Q2 2026 Matson Inc Earnings Call

Speaker #1: And you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again.

Speaker #1: As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Justin Schoenberg, Director of Investor Relations.

Speaker #1: Please go ahead, sir.

Speaker #2: Thank you. Joining me on the call today are Matt Cox, Chairman and Chief Executive Officer, and Joel Wine, Executive Vice President and Chief Financial Officer.

Speaker #2: Slides from this presentation are available for download at our website, www.matson.com, under the Investors tab. Before we begin, I would like to remind you that during the course of this call we will make forward-looking statements within the meaning of the Federal Securities Laws regarding expectations, predictions, projections, or future events.

Speaker #2: We believe that our expectations and assumptions are reasonable. We caution you to consider the risk factors that could cause actual results to defer materially from those in the forward-looking statements in the press release, the presentation slides, and this conference call.

Speaker #2: These risk factors are described in our press release and presentation, and are more fully detailed under the caption "Risk Factors" on pages 12 to 23 of our Form 10-K filed on February 27, 2026, and in our subsequent filings with the SEC.

Speaker #2: Please also note that the date of this conference call is August 3, 2026, and any forward-looking statements that we make today are based on assumptions as of this date.

Speaker #2: We undertake no obligation to update these forward-looking statements. I will now turn the call over to Matt.

Speaker #3: Thanks, Justin. And thanks to those on the call. I'll start on slide 3. Matson delivered a strong second quarter and we are raising our outlook for the full year.

Speaker #3: The strong performance in the quarter was driven primarily by our China service. The momentum in our China service carried over from the post-Lunar New Year period and freight rates exceeded our expectations.

Speaker #3: Demand for our China service benefited from tight market conditions and continued demand across e-commerce, garments, and e-goods. Our domestic trade lanes performed largely as expected, and logistics delivered year-over-year operating income growth.

Speaker #3: Looking ahead, we are optimistic about the second half of the year supported by continued demand in our China service, resilient consumer spending, and a stable transpacific trading environment.

Speaker #3: In summary, our differentiated service model continues to perform well and, as we enter the second half of the year with strong momentum, solid customer demand, and a healthy balance sheet.

Speaker #3: And as a result, we're optimistic about the second half of '26 and expect higher performance versus the second half of 2025. Joel will go into more detail on the outlook later in this presentation.

Speaker #3: I will now go through the second quarter performance of our trade lanes, SSAT, and logistics, so please turn to the next slide. In our Hawaii service, container volume in the second quarter decreased 1.1% year-over-year primarily due to lower general demand.

Matt J. Cox: Hawaii's economy remains stable, supported by strong construction activity and modest growth in tourist arrivals, but continues to face headwinds from higher energy-related inflation. Construction remains a source of strength for Hawaii's economy, supported by large federal contracts, the Maui wildfire rebuilding efforts, and investments in infrastructure. Tourism is also improving modestly as visitor arrivals continue to recover, though the increase is from domestic tourists as opposed to higher-spending international visitors. Moving to our China service on slide six, container volume in Q2 2026 increased 15.2% year-over-year. The increase was primarily due to significantly higher demand compared to the prior year period. As you may recall, in Q2 2025, there was a market decline in the Trans-Pacific demand due to the tariffs imposed in April 2025. Please turn to slide seven for additional commentary on current business trends.

Matt Cox: Hawaii's economy remains stable, supported by strong construction activity and modest growth in tourist arrivals, but continues to face headwinds from higher energy-related inflation. Construction remains a source of strength for Hawaii's economy, supported by large federal contracts, the Maui wildfire rebuilding efforts, and investments in infrastructure. Tourism is also improving modestly as visitor arrivals continue to recover, though the increase is from domestic tourists as opposed to higher-spending international visitors. Moving to our China service on slide six, container volume in Q2 2026 increased 15.2% year-over-year. The increase was primarily due to significantly higher demand compared to the prior year period. As you may recall, in Q2 2025, there was a market decline in the Trans-Pacific demand due to the tariffs imposed in April 2025. Please turn to slide seven for additional commentary on current business trends.

Speaker #1: The economy remains stable, supported by strong construction activity and modest growth in tourist arrivals, but continues to face headwinds from higher energy-related inflation.

Speaker #1: Construction remains a source of strength for Hawaii's economy, supported by large federal contracts, the Maui wildfire rebuilding efforts, and investments in infrastructure. Tourism is also improving modestly, as visitor arrivals continue to recover, though the increase is from domestic tourists as opposed to higher-spending international visitors.

Speaker #3: For the full year 2026, we expect volume to approach the level achieved in 2025 based on our expectations of similar economic conditions as 2025 and a stable market share.

Speaker #3: Please turn to slide 5. According to UHERO's second quarter 2026 economic report, Hawaii's economy remained stable supported by strong construction activity and modest growth in tourist arrivals, but continues to face headwinds from higher energy-related inflation.

Speaker #1: Moving to our China service, on slide 6, container volume in the second quarter of 2026 increased 15.2% year-over-year. The increase was primarily due to significantly higher demand compared to the prior year period. As you may recall, in the second quarter of 2025, there was a market decline in Trans-Pacific demand due to the tariffs imposed in April 2025.

Speaker #3: Construction remains a source of strength for Hawaii's economy, supported by large federal contracts, the Maui Wildfire Rebuilding efforts, and investments in infrastructure. Tourism is also improving modestly, as visitor arrivals to continue to recover though the increase is from domestic tourists as opposed to higher spending international visitors.

Speaker #1: Please turn to slide 7 for additional commentary on current business trends. Momentum in our China service carried over from the post-Lunar New Year period.

Matt J. Cox: Momentum in our China service carried over from the post-Lunar New Year period. For Q2, our CLX and MAX services saw higher than expected freight rates and demand across e-commerce, garments, and e-goods against a backdrop of tighter supply conditions in the Trans-Pacific trade lane. The elevated demand grew throughout the quarter in both China and Southeast Asia. We saw a mix of strong e-commerce demand, inventory replenishment, and some pull forward of seasonal goods. Some customers opted to get ahead of the general rate increases and higher fuel surcharges, while also de-risking upcoming U.S. tariffs discussions and uncertainties related to the Iran conflict. Please turn to the next slide for our commentary on H2. We continue to expect our China service to be at or near capacity through the peak season.

Matt Cox: Momentum in our China service carried over from the post-Lunar New Year period. For Q2, our CLX and MAX services saw higher than expected freight rates and demand across e-commerce, garments, and e-goods against a backdrop of tighter supply conditions in the Trans-Pacific trade lane. The elevated demand grew throughout the quarter in both China and Southeast Asia. We saw a mix of strong e-commerce demand, inventory replenishment, and some pull forward of seasonal goods. Some customers opted to get ahead of the general rate increases and higher fuel surcharges, while also de-risking upcoming US tariffs discussions and uncertainties related to the Iran conflict. Please turn to the next slide for our commentary on H2. We continue to expect our China service to be at or near capacity through the peak season.

Speaker #1: For the second quarter, our CLX and MAX services saw higher-than-expected freight rates and demand across e-commerce, garments, and e-goods, against a backdrop of tighter supply conditions in the Trans-Pacific trade lane.

Speaker #3: Moving to our China service, on slide 6, container volume in the second quarter of 2026 increased 15.2% year-over-year. The increase was primarily due to significantly higher demand compared to the prior year period, as you may recall, in the second quarter of 2025 there was a market decline in the transpacific demand due to the tariffs imposed in April 2025.

Speaker #1: The elevated demand grew throughout the quarter in both China and Southeast Asia. We saw a mix of strong e-commerce demand, inventory replenishment, and some pull-forward of seasonal goods.

Speaker #3: Please turn to slide 7 for additional commentary on current business trends. Momentum in our China service carried over from the post-Lunar New Year period.

Speaker #1: Some customers opted to get ahead of the general rate increases and higher fuel surcharges, while also de-risking upcoming U.S. tariffs discussions and uncertainties related to the Iran conflict.

Speaker #3: For the second quarter, our CLX and MAX services saw higher-than-expected freight rates and demand across e-commerce, garments, and e-goods against a backdrop of tighter supply conditions in the transpacific trade lane.

Speaker #1: Please turn to the next slide for our commentary on the second half of the year. We continue to expect our China service to be at or near capacity through the peak season.

Speaker #1: Through July, freight demand on our CLX and CLX+ services remained in excess of capacity. For the fourth quarter of 2026, we expect demand to reflect a more traditional seasonality pattern compared to the elevated period of freight demand experienced in the Trans-Pacific market in the fourth quarter of 2025, following the U.S.-China trade and economic agreement announced on October 30, 2025.

Matt J. Cox: Through July, freight demand on our CLX and MAX services remain in excess of capacity. For Q4 2026, we expect demand to reflect a more traditional seasonality pattern compared to the elevated period of freight demand experienced in the Trans-Pacific market in Q4 2025, following the U.S.-China Trade and Economic Agreement announced on 30 October 2025. The agreement helped ease tariff and port entry fee uncertainty for our customers, that it constrained freight flows and led to prolonged demand with strong volume and high freight rates lasting later in the quarter last year than normal. For the full year 2026, we expect volume to be higher than the level achieved in 2025, based on our expectation of continued solid U.S. consumer demand and a stable trading environment in the Trans-Pacific trade lane. Please turn to the next slide.

Matt Cox: Through July, freight demand on our CLX and MAX services remain in excess of capacity. For Q4 2026, we expect demand to reflect a more traditional seasonality pattern compared to the elevated period of freight demand experienced in the Trans-Pacific market in Q4 2025, following the US-China Trade and Economic Agreement announced on 30 October 2025. The agreement helped ease tariff and port entry fee uncertainty for our customers, that it constrained freight flows and led to prolonged demand with strong volume and high freight rates lasting later in the quarter last year than normal. For the full-year 2026, we expect volume to be higher than the level achieved in 2025, based on our expectation of continued solid US consumer demand and a stable trading environment in the Trans-Pacific trade lane. Please turn to the next slide.

Speaker #3: The elevated demand grew throughout the quarter in both China and Southeast Asia. We saw a mix of strong e-commerce demand inventory replenishment and some pull-forward of seasonal goods.

Speaker #3: Some customers opted to get ahead of the general rate increases and higher fuel surcharges, while also de-risking upcoming U.S. tariffs discussions and uncertainties related to the Iran conflict.

Speaker #1: The agreement helped ease tariff and port entry fee uncertainty for our customers, which had constrained freight volume and caused high freight rates to last later in the quarter last year than normal.

Speaker #3: Please turn to the next slide for our commentary on the second half of the year. We continue to expect our China service to be at or near capacity through the peak season.

Speaker #3: Through July, freight demand on our CLX and MAX services remained in excess of capacity. For the fourth quarter of 2026, we expect demand to reflect a more traditional seasonality pattern compared to the elevated period of freight demand experienced in the transpacific market in the fourth quarter of 2025, following the U.S.-China trade and economic agreement announced on October 30, 2025.

Speaker #1: For the full year 2026, we expect volume to be higher than the level achieved in 2025, based on our expectation of continued solid U.S. demand.

Speaker #1: Consumer demand and a stable trading environment in the Trans-Pacific trade lane. Please turn to the next slide. We're encouraged by the continued growth of our regional services across Vietnam, Thailand, and the broader Southeast Asia region.

Matt J. Cox: We're encouraged by the continued growth of our regional services across Vietnam, Thailand, and the broader Southeast Asia region. While this expansion was initially driven by our customers' needs, it has also enabled us to diversify our cargo mix. Weekly, Southeast Asia cargo now represents 20% to 25% of the China service volume, which is significantly higher than the level achieved in the beginning of 2025. We believe we have the right regional transportation partners to support our growth and build an integrated transportation network. These partners share our commitment to schedule integrity and premium service levels. We continue to look for opportunities to grow with our customers, expand our geographic footprint, and capture market share as Southeast Asia becomes a larger part of our weekly China service volume. Please turn to slide 10. In Guam, Matson's container volume in Q2 2026 increased 4.4% year-over-year.

