Matson(MATX) - 2024 Q2 - Quarterly Results

Executive Summary & Q2 2024 Highlights Q2 2024 Financial Performance Matson's Q2 2024 showed strong financial performance with significant year-over-year growth in net income, EPS, operating income, and EBITDA, primarily driven by ocean transportation and logistics segments | Metric | 2Q24 (million USD) | 2Q23 (million USD) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | EPS | $3.31 | $2.26 | +46.5% | | Net Income | $113.2 | $80.8 | +39.9% | | Consolidated Operating Income | $124.6 | $96.7 | +28.8% | | EBITDA | $171.5 | $140.5 | +22.1% | | Consolidated Revenue | $847.4 | $773.4 | +9.6% | - The company repurchased approximately 0.6 million shares in Q2 2024[1] - The company raised its full-year 2024 consolidated operating income outlook[1] CEO Commentary & Business Outlook CEO Matt Cox noted China service freight rate increases drove operating income growth, with high rates expected through peak seasons, alongside mixed domestic volumes and strong logistics performance - Significant year-over-year increases in China service freight rates were the primary driver for consolidated operating income growth[2] - US economic and consumer demand, coupled with tightening supply chains, led to higher trans-Pacific freight rates[2] - Freight rates are expected to remain elevated in the near term, with a long-term demand for China service driven by air-to-ocean conversion and continued e-commerce growth[2] - Domestic volumes saw an increase in Alaska due to additional sailings, while Hawaii and Guam volumes decreased year-over-year[2] - Logistics operating income increased year-over-year, benefiting from strong supply chain management performance[2] - Ocean transportation operating income for Q3 and Q4 is expected to be significantly and moderately higher, respectively, than the prior-year periods[2] - Logistics operating income for Q3 and Q4 is expected to be flat compared to the prior-year periods[2] Second Quarter 2024 Discussion and Outlook for 2024 Ocean Transportation Segment Ocean transportation in Q2 2024 showed mixed performance, with strong China service growth in rates and volumes, varied domestic volumes, and an outlook for sustained high China rates and cautious optimism for domestic routes - Hawaii service container volume decreased by 3.6% year-over-year in Q2 2024, primarily due to overall demand decline and fewer Maui visitors[3] - China service freight rates significantly increased in Q2 2024, with container volume up 3.0% year-over-year, driven by US economic and consumer demand and tightening supply chains[4] - Guam container volume decreased by 6.1% year-over-year in Q2 2024, mainly due to fewer sailings, though the economy is expected to continue improving[5] - Alaska container volume increased by 4.9% year-over-year in Q2 2024, primarily due to two additional northbound sailings, with the economy expected to continue growing[5] - The SSAT joint venture contributed $1.2 million, an increase of $2.6 million from Q2 2023, primarily due to higher lift volumes[6] - Ocean transportation operating income for Q3 2024 is projected to be significantly higher than $118.2 million in the prior-year period, and moderately higher than $66.4 million for Q4 2024[6] Hawaii Service - Hawaii service container volume decreased by 3.6% year-over-year in Q2 2024, primarily due to overall demand decline and fewer Maui visitors[3] - 2024 volumes are expected to be slightly below 2023 levels, mainly impacted by population growth challenges, inflation, and reduced disposable income from higher interest rates[3] China Service - China service freight rates significantly increased in Q2 2024, with container volume up 3.0% year-over-year[4] - Freight rate increases were primarily driven by US economic and consumer demand and tightening supply chains[4] - China service freight rates are expected to remain elevated during the traditional peak seasons of Q3 and Q4, but the post-peak season rate trajectory remains uncertain[4] - Long-term demand for China service is expected to be driven by air-to-ocean conversion and continued e-commerce growth[4] Guam Service - Guam container volume decreased by 6.1% year-over-year in Q2 2024, primarily