Welcome to the conference call. All participants are currently in listen-only mode. Following the speaker's presentation, there will be a question-and-answer session. Please note that today's conference is being recorded. I will now turn the conference over to our first speaker, Justin Schoenberg. Please proceed.

Thank you, Karen. Joining me on the call today are Matt Cox, Chairman and Chief Executive Officer; and Joel Wine, 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’ll make forward-looking statements within the meaning of the Federal Securities Laws regarding expectations, predictions, projections, and 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 in the captioned Risk Factors on Pages 13 to 25 of our Form 10-K filed on February 23, 2024, and in our subsequent filings with the SEC. Please also note that the date of this conference call is August 1, 2024, and any forward-looking statements that we make today are based on assumptions and predictions. We undertake no obligation to comment on these forward-looking statements. I will now turn the call over to Matt.

Okay, Justin. Thanks. Thanks to those on the call. Starting on Slide 3. Matson's ocean transportation and logistics business segment performed well, with higher year-over-year operating income in the second quarter. In ocean transportation, operating income increased year-over-year. Our China service saw significantly higher year-over-year rates and was the primary driver of consolidated operating income. We had higher year-over-year volumes in Alaska, primarily due to two additional sailings. Hawaii and Guam saw lower year-over-year volume. In logistics, operating income increased year-over-year on the strength of supply chain management. As a result of our performance in the second quarter and the expected strength of our China service in the back half of the year, we are raising our outlook in 2024. Joel will go into more detail on our updated outlook later in the presentation. I'll now go through the second quarter performance of our tradelanes, SSAT, and logistics, so please turn to the next slide. Container volume in our Hawaii service decreased 3.6% in the second quarter year-over-year. The decrease was primarily due to lower general demand. Tourist arrivals in the second quarter were lower, primarily due to significantly lower visitor traffic to Maui as a result of the wildfires last year. I will go through our full year outlook on the next slide, so please turn to Slide 5. According to UHERO's second quarter 2024 economic report, Hawaii's economy is projected to grow modestly in 2024, supported by a low unemployment rate and increasing construction activity. While we're encouraged by UHERO's longer-term forecast and some of the positive factors supporting that growth, our recent performance is reflective of a softer market. We expect volume in 2024 to be modestly lower than the level achieved last year, primarily due to continued challenges in population growth and lower discretionary income as a result of higher inflation and interest rates. Moving on to our China service on Slide 6. Matson's volume in Q2 2024 was 3% higher year-over-year as we continue to see a high level of demand from e-commerce and garment customers. We achieved average freight rates that were significantly higher year-over-year. Please turn to Slide 7. A supportive economic and consumer demand environment in the U.S. coupled with tighter supply chains led to elevated freight rates during the quarter. The supply and demand dynamics we experienced in the second quarter were not consistent with the normalized operating environment. We outperformed from a freight rate perspective. We expect our China service to continue to see elevated freight rates during the traditional peak season in the third and early fourth quarters. While we feel good about rate levels during the traditional peak season period, the trajectory after the peak season is uncertain, given several factors, including the strength of the U.S. economy and interest rates, transpacific supply, the Red Sea situation and its related supply chain effects, the East Coast Labor Union negotiation, and the U.S. elections. Nonetheless, we expect freight rates to remain elevated as long as the underlying economic supply chain and geopolitical conditions persist. At some point, we expect rates to normalize, the timing of which will likely depend on the duration and the degree to which these factors influence supply and demand dynamics in the tradelane. Regardless of the environment, we expect the ongoing shift from airfreight to expedited ocean and the continued growth in e-commerce goods to drive long-term demand for our China service. I'm confident in our positioning with the two fastest and most reliable expedited ocean services in the transpacific tradelane and our unmatched destination services. Please turn to the next slide. In Guam, Matson's container volume in the second quarter of 2024 decreased 6.1% year-over-year due to one less sailing compared to last year. In the near term, we expect continued improvement in the Guam economy underpinned by a low unemployment rate. For 2024, we expect container volume to approach the level achieved last year. Please turn to the next slide. In Alaska, Matson's container volume for the second quarter of 2024 increased 4.9% year-over-year due to two additional northbound sailings compared to last year. In the near term, we expect continued economic growth in Alaska supported by a low unemployment rate, job growth, and lower levels of inflation. For 2024, we expect Alaska's volume to approximate the level achieved last year. Please turn to Slide 10. Our terminal joint venture, SSAT, increased $2.6 million year-over-year to $1.2 million. The higher contribution was primarily due to higher lift volumes. Although container volumes on the U.S. West Coast system have been particularly strong in the first half of the year, volume across SSAT's terminals has not been as strong. In 2024, we expect the contribution from SSAT to be modestly higher than 2023 due to an expected increase in lift volumes. Turning now to logistics on Slide 11. Operating income in the second quarter came in at $15.6 million or approximately $1.3 million higher than the results in the year-ago period. The increase was primarily due to a higher contribution from supply chain management. Our supply chain management service includes purchase order management, origin operation, and destination services, and allows us to provide a comprehensive solution from factory floor to destinations across the U.S. For the third and fourth quarters of 2024, we expect operating income to approximate the level achieved last year. And with that, I will now turn the call over to Joel for a review of our financial performance.

