Q4 2023 Matson Inc Earnings Call

Operator: These risk factors are described in our press release and presentation and are more fully detailed under the caption risk factors on pages 14 to 24 of our form 10k filed on February 24, 2023, and our subsequent filings with the SEC. Please also note that the date of this conference call is February 20, 2024, and any forward-looking statements that we make today are based on assumptions as of that date. We undertake no obligation to update these forward-looking statements. I will now turn the call over to Matt.

These risk factors are described in our press release and presentation and are more fully detailed under the caption risk factors on pages 14 through 24 of our Form 10-K filed on February 24 2023.

Subsequent filings with the SEC.

Please also note that the date of this conference call is February.

<unk> 2008, 2024, 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.

Justin: Okay, thanks Justin and thanks to those on the call. I'll be starting on slide three. Matson's ocean transportation and logistics business segments performed well in the fourth quarter, capping off a solid year for both business segments. Matson is in a solid operational and financial position. We are the leading expedited ocean freight provider in the Trans-Pacific, and we're well positioned for growth in our Jones Act and logistics market. Our balance sheet is strong, with a low-cost capital structure and low leverage.

Okay, Thanks, Justin and thanks to those on the call.

Starting on slide three.

That's an ocean transportation and logistics business segments performed well in the fourth quarter capping off a solid year for both business segments.

That's instead of solid operational and financial position.

We are the leading exploration ocean freight provider in the transpacific and we're well positioned for growth in our Jones Act and logistics markets.

Our balance sheet is strong with a low cost capital structure and low leverage.

Matt: We're in a very good funding position on our new Aloha-class vessels, with the program two-thirds funded at year-end, with approximately $600 million in capital construction. And lastly, we returned approximately $203 million to shareholders in 2023 in the form of share repurchases and dividends. For the fourth quarter, within ocean transportation, our China service experienced solid freight demand with higher year-over-year volume but lower year-over-year rates, which when combined with higher operating costs across all trade lanes resulted in a year-over-year decline in operating costs. In logistics, operating income declined year over year, primarily due to a lower contribution from transportation. I will now go through the fourth quarter performance of our Trade Lanes, SSAP, and Logistics, so please turn to the next slide. Hawaii container volume for the fourth quarter declined 1.9% year over year due to lower general demand. Volume in the fourth quarter of 2023 was 5.1% lower than volume achieved in the fourth quarter of 2019. Tourist arrivals in the fourth quarter were modestly lower year over year as tourism to Maui was impacted by wildfires. Volume for the full year 2023 was $29.6 million.

We're in very good position on our new Aloha class vessels with the program two thirds funded at year end was approximately $600 billion in our capital construction plan.

And lastly, we returned approximately $203 billion to shareholders in 2023 in the form of share repurchases and dividends.

For the fourth quarter within Ocean transportation, our China service experienced solid brake demand was higher year over year volume, but lower year over year rates, which when combined with higher operating costs across all trade lanes have resulted in a year over year decline in operating income.

In logistics operating income declined year over year, primarily due to a lower contribution from transportation brokerage.

I will now go through fourth quarter performance of our trade lanes.

S E T and logistics. So please turn to the next slide.

Hawaii container volume for the fourth quarter declined one 9% year over year due to lower general demand.

Volume in the fourth quarter of 2023 was five 1% lower sales volume achieved in the fourth quarter of 2019.

Tourist arrivals in the fourth quarter were modestly lower year over year as tourism to Maui was impacted by wildfires.

For the full year 2023 contain.

Matt: Container volumes decreased 3% year-over-year, primarily due to lower general westbound demand and lower eastbound volume. For the full year 2024, we expect volume to be comparable to the level in 2023, reflecting modest economic growth in Hawaii and stable market share. Please turn to slide five. The Hawaii economy held up well in 2023, despite high interest rates, high inflation, a modest decline in population, headwinds to tourism from the Maui wildfires, and the slow return of international trade. According to YouHero's December economic report, the Hawaii economy is predicted to grow modestly in 2024, underpinned by a low unemployment rate and easing inflation; construction jobs are projected to increase, done in large part from government-related projects Near-term growth in visitor arrivals is expected to be challenging due to reduced tourism to Maui as a result of the wildfires last year and the Sluggish Recovery of International Tourism.

Container volume decreased 3% year over year, primarily due to lower general westbound demand and lower eastbound volume.

For the full year 2024, we expect volume to be comparable to the level in 2023, reflecting modest economic growth in Hawaii and stable market share.

Please turn to slide five.

The Hawaii economy held up well in 2023, despite high interest rates high inflation, a modest decline in population and headwinds tourism from the Maui wildfires and the slow return of international visitors.

According to your Heroes December economic report.

Hawaii economy is predicted to grow modestly in 2024 underpinned by a low unemployment rate and easing installation.

Construction jobs are projected to increase.

In large part from government related projects.

As well as initial rebuilding efforts in Bali.

Near term growth in visitor arrivals is expected to be challenging due to reduced tourism to Maui as a result of the wire wildfires last year and sluggish recovery of international tourism.

Matt: Moving to our China service on slide six, Matson's volume in the fourth quarter of 2023 was 23.3% higher year over year, primarily due to higher demand for the China service, resulting in higher volumes for both the CLX and CLX+. We achieved average freight rates in the quarter that were lower than the year-ago period but well above those achieved in the fourth quarter of 2019. For the full year 2023, container volume decreased 13.7% year over year, primarily due to CCX volume in the first nine months of 2022. Recall that we discontinued this DCX service in the third quarter of 2020; please turn to slide 7.

Moving to our China service on slide six.

That since volume in the fourth quarter of 'twenty 2023 was 23, 3% higher year over year, primarily due to higher demand for the China service, resulting in higher volumes for both the <unk> and CLS plus.

We achieved average freight rates in the quarter that were lower than the year ago period, but well above those achieved in the fourth quarter of 2019.

For the full year 2023 container volume decreased 13, 7% year over year, primarily due to the Cc X volume in the first nine months of 2020 to.

Recall that we discontinued the Ccs service in the third quarter of 2022.

Matt: Currently, in the Trans-Pacific Marketplace, we continue to see steady U.S. consumer demand. As is typical in the Trans-Pacific Trade Lane, our CLX and CLX Plus vessels experience light volume coming out of the Christmas and New Year period, but near capacity as we approach the Lunar New Year. We expect the post-lunar new year period to be more traditional, with factories closed for a couple of weeks, and the workforce slowly returning to work. As we did in the prior year, we decided not to sail the CLX Plus vessels from Shanghai for a few weeks because the cargo package could be accommodated with a weekly CLX departure.

