Welcome, and thank you for joining Rayonier's Second Quarter 2025 Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I would like to turn the meeting over to Collin Mings, Vice President, Capital Markets and Strategic Planning.

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

Thanks, Collin. Good morning, everyone. First, I'll make some high-level comments before turning it over to April Tice, Senior Vice President and Chief Financial Officer, to review our consolidated financial results. then Doug Long, Executive Vice President and Chief Resource Officer, will comment on our timber results. And following the review of our timber segments, April will discuss our real estate results and our outlook for the balance of the year. Before turning to our second quarter results, I'd like to briefly touch on the sale of our New Zealand business. On June 30, we closed on the previously announced sale of our New Zealand joint venture interest to The Rohatyn Group, or TRG, for $710 million, marking a significant milestone in our asset disposition and capital structure realignment plan. I want to once again extend our appreciation to the team in New Zealand, for their diligence and professionalism throughout this process as well as for the outstanding job that they did in managing these assets for value creation over the 30-plus years of Rayonier's ownership in the region. We are pleased to transfer the stewardship of this business to TRG, a well-regarded manager of forestry assets in the region. With the closing of the New Zealand transaction, we have now completed dispositions totaling $1.45 billion, significantly exceeding our original $1 billion target. The success of this plan has allowed us to achieve our new leverage target in a manner that has been accretive to both CAD and NAV per share as well as better position Rayonier to create long-term value for our shareholders going forward. As previously discussed, we anticipate using at least 50% of the sale proceeds from the New Zealand transaction to reduce leverage and return capital to shareholders through share repurchases and a special dividend, details…

Thanks, Mark. As we discussed last quarter, the contribution from our New Zealand business prior to its sale on June 30 is reflected in discontinued operations on our consolidated financial statements for the second quarter as well as all prior periods. Moving to the financial highlights on Page 5 of the supplement. For the second quarter, sales totaled $107 million, while operating income was $15 million and net income attributable to Rayonier was $409 million or $2.63 per share. On a pro forma basis, net income was $10 million or $0.06 per share. Pro forma items in the quarter included a $404 million gain related to the sale of our New Zealand joint venture interest and a $600,000 loss from discontinued operations. Our adjusted EBITDA was $45 million in the second quarter, up from $33 million in the prior year period. Moving to our capital resources and liquidity at the bottom of Page 5. Our cash available for distribution, or CAD, for the first half of the year was $47 million versus $38 million in the prior year period. Lower adjusted EBITDA was more than offset by lower cash interest and capital expenditures. A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on Page 8 of the financial supplement. As Mark discussed in his opening comments, we believe share repurchases continue to represent a compelling use of capital at our current stock price. During the quarter, we repurchased 1.5 million shares at an average price of $23.71 per share or $35 million in total. As of June 30, we had $262 million remaining on our current share repurchase authorization and are positioned to continue opportunistic repurchases as we focus on creating long-term value for our shareholders. We closed the second quarter with $892 million of cash and roughly $1.1 billion of debt. At quarter end, our weighted average cost of debt was approximately 2.4%, and the weighted average maturity on our debt portfolio was approximately 4 years. Our net debt to enterprise value based on our closing stock price at the end of the quarter was 4% and our net debt is less than 1x the midpoint of our adjusted EBITDA guidance. On that note, we were pleased that our current credit rating from S&P was recently upgraded from BBB- to BBB following the closing of the New Zealand transaction. I'll now turn the call over to Doug to provide a more detailed review of our timber results.

Thanks, April. Let's start on Page 9 with our Southern Timber segment. Adjusted EBITDA in the second quarter of $28 million was 16% below the prior year quarter due to lower harvest volumes and net stumpage realizations. Total harvest volumes decreased 5% versus the prior year quarter due to softer demand from both sawmills and pulp mills, the availability of salvage volume on the market in our Atlantic region and the disposition of our Oklahoma acreage in the fourth quarter of 2024. Meanwhile, non-timber revenue was slightly higher compared to prior year period due to a higher contribution from our land-based solutions businesses. Average sawlog stumpage pricing was $27 per ton, a 9% decrease compared to the prior year period due to reduced demand from sawmills and an unfavorable shift in geographic mix. Pulpwood net stumpage pricing was 25% lower than the prior year quarter at roughly $13 per ton, driven by the continued impact of salvage volume on the market, softer demand from pulp mills due to maintenance outages and tariff uncertainty and an unfavorable shift in geographic mix. Overall, weighted average stumpage prices in the second quarter fell 14% versus the prior year quarter to roughly $19 per ton. As we have discussed on the last few calls, we have contended with significant salvage volume in our Atlantic markets in recent quarters, stemming from last year's hurricanes. The availability of salvage volume was a considerable headwind in the first half of 2025 constrained demand for green logs and [ lag on ] pricing. Encouragingly, as we start the third quarter, conditions are normalizing in the markets most impacted by salvage efforts, we're seeing mills increasingly shift their procurement efforts to more green logs. In [indiscernible] markets, soft end market demand, coupled with ample lumber inventories, led some sawmills…