Okay. Thanks, Matt. Please turn to Slide 12 for a review of our second quarter results. For the second quarter, consolidated operating income increased $27.9 million year-over-year to $124.6 million with higher contributions from ocean transportation and logistics, $26.6 million and $1.3 million, respectively. The increase in ocean transportation operating income in the second quarter was primarily due to significantly higher freight rates in China, partially offset by higher vessel operating costs, including fuel-related expenses and higher SG&A costs. The increase in logistics operating income was primarily due to a higher contribution from supply chain management. In the quarter, we had interest income of $18.8 million, which includes $10.2 million of interest income earned on our investments. The interest expense in the quarter decreased to $0.8 million year-over-year due to a decline in outstanding debt in the past year. Net income increased 40.1% year-over-year. Diluted earnings per share increased 46.5% year-over-year. The difference between the two is due to a decrease in the diluted weighted average shares outstanding. Please turn to Slide 13. This slide shows how we allocated our trailing 12 months of cash flow generation. The LTM period generated a cash flow from operations of approximately $608.5 million, from which we used $41.7 million to retire debt, $206.9 million on maintenance and other CapEx, $40.3 million on new vessel CapEx, including capitalized interest and owner's items, $24.6 million in cash deposits and interest income in the CCF, net of withdrawals for milestone payments, and $12.8 million on other cash outflows, while returning approximately $237.5 million to shareholders via dividends and share repurchases. Please turn to Slide 14 for a summary of our share repurchase program and balance sheet. During the second quarter, we repurchased approximately 0.6 million shares for a total cost of $72.2 million, including taxes. Year-to-date, we repurchased approximately 1 million shares for a total cost of $121.1 million, including taxes. Since we initiated our share repurchase program in August 2021 through June of this year, we have repurchased approximately 10.6 million shares or 24.4% of our stock for a total cost of approximately $877 million. As we have said before, we are committed to returning excess capital to shareholders and plan to continue to do so 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 second quarter was $420.7 million, a reduction of $9.8 million at the end of the first quarter. Two other items to note. On April 19, 2024, Matson received a Federal tax refund related to the company's 2021 Federal tax return of $118.6 million, as well as $10.2 million in interest income earned on the tax refund. During the quarter, we also paid $35.8 million into the CCF related to a milestone payment on our new vessel program. With that, let me now turn to Slide 15 and walk through our outlook for the third and fourth quarters of 2024. We expect ocean transportation operating income in the third quarter of 2024 to be meaningfully higher than the $118.2 million achieved last year. And in the fourth quarter of 2024, we expect operating income to be moderately higher than the $66.4 million achieved in the fourth quarter of 2023. We expect our China service to continue to see elevated rates during the traditional peak season in the third and early fourth quarters. For our domestic tradelanes, we expect volumes to approach their levels in 2023, absent a significant change in the trajectory of the U.S. economy. For logistics, we expect operating income in both the third and fourth quarters of 2024 to approximate the levels achieved last year. On the right-hand side of this slide, we expect the following outlook items for the full year: depreciation and amortization to approximate $180 million, closer to $27 million for drydock amortization; interest income to be approximately $45 million; interest expense to be approximately $8 million; other income to be approximately $7 million; and an effective tax rate of approximately 22.0% and drydocking payments of approximately $35 million. Moving to Slide 16. The table on the slide shows the CapEx projection for 2024. Compared to what we previously provided on our first quarter call in April, we increased our capital expenditure outlook for LNG installations and reengineering projects by $15 million to $85 million to $95 million because of higher parts and labor associated with the LNG installation of Molokai. All other line items remain unchanged. Milestone payments for new vessel construction are expected to be paid from the capital construction fund, which already covers approximately 71% of the remaining obligations. I will now turn the call back over to Matt.

