Welcome, and thank you for joining Rayonier's Fourth Quarter and Year-end 2022 Teleconference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I will turn the meeting over to Mr. Collin Mings, Vice President, Capital Markets and Strategic Planning.

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

Thanks, Colin. Good morning, everyone. First, I'll make some high-level comments before turning it over to Mark McHugh, President and Chief Financial Officer, to review our consolidated financial results. Then we'll ask Doug Long, Executive Vice President and Chief Resource Officer, to comment on our U.S. and New Zealand timber results. And following the review of our timber segments, Mark will discuss our Real Estate results as well as our outlook for 2023. We are pleased with our overall financial performance in '22, particularly given the challenging macroeconomic backdrop that developed during the course of the year. For the full year, we generated GAAP earnings per share of $0.73, pro forma earnings per share of $0.62 and adjusted EBITDA of $314 million. Notably, our three timber segments generated total adjusted EBITDA of $275 million, representing the highest ever result for the company and roughly 8% above the previous record achieved in 2021. Despite deteriorating market conditions towards the end of 2022, in response to rising interest rates, growing macroeconomic uncertainty and a slowing U.S. housing market, we still achieved record full year adjusted EBITDA in both our Southern and Pacific Northwest Timber segments. We believe this underscores the relative strength of our timber markets and the ability of our team to navigate an ever-evolving operating environment. The strong full year results in our U.S. timber operations were partially offset by lower adjusted EBITDA versus the prior year in our New Zealand Timber segment, which contended with slower economic activity in China, as well as higher operating costs. Meanwhile, in our Real Estate segment, we achieved solid retention that were generally in line with our expectations entering the year, reflecting our continued focus on optimizing the value of our portfolio through the sale of rural and recreational properties, land entitled for…

Thanks, Dave. Let's start on Page 5 with our financial highlights. Sales for the fourth quarter totaled $245 million, while operating income was $44 million and net income attributable to Rayonier was $33 million or $0.22 per share. On a pro forma basis, net income was $16 million or $0.11 per share. Pro forma items in the fourth quarter included $16.6 million of income from large dispositions and a $0.4 million favorable adjustment to a timber write-off taken in the third quarter. Adjusted EBITDA was $68 million in the fourth quarter, up from $50 million in the prior year period. On the bottom of Page 5, we provide an overview of our capital resources and liquidity. Our cash available for distribution, or CAD, for the full year was $189 million versus $208 million in the prior year period. The decrease was primarily driven by lower adjusted EBITDA, higher cash taxes and higher capital expenditures, partially offset by lower cash interest paid. As previously discussed, cash taxes were elevated in 2022 due to the required timing of estimated tax payments for our New Zealand subsidiary, following the full utilization of its NOLs. A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on Page 8 of the financial supplement. During the fourth quarter, we closed on the previously announced 5-year $250 million incremental term loan through the farm credit system to partially fund the U.S. South acquisitions that Dave discussed. The company also entered into an interest rate swap agreement to fix $100 million of the term loan at an all-in effective cost of approximately 4.6% net of estimated patronage refunds. Additionally, in the fourth quarter, we replaced our prior aftermarket, or ATM, equity offering program with a new $300 million ATM program. During the quarter, we raised approximately $30 million through the new ATM program at an average price of $35.51 per share. We continue to view the ATM as a cost-effective tool to opportunistically raise equity capital and fund capital allocation priorities. In sum, we closed the fourth quarter with $114 million of cash and $1.5 billion of debt. At year-end, our weighted average cost of debt was approximately 3% and the weighted average maturity on our debt portfolio was approximately 6 years with no significant debt maturities until 2026. Our net debt of approximately $1.4 billion represented 22% of our enterprise value based on our closing stock price at the end of the year. I'll now turn the call over to Doug to provide a more detailed review of our timber results.