Thanks, Doug. As detailed on Page 11, the contribution from our Real Estate segment during the second quarter was above our expectations due to continued strong demand and the accelerated timing of several transactions. Real estate revenue totaled $29 million on roughly 3,300 acres sold at an average price of $8,300 per acre. The strong average price per acre reflects both the proportion of development sales closed as well as the healthy premiums above timberland value that our team is realizing on rural land sales. Real Estate segment adjusted EBITDA in the second quarter was $19 million, well above our prior guidance range of $5 million to $10 million. Drilling down, sales in our improved development category totaled $8 million, with our Heartwood development project contributing $5 million and our Wildlight development project contributing $3 million. Sales in Heartwood consisted of a 23-acre commercial parcel for $5 million or $225,000 per acre. A multi-tenant retail project is expected to be developed on this parcel. Meanwhile, sales in Wildlight consisted of 2 commercial parcels totaling 3.1 acres that were sold at an average price above $1 million per acre, reflecting the strong demand for prime locations within this project. Moving forward, we remain encouraged by the strong interest in homebuilder activity at both projects. In Heartwood, we believe the opening of the new Richmond Hill high school this month located on the same campus as the previously opened elementary and middle schools will serve as an additional catalyst to attract families to Heartwood and its highly regarded school system. Despite continued softness in the national housing market, demand remains robust for our master planned communities in Florida and Georgia. Both Wildlight and Heartwood continue to benefit from strong positioning in their respective markets based on the project maturity, favorable amenities, a…

Thanks, April. As I reflect on the first half of the year, I'm proud of the perseverance displayed by our team in the face of continued economic uncertainty. Our team focused on controlling the controllables within our operations amid challenging timber market conditions while also advancing important strategic priorities aimed at building long-term value per share. Although housing starts and repair and remodel activity have underwhelmed thus far in 2025, we believe that a combination of factors will result in relatively improved timber market conditions during the second half of the year. As Doug discussed earlier, the headwinds created by Hurricane salvage operations within some of our larger U.S. South markets are subsiding and demand for green logs is normalizing. Further, the supply of lumber entering the U.S. market is poised to decline in response to higher duty rates being assessed on Canadian lumber imports. In turn, U.S. sawmills should gain market share, leading to better operating conditions for timberland owners. Further, the potential for new tariffs stemming from the Section 232 investigation on wood products could potentially serve as an additional catalyst for increased U.S. lumber production. These factors, coupled with the prospect of interest rate cuts later this year give us reasons for optimism regarding the near-term outlook for our timber business. Turning to Real Estate. Demand for our rural properties remains strong, and we continue to see favorable momentum at both our Wildlight and Heartwood development projects. As discussed earlier, we expect a significantly stronger contribution from the Real Estate segment during the second half of the year versus the first half, and we now expect that full year results will be at or modestly above the high end of our prior guidance range. On the land-based solutions front, our team continues to advance solar, carbon capture…

[Operator Instructions] Mike Roxland with Truist Securities.

Yes. Congrats on all the significant progress. First question is we saw timber prices in the Pacific Northwest, better than we expected. Are you starting to see some increasing tension due to the upcoming Canadian duties?

Yes, sure. This is Doug. I'll take that. Yes, as you noticed, we did see improved pricing during the quarter. I would say that in anticipation of that, we're seeing folks that are looking towards that, but it's been relatively steady as we go on. We've actually seen interestingly enough is that whitewood pricing also came up during that time. So there's anticipation, but I wouldn't say that that's been a significant increase yet, but we're hearing a lot of chatter about that going forward.

And Mike, keep in mind that some of that is a function of just the residual portfolio following the disposition of the properties in Clallam. The residual portfolio is just a better portfolio. So that's reflected in the pricing achieved in this most recent quarter.

Yes, I appreciate the color. That makes sense. What are you seeing currently just out of curiosity in terms of prices. Have you seen -- so in 2Q, if there was a residual from the portfolio and it's -- you're seeing trends as you outline them. Are you seeing anything more currently with respect to pricing being attention because the ADD was announced?