Matt Cox: We're encouraged by the continued growth of our regional services across Vietnam, Thailand, and the broader Southeast Asia region. While this expansion was initially driven by our customers' needs, it has also enabled us to diversify our cargo mix. Weekly, Southeast Asia cargo now represents 20% to 25% of the China service volume, which is significantly higher than the level achieved in the beginning of 2025. We believe we have the right regional transportation partners to support our growth and build an integrated transportation network. These partners share our commitment to schedule integrity and premium service levels. We continue to look for opportunities to grow with our customers, expand our geographic footprint, and capture market share as Southeast Asia becomes a larger part of our weekly China service volume. Please turn to slide 10. In Guam, Matson's container volume in Q2 2026 increased 4.4% year-over-year.

Speaker #3: The agreement helped ease tariff and port entry fee uncertainty for our customers, that had constrained freight flows and led to prolonged demand with strong volume and high freight rates lasting later in the quarter last year than normal.

Speaker #1: While this expansion was initially driven by our customers' needs, it has also enabled us to diversify our cargo mix. Weekly, Southeast Asia cargo now represents 20 to 25 percent of the China service volume, which is significantly higher than the level achieved at the beginning of 2025.

Speaker #3: For the full year 2026, we expect volume to be higher than the level achieved in 2025, based on our expectation of continued solid U.S.

Speaker #1: We believe we have the right regional transportation partners to support our growth and build an integrated transportation network. These partners share our commitment to schedule integrity and premium service levels.

Speaker #3: consumer demand and a stable trading environment in the transpacific trade lane. Please turn to the next slide. We're encouraged by the continued growth of our regional services across Vietnam, Thailand, and the broader Southeast Asia region.

Speaker #1: We continue to look for opportunities to grow with our customers, expand our geographic footprint, and capture market share as Southeast Asia becomes a larger part of our weekly China service volume.

Speaker #3: While this expansion was initially driven by our customers' needs, it has also enabled us to diversify our cargo mix. Weekly, Southeast Asia cargo now represents 20 to 25 percent of the China service volume, which is significantly higher than the level achieved in the beginning of 2025.

Speaker #1: Please turn to slide 10. In Guam, Matson's container volume in the second quarter of 2026 increased 4.4% year over year. In the near term, we expect Guam's economy to remain stable. As such, for the full year 2026, we expect container volume to be comparable to the level achieved last year.

Matt J. Cox: In the near term, we expect Guam's economy to remain stable. As such, for the full year 2026, we expect container volume to be comparable to the level achieved last year. Please turn to the next slide. In Alaska, Matson's container volume in Q2 2026 decreased 2.3% year-over-year. The decrease was primarily due to lower export seafood volume on AAX, partly offset by one additional northbound sailing. In the near term, we expect Alaska's economy to remain stable, supported by a low unemployment rate, steady job market, and continued oil and gas exploration and production activity. As such, for the full year 2026, we expect container volume to approach the level achieved last year. Please turn to slide 12. In Q2, our SSAT investment joint venture contributed $4.8 million, representing a year-over-year decrease of $2.5 million.

Matt Cox: In the near term, we expect Guam's economy to remain stable. As such, for the full-year 2026, we expect container volume to be comparable to the level achieved last year. Please turn to the next slide. In Alaska, Matson's container volume in Q2 2026 decreased 2.3% year-over-year. The decrease was primarily due to lower export seafood volume on AAX, partly offset by one additional northbound sailing. In the near term, we expect Alaska's economy to remain stable, supported by a low unemployment rate, steady job market, and continued oil and gas exploration and production activity. As such, for the full-year 2026, we expect container volume to approach the level achieved last year. Please turn to slide 12. In Q2, our SSAT investment joint venture contributed $4.8 million, representing a year-over-year decrease of $2.5 million.

Speaker #3: We believe we have the right regional transportation partners to support our growth and build an integrated transportation network. These partners share our commitment to schedule integrity and premium service levels.

Speaker #1: Please turn to the next slide. In Alaska, Matson's container volume in the second quarter of 2026 decreased 2.3% year over year. The decrease was primarily due to lower export seafood volume on AAX, partly offset by one additional northbound sailing.

Speaker #3: We continue to look for opportunities to grow with our customers, expand our geographic footprint, and capture market share as Southeast Asia becomes a larger part of our weekly China service volume.

Speaker #3: Please turn to slide 10. In Guam, Matson's container volume in the second quarter of 2026 increased 4.4% year-over-year. In the near term, we expect Guam's economy to remain stable.

Speaker #1: In the near term, we expect Alaska's economy to remain stable, supported by a low unemployment rate, a steady job market, and continued oil and gas exploration and production activity.

Speaker #3: As such, for the full year 2026, we expect container volume to be comparable to the level achieved last year. Please turn to the next slide.

Speaker #1: As such, for the full year 2026, we expect container volume to approach the level achieved last year. Please turn to slide 12. In the second quarter, our SSAT investment joint venture contributed $4.8 million, representing a year-over-year decrease of $2.5 million.

Speaker #3: In Alaska, Matson's container volume in the second quarter of 2026 decreased 2.3% year-over-year. The decrease was primarily due to lower export seafood volume on AAX, partly offset by one additional northbound sailing.

Speaker #1: The decrease was primarily due to lower lift volume and higher operating expenses. For the full year 2026, we expect the contribution from SSAT to be lower than the $32.5 million achieved in the full year 2025.

Matt J. Cox: The decrease was primarily due to lower lift volume and higher operating expenses. For the full year 2026, we expect the contribution from SSAT to be lower than the $32.5 million achieved in the full year 2025. Turning now to logistics on slide 13, operating income in Q2 came in at $14.9 million, or a half a million dollars higher than the result in the year ago period. The increase was primarily due to higher contributions from freight forwarding and transportation brokerage, partially offset by a lower contribution from warehousing. For the full year 2026, we expect logistics operating income to be higher than the level achieved in full year 2025. I will now turn the call over to Joel for a review of our financial performance. Joel?

Matt Cox: The decrease was primarily due to lower lift volume and higher operating expenses. For the full-year 2026, we expect the contribution from SSAT to be lower than the $32.5 million achieved in the full-year 2025. Turning now to logistics on slide 13, operating income in Q2 came in at $14.9 million, or a half a million dollars higher than the result in the year ago period. The increase was primarily due to higher contributions from freight forwarding and transportation brokerage, partially offset by a lower contribution from warehousing. For the full-year 2026, we expect logistics operating income to be higher than the level achieved in full-year 2025. I will now turn the call over to Joel for a review of our financial performance. Joel?

Speaker #3: In the near term, we expect Alaska's economy to remain stable supported by a low unemployment rate and steady job market, and continued oil and gas exploration and production activity.

Speaker #3: As such, for the full year 2026, we expect container volume to approach the level achieved. Last year. Please turn to slide 12. In the second quarter, our SSAT investment joint venture contributed 4.8 million dollars representing a year-over-year decrease of 2.5 million dollars.

Speaker #1: Turning now to logistics on slide 13, operating income in the second quarter came in at $14.9 million, or half a million dollars higher than the result in the year-ago period.

Speaker #1: The increase was primarily due to higher contributions from freight forwarding and transportation brokerage, partially offset by a lower contribution from warehousing. For the full year 2026, we expect logistics operating income to be higher than the level achieved in full year 2025.

Speaker #3: The decrease was primarily due to lower lift volume and higher operating expenses. For the full year 2026, we expect the contribution from SSAT to be lower than the 32.5 million dollars achieved in the full year 2025.

Speaker #1: I will now turn the call over to Joel for a review of our financial performance. Joel, okay.

Joel M. Wine: Okay. Thanks, Matt. Please turn to slide 14 for a review of our Q2 results. For Q2, consolidated operating income increased to $45.9 million year-over-year to $158.9 million, with higher contributions from ocean transportation and logistics of $45.4 million and $0.5 million, respectively. The increase in ocean transportation operating income was primarily due to a higher contribution from our China service, partially offset by higher vessel operating expenses, primarily due to higher fuel-related costs. As Matt noted, the increase in logistics operating income was primarily due to higher contributions from freight forwarding and transportation brokerage, partially offset by a lower contribution from warehousing. We had an interest income of $5 million in the quarter compared to $8 million in the same period last year.

Joel Wine: Okay. Thanks, Matt. Please turn to slide 14 for a review of our Q2 results. For Q2, consolidated operating income increased to $45.9 million year-over-year to $158.9 million, with higher contributions from ocean transportation and logistics of $45.4 million and $0.5 million, respectively. The increase in ocean transportation operating income was primarily due to a higher contribution from our China service, partially offset by higher vessel operating expenses, primarily due to higher fuel-related costs. As Matt noted, the increase in logistics operating income was primarily due to higher contributions from freight forwarding and transportation brokerage, partially offset by a lower contribution from warehousing. We had an interest income of $5 million in the quarter compared to $8 million in the same period last year.

Speaker #2: Thanks, Matt. Please turn to slide 14 for a review of our second quarter results. For the second quarter, consolidated operating income increased $45.9 million year over year to $158.9 million, with higher contributions from Ocean Transportation and Logistics of $45.4 million and $0.5 million, respectively.

Speaker #3: Turning now to logistics on slide 13, operating income in the second quarter came in at 14.9 million dollars, or a half a million dollars higher than the result in the year-ago period.

Speaker #3: The increase was primarily due to higher contributions from freight forwarding and transportation brokerage, partially offset by a lower contribution from warehousing. For the full year 2026, we expect logistics operating income to be higher than the level achieved in full year 2025.

Speaker #2: The increase in Ocean Transportation operating income was primarily due to a higher contribution from our China service, partially offset by higher vessel operating expenses, primarily due to higher fuel-related costs.

Speaker #3: I will now turn the call over to Joel for a review of our financial performance. Joel, okay.

Speaker #2: As Matt noted, the increase in logistics operating income was primarily due to higher contributions from freight forwarding and transportation brokerage, partially offset by a lower contribution from warehousing.

Speaker #1: Thanks, Matt. Please turn to slide 14 for a review of our second quarter results. For the second quarter, consolidated operating income increased 45.9 million year-over-year to 158.9 million, with higher contributions from ocean transportation and logistics of 45.4 million and 0.5 million respectively.

Speaker #2: We had interest income of $5 million in the quarter, compared to $8 million in the same period last year. The decrease was due to a $311 million reduction in the CCF balance in the last 12 months, as construction milestones on our new Aloha-class vessels had been achieved, necessitating higher payments to the shipyard.

Joel M. Wine: The decrease was due to $311 million reduction in the CCF balance in the last 12 months as construction milestones on our new Aloha Class vessels had been achieved, necessitating higher payments to the shipyard. Net income increased 36.6% year-over-year to $129.4 million, and diluted earnings per share increased 46.2% year-over-year to $4.27 per share. Lastly, diluted weighted average shares outstanding decreased 6.5% year-over-year. Please turn to the next slide. We continue to generate strong cash flows. For the trailing 12 months, we generated cash flow from operations of $584.1 million. We returned capital in the form of dividends and share repurchases of $307.3 million, and we had maintenance CapEx of $133.4 million. Our cash flow from operations exceeded the aggregate spend on maintenance CapEx, dividends, and share repurchases by $143.4 million. Please turn to slide 16 for a summary of our share repurchase program and balance sheet.

Joel Wine: The decrease was due to $311 million reduction in the CCF balance in the last 12 months as construction milestones on our new Aloha Class vessels had been achieved, necessitating higher payments to the shipyard. Net income increased 36.6% year-over-year to $129.4 million, and diluted earnings per share increased 46.2% year-over-year to $4.27 per share. Lastly, diluted weighted average shares outstanding decreased 6.5% year-over-year. Please turn to the next slide. We continue to generate strong cash flows. For the trailing 12 months, we generated cash flow from operations of $584.1 million. We returned capital in the form of dividends and share repurchases of $307.3 million, and we had maintenance CapEx of $133.4 million. Our cash flow from operations exceeded the aggregate spend on maintenance CapEx, dividends, and share repurchases by $143.4 million. Please turn to slide 16 for a summary of our share repurchase program and balance sheet.

