Matson, Inc.

Thank you for standing by. Welcome to Matson's First Quarter 2026 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Justin Schoenenberg, Director of Investor Relations and Corporate Development. Please go ahead, Sarah.

Thank you. 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 12 to 23 of Form 10-K filed on February 27, 2026 and in our subsequent filings with the SEC. Please also note that the date of this conference call is May 4, 2026, 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, in the first quarter 2026, ocean transportation operating income exceeded our expectations, primarily due to higher freight demand post-Lunar New Year in our China service. In our domestic trade lanes, we saw lower year over year volume in Hawaii and Alaska. In logistics, operating income was lower year over year, primarily due to a lower contribution from supply chain management. To date, the Iran conflict has not impacted our operating performance or service levels. However, it has impacted fuel prices in all our markets. While we have effective mechanisms to recover the cost of fuel by the end of the year, For the second quarter, we expect a negative impact from the lag in the recovery of fuel costs. I'll go into more detail later in the presentation on the effects of fuel prices and our recovery mechanisms. Lastly, we are raising our full year outlook for consolidated operating income and now expect to modestly exceed the level achieved in 2025. The primary driver behind raising outlook for consolidated operating income is the strengthening of freight demand in our China service post-lunar new year that we expect now to continue through peak season. Joel will go into more detail on the outlook later in the presentation. I will now go through the first quarter performance in our trade lanes, SSAT, and logistics, so please turn to the next slide. In our Hawaii service, container volume for the first quarter decreased 5.6% year over year, primarily due to lower general demand and the dry docking of a competitor's vessel in the year-ago period. For the full year 2026, we expect volume to be comparable to the level achieved in 2025, reflecting similar economic conditions in Hawaii and stable market share. Please turn to slide five. According to UHERO's February Economic Report, Hawaii's economy is expected to experience modest growth supported by construction activity, while tourism remains soft and inflationary pressures persist. Construction continues to be a bright spot for the labor market with a high level of public and private building activity, including the rebuilding of Maui. Regarding tourism, the outlook for international visitors remains weak. offsetting modest growth in domestic tourist arrivals. Lastly, inflation remains elevated and may continue to weigh on discretionary spending and overall demand. Moving on to our China service on slide six. Mattson's volume in the first quarter of 2026 was 9.5% lower year over year, primarily due to lower general demand. As we noted on the fourth quarter earnings call, We expected volume in the first quarter to be lower than the prior year as we return to a more traditional Lunar New Year freight cycle. Please turn to slide seven for additional commentary on current business trends. In the first quarter, we did not see a traditional bump in demand prior to Lunar New Year. Post-holiday, the freight demand exceeded our expectation and was driven by Higher demand across several of our key market segments such as e-commerce, e-goods, and garments. We saw continued air to ocean freight conversions and further growth and penetration into Southeast Asia ports. E-commerce from South China continues to be a solid recurring contributor to volume demand. E-goods volume picked up in the post-holiday due to strong demand for data center servers and racks which has continued into the second quarter. With respect to air to ocean freight conversions, we've benefited from elevated freight costs and reduced air cargo capacity in select markets. In the first quarter of 2026, we saw strong volume from our feeder network in North and South Vietnam and Thailand. Our Thailand feeder service, which commenced operations in late December, 2025 has received positive feedback and has exceeded our expectations to date on volume. Overall, the uptick in freight demand we saw post-Lunar New Year has continued to build in the second quarter as demand strengthens and volumes return to a more traditional seasonal pattern. With increasing demand, we remain focused on maximizing the yield on every sailing out of Shanghai, and our freight rates remain at healthy levels. As a result, we expect second quarter 2026 container volume to be higher compared to the prior year period, which included a market decline in Trans-Pacific demand due to the tariffs imposed in April of 2025. As a reminder, our container volume declined 30% last April before recovering in May and June. Encouragingly, conditions are more stable today. For the full year 2026, we expect container volume to be moderately higher than the level achieved in 2025 as we expect the demand strength in the second quarter to continue through peak season. Please turn to the next slide. In our Guam service, Mattson's container volume in the first quarter of 2026 was flat year over year. In the near term, we expect Guam's economy to remain stable. As such, for the full year 2026, We expect container volume to be comparable to the level achieved last year. Please turn to the next slide. In our Alaska service, Matson's container volume in the first quarter of 2026 decreased 2% year over year. The decrease was primarily due to lower general demand, partially offset by an additional northbound sailing, and an additional AAX sailing compared to the year-ago period. In the near term, we expect continued economic growth in Alaska, supported by a low unemployment rate, job growth, and continued oil and gas exploration and production activity. As such, for full year 2026, we expect container volume to be comparable to the level achieved last year. Please turn to slide 10. In the first quarter, Our SSAT terminal joint venture contributed $5 million, representing a year-over-year decrease of $1.6 million. The decrease was primarily due to lower lift volume. For the full year 2026, we expect the contribution from SSAT to be lower than the $32.5 million achieved in full year 2025. Turning now to logistics on slide 11. Operating income in the first quarter came in at $6.8 million, or $1.7 million lower than the result in the year-ago period. The decrease was primarily due to lower contribution from supply chain management. For full year 2026, we expect operating income to approach the level achieved in full year 2025. Please turn to the next slide. Before I turn the call over to Joel for a review of our financial performance, I'd like to share a few thoughts on the recent volatility in fuel prices attributed to the Iran conflict. We expect fuel price volatility to impact our near-term earnings due to a timing lag between when we incur fuel costs and when we can fully recover these costs through our fuel surcharge. These mechanisms are very effective at recovering the cost of fuel over time. Historically in our maritime business, we have been successful in recouping the cost of fuel within any calendar year, although fluctuations can occur between quarters. In the first quarter of this year, the impact was not material as we experienced escalating fuel prices only during the last few weeks of the quarter. For the second quarter, We expect to lag in the recovery of fuel costs, but we expect to fully recover our fuel costs by the end of the year, with most of that occurring in the third quarter. These expectations regarding the impact of fuel costs and the recoverability of these costs have been factored into our outlook. And with that, I will now turn the call over to my partner, Joel.

