Welcome, and thank you for joining Rayonier's Second Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I will turn the meeting over to Mr. Collin Mings, Vice President, Capital Markets and Strategic Planning.

Thank you and good morning. Welcome to Rayonier's investor teleconference covering second quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our website at rayonier.com. I would like to remind you that in these presentations, we include forward-looking statements made pursuant to the safe harbor provisions of federal securities laws. Our earnings release and forms 10-K and 10-Q filed with the SEC lists some of the factors that may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on Page 2 of our financial supplement. Throughout these presentations, we will also discuss non-GAAP financial measures, which are defined and reconciled to the nearest GAAP measures in our earnings release and supplemental materials. With that, let's start our teleconference with opening comments from Mark McHugh, our President and CEO. Mark?

Thanks, Collin. Good morning everyone. First, I'll make some high-level comments before turning it over to April Tice, Senior Vice President and Chief Financial Officer, to review our consolidated financial results. Then we'll ask Doug Long, Executive Vice President and Chief Resource Officer, to comment on our US and New Zealand timber results. Following our review of our timber segments, April will discuss our real estate results and our outlook for the balance of the year. Overall, we generated second quarter adjusted EBITDA of $56 million and pro forma net income of $4 million or $0.02 per share. Market conditions remain challenging during the second quarter, with much of the decline in adjusted EBITDA versus the prior year period attributable to lower harvest volumes in our timber segments, reflecting generally softer demand and the deferral of some harvest activity. We expect to recoup much of this volume over the balance of the year, which should translate to stronger second half results versus first half results for our timber segments collectively. Drilling down further on our timber segment operating results. Our southern timber segment generated second quarter adjusted EBITDA of $34 million, down $10 million from the prior year period, as a 17% decline in harvest volumes more than offset a 2% improvement in net stumpage realizations. In our Pacific Northwest timber segment, second quarter adjusted EBITDA of $6 million was down $1 million from the prior year quarter, as a 12% reduction in harvest volumes due to the Oregon sale completed late last year and lower non-timber income more than offset improved net stumpage realizations. Turning to our New Zealand timber segment, second quarter adjusted EBITDA of $8 million decreased $1 million versus the prior year quarter. The decrease in adjusted EBITDA was driven by lower net stumpage realizations and lower harvest volumes, partially offset by increased carbon credit sales and favorable foreign exchange impacts. In our real estate segment, we generated second quarter adjusted EBITDA of $19 million, down $1 million from the prior year period. Adjusted EBITDA in our real estate segment improved significantly versus the first quarter, but was below our expectations entering the quarter due to the timing of closings in our improved development business. However, our full-year transaction pipeline remained strong and we expect that second half results in our real estate segment will be significantly higher than first-half results. Overall, as April will discuss in greater detail later in the call, we are on track to achieve full-year adjusted EBITDA toward the lower end of our prior guidance range of $290 million to $325 million. As we indicated at the beginning of the year, our full-year 2024 financial guidance excludes the potential impact of any additional asset sales as part of the $1 billion disposition target that we announced in November. As it relates to our disposition target, we made significant progress during the second quarter and we currently have several large transactions that are in various stages of evaluation or negotiation. Overall, we have been encouraged by the interest received from prospective buyers as we advance our efforts to reduce leverage and capitalize on the continued disconnect between public and private values for Timberland assets. We expect to be in a position to provide additional details regarding pending transactions on or before our next quarterly earnings call. With that, let me turn it over to April for more details on our second quarter financial results.