Thanks, Mark. Good morning. Let's start on Page 9 with the Southern Timber segment. Adjusted EBITDA in the fourth quarter of $33 million was 1% below the prior year quarter, driven by lower harvest volumes, largely offset by higher net stumpage pricing, lower leased land report station costs and higher non-timber income. Volume decreased 11% versus the prior year quarter as macroeconomic [ph] headwinds led to softer demand in certain markets, particularly for pulpwood. Average sawlog stumpage pricing was $34 per ton, an 11% increase compared to the prior year period. The improved pricing reflected healthy demand from sawmills across most of our operating areas, despite a significant decline in lumber prices relative to the prior year period. Meanwhile, pulpwood net stumpage pricing decreased 1% to roughly $21 per ton versus prior year quarter, primarily due to weaker end market demand and an increase in available supply as a result of drier weather conditions. Overall, weighted average stumpage prices in the fourth quarter improved 7% versus the prior year quarter to nearly $26 per ton. Entering 2023, we have seen some decline in both sawtimber and pulpwood pricing compared to the fourth quarter as our customers are approaching the New Year cautiously, given the slowdown in residential construction activity and other macroeconomic challenges. Notwithstanding these near-term headwinds, we believe that the longer-term outlook for Southern timber prices remains favorable. Specifically, we expect that lower lumber pricing will lead to additional sawmill curtailment in British Columbia, which should allow the U.S. South to continue to capture a greater market share of North American lumber production. Importantly, we also anticipate that the Southern Timber markets with more favorable supply-demand dynamics and corresponding price elasticity will benefit disproportionately from this transition relative to the U.S. South as a whole. Moving to our Pacific…

Thanks, Doug. As detailed on Page 12, our Real Estate segment delivered strong results in the fourth quarter. Real estate sales totaled $57 million on roughly 13,100 acres sold, which included a large disposition in Washington, consisting of roughly 11,000 acres sold to a conservation-oriented buyer for approximately $30 million. Excluding this transaction, fourth quarter sales totaled $27 million on roughly 2,100 acres sold at an average price of over $13,700 per acre. Real Estate segment adjusted EBITDA in the fourth quarter was $14 million. Drilling down, sales in the improved development category totaled $17 million, including $15 million of sales from our Wildlight development project north of Jacksonville, Florida; $700,000 for an industrial lease parcel in Kitsap County, Washington; and $400,000 from our Heartwood development project south of Savannah, Georgia. Sales in Wildlight included a $7.3 million sale of 87 acres to an industrial park developer and a $3 million sale of 16 acres for a senior housing community. On the residential side, we also sold a 74 lot residential pod to a national homebuilder for $4.3 million and 13 developed lots for $800,000 at an average base price of $65,000 per lot. Sales in our Heartwood development project consisted of 10 developed residential lots at an average base price of roughly $43,000 per lot. While Heartwood is still in its early stages, we are excited about the two new Hyundai [ph] facilities that have been announced in Bryan County, Georgia. With an estimated 9,500 jobs being created within a 30-minute drive from Heartwood, we believe the project is well situated to capture incremental demand from these facilities as well as the ancillary suppliers they are likely to attract. Overall, our Wildlight and Heartwood development projects continue to benefit from favorable migration and demographic trends, relatively affordable price points…

Thanks, Mark. As I reflect on 2022, I'm pleased with how our team was able to work together to deliver strong financial performance while contending with considerable challenges during the year. These challenges included significant inflationary pressures, which were exacerbated by the Russia-Ukraine war, a slowdown in U.S. housing activity driven by a dramatic increase in interest rates and a challenging export environment due to COVID-related disruptions in China. Nevertheless, our team was able to adapt quickly amid a very volatile business environment to deliver strong results throughout the year. While our products and markets are certainly not immune from the macroeconomic headwinds facing the broader economy, I believe that the dedication of our talented employees, the geographic diversity of our portfolio and the tensioned log markets in which we operate position us well to build long-term value for our shareholders across economic cycles. On the capital markets front, following a very active 2021, we entered 2022 with our balance sheet in an excellent position to deploy capital if the right growth opportunities emerged. To this end, we were pleased to close on seven transactions totaling 140,000 acres for $458 million during the year, which was primarily driven by the large acquisition in the U.S. South that we closed in the fourth quarter. While we are very excited about these acquisitions, our active portfolio management strategy also remained focused on addition through subtraction as we completed a large disposition of nearly 11,000 acres of less strategic holdings during the fourth quarter for over $30 million. In sum, over the past year, we improved our portfolio through acquisitions that will further bolster our competitive positioning, recycled less productive capital toward uses with a better risk return profile and opportunistically raised capital through our ATM program to fund growth opportunities. In addition…