due to fewer sailings[5] - The Guam economy is expected to continue improving, benefiting from low unemployment rates[5] - 2024 volumes are expected to be near prior-year levels[5] Alaska Service - Alaska container volume increased by 4.9% year-over-year in Q2 2024, primarily due to two additional northbound sailings[5] - The Alaska economy is expected to continue growing, supported by low unemployment, job growth, and lower inflation[5] - 2024 volumes are expected to be near prior-year levels[5] SSAT Joint Venture - The SSAT joint venture contributed $1.2 million in Q2 2024, an increase of $2.6 million from Q2 2023, primarily due to higher lift volumes[6] - SSAT contributions for 2024 are expected to be slightly higher than 2023 levels, driven by anticipated increased lift volumes[6] Ocean Transportation Outlook - Ocean transportation operating income for Q3 2024 is expected to be significantly higher than $118.2 million in the prior-year period[6] - Ocean transportation operating income for Q4 2024 is expected to be moderately higher than $66.4 million in the prior-year period[6] Logistics Segment Logistics operating income grew year-over-year in Q2 2024, driven by strong supply chain management, with the company expecting flat operating income for the next two quarters | Metric | 2Q24 (million USD) | 2Q23 (million USD) | Y-o-Y Change (million USD) | | :--- | :--- | :--- | :--- | | Operating Income | $15.6 | $14.3 | +$1.3 | - Operating income growth was primarily attributed to strong supply chain management performance[7] Logistics Outlook - Logistics operating income for Q3 and Q4 2024 is expected to be flat compared to prior-year levels[7] Consolidated Operating Income Outlook The company projects consolidated operating income for Q3 2024 to be significantly higher and for Q4 2024 moderately higher than the prior-year periods - Consolidated operating income for Q3 2024 is expected to be significantly higher than $132.1 million in the prior-year period[7] - Consolidated operating income for Q4 2024 is expected to be moderately higher than $75.3 million in the prior-year period[7] Financial Projections The company provided full-year 2024 financial projections for depreciation, amortization, interest, other income, income tax rates, and detailed capital and vessel dry-docking expenditures | Metric | FY2024 Projection (million USD) | | :--- | :--- | | Depreciation & Amortization | Approx. $180 (incl. dry-docking amortization approx. $27) | | Interest Income | Approx. $45 (incl. federal tax refund interest $10.2) | | Interest Expense | Approx. $8 | | Other Income (Net) | Approx. $7 | | Effective Tax Rate | Approx. 22.0% | | Other Capital Expenditures | Approx. $110 - $120 | | New Vessel Construction Expenditures | Approx. $75 | | LNG Installation & Re-engining Expenditures | Approx. $85 - $95 | | Dry-docking Payments | Approx. $35 | Depreciation and Amortization - Full-year 2024 depreciation and amortization expense is projected to be approximately $180 million, including about $27 million for dry-docking amortization[7] Interest Income & Expense - Full-year 2024 interest income is projected to be approximately $45 million, including $10.2 million received on April 19, 2024, related to a 2021 federal tax refund[8] - Full-year 2024 interest expense is projected to be approximately $8 million[8] Other Income (Expense) - Full-year 2024 other income (expense) is projected to be approximately $7 million in income, primarily attributable to the amortization of net periodic benefit costs or gains related to the company's pension and post-retirement plans[8] Income Taxes - The effective tax rate for Q2 2024 was 20.9%[8] - The effective tax rate for full-year 2024 is projected to be approximately 22.0%[8] Capital and Vessel Dry-docking Expenditures | Expenditure Type | Q2 2024 Payments (million USD) | FY2024 Estimated Payments (million USD) | | :--- | :--- | :--- | | Capital Expenditures (excl. vessel construction) | $32.7 | Approx. $110 - $120 | | Capitalized Vessel Construction Expenditures | $37.1 | Approx. $75 | | LNG Installation & Re-engining Expenditures | N/A | Approx. $85 - $95 | | Dry-docking Payments | $12.1 | Approx. $35 | Results By Segment Ocean