Speaker #1: The increase in ocean transportation operating income was primarily due to a higher contribution from our China service partially offset by higher vessel operating expenses, primarily due to higher fuel-related costs.

Speaker #2: Net income increased 36.6% year over year to 129.4 million and diluted earnings per share increased 46.2% year over year to $4.27 per share. Lastly, diluted weighted average shares outstanding decreased 6.5% year over year.

Speaker #1: As Matt noted, the increase in logistics operating income was primarily due to higher contributions from freight forwarding and transportation brokerage, partially offset by a lower contribution from warehousing.

Speaker #1: We had interest income of 5 million in the quarter compared to 8 million in the same period last year. The decrease was due to 311 million reduction in the CCF balance in the last 12 months as construction milestones on our new Aloha-class vessels had been achieved, necessitating higher payments to the shipyard.

Speaker #2: Please turn to the next slide. We continue to generate strong cash flows. For the trailing 12 months, we generated cash flow from operations of $584.1 million.

Speaker #2: We returned capital in the form of dividends and share repurchases of $307.3 million, and we had maintenance capex of $133.4 million. Our cash flow from operations exceeded the aggregate spend on maintenance capex, dividends, and share repurchases by $143.4 million.

Speaker #1: Net income increased 36.6 percent year-over-year to 129.4 million and diluted earnings per share increased 46.2 percent year-over-year to $4.27 per share. Lastly, diluted weighted average shares outstanding decreased 6.5 percent year-over-year.

Speaker #2: Please turn to slide 16 for a summary of our share repurchase program and balance sheet. During the second quarter, we repurchased approximately 300,000 shares for a total cost of $67.8 million.

Speaker #1: Please turn to the next slide. We continue to generate strong cash flows. For the trailing 12 months, we generated cash flow from operations of 584.1 million.

Joel M. Wine: During Q2, we repurchased approximately 0.3 million shares for a total cost of $67.8 million. Year-to-date, we repurchased approximately 0.7 million shares for a total cost of $122.2 million. Since we initiated our share repurchase program in August 2021 through June of this year, we have repurchased approximately 14.6 million shares or approximately 34% of our stock for a total cost of approximately $1.4 billion. On April 23, we announced the addition of 3 million shares to our existing share repurchase authorization. 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. As of 30 June 2026, there were approximately 3.4 million shares remaining in our share repurchase program.

Joel Wine: During Q2, we repurchased approximately 0.3 million shares for a total cost of $67.8 million. Year-to-date, we repurchased approximately 0.7 million shares for a total cost of $122.2 million. Since we initiated our share repurchase program in August 2021 through June of this year, we have repurchased approximately 14.6 million shares or approximately 34% of our stock for a total cost of approximately $1.4 billion. On April 23, we announced the addition of 3 million shares to our existing share repurchase authorization. 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. As of 30 June 2026, there were approximately 3.4 million shares remaining in our share repurchase program.

Speaker #2: Year to date, we repurchased approximately 0.7 million shares for a total cost of $122.2 million. Since we initiated our share repurchase program in August of 2021 through June of this year, we have repurchased approximately 14.6 million shares, or approximately 34% of our stock, for a total cost of approximately $1.4 billion.

Speaker #1: We returned capital in the form of dividends and share repurchases of 307.3 million and we had maintenance capex of 133.4 million. Our cash flow from operations exceeded the aggregate spend on maintenance capex, dividends, and share repurchases by 143.4 million.

Speaker #1: Please turn to slide 16 for a summary of our share repurchase program and balance sheet. During the second quarter, we repurchased approximately 0.3 million shares for a total cost of $67.8 million.

Speaker #2: Also, on April 23rd, we announced the addition of 3 million shares to our existing share repurchase authorization. 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.

Speaker #1: Year-to-date, we repurchased approximately 0.7 million shares for a total cost of $122.2 million. Since we initiated our share repurchase program in August of 2021 through June of this year, we have repurchased approximately 14.6 million shares or approximately 34 percent of our stock for a total cost of approximately $1.4 billion.

Speaker #2: As of June 30, 2026, there were approximately 3.4 million shares remaining in our share repurchase program. Turning to our debt levels, our total debt at the end of the second quarter was $341.3 million, a reduction of $9.8 million from the end of the first quarter.

Joel M. Wine: Turning to our debt levels, our total debt at the end of Q2 was $341.3 million, a reduction of $9.8 million from the end of Q1. With that, let me now turn to slide 17 and walk through our outlook, starting with Q3 and Q4 2026 at the top of the page. Based on the outlook trends Matt mentioned earlier, we expect Ocean Transportation operating income in Q3 to be approximately 45% higher than the $147.4 million achieved in Q3 2025, with our China service expected to be the primary driver of the year-over-year increase. For Logistics, we expect operating income in Q3 to be modestly higher than the $13.6 million achieved in Q3 2025.

Joel Wine: Turning to our debt levels, our total debt at the end of Q2 was $341.3 million, a reduction of $9.8 million from the end of Q1. With that, let me now turn to slide 17 and walk through our outlook, starting with Q3 and Q4 2026 at the top of the page. Based on the outlook trends Matt mentioned earlier, we expect Ocean Transportation operating income in Q3 to be approximately 45% higher than the $147.4 million achieved in Q3 2025, with our China service expected to be the primary driver of the year-over-year increase. For Logistics, we expect operating income in Q3 to be modestly higher than the $13.6 million achieved in Q3 2025.

Speaker #1: Also, on April 23rd, we announced the addition of 3 million shares to our existing share repurchase authorization. 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.

Speaker #2: With that, let me now turn to slide 17 and walk through our outlook, starting with the third and fourth quarters of 2026 at the top of the page.

Speaker #2: Based on the outlook trends Matt mentioned earlier, we expect ocean transportation operating income in the third quarter to be approximately 45% higher than the $147.4 million achieved in the third quarter of 2025, with our China service expected to be the primary driver of the year-over-year increase.

Speaker #1: As of June 30, 2026, there were approximately 3.4 million shares remaining in our share repurchase program. Turning to our debt levels, our total debt at the end of the second quarter was 341.3 million; a reduction of 9.8 million from the end of the first quarter.

Speaker #2: For Logistics, we expect operating income in the third quarter to be modestly higher than the $13.6 million achieved in the third quarter of 2025.

Speaker #2: As such, we expect consolidated operating income in the third quarter to be approximately 45% higher than the prior year. For the fourth quarter of 2026, we expect ocean transportation operating income to be modestly lower than the $136 million achieved in the fourth quarter of 2025.

Joel M. Wine: We expect consolidated operating income in Q3 to be approximately 45% higher than the prior year. For Q4 2026, we expect Ocean Transportation operating income to be modestly lower than the $136 million achieved in Q4 2025. As a reminder, and as Matt mentioned earlier, Q4 last year in the Transpacific market experienced an elevated period of freight demand following the U.S.-China Trade and Economic Agreement announced on 30 October last year. For Logistics, we expect operating income to be modestly higher than the $7.7 million achieved in Q4 2025. On the bottom half of the slide, we have our expectations for full year 2026. Starting with Ocean Transportation, we expect year-over-year operating income to be higher than the $455.6 million achieved in 2025.

Speaker #1: With that, let me now turn to slide 17 and walk through our outlook. Starting with the third and fourth quarters of 2026 at the top of the page.

Joel Wine: We expect consolidated operating income in Q3 to be approximately 45% higher than the prior year. For Q4 2026, we expect Ocean Transportation operating income to be modestly lower than the $136 million achieved in Q4 2025. As a reminder, and as Matt mentioned earlier, Q4 last year in the Transpacific market experienced an elevated period of freight demand following the US-China Trade and Economic Agreement announced on 30 October last year. For Logistics, we expect operating income to be modestly higher than the $7.7 million achieved in Q4 2025. On the bottom half of the slide, we have our expectations for full-year 2026. Starting with Ocean Transportation, we expect year-over-year operating income to be higher than the $455.6 million achieved in 2025.

Speaker #1: Based on the outlook trends Matt mentioned earlier, we expect ocean transportation operating income in the third quarter to be approximately 45 percent higher than the 147.4 million achieved in the third quarter of 2025, with our China service expected to be the primary driver of the year-over-year increase.

Speaker #2: As a reminder, and as Matt mentioned earlier, the fourth quarter last year in the Trans-Pacific market experienced an elevated period of freight demand following the US-China trade and economic agreement announced on October 30 last year.

Speaker #1: For logistics, we expect operating income in the third quarter to be modestly higher than the 13.6 million achieved in the third quarter of 2025.

Speaker #2: For Logistics, we expect operating income to be modestly higher than the $7.7 million achieved in the fourth quarter of 2025. On the bottom half of the slide, we have our expectations for full year 2026.

Speaker #1: As such, we expect consolidated operating income in the third quarter to be approximately 45 percent higher than the prior year. For the fourth quarter of 2026, we expect ocean transportation operating income to be modestly lower than the 136 million achieved in the fourth quarter of 2025.

Speaker #2: Starting with ocean transportation, we expect year-over-year operating income to be higher than the $455.6 million achieved in 2025. For logistics, we expect operating income to be higher than the $44.2 million achieved in full year 2025.

Speaker #1: As a reminder and as Matt mentioned earlier, the fourth quarter last year in the Trans-Pacific market experienced an elevated period of freight demand following the US-China trade and economic agreement announced on October 30 last year.

Joel M. Wine: For Logistics, we expect operating income to be higher than the $44.2 million achieved in full year 2025. We now expect consolidated operating income to be higher than the $499.8 million achieved in 2025. This outlook reflects our expectation of continued solid U.S. consumer demand and a stable trading environment in the Transpacific trade lane. Our full-year outlook also reflects our expectation regarding fuel cost recovery. To date, the Iran conflict has not impacted our operating performance or service levels. However, it has impacted fuel prices in all of our markets. At the end of Q2, we had under-collected fuel costs across all trade lanes by an amount in the low teens of millions of dollars. We expect to recover these elevated fuel costs by the end of the year.

Joel Wine: For Logistics, we expect operating income to be higher than the $44.2 million achieved in full-year 2025. We now expect consolidated operating income to be higher than the $499.8 million achieved in 2025. This outlook reflects our expectation of continued solid US consumer demand and a stable trading environment in the Transpacific trade lane. Our full-year outlook also reflects our expectation regarding fuel cost recovery. To date, the Iran conflict has not impacted our operating performance or service levels. However, it has impacted fuel prices in all of our markets. At the end of Q2, we had under-collected fuel costs across all trade lanes by an amount in the low teens of millions of dollars. We expect to recover these elevated fuel costs by the end of the year.

Speaker #2: As a result, we now expect consolidated operating income to be higher than the $499.8 million achieved in 2025. This outlook reflects our expectation of continued solid U.S. consumer demand and a stable trading environment in the Trans-Pacific trade lane.

Speaker #1: For logistics, we expect operating income to be modestly higher than the 7.7 million achieved in the fourth quarter of 2025. On the bottom half of the slide, we have our expectations for full year 2026.

Speaker #2: Our full-year outlook also reflects our expectation regarding fuel cost recovery. To date, the Iran conflict has not impacted our operating performance or service levels; however, it has impacted fuel prices in all of our markets.

Speaker #1: Starting with ocean transportation, we expect year-over-year operating income to be higher than the 455.6 million achieved in 2025. For logistics, we expect operating income to be higher than the 44.2 million achieved in full year 2025.

Speaker #2: At the end of the second quarter, we had under-collected fuel costs across all trade lanes by an amount in the low teens of millions of dollars.

Speaker #1: As a result, we now expect consolidated operating income to be higher than the 499.8 million achieved in 2025. This outlook reflects our expectation of continued solid US consumer demand and a stable trading environment in the Trans-Pacific trade lane.

Speaker #2: We expect to recover these elevated fuel costs by the end of the year. In addition, to this full-year operating income outlook, we expect the following for the full year.

