Matson, Inc.

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 12 to 23 of our Form 10-K filed on February 28, 2025 and in our subsequent filings with the SEC. Please also note that the date of this conference call is May 5, 2025, 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.

Thanks, Justin, and thanks to those on the call. Starting on slide three, our first quarter financial performance was as expected. with significantly higher year-over-year consolidated operating income. The year-over-year increase was primarily driven by our China service, which benefited from the carryover of elevated freight rates from the fourth quarter of 2024, combined with healthy freight demand following the traditional post-Lunar New Year period. In our domestic trade lanes, we saw higher year-over-year volume in Hawaii and Alaska and a lower year over year volume in Guam. In logistics, our operating income was lower year over year, primarily due to a lower contribution from freight forwarding and transportation brokerage, partially offset by a higher contribution from supply chain management. Looking ahead, we are lowering our 2025 outlook due to the significant uncertainty regarding tariffs and global trade, regulatory measures, the trajectory of the U.S. economy, and other geopolitical factors. 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 increased 3.2% year-over-year due to the dry docking of a competitor's vessel. Excluding the volume related to the dry docking of a competitor's vessel, Hawaii container volume would have been roughly flat year over year. For the full year 2025, we expect volume to be comparable to the level in 2024, reflecting modest economic growth in Hawaii and stable market share. Please turn to slide five. According to UHERO's February economic report, the Hawaii economy remained stable with a low unemployment rate, strong construction activity, and stable tourism, offset by challenging population growth and high inflation and interest rates. Hawaii is experiencing solid construction activity from both public and private sector projects, including rebuilding efforts on Maui following the wildfires in 2023 with elevated demand for construction workers. With respect to tourism, International tourist arrivals continue to be well below pre-pandemic levels, and tourist arrivals to Maui remains on a slow recovery path. Moving to our China service on slide six, we saw significantly higher freight rates year over year as the elevated freight rates from the fourth quarter of 2024 carried into the first quarter. Mattson's volume in the first quarter of 2025 was 1.4% lower year over year. Please turn to slide seven. Currently, there is significant uncertainty regarding tariffs and global trade, regulatory measures, the trajectory of the U.S. economy, and other geopolitical factors. Since the tariffs were implemented in April, our container volume has declined approximately 30 percent year over year. Given the pronounced market decline in demand in the Trans-Pacific in April, coupled with limited visibility to our container demand, we expect container volume and average freight rates in the second quarter to be lower year over year. At the moment, it's difficult to know if these lower volume levels are transitory or will persist for a longer time in 2025, and the duration of this lower demand period will likely depend on active negotiations taking place across the supply chain and the timing of potential amendments to the tariffs. As such, for the full year 2025, we also expect container volume and average freight rates to be lower year over year. We continue to work closely with our Asia transshipment partners as our customers look at options to diversify and grow their manufacturing locations. Many of our customers move to a China Plus One strategy a few years ago to diversify their operations, and we expect this trend to continue. We will continue to follow our customers as they reposition and expand their manufacturing footprint in response to changing tariffs as part of our catchment basin strategy in Asia. During the first quarter, we announced a new direct service connecting Ho Chi Minh to our CLX and MAC Shanghai departures. This development is a testament to our brand recognition in Asia and our ability to provide the fastest connecting times out of Vietnam. Ho Chi Minh will be our second direct connection in Vietnam, and our expansion is based on the success and customer feedback we received since launching our inaugural direct service connection from Hai Phong two years ago. As a result, in the near term, we expect higher volume from Vietnam from transshipments as our customers manage their freight in an unsettled environment. We believe we are well positioned with multi-year transshipment relationships to scale up the services as expedited freight volume grow in the region. We expect the uncertain environment to accelerate the diversification of our catchment basin in Asia. And in addition to Vietnam, we are already carrying freight originating in Cambodia, Thailand, Indonesia, Malaysia, India, and the Philippines. Please turn to the next slide. We believe we're in the early innings of U.S.-China trade negotiations and expect disruptive conditions in the Trans-Pacific with ocean carriers blanking China sailings and implementing service changes due to lower volume in response to the tariffs. We have also seen some carriers add port calls and increase capacity and allocation in strings from other Asia origins. At some point, though, retailers will need to restock their shelves or risk significant inventory issues. We also expect that consumer demand for e-commerce goods will continue to grow. In the meantime, we remain a trusted supply chain partner to our customers and expect to run our business like we always have with a focus on speed, on-time arrivals, early access to cargo, and customer service. As I mentioned earlier, our solid relationship with transshipment partners in the region provide opportunities for further diversification of where our freight is originated. And lastly, we have the resources and assets to move quickly to adapt to a changing environment and find opportunities. For the last 20 years, our China service has gone through many significant disruptive environments and time and time again, it is shown to be a critical provider of expedited ocean service to existing and new customers. I see this period of uncertainty and disruption as an opportunity for Matson to do what it does best for its customers, meeting the evolving challenges and delivering freight fast and reliably given our competitive advantages. Please turn to the next slide. On April 17th, the USTR finalized its Notice of Action under Section 301 as a follow-up to the President's Executive Order on April 9. The announcement confirmed that new targeted port fees will be applied to Chinese vessel owners and operators and Chinese-built vessels. Based on our review, we believe that Matson is part of a group of small vessel operators who received exemptions from the USTR. The USTR also proposed additional duties on ship to shore cranes, containers, and certain chassis. The proposal is open to comment and depending on its final form may impact how we procure our equipment. In summary, we believe that we are exempt from the USTR for now based on the size of our vessels, but will likely face higher container equipment costs in the future. We also remain negatively impacted directly by lower volume and indirectly by merchandise tariffs paid by our customers. Please turn to the next slide. In Guam, Matson's container volume in the first quarter of 2025 decreased 14.3% year over year. The decrease was primarily due to lower demand from retail and food and beverage segments. In the near term, we expect Guam's economy to remain stable with a slow recovery in tourism, a low unemployment rate, and some increase in construction activity. As such, for 2025, we expect container volume to approach the level achieved last year. Please turn to the next slide. In Alaska, Mattson's container volume in the first quarter of 2025 increased 4.8% year over year. The increase was due to higher northbound volume, partially offset by an additional sailing in the year-ago period. In the near term, we expect continued economic growth in Alaska, supported by low unemployment rate, jobs growth, and continued oil and gas exploration and production activity. As such, for 2025, we expect container volume to be comparable to the level achieved last year. Please turn to slide 12. In the first quarter, our SSA terminal joint venture contributed $6.6 million, representing a year-over-year decrease of $6.2 million. The increase was primarily due to higher lift volume. For 2025, we expect the contribution from SSAT to be lower than the $17.4 million achieved last year without taking into account the $18.4 million impairment charge at SSAT during the fourth quarter of 2024. Turning now to logistics on slide 13, operating income in the first quarter came in at $8.5 million, or $800,000 lower than the result in the year-ago period. The decrease was primarily due to a lower contribution from freight forwarding and transportation brokerage, partially offset by a higher contribution from supply chain management. For 2025, we expect operating income to be lower than the level achieved in 2024 due to a challenging environment for all of our business lines. I will now turn the call over to Joel for a review of our financial performance.