Please turn to slide seven.

Currently the Trans Pacific marketplace, we continue to see steady U S consumer demand.

As is typical in the transpacific trade lane, our CLEC since helix plus vessels experienced light volume coming out of the Christmas and new year period.

But near capacity as we approach lunar new year.

We expect to post lunar new year period to be more traditional with factories closed for a couple of them.

The workforce slowly returning to work.

As we did in the prior year, we decided not to sale the seal X plus vessels from Shanghai for a few weeks because the cargo package could be accommodated with a weekly <unk> departure.

Matt: We currently expect volume demand to gradually recover over a four to six week period as factories return to normal, post-holiday. For a full year 2024, we expect similar demand for our CLX and CLX plus services as in 23 and average freight rates to be modestly higher and above pre-pandemic freight rate levels today. China's service has seen a very limited effect from the supply chain disruptions caused by the Panama Canal drought and the events in the Red Sea.

We currently expect volume demand to gradually recover over a four to six week period as factories returned to normal.

Post holiday.

For full year 2024, we expect similar demand for our <unk> and <unk> plus services is in 'twenty three.

And average freight rates to be modestly higher.

Above pre pandemic freight rate levels.

To date.

Our China service have seen a very limited effects from the supply chain disruptions caused by the Panama Canal drought.

The events in the Red Sea.

Matt: Depending on the duration and evolution of these situations, it's possible we could see further impact on our expedited ocean services. We know more customers are evaluating their shipping options in light of these events, but we're not aware of any material changes to our customers' cargo routing. Regardless of the uncertainty of these and other events, we're focused on maintaining the two fastest and most reliable ocean services in the trans-Pacific. Lastly, on February 18th, we renamed the CLX Plus service to the MAX, Matson Asia Express.

Depending on the duration and the evolution of these situations. It's possible we could see further impact on our expedited Ocean services.

We know more customers are evaluating their shipping options in light of these events, but we're not aware of any material changes to our customers' cargo rabbit.

Regardless of the uncertainty of these and other events, we're focused on maintaining the two fastest and most reliable ocean services and the Trans Pacific.

Lastly on.

On February 18th we renamed the <unk> plus service to the Max Mattson Asia Express <unk> plus was introduced in 2020 to accommodate extraordinary demand for match since expedited Transpacific service during the pandemic and its had industry leading performance for the last four years.

Matt: CLX Plus was introduced in 2020 to accommodate extraordinary demand for Matson's expedited transpacific service during the pandemic and has had industry-leading performance for the last four years. We've rebranded CLX Plus to Max to reflect this highly differentiated service, including a recently added sixth ship that provides scheduled flexibility to ensure a weekly departure from China. Max is the only liner service in the Trans-Pacific Trade Lane providing customers with this unique service element. Please turn to the next slide.

<unk>.

We rebranded the <unk> plus to Max to reflect this highly differentiated service include.

Including our recently added six ship that provides scheduled flexibility to ensure a weekly departure from China.

Matches, the only liner serviced in the transpacific trade lane, providing customers with this unique service element.

Please turn to the next slide.

Matt: In Guam, Matson's container volume in the fourth quarter of 2023 increased 2% year over year. The increase was primarily due to higher general demand; volume in the fourth quarter of 2023 was 4.2% higher than the level achieved in the fourth quarter of 2019. For the full year 2023, container volume decreased 4.7% due to lower general demand. In the near term, we expect continued improvement in the Guam economy with a low unemployment rate and a modest increase in tourism. In 2024, we expect container volume to approximate the level achieved last year; please turn to the next slide. In Alaska, Matson's container volume for the fourth quarter of 2023 decreased.

In Guam Madsen's container volume in the fourth quarter of 2023 increased 2% over year over year.

The increase was primarily due to higher general demand.

Volume in the fourth quarter of 2023 was four 2% higher than the level achieved in the fourth quarter of 2019.

For the full year 2023 container volume decreased four 7% due to lower general demand.

In the near term, we expect continued improvement in the Guam economy, with low unemployment rate and a modest increase in tourism.

For 2024, we expect container volume to approximate the level achieved last year.

Please turn to the next slide.

In Alaska Madsen's container volume for the fourth quarter of 2023 decreased <unk>, 6% year over year. The decrease was due to lower export seafood volume from <unk>, partially offset by higher northbound volume due to an additional sailing and.

Matt: 0.6 percent year-over-year. The decrease was due to lower export seafood volume from AAX, partially offset by higher northbound volume due to an additional sailing and higher southbound volume due to higher domestic seafood volume. Compared to the fourth quarter of 2019, volume for the quarter was 20.3% higher. For the full year 2024, we expect Alaskan volume to approximate the level achieved last year; please turn to slide 10. The Alaskan economy continues to show good economic growth and improvement in key economic indicators despite flattish growth in population.

Higher southbound volume due to higher domestic seafood volume.

Compared to the fourth quarter of 2019 volume in the quarter was 23% higher.

For the full year 2024, we expect Alaska volume to approximate the level achieved last year.

Please turn to slide 10.

The Alaska economy continues to show good economic growth and improvement in key economic indicators, despite flattish growth in population.

Matt: In 2023, the state saw widespread job growth across almost every industry, and the Alaska Department of Labor projects continued job growth in 2024. In the near term, we expect the Alaskan economy to grow, supported by low unemployment, job growth, and lower levels of inflation. The state's economy is also expected to benefit in the near and medium term from increased energy-related exploration and production activity, as well as significant infrastructure investment funded by the federal infrastructure bill by the Inflation Reduction Act, please turn to slide 11. The higher contribution was primarily due to higher list revenue, partially offset by lower demerit revenue.

In 2023 states saw widespread job growth across almost every industry.

And the Alaska Department of Labor projects continued job growth in 2024.

In the near term, we expect the Alaska economy to grow supported by low unemployment job growth and lower levels of inflation.

<unk> economy is also expected to benefit in the near and medium term from increased energy related exploration and production activity as well as significant infrastructure investments funded by the federal infrastructure Bill.

Inflation reduction Act.

Please turn to slide 11.

Our terminal joint venture SSAT.

<unk> $3 $1 million year over year to $4 1 billion.

The higher contribution was primarily due to higher lift revenue, partially offset by lower demurrage revenue.

Matt: For the full year 2023, SSAT contributed $2.2 million, reflecting a year-over-year decrease of $80.9 million, primarily due to the lower demerge rep. In 2024, we expect contributions to be higher from increased list volume. Turning now to logistics on slide 12. Operating income in the fourth quarter came in at $8.9 million, which was approximately $3.9 million lower than the result in the year-ago period.