Yes. This is Doug, and I'll take that. I would say right now, it's pretty much still steady as she goes with the expectation that we'll see things. There still are ample log supplies out there right this minute. So I think folks are really waiting to see how this impacts things, but we have seen some mills that are increasing demand. So there is that opportunity out there, and we expect that will come forward as we see things. But I think it's just too early to really say that we've seen prices respond immediately. But expectations are definitely that as the Canadian lumber starts to slow down coming in with these extra duties that we will see that response. Typically in the past, we've seen is that there has been additional shipments of lumber from Canada pre increases in duties in the United States. So you don't normally see it just immediately respond at the announcement of the duties. There's usually a little bit of a lag time between when that happens and that product starts to clear out the supply channels.

Got it. I appreciate it. And one final question. Just Mark, now that you've completed your transformation that paid down as notable, what's next for the company? In recent calls, you've mentioned that you're better positioned for growth. So help us frame how you expect to accomplish that growth particularly given comments you've made around elevated timberland values. And really, is your -- is it more just you're going to run the business as it stands today and just use share repurchases to drive NAV accretion. Any color you can provide around growth and how you expect to drive that?

Yes. So maybe just kind of focusing on our philosophy around capital allocation more generally. It's always been to just be nimble and opportunistic really with a view towards building long-term value per share. You've seen over the past several years, we pivoted our priorities a number of times to take advantage of what we thought was the best opportunity in the market at that point in time. So we've grown our portfolio through acquisitions. We bought back stock, when we've seen a big disconnect between our stock price and NAV. And more recently here, we paid down some debt as we wanted to improve our balance sheet positioning. We don't go into any period with prescriptive capital allocation targets. We really try to play the hand we're dealt to create value for shareholders. Right now, we're certainly focused on share buybacks given the significant disconnect that we see between our share price and our view of NAV. But we're not afraid to pivot when it makes sense to do so. Of course, we've indicated that we intend to maintain a leverage target below 3x net debt to EBITDA. So some of our cash will invariably be earmarked for debt pay down. But that still leaves about $500 million or over $500 million that we have available to deploy opportunistically. So again, we're going to just continue to think about that in terms of how do we build long-term value per share. Timberland acquisitions are obviously challenging in this market environment relative to our cost of capital. But that could change -- that dynamic could change over time.

Our next caller is Buck Horne with Raymond James.

Congrats on the New Zealand sale and all the progress year-to-date. Great job. And I'm kind of curious about your thoughts on just the upcoming hurricane season as it relates to the U.S. South and you've been dealing with the salvage volume overhang for the past couple of quarters, but we've got another hurricane season where the forecast is for an above-average number of storms and 3 to 5 kind of major hurricanes projected. How do you look at the landscape in terms of if we did have a couple of major storms, is -- are the -- I mean it's a hard question to answer, but are the timber strands that are out there in the wood baskets more or less vulnerable to damages or salvage or some sort of salvage activity if we did have another couple of major storms hit the region.

Yes. As you say, that is a hard one to predict or forecast going forward to your point. What I would say is you're right, they are predicting potentially additional. But what we've seen so far is the setup is that they're not necessarily aimed at the Southeast United States right this minute, which is good news as we go forward. So it's been a little bit slow to start, and I'm going to knock on some wood if that continues and that they didn't form that formation. With respect to our own assets, we, for the last few years, we've been thinking about this quite a bit, we think about kind of adapting for climate change, things like that. So we've been doing less spinning within a certain distance from the coastlines basically, and I know that other folks are also starting to follow through with that also. So I think you're seeing forest owners starting to basically often what happens is recently then stands that really take a beating when a hurricane comes through. And so we're seeing folks start to think about those similarly as we go across. So I would say in some respects, over time, we're going to see that hardening off, but it really is impossible to tell kind of the duration of the impact of a hurricane and how it's going to impact an area and just what might happen. Hurricane Helene was definitely a unique one that we haven't seen before, it started in Florida and went all way up into North Carolina. [indiscernible] We don't see another one like that. But our own assets, like I said, we're adapting to things we're seeing changes in the climate and kind of what I'd call hardening off and making ourselves less susceptible to those things, and I've seen that elsewhere also.

Great. I appreciate the color there. And on the real estate side, looking ahead to the third quarter with the projections and the pipeline looks very robust. I mean is there any is there any particular group of buyers that is getting more active? Whether that's the rural or the conservation side? Or is there a noticeable uptick in terms of just how sustainable this level of demand for higher and better use real estate is going forward?