Thank you. Thanks for the details, Dave, Mark. So first, just a couple of questions, if I could. One, so the more tensioned wood baskets in the South, which help you when things are good. Does that mean that things soften a bit more when things are weak and then you get more upside when they tighten again in the future kind of similar to how in the Pacific Northwest, there's a bit more volatility or not necessarily? What's your view on that?

Yes. Good morning. This is Doug. I'll take a swing at that one first. Yes, I think you've kind of categorized that correctly. For example, some of the highest-priced baskets that we saw the biggest year-over-year improvements in 2022, and while we're seeing some decline relative to those levels reached last year, the absolute pricing level in the major [ph] markets are still very favorable compared to the South as a whole and we're still seeing weighted average total pricing seeing 2021 [ph] levels. But I think that price elasticity, you point out, is exactly right that when there's tension we see prices really ramp up, but then we also can see them slowly come back down off this sometimes.

I think it's also worth noting, Mark, that the overall pricing is quite a bit higher in those tension markets. And so again, we saw very significant lifts in '21 and then again in 2022 in some of those more tensioned markets, whereas bottom quartile markets really saw a relatively flat pricing or very modest increase. And so again, while we have seen prices come off, those extraordinary highs that we saw in 2022, the absolute pricing level in those markets is still considerably higher.

Understood. And then second, in New Zealand, if I could kind of look back the last since 7, 8 years, EBITDA range from $55 million, I think, to $100 million plus. And your guidance for next year is obviously towards the low end of what we've seen. Can you talk about kind of what you think the medium to longer term right type of normalized level is? And how important is China to where - when we start seeing higher profitability there? And then any more color you can provide about the changes in the China property market initiatives and - et cetera, as to how that might factor into the timing of when the improvement might develop?

Yes, sure, Mark. This is Mark. I'll take that. I mean in terms of a normalized EBITDA there, again, we - to your point, I mean, we've seen EBITDA as low as the 30s back a number of years ago and sort of peaking probably in the '90s. And so New Zealand has always been more volatile, and that's really driven by the much more heavy reliance on export markets, just the cost structure there. A lot of the land is - is leased. You've got a much higher cost component in terms of delivering wood in the export market. So obviously, headline price volatility translates to greater margin volatility in New Zealand, certainly relative to, say, the U.S. South where we're - a lot of our sales are stumpage. And so it's a very high EBITDA margin on the stumpage sales. Yeah, I certainly don't think that New Zealand is going to retreat to levels that we saw in '13, '14, '15. But obviously, we've normalized kind of off of the levels that we saw 3, 4 years ago as well. I think - as it relates to China, obviously, China was very challenged in 2022, given the COVID containment measures, as well as some challenges in the property sector there. I'd say we're very optimistic that now that China is reopening. We've already seen some bounce back in export pricing there. As the supply chain in general has loosened up, we've seen some relaxation of export freight costs there. And obviously, carbon has been a bright spot in New Zealand as well. So a lot of moving pieces, I'd be reluctant to kind of characterize what we see as a normalized EBITDA. But certainly, we're hopefully trending back towards that type of level here as we move into 2023.