For the full year 2023, SSAT contributed $2 $2 million, reflecting.

Reflecting a year over year decrease.

$8 9 million.

Primarily due to lower demurrage revenue.

In 2024, we expect contributions to be higher from increased lift volumes.

Turning now to logistics on slide 12.

Operating income in the fourth quarter came in at $8 $9 billion.

Or approximately $3 $9 million lower than the result in the year ago period.

Joel: The decrease was primarily due to lower contribution from transportation brokers. For the full year of 2023, operating income was $48 million, reflecting a year-over-year decrease of $24.4 million. The decrease was due to a lower contribution from Transportation Brokerage and Supply Chain Management. For 2024, we expect operating income to be lower than the level achieved in 2023, and for transportation brokerage, we expect challenging business conditions at least through the first half of 2024. We expect demand for our freight forwarding, supply chain management, and warehousing business lines to be comparable in 2020. And I will now turn the call over to Joel for a review of our financial performance. Joel

The <unk>.

The decrease was primarily due to a lower contribution from transportation brokerage.

For the full year 2023 operating income was $48 million.

<unk> year over year decrease of $24 4 million for.

The decrease was due to a lower contribution from transportation brokerage and supply chain management.

For 2004, we expect operating income to be lower than the level achieved in 2023 for transportation brokerage, we expect challenging business conditions at least through the first half of 2024.

We expect demand for our freight forwarding supply chain management, and warehousing business lines to be comparable to 2023.

I will now turn the call over to Joel for a review of our financial performance Joel. Okay. Thanks, Matt. Please turn to slide 13 for a review of our fourth quarter and full year 2023 results.

Joel: Okay. Thanks, Matt. Please turn to slide 13 for a review of our fourth quarter and full year 2023 results. For the fourth quarter, consolidated operating income decreased $17.3 million year-over-year to $75.3 million, with lower contributions from ocean transportation and logistics of $13.4 million and $3.9 million, respectively. The decrease in ocean transportation operating income in the fourth quarter was primarily due to lower freight rates in China and higher operating costs and expenses, including fuel-related expenses, partially offset by higher volume in China and higher contributions from Alaska and Hawaii. As Matt just noted, the decrease in logistics operating income was primarily due to a lower contribution from transportation brokers. We had an interest income of $9.8 million in the quarter due to higher investment rates on our cash and cash equivalents and deposits in the CCS as compared to the prior year period. Interest expense in the quarter decreased $1.3 million year over year due to the decline in outstanding debt in the past year. The effective tax rate in the quarter was 26% compared to 20.4% in the year-ago period.

For the fourth quarter consolidated operating income decreased $17 3 million year over year to $75 $3 million with lower contributions from Ocean transportation and logistics of $13 4 million and $3 9 million respectively.

The decrease in Ocean transportation operating income in the fourth quarter was primarily due to lower freight rates in China, and higher operating costs and expenses, including fuel related expenses, partially offset by higher volume in China, and higher contributions from Alaska and Hawaii.

As Matt just noted the decrease in logistics operating income was primarily due to a lower contribution from transportation brokerage.

We had interest income of $9 $8 million in the quarter due to higher investment rates on our cash and cash equivalents and deposits in the Ccs as compared to the prior year period.

Interest expense in the quarter decreased $1 3 million year over year due to the decline in outstanding debt in the past year.

The effective tax rate in the quarter was 26% compared to 24% in the year ago period.

Joel: For the full year, consolidated operating income decreased $1.01 billion year-over-year to $342.8 million, with lower contributions from Ocean Transportation and Logistics of $986.4 million and $24.4 million, respectively. The decrease in ocean transportation operating income for the year was primarily due to lower freight rates and volume in China and a lower contribution from SFA Key, partially offset by lower operating costs and expenses, including fuel-related expenses, primarily related to the discontinuation of the CCX service and lower fuel costs and the timing of fuel-related surcharge collection. The decrease in logistics operating income was primarily due to lower contributions from transportation brokers and supply chain managers. Please turn to the next slide.

For the full year consolidated operating income decreased 1.01 billion year over year to $342 8 million with lower contributions from Ocean transportation and logistics of $986 4 million and $24 4 million respectively.

The decrease in Ocean transportation operating income for the year was primarily due to lower freight rates and volume in China, and a lower contribution from SSH key.

Partially offset by lower operating costs and expenses, including fuel related expenses, primarily related to the discontinuation of the CTX service and lower fuel cost and the timing of fuel related surcharge collections.

The decrease in logistics operating income was primarily due to lower contributions from transportation brokerage and supply chain management.

Please turn to the next slide.

Joel: The slide shows how we allocated our trailing 12 months of cash flow generation. For the LTM period, we generated cash flow from operations of approximately $510.5 million, from which we used $76.9 million to retire debt, $195.5 million on maintenance, and other CapEx. $52.9 million on new vessel CapEx, including capitalized interest and owner's items. $78.6 million in cash deposits and interest income in the CCF, net of withdrawals for milestone payments. $23.8 million on other cash outflows, while returning approximately $200.2 million to shareholders via dividends and share repurchase. Please turn to slide 15 for a summary of our Shared Purchase Program and Balance Sheet. So in the fourth quarter, we repurchased approximately 0.5 million shares for a total cost of $47.9 million, including tax. For the full year 2023, we repurchased approximately 2.1 million shares for a total cost of $158.2 million.

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 approximately $510 5 million from which we used $76 9 million to retire debt $195 5 million on maintenance and other Capex 52.

9 million on new vessel, capex, including capitalized interest and owners' items.

$78 6 million in cash deposits and interest income into the CCF net withdrawals from milestone payments.

$23 8 million on other cash outflows, while returning approximately $202 million to shareholders via dividends and share repurchase.

Please turn to slide 15 for a summary of our share repurchase program and balance sheet.

During the fourth quarter, we repurchased approximately <unk> 5 million shares for a total cost of $47 9 million, including taxes.

For the full year 2023, we repurchased approximately $2 1 million shares for a total cost of $158 2 million.

Joel: Since we initiated our share repurchase program in August 2021 through December of 2023, we repurchased 9.5 million shares, or 21.9% of our stock, for a total cost of approximately $755 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 4th quarter was $440.6 million, a reduction of $9.7 million from the end of the 3rd quarter. For the year, we have reduced total debt by $76.9 million. I'm now going to walk through an update on a couple of financial items, so please turn to the next slide. The cash balance in the Capital Construction Fund at the end of 2023 is expected to be $599.4 million.

