading. One effect of these operating conditions is that some ocean carriers are omitting calls in China to try to stay on schedule. Through all the noise, the important point to note is that the impact to Mattson's China operation from these supply chain challenges has been minimal. Our terminals are receiving freight and managing empties, and our ships are departing Ningbo and Shanghai on time. Some customers have moved their freight to Ningbo from Shanghai to avoid COVID-related logistics issues. And we've seen a few customers cancel reservations on a weekly basis, but those spots were filled back rather quickly as other customers continued to seek expedited ocean freight solutions to deliver their goods to warehouses on the U.S. West Coast. The bottom line is that Mattson's vessels are sailing full from China. In addition to these challenges in China, we continue to see supply chain constraints and congestion on the U.S. West Coast. Warehouse capacity constraints equipment availability and rail congestion remain key supply chain issues. The number of container ships awaiting at birth in the ports of Los Angeles and Long Beach remain elevated as of 39 as of yesterday. As factories in China resume production and shipments begin to flow at normal levels, we expect to see an increase in marine traffic and import volume in Southern California thereby adding to the stress at many key points in the infrastructure. Lastly, consumption trends remain elevated and inventory replenishment continues to be a challenge for our customers. The chart on the slide shows the U.S. retail inventory to sales ratio. As you can see, the current ratio is well below the pre-pandemic level and has struggled to recover ground. This chaotic environment affords us the opportunity to manage our discreet, CLX, CLX Plus, and CCX Expedited Ocean Service as a portfolio, providing customers multiple options for ocean freight management to meet their supply chain needs. We continue to offer the fastest ocean transits in the trade lane, and for our CLX and CCX services, we offer first offloading of customer cargo at our dedicated SSAT-operated terminals onto our chassis cargo availability within 24 hours of arrival at berth, and industry-leading truck turn times at shipper's transport, which is a unique off-dock facility. Our CLX Plus service berths at the multi-user terminal at Pier A in Long Beach, an SSAT-operated facility, and also offers cargo availability within 24 hours of arrival at berth and the customer benefit of picking up their freight at the off-dock facility at shipper's transport. With the forthcoming ramp-up to normal manufacturing logistics operations in China, we expect the competitive advantages of our China service to play an important role in meeting the supply chain needs of our customers. For the year, we expect a combination of these current supply and demand factors to remain largely in place through at least the October peak season, and we expect elevated demand for our China services for most of the year. As such, we expect to keep the CCX service in place until at least through October 2022 peak season. Turning to slide eight, in Guam, Mattson's container volume in the first quarter of 2022 increased 10% year over year, primarily due to higher retail-related demand. For 2022, we remain cautiously optimistic on further economic recovery in Guam as we expect improvement in tourism traffic as the year progresses, but we also recognize the potential negative effects on visitor traffic and other economic factors that future COVID-19 variant waves could have on the economic recovery. Moving on now to slide nine. In Alaska, maximum container volume for the first quarter 2022 increased 20.2% year over year. The increase year-over-year was primarily due to increased seafood volume in our AAX service, higher northbound volume primarily due to higher retail-related demand and volume related to totes dry docking, and higher southbound volume primarily due to higher seafood volume. The A fishing season this year has been stronger and started earlier than last year, which benefited AAX and our southbound volumes. On the first quarter 2021 earnings call, we indicated that the eight fishing season last year had a delayed start due to an outbreak of COVID-19 at several fish processing facilities in Alaska's Aleutian Islands. In the near term, we expect improving economic trends in Alaska from increased oil exploration and production activity as a result of higher energy prices and the resumption of summer tourism from the cruise lines. However, the recoveries trajectory continues to remain uncertain given the incremental waves of COVID-19 variants presenting the possibility of economic slowdowns or disruptions and the potential effects on discretionary income from the loss of federal stimulus, inflation, and higher interest rates. Turning next to slide 10, our terminal joint venture, SSAT, contributed $34 million in the first quarter 2022 compared to $9.2 million in the prior year period. The higher contribution was primarily a result of higher other terminal service revenue. Currently, we continue to see elevated import volume into the U.S. West Coast, which we expect to translate into a relatively high contribution from SSAT. Turning now to logistics on slide 11. Operating income in the first quarter came in at $16.4 million, or $10.3 million higher than the result in the year-ago period. The increase was primarily due to higher contributions from all service lines as we continue to see elevated goods consumption, inventory restocking, and favorable supply and demand fundamentals in our core markets. We're currently seeing continued elevated container volumes in Southern California, which will benefit some of our lines of business. The contribution from our supply chain management business is expected to continue to track with the performance of our China service. And with that, I will now turn the call over to Joel for a review of our financial performance.