Okay, thanks, Matt. Please turn to slide 13 for a review of our financial results. For the first quarter, consolidated operating income decreased 20.7 million year-over-year to 61.4 million, with ocean transportation decreasing 19 million and logistics declining 1.7 million. The decrease in ocean transportation operating income in the first quarter was primarily due to a lower contribution from our CHANA service. The decrease in logistics operating income was primarily due to a lower contribution from supply chain management. We had interest income of 6.1 million in the quarter compared to 9.4 million in the same period last year. The effective tax rate in the quarter was 16.6% compared to 21.6% in the year-ago period. Our tax rate was lower year-over-year due to a discrete tax item that reduced taxable income. Given the lower income level in the quarter relative to the other quarterly periods in the year, discrete tax items can have a more pronounced impact on our effective tax rate in the quarter. In the first quarter of 2026, net income and diluted earnings per share were $56.6 million and $1.85 respectively. Diluted weighted shares outstanding decreased 7.8% year over year. Please turn to the next slide. We continue to generate strong cash flows. For the trailing 12 months, we generated cash flow from operations of $552.1 million. We returned capital in the form of dividends and share repurchases of $333.8 million, and we had maintenance capex of $156.9 million. Our cash flow from operations exceeded the aggregate spend on maintenance capex, dividends, and share repurchases by $61.4 million. Please turn to slide 15 for a summary of our share repurchase program and balance sheet. During the first quarter, we repurchased approximately 400,000 shares for a total of $54.4 million. Since we initiated our share repurchase program in August 2021 to the end of March of this year, we have repurchased approximately 14.2 million shares, or 32.7% of our stock, for a total cost of approximately $1.3 billion. On April 23, 2026, we announced the addition of 3 million shares to our existing share repurchase authorization. As we have said before, share repurchases are an important component of our capital allocation strategy, and this increase allows us to continue to be steady buyers of our shares in the absence of any large organic or inorganic growth investment opportunities. Turning to our debt levels, our total debt at the end of the first quarter was $351.1 million, a reduction of $10.1 million from the end of the fourth quarter of 2025. With that, let me now turn to slide 16 and walk through our outlook for the second quarter of 2026 at the top of the page. Based on the outlook trends Matt mentioned earlier, we expect ocean transportation operating income to be approximately $20 million higher than the $98.6 million achieved in the second quarter of 2025. We also expect logistics operating income to approach the $14.4 million achieved in the second quarter of 2025. As such, we expect consolidated operating income in the second quarter to be approximately $20 million higher than the prior year, which includes the negative impact we expect from the lag in the recovery of fuel costs that Matt mentioned earlier. On the bottom half of the slide, we have our expectations for full year 2026. Starting with ocean transportation, we now expect year-over-year operating income to modestly exceed the level achieved in the prior year. The strengthening of freight demand in our China service post-Lunar New Year and our expectation that this demand strength continues through peak season is the primary driver behind our raise in outlook. For logistics, we expect operating income to approach the level achieved in the prior year. As a result, we now expect consolidated operating income to modestly exceed the level achieved in the prior year. Our full year outlook includes the expectation that we're able to recover fuel costs by the end of the year with most of the recovery occurring in the third quarter. We also expect a more normal operating seasonality pattern with consolidated operating income in the second and third quarters being the strongest relative to the first and fourth quarters. In addition to this full-year operating income outlook, we expect the following for the full year. Depreciation and amortization to approximate $210 million, inclusive of approximately $35 million for draw docking amortization. Interest income to be approximately $16 million, and interest expense to be approximately $6 million. Other income to be approximately $7 million. An effective tax rate of approximately 21%. and dry docking payments of approximately $45 million. Moving to slide 17, the table on the slide shows our capex projections for the full year 2026. Our range for maintenance and other capital expenditures is unchanged at $150 to $170 million for full year 2026. Our estimate for expected new vessel construction milestone payments and related costs for full year 2026 is $400 million. As of March 31st, we had cash and cash equivalents of approximately $100 million and had approximately $522 million in our capital construction fund. Our CCF covers approximately 93% of our remaining milestone payment obligations, and when combined with our balance sheet cash, exceeds our remaining financial obligations. We continue to be in a great funding position on the New Build program. Lastly, our targeted build schedule remains unchanged. In the first quarter, we made a milestone payment of approximately $16 million from the CCF. Looking ahead, we expect to make approximately $213 million in milestone payments in the second quarter. And then in the third and fourth quarters, we expect to make milestone payments of approximately $34 million and $110 million respectively. With that, let me turn the call back over to Matt for closing remarks.