Since we initiated our share repurchase program in August 2021 through December of 2023, we repurchased nine 5 million shares or 21, 9% of our stock for a total cost of approximately $755 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 fourth quarter was $440 6 million a reduction of $9 7 million from the end of the third quarter.

For the year, we have reduced total debt by $76 9 million.

I'm now going to walk through an update of a couple of financial items. So please turn to the next slide.

The cash balance in the capital construction fund at the end of 2023 was $599 4 million.

Joel: Based on the remaining milestone payments of $899 million, nearly two-thirds of the program at year-end was funded by restricted cash in the CCF. However, note that the two-thirds figure excludes interest income on cash deposits that may be earned in future years. We currently expect to make milestone payments of $35.5 million in each of the second and fourth quarters of this year. Additionally, we recently executed a strategy to term out a portion of the CCF cash deposits held in short-term U.S. government money market funds with a purchase of approximately $450 million in fixed-rate U.S. treasuries to align with the milestone payments in 2025, 2026, and 2027. The effective yield of this fixed-rate portfolio is 4.53%, with an effective duration of 1.9 years.

Based on the remaining milestone payments of $899 million nearly two thirds of the program at year end was funded by restricting cash in the Ccs.

Note that the two thirds figure excludes interest income on cash deposits that may be earned in future years.

We currently expect to make milestone payments of $35 5 million in each of the second and fourth quarters of this year.

Also we recently executed a strategy to term out a portion of the Ccs cash deposits held in short term U S government money market funds with the purchase of approximately $450 million and fixed rate U S treasuries to align with milestone payments in 2025, 2026 and 21%.

In 2027.

The effective yield of this fixed rate portfolio is 453% with an effective duration of one nine years.

Joel: By executing this turnout strategy, approximately half of the remaining $899 million in milestone payments are in fixed-rate instruments, providing greater certainty around the amount of tax-deductible interest income we can expect to receive over the next few years, and the balance of the deposits in the CCF remain in short-term investments of 90 days duration or less. Lastly, we continue to expect to receive a general corporate tax refund of $119 million for 2021 federal tax; please turn to slide 17. The table on the slide summarizes our $248.4 million in capital expenditures for 2023. We had capitalized construction expenditures of $52.9 million, which consisted of milestone payments and other related costs for our new Aloha class vessel. Maintenance and other capital expenditures were $195.5 million, of which $71.9 million was for equipment to support network requirements and growth. $66.1 million was for the LNG installations on the Daniel K. Inouye in Kamanahila and the LNG installation re-engineering of Monaco.

By executing this turnaround strategy approximately half of the remaining $899 million in milestone payments are in fixed rate instruments.

Adding a greater certainty around the amount of tax deductible interest income we can expect to receive over the next few years.

And the balance of the deposits in the CCF remain and short term investments of 90 days duration or less.

Lastly, we continue to expect to receive a general corporate tax refund of $119 million for 2021 federal taxes.

Please turn to slide 17.

The table on this slide summarizes our $248 4 million in capital expenditures in 2023.

We had capitalized construction expenditures at $52 9 million, which consisted of milestone payments and other related cost on our new Aloha class vessels.

Maintenance and other capital expenditures were $195 5 million of which $71 9 million was for equipment to support network requirements and growth.

$66 1 million for the LNG installations on the Daniel K Inouye and come on at Uva and the LNG installation reengineering of Monica.

Joel: And $57.5 million was for other maintenance CapEx across a variety of projects. Please turn to the next slide. Slide 18 shows the key capital expenditures planned over the next three years. For 2024, we expect total CapEx of $255 to $275 million, of which $110 to $120 million is for maintenance and other capital expenditures, including Phase II and Phase III work at Sand Island and Honolulu, and normal course capital expenditures to support our vessels, shoreside operations, and logistics business. $70-$80 million for LNG installations and re-engineering of the monokai, and $75 million for new vessel construction expenditures including capitalized interest and owner's items. The LNG projects for Mauna Kai and Kamanahila remain on track for the vessels to return to service later this year.

And $57 5 million was for other maintenance capex across a variety of projects.

Please turn to the next slide.

Slide 18 shows the key capital expenditures planned over the next three years for 2024, we expect total capex of 255% to $275 million of which $110 million to $120 million is for maintenance and other capex, including phase two and phase III work at sand Island.

In Honolulu, and normal course capital expenditures to support our vessel are.

Vessels shoreside operations and logistics businesses.

$70 million to $80 million for LNG installations, and reengineer, monokine and $75 million for new vessel construction expenditures, including capitalized interest and owners' items.

The LNG projects for Monica income on a hela remain on track for the vessels to returned to service later this year.

Joel: For 2025, we expect slightly lower year-over-year maintenance and other capital expenditures, trending to our maintenance level of $80 to $90 million in 2026. We also expect the remaining payments on the LNG projects in early 2025. And new vessel capital expenditures are projected to increase materially in 2025 and 2026 as our project advances into the construction phases on all three vessels at the Philly shipyard.

For 2025, we expect slightly lower year over year maintenance and other capital expenditures trending to a maintenance level of $80 million to $90 million in 2026.

We also expect the remaining payments on the LNG projects in early 2025.

And new vessel capital expenditures are projected to increase materially in 2025, and 2026 as our project advances into the construction phases on all three vessels at the Philly shipyard.

Joel: With that, let me now turn to slide 19 and walk through our outlook for the full year and first quarter of 2024. For 2024, we expect year-over-year growth in ocean transportation operating income. As a significant change in trajectory of the U.S. economy, we expect trade dynamics across all our trade lanes to be comparable to 2023 as consumer-related spending activity is expected to remain stable.

With that let me now turn to slide 19, and walk through our outlook for the full year and first quarter of 2024.

For 2024, we expect year over year growth in Ocean transportation operating income.

As in a significant change in trajectory in the U S economy, we expect trade dynamics across all our trade lanes to be comparable to 2023 as consumer related spending activity is expected to remain stable.

Joel: For logistics, we expect challenging business conditions for transportation brokerage at least through the first half of the year, which we expect to lead to lower year-over-year business segment operating income. As a result, we expect consolidated operating income to approximate the level achieved in the prior year with a quarterly seasonality pattern consistent with 2023. In addition to this full year operating income outlook, we expect the following for the full year: depreciation and amortization to approximate $180 million, inclusive of $24 million for dry dock amortization; interest income to be approximately $35 million and interest expense to be approximately $8 million; other income to be approximately $7 million; and an effective tax rate of approximately 22%, and dry docking payments of approximately $35 million. The interest income outlook we are providing is based on the current CCF deposits and cash and cash equivalents invested at current short-term government money market rates, as well as the CCF fixed-rate portfolio yielding 4.53%. This outlook does not factor in the cash and interest income from the expected tax refund.