Okay. Thanks, Joel. In closing, Matson performed well in the first half of the year. For the remainder of the year, we expect higher year-over-year financial performance, driven largely by elevated freight rates in the China service. At some point, we expect supply and demand activity in the transpacific tradelane to trend towards normalized operating efficiencies. And while we acknowledge that a number of factors in the China service outlook remain uncertain, we remain confident in our ability to respond to changing market conditions to serve our customers at an extremely high level. And with that, I will turn the call back to the operator and ask for your questions.

Our first question comes from Ben Nolan of Stifel.

So first of all, it was breaking up a little bit. But Matt, did you say that SSAT, while there was a lot of volume moving through the West Coast, SSAT did not have as much as some of the other ports. Is that what you'd say?

Yes, Ben…

Can you maybe explain that a little bit?

So we operate a portfolio of eight terminals along the U.S. West Coast, that the SSAT joint venture does. And two of those are in LA, Long Beach, two are in Oakland, with the balance being in the Pacific Northwest, both to come operation and three terminals in the Seattle area. And what we saw as the volumes increased generally in the transpacific, that cargo historically and in this case the same generally fills up in Southern California first and then migrates north to Oakland and lastly goes to the Pacific Northwest. It's really in the Pacific Northwest where most of that volume really did not appear and has not yet appeared. And so that was the explanation for why we didn't see the averages move up given the portfolio and the geographic location of those terminals.

It's been interesting to observe the situation on the freight side. I know you are well-equipped to discuss this. We've seen a significant amount of freight arriving at the ports, but the trucking and domestic logistics markets haven't been performing well. I've spoken with many people who are uncertain about where all this freight is going; it doesn't seem to be accumulating as inventory. Could you share your insights on what you are witnessing, the types of freight that are moving, and their destinations? Any information that could clarify this situation would be appreciated.

Yes, I'll do my best. It's a complex question. First, I want to comment on the overall market before discussing Matson and specific customer dynamics, which we believe are somewhat distinct. I agree that it's noteworthy how international freight markets are performing significantly better than those in the U.S. domestic sector. Customers have been conveying similar insights, particularly that there doesn't seem to be an excess of inventory, and they are carefully monitoring their inventory levels. We're only observing typical seasonal adjustments in preparation for peak season, so that aspect remains stable. If we look at consumer behavior, it's clear that consumers are resilient, and spending has remained steady. Overall, we're witnessing a robust level of demand that supports growth in imports. What stands out is the shift in excess supply within the trucking sector, which is affecting pricing structures in domestic trades. This trend is also evident in our intermodal brokerage. We are experiencing significant downward pressure on rates due to this surplus capacity. However, I cannot provide much more general insight into the trade. I can share that Matson's services are somewhat different. We strive to consistently offer the fastest and most reliable service for e-commerce, last-minute orders, and late production, which prompts demand for premium services to address congestion and air freight. All these factors indicate a strong demand for expedited services, particularly for Matson. That's about as much clarity as I can provide, Ben.

And then last, and I appreciate you hanging in with me for this. So this is the first time that I remember you guys calling out your supply chain management business. I could be not remembering. But would you say, as you're thinking about your logistics business, this is an area of increased focus? If so, are you looking to expand on that either organically or inorganically, or can you maybe just talk me through how that fits as part of the puzzle and where you think it's headed?

And you're right, I believe it's the first time we've called it out. I would also note for qualification that the changes in profit for logistics are very small. So it tends to amplify things that typically are not part of our core story. But it does highlight the synergies between Matson Logistics and Matson's ocean businesses with regard to our China service. Matson Logistics operates in multiple locations inside of China. It also, as you know, moves the intermodal cargo once it arrives in our Long Beach terminals to the final destinations in Chicago, Memphis, Dallas, and other locations. But the supply chain services we called out are those services that we provide to customers in China that are less than container load that would be consolidated and moved onto a Matson container and onto Matson's expedited service offering. That has been a very slow and steady organic growth build, which has really accelerated since the pandemic and is now approaching the radar again with the acknowledgment that the numbers are relatively small in the logistics business in terms of its relative change in profitability. So that's the story there, Ben.

And just to round that out, how do you think about the trajectory of it?

I see it like many of our other businesses continuing to grow organically. We have an unbelievable brand in China. And for customers that have 3.5 container loads of cargo, they want to have that last half of a container loaded into an LTL box consolidated by Matson and delivered. We will continue to see growth in that segment as our China business continues to perform well.

Our next question will be coming to us from Jake Lacks of Wolfe.

I wanted to ask for more insight on the level of outperformance in ocean. When you say meaningfully, can you elaborate? I know this is a bit more specific than usual, but we've observed a significant increase in rates. Any thoughts you have on this would be appreciated as we consider adjusting our models.