Thanks, Mark. Moving to the financial highlights on Page 5 of the supplement, sales for the second quarter totaled $174 million while operating income was $12 million and net income attributable to Rayonier was $2 million or $0.01 per share. On a pro forma basis, net income was $4 million or $0.02 per share. Pro forma items in the second quarter included $1.1 million of net costs associated with legal settlements and $700,000 of costs related to our disposition plans. Adjusted EBITDA was $56 million in the second quarter, down from $69 million in the prior year period. On the bottom of Page 5, we provide an overview of our capital resources and liquidity. Our Cash Available for Distribution or CAD, for the first half of the year was $60 million versus $63 million in the prior year period. The decrease was driven by lower adjusted EBITDA, partially offset by lower net cash interest paid. A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on Page 8 of the financial supplement. We closed the second quarter with $142 million of cash and roughly $1.4 billion of debt. Our net debt to trailing 12 months adjusted EBITDA was approximately 4.3 times. At quarter end, our weighted average cost of debt was approximately 2.8% and the weighted maturity, average maturity of our debt portfolio was approximately five years, with no significant debt maturities until 2026. Our net debt to enterprise value based on our closing stock price at the end of the quarter was 22%. I'll now turn the call over to Doug to provide a more detailed review of our timber results.

Thanks, April. Let's start on Page 9 with Southern Timber segment. Adjusted EBITDA in the second quarter of $34 million was $10 million or 22% below the prior year quarter, driven by lower volumes and higher costs, partially offset by slightly higher net stumpage realizations. Total harvest volumes fell 17% versus a strong prior year quarter due to weather-related constraints in the Gulf region as well as weaker demand from sawmills. Meanwhile, non-timber revenue decreased 5% versus the prior year period as continued growth in our land-based solutions business was more than offset by lower pipeline easement revenues. Average saw log stumpage pricing was $29 per tonne, a 1% increase compared to the prior year period due to improved chip and salt pricing in most of our markets. Pulpwood net stumpage pricing was 10% higher than the prior year quarter at roughly $17 per tonne. Overall, weighted average stumpage prices in the second quarter increased 2% versus the prior quarter to roughly $22 per tonne. Improved in-market demand and reduced residual sawmill chip availability translated into improved pulpwood pricing across most of our markets in US South. Market pulp prices have improved over the past year, and containerboard operating rates continue to rebound following the inventory destocking cycle that weighed heavily on containerboard demand in 2023. Turning to Grade markets. Log demand softened throughout the second quarter due to continued weakness in Southern Yellow Pine lumber demand as well as drier weather across our Atlantic operating areas. Encouragingly, we have seen indications that the second quarter may mark the low point in pricing. Additionally, over the past few months, we've seen a nearing of the price discount between Southern Yellow Pine lumber and other species. However, the overall demand picture for lumber remains challenged by continued softness in housing and repair and remodel markets. Lumber producers are responding by reducing production, with several mills in the region opting to reduce output in response to current market conditions. In turn, we're seeing less demand for sawtimber as mills adjust their operations over the near term. That said, the relative strength and diversity of our US South footprint remains a key competitive advantage as we navigate these headwinds. We anticipate a potential rebound in end-market demand following expected interest rate cuts later this year. When this occurs, we believe that our strategic positioning will allow us to capitalize on stronger log pricing as lumber production ramps up again in the US South. Moving to our Pacific Northwest Timber segment on Page 10. Adjusted EBITDA of $6 million was $1 million below the prior year quarter. The year-over-year decrease was primarily driven by lower harvest volumes and lower non-timber revenue, partially offset by improved net stumpage realizations. Volumes decreased 12% in the second quarter as compared to the prior year period, reflecting the large disposition we completed in Oregon during late 2023. At $91 per tonne, average delivered domestic saw log pricing in the second quarter decreased 7% in the prior year period due to a combination of weaker demand from domestic lumber mills, a lower proportion of Douglas-Fir volumes, and reduced export market tension. Meanwhile, at $30 per tonne, pulpwood pricing remained fairly stable during the quarter, but was down 17% versus a strong prior year quarter that benefited from favorable supply demand dynamics for pulpwood in the region. Overall, despite lower delivered pricing, net stumpage realizations increased 10% due to favorable pricing on stumpage sales and lower per tonne cut and haul costs on delivered volume. The Pacific Northwest log market continued to face headwinds during the second quarter from both challenging domestic lumber markets and reduced demand for log exports. Similar to the US South, sawmills in the region are responding to these market conditions by reducing lumber production to better align with current demand. Still, our pricing has been fairly resilient thus far in 2024. We believe that the threat of potential supply constraints as we enter the peak of fire season as well as the recent uptick in lumber prices should translate into fairly stable pricing with some modest upside potential as we move through the balance of the year. Moving to New Zealand. Page 11 shows results in key operating metrics for our New Zealand timber segment. Adjusted EBITDA in the second quarter of $8 million was $1 million below the prior year quarter. The decrease in adjusted EBITDA compared to the prior year period was primarily driven by a 12% decrease in harvest volumes and 7% lower weighted average delivered log prices, partially offset by higher carbon credit sales and favorable foreign exchange impacts. Average delivered export sawtimber prices of $102 per tonne declined 2% compared to the prior year quarter as demand continued to be constrained by ongoing challenges in China's property sector. Offtake from Chinese ports remains subdued, reflecting weak construction demand. After rebounding seasonally following the Lunar New Year, daily port offtake has fallen back to approximately 50,000 cubic meters to 60,000 cubic meters over the past few months. Positively though, inventory levels have generally adjusted to the weaker demand environment. At the end of July, softwood log inventories at Chinese ports stood at approximately 3.3 million cubic meters, down roughly 10% year-over-year. The relatively lean log inventories in China give us optimism that modestly more favorable pricing conditions will materialize as we move through the balance of the year. Shifting to the New Zealand domestic market. Second quarter average delivered solid prices fell 6% from the prior year period or 4% when including foreign exchange impacts. The decline in pricing reflects soft demand in the local construction market amid a higher interest rate environment as well as reduced competition from the export market. Second quarter non-timber income in New Zealand of $5 million increased $4 million relative to the prior year period. The year-over-year increase reflects higher carbon credit sales in the current year period as we temporarily suspended our sales program in the first half of 2023 amid significant market volatility. We anticipate that we will remain active in the New Zealand carbon market over the course of 2024, as prices remain healthy from a historical standpoint. Lastly, in our trading segment, we registered a breakeven result in the second quarter. As a reminder, our trading activities typically generate low margins and are primarily designed to provide additional economies of scale to our key timber export business. I'll now turn it back over to April to cover our real estate results.