For logistics, we expect challenging business conditions for transportation brokerage at least through the first half of the year, which we expect to lead to lower year over year business segment operating income.

As a result, we expect consolidated operating income to approximate the level achieved in the prior year with the quarterly seasonality pattern consistent with 2023.

In addition to this full year operating income outlook, we expect the following for the full year depreciation and amortization to approximate $180 million inclusive of $24 million for dry dock amortization.

Interest income to be approximately $35 million and interest expense to be approximately $8 million.

Other income to be approximately $7 million and effective tax rate of approximately 22%.

And dry docking payments of approximately $35 million.

The interest income outlook, we are providing is based on the current CCF deposits in cash and cash equivalents invested at current short term government money market rates as well as the Cc F fixed rate portfolio, yielding 453%.

This outlook does not factor in the cash and interest income from the expected tax refund.

Matt: For the first quarter of 2024, we expect ocean transportation operating income to be lower than the $27.8 million achieved in the first quarter of 2023, and logistics operating income to be lower than the $10.9 million achieved in the first quarter of 2023. As such, we expect consolidating operating income in the first quarter to be lower than the prior year. The first quarter has historically been our weakest period in the year due to seasonality in our Jones Act train lanes and a slower period of activity in our China business due to the post-Lunar New Year period. As for logistics, as I noted earlier, we expect challenging business conditions for transportation brokerage at least through the first half of the year. I'll now turn the call back over to Matt.

For the first quarter of 2024, we expect Ocean transportation operating income to be lower than the $27 8 million achieved in the first quarter of 2023 and logistics operating income to be lower than the $10 9 million achieved in the first quarter of 2023 as such we expect consolidated operating income in the first quarter.

<unk> to be lower than the prior year.

The first quarter has historically been our weakest period in the year due to seasonality in our Jones Act trade lanes and a slower period of activity in our China business due to the post lunar new year period.

As for logistics as I noted earlier, we expect challenging business conditions for transportation brokerage at least through the first half of the year I'll now turn the call back over to Matt. Okay. Thanks, Joel Please turn to slide 20, where I'll go through some closing thoughts.

Matt: Okay. Thanks, Joel. Please turn to slide 20 where I'll go through some closing thoughts. As I mentioned in my introductory comments, Matson is in a very good position operationally and financially. The strength of the Matson brand is a testament to our market positioning across both business segments and the collective efforts of our employees to serve the needs of our customers.

As I mentioned in my introductory comments matches at a very good position operationally and financially.

The strength of the Madsen brand is a testament to our market positioning across both business segments.

And the collective efforts of our employees to serve the needs of our customers.

Matt: We close 2023 in a strong financial position. We have a low-cost investment-grade balance sheet, which we view as a competitive advantage to pursue growth opportunities as they present themselves. Two-thirds of the current remaining milestone payments in our new vessel-built program are funded with cash deposits in the Capital Construction Fund.

We closed 2023, and a strong financial position, we have low cost investment grade balance sheet, which we view as a competitive advantage to pursue growth opportunities as they present themselves.

Two thirds of the current remaining milestone payments on our new vessel build program was funded with cash deposits in this capital construction plan.

Matt: We have completed one LNG vessel project, and by the end of the year, we expect the remaining two LNG vessel projects to be finished, with those vessels back in service. There will always be some degree of uncertainty and noise, but we remain focused on what we can control. First and foremost, we're focused on vessel schedule integrity, the reliability of our operation, and delivering high-quality service for our customers. This focus has served our company well for 141 years and remains the foundation of our success moving forward. We will continue to maintain discipline in our capital allocation strategy.

We completed one LNG vessel project by the end of the year, we expect the remaining two LNG vessel projects to be finished with those vessels back in service.

So what would be some degree of uncertainty and noise, but we remain focused on what we can control first and foremost we are focused on vessel schedule integrity reliability of our operation.

And delivering high quality service for our customers.

This focus has served our company well for 141 years and remains the foundation of our success moving forward.

We will continue to maintain discipline in our capital allocation strategy.

Matt: We invest your capital for the long term to create value. In some cases, we are making capital decisions for many decades, like our new Aloha-class vessel build program. We currently expect these vessels to be in service in late 2026 through 2027. After that, we do not expect to build any additional vessels until the mid-2030s.

Investor capital for the long term to create value and in some cases, we are making capital decisions for many decades like our new Aloha class vessel build program.

We currently expect these vessels to be in service in late 2026 through 2027.

After that we do not expect to build any additional vessels until the mid 2000 <unk>.

Matt: We have steadily built a portfolio of high-quality businesses through organic pursuits and acquisitions. Roe is looking for natural extensions to our businesses and to leverage the Matson brand. But we're also attentive to the returns on capital and long-term cash flow characteristics of pursuing growth. And last but not least, we will continue to return capital to shareholders after funding our maintenance of capital expenditures, long-term investments, and dividends. Since 2021, when we initiated our share repurchase program, we have repurchased 9.5 million shares, or nearly 22% of the then outstanding shares, for $755 million.

Steadily built a portfolio of high quality businesses through organic pursuits and acquisitions.

We're always looking for natural extensions to our businesses and to leverage the Madison brand.

But we're also attentive to the returns on capital and long term cash flow characteristics of pursuing growth.

And last but not least we will continue to return capital to shareholders. After funding our maintenance capital expenditures long term investments and dividend since 2021, when we initiated our share repurchase program, we repurchased $9 5 billion shares or nearly 22% of the shares.

For $755 million going forward, we expect to be steady buyers of our shares.

Matt: Going forward, we expect to be steady buyers of our shares. And with that, I will turn the call back to the operator and ask for your question. Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone. One moment while we compile the Q&A roster. And please wait for your name to be announced before you proceed with your question.

And with that I will turn the call back to the operator and ask for your questions.

Thank you.

As a reminder, if you would like to ask a question. Please press star one on your telephone.

One moment, while we compile the Q&A roster and please wait for your name to be announced before you proceed with your question one moment. Please.

Yeah.

Operator: Our first question for the day will be coming from Jacob Lacks of Wolf Research. Your line is open. Hey, Matt.

Our first question for the day will be coming from Jacob <unk> of Wolfe Research. Your line is open.

Jacob Lacks: Hey, Joel. Thanks for your time. Hey, Jacob. Hi, Jake.

Hey, Matt Hey, Joel Thanks for your time.