I mean, you got to take meaningfully, we're just saying meaningfully higher. So I can't really elaborate on that. Just use your best estimate based upon that. I would say though that this quarter we just had is meaningfully higher than last year's second quarter. But we're just going to leave it with the language we've chosen, meaningfully higher.

And then in Q4, are you assuming a pretty full rate normalization there?

I think at this point, Jake, we're expecting a more traditional peak period, meaning after the first week or so of October when we get into our traditional environment, we start to see the normal market adjustment factors of peak season surcharge to subside. And as we get to the second half of the fourth quarter, we return to a more post-peak season environment. It's really more of a traditional return to a seasonal pattern, subject to all the qualifications about other external events that may impact that positively and negatively.

You mentioned the long-term demand growth and the shift from airfreight to your expedited ocean service. How close are we to having enough demand to consider introducing a third expedited service?

We certainly have it on our long-term planning radar. However, I would say it is unlikely that we will see the demand within this time frame. If the market opportunity arises, we have a proven ability to respond and take advantage of those changes. There aren't many vessels available for charter that would be suitable for a service requiring six vessels in the transpacific tradelane. We believe it remains an option under different market conditions, but we don’t expect it to happen under the current conditions.

Our next question will be coming from Daniel Imbro of Stephens Inc.

Joel, I want to follow up maybe on the guidance. I think you guys talked about accepting pricing to stay strong through peak season, but how are you thinking about volume through the upcoming peak season? Maybe with some of the strength in Q2, a pull forward, do you still think we'll see a normal kind of growth sequentially? I'm curious how you're feeling about the volume growth as you talk to your customers for the back half?

We anticipate being fully booked. Generally, CLX and MAX are busy throughout the year, except for some off periods during holidays like Lunar New Year. Therefore, we expect to remain fully booked in the third quarter and continuing into the early part of the fourth quarter, as we approach the end of the peak season.

And then on the balance sheet, I think you took up CapEx Guide a little bit here for this year. I guess that's just a pull forward from some of the investments from next year. And then as you think about the windfall of cash with stronger pricing, how do you think about deploying that cash between growth, buyback, any other investments you're looking at?

Really no change in all of that, Daniel, to be honest. The only thing we changed was because of actual costs that are coming through on our Molokai project, our LNG reengineering project, we bumped up that line item by $15 million just due to that one specific project. There's really no pull forward of CapEx from one period to another or anything like that. And last quarter, we gave numbers for 2025 and 2026, and we've made no change to that either. Overall, the CapEx picture, I would describe as unchanged other than just some higher costs on one specific project.

Can you provide an update on the near term? I understand it's challenging to provide details on Q3, but did I hear you correctly? You mentioned that the Q2 growth was significant; is that the benchmark you are considering for what you define as meaningful?

Yes, if you compare last year’s performance, we discussed the operating income across each segment and the consolidated numbers. This year's second quarter for ocean and the consolidated figures were significantly higher than the second quarter of last year. I want to clarify that doesn't mean it will be the exact same amount, but it does qualify as significantly higher.

And then one more follow-up. When you think about adding the new string of ships, whether it's South China or North Vietnam, I guess, would you be looking to add company-owned ships? Could you lease ships like you do with the MAX line? Would that make it easier to do what are the considerations, or how long would you need to see this growing demand to decide if it's worth setting up a new string of six ships?

I think our view is, and as I said, it's not right on our radar at the moment. But if we were to add it to the third string, they would very likely be chartered vessels, foreign-built chartered vessels like we have with our MAX service. Those are comprised of chartered vessels that we would do it that way. Some factors that of course would go into it are, as I mentioned a moment ago, the availability of chartered ships, and you'd need to charter six of them to be able to have a weekly service. The other factors are in each of these markets, especially the growing markets like Vietnam and in other places, the question is not so much whether there's a demand for Matson's product but is there enough demand that would be willing to pay a premium price that would allow us to operate that service at a level of profits that would make sense for us to do. It's not that there isn't cargo there, but in some of these smaller markets, there's a smaller segment. For example, we do have a regular service at Haiphong, which connects with one of our trusted partners that move a couple of hundred loads a week out of Vietnam, Haiphong in particular that meets up with our line-haul ships on the CLX and MAX. We need to be confident that those markets can accommodate a much greater percentage of capacity to make those voyages profitable.

Thank you. This concludes the question and answer session. I would now like to turn it back to Matt Cox, CEO, for closing remarks.

Okay. Well, thanks for being on the call today. We look forward to catching up with you on the third quarter call. Thanks. Aloha.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.