Thanks, Joel. Please turn to slide 18, where I'll go through some closing thoughts. We continue to navigate a period of geopolitical tension and uncertainty. While we've experienced higher fuel prices, we're confident in our ability to fully recover our increased fuel costs. Our focus remains on what we can control, which is to put our customers first, maintain operational excellence, and uphold our high standard of service. We remain confident in the demand consistency of our businesses because of our focus on serving niche markets where we're an integral part of the supply chain. In our domestic trade lanes, we provide a vital lifeline to the communities we serve. And in our China service, our value proposition is differentiated based on speed, reliability, and schedule integrity. Building on these strengths, we've successfully moved with our customers into Southeast Asia markets to extend our geographic reach and diversify our origination ports. Our China service has also become an important means for our e-commerce customers to meet the increasing consumer demand in the U.S. And we continue to expect e-commerce to be a long-term driver of growth for our CLX and MAX services. Lastly, We remain disciplined in our return of capital to shareholders. In the absence of sizable growth projects or acquisitions, we expect to continue to return excess cash to shareholders. As Joel mentioned, and we recently announced, we added 3 million shares to our authorization to repurchase stock. And with that, I will turn the call back to the operator and ask for your questions.

Certainly. And our first question for today comes from the line of Jacob Lacks from Wolf Research. Your question, please.

Hey, Matt. Hey, Joel. Thanks for your time.

Sure.

So you mentioned that you expect demand strength to continue through peak season. Last year was a little bit unique with the max service below 100% utilization during peak. Do you think you can get back towards more full shifts this year as we move into 3Q?

Yeah, I do, Jake. I think we said at the beginning of the year, and we continue to see it as it's unfolding in front of us, a more traditional cycle in the China trades, meaning a post-Lunar New Year slow build to the second and third quarter, full or nearly full ships as we have traditionally, whether we a week and we have vessels that are slightly different sizes, but we expect to be full or nearly full in the second and third quarter as we build into the traditional peak season. So when we expect it to remain busy until, you know, the traditional first second week of October pattern in the Lunar New Year. So, yeah, we're feeling like we're in a more normal environment and perhaps a bit slower post Lunar New Year, but that's kind of the way we're seeing the world today. But overall, you know, we expect to end up above where we did last year. And now we're at a point where we're feeling like we're going to exceed last year's marks.

Very helpful. And when I look at sort of air freight versus ocean freight, air tends to be a lot more fuel intensive. Are you seeing more shippers look to convert freight to your service just the longer this high fuel price environment persists? And to the extent we start seeing some jet fuel shortages in Asia, did that accelerate volume growth from some of the non-China geographies?