I'd say we've generally continue to see pretty strong demand across all the different categories of real estate sales. I recognize, as we discussed in the prepared remarks, real estate sales are invariably lumpy in nature. And we do have a pretty strong second half planned for. And that's really just driven by a number of relatively large transactions that we anticipate are going to close in the third quarter. So again, overall demand environment continues to be strong, but really the strong 3Q and H2, it's really driven by a handful of significant transactions.

Our next caller is Anthony Pettinari with Citi Research.

Mark, you touched on this in your earlier comments, but I'm just wondering if you could dig a little bit deeper on One Big Beautiful Bill impact, if any, to solar end market and kind of conversations you've had with partners and customers since the bill was passed.

Yes, I'll let Doug comment on that.

Sure. I'm happy to comment on that. For our solar development pipeline, we continue to be encouraged by the level of activity that we're seeing in new projects being identified and negotiated putting our option agreements across ESL footprint. So kind of despite that uncertainty from the One Big Beautiful Bill that you mentioned, we're still seeing our best activity and driving new projects forward toward development and securing new properties for post-tax incentive kind of went to development. And as we've seen and Mark mentioned, kind of industry reports show a broad range of expected impacts to the level of new utility scale, solar development over the next 5 to 10 years. But still most estimate that residual level of growth is going to be above the [ PRA ] levels. And so we currently have solar options covering about 40,000 acres, a little bit over that in the U.S. South. And we've seen a modest number of options expire, but we've also seen those be offset by new options that were put in place over the last quarter. So we feel good about where we're sitting right this minute. As we've mentioned before, we still think it's got a good growth rate. Our option pipeline remains strong. We've got more than 10 projects currently in negotiation or consideration with high-quality counterparties. So we have seen some move off, but we've also seen those been replaced in the last quarter.

Okay. That's very helpful. And then the 100% bonus depreciation, does that have any impact to your customers or sort of project time lines? And is there anything else from One Big Beautiful Bill that investors should keep in mind when we think about Rayonier?

I think we tried to cover kind of the key highlights around that in prepared remarks. And so those are what we really see as the key drivers that are going to affect us as we look forward. And again, it's mainly around our land-based solutions business and opportunities there.

Our next caller is Mark Weintraub with Seaport Research Partners.

Congrats on completing the asset disposition program. First, Mark, you mentioned the $500 million of cash for opportunistic actions. Does -- is a portion of that going to be used for distribution? I know you have some flexibility on how you can do that distribution. But does that include -- some of that would be part of that distribution? And if so, is there a minimum amount that would be cash in the distribution?

Yes. As it relates to the distribution, our guidance that we indicated at the time that we announced the New Zealand transaction. Our expectation is it's still that we'll have a $1, to $1.40 per share special distribution for this year that will be paid in some combination of cash and stock. So we haven't yet identified the specific amount of that or kind of what the breakdown would be between cash and stock, but we do anticipate announcing that later this year. I recognize that, that distribution is driven not just by the gain on the New Zealand transaction, but also the retaxable income from operations. And so we want to get a little bit further into the year and kind of see where we expect that to shake out before we declare that special.

Understood. And then presumably, like last time, you'd have some flexibility on how much of it is cash versus how much is a stock dividend? Is that...

That's right.

Okay. All right. So we can do the math. So then -- so obviously, the development business seems to be doing very well. I'm just curious, so 18 months ago, you had your Investor Day, a very thorough presentation on what you saw as potential there. Has that evolved at all? Or would you say that that's still sort of the blueprint that we can look back to see the likely trajectory from your perspective?

Yes, I'd say our expectations are largely still in line with what we laid out an Investor Day last year, certainly in terms of the net value per acre that we're looking to achieve within that business. Maybe just offer some comments more broadly on our development business. The overall housing environment has been pretty challenging. But we continue to see really strong momentum at both Wildlight and Heartwood, our 2 master planned communities. You recognize we had pretty meaningful commercial sales in both those projects this past quarter, which I think really underscores kind of how those projects have matured over time. Yes, as we discussed in the past, improved development sales are inherently going to be lumpy quarter-to-quarter and year-to-year. But I'd say we've been very pleased with the overall trajectory of both of those projects over the past few years. Our team has really put a lot of attention into place making and really trying to build a strong brand among homebuilders and we're seeing that activity within those projects ramp up. To put things in perspective, Wildlight had about 30 homes entering 2020. We're on pace to finish the year with over 750 project to date residential closings in Wildlight. And we expect that pace of residential closings are going to continue to ramp up over the next few years. We expect to get to upwards of 400 closings annually, which would put Wildlight up there among the top 50 MPCs in the country. So suffice it to say, we're still in the early innings on these projects. Overall, we've sold 10% of the acreage that we have entitled at Wildlight and less than 15% of the acreage at Heartwood. But again, we're really looking forward to a long runway for value creation here.