Joel M. Wine: In addition to this full-year operating income outlook, we expect the following for the full year. Depreciation and amortization to approximate $205 million, including approximately $35 million in dry docking amortization. Interest income to be approximately $18 million, and interest expense to be approximately $6 million. Other income to be approximately $7 million. An effective tax rate of approximately 21.0%, and dry docking payments of approximately $45 million. Moving to Slide 18, the table shows our CapEx projections for the full year 2026. Our range for maintenance and other capital expenditures is unchanged at $150 to $170 million for full year 2026. Our estimate for expected vessel construction milestone payments and related costs for full year 2026 remains at $400 million. In Q2, we paid approximately $180 million in milestone payments from our Capital Construction Fund.

Joel Wine: In addition to this full-year operating income outlook, we expect the following for the full-year. Depreciation and amortization to approximate $205 million, including approximately $35 million in dry docking amortization. Interest income to be approximately $18 million, and interest expense to be approximately $6 million. Other income to be approximately $7 million. An effective tax rate of approximately 21.0%, and dry docking payments of approximately $45 million. Moving to Slide 18, the table shows our CapEx projections for the full-year 2026. Our range for maintenance and other capital expenditures is unchanged at $150 to $170 million for full-year 2026. Our estimate for expected vessel construction milestone payments and related costs for full-year 2026 remains at $400 million. In Q2, we paid approximately $180 million in milestone payments from our Capital Construction Fund.

Speaker #2: Depreciation and amortization to approximate 205 million including approximately 35 million in dry docking amortization. Interest income to be approximately 18 million and interest expense to be interest expense to be approximately 6 million.

Speaker #1: Our full year outlook also reflects our expectation regarding fuel recovery fuel cost recovery. To date, the IRAN conflict has not impacted our operating performance or service levels; however, it has impacted fuel prices in all of our markets.

Speaker #2: Other income to be approximately $7 million, an effective tax rate of approximately 21.0%, and dry docking payments of approximately $45 million. Moving to slide 18, the table shows our capex projections for the full year 2026.

Speaker #1: At the end of the second quarter, we had undercollected fuel costs across all trade lanes by an amount in the low teens of millions of dollars.

Speaker #1: We expect to recover these elevated fuel costs by the end of the year. In addition, to this full year operating income outlook, we expect the following for the full year.

Speaker #2: Our range for maintenance and other capital expenditures is unchanged at $150 to $170 million for full year 2026. Our estimate for expected vessel construction milestone payments and related costs for full year 2026 remains at $400 million.

Speaker #1: Depreciation and amortization to approximate 205 million including approximately 35 million in dry docking amortization. Interest income to be approximately 18 million and interest expense to be interest expense to be approximately 6 million.

Speaker #2: In the second quarter, we paid approximately $180 million in milestone payments from our capital construction fund. Looking ahead, we expect to make approximately $50 million in milestone payments in the third quarter and approximately $127 million in the fourth quarter.

Speaker #1: Other income to be approximately 7 million. And effective tax rate of approximately 21.0 percent and dry docking payments of approximately 45 million. Moving to slide 18, the table shows our capex projections for the full year 2026.

Joel M. Wine: Looking ahead, we expect to make approximately $50 million in milestone payments in Q3 and approximately $127 million in Q4. As of 30 June, we had cash and cash equivalents of approximately $119 million and approximately $346 million in our Capital Construction Fund. Our CCF covers approximately 90% of our remaining milestone payment obligations and when combined with our balance sheet cash, exceeds our remaining milestone payments. We continue to be in a strong funding position on the new-build program. Please turn to the next slide. Our targeted delivery schedule for the new Aloha Class vessels remains unchanged. Our first vessel, Makua, is approximately 89% complete, with delivery expected in Q1 2027. The pictures on the slide show Makua's bow being mounted on the hull, giving a clear view of the front of the vessel.

Joel Wine: Looking ahead, we expect to make approximately $50 million in milestone payments in Q3 and approximately $127 million in Q4. As of 30 June, we had cash and cash equivalents of approximately $119 million and approximately $346 million in our Capital Construction Fund. Our CCF covers approximately 90% of our remaining milestone payment obligations and when combined with our balance sheet cash, exceeds our remaining milestone payments. We continue to be in a strong funding position on the new-build program. Please turn to the next slide. Our targeted delivery schedule for the new Aloha Class vessels remains unchanged. Our first vessel, Makua, is approximately 89% complete, with delivery expected in Q1 2027. The pictures on the slide show Makua's bow being mounted on the hull, giving a clear view of the front of the vessel.

Speaker #2: As of June 30th, we had cash and cash equivalents of approximately $119 million, and approximately $346 million in our capital construction fund. Our CCF covers approximately 90% of our remaining milestone payment obligations and, when combined with our balance sheet cash, exceeds our remaining milestone payments.

Speaker #1: Our range for maintenance and other capital expenditures is unchanged at 150 to 170 million for full year 2026. Our estimate for expected vessel construction milestone payments and related costs for full year 2026 remains at 400 million dollars.

Speaker #1: In the second quarter, we paid approximately 180 million in milestone payments from our capital construction fund. Looking ahead, we expect to make approximately 50 million in milestone payments in the third quarter and approximately 127 million in the fourth quarter.

Speaker #2: So, we continue to be in a strong funding position on the new build program. Please turn to the next slide. Our targeted delivery schedule for the new Aloha-class vessels remains unchanged.

Speaker #2: Our first vessel, Makua, is approximately 89% complete, with delivery expected in the first quarter of 2027. The pictures on the slide show Makua's bow being mounted on the hull, giving a clear view of the front of the vessel.

Speaker #1: As of June 30th, we had cash and cash equivalents of approximately 119 million and approximately 346 million in our capital construction fund. Our CCF covers approximately 90 percent of our remaining milestone payment obligations, and when combined with our balance sheet cash, exceeds our remaining milestone payments.

Speaker #2: Our second vessel, Malama, is approximately 64% complete, with delivery expected in the third quarter of 2027. Our third vessel, Makena, is approximately 30% complete, with delivery expected in the second quarter of 2028.

Joel M. Wine: Our second vessel, Malama, is approximately 64% complete, with delivery expected in Q3 2027. Our third vessel, Makena, is approximately 30% complete, with delivery expected in Q2 2028. With that, let me turn the call back over to Matt for closing remarks.

Joel Wine: Our second vessel, Malama, is approximately 64% complete, with delivery expected in Q3 2027. Our third vessel, Makena, is approximately 30% complete, with delivery expected in Q2 2028. With that, let me turn the call back over to Matt for closing remarks.

Speaker #1: So, we continue to be in a strong funding position on the new build program. Please turn to the next slide. Our targeted delivery schedule for the new Aloha-class vessels remains unchanged.

Speaker #2: With that, let me turn the call back over to Matt for closing remarks.

Speaker #1: Okay, Joel, thanks. Please turn to slide 20, where I'll go through some closing thoughts. As I mentioned in my introductory comments, we believe we're well positioned heading into the second half of the year.

Matt J. Cox: Okay, Joel, thanks. Please turn to Slide 20, where I'll go through some closing thoughts. As I mentioned in my introductory comments, we believe we're well-positioned heading into H2. Our China service to continue to perform at or near capacity, and we're optimistic that the US consumer remains resilient and will be supportive of freight demand in the Transpacific for the remainder of the year. Altogether, these factors support our expectations for a particularly strong Q3. We continue to navigate geopolitical uncertainty related to the Iran conflict and US tariffs. Our business has generally performed well when global supply chains are disrupted or become congested, and where schedule reliability and high service standards are essential.

Matt Cox: Okay, Joel, thanks. Please turn to Slide 20, where I'll go through some closing thoughts. As I mentioned in my introductory comments, we believe we're well-positioned heading into H2. Our China service to continue to perform at or near capacity, and we're optimistic that the US consumer remains resilient and will be supportive of freight demand in the Transpacific for the remainder of the year. Altogether, these factors support our expectations for a particularly strong Q3. We continue to navigate geopolitical uncertainty related to the Iran conflict and US tariffs. Our business has generally performed well when global supply chains are disrupted or become congested, and where schedule reliability and high service standards are essential.

Speaker #1: Our first vessel, Makua, is approximately 89 percent complete with delivery expected in the first quarter of 2027. The pictures on the slide show Makua's bow being mounted on the hull, giving a clear view of the front of the vessel.

Speaker #1: Our China service continues to perform at or near capacity, and we're optimistic that the U.S. consumer remains resilient. We'll be supportive of freight demand in the Trans-Pacific for the remainder of the year.

Speaker #1: Our second vessel, Malama, is approximately 64 percent complete with delivery expected in the third quarter of 2027. Our third vessel, Makena, is approximately 30 percent complete with delivery expected in the second quarter of 2028.

Speaker #1: Altogether, these factors support our expectations for a particularly strong third quarter. We continue to navigate geopolitical uncertainty related to the Iran conflict and U.S. tariffs.

Speaker #1: With that, let me turn the call back over to Matt for closing remarks.

Speaker #1: Our business has generally performed well when global supply chains are disrupted or become congested, and when schedule reliability and high service standards are essential.

Speaker #2: Okay, Joel. Thanks. Please turn to slide 20 where I'll go through some closing thoughts. As I mentioned in my introductory comments, we believe we're well positioned heading into the second half of the year.

Speaker #1: Southeast Asia expansion continues to be a key strategic priority for Matson, and we expect to grow with our customers as they diversify and expand their manufacturing base in the region.

Matt J. Cox: Southeast Asia expansion continues to be a key strategic priority for Matson, we expect to grow with our customers as they diversify and expand their manufacturing base in the region. We feel we've made tremendous progress in building out our regional service offering into a viable extension of our China service. The product offering has resonated with customers needing speed and reliability on the water, I'm excited for Matson to continue to build on the success in the region that we've achieved to date. With that, I will turn the call back to the operator and ask for your questions. Thanks.

Matt Cox: Southeast Asia expansion continues to be a key strategic priority for Matson, we expect to grow with our customers as they diversify and expand their manufacturing base in the region. We feel we've made tremendous progress in building out our regional service offering into a viable extension of our China service. The product offering has resonated with customers needing speed and reliability on the water, I'm excited for Matson to continue to build on the success in the region that we've achieved to date. With that, I will turn the call back to the operator and ask for your questions. Thanks.

Speaker #2: Our China service to continue to perform at or near capacity and we're optimistic that the US consumer remains resilient. And we'll be supportive of freight demand in the Trans-Pacific for the remainder of the year.

Speaker #1: We feel we've made tremendous progress in building out our regional service offering into a viable extension of our China service. The product offering has resonated with customers needing speed and reliability on the water, and I'm excited for Matson to continue to build on the success in the region that we've achieved to date.

Speaker #2: Altogether, these factors support our expectations for a particularly strong third quarter. We continue to navigate geopolitical uncertainty related to the Iran conflict and US tariffs.

Speaker #2: Our business has generally performed well when global supply chains are disrupted or become congested, and we're scheduled reliability and high service standards are essential.

Speaker #1: And with that, I will turn the call back to the operator and ask for your questions. Thank you.

Speaker #3: Certainly. And our first question for today comes from the line of Jacob Black from Wolfe Research. Your question, please.

Operator: Certainly. Our first question for today comes from the line of Jacob Lacks from Wolfe Research. Your question, please.

Operator: Certainly. Our first question for today comes from the line of Jacob Lacks from Wolfe Research. Your question, please.

Speaker #2: Southeast Asia expansion continues to be a key strategic priority for Matson, and we expect to grow with our customers as they diversify and expand their manufacturing base in the region.

Jacob Lacks: Hey, Matt. Hey, Joel. Thanks for your time.

Jacob Lacks: Hey, Matt. Hey, Joel. Thanks for your time.

Speaker #4: Hey, Matt. Hey, Joel. Thanks for your time.

Speaker #1: Hi, Jake.

Matt J. Cox: Hi, Jake.