Joel. Thanks, Matt. Please turn to slide 14 for a review of our financial results. For the first quarter, consolidated operating income increased 45.2 million year-over-year to 82.1 million, with ocean transportation increasing 46 million and logistics declining 800,000. The increase in ocean transportation operating income in the first quarter was primarily due to significantly higher freight rates in China and a higher contribution from SSAT partially offset by higher direct cargo expense and operating overhead costs. The decrease in logistics operating income was primarily due to a lower contribution from freight forwarding and transportation brokerage, partially offset by a higher contribution from supply chain management. We had interest income of $9.4 million in the quarter, or $600,000 higher than last year, primarily due to higher balances of cash and cash equivalents. Interest expense in the quarter decreased 500,000 year-over-year due to the decline in outstanding debt. Net income increased 100.3% year-over-year to 72.3 million, and diluted earnings per share increased 109.6% year-over-year to $2.18 per share. Diluted weighted average shares outstanding decreased 4% year-over-year. Please turn to the next slide. This slide shows how we allocated our trailing 12 months of cash flow generation. For the LTM period, we generated cash flow from operations of $820.2 million, from which we used $39.7 million to retire debt, $182.8 million on maintenance and other CapEx, $161.2 million on new vessel CapEx, including capitalized interest and owner's items, $65.5 million in cash deposits and interest income into the CCF, net of withdrawals for milestone payments, and $13.5 million on other cash uploads, while returning $263.7 million to shareholders via dividends and share repurchase. Please turn to slide 16 for a summary of our share repurchase program and balance sheet. During the first quarter, we repurchased approximately 500,000 shares for a total cost of $69.2 million. Turning to our debt levels, our total debt at the end of the first quarter was 390.8 million, a reduction of 10.1 million from the end of the fourth quarter of 2024. With that, let me now turn to slide 17 and walk through our outlook for the second quarter of 2025 on the left-hand side of the page. Based on the outlook trends Matt mentioned earlier, we expect ocean transportation operating income to be meaningfully lower than the 109 million achieved in the second quarter of 2024. We also expect logistics operating income to be lower than the $15.6 million achieved in the second quarter of 2024. As such, we expect consolidated operating income in the second quarter to be meaningfully lower than the prior year. On the right-hand side of the slide, we have our expectations for full year 2025, starting with ocean transportation. We expect year-over-year operating income to be lower than the level achieved in the prior year with the amount dependent on the impact and timing of the global trade and macroeconomic uncertainties we have discussed on this call. For logistics, we also expect operating income to be lower than the level achieved in the prior year due to a challenging environment for all business lines. As a result, we now expect consolidated operating income to be lower than the level achieved in the prior year. In addition to this full-year operating income outlook, we expect the following for the full year. depreciation and amortization to approximate $200 million, inclusive of $26 million for dry docking amortization, interest income to be approximately $31 million, and interest expense to be approximately $7 million, other income to be approximately $9 million, an effective tax rate of approximately 23%, and dry docking payments of approximately $40 million. Moving to slide 18, The table on the slide shows our capex projections for the full year of 2025. Compared to what we previously provided on our fourth quarter call in February, our range for maintenance and other capital expenditures has been lowered by $20 million to $100 to $120 million for full year 2025. Our estimate for expected new vessel construction milestone payments in 2025 remains unchanged at $305 million. Again, milestone payments for new vessel construction are expected to be paid from our capital construction fund, which already covers approximately 91% of the remaining obligations, excluding future interest income and accretion earned on cash deposits and treasury securities. We currently expect our next cash contribution into the CCF for milestone payments to not be until 2028. In the second quarter, we expect to make approximately $36 million in milestone payments from the CCF. And then in the third and fourth quarters, we expect to make milestone payments of approximately $71 million and approximately $118 million, respectively. With that, let me turn the call back over to Matt for closing remarks.