Jacob Lacks: So I just wanted to dig into the 1Q guidance a bit. I guess what's driving the lower year-on-year operating income in Ocean? And then, you know, we've seen a big increase in Trans-Pacific Ocean spot rates to start the year. And, you know, I know your expedited rates are a little different. Do you think there's just a pricing lag between them? Or is there some other reason why this wouldn't impact your price as well? Yes, Jake. It's Joel.

Hey, Jacob hygiene.

I just wanted to dig into the <unk> guidance, So bad and I guess, what's driving the lower year on year operating in combination and then.

We've seen a big increase in transpacific ocean spot rates to start the year.

I know your expedited rates are a little different.

Theres, just a pricing lag there or is there. Some other reason why the impact to your price as well.

Joel: I'll take that. So, the biggest thing we expect is a little bit lighter volumes than we had last year on the China business. The rates, as Matt mentioned, are a little bit higher than we were in the first quarter of last year, but on a year-over-year basis, it's the volume impact that'll probably be the bigger change there. Our Jones Act businesses are more or less in similar places on a year-over-year

Yes, Jacob it's Joel I'll take that so the biggest thing we expect a little bit lighter volumes that we had last year on the China business.

The rates as Matt mentioned, a little bit higher than we head into that than we were in the first quarter of last year, but on a year over year basis is the volume impact that will probably be the bigger the bigger change. There are Jones act businesses are more or less in similar places on a year over year basis. So it's primarily the China business and then the other part of your question. There is is the rate environment.

Joel: So, it's primarily the China business. And then, the other part of your question there is the rate environment. Matt can add in here, too, but what we've said here is that we haven't seen, really, any material impact on our China business based on the Red Sea or other events in international ocean shipping. So, even though some of the commodity price indices, like the SCFI and Asia-Europe rates, are higher, that's not necessarily impacting our expedited segment. Yeah, is that just seasonality, the year on year volumes being lower in the first quarter? Yes, I mean, it's really seasonality.

Matt can add in here too, but what we what we've said here is that we haven't seen really any material impact on our China business based upon the Red sea or other events of note in international Ocean shipping so even though some of the commodity price indices like the Sci Fi and Asia Europe rates are higher and Thats not.

Necessarily impacting our extra added segment.

Yes.

Seasonality the year on year.

<unk> being lower in the first quarter.

Yes.

Joel: Yes, around around post-Lunar New Year. And we're seeing a little bit more, a little bit less volume this year than last year. Yeah. So, Jake, this is Matt.

It's really it's really annual seasonality, yes around around post lunar new year, and we're seeing a little bit more a little bit less volume this year than last year, yes. So Jake this is Matt I would just add a little more color I think.

Matt: I would just add a little more color. I think we see the pattern that's emerging in 2024 in the first quarter around the Lunar New Year, as Joel mentioned, to be much more traditional. This is really the first year in four years that people have had a chance to return to their homes and are taking advantage of kind of a longer shutdown period that was abbreviated during the pandemic for various reasons. And so it's more a return to normal than I would say anything that is of concern to us about our outlook, which is in part why we still think that the full year we're going to have a year that looks a lot Got it. Okay, that's helpful. And then, on a sequential basis in 4Q, it looks like operating expenses stepped up despite lower volumes. What were the big buckets driving that?

We see the pattern that's emerging in 2024 in the first quarter around lunar new year as Phil mentioned to be much more traditional.

This is really the first year in four years.

People have had a chance to return to their basically their homes and are taking advantage of kind of a longer shutdown period that were abbreviated during the pandemic for various reasons and so it's more a return to normal than then I would say anything that is.

Of concern to us about our outlook, which is in part why we still think that the full year, we're going to have a year that looks a lot like on a consolidated basis for the year. We just finished in 2023.

Got it okay. That's helpful.

And then on a sequential basis in <unk> it looks like operating expenses stepped up.

Despite lower volumes.

Are the big buckets driving that.

Joel: Well, on the 4Q, Jake, volumes are actually up quite a bit in China, so we did have higher terminal handling costs, and we also had higher fuel costs, particularly in our domestic trade lanes on a year-over-year basis, and there's also an issue with year-over-year timing of collections. So we had a little bit more collections on a timely basis in Q4 of 2022, a little bit less in 2023, so the actual fuel price, timing of fuel collections, and volumes in the China business were the biggest drivers. Okay, so I was thinking sequentially from 3Q to 4Q.

Well on the on the Q Jake volumes were actually up quite a bit in China. So we did have higher terminal handling costs and we also had we also had higher fuel costs.

Taking our domestic trade lanes on the year over year basis and there is also there is also an issue of year over year timing of collections. So we.

We had a little bit more collections on Italian basis in Q4 of 2022, a little bit less in 2023, so as actual fuel price fuel economy, and fuel collections and volumes in the China business were the biggest drivers okay.

Sequentially.

So I'll take you to forecast.

Joel: Oh, I see. Cool. Sorry. Yeah, the biggest issue there was fuel, the timing of fuel, and fuel collections.

Oh I see.

Hum.

Yes, the biggest issue there is the timing of fuel and fuel clients. Okay.

Joel: Got it. Okay. And then, you know, in terms of the broader ocean, it seems like we've seen some shift of West Coast imports back, or East Coast imports back to the West Coast. Is this impacting SSAT at all?

Got it Okay and then it.

It seems like just in terms of broader Asia and it seems like we've seen a subtle shift of west coast imports back East coast ports back to the West Coast is this impacting SSAT at all does it all get.

Matt: Does this help get profitability back towards pre-COVID levels? I guess, what do we need to get SSAT back? Yeah, it's a good question.

Get profitability back towards pre Covid levels, I guess, what do we need to get yes. Okay.

Yes, Jake it's a good question I think.

Matt: I think, certainly, we know our customers are looking closely at, you know, we talked about the Red Sea, we talked about the drought in the Panama Canal, the ILA contract renewal. These are all factors that I think are going to inform our customers' decisions around how they're going to route their cargo into the U.S., the imports. Many of our customers have multiple distribution centers and can select where they want to have the imports focused.

Certainly we know our customers are looking closely at we talked about the Red Sea, we talked about the drought in the Panama Canal. The Iowa contract renewal. These are all factors that I think are going to inform our customers decisions around how they're going to route their cargo into the U S with the imports at many of our customers have multiple distribution centers.

Kevin can select where they want to have the imports focused.

Matt: What I would say is, while we know customers are looking closely at these various factors, so far, we haven't seen any significant movement of customer moves in that direction, and nor have we seen any significant changes in deployed capacity by the international ocean carriers. But I do expect that we will see, at a minimum, a return of that cargo which moved off of the West Coast when the ILWU contract is renewed in 2023. So, we do expect some volume to return to the West Coast that had left during the ILWU contract renewal. The extent and amount are unclear and not yet present, but we do expect some increased volume as a result of some of that as the year progresses in 2023.