Matt Cox: Hi, Jake.

Speaker #5: Hi, Jake.

Joel M. Wine: Hi, Jake.

Joel Wine: Hi, Jake.

Jacob Lacks: You guys are guiding to Q3 ocean EBIT to be much higher a year ago, Q4 to be a bit lower. Understanding that last year is a tough comp, are you assuming that all the global trade strength we see today fully subsides in the next couple of months as well?

Speaker #4: So, you guys are guiding to Q3 Ocean EBIT being much higher than a year ago, but then Q4 to be a bit lower?

Jacob Lacks: You guys are guiding to Q3 ocean EBIT to be much higher a year ago, Q4 to be a bit lower. Understanding that last year is a tough comp, are you assuming that all the global trade strength we see today fully subsides in the next couple of months as well?

Speaker #2: We feel we've made tremendous progress in building out our regional service offering into a viable extension of our China service. The product offering has resonated with customers needing speed and reliability on the water, and I'm excited for Matson to continue to build on the success in the region that we've achieved to date.

Speaker #4: You know, understanding that last year is a tough comp, are you assuming that all the global trade strength we see today fully subsides in the next couple of months as well?

Speaker #1: Yeah, it's a good question, Jake. I think our view—and we started the year by talking about this—is that after this period of tariff-driven changes, in 2025 we expect to see a normalization to a more traditional Trans-Pacific pattern, which, of course, as you know, is that the second and third quarters are our strongest.

Matt J. Cox: Yeah. It's a good question, Jake. I think our view, we started the year by talking about after this period of tariff-driven changes in 2025, we were expecting to see a normalization of a more traditional Transpacific pattern, which, of course, you know is the second and third are our strongest quarters, and first and fourth are the lower quarters. We're still projecting to see sort of a normal fall off. Again, with the backdrop of strong consumer demand, the US economy hanging in there. We expect to see some fall off as we get past peak and the largest amount of volume going through. We're not expecting anything unusual other than, to your point, kind of a stronger comp, but we see it as very much normalized and nothing out of the ordinary in Q4.

Matt Cox: Yeah. It's a good question, Jake. I think our view, we started the year by talking about after this period of tariff-driven changes in 2025, we were expecting to see a normalization of a more traditional Transpacific pattern, which, of course, you know is the second and third are our strongest quarters, and first and fourth are the lower quarters. We're still projecting to see sort of a normal fall off. Again, with the backdrop of strong consumer demand, the US economy hanging in there. We expect to see some fall off as we get past peak and the largest amount of volume going through. We're not expecting anything unusual other than, to your point, kind of a stronger comp, but we see it as very much normalized and nothing out of the ordinary in Q4.

Speaker #2: And with that, I will turn the call back to the operator and ask for your questions. Thanks.

Speaker #3: Certainly. And our first question for today comes from the line. Jacob Lacks from Wolf Research. Your question, please.

Speaker #4: Hey, Matt. Hey, Joel. Thanks for your time.

Speaker #1: And first and fourth are the slower quarters. So we're still projecting to see sort of a normal fall-off. Again, with the backdrop of strong consumer demand, the U.S. economy hanging in there, and so we expect to see some fall-off as we get, you know, past peak in the largest amount of volume going through.

Speaker #2: Hi, Jake.

Speaker #5: Hi, Jake.

Speaker #4: So, so you guys are guiding to Q3 Ocean EBIT to be much higher a year ago, but then Q4 to be a bit lower.

Speaker #4: You know, understanding that last year is a tough comp, are you assuming that all the global trade strength we see today fully subsides in the next couple of months as well?

Speaker #2: Yeah, it's, it's, it's a good question, Jake. I, I think our view, and we started the year by talking about, after this period of tariff-driven changes in 2025, we were expected to see a normalization of, you know, more traditional Trans-Pacific pattern, which, of course, as you know, is the second and third are our strongest quarters.

Speaker #1: So we're not expecting anything unusual other than, to your point, a kind of stronger comp, but we see it as very much normalized and nothing out of the ordinary.

Speaker #1: In the fourth quarter.

Speaker #4: Understood. And have you seen, just like—I mean, traditional ocean spot rates are up well over 100% year over year. Have you seen any sign of that start to normalize to date, or has that generally held up for now?

Jacob Lacks: Understood. Have you seen traditional ocean spot rates up well over 100% year-on-year? Have you seen any sign of that start to normalize to date, or has that generally held up for now?

Jacob Lacks: Understood. Have you seen traditional ocean spot rates up well over 100% year-on-year? Have you seen any sign of that start to normalize to date, or has that generally held up for now?

Speaker #2: And first and fourth are this lower quarters. So we're still projecting to see sort of a normal fall-off. Again, with the backdrop of strong consumer demand, the US economy hanging in there, and so we expect to see some fall-off as we get, you know, past peak in the largest amount of volume going through.

Speaker #1: Yeah, I mean, I think traditionally—and my comments will be relative to the overall trade, not our specific trade—where we tend to stay higher and longer.

Matt J. Cox: Yeah. I think traditionally, my comments will be relative to the overall trade, not our specific trade, where we tend to stay higher and longer. I would say for the overall seasonality, we are seeing at or near peak level demands now. The international ocean carriers had just put through another 1 August rate increase, some of that at least will stick. The carriers are interested in trying to do what they can to keep rates up. They have done, in my opinion, a remarkable job of providing the right amount of tonnage into the market so that the trade gets carried. There aren't large backlog of cargoes, but neither are there significant sailings that are not close to being full. The market is being supplied in an orderly manner.

Matt Cox: Yeah. I think traditionally, my comments will be relative to the overall trade, not our specific trade, where we tend to stay higher and longer. I would say for the overall seasonality, we are seeing at or near peak level demands now. The international ocean carriers had just put through another 1 August rate increase, some of that at least will stick. The carriers are interested in trying to do what they can to keep rates up. They have done, in my opinion, a remarkable job of providing the right amount of tonnage into the market so that the trade gets carried. There aren't large backlog of cargoes, but neither are there significant sailings that are not close to being full. The market is being supplied in an orderly manner.

Speaker #2: So we're not expecting anything unusual other than it, to your point, kind of a stronger comp, but we see it as very much normalized and nothing out of the ordinary, in the fourth quarter.

Speaker #1: But I would say, for the overall seasonality, we're seeing at or near peak-level demands now. The international ocean carriers have just put through another August 1st rate increase, and some of that, at least, will stick.

Speaker #4: Understood. And have you seen just like, I mean, traditional ocean spot rates up well over 100 percent year on year? Have you seen any sign of that start to normalize to date or has that generally held up for now?

Speaker #1: And the carriers are interested in trying to do what they can to, you know, keep rates up, and they've done, in my opinion, a remarkable job of providing the right amount of tonnage into the market so that the trade gets carried.

Speaker #1: There isn't a large backlog of cargo, but neither are there significant sailings that are, you know, not close to being full. So the market is being supplied in an orderly manner.

Speaker #2: Yeah, I mean, I think traditionally, and my comments will be relative to the overall trade, not our specific trade, where we, we tend to stay higher and longer.

Speaker #1: It's a little too early to say what will happen once we get past the first or second week of October, as we transition into a normal peak season.

Matt J. Cox: It's a little too early to say what will happen once we get sort of past the first or second week of October as we transition into a normal peak season. Time will tell. It's just a bit early to call that one, Jake.

Matt Cox: It's a little too early to say what will happen once we get sort of past the first or second week of October as we transition into a normal peak season. Time will tell. It's just a bit early to call that one, Jake.

Speaker #2: But I would say for the overall seasonality, we're seeing at or near peak level demands now. The international ocean carriers had just put through another August 1st rate increase, and some of that at least will stick.

Speaker #1: Time will tell. It's just a bit early to call that one, Jake.

Speaker #4: Makes sense. And then maybe last one for me before—and then I'll hop back in the queue. How are you thinking about China trade policy over the next several months?

Jacob Lacks: Makes sense. Maybe last one for me before, I'll hop back in the queue. How are you thinking about China trade policy over the next several months? Is your expectation that the one-year truce gets extended in November and that the port fees remain on hold?

Jacob Lacks: Makes sense. Maybe last one for me before, I'll hop back in the queue. How are you thinking about China trade policy over the next several months? Is your expectation that the one-year truce gets extended in November and that the port fees remain on hold?

Speaker #2: And the carriers are interested in trying to do what they can to, you know, keep rates up and they've done, in my opinion, a remarkable job of providing the right amount of tonnage into the market so that the trade gets carried.

Speaker #4: And is your expectation that the one-year truce gets extended in November, and that the port fees remain on hold?

Speaker #1: Yeah, these are good questions. I think the backdrop of our outlook really reflects a stable trading environment. We use a phrase like that.

Matt J. Cox: Yeah. These are good questions. I think the backdrop of our outlook, it really reflects a stable trading environment. We use a phrase like that. What we really mean by that is that the US and China's governments, we think, are both interested in creating a stable trade environment. That will persist through the end of the year and into next year. Of course, something else may come up, our expectation is very much the case that neither the US or Chinese government want to upset the cart at this point in time.

Matt Cox: Yeah. These are good questions. I think the backdrop of our outlook, it really reflects a stable trading environment. We use a phrase like that. What we really mean by that is that the US and China's governments, we think, are both interested in creating a stable trade environment. That will persist through the end of the year and into next year. Of course, something else may come up, our expectation is very much the case that neither the US or Chinese government want to upset the cart at this point in time.

Speaker #2: There aren't large backlog of cargos. But neither are there significant sailings that are, you know, not, not close to being full. So the market is being supplied in an orderly manner.

Speaker #1: What we really mean by that is that the US and China's governments, we think, are both interested in creating a stable trade environment. And that will persist through the end of the year and into next year.

Speaker #2: It's a little too early to say what will happen once we get sort of past the first or second week of October as we transition into a normal peak season.

Speaker #2: Time will tell. It's just a bit early to call that one, Jake.

Speaker #1: Of course, something else may come up, but our expectation is very much the case that neither the US or Chinese government want to upset the cart at this point in time.

Speaker #4: Makes sense. And then maybe last one for me before, and then I'll hop back into Q. How are you thinking about China trade policy over the next several months?

Speaker #4: And is your expectation that the one-year truce gets extended in November and that the port fees remain on

Jacob Lacks: Great. Thanks for your time. I'll hop back in queue.

Jacob Lacks: Great. Thanks for your time. I'll hop back in queue.

Speaker #4: Great, thanks for your time. I'll hop back in the queue.

Matt J. Cox: Okay. Thanks, Jake.

Matt Cox: Okay. Thanks, Jake.

Speaker #1: Okay. Thanks, Jake.

Speaker #3: Thank you. And our next question comes from the line of Reed Say from Stephens. Your question, please.

Operator: Thank you. Our next question comes from the line of Reed Seay from Stephens. Your question please.

Operator: Thank you. Our next question comes from the line of Reed Seay from Stephens. Your question please.

Speaker #2: Yeah, these are good questions. I think the backdrop of our reflects a stable trading environment. We use a phrase like that. What we really mean by that is that the US and China's governments we think are both interested in creating a stable trade environment.

Speaker #6: Hey, guys. Thanks for taking my question. I want to follow up a little bit on the pricing piece here. It's been stronger than expected.

Reed Seay: Hey, guys. Thanks for taking my question. I kind of want to follow up a little bit on the pricing piece here. It's been stronger than expected these past three quarters. I just wanted to get your thoughts on maybe trying to parse out how much of this is, obviously, you've had some support here recently from ocean and air rates. How much of this is continued price discovery as the value of your offering has really been proven out? Then if you could also help us understand how much of this is fuel here in Q2 and how much fuel we should expect in Q3, just as we look at how much of this is permanent, how much of this is temporary, just given the current backdrop.