Thanks, Doug. As detailed on Page 12, the contribution from our Real Estate segment during the second quarter was considerably higher than the first quarter, fueled in large part by a non-strategic timberland sale in New Zealand. Real estate revenue totaled $31 million on 14,600 acres sold at an average price of $1,750 per acre. Real estate segment adjusted EBITDA in the second quarter was $19 million. Drilling down sales in the improved development category totaled $2.6 million. In our Heartwood development project south of Savannah, Georgia, sales consisted of two residential pods for $1.6 million or $34,000 per acre. In our Wildlife development project north of Jacksonville, Florida, we sold an 8-acre commercial parcel for $1 million or $125,000 per acre. Despite the elevated interest rate environment, we continue to see healthy interest from home builders as both our projects continue to benefit from favorable migration patterns as well as relatively affordable price points. Interest from developers for non-residential end uses remains stable, but some deals are taking longer to materialize in the current financing environment. While we expect that the timing of land sales will remain lumpy quarter-to-quarter, as we detailed in our Investor Day in February, we continue to see a growing pipeline of opportunities in our development business. Turning to our Rural category. Second quarter sales totaled $7 million, consisting of approximately 1,400 acres at an average price of roughly $5,200 per acre. While elevated interest rates continue to impact the willingness of some buyers to transact, the overall demand and pricing for rural properties remain favorable. As discussed last quarter, we have seen growing interest among conservation and impact-oriented buyers looking to place capital. We continue to expect a larger contribution from these sales as we move through the balance of the year. Lastly, during the second quarter, we also closed on a non-strategic timberland sale in New Zealand. The transaction consisted of approximately 13,000 acres for roughly $16 million or $1,200 per acre. The transaction included several geographically isolated parcels with above-average production costs, a relatively young age class distribution and below-average operability with only about 50% of the total acres classified as plantable. The sale price per acre reflects the below-average quality of this asset and is not indicative of the overall value of our New Zealand timberland portfolio. Notably, this transaction was initiated mid-last year and is not related to the review of a strategic alternative for our New Zealand joint venture interest. Now moving on to the outlook for the balance of 2024. Based on our first half results and our expectations for the remainder of the year, we now expect that full-year adjusted EBITDA will be toward the lower end of our prior guidance range of $290 million to $325 million. Further, we now expect pro forma EPS to be modestly below the low end of prior guidance. As a reminder, our guidance excludes the potential impact from any additional asset sales as part of our previously announced $1 billion disposition target. With respect to our individual segments, in our southern timber segment, we expect full-year harvest volumes toward the lower end of prior guidance as we look to opportunistically flex our volume in response to market conditions. Further, we anticipate that pine stumpage realizations will be lower in the second half of the year as compared to the first half due to a less favorable geographic mix, lower sawlog prices, and a relatively higher proportion of thinning volume. Lastly, we remain encouraged by the momentum of our land-based solutions business and continue to expect higher non-timber income for full year 2024 relative to full year 2023. Overall, we anticipate full year Southern Timber adjusted EBITDA toward the lower end of our prior guidance range. In our Pacific Northwest Timber segment, we expect to achieve full year volumes slightly below our prior guidance. As Doug discussed, pricing conditions have been relatively stable thus far in 2024, but our ability to increase delivered log prices has been constrained by challenging domestic and export market conditions. While we believe there is some modest upside potential as we move through the balance of the year, we have tempered our pricing expectations as compared to earlier in the year. Overall, we expect full year Pacific Northwest timber adjusted EBITDA toward the lower end of our prior guidance range. In our New Zealand Timber segment, we are on track to achieve our full year volume guidance as we anticipate relatively higher harvest volumes during the second half of the year as compared to the first half. Further, we continue to expect that full year domestic and export saw timber pricing will improve modestly relative to the full year pricing achieved in 2023. Despite improved pricing conditions, we expect full year New Zealand timber adjusted EBITDA to fall slightly below our prior guidance range due to lower carbon sales, softer export markets, and elevated shipping costs. In our Real Estate segment, we continue to see healthy interest in our development projects and rural properties. We continue to anticipate full year adjusted EBITDA within our prior guidance range with transaction activity heavily concentrated in the fourth quarter.