What I would say is while we know customers are looking closely at least that various factors. So far we haven't seen any significant movement.

Customer moves in that direction.

Though.

Or have we seen any significant changes in deployed capacity by the international Ocean carriers, but I do expect that we will see at a minimum a return of that cargo, which which moved off of the west coast. When the <unk> contract was renewed in 2023. So we do expect some volume to return to the West coast that had left during the.

<unk> contract renewal, the extent and timing and.

And amounts are unclear and not yet present, but we do we do expect some increased volume as a result of some of that as the year progresses in 'twenty four.

Jacob Lacks: Yeah, that's helpful. Thanks for your time. Sure, thank you. Thanks, Jay.

Got it that's helpful. Thanks for your time.

Sure. Thank you thanks Jay.

Operator: Thank you. One moment for the next question, and our next question will be coming from Ben Nolan of Stiefel. Your line is open. Hey, Joel, Matt.

Thank you one moment for the next question.

Yeah.

And our next question will be coming from Ben Nolan of Stifel. Your line is open.

Hey, Joel Matt long time to talk.

Okay.

Benjamin Joel Nolan: Long time to talk. Hey, so I wanted to dig in a little bit on slide number seven, you talk about demand for CLX and CLX Plus, or I guess the max service now to approximate what it was last year. And it could just be me being, I'm not seeing more into this than is really there, but normally, you're talking about volumes approximating your levels here.

So I wanted to dig in a little bit on I know on slide number seven you talk about demand for CLS Ax in Salix, plus or I guess, the Mac service now.

To approximate what it was last year and it could just be me being.

Seeing more into this news really there, but normally youre talking about volumes approximating.

Benjamin Joel Nolan: It sort of says demand, and I know you talked about adding a sixth ship as sort of a spare. Is it fair to say that there may be some demand that you missed out on because of whatever? You just didn't have enough equipment in place, and now you have a little bit more equipment.

Year over year levels here sort of said demand and I know you talked about adding a sixth ship it service spare.

Is it fair to say that you were there maybe with some demand that you missed out on because of whatever.

You just didn't have enough equipment in place now you have a little bit more equipment. So actually even if demand is equal your volume could be higher next year or am I just.

Matt: So actually, even if demand is equal, your volume could be higher next year, or am I just wrong? Reading too much into that. Yeah, let me take a crack at that. So from our expectation of what we know now, of course, we'll have two weekly departures for the full year 2024, as we did in 2023, except for the handful of CLX plus now max voyages post-Lunar New Year, when the expedited market demand could be accommodated by the single sailing of the CLX service. So I think what you'll see, and we were effectively full once we ramped ourselves back up after this post-Lunar New Year period. So we expect that really there are no fundamental changes in our expectation at this point about the number of voyages, that sixth ship we've added, we do not expect will result in additional voyages, that that vessel is there to stand by as a reserve if either the CLX or the max service, because of So I don't think you're going to see it.

Reading too much into that.

Yeah, let me take a crack at that.

So from our expectation of what we know now.

Of course, we will have two weekly departures.

For the full year 2024, as we did in the 2023, except for the handful of <unk> plus now Max wages post lunar new year, when the expedited expedited market demand could be accommodated by the single sailing of the CLS service. So I think what youll see.

And we were effectively full once we ramped ourselves back up.

After this post lunar new year period. So we expect set there really is no fundamental changes in our expectation at this point about the number of voyages that sixth ship. We've added we do not expect will be the results an additional voyage that that vessel is there to standby as I.

Our reserves, if either the <unk> or the Max service because of a weather event or some other circumstance is not able to sale to ensure an on time departure that our customers rely on.

And are willing to pay for it.

Our premium rate structure. So I don't think youre going to see we're not thinking that theres going to be any significant.

Joel: We're not thinking that there's going to be any significant additional capacity that's introduced with a very similar profile in terms of how our ships are going to fill up as the year goes on. Okay, that's helpful. And then, if I could, just sticking with the China side, you talk about on slide number seven there, freight rates being a little higher in 2024 than they are in 2023. I'm curious, how much of that is contractual versus just sort of your expectation for what the spot would look like.

Digital capacity that's introduced in a very similar profile in terms of our ships are going to fill levels as the year goes on.

Okay. That's helpful.

And if I could just sticking with the China side, you talked about and then on slide number seven there are freight rates being a little bit higher in 2024 and you are in 2023.

How much of that is contract versus just sort of your expectation for what the.

Joel: I'll take the first part of that first, Ben, which is that what we're saying about, we're not necessarily saying the rates will be higher for an entire year. What we're saying is right now, rates are at a higher point in January than they were last January, February, and then they found their pricing level after the Lunar New Year ramped up towards the end of February into March, April, and then they were pretty consistent throughout the year, as we reported throughout the year. So what we're saying in general is that the overall demand for volume and rates should not be that different in the China business, but that said, except for January and February, the rates were higher than where we started. So that's my comment about rates for the whole year. And then the question on contracts; we don't see a significant change in the percentage of contracts.

The spot will look like.

Well.

I'll take the first part of that first band, which is that we're saying about we're not necessarily seeing the rates would be higher in entire year. What we're saying is right now rates are at a higher point in January where they.

Were last January February.

And then and then they found their pricing level after the lunar new year ramp out towards the end of February into March April and then they were pretty consistent throughout the year as we reported throughout the year. So what we're seeing in general is that the overall demand.

Volume and rates that should not be that different in the China business, but that said, except January and February the rates were higher than where we started so that's the comment about rates for the whole year and then the comp.

On contracts, we don't see a significant change in the percentage of contracts.

Joel: We certainly have important contracts with our customers, but the majority of the freight spills moves to freight forwarders on short-term one, two, and three-week outbays. Okay, all right. And then last for me, just on Alaska, you mentioned it a little bit, doing or anticipating perhaps a little bit more business from drilling activity and energy activity in Alaska. And that had always been, as I recall, a market where you say, you know, there might be more touch points that you could add in time as part of the logistics program, either organically or inorganically, are there opportunities emerging to, you know, add to what you're Yeah, I think the short answer is yes.

We certainly have important contract with our customers, but the majority of the phrase still moves as grateful orders on short term short term 123 week out basis.

Okay Alright.

And then last for me just on.

Lastly, you mentioned it a little bit.

Doing well.

Or are you anticipating perhaps a little bit more business from them.