Mark, this is Dave. I'd add just a couple of things I'd add to that is keep in mind that a lot of the drivers are also around relative supply from other regions and you've had historically, a lot of wood going into China from Russia as well as Australia. Those two sources are essentially done. And what really overwhelmed the last number of years was flow of salvage wood from Europe, which took Europe's market share from essentially next to nothing to write behind New Zealand. And so I think where we have a lot of optimism is that is tapering off as they've essentially gone through that wood. And we feel like New Zealand is very well positioned going forward, and we expect to see less volatility certainly than we had over the last year in things like shipping costs. And so notwithstanding some of the headwinds in 2022, we remain pretty optimistic about how that's positioned. And it shows in our cash flow generation on a per acre basis is superior to all of our other regions.

Right. And I guess - and I recognize you're juggling lots of variables coming up with your various outlooks by regions. But I know it's kind of the range you had for New Zealand is actually maybe less wide than you had it for some of the U.S. regions, which I guess surprised me a little bit given the uncertainties of exactly when and how China plays out, as well as the historical greater volatility. And I don't know if that's communicating something specific? Or again, it's really just a function of your juggling lots of variables and coming up with your best assessments and that's the way it came out? Any color on that?

Yes. This is Doug again. I'll take the start this one. I think what that shows is we really are having some optimism around what's happening in China as they come out their COVID restrictions. Prior to the Lunar New Year, we saw demand really pick up. The headline numbers only averaged 55,000 cubes per day, which doesn't sound that amazing. But really, what we saw is a real pickup towards the right before the Lunar New Year. And as mentioned by, I think it was Mark, we've seen a trend where the long brokers have additional confidence now to hold inventories because they're forecasting higher demand and pricing after the holidays. So we're seeing some potential really green shoots in that area. And then with - I think you mentioned there that the property markets, and we've seen quite a bit - policymakers and to governments have pledged quite a bit of money to restart construction in the areas, and we're seeing that start to flow back through into demand also. So the People's Bank of China have recently launched a CNY 200 billion relending program and quite a few regional banks have also kind of matched that. And so kind of what we're hearing kind of on the ground is that expecting property sales to stabilize at lower levels, obviously, in these coming months, but then to rebound gradually from the second quarter onward. And that's really being help with that reopening of China.

Okay. I promise you, last one just on the same thing. So I guess what I'm trying to understand is if things play out as you are kind of seeing, is that particular - New Zealand, is that one region where maybe if we look into next year, you can really get an outsized increase relative to what one might expect in North America? Or is that not necessarily a right avenue to be thinking about at this point? Again, I apologize because that's looking quite far out.

I mean, it's certainly possible, Mark. Again, if you look at where New Zealand EBITDA has been last year and kind of what we're forecasting for 2023, it's generally kind of below the level that we've averaged for the last 5 years. And so '22 is obviously very challenging. We're expecting to see some recovery in 2023. And to your point, if that trajectory continues, we're obviously not providing 2024 guidance, but you could certainly see some outsized gains there.

I would just add one more thing that's kind of probably not appreciated a little more in the details. But due to some few mega issues that we've had being banned in New Zealand, the India market has not been an option for us for most of last year. And we're seeing discussions between India and the New Zealand official is basically around that. And so we think that, that market to India could also open up for us in this current year and the next year. So some more optimism around that.

I think another - lastly, Mark, I think another thing to think about is, historically, carbon credit sales have not been a very big factor in New Zealand, and that market has really evolved to a point where it's making meaningful contributions last year, and we expect that's going to play a role going forward as well.

Appreciate all the details. Thanks a lot.

Thank you. [Operator Instructions] Our next question comes from Paul Quinn with RBC Capital Markets. Your line is open.

Yeah. Thanks very much. Morning, guys. Just following up Dave on your comment on carbon markets. I saw that $21 million in sales in New Zealand in '22 versus kind of just over the $1 million that you did in '21. Maybe you could give us a background of what those - how you achieved that and what your expectation is for '23?