Yeah, I think you're right. So I think what we have heard from our customers is, although we have been mentioning this air freight conversion for the last couple of years, given this expedited space that we created, there's been sort of a long term. There are periods in markets where that growth trend would go up or go down, and we think we're entering a period where we're going to see more air freight conversions, some of which will be temporary and some of which will continue to convert. I also think that the longer that energy prices and availability are issues, I think the air freight markets have been significantly dislocated, and especially in places where they primarily import their jet fuel. So while we haven't seen significant impacts yet, we are seeing both from a price standpoint and a potential availability, we're seeing a lot of passenger airlines cancel flights or cancel marginally profitable flights. That's happening all over the world, including in the US, although that's not our core market. Just a reminder that 50% of the air freight flies in the bellies of passenger planes. So we think we see it as not a

is as a tailwind um and rather than a you know a huge catalyst um our ships will are likely to be in a more traditional peak cycle nearly full so i i think it'll be helpful in the tailwind interesting thanks and maybe last one for me um can you give us a sense how much the fuel lag headwind you're expecting in the second quarter is i know it's volatile but you know uh any quantitative uh like just a number around that would be helpful and then

Oh, go ahead. Did you have a second part of that question?

Yeah. Just as you get into 3Q, could you even over-recover just given the investments you've made in scrubbers and LNG, or is this really a true pass-through?

Yeah. Okay. So let me get to your first question first. I think the way we're thinking about it in terms of providing more visibility to our second quarter under collection, we're not exactly sure where we're going to end up. As you say, there's a significant amount of volatility Um, and I think it's not central to our story as we, as we think about it, we remain highly confident in our ability to recover fuel for the year. Um, the first quarter, because of that, it happened late in the quarter and we consume fuel over longer voyages. So there was very little impact. Um, we're thinking that the, you know, the impact will primarily be felt in the second quarter. And we're also highly confident that we're going to be able to recover that in the second half of the year. So there's not a margin erosion story. And I think we've given you our second quarter guide, so that's inclusive of the amounts we're including, but would rather stay away from point-specific items. And then as to your second question on fuel, I'll turn that over to Joel.

Yeah, so if it's fuel-related items that we'll put in the recovery basket, Jake, so for instance, for a scrubber, which we haven't done recently, but we did many, many years ago, That's a fuel-related item that allows us to really purchase fuel at lower costs. It's part of the overall equation. So if something like that is very specific to our fuel, it's related to fuel, then yes, that goes into our overall recovery basket.

Got it. Thanks for your time. I appreciate it.

Okay. Thank you. Thanks, Jake.

Thank you. And our next question comes from the line of Joe Enderle from Stevens Inc. Your question, please.

Hey, guys. Thanks for taking the question. You've previously disclosed transshipment mix around 20% of CLX and MAX. Was there any change in that figure in 1Q? And then any regions in particular made you more optimistic on near-term growth?

Yeah, I think that 20% we previously cited, we're in the 20% to 25% range. I think we expect to continue to be in that range as we'll grow both our China origins and our Southeast Asia origins. both as we look towards filling our ships as we get into the more traditional peak season. I think the question really is we do expect our customers to continue to move some of their manufacturing base out of China, although we continue to believe that China will remain an important element of our story and remain an important part of the world productive capability for manufacturing products so I would say could that could we go up from the 20 to 25 percent sure I think it's possible but importantly if it allows us to move with our customers as they look at relocating their plants were a trusted supply chain partner and they have confidence in us and so we'll continue to move as our customers move at that pace

Got it. That's helpful. And then just as a follow-up, I guess kind of a broader question on the China service. It was a really volatile year last year, a lot of changes in trade. How would you just describe overall hesitancy on China trade as we have moved through the year among customers?

Yeah, I mean, I think for our customers, there are, you know, Tariffs, do those settle down? They're going to be looking at producing their products at a place from an all-in standpoint, including tariffs and transportation charges and all of the things to help them meet their needs for their retailing needs. And so I think there's a lot of factors that go into it, but our view and is embedded in our commentary is that we think while there will be moments where tariff issues pop up, I think in our world we think that Tariff uncertainties are largely behind us. President Xi and President Trump will be meeting in a few weeks. We're optimistic that we're past the period like we had last fall where there was significant uncertainty. That's based into or baked into our thinking about how the rest of the year is going to unfold in that regard.

Got it. That's helpful. Thank you. And just one more on the competitive backdrop. We touched on expedited air. But then within expedited ocean, how do you shape up the competitive backdrop there? Have you seen any increase in blank sailings? Or has there been any capacity losses as competitors had less confidence on the trade backdrop with China?

Yeah, so let me make a general comment about the ocean trades perspective. generally, the more generic. And then I'll pivot to your question about what we describe as a second tier expedited carriers, that is that group that are below us or between the general freight markets and our industry leading markets. So on the general generic ocean side, I think we're seeing relatively good utilization of the ocean carriers there are small role pools the ocean carriers themselves are trying to get air freight I'm sorry ocean freight up many of them have very significant increases in their fuel consumption and cost and other cost increases and they're seeking to raise rates in part to recover those costs so I would call the broader generic ocean market as orderly and And I would say the second-tier expedited carriers, we haven't seen any dramatic changes in any of the carriers' capabilities. We haven't seen any significant cancellations of sailings. And so we see that the market for that secondary carrier, there's three or four of them that buy for that space to be relatively similar. And again, not that you asked, but Our belief was and continues to be that if we remain the fastest and second fastest CLX and Mac service, we're going to get the lion's share of this expedited market, and that continues to be true now. Thanks.