Drilling activity in energy activity in Alaska.

And that had always been as I recall market, where you say there might be more touch points.

Could add in time as part of the logistics program.

Our.

Either organically or Inorganically.

Are there opportunities emerging.

Two.

To what Youre doing in the Alaska business here.

Yes, I think the short answer is yes, I think we.

Matt: I think we, as we talked about in our prepared comments, I do feel like Matson. Since the acquisition 5-6 years ago, we have really focused on two areas of growth, or three. One, of course, was the acquisition of SPAN Alaska in our logistics business, and that business has continued to grow faster than the market. We've invested in new distribution facilities, two in the state, one in Anchorage and one in Fairbanks, that have led to strong growth in that segment. And on the ocean transportation side, really, there are two segments that we focused on. One is in the oil and gas segment that Horizon Lines, our previous company, had not focused very much on, and we are now seeing it as a growing component of our freight flows, and right now, the dynamics in Alaska for exploration and production are good, and we're aware of our customers looking at large multi-year projects, and we expect to benefit from that additional volume in drilling and production. The other one, of course, is seafood exports outside of the Ale So those are the two verticals that we've seen most directly where we've grown ourselves into.

As we as we talked about in our prepared comments I do feel like.

Madison.

Since the acquisition five six years ago have really focused on two areas.

Growth.

Three one of course was the acquisition of span, Alaska, and our logistics business and that business has continued to grow faster than markets. We've invested in new distribution facilities two in the state what an acreage and one in Fairbanks that of <unk>.

Led to strong growth in that segment, but on the Ocean transportation side really there are two segments that we focus on one is.

In the oil and gas segment that horizon lines our previous.

The company had not focused very much on and we are now seeing it as a growing component of our freight flows in right now about the dynamics in Alaska.

For exploration and production are good.

And we are aware of our customers looking at large multi year projects and we expect to benefit.

That additional volume in drilling and production. The other one of course is the seafood exports.

Outside of.

On the Aleutian Islands at Kodiak, and Dutch Harbor, primarily to international seafood market suppliers in Asia.

And our scope of services and so those are the two verticals that we've seen most directly.

Benjamin Joel Nolan: Frankly, we continue to see more growth opportunities in both of those segments moving forward. All right. I appreciate it. Thank you, guys.

We've grown ourselves until frankly, we continue to see more growth opportunities in both of those segments moving forward.

Alright.

I appreciate it thank you guys.

Operator: Thank you, Ben. Thank you. As a reminder, if you would like to ask a question, please press star 11 on your teller.

Okay. Thank you. Thank you Ben.

Thank you.

Mind, if you would like to ask a question. Please press star one on your telephone.

Operator: One moment for the next question, and our next question will be coming from Jack Atkins of Stephen's. Your line is open. Hey guys, this is Grant on for Jack. Thank you for taking my questions. You mentioned natural extensions to the Matson brand.

One moment for the next question.

And our next question will be coming from Jack Atkins of Stephens. Your line is open.

Hey, guys. This is grant on for Jack Thank you for taking my questions.

Yeah, Matt you mentioned natural extension Madsen brand you previously I think you guys had talked about that likelihood coming within the logistics segment could you maybe just kind of update us on what you are saying related to logistics M&A targets.

Grant: I think you guys have talked about that previously, likely with coming within the logistics segment. Could you maybe just kind of update us on what you're seeing related to logistics M&A targets and, or maybe you're seeing opportunities in other trade lanes like South China on the ocean transportation side, perhaps as it relates to the events in the Red Sea. Yeah, sure. Thanks. Thanks for the question. I would say that where we look at brand extensions, I would say we would look to our past to look at both organic growth initiatives and new verticals, whether it's our fleet of 53-foot rail boxes or growth in those rail services, in and out of Mexico, for example, is a new vertical that's an organic growth initiative.

Maybe are you seeing opportunities in other trade lanes like South China on the Ocean transportation side, perhaps as it relates to to the events in there I'd say thanks.

Yeah sure. Thanks, Thanks for the question.

I would say that where we look at that.

Brand extensions.

I'd say, we would look to our past to look at both organic growth initiatives, whether it's our fleet of <unk>.

<unk> 53 foot rail.

Boxes growth in those.

Those rail services in and out of Mexico. For example is a new vertical lesser organic growth initiative, we've done some small tuck in acquisitions in the Alaska service.

Matt: We've done some small top gain acquisitions in the Alaska service. And while we see valuations as continuing to be elevated in logistics businesses, or based their financial forecasts on elevated profit forecasts that were born out of the pandemic boom, we do keep a watchful eye on good quality businesses that fit our investment profile. I would say right now, while we're going to keep a close eye on it, we think valuations are still relatively elevated and beyond our underwriting capability. To your point about China, we expanded our service offering, connecting with partners to have direct services from Vietnam, which connect over Shanghai to meet our CLX or our MAX services. We expect continued growth in working with partners to expand the origins of our business out of China into nearby markets. Those are just a couple of examples of ways in which we expect to continue to grow over time.

And while we while we see valuations has continued to be elevated.

<unk> businesses or base their financial forecasts on elevated.

Profit forecast that were born out of the.

The pandemic boom.

We do.

Keep up a watchful eye on good quality businesses that fit our investment profile I would say right now there as well.

We're going to keep a close eye on it we think valuations are still relatively elevated.

And our underwriting capabilities to.

To your point about China, we expanded our service offering connecting with partners to have direct services from Vietnam, which connect over Shanghai to meet our <unk> or our Mac services, we expect continued growth in.

And working with partners to expand the origins of our business out of China into new or near nearby markets. So those are just a couple of examples of ways in which we expect to continue to grow over time.

Matt: Okay, great. Thank you guys for the time. Okay, thank you.

Okay, great. Thank you guys for the time.

Matt: Thank you, Grant. Thank you. And that does conclude the Q&A session for the day. I would now like to turn the conference back over to Matt Cox, CEO, for closing remarks. Please go ahead.

Okay. Thank you. Thank you grant.

Thank you and that does conclude the Q&A session for today I would now like to turn the conference back over to Matt Cox CEO for closing remarks. Please go ahead.

Operator: Okay, thanks, operator. Thanks for tuning in today. We look forward to catching up with everyone at the first quarter call. Aloha. This does conclude today's conference call. Thank you all for joining. You may disconnect. Thanks for watching!

Okay. Thanks, operator, thanks for tuning in today, we look forward to catching up with everyone at the first quarter call Aloha.

This does conclude today's conference call. Thank you all for joining you may disconnect.

Okay.

Okay.

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Yeah.

Yeah.

Yes.

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