Thank you for standing by, and welcome to Matson's First Quarter 2025 Financial Results Conference Call. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Justin Schoenberg, Investor Relations and Corporate Development at Matson. Please go ahead, sir.

Thank you. 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 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 position 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 3. 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 the 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 5. 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 remain on a slow recovery path. Moving to our China service on Slide 6. 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. Matson's volume in the first quarter of 2025 was 1.4% lower year-over-year. Please turn to Slide 7. 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% year-over-year. Given the pronounced market decline in demand in the Transpacific 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 moved 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 customer feedback we received since launching our inaugural direct service connection from Haifeng 2 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 volumes grow in the region. We expect the uncertain environment to accelerate the diversification of our catchment basin in Asia. 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 transpacific 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 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, the 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 has 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 17, the USTR finalized its notice 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 we 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 the Guam 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, Matson'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 a low unemployment rate, job 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.

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 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 $0.04 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 owners' items, $65.5 million in cash deposits and interest income into the CCF, net of withdrawals from milestone payments, and $13.5 million on other cash outflows, 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 outlooks 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 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 the 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 from maintenance and other capital expenditures has been lowered by $20 million to $100 million 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 or 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.

Thanks, Joel. Please turn to Slide 19, where I'll go through some closing thoughts. We are navigating like many in an unsettled and rapidly evolving environment. For the last 2 decades, we've operated our expedited ocean service through significant periods of uncertainty and disruption, and we've come out of those periods better for it as we demonstrate what we do best for our customers, which is to be a trusted supply chain partner with consistent, reliable, and fast service. We believe we are in the early innings of U.S.-China trade negotiations and expect a deal to be reached, although timing is unclear. At some point, the largest and second-largest economies will find a way of working together. The stakes are too high for both countries. Despite the current uncertainties, we remain quietly confident in our long-term prospects due to the diversification of our business and cash flows, our focus on serving niche markets where we're an integral part of the supply chain, and the strength of our balance sheet. Our businesses are durable and capable of withstanding short-term fluctuations while creating long-term shareholder value. We remain committed to maintaining the reliability of our vessel operations and providing high-quality service to our customers and the communities that rely on us. Matson has over 140 years of operating strength and has historically performed well during periods of supply chain disruption given our competitive advantages and the reliability of our services. We remain committed to looking for growth, either organically or via acquisition, and are prepared to act quickly if an opportunity presents itself during this period of uncertainty. Lastly, we expect to continue to return capital to shareholders through dividends and our share repurchase program. Our share repurchase program remains a core tenet of our capital allocation strategy, and we continue to expect to be steady buyers of our shares. 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 Daniel Imbro from Stephens.

Maybe a couple starting on the ocean side. Obviously, a lot of moving pieces here quarter-to-date, Matt. But if we think about Vietnam and the Catchment Basin you've built out, just curious how much capacity is down there? I think you said you set up a second direct service in the quarter? I guess if we think about the infrastructure down there being less familiar, how much volume could you pick up if those two direct services really ramped relative to offsetting maybe what's coming out of China as we just think about what you're building and the ability to maybe expand into new markets to offset the China weakness?

Yes, that's a great question. Currently, about 20% of our weekly volumes from Vietnam comes from the recent launch of our Ho Chi Minh service. We can increase that volume significantly, as we maintain regular communication with our feeder partners in Asia. They can adjust to use larger vessels if necessary and meet our requirements for connections over Shanghai. This gives us a strong capacity to scale up depending on market demand. It's noteworthy that Vietnam has experienced rapid growth, partially due to the China Plus One strategy initiated during the first Trump administration, as companies sought to diversify their risks. However, like many rapidly growing Asian economies, Vietnam faces challenges such as power and labor shortages in both the north and south. They were already busy before the recent tariff changes, so it’s unclear how much more they can scale quickly. As I mentioned, we will support our customers if they choose to shift some production there. Additionally, our new Ho Chi Minh service has good connections to Cambodia, which has also been seeing fast growth in production. As the situation evolves, we will continue to follow our customers' needs.

That's helpful. And these trends shipments that are going through Shanghai show and the China containers. Maybe just to clarify, that down 30% on the quarter-to-date China volumes, is that directly out of China? Or is that including the positive effect of seemingly some probably more growth out of Vietnam?