Thanks so much, guys. That's all for me.

Okay. Appreciate the questions. Thank you, Joe.

Thank you. And our next question comes from the line of Tom Osano from JP Morgan. Your question, please.

Hello, everyone.

Hi, Tomo. Hi, Tomo.

Thank you. So your Q2 ocean transportation operating income guidance is $20 million of up last year. Which services or customer segments are driving this growth, and what are the key risks to achieving it, please?

Okay. Thanks, Tomo. So the primary driver to that increase is really the continued strength in our China trade post-Lunar New Year that we talked about. And so our domestic businesses, we expect to hang in there on a relatively similar basis on a year-over-year basis. So the primary uptick is really the China trade and the demand drivers and some of our core segments that Matt talked about earlier. So e-commerce, e-goods, garments, those sectors really returning to a more normal traditional demand in Q2 compared to last year's Q2, which had a lot of tariff impacts on it. And so the risk, and that speaks to the risk, the risk are that there's a dislocation or there's tariffs reenacted or other kind of shocks to the system. So absent a shock to the system that would impact consumer demand or tariffs and direct trade relationships, we expect it to be a relatively orderly demand-driven second quarter, and that's what I would expect to be up year over year.

Thank you. And if you could share some more color on Hawaii and Alaska demand and economic conditions, especially regarding tourism and constructions, energies, and again, like what risk do you see for 2026? Okay.

Thomas, I'll start with Hawaii. So Hawaii, the bright spot is construction. There has been more construction activity. It's been fairly consistent for a year, year and a half, and we see that driving some demand in 2026. But it hasn't been enough to really buoy the economy in a really meaningful, positive way because the other side, the tourism side, has been still very sluggish. So U.S. West Coast tourism and U.S. tourism to Hawaii's been okay, although dollar spend has been not really dramatically growing. But where you really continue to see sluggishness on the tourism side is international tourism, which is still quite a bit off where it was three, four, five years ago. And that's been the biggest overhang on creating lack of growth and GDP growth in the Hawaiian economy. So it's a mixed bag in Hawaii, but overall we still continue to say it's a sluggish environment. In the case of Alaska, moving to that market, um there there's continues to be a significant amount of oil and gas and infrastructure investing around energy that's been very very positive for alaska our volumes have hung in there well we sometimes have year-over-year differentiation based upon competitors dry docking and timing of voyages and things like that but overall the alaska market continues to be steady and hanging in there with upward trajectories our expectation because of investment in oil and gas and and activity happening because of that more disposable income for the residents of Alaska because of that. So those are the general high-level puts and takes in those two key markets. The third market for us, Guam, you didn't ask about that directly, but it's a really important domestic market for us, and that's continued to be steady as well. Tourism is hanging in okay, but again, not on the international side. But we still continue to see a lot of government spending in Guam and the Western Pacific region that's helping the volumes in that region.

Thank you. Go ahead. Thank you. Yep. And then lastly, if you could talk about logistics segment operating income decline in Q1, what specific actions are you taking to drive recovery in Q2 and beyond? And what is your outlook for the rest of the year?

Yes. So the outlook for the rest of the year is that we'll be approaching last year's results. And the actions we've been taking is really focusing on two different pieces. Our Alaska, Span Alaska piece is about a little bit over half the logistics side. And there we're continuing just to focus on discipline pricing and delivery for our customers and providing the best transit times and customer service in that market. And then a similar strategy on the brokerage business side, which has been the other piece Our margins have been more compressed and under pressure, both on highway truckload, but also intermodal. And there, we're continuing to really focus on stickier customer relationships, small and medium customers, and having pricing discipline and good execution to deliver for those customers in what's still been generally a soft freight environment. That's on the demand side. Then also on the buy side for the actual procurement of truck pricing, continuing to work with our trucking partners and buying the truck load capacity at the right kind of price in the market as well to maintain our pricing and margin discipline. So those are the actions that our team's focused on in this environment, and we expect to be able to achieve the results we talked about the rest of the year by approaching this year, approaching last year's results as well.

Thank you very much.

Okay. Thank you.

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Matt for any further remarks.

Okay. Thanks for listening in today. We'll look forward to catching up with everyone on our second quarter call. Thanks very much. Aloha.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.