Matson, Inc.

Good day and thank you for standing by. Welcome to the Matson Third Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded And I would now like to hand the conference over to your speaker today, Mr. Lee Fishman. Lee, please go ahead.

Thank you, Cal. 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 November 2nd, 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. I'll now turn the call over to Matt.

Okay, thanks, Lee, and thanks to those on the call. Starting on slide three, Matt has differentiated ocean services well in the third quarter, but we achieved lower year-over-year consolidated operating income as we saw lower demand for expedited ocean services in the Trans-Pacific trade lane compared to the high levels of freight demand during the pandemic and the year-ago period. Within ocean transportation, our CLX, CLX Plus, and CCX services achieved lower volumes, which contributed to the decline in both business segment and consolidated operating income. In our domestic trade lanes, we saw higher volume in Alaska and lower volumes in Hawaii, Guam, compared to the third quarter of last year. In logistics, The increase in operating income was due to strength across all of the lines of business as we continue to see favorable supply and demand fundamentals in our core markets. Today, we announced that we signed approximately $1 billion in vessel construction agreements for three new LNG Ready Aloha-class vessels. These new vessels will be purpose-built for our CLX Plus excuse me, our CLX service and will bring meaningful additional capacity to the service and profitability to the company when the vessels are placed in service. Joel will go through the announcement in more detail later in the presentation. Please turn to slide four. I want to start off by providing our views on the current market environment across the Trans-Pacific Trade Lane, domestic trade lanes, and logistics. after which I'll go through the trade lane performance in the third quarter. In the third quarter, we saw lower demand for our expedited ocean services in the Trans-Pacific trade lane. With less demand and easing port congestion in Southern California, we ended the CCX service in early September, about six weeks earlier than we expected. As you may recall, we initiated this temporary premium service in August of last year to meet the then extraordinary levels of volume demand resulting from challenging supply chain and port conditions in Southern California by providing a first U.S. West Coast port call in Oakland, followed by a call in Long Beach. With the end of the CCX service, we moved our Kanaloa-class vessels back to the Hawaii service. On our second quarter earnings call, we indicated that we'd seen a gradual decline in Trans-Pacific Freight indices from the high expected earlier this year, and this likely signaled that rates had peaked. In the fourth quarter, we've continued to see freight rates in a transitional decline from the pandemic highs. Looking forward, we currently expect the next two quarters to be challenging in this trade lane. On the demand side, we're seeing retailers adjust their inventories to current consumer demand levels. And on the supply side, we've seen ocean liners reduce at least 10% to the vessel capacity in the trade lane, and we expect more reductions in scheduled changes to meet the lower demand levels. Based on these factors, for the remainder of this year and into the first quarter of 2023, we expect to experience lower year-over-year freight volume and lower rate environment for our CLX and CLX Plus services. However, we also expect to continue to earn a significant rate premium to the Shanghai Containerized Freight Index as our CLX and CLX Plus services provide value to our customers with their differentiated destination services, reliability, and fast speeds on the water. The Matson brand was enhanced in the pandemic given the reliability of our services during a chaotic supply chain environment. Regardless of where we are in the cycle, We're well positioned to help our customers with the fastest and the second fastest ocean services in the Trans-Pacific trade lane. Please turn to the next slide. Within our domestic trade lanes, we continue to see economic growth in Hawaii, Alaska, and Guam. In Hawaii, domestic tourism was strong in the first nine months of the year, and international tourist arrivals picked up a bit in this past quarter but total arrivals are still below pre-pandemic highs. UHERO is projecting Hawaii visitor arrivals for 2022 to be 90% of the pre-pandemic high in 2019, increasing to 95% in 2023. The strong recovery in Hawaii's tourism industry has led to a rapid decline in the unemployment rate and the labor market remains tight. In Alaska, We continue to expect the Alaska economy to benefit from increased energy-related exploration and production activity as a result of elevated oil prices. Consumer demand continues to remain strong in the state, supported by a low unemployment rate, job growth, and wage growth. In September, the state announced a record permanent fund dividend to residents, which is expected to lead to good consumption in the near term. The economy continues to recover from the pandemic low despite the slow return of tourism. The unemployment rate continues to improve, and tourism has increased since the beginning of the year but remains well below pre-pandemic levels. We expect further improvement in tourism arrivals from Asia to support the local economy, but the timing remains unclear. While there are positive drivers supporting further growth in our core domestic markets, weakening economic conditions in the U.S. and global economies could negatively affect tourism and consumer spending. In addition, the combination of higher inflation, higher interest rates, and lower personal income with the end of the pandemic era stimulus is likely having a negative impact on household income and consequently consumer goods demand. In logistics, We continue to see a solid level of activity at Span Alaska, consistent with our Alaska trade lane business. Our transportation brokerage business is to continue to perform above expectations, but is seeing softer freight volumes due to higher customer inventory levels, softness and truckload spot market rate, and other macroeconomic trends. Lastly, our supply chain business is trending consistent with the demand for our China service. I'll now go through the third quarter performance of our trade lanes, SSAT and logistics. So please turn to the next slide. Hawaii container volume for the third quarter decreased 7.1% year over year, primarily due to lower retail related demand. The year over year decline was impacted by the difficult comparison to the pandemic demand spike in the year ago period. Volume in the third quarter of 2022 was 2.7% higher than the volume achieved in 2019. The Hawaii economy continued to show growth in the quarter, supported by strong domestic tourist arrivals and unemployment rate that remained near the pandemic lows. Moving to our China service on slide seven. Mattson's volume in the third quarter of 2022 was 15.1% lower year over year due to lower demand for our CLX, CLX Plus, and CCX services and one less sailing. Matson continued to realize a significant rate premium over the Shanghai Containerized Freight Index in the third quarter of 2022 and achieved average freight rates that were higher than in the year-ago period. For the fourth quarter of 2022, we expect lower year-over-year volume. As I mentioned previously, We ended our temporary CCX service in early September, so there'll be no contribution from this service in the fourth quarter. Turning to slide eight, in Guam, Mattson's container volume in the third quarter of 2022 decreased 1.8% year over year. The decrease is primarily due to lower retail-related demand. Volume in the third quarter of 2022 was higher than the level achieved in the third quarter of 2019. Please turn to slide 9. In Alaska, maximum container volume for the third quarter 2022 increased 10.6% year over year. The increase was primarily due to higher export seafood volume from the AAX service, higher northbound volume due to higher retail-related demand, and volume related to a competitor's dry docking, and higher southbound volume primarily due to higher domestic seafood volume. Turning next to slide 10, our terminal joint venture, SSAT, contributed $23.4 million in the third quarter 2022 compared to $13 million in the prior year period. The higher contribution was primarily a result of higher other terminal revenue. Turning now to logistics on slide 11, operating income in the third quarter came in at $20.1 million or $4.1 million higher than the results in the year-ago period. The increase was primarily due to higher contributions from all services as we continue to see favorable supply and demand fundamentals in our core markets. And with that, I will turn the call over to Joel for a review of our financial performance.