Yes, initially, we had very few data points to analyze. In Vietnam, we observed a decline in volume across all origins during that period due to uncertainty about whether tariffs would be rolled back, and it wasn't clear how long the temporary tariffs would remain in effect. Consequently, we experienced reduced volumes from all origins in the beginning. However, in the weeks since, we have seen volumes from Vietnam increase, partly due to the introduction of our Ho Chi Minh service, bringing them back to the general levels we had before the tariff discussions.

Great. And then maybe last one for me. Sorry for being more near term here, but I know you do not want to quantify maybe pricing movements historically. But given the volatility and also the increased disclosure around 2Q volume so far, can you talk about rates and maybe how those have developed? What kind of rate pressures or actions have you seen in the market in response to these tariffs and subsequent volume drop-off?

Yes, I would say the situation has been somewhat inconsistent. I want to address market dynamics first, then I will discuss Matson. We have observed that international ocean carriers have canceled a significant number of sailings due to reduced demand, as they are trying to adjust their fleets for the decreased shipments and capacity. Some carriers have maintained their rates while attempting to reduce capacity. In some instances, certain ocean carriers have raised their rates for shipments from other non-Chinese origins, while in other cases, we have seen lower rates in the market, which you can track through the SCFI. It is interesting because this is happening in real-time, and the market is still beginning to adjust to whatever the new normal becomes, leading to considerable disruption. From Matson's viewpoint, as Joel mentioned, we anticipate both lower rates and lower volumes for the second quarter and the entire year. Although we won't be immune to these changes, we still hold a significant premium over the market, but our rates will adjust in line with the overall market trends.

Our next question comes from the line of Jacob Lacks from Wolfe Research.

So with China volumes down so dramatically, does it make sense at some point to start temporarily canceling some MAX sailings similar to what we see during Lunar New Year?

Yes, that's an important question. Our perspective involves a timing aspect. We aim to avoid canceling any sailings because we believe that in about 4 to 8 weeks, when much of the inventory depletes, our customers will need to start moving their cargo. Currently, there's significant interaction among product manufacturers, importers, and retailers regarding how to manage the costs of tariffs. Our customers are very concerned about having empty shelves as much as possible. We anticipate that a considerable amount of cargo will be moved at the last minute, and we're noticing various shifts in demand patterns as capacity, supply, and demand start to align. Our goal is for our customers, when reflecting on this challenging period, to recognize that Matson and our brand symbolize reliable delivery without canceled sailings. If economic conditions require us to reassess, we will do so when the time comes; however, that's not where our focus is at present.

Got it. That all makes a lot of sense. And I know it's just been a few days here, but have you seen any changes from the elimination of the mines exemption from last week and any changes you expect to see?

Yes, we recognize that Temu has canceled its direct shipments from China and is shifting towards a model similar to Amazon’s, focusing on cargo available in the U.S. through domestic warehouses and distribution centers rather than relying on air freight. This shift has resulted in a notable decrease in air freight demand linked to Temu’s new business strategy. Consequently, we anticipate that more air cargo will transition to ocean shipping, which could present a long-term opportunity for us as e-commerce continues to expand. This change became evident over the weekend with the end of the de minimis exemption.

And our next question comes from the line of Omar Nokta from Jefferies.

Good discussion and a couple of questions or a couple of follow-ups from my end. And maybe just on this last point of the de minimis exemption. I know it's still very early, but do you think maybe perhaps longer term, indeed, that this could be an opportunity to grab market share, perhaps more permanently from airfreight? Is that kind of the tough process? I know it's, again, still early, but is that kind of the thinking here long term?

I believe the de minimis exemption is unlikely to be negotiated in any settlement with China. It's essentially gone, and the business models that relied on it will now be forced to adapt. This change will likely increase opportunities in the ocean market by closing that loophole. A portion of e-commerce will have a chance to quickly replenish its needs, which presents an opportunity for us. It will be intriguing to see how the air freight markets adjust, especially since there will likely be significant excess capacity that needs to be realigned. This change appears to be permanent and should create more opportunities for ocean carriers.

Okay. Regarding the 30% decline in China volumes since the tariffs were announced in April, everything is evolving rapidly. It's only been about four or five weeks since that point. From your perspective, have you observed any changes in China volumes, particularly in the first couple of weeks of April when global activities appeared to stall? Over the past week or two, have you noticed any specific changes in the China-U.S. volume?