Thanks, April. As I reflect on the first half of the year, I'm proud of how our team has continued to navigate challenging operating conditions with an unwavering focus on making decisions in the best long-term interest of Rayonier and its shareholders. To this end, we elected to strategically defer some harvests in more challenged markets to preserve value in the face of ongoing headwinds posed by soft domestic lumber markets and lower export market demand. Despite the headwinds facing sawtimber markets this year, we are encouraged by the sustained improvement in pulp mill operating rates across our US South footprint and the corresponding gains in pulpwood pricing that we've been able to capture. The prospect of rate cuts later this year, coupled with continued low log inventories in China, give us additional reasons for optimism over the balance of the year. On the Real Estate front, we've been pleased by the continued demand for both rural and development properties despite the higher interest rate environment. As previously discussed, we expect a significantly stronger contribution from our real estate segment during the second half of the year versus the first half. We also believe that more favorable financing conditions could further bolster the already healthy demand we're seeing across our real estate categories. Throughout the first half of the year, we've also continued to advance important strategic initiatives. On the land-based solutions front, our team is energized by the pipeline of opportunities we're pursuing with high-quality counterparties. We continue to believe that our land base leaves us uniquely well positioned to grow these revenue streams over time. And as I discussed earlier, we are pleased with the progress we've made toward executing our $1 billion disposition target. There remains a strong bid for timberland assets in the private market and we continue to advance a variety of options to achieve this target. We look forward to sharing more details regarding our disposition efforts in the coming months. That concludes our prepared remarks, and I'll now turn the call back to the operator for questions.