Transportation Ocean transportation achieved significant revenue and operating income growth in Q2 and the first six months of 2024, driven by higher China service freight rates, despite mixed domestic volumes, and a profitable SSAT joint venture - Ocean transportation revenue growth was primarily due to significantly higher China service freight rates, increased domestic freight rates, and higher volumes in China and Alaska, partially offset by lower Hawaii volumes[10] - Ocean transportation operating income growth was primarily due to significantly higher China service freight rates, partially offset by increased vessel operating costs (including fuel-related expenses) and higher selling, general, and administrative expenses[13] - The SSAT terminal joint venture's contribution shifted from a loss to a gain, primarily benefiting from increased lift volumes[13][16] Three Months Ended June 30, 2024 vs. 2023 | Metric (million USD) | 2024 | 2023 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $689.9 | $616.9 | $73.0 | 11.8% | | Operating Costs & Expenses | ($580.9) | ($534.5) | ($46.4) | 8.7% | | Operating Income | $109.0 | $82.4 | $26.6 | 32.3% | | Operating Income Margin | 15.8% | 13.4% | | | | Volume (FEU) | 2024 | 2023 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Hawaii Container | 35,100 | 36,400 | (1,300) | (3.6)% | | Hawaii Auto | 8,600 | 9,800 | (1,200) | (12.2)% | | Alaska Container | 21,500 | 20,500 | 1,000 | 4.9% | | China Container | 37,800 | 36,700 | 1,100 | 3.0% | | Guam Container | 4,600 | 4,900 | (300) | (6.1)% | | Other Container | 4,400 | 4,400 | — | —% | - The SSAT joint venture contributed $1.2 million, compared to a loss of $1.4 million in the prior-year period[13] Six Months Ended June 30, 2024 vs. 2023 | Metric (million USD) | 2024 | 2023 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,268.9 | $1,167.9 | $101.0 | 8.6% | | Operating Costs & Expenses | ($1,132.3) | ($1,057.7) | ($74.6) | 7.1% | | Operating Income | $136.6 | $110.2 | $26.4 | 24.0% | | Operating Income Margin | 10.8% | 9.4% | | | | Volume (FEU) | 2024 | 2023 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Hawaii Container | 69,700 | 71,600 | (1,900) | (2.7)% | | Hawaii Auto | 15,000 | 19,200 | (4,200) | (21.9)% | | Alaska Container | 40,300 | 40,300 | — | —% | | China Container | 66,700 | 66,800 | (100) | (0.1)% | | Guam Container | 9,500 | 9,800 | (300) | (3.1)% | | Other Container | 8,000 | 8,500 | (500) | (5.9)% | - The SSAT joint venture contributed $1.6 million, compared to a loss of $3.2 million in the prior-year period[16] Logistics Logistics revenue and operating income grew in Q2 2024, driven by strong supply chain management, but saw slight declines for the first six months due to reduced transportation brokerage contributions - Logistics revenue growth was primarily due to increased supply chain management revenue[16] - Logistics operating income growth was primarily due to increased supply chain management contributions[17] - Logistics revenue for the first six months decreased primarily due to reduced transportation brokerage revenue[17] - Logistics operating income for the first six months decreased primarily due to reduced transportation brokerage contributions, partially offset by increased supply chain management contributions[18] Three Months Ended June 30, 2024 vs. 2023 | Metric (million USD) | 2024 | 2023 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $157.5 | $156.5 | $1.0 | 0.6% | | Operating Costs & Expenses | ($141.9) | ($142.2) | $0.3 | (0.2)% | | Operating Income | $15.6 | $14.3 | $1.3 | 9.1% | | Operating Income Margin | 9.9% | 9.1% | | | Six Months Ended June 30, 2024 vs. 2023 | Metric (million USD) | 2024 | 2023 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $300.6 | $310.3 | ($9.7) | (3.1)% | | Operating Costs & Expenses | ($275.7) | ($285.1) | $9.4 | (3.3)% | | Operating Income | $24.9 | $25.2 | ($0.3) | (1.2)% | | Operating Income Margin | 8.3% | 8.1% | | | Liquidity, Cash Flows and Capital Allocation Liquidity, Cash Flows and Capital Allocation As of June 30, 2024, Matson reported increased cash, significant operating cash flow growth, receipt of federal tax refunds and interest, ongoing share repurchases and