I can share some general observations while being cautious about my forward outlook. These comments reflect the average situation over the past two weeks. It appears that significant activities are happening between our retail customers and the manufacturers of this product regarding pricing adjustments and how costs will be shared among the involved parties before reaching the end consumer. As negotiations continue, we expect more cargo to start moving. We've also observed in the trade press that some major retailers, who previously halted or shipped nothing, are now resuming cargo movements. We anticipate that cargo will need to move as it's essential for products to be available on shelves for sale. Our position is that normalization is unlikely until tariffs are established at a permanent level, the timeline for which remains uncertain. However, more cargo is beginning to move for two main reasons: the upcoming peak seasons and the urgency of negotiations. For instance, manufacturers of swimsuits face a limited sales window during the season, requiring timely agreements. Therefore, cargo will need to be moved, even though it may be at reduced levels until we reach a stabilization of the tariffs, which we hope occurs soon.

Our next question comes from Ben Nolan from Stifel.

I appreciate it. And I also appreciate you guys being forthright with respect to sort of how this is happening. So first of all, can you maybe talk through, is there anything that you can do to sort of help mitigate? I mean, obviously, there's the catchment basin thing and picking up volumes from Vietnam, and it doesn't sound like you're going to be doing any blank sailings. But are there other things on the cost side or just anything else that can be a toggle that can be pulled to help offset the impact of what's going on here?

Yes. The key question for us is the duration of the current situation and what it will look like when we return to normal. Like many companies in the U.S., we have reviewed our capital spending to identify areas that can be deferred. We have instituted a hiring freeze and reduced our spending levels to the extent possible. Our goal is to be prepared for any changes in costs that may arise once things stabilize. Our view is to implement the most obvious measures while retaining the flexibility to recover. From past experience during the pandemic, when normalcy resumes, we expect a significant rebound in activity, and we want to be in a position to leverage that. The greater the rebound, the longer this situation lasts. Therefore, we prefer not to downsize in a way that would make it difficult to reinstate resources quickly. We have demonstrated our commitment by not canceling any sailings, positioning ourselves as a reliable partner, which we believe will contribute to long-term value creation. We will continue to monitor the situation and avoid making any permanent decisions at this time. Every company, including ours, is engaging in extensive planning and scenario analysis, and we will act appropriately when necessary.

Okay. I think I have an idea, but can you provide more context? You mentioned a 30% volume decline in April. Can you explain what that might mean for your operating income in the Marine Transportation business?

Ben, it's Joel. I'll take that one. So we won't give anything specific, but the 30% decline, you can look at our numbers, that's a year-over-year phenomenon that we quoted in April. So the best way I can contextualize it for you is to say, look at our second quarter numbers last year, assume April is down 30% year-over-year. And then make your own estimates of what we think the rest of the quarter will be for our China business. And then, of course, layer on what you think the incremental contribution would be, and that would be the consolidated operating income impact of it. So that's the best way to think through it and conceptualize it.

At this point, we are uncertain if the 30% decline will gradually improve. It's unclear if China and the U.S. might pause the tariffs or make significant changes before the end of the quarter. This contributes to a lack of clarity for everyone. As Joel mentioned, that's the approach to consider when trying to anticipate our outlook.

Right. Okay. And then if I could sneak one last in. You talked about 20% of the volume that's running through China, originating in Vietnam. Is there any thinking about maybe running a direct shipment from Vietnam?

Yes. We believe that our feeder strategy with our trusted partners in the region allows us to provide the quickest service to the U.S. West Coast from Hai Phong and Ho Chi Minh, even with the feeder connections arriving just before our departure in Shanghai. We certainly have the flexibility to move ships as needed, but we can also maintain the fastest connections from Hai Phong and Ho Chi Minh through our feeder network while keeping our long-standing relationships that ensure excellent service. Additionally, there is considerable congestion at the major ports in Vietnam, and our lack of established relationships there means our own vessels might not operate as efficiently as they do at the smaller ports serving our feeder vessels. This illustrates our point further.

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

Okay. Well, thanks for your attention today. We look forward to connecting with you at the end of the next quarter. Thank you.

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