Okay. Super, and 2 real fast ones. Have you repurchased any stock since the end of the quarter since June 30? And second -- so you mentioned on -- in some cases, because there are still -- there are -- you can get the tax incentives on development spend, if you hurry it up, but it doesn't sound like you're seeing any acceleration from any of the situations where you're involved. And then just on CCS, you have one competitor who's talking about maybe they could see meaningful revenue starting 2029, -- sorry, 2029 or 2030. Do you have any time line of when that might be a meaningful revenue contributor for you guys?

Yes, maybe take the first question, and then I'll turn it over to Doug. We have bought back some additional stock post the end of the quarter. Not going to get into the details of that right now. We'll plan to just make those disclosures in line with our quarterly earnings release. But again, we continue to see a real opportunity with that disconnect between private market values and where the stock trades.

Yes. And I'll pick up first on, I believe your question kind around solar and development credit. And yes, we have seen some potential for a couple of our counterparties to speed up within the existing options we already had in conversions. Several of them anticipating the tariffs had bought ahead enough equipment basically for a year or more. And so we're seeing them talking about moving forward on that. So -- and in some cases, one of the options that dropped off was one they're saying we're going to put our attention on this other one and focus on that. So we are seeing some focus on that. I can't say that when they're going to go into place yet, but we have seen some people speeding up on that kind of option lease process. So that is something that's on people's minds for share in the solar. And on the carbon capture and storage, as we mentioned in our prepared comments, we're really pleased to have made the progress we have with almost nearly half of our 154,000 acres on our CCS lease. And those are now moving through different stages of the Class VI underground injection control permitting process. And that's for up to 53 wells right now. So it's an impressive number of wells that are currently in the permitting process. And we're really encouraged by continued momentum of work we have with several other parties on new projects. And one of the things that didn't necessarily come out of the OBBA, but has kind of come out from recent actions is the current regime has been supportive of CCS and really on improving things -- getting things processed more quickly. And so to the permitting technology action plan, the administration is aiming to see that…

Our next caller is Ketan Mamtora with BMO Capital Markets.

Maybe coming back to Southern Timber, excluding kind of the salvage activity that's been going on for the last couple of quarters, are you seeing sort of signs that sort of things are stabilizing and sort of demand is improving? I mean if you look from a housing standpoint, the recent data points haven't been great. So I'm just curious, what are you hearing from your customers in terms of their approach towards the back half as it relates to both sawlog and pulpwood?

Sure. This is Doug. I'll start with that. I'd say even in light of the tough conditions we've seen particularly from the salvage, if you look, our pine sawtimber average pricing was still up 3% quarter-over-quarter. So while we are still contending with really tough conditions, we did see improvement overall across the U.S. South in our operations and to see that pine sawtimber pricing coming up. So I think where we sit right now, we've seen -- it's very dependent on the customer and how they're thinking. We've recently seen mills that are procuring additional sawtimber and are looking to gear up, talking about additional shifts in the U.S. South in particular. And then we've seen customers are taking a wait and see. So it's -- there's just a lot of uncertainty still. I wish I could tell you the exact answer to that. But what's been positive is that we have seen customers returning from their harvesting operations, as Mark mentioned, kind of normalizing. We talked in our prepared comments. We had Florida customers who are up harvesting basically pulpwood salvage in Georgia. Primarily, most of what we're aware of, they've returned back to Florida, and they've been active in recent stumpage sales and really looking at increasing sawtimber production. And so we've seen pricing improve and our stumpage sales as we've sold things. So I think we're seeing the early hints of improvement there. It's a positive momentum as we go through that. But in the quarter, we still suffered from that, as we mentioned kind of last time, about a 20% price decline in that primary market of our Southeast Georgia area. But as we get outside of that, we've been pleased with what we've seen so far. And pricing was more than stable. It increased…

There are no further questions. I'll now turn the call back over to Collin Mings. You may go ahead, sir.

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

Thank you. This concludes today's conference call. You may go ahead and disconnect at this time.