dividends, and reduced total debt | Metric | June 30, 2024 (million USD) | December 31, 2023 (million USD) | | :--- | :--- | :--- | | Cash & Cash Equivalents | $168.2 | $134.0 | | Capital Construction Fund | $613.9 | $599.4 | | Total Debt | $420.7 | $440.6 (estimated) | | Available Revolving Credit Facility | $644.2 | N/A | | Cash Flow Metric (Six Months) | 2024 (million USD) | 2023 (million USD) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $344.5 | $246.5 | | Capital Expenditures (incl. vessel construction) | $125.1 | $126.3 | - The company received a federal tax refund of $118.6 million and related interest of $10.2 million[19] - Approximately 0.6 million shares were repurchased in Q2 2024 at a total cost of $72.2 million[20] - Approximately 1.4 million shares remained under the share repurchase program at the end of Q2[20] - The Board of Directors declared a cash dividend of $0.34 per share[20] Additional Information Teleconference and Webcast Matson will host a teleconference and webcast on August 1, 2024, to discuss its Q2 results, with registration and replay information provided - The teleconference is scheduled for August 1, 2024, at 4:30 PM ET[21] - The conference will be webcast via the company's website, www.matson.com, and will include a slide presentation[21] About the Company Founded in 1882, Matson is a leading Pacific ocean transportation and logistics provider, offering critical freight services to Hawaii, Alaska, Guam, and Micronesia, operating China-Long Beach express service, and integrated logistics across North America and Asia - Matson is a leading provider of ocean transportation and logistics services, founded in 1882[22] - It provides ocean freight services to Hawaii, Alaska, Guam, and Micronesia[22] - The company operates a premium China-Long Beach express service and international export services from Alaska to Asia[22] - Matson Logistics offers asset-light logistics services including rail intermodal, highway brokerage, warehousing, freight consolidation, supply chain management, and Alaska freight forwarding[22] GAAP to Non-GAAP Reconciliation The company utilizes non-GAAP financial measures, such as EBITDA, to evaluate performance, support operational decisions, assist investors in understanding debt capacity and capital expenditures, and isolate specific period impacts - The company uses non-GAAP measures (e.g., EBITDA) to assess performance, aid operational decisions, help investors understand debt service capacity and capital expenditures[23] - EBITDA is defined as earnings before interest, taxes, depreciation, and amortization (including deferred dry-docking amortization)[23] Forward-Looking Statements This press release contains forward-looking statements regarding future performance, operating income, capital expenditures, market conditions, and economic environment, which involve risks and uncertainties that could cause actual results to differ materially, including macroeconomic changes, competition, fuel prices, regulations, and geopolitical events - Forward-looking statements cover expectations regarding future outlook, operating income, depreciation and amortization, interest income and expense, tax rates, capital expenditures, volumes, freight rates, and demand[24] - Risks and uncertainties include the repeal or modification of the Jones Act, changes in macroeconomic conditions, geopolitical developments, increased competition, fuel price volatility, regulatory changes, climate change risks, maritime accidents, labor disruptions, and cybersecurity attacks[25] Financial Statements Condensed Consolidated Statements of Income Matson's condensed consolidated statements of income for Q2 and the first six months of 2024 show year-over-year growth in total operating revenue and net income, primarily driven by strong ocean transportation performance | (million USD, except per share amounts) | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Ocean Transportation Revenue | $689.9 | $616.9 | $1,268.9 | $1,167.9 | | Logistics Revenue | $157.5 | $156.5 | $300.6 | $310.3 | | Total Operating Revenue | $847.4 | $773.4 | $1,569.5 | $1,478.2 | | Operating Costs | ($646.9) | ($604.7) | ($1,259.1) | ($1,202.2) | | SSAT Equity in