Reed Seay: Hey, guys. Thanks for taking my question. I kind of want to follow up a little bit on the pricing piece here. It's been stronger than expected these past three quarters. I just wanted to get your thoughts on maybe trying to parse out how much of this is, obviously, you've had some support here recently from ocean and air rates. How much of this is continued price discovery as the value of your offering has really been proven out? Then if you could also help us understand how much of this is fuel here in Q2 and how much fuel we should expect in Q3, just as we look at how much of this is permanent, how much of this is temporary, just given the current backdrop.

Speaker #6: These past three quarters, I just want to get your thoughts on maybe trying to parse out how much of this is—obviously, you've had some support here recently from ocean and air rates.

Speaker #2: And that will persist through the, through the end of the year and into next year. Of course, that something else may come up, but our expectation is very much the case that neither the US or Chinese government want to upset the card at this point in time.

Speaker #6: But how much of this is continued price discovery as the value of your offering has really been proven out? And then, if you could also help us understand how much of this is fuel here in Q2 and how much fuel we should expect in Q3, just as we look at how much of this is permanent, how much of this is temporary, just given the current backdrop.

Speaker #4: Great. Thanks for your time. I'll hop back into Q.

Speaker #2: Okay. Thanks, Jake.

Speaker #3: Thank you. And our next question comes from the line of Reed Seay from Stephen's. Your question, please.

Speaker #6: Hey, guys. Thanks for taking my question. I kind of want to follow up a little bit on the pricing piece. Here, it's been stronger than expected.

Speaker #1: Sure, Reed. Why don't I ask Joel to comment on the fuel question, and then I'll focus on the body of the first part of your question.

Matt J. Cox: Sure, Reed. Why don't I ask Joel to comment on the fuel question. I'll focus on the body of the first part of your question.

Matt Cox: Sure, Reed. Why don't I ask Joel to comment on the fuel question. I'll focus on the body of the first part of your question.

Speaker #5: Yeah. Reed, the quick answer on the fuel is not much of it has been impacted by the fuel. You know, we announced, and it's publicly available, on our domestic trade lanes, the fuel pieces.

Joel M. Wine: Yeah. Reed, the quick answer on the fuel is not much of it has been impacted by the fuel. We announced, and it's publicly available on our domestic trade lanes, the fuel pieces, so you can see that. I think your question was geared more towards the Transpacific and our China services. Most of the early rate action that we took that had some fuel components to it was done early in Q2, the March-April timeframe. The rest of the pricing environment since then has really been market-driven, not fuel-driven.

Joel Wine: Yeah. Reed, the quick answer on the fuel is not much of it has been impacted by the fuel. We announced, and it's publicly available on our domestic trade lanes, the fuel pieces, so you can see that. I think your question was geared more towards the Transpacific and our China services. Most of the early rate action that we took that had some fuel components to it was done early in Q2, the March-April timeframe. The rest of the pricing environment since then has really been market-driven, not fuel-driven.

Speaker #6: These past three quarters, I just want to get your thoughts on maybe trying to parse out how much of this is obviously you've had some support here recently from Ocean and Air rates.

Speaker #5: So you can see that. And I—but I think your question was geared more towards the Trans-Pacific and our China services. And most of the early rate action that we took has some fuel components to it.

Speaker #6: But how much of this is continued price discovery as the value of your offering has really been proven out? And then if you could also help us understand how much of this is fuel here into Q and how much fuel we should expect in Q3, just as we look at how much of this is permanent, how much of this is temporary, just given the current backdrop.

Speaker #5: Was done early in the, in the second quarter, the March, April timeframe. And then, and then the rest of the rest of the pricing environment since then has really been market-driven, not fuel-driven.

Speaker #1: Okay. And then, Reed, to the main body of the first part of your question, I think as we've said in our prepared comments, we have been pleasantly surprised by the strength of the international ocean markets.

Matt J. Cox: Okay. Reed, to the main body of the first part of your question. I think, as we've said in our prepared comments, we've been pleasantly surprised by the strength of the international ocean markets. I'll talk about the Transpacific and ours in a moment. What's interesting this year that perhaps didn't exist last year on the international trades was it's not just the Transpacific volumes that we're seeing strength. We're seeing, despite the conflict in the Middle East, the international trades, whether they be the South American trades, whether they be Asia, Europe, or African trades, have all been remarkably resilient, and as a result, have absorbed much of the capacity of the international ocean carriers.

Matt Cox: Okay. Reed, to the main body of the first part of your question. I think, as we've said in our prepared comments, we've been pleasantly surprised by the strength of the international ocean markets. I'll talk about the Transpacific and ours in a moment. What's interesting this year that perhaps didn't exist last year on the international trades was it's not just the Transpacific volumes that we're seeing strength. We're seeing, despite the conflict in the Middle East, the international trades, whether they be the South American trades, whether they be Asia, Europe, or African trades, have all been remarkably resilient, and as a result, have absorbed much of the capacity of the international ocean carriers.

Speaker #2: Sure, Reed. Why don't I ask Joel to comment on the fuel question and then I'll, I'll, I'll focus on the body of the first part of your question.

Speaker #5: Yeah. Reed, the quick answer on the fuel is not much of it has been impacted by the fuel. You know, we announced and it's publicly available on our domestic trade lanes, the fuel pieces.

Speaker #1: I'll talk about the Trans-Pacific and ours in a moment, but what's interesting this year, that perhaps didn't exist last year on the international trades, is it's not just the Trans-Pacific volumes where we're seeing strength.

Speaker #5: So you can see that. And I, but I think your question was geared more towards the Trans-Pacific and our China services. And, and most of, most of the early rate action that we took that had some fuel components to it was done early in the, in the second quarter, the March, April timeframe.

Speaker #1: We're seeing despite the conflict in the Middle East, the international trades, whether they be the South American trades, whether they be Asia-Europe or, or African trades, have all been remarkably resilient and have as a result have absorbed much of the capacity of the international ocean carriers.

Speaker #5: And then, and then the rest of the rest of the pricing environment since then has really been market-driven, not fuel-driven.

Speaker #2: Okay. And then, Reed, to the main body of the first part of your question, I think as we've said in our prepared comments, we, we have been pleasantly surprised by the strength of the international ocean markets.

Speaker #1: And as I said in my earlier comment, to answer your question, I think the carriers have done a good job of deploying the right amount of capacity to carry each of these international trades without creating a huge backlog of cargo, nor by creating a large surplus of capacity.

Matt J. Cox: As I said in my earlier comment, to answer a question, I think the carriers have done a good job of deploying the right amount of capacity to carry each of these international trades without creating a huge backlog of cargo, nor by creating a large surplus of capacity. The networks have responded in a very orderly way. I think that's translated into the pricing that you see on the SCFI or other publicly available indices. Of course, Matson's, as you point out and know, our freight rates are above the rates of the international trade. Our freight rates don't generally move. We don't change them as much, but we're definitely into a period under which we're achieving very satisfactory freight rates and expect those freight rates to continue till the end of peak season.

Matt Cox: As I said in my earlier comment, to answer a question, I think the carriers have done a good job of deploying the right amount of capacity to carry each of these international trades without creating a huge backlog of cargo, nor by creating a large surplus of capacity. The networks have responded in a very orderly way. I think that's translated into the pricing that you see on the SCFI or other publicly available indices. Of course, Matson's, as you point out and know, our freight rates are above the rates of the international trade. Our freight rates don't generally move. We don't change them as much, but we're definitely into a period under which we're achieving very satisfactory freight rates and expect those freight rates to continue till the end of peak season.

Speaker #2: I'll talk about the Trans-Pacific and ours in a moment, but what's interesting this year that perhaps didn't exist last year on the international trades was it's not just the Trans-Pacific volumes that we're seeing strength.

Speaker #2: We're seeing despite the conflict in the Middle East, the international trades, whether they be the South American trades, whether they be Asia-Europe or African trades, have all been remarkably resilient and have as a result have absorbed much of the capacity of the international ocean carriers.

Speaker #1: So the networks have responded in a very orderly way. I think that's translated into the pricing that you see on the SCFI or other publicly available indices.

Speaker #1: And of course, Matson, as you point out and know, our freight rates are above the rates of the international trade. Our freight rates don't generally move—we don't change them as much—but we're definitely into a period under which we're achieving very satisfactory freight rates and expect those freight rates to continue till the end of peak season.

Speaker #2: And as I said in my earlier comment, to answer your question, I think the carriers have done a good job of deploying the right amount of capacity to carry each of these international trades without creating a huge backlog of cargo, nor by creating a large surplus of capacity.

Speaker #6: Got it, that's very helpful. And I just have a quick follow-up there. I think last year, when the broader ocean rates came down, Matson rates seemed to hold a little bit more stable.

Reed Seay: Got it. That's very helpful. Just a kind of a quick follow-up there. I think last year when the broader ocean rates came down, Matson rates seemed to hold a little bit more stable. Should we expect similar price action or maybe a little bit more in tandem movement this time around?

Reed Seay: Got it. That's very helpful. Just a kind of a quick follow-up there. I think last year when the broader ocean rates came down, Matson rates seemed to hold a little bit more stable. Should we expect similar price action or maybe a little bit more in tandem movement this time around?

Speaker #2: So the networks have responded in a very orderly way I think that's translated into the pricing that you see on the SCFI or other publicly available indices.

Speaker #6: Should we expect similar price action, or maybe a little bit more in tandem movement this time around?

Speaker #2: And of course, Matson, as you point out and know, are freight rates are above the rates of the international trade. Our freight rates don't generally move we don't change them as much, but we're definitely into a period under which we're achieving very satisfactory freight rates and expect those freight rates to continue till the end of peak season.

Speaker #1: Yeah, I think our thinking about pricing just more generally is expressed in our guide forward on the third quarter and the full year.

Matt J. Cox: I think our thinking about pricing just more generally is expressed in our guide forward on the Q3 and the full year. That is to say in the Q4, we do expect, once we get past peak season, we have historically and at this point expect to step rates down as we get towards the end of the year. Again, that's all reflected into our thinking about how that's going to result for the Q3 and Q4 guides.

Matt Cox: I think our thinking about pricing just more generally is expressed in our guide forward on the Q3 and the full-year. That is to say in the Q4, we do expect, once we get past peak season, we have historically and at this point expect to step rates down as we get towards the end of the year. Again, that's all reflected into our thinking about how that's going to result for the Q3 and Q4 guides.

Speaker #1: And that is to say, in the fourth quarter, we do expect, once we get past peak season—we have historically, and at this point expect—to step rates down as we get towards the end of the year.

Speaker #1: Again, that's all reflected in our thinking about how that's going to result for the Q3 and Q4 guides.

Speaker #6: Got it. That's very helpful. And I just kind of a quick follow-up there. I think last year when the broader ocean rates came down, Matson rates seemed to hold a little bit more stable.

Reed Seay: That makes a lot of sense. Last one for me, just kind of bigger picture. As we look out to 2027, looks like ships are on pace to be delivered on time. When you think about the current volume backdrop, is it shaping up how you expected/hoped for whenever these ships get deployed to where you can utilize them? To the best of their abilities, or is the backdrop slightly different than you planned? Just kind of has your thinking changed at all?

Reed Seay: That makes a lot of sense. Last one for me, just kind of bigger picture. As we look out to 2027, looks like ships are on pace to be delivered on time. When you think about the current volume backdrop, is it shaping up how you expected/hoped for whenever these ships get deployed to where you can utilize them? To the best of their abilities, or is the backdrop slightly different than you planned? Just kind of has your thinking changed at all?

Speaker #6: That makes a lot of sense. And last one from me, just kind of bigger picture—as we look out to 2027, it looks like ships are on pace to be delivered on time.

Speaker #6: Should we expect similar price action or maybe a little bit more in tandem movement this time around?

Speaker #6: When you think about the current volume backdrop, is it shaping up how you expected or hoped for whenever these ships get deployed, so you can utilize them to the best of their abilities? Or is the backdrop slightly different than you planned?

Speaker #2: Yeah, I think our, our thinking about pricing just more generally is, is expressed in our guide forward on the third quarter and the full year.

Speaker #2: And, and that is to say in the fourth quarter, we do expect once we get past peak season, we have historically and at this point expect to step rates down as we get towards the end of the year.

