Matson, Inc.

Good day, and thank you for standing by. Welcome to the Maxson First Quarter 2023 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw the question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lee Fishman. Please go ahead.

Thank you, Felicia. Joining me on the call today are Matt Cox, Chairman and Chief Executive Officer, and Joel Winney, 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 14 to 24 of our Form 10-K, filed on February 24, 2023, and in our subsequent filings with the SEC. Please also note that the date of this conference call is May 4th, 2023, 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 will now turn the call over to Matt.

Okay, thanks, Lee, and thanks to those on the call. I will start on slide three. Despite being down from the extraordinary pandemic-driven demand level over the last two years, Matson's ocean transportation and logistics business segments performed well in a challenging business environment. For the first quarter within ocean transportation, our China service generated lower year-over-year volume in freight rates, which were the primary contributors to the decline in our consolidated operating income. We also saw lower year-over-year volumes in Hawaii, Alaska, and Guam compared to the year-ago period. In logistics, operating income decreased year-over-year primarily due to lower contributions from supply chain management and transportation brokerage. I will now go through the first quarter performance of our trade lanes, SSAT, and logistics, so please turn to the next slide. Hawaii container volume for the first quarter decreased 0.8% year-over-year primarily due to lower eastbound volumes. For the quarter, we saw muted growth in westbound volume, and we saw a steadier level of retailer-related freight demand consistent with pre-pandemic trends. Volume in the first quarter of 2023 was 0.9% higher than the volume achieved in 2019. Please turn to slide five. Hawaii's economic economy continues to grow from strong tourism trends and low unemployment but is slowing. UHERO's March projections continue to show economic growth in 2023 supported by continued strength in total tourism and a relatively low unemployment rate. UHERO projects weakness in domestic tourist arrivals from weakening macroeconomic conditions to be countered by continued improvement in international tourist trends. Unemployment is expected to rise a little as the economy responds to the effects of higher interest rates to subdue inflationary pressures. Despite UHERO's view of continued economic growth, in the near term, we expect muted freight demand. In the medium term, the trajectory of economic growth in the state remains uncertain, given the negative trends as a result of higher inflation and higher interest rates. Moving to our China service on slide six, Matson's volume in the first quarter of 2023 was 35.4% lower year over year, primarily due to no CCX service in the quarter and lower demand for our CLX and CLX Plus services. Nearly two thirds of the year over year volume decline was related to the CCX service in the year ago period. Matson continued to realize a significant rate premium over the Shanghai Containerized Freight Index in the first quarter of 2023. We achieved freight rates that were lower than in the year-ago period, but higher than those achieved in the first quarter of 2019. Please turn to slide seven. In the first quarter, our retail customers continued to conservatively manage the inventories amid weakening consumer demand, increasing interest rates, and economic uncertainty. As we noted on our fourth quarter earnings call, in the weeks post-Lunar New Year, we saw light demand for our China service, and as a result, we decided not to sail the CLX Plus vessel from Shanghai for a few weeks. Currently in the Trans-Pacific, business conditions are mixed with general improvement in trade lane capacity and some improvement in retailer inventories. Regarding trade lane capacity, we have seen more short-term capacity management in the form of blight sailings. Within our scope of expedited ocean, we have seen one competitor terminate its west coast bound service. On the demand side, we continue to see conservative inventory management by our retail customers in light of the economic uncertainty. Given the conservatism in inventory management Retail inventories could become quite tight to the extent consumer demand stabilizes or firms up, which could drive incremental short-term demand for our expedited services. Looking ahead, for the second quarter, we expect our CLX and CLX Plus services to reflect freight demand levels below normalized condition with lower year-over-year volumes and a lower freight rate environment. Absent an economic hard landing in the U.S., we expect improved trade dynamics in the second half of 2023 as the Trans-Pacific Marketplace transitions to a more normalized level of demand. Regardless of the economic environment, we expect to continue to earn a significant rate premium to the SCFI, reflecting our fast and reliable ocean services and unmatched destination services. Please turn to the next slide. This slide is a summary of our China service offerings in the last couple of years and what we expect in 2023, 2024, and beyond. Our expedited service in the Trans-Pacific have evolved through and beyond the pandemic to meet the demands from our customers. Out of the pandemic, we gained the CLX Plus service as a permanent fast transit service into Southern California. that complements our highly differentiated CLX offering. The Matson brand was enhanced during the pandemic with our CLX Plus and CCX offerings as we responded quickly to our customers' needs and provided reliable ocean and terminal services during a difficult period with port congestion and supply chain issues. Going forward, we will continue to uncover growth opportunities in the Trans-Pacific by leveraging our brand and success with the CLX and CLX Plus service. Given the vessel changes in the CLX string in the next couple of years, we expect the annual run rate of volume for the CLX to be approximately 60 to 65,000 containers until the three new Aloha-class vessels are in service in 2026 and 2027. As the new Aloha-class vessels enter the trade lane, we expect the CLX capacity to increase approximately 500 containers per vessel per voyage. For the CLX Plus service, we expect the annual run rate of volume to also be approximately 60 to 65,000 containers. Please, sir, turn to slide nine. In Guam, Mattson's container volume in the first quarter of 2023 decreased 10.9% year over year. The decrease was primarily due to lower retail-related demand. Volume in the first quarter of 2023 was 3.9% lower than the level achieved in the first quarter of 2019. In the near term, we expect muted freight demand in Guam despite continued improvement in the economy with increasing tourism and a low unemployment rate. There are also negative trends as a result of higher inflation and higher interest rates that create uncertainty in the economic growth trajectory. Please turn to the next slide. In Alaska, Mattson's container volume for the first quarter of 2023 decreased 4.8% year over year. The decrease was due to lower export seafood volume from AAX, primarily due to three less sailings, lower southbound volume, primarily due to lower domestic seafood and household goods volume, partially offset by higher northbound volume due to two additional sailings. Compared to the first quarter of 2019, volume in the quarter was 20.7% higher. The Alaska economy continues to show good growth and improvement in key indicators from the depths of the pandemic. In the near term, we expect continued economic growth from continued job growth and increased energy-related exploration and production activity. However, there are negative trends as a result of higher inflation and higher interest rates that create uncertainty in the economic growth trajectory. Please turn to slide 11. Our terminal joint venture, SSAT, declined $35.8 million year over year to a negative $1.8 million. The lower contribution was primarily due to lower other terminal revenue and lower lift volume. SSAT saw significantly less detention and demurrage revenue in the quarter due to easing port congestion and lower lift volume consistent with lower demand in the Trans-Pacific trade lane. For the second quarter of 2023, we expect lift volume to reflect the challenging environment in the Trans-Pacific trade lane We also expect significantly less detention and demurrage revenue than the year-ago quarter. Absent an economic hard landing, we expect SSAT to trend to pre-pandemic profitability levels beginning in the second half of the year. Turning now to logistics on slide 12. Operating income in the first quarter came in at $10.9 million or $5.5 million lower than the result in the year-ago period. The decrease was primarily due to a lower contribution from supply chain management consistent with lower demand in the Trans-Pacific trade lane and a lower contribution from transportation brokerage. In the near term, we expect a mix of activity across the logistics line of business. We expect continued growth in Alaska to be supportive of our freight forwarding demand. We expect supply chain management to track our China service So a challenging environment in the second quarter as I discussed previously. For transportation brokerage, we expect near term challenges with lower freight demand driven primarily by retail customers continuing to manage down inventories, excess capacity, and declining accessorial fees. I will now turn the call over to Joel for a review of our financial performance.