I'll start on that, and I'll let Doug provide a little bit more color. Keep in mind that historically, the carbon credit market there had been at a fairly low pricing level. And so we had sort of taken a very opportunistic approach. It was one of the reasons that we really didn't have much in the way of sales a couple of years ago, but that market really took off. And they conduct quarterly auctions by the government where they release carbon credits out onto the market, and we watch that pretty carefully. And that started giving us confidence that that the market was going to head up. And some of that's also predicated on prices that the government sets where they will release incremental carbon credits onto the market. And those prices tended to lead the market up. And so it gave us a lot of confidence to bring more volume forward last year of our credits. And Doug can provide a little bit more color as to as to where we stand on the credits as we enter this year, but it's definitely playing a bigger role in how we think about those - that region.

Yes. Thanks, Dave. I think as Dave mentioned, with those auctions, the government does set these cost containment reserve prices that basically at that point, if the price is reached, they'll release some more credits into the market. And so they often kind of do tend to set I wouldn't say a floor, but that's where targeting seems to be towards. And so we saw - the current one is around $80. And so we saw pricing last year in the $70 to $80 range. And as Dave said, it's markedly up from years before where it's been as low as single digits to probably more recently in the $30 to $40 range. So we saw a pretty drastic step-up and the opportunity to execute on those as we said, the opportunistic around that.

Those are all New Zealand dollars...

Sorry, all New Zealand dollars. Yes, thanks, Dave for correction on that. And as we go into this year, we're building new units as we go, growing them up, but we also come in with roughly around 1.6 million in the use that we had. We do have to surrender units as we harvest and then we also gain units as we grow timber. And so as we go through the year, we have the opportunity to sell some more and can be somewhere. I don't want to give out our exact - what our plans are to the market but exceeded at the end of the year over 2 million units type of thing and potentially more than that, just depends on how we see the pricing flow through year and how we side to execute.

Okay. And if I could compare that to what you're seeing in North American markets on the carbon side?

Yes, the North American markets, those are still voluntary. So basically, not - and they still have a lot of standardization, I guess, what I would say. So there are a few obviously [ph] firms that are basically focused on getting that standardization. But we've seen as everyone is seeing some issues around people talking about green washing and different things. And so what I think is happening now is that the buyers are starting to figure out what is a valuable credit to them and looking for those. And so we've really seen pricing move around in the single digits to $20, $30 a ton depending on how it's being produced. And so I think what we're still waiting on in that market is for more standardization and for the market to realize what the value is and to possibly get rid of some of these lower value credits that are out there right now. So we've got some projects in our back pockets, but we haven't actually registered those yet because we feel like there's still opportunity in that market yet before we do that.

Okay. And then just turning over overall, it looks like with your '23 guidance, you're expecting to slow down in North mark on the timberland side, that percentage of real estate of EBITDA - of your total EBITDA is kind of holding up a lot better than new timberlands business. Just wondering if that's a lag and you expect a slowdown in '24 as a result? Or maybe you could comment on that.

I think some of what you're seeing, Paul, is that we have these two big projects, one that's in the Jacksonville, Florida area, the other in Savannah, Georgia. And as they kind of pick up heads of steam, they have been running at more kind of regular levels. And so over the past number of years, we've seen that Wildlight project here in Florida growing larger and larger. And meanwhile, the project in Savannah is really just getting started, but we're very encouraged by the developments that we've seen there and we're leveraging a lot of the learnings that we've had here. And one of the things that we're particularly excited about, there's a large investment being made by Hyundai around electric vehicles and other aspects that's going to bring substantial employment into the area right adjacent to our project. And we think that's going to translate into further demand. And one of the things that we've done in both our Florida and our Georgia projects is we've got a really nice mix of product types from developed lots to residential pods, to build-for-sale, to multifamily. All of those things, I think, are helping to propel the momentum on those two projects. And so I think that those two projects, as they exit kind of their beginning stages, are going to supply a more stable stream of cash flow going forward. And then shifting to our more rural product mix. That's one that's always been relatively stable. And I think as we've seen pressures on land values. You've seen that translate in terms of the types of values you're getting. And we're really focused on - on selling lands where we can get a good premium. And so we've been happy with the progress that we've seen on the real estate side and don't see that kind of tailing off as we go down the road.