Speaker #6: Just kind of has your has your thinking changed at all?

Speaker #1: Yeah, I mean, we're very much looking forward to the additional capacity with the first of the vessels getting delivered in the first quarter of 2027.

Matt J. Cox: We're very much looking forward to the additional capacity with the first of the vessels getting delivered in the Q1 2027. That'll, for the first vessel at least, move nicely as we get into the Q2 and Q3 peaks. That additional capacity is welcome, will be taking the place of a smaller vessel that will then be deployed into one of our US domestic trades, Hawaii or Alaska. We continue to feel that that additional capacity will be welcome and will allow us over time both to increase our earnings footprint. Also, connected to our Southeast Asia strategy of broadening our markets that we focus on with our highly differentiated product, I think will tailor nicely into the additional capacity that gets woven into our fleet over the next couple of years. We feel really good about our positioning there.

Matt Cox: We're very much looking forward to the additional capacity with the first of the vessels getting delivered in the Q1 2027. That'll, for the first vessel at least, move nicely as we get into the Q2 and Q3 peaks. That additional capacity is welcome, will be taking the place of a smaller vessel that will then be deployed into one of our US domestic trades, Hawaii or Alaska. We continue to feel that that additional capacity will be welcome and will allow us over time both to increase our earnings footprint. Also, connected to our Southeast Asia strategy of broadening our markets that we focus on with our highly differentiated product, I think will tailor nicely into the additional capacity that gets woven into our fleet over the next couple of years. We feel really good about our positioning there.

Speaker #2: Again, that's all reflected into our thinking about how that's going to result for the Q3 and Q4 guides.

Speaker #1: That'll, that'll for the first vessel at least, move nicely as we get into the second and third quarter peaks, so that additional capacity is welcome.

Speaker #6: That that makes a lot of sense. And last one from me, just kind of bigger picture. As we look out to 2027, it looks like ships are on pace to be delivered on time.

Speaker #1: We'll be taking the place of a smaller vessel that will then be deployed into one of our U.S. domestic trades—Hawaii or Alaska.

Speaker #6: When you think about the current volume backdrop, is it shaping up how you expect it slash hoped for whenever these ships get deployed to where you can utilize them to the best of their abilities, or is there is the backdrop slightly different than you planned?

Speaker #1: And so we continue to feel that that additional capacity will be welcome, and will allow us over time both to increase our earnings footprint, but also, you know, connect to our Southeast Asia strategy of broadening the markets that we focus on with our highly differentiated product.

Speaker #6: Just kind of has your has your thinking changed at all?

Speaker #2: Yeah, I mean, we're very much looking forward to the additional capacity with the first of the vessel getting delivered in the first quarter of 2027.

Speaker #1: I think we'll tailor nicely into the additional capacity that gets woven into our fleet over the next couple of years, so we feel really good about our positioning there.

Speaker #2: That'll, that'll for the first vessel, at least move nicely into as we get into the second and third quarter. Peaks so that additional capacity is welcome.

Speaker #6: Great. Thank you, Matt. Thank you, Joel.

Reed Seay: Great. Thank you, Matt. Thank you, Joel.

Reed Seay: Great. Thank you, Matt. Thank you, Joel.

Speaker #2: We'll be taking the place of a smaller vessel that will then be deployed into one of our US domestic trades, Hawaii or, or Alaska.

Joel M. Wine: Thank you.

Matt Cox: Thank you.

Speaker #1: Thanks, Reed.

Speaker #5: Thank you, Reed.

Matt J. Cox: Thank you, Reed.

Joel Wine: Thank you, Reed.

Speaker #6: Thank you. And our next question comes from the line of Tomo Sano from J.P. Morgan. Your question, please.

Operator: Thank you. Our next question comes from the line of Tomo Sano from JPMorgan. Your question please.

Operator: Thank you. Our next question comes from the line of Tomo Sano from JPMorgan. Your question please.

Speaker #2: And so we continue to feel that that additional capacity will be welcome. And we'll allow us over time both to, to increase our earnings footprint, but also you know, connected to our Southeast Asia strategy of, of broadening our markets that we focus on with our highly differentiated product.

Speaker #7: Hello everyone.

Tomo Sano: Hello, everyone.

Tomo Sano: Hello, everyone.

Speaker #1: Hey, Tomo.

Matt J. Cox: Hey, Tomo.

Matt Cox: Hey, Tomo.

Speaker #5: Hi, Tomo.

Joel M. Wine: Hi, Tomo.

Joel Wine: Hi, Tomo.

Speaker #7: Thank you. Congrats on the quarter. On the 45% year-over-year increase outlook for third quarter Ocean Transportation operating income, could you provide more color at a higher level, and bridge across pricing and volumes and key costs if possible?

Tomo Sano: Thank you. Congrats on the quarter. On the 45% year-over-year increase outlook for Q3 ocean transportation operating income, could you provide more color at a high level bridge across pricing and volumes and key costs, if possible? Thank you.

Tomo Sano: Thank you. Congrats on the quarter. On the 45% year-over-year increase outlook for Q3 ocean transportation operating income, could you provide more color at a high level bridge across pricing and volumes and key costs, if possible? Thank you.

Speaker #2: I think we'll tailor nicely into the additional capacity that gets woven into our fleet over the next couple of years. So we feel really good about our positioning there.

Speaker #7: Thank you.

Speaker #1: Yeah, Tomo, I'll take a first stab at that. The primary one—there's some piece of volume, and there's some piece of higher freight rates.

Joel M. Wine: Yeah. Tomo, I'll take a first stab at that. The primary one, there's some piece of volume and there's some piece of higher freight rates. Clearly rates are higher now than they were last year's Q3. On the volume side, both Q2 and Q3 last year were highly unusual, as we've talked about. The tariff impact in April and May was extreme last year. There was actually a bit of a mini surge and a rush to move cargo in June and early July. Later in August and September, it was a muted peak season that we talked about. You had less volume really, frankly, moving through Q3 than you normally would have in Q3.

Joel Wine: Yeah. Tomo, I'll take a first stab at that. The primary one, there's some piece of volume and there's some piece of higher freight rates. Clearly rates are higher now than they were last year's Q3. On the volume side, both Q2 and Q3 last year were highly unusual, as we've talked about. The tariff impact in April and May was extreme last year. There was actually a bit of a mini surge and a rush to move cargo in June and early July. Later in August and September, it was a muted peak season that we talked about. You had less volume really, frankly, moving through Q3 than you normally would have in Q3.

Speaker #6: Great. Thank you, Matt. Thank you, Joel.

Speaker #1: So, I mean, clearly rates are higher now than they were in last year's Q3. And then, on the volume side, both Q2 and Q3 last year were highly unusual, as we've talked about.

Speaker #2: Thanks, Reed.

Speaker #5: Thank you, Reed.

Speaker #6: Thank you. And our next question comes from the line of Tomo Sano from JP Morgan. Your question, please.

Speaker #4: Hello everyone.

Speaker #1: So the tariff impact in April and May was extreme last year, but then there was actually a bit of a mini surge and a rush to move cargo in June and early July.

Speaker #2: Hi, Tomo.

Speaker #5: Hi, Tomo.

Speaker #4: Thank you. Congrats on a quarter. On the 45% year-over-year increase outlook for third quarter ocean transportation operating income, could you provide more color at a higher level, bridge across pricing and volumes and key cost if possible?

Speaker #1: And then later in August and September, it was a muted peak season that we talked about. So you had less volume, really, frankly, moving through the third quarter than you normally would have in the third quarter.

Speaker #4: Thank you.

Speaker #2: Yeah. Tomo, I'll take I'll take a first stab at that. The primary one there's some piece of volume and there's some piece of higher freight rates.

Speaker #1: So we expect this year to be a better volume environment for our China trade, as well as we're heading in, in the environment right now is at higher all in rates.

Joel M. Wine: We expect this year to be a better volume environment for our China trade, as well as we're heading in the environment right now to higher all-in rates. The answer is the 45% year-over-year is being driven by both the volume and the rate side.

Joel Wine: We expect this year to be a better volume environment for our China trade, as well as we're heading in the environment right now to higher all-in rates. The answer is the 45% year-over-year is being driven by both the volume and the rate side.

Speaker #2: So I mean, clearly rates are higher now than they were last year's Q3. And then then on the volume side, both Q2 and Q3 last year were highly unusual, as we've talked about.

Speaker #1: So the answer is the 45% year over year is being driven by both those both the volume and the rate side.

Speaker #7: Thank you. That's helpful. And you talk about Southeast Asia cargo is now 20 to 25% of China service volumes. If possible, could you discuss qualitatively how it's different versus China origins, cargo in terms of the profitabilities and pricing structures and seasonalities and, and the customer concentration, please?

Tomo Sano: Thank you. That's helpful. You talk about Southeast Asia cargo is now 20% to 25% of China service volumes. If possible, could you discuss qualitatively how it's different versus China origins cargo in terms of the profitabilities, pricing structures, seasonalities, and the customer concentration, please?

Tomo Sano: Thank you. That's helpful. You talk about Southeast Asia cargo is now 20% to 25% of China service volumes. If possible, could you discuss qualitatively how it's different versus China origins cargo in terms of the profitabilities, pricing structures, seasonalities, and the customer concentration, please?

Speaker #2: So the tariff impact in April and May was extreme last year. But then there was actually a bit of a mini surge and a rush to move cargo in June and early July.

Speaker #2: And then later in August and September, it was a muted peak season that we talked about. So you had you had less volume really frankly moving through the third quarter than you normally would have in the third quarter.

Speaker #2: So we expect this year to be a better volume environment for our China trade, as well as we're heading in, in the environment right now is a higher all-in rate.

Speaker #1: Sure. Yeah. I will I will endeavor to do that. It's a multifaceted question. So let me let me let me try to break that down.

Matt J. Cox: Sure. Yeah. I will endeavor to do that. It's a multifaceted question, so let me try to break that down. I think the first thing that we are very pleased about is just in the last couple of years, we went from essentially no organized Southeast Asia services to now, in North and South Vietnam and in Thailand, we are the fastest and most reliable carrier, including those that are ocean direct from those origin, with our regional transportation partners and our service.

Matt Cox: Sure. Yeah. I will endeavor to do that. It's a multifaceted question, so let me try to break that down. I think the first thing that we are very pleased about is just in the last couple of years, we went from essentially no organized Southeast Asia services to now, in North and South Vietnam and in Thailand, we are the fastest and most reliable carrier, including those that are ocean direct from those origin, with our regional transportation partners and our service.

Speaker #2: So the answer is the 45% year-over-year is being driven by both those both the volume and the rate side.

Speaker #1: So I, I think the, the first thing that we are very pleased about is from in just in the last couple of years, we went from essentially no organized Southeast Asia services to now in North and South Vietnam and, and in Thailand, we are the fastest and most reliable carrier, including those that are ocean direct from those origin.

Speaker #4: Thank you. That's helpful. And you talk about Southeast Asia cargo is now 20 to 25% of China service volumes. If possible, could you discuss qualitatively how it's different versus China origins, cargo in terms of the profitabilities and pricing structures and seasonalities and, and the customer concentration, please?

Speaker #1: With our regional transportation partners and our service. So the good news is out of all of those origins, we've satisfied our strategy, which is we want to participate in markets where we are the fastest and most reliable.

Matt J. Cox: The good news is out of all of those origins, we've satisfied our strategy, which is we want to participate in markets where we are the fastest and most reliable, where we can offer a competitive product such that we will grab the top 5% or some small percent of the market that really needs to get their cargo there on time, whether it's a late order production problem, whether it's coming out of air freight, and that absolutely needs to be at its destination where it matters. We do achieve a premium relative to the market, and significant premium relative to the market from those origins. As to the element of the question about our relative contribution, freight rates are similar but slightly lower all-in rates for us than our China origin direct cargo.