Thank you. Our first question comes from Mark Weintraub with Seaport Research Partners. Your line is open.

Thank you. Two quick questions. One, when you originally announced the disposition plan you had suggested an 18-month time frame, is that still the right duration to be thinking about? Or any update there?

Hey, Mark, this is Mark. Good morning. Yes, that is still the right time frame to be thinking of. As we said in the prepared remarks as well as in the release. We've made quite a bit of progress here in the last several months, and we look forward to sharing more details on or before our next earnings call.

Okay. I appreciate that. And then any additional specifics in terms of things that might have moved forward on land-based solutions? You made some general comments. But were there any updates that you can give us in terms of things concretely seeing done during the quarter?

Sure. Good morning, this is Doug. On the land-based solutions front, our team continues to advance a range of opportunities with high-quality counterparts. Recently, we've added another 5,000 acres of executed carbon capture storage leases. And as we discussed on our last call, we're still well on the way to achieving our year-end goals of having over 70,000 acres under lease for current capture storage and targeting over 50,000 acres under options for solar. So we continue to believe our portfolio is uniquely well positioned to provide these solutions as many large corporations are setting ambitious sustainability goals, including those commits to reduce their carbon footprint and increase the use of renewable energy. So we did have some success in the current quarter and are seeing great progress as we move forward for the rest of the year.

Great. And in curiosity, back in February, you provided some targets I guess we're 6 months forward from that. How do you feel about those targets today versus how you felt about them back in February?

Yes, I'd say we still feel very good about those targets. And if anything else, we're seeing probably more interest than we had in February for these type of opportunities.

Thank you. Our next question comes from Anthony Pettinari with Citi. Your line is open.

Hi, good morning. This is Gregory on for Anthony. First, I guess, on Timberlands. Can you just comment on what you saw across your various subregions in the second quarter and maybe what's implied in the full year guidance? And then I'm wondering also if there are any disparities locally in the South, are the main drivers there kind of sawmill operating rates? Or are there more kind of nuanced drivers of prices regionally? Would love to hear your thoughts there.

Sure. This is Doug, and I'll be happy to start there. One important thing to keep in mind is that we do a combination of stumpage sales and delivered sales, and we don't have exact control when a stumpage track is going to be harvested. And those buyers typically have a year to harvest, and we'll start selling towards the end of Q4 of the prior year and the beginning of the current year. To your point, for the first half of the year, the southern portion of our Southwest resource unit experienced excess rainfall, leading to limitations in harvest activity. Harvests were constrained particularly in Texas and Louisiana due to the wet weather combined with market softness. However, we are seeing improvements as we move forward.

Thank you for that. I would like to follow up on carbon credits. Based on the data I've reviewed, it seems that New Zealand carbon credits have stabilized after a sharp decline in March and April. Can you provide some context regarding what has allowed prices to stabilize, whether demand has increased slightly or if supply has become tighter? Additionally, regarding the New Zealand credits on your balance sheet, are they sellable in the U.S. market? I'm asking because it appears that the credits on your balance sheet are of high quality.

Hi Greg, this is April, I'll take that. So as we detailed in our supplement, we sold about $4.4 million worth of carbon credits in New Zealand in the second quarter, and that was up from $400,000 in Q2 of 2023. Last year, we deferred our New Zealand sales early in 2023 due to market volatility, but we're resuming sales later in the year. We are being opportunistic as we sell in New Zealand.

Yes. And I'll just address your question a little more around the quality of markets and things like that. We continue to be very deliberate in how we're thinking about moving forward in the voluntary carbon markets because our customers are focused on high-quality carbon credits.

As it relates to just the ability to monetize New Zealand credits in the voluntary market in the U.S., keep in mind those are two different markets, and those credits are not fungible. There has been a lot of press about some of the quality issues with credits issued historically in the voluntary carbon market, whereas the regulated market treats a credit as a credit. If standards evolve in the voluntary market, we may eventually reach a point where they are considered more fungible, but we're certainly not there yet.