Okay. That's great. Thanks for that. And then just overall, I mean, one of your competitors mentioned that their expectation for 2023 timberland sales was more muted than what we saw in '22. Do you have the same expectation? Or what is your view of the future on M&A?

Yes, I wouldn't - I'm not sure I agree with that. And - but having said that, it's a hard thing to peg. And so you have - increasingly, you have situations where a lot of the - a lot of the TMO [ph] downstream investment clients are controlling exits of sales and forcing that to occur through separate accounts. And as that occurs, you really have to kind of get into the mindset of those ultimate owners of those properties, and they're all over the board. You've got some people that had a desire to sell during COVID that weren't able to because you really couldn't do much due diligence. And I think that contributed to some of the outsized volume that we saw last year, and I suspect there's still maybe some of that at play. I think another thing to keep in mind is as we've seen stronger pricing, we've seen NCREIF - the NCREIF Index is now over $2,000 an acre in the South and certainly on the higher-quality properties like the one that we completed in Q4, where you're seeing really outsized cash flow generation, those are generating large values. And I think that's going to have the potential of spurring additional volume on the market as the ultimate owners of those properties decide they want to cash in. The flip side of that, I think, is there's a greater recognition that you've got optionality around ESG and carbon-related values. And I think some - there will be some owners that want to stick around and see if they can see that translate into their properties. As we look across the three geographies that we're in, I think we see more potential for stronger activity in the U.S. South than we do in the Northwest and New Zealand. I think we've seen much more tepid volume of offerings in those two geographies, and we expect that to continue.

All right. That's all I had. Best of luck. Thanks.

Thank you. Our last question will come from Tousley Hyde with Raymond James. Your line is open.

Hey, guys. Thank you for taking my questions. And Mark and Doug, congratulations on the new roles.

Thank you.

The 2023 outlook for the saw and timber segment. I was hoping you could provide some additional colors to what your demand picture kind of looks like right now? And how much of an impact are you expecting that to have on log pricing? And also if there's been any changes to the assumptions for the recent [ph] acquisition?

Yes. There are always moving pieces in kind of terms of our geographic mix and other factors, and we're looking at it kind of year-over-year comparisons. And we have seen some decline for demand and particularly along the East Coast here of the U.S. And a lot of that - we're in a drought situation right now, so there's plentiful wood out there. But also, I think given the kind of macroeconomic uncertainty at the end of 2022, we have our customers, we're trying to manage inventories quite closely, and they were reluctant to secure log volume by locking and pricing beyond Q1. But as we progress through the month of January, and we see more positive news on lumber pricing and homebuilder sentiment and things like that, we start to see increased interest by mills to secure forward volume. So I think we're cautiously optimistic that things are starting to move around and turn around in the market and those things. But we did factor that in as we thought about our guidance. With respect to Project D, the new acquisitions that we talked about, we take the combined acquisitions with our overall harvest plans. And then there's always some changes we look to stay nimble with our operations based on how we see the current market conditions. And so we're working those in as we think about them and basically take into account how we think about the market and where we should harvest and where we should maybe pull back and allow markets to regain strength. But overall, I'd say our estimates for that acquisition are largely intact. I don't think anything has changed in terms of our 10 year outlook or certainly our harvest flows that we provided when we announced that acquisition.

Absolutely correct.

Okay. Thank you. That's pretty helpful. And just to follow-up on that. You noted that you're seeing increases in cost. I'm just trying to get a little bit of gauge as to how significant increases may be. Should we expect something similar to give your growth in 2022? Or do you think it's going to come in a little higher?

We've actually seen costs moderate over the last couple of quarters. So really, while there really more folks are on diesel now. Labor seems to have settled down and equipment is starting to work through the process - through the chain, supply chain, things like that. So I would say that we still see increased costs, but they're not near what they were kind of going from '21 into '22.

Okay, great. Thank you, guys.

We are showing no further questions at this time.

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

That does conclude today's conference. Thank you for participating. You may disconnect at this time.