Earnings (Losses) | $1.2 | ($1.4) | $1.6 | ($3.2) | | Selling, General & Administrative Expenses | ($77.1) | ($70.6) | ($150.5) | ($137.4) | | Total Costs & Expenses | ($722.8) | ($676.7) | ($1,408.0) | ($1,342.8) | | Operating Income | $124.6 | $96.7 | $161.5 | $135.4 | | Interest Income | $18.8 | $8.7 | $27.6 | $16.9 | | Interest Expense | ($2.1) | ($2.9) | ($4.3) | ($7.4) | | Other Income (Expense), Net | $1.8 | $1.8 | $3.6 | $3.6 | | Income Before Income Taxes | $143.1 | $104.3 | $188.4 | $148.5 | | Income Taxes | ($29.9) | ($23.5) | ($39.1) | ($33.7) | | Net Income | $113.2 | $80.8 | $149.3 | $114.8 | | Basic Earnings Per Share | $3.34 | $2.28 | $4.38 | $3.21 | | Diluted Earnings Per Share | $3.31 | $2.26 | $4.33 | $3.19 | | Weighted Average Shares Outstanding (Basic) | 33.9 | 35.5 | 34.1 | 35.8 | | Weighted Average Shares Outstanding (Diluted) | 34.2 | 35.7 | 34.5 | 36.0 | Condensed Consolidated Balance Sheets As of June 30, 2024, Matson's balance sheet shows increases in cash and capital construction funds, slight decreases in total assets and liabilities, and stable shareholders' equity | (million USD) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash & Cash Equivalents | $168.2 | $134.0 | | Other Current Assets | $378.0 | $468.3 | | Total Current Assets | $546.2 | $602.3 | | SSAT Investment | $86.4 | $85.5 | | Property & Equipment, Net | $2,151.2 | $2,089.9 | | Goodwill | $327.8 | $327.8 | | Intangible Assets, Net | $169.1 | $176.4 | | Capital Construction Fund | $613.9 | $599.4 | | Other Long-Term Assets | $379.3 | $413.3 | | Total Long-Term Assets | $3,727.7 | $3,692.3 | | Total Assets | $4,273.9 | $4,294.6 | | Liabilities & Stockholders' Equity | | | | Current Portion of Long-Term Debt | $39.7 | $39.7 | | Other Current Liabilities | $544.8 | $522.6 | | Total Current Liabilities | $584.5 | $562.3 | | Long-Term Debt (less deferred loan costs) | $370.0 | $389.3 | | Deferred Income Taxes | $679.9 | $669.3 | | Other Long-Term Liabilities | $241.0 | $273.0 | | Total Long-Term Liabilities | $1,290.9 | $1,331.6 | | Total Stockholders' Equity | $2,398.5 | $2,400.7 | | Total Liabilities & Stockholders' Equity | $4,273.9 | $4,294.6 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, Matson's operating cash flow significantly increased, investing cash outflows decreased, and financing cash outflows slightly rose, leading to a net increase in cash and equivalents at period-end | (million USD) | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $344.5 | $246.5 | | Net Cash Used in Investing Activities | ($131.1) | ($201.8) | | Net Cash Used in Financing Activities | ($179.1) | ($172.5) | | Net Increase (Decrease) in Cash, Cash Equivalents & Restricted Cash | $34.3 | ($127.8) | | Cash, Cash Equivalents & Restricted Cash at End of Period | $170.6 | $125.9 | - Operating cash flow increased primarily due to higher net income and changes in prepaid expenses and other assets[29] - Investing cash outflows decreased mainly due to lower capitalized vessel construction expenditures and reduced net deposits into the capital construction fund[29] - Financing cash outflows increased primarily due to higher share repurchases[29] EBITDA Reconciliation The company provided EBITDA reconciliation tables for Q2 and the first six months of 2024, showing significant year-over-year EBITDA growth, reflecting enhanced core business profitability | (million USD) | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income | $113.2 | $80.8 | $32.4 | | Less: Interest Income | ($18.8) | ($8.7) | ($10.1) | | Add: Interest Expense | $2.1 | $2.9 | ($0.8) | | Add: Income Taxes | $29.9 | $23.5 | $6.4 | | Add: Depreciation & Amortization | $38.2 | $35.8 | $2.4 | | Add: Dry-docking Amortization | $6.9 | $6.2 | $0.7 | | EBITDA | $171.5 | $140.5 | $31.0 | | (million USD) | Six Months 2024 | Six Months 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income | $149.3 | $114.8 | $34.5 | | Less: Interest Income | ($27.6) | ($16.9) | ($10.7) | | Add: Interest Expense | $4.3 | $7.4 | ($3.1) | | Add: Income Taxes | $39.1 | $33.7 | $5.4 | | Add: Depreciation & Amortization | $75.5 | $70.8 | $4.7 | | Add: Dry-docking Amortization | $13.7 | $12.4 | $1.3 | | EBITDA | $254.3 | $222.2 | $32.1 |