Thank you very much.

Thank you. Our next question comes from Matthew McKellar with RBC Capital Markets. Your line is open.

Hi, good morning. Thanks for taking my questions. Could you share how you're thinking about the pace of construction in Wildlight over the next year or so? That community has built a lot of momentum over the past few years, and you mentioned good interest, but just wondering if you see any signs of caution from builders in the area?

I'd say that the single-family homebuilding market has held up reasonably well. The demand for new homes has transitioned into the new home construction market. Particularly large national homebuilders have been successful in buying down rates to stimulate demand in that market. Given the demographics of our projects and the relatively affordable price point, we believe these areas remain attractive. While the market is more cautious today than in prior years, we remain optimistic about the pace of absorption and the level of interest in those markets.

Okay. Thanks very much for that color. And then for Q3 specifically, do you expect any impact to your business, whether it be disruption to harvest operations or otherwise in the South with some of the heavy rain from the Debbie tropical storm? Or maybe conversely, would you expect to potentially benefit in some areas, given better road infrastructure versus other owners of timberland in the area?

Yes, sure. This is Doug. We have experienced varying rainfall levels, which could impact our log production in the short term, but our infrastructure investments position us to recognize increased volume into mills. The long-term impact is expected to be minimal, and our geographic diversity helps mitigate risks associated with weather events.

Okay, great. So then, last one from me. Just touching on the log exports out of the Pacific Northwest, have you seen any change in market conditions there? Any additional tension in the markets compared to what you saw in Q2?

I would say it's pretty much the same. The opportunities for additional exports into China have pretty much remained stable, with slight improvements into Japan. There haven't been any significant changes between Q2 and now.

Okay, thanks. That's all for me. I'll turn it back.

Thank you. Our next question comes from Buck Horne with Raymond James. Your line is open.

Hey, thanks. Good morning. I just kind of want to follow up on the weather update situation with the ground post Debbie. I guess my follow-up would be, if we continue to have a very busy storm season across the Southeast, it feels like your guidance is somewhat dependent on ramping up harvest activity throughout the third and fourth quarters. Just wondering what's the flexibility across the region if we continue to have a fairly active storm season?

Hey Buck, this is Mark. While our guidance did include expectations of increased harvest volumes in the back half of the year, that mainly pertains to New Zealand and the Pacific Northwest. We have already seen large harvest volumes in Q1 in the U.S. South, and we guided towards lower harvest volumes for the remainder of the year in that region. Weather events may impact removal activity, but we also stand to benefit from pricing tension that arises when volume is restricted. Rayonier's infrastructure investments often give us an advantage over other landowners.

Mark, I think you did an excellent job of explaining that. If harvest operations are constrained, it usually means that everyone else is too, which often results in pricing tension.

Got you. Thanks, guys. That's really helpful color. And then I guess related to that is kind of a combination question. But it's related to the dividend policy and dividend sustainability here, cash flow trends seem to be trending well below the payout schedule at the moment. With the dispositions that are planned for the back half of this year or next year, what's the thought process around near-term dividend sustainability or addressing the payout ratio sometime in the near future? What's the outlook and what's the flexibility on the balance sheet?

Yes. As it relates to this year, Buck, keep in mind, we focus on long-term dividend sustainability and growth rather than quarter-by-quarter management of the payout ratio. This year has been slower than anticipated, but our year-to-date Cash Available for Distribution is only about $4 million short of last year's level. Our focus is on advancing our asset disposition target, which we believe will enhance Cash Available for Distribution on a per-share basis. We anticipate second half cash flow will significantly increase compared to the first half, and we target a dividend that will be fully funded this year or very close to it.

Got it. Thanks, guys. Good luck.

Thanks, Buck.

I am showing no further questions at this time. I will turn the conference back to Collin.

This is Collin Mings. I'd like to thank everybody for joining us. Please contact us with any follow-up questions.

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