Matt Cox: The good news is out of all of those origins, we've satisfied our strategy, which is we want to participate in markets where we are the fastest and most reliable, where we can offer a competitive product such that we will grab the top 5% or some small percent of the market that really needs to get their cargo there on time, whether it's a late order production problem, whether it's coming out of air freight, and that absolutely needs to be at its destination where it matters. We do achieve a premium relative to the market, and significant premium relative to the market from those origins. As to the element of the question about our relative contribution, freight rates are similar but slightly lower all-in rates for us than our China origin direct cargo.

Speaker #2: Sure. Yeah. I will I will endeavor to do that. It's a multifaceted question. So let me let me let me try to break that down.

Speaker #1: Where we can offer a competitive product such that we will grab the top 5%, or some small percent of the market, that really needs to get their cargo there on time—whether it's a late order or a production problem, whether it's coming out of air freight—and that absolutely needs to be at its destination.

Speaker #2: So I, I think the, the first thing that we are very pleased about is from just in just in the last couple of years, we went from essentially no organized Southeast Asia services to now in North and South Vietnam and, and in Thailand, we are the fastest and most reliable carrier, including those that are ocean direct from those origin.

Speaker #1: Where it matters. And there's we, we do achieve a premium relative to the market. And significant premium relative to the market from those origins.

Speaker #2: With our regional transportation partners and our service. So the good news is out of all of those origins, we've satisfied our strategy, which is we want to participate in markets where we are the fastest and most reliable.

Speaker #1: But as to the element of the question about our relative contribution, freight rates are similar but slightly lower, all-in rates for us than our China origin direct cargo.

Speaker #2: Where we can offer a competitive product such that we will grab the top 5% or some small percent of the market that really needs to get their cargo there on time, whether it's a late order or production problem, whether it's coming out of air freight, and that absolutely needs to be at its destination.

Speaker #1: Our operating costs to carry that are a little bit higher because we're positioning equipment into that region, and we're carrying it out. So, there's a connecting carrier agreement payout.

Matt J. Cox: Our operating costs to carry that are a little bit higher because we're positioning equipment into that region, and we're carrying it out, so there's a connecting carrier agreement payout. I would say those numbers are very small and manageable relative to the size of our freight rates, and we are highly satisfied with the ending yield that drops to the bottom line associated with the Southeast Asia cargo, acknowledging that it's slightly lower than a China direct. We've been able to, we think, diversify. We've established our market presence. As to your question about the types of cargo, many of the customers that are using us in Vietnam and in Thailand are the same customers that trust us with cargo out of China and for the beneficial.

Matt Cox: Our operating costs to carry that are a little bit higher because we're positioning equipment into that region, and we're carrying it out, so there's a connecting carrier agreement payout. I would say those numbers are very small and manageable relative to the size of our freight rates, and we are highly satisfied with the ending yield that drops to the bottom line associated with the Southeast Asia cargo, acknowledging that it's slightly lower than a China direct. We've been able to, we think, diversify. We've established our market presence. As to your question about the types of cargo, many of the customers that are using us in Vietnam and in Thailand are the same customers that trust us with cargo out of China and for the beneficial.

Speaker #1: I would say those numbers are very small and manageable relative to the size of our freight rates, and we are highly satisfied with the ending yield that drops to the bottom line associated with the Southeast Asia cargo, acknowledging that it's slightly lower than a China direct.

Speaker #2: Where it matters. And there's we, we do achieve a premium relative to the market. And significant premium relative to the market from those origins.

Speaker #2: But as to the element of the question, about our relative contribution freight rates are similar, but slightly lower. All-in rates for us than our China origin direct cargo.

Speaker #1: But we've been able to we think diversify we've established our market presence. As to your question about the types of cargo, many of the customers that are using us in Vietnam and in Thailand are the same customers that trust us with cargo out of China and for the beneficial cargo owners are the same customers that are using us that have multiple facilities in different countries.

Speaker #2: Our operating cost to carry that are a little bit higher because we're positioning equipment into that region. And we're, we're carrying it out. So there, there's a connecting carrier agreement payout.

Matt J. Cox: Our cargo owners are the same customers that are using us that have multiple facilities in different countries, our value proposition is already known and trusted by them. Maybe I've over answered your question or not exactly right, that's some of the color of the comparisons between our China origin cargo and our Southeast Asia cargo.

Matt Cox: Our cargo owners are the same customers that are using us that have multiple facilities in different countries, our value proposition is already known and trusted by them. Maybe I've over answered your question or not exactly right, that's some of the color of the comparisons between our China origin cargo and our Southeast Asia cargo.

Speaker #2: I would say those numbers are very small and manageable. Relative to the size of our freight rates, and we are highly satisfied with the ending yield that drops to the bottom line associated with the Southeast Asia cargo acknowledging that it's slightly lower than a China direct.

Speaker #1: So our value proposition is already known and trusted by them. So maybe I’ve over-answered your question or not answered it exactly right, but that’s some of the color on the comparisons between our China origin cargo and our Southeast Asia cargo.

Speaker #2: But we've been able to we think diversify we've established our market presence. As to your question about the types of cargo, many of the customers that are using us in Vietnam and in Thailand are the same customers that trust us with cargo out of China and for the beneficial cargo owners are the same customers that are using us that have multiple facilities in different countries.

Speaker #7: Thank you very much. I appreciate it. Congrats again.

Tomo Sano: Thank you very much. I appreciate it. Congrats again.

Tomo Sano: Thank you very much. I appreciate it. Congrats again.

Speaker #1: Thanks, Tomo.

Matt J. Cox: Thanks, Tomo.

Matt Cox: Thanks, Tomo.

Speaker #5: Thanks, Tomo.

Joel M. Wine: Thanks, Tomo.

Joel Wine: Thanks, Tomo.

Speaker #6: Thank you. As a reminder, if you do have any question at this time, please press star 11 on your telephone. Our next question is a follow-up from the line of Jacob Flax from Wolf Research.

Operator: Thank you. As a reminder, if you do have a question at this time, please press * one one on your telephone. Our next question is a follow-up from the line of Jacob Lacks from Wolfe Research. Your question please.

Operator: Thank you. As a reminder, if you do have a question at this time, please press * one one on your telephone. Our next question is a follow-up from the line of Jacob Lacks from Wolfe Research. Your question please.

Speaker #6: Your question, please.

Speaker #8: Hey, guys. One, one more for me. How, how do you view the cost structure of the new vessels compared to the current CLX vessels that will be shifting out?

Jacob Lacks: Hey, guys. One more for me. How do you view the cost structure of the new vessels compared to the current CLX vessels that'll be shifting out? Then should the improved profitability on these be realized immediately following delivery, or will there be a bit of a lag for any reason? Thanks.

Jacob Lacks: Hey, guys. One more for me. How do you view the cost structure of the new vessels compared to the current CLX vessels that'll be shifting out? Then should the improved profitability on these be realized immediately following delivery, or will there be a bit of a lag for any reason? Thanks.

Speaker #8: And then, should the improved profitability on these be realized immediately following delivery, or will there be a bit of a lag for any reason?

Speaker #2: So our value proposition is already known and trusted by them. So maybe I've over-answered your question or not exactly right, but that's some of the color of the comparisons between our China origin cargo and our Southeast Asia cargo.

Speaker #8: Thanks.

Joel M. Wine: Jake, the cost structure is very similar. They're larger, but the daily operating cost and the fuel burn, importantly, are very similar to the vessels that we have today. There won't be a big change or meaningful change on the cost structure. We do have the bigger capacity. The answer then becomes on the additional utilization that we've talked about, that should be incrementally profitable to our bottom line, and we expect that. It depends on exactly what month when each of the ships are deployed. We expect them to be full, all of them, in Q2 and Q3. All the incremental capacity may not be used in Q1 and Q4.

Joel Wine: Jake, the cost structure is very similar. They're larger, but the daily operating cost and the fuel burn, importantly, are very similar to the vessels that we have today. There won't be a big change or meaningful change on the cost structure. We do have the bigger capacity. The answer then becomes on the additional utilization that we've talked about, that should be incrementally profitable to our bottom line, and we expect that. It depends on exactly what month when each of the ships are deployed. We expect them to be full, all of them, in Q2 and Q3. All the incremental capacity may not be used in Q1 and Q4.

Speaker #5: Jake, so the cost structure is very similar. They're larger, but the daily operating cost—and the fuel burn, importantly—are very similar to the vessels that we have today.

Speaker #4: Thank you very much. I appreciate it. Congrats again.

Speaker #2: Thanks, Tomo.

Speaker #5: Thanks, Tomo.

Speaker #5: So there won't be a big change, or meaningful change, on the cost structure. But we do have the bigger capacity. So the answer then becomes, you know, on the additional utilization that we've talked about, that should be incrementally profitable to our bottom line.

Speaker #6: Thank you. As a reminder, if you do have any question at this time, please press star 11 on your telephone. Our next question is a follow-up from the line of Jacob Lacks from Wolf Research.

Speaker #6: Your question, please.

Speaker #7: Hey, guys. One, one more for me. How, how do you view the cost structure of the new vessels compared to the current CLX vessels that will be shifting out?

Speaker #5: And we expect that it dep it depends on exactly what month, you know, when each when each of the ships are deployed. But we expect them to be full, all of them, in Q2 and Q3.

Speaker #7: And then should the improved profitability on these be realized immediately following delivery or, or will there be like a, a bit of a lag for any reason?

Speaker #5: They may not—all the incremental capacity may not be used in Q1 and Q4. But generally, we expect these vessels to be near— all the additional capacity to be used and to be very profitable for us, and flowing through to the bottom line because of the comment I made about operating costs being similar.

Speaker #7: Thanks.

Speaker #5: Jake, so the cost structure is very similar. They're larger, but the oper the daily operating cost and the fuel burn importantly are very similar to the vessels that we have today.

Joel M. Wine: Generally, we expect these vessels to be near all the additional capacity to be used and be very profitable for us and flowing through the bottom line because of the comment I made about operating costs being similar. That's generally how we expect it to improve our bottom line as each vessel is phased in.

Joel Wine: Generally, we expect these vessels to be near all the additional capacity to be used and be very profitable for us and flowing through the bottom line because of the comment I made about operating costs being similar. That's generally how we expect it to improve our bottom line as each vessel is phased in.

Speaker #5: So there won't be a big change or, or meaningful change on the cost structure. But we do have the bigger capacity. So the answer then becomes you know, on the additional utilization that we've talked about, that should be incrementally profitable to our bottom line.

Speaker #5: So, that's generally how we expect it to improve our bottom line as each vessel is phased in.

Matt J. Cox: Great. Thank you.

Jacob Lacks: Great. Thank you.

Speaker #8: Great. Thank you.

Speaker #5: Okay. Thanks, Jake.

Joel M. Wine: Okay. Thanks, Jake.

Joel Wine: Okay. Thanks, Jake.

Speaker #6: Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Matt Cox, CEO, for any further remarks.

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

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

Speaker #5: And we expect that it dep it depends on exactly what month, you know, when each when each of the ships are deployed. But we expect them to be full, all of them, in Q2 and Q3.

Speaker #1: Okay. Hey, thanks to everybody listening in. We look forward to catching up with you.

Matt J. Cox: Okay. Hey, thanks for everybody listening in. We look forward to catching up with everyone on the Q3 call. Thank you.

Matt Cox: Okay. Hey, thanks for everybody listening in. We look forward to catching up with everyone on the Q3 call. Thank you.

Speaker #5: They may not all the incremental capacity may not be used in Q1 and Q4. But, but generally we expect these vessels to be near all the additional capacity to be used and be very profitable for us and, and flowing through the bottom line because of the, the comment I made about operating costs being similar.

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

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

Speaker #5: So that's, that's generally how we expect it to, to improve our bottom line as each as each vessels phased in.

Speaker #7: Great. Thank you.

Speaker #5: Okay. Thanks, Jake.

Speaker #6: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Matt Cox, CEO, for any further remarks.

Speaker #2: Okay. Hey, thanks for everybody listening in. We look forward to catching up with everyone on the Q3 call. Thank you.