Q4 2023 Matson Inc Earnings Call

Presentation

Operator

Good day, and thank you for standing by, and welcome to The Medicines First Quarter 2023 financial results conference call. (Operator Instructions)
Again, please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Justin Schaumburg, Director of Investor Relations. Please go ahead.

Thank you, Lisa. Joining me on the call today are Matt Cox, Chairman and Chief Executive Officer, and Joel Wine, Executive Vice President and Chief Financial Officer. Slides from this presentation are available for download at our website, www.Mattson.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 for future events.
We believe that our expectations and assumptions are reasonable. We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements in the press release, the presentation slides and this conference call.
These risk factors are described in our press release and presentation and are more fully detailed under the caption Risk Factors on pages 14 to 24 of our Form 10-K filed on February 24, 2023, and our subsequent filings with the SEC. Please also note that the date of this conference call is February 20, 2024, and any forward-looking statements that we make today are based on assumptions as of this date, and we undertake no obligation to update these forward-looking statements.
I will now turn the call over to Matt.

Okay. Thanks, Justin, and thanks to those on the call. Starting on Slide 3, Mattson's ocean transportation and logistics business segments performed well in the fourth quarter, capping off a solid year for both business segments. Matson had a solid operational and financial position. We are the leading expedited ocean freight provider in the transpacific, and we're well positioned for growth in our Jones Act and logistics markets.
Our balance sheet is strong with a low cost capital structure and low leverage. We're in a very good funding position on our new Aloha Class vessels with the program. Two-thirds funded at year end with approximately $600 million in our capital construction fund.
And lastly, we returned approximately $203 million to shareholders in 2023 in the form of share repurchases and dividends. For the fourth quarter within Ocean Transportation, our China service experienced solid freight demand was higher year-over-year. Volume was lower year-over-year rates, which when combined with higher operating costs across all trade lanes, resulted in a year-over-year decline in operating income. In logistics, operating income declined year-over-year, primarily due to a lower contribution from transportation brokerage.
I will now go through fourth-quarter performance of our trade lanes, SSAT in logistics.
So please turn to the next slide.
White container volume for the fourth quarter declined 1.9% year-over-year due to lower general demand volume in the fourth quarter of 2023 was 5.1% lower than volume achieved in the fourth quarter of 2019. Tourist arrivals in the fourth quarter were modestly lower year-over-year as tourism to Maui was impacted by wildfires.
For the full year 2023 container volume decreased 3% year-over-year, primarily due to lower general westbound demand and lower eastbound volume. For the full year 2024, we expect volume to be comparable to the level in 2023, reflecting modest economic growth in Hawaii and stable market share.
Please turn to slide 5. The Hawaii economy held up well in 2023 despite high interest rates, high inflation, a modest decline in population and headwinds to tourism from the Valley wildfires and the slow return of international visitors. According to EUR December economic report. So Hawaii's economy is predicted to grow modestly in 2024 underpinned by a low unemployment rate and easing inflation. Construction jobs are projected to increase due in large part from government related projects as well as initial rebuilding efforts in Valley near term growth in visitor arrivals is expected to be challenging due to reduced tourism to Maui as a result of the virus wildfires last year, sluggish recovery of international tourism.
Moving to our China service on slide 6.
Matson's volume in the fourth quarter of 2023 was 23.3% higher year-over-year, primarily due to higher demand for the China service, resulting in higher volumes for both the CLX and CLX-plus. We achieved average freight rates in the quarter that were lower than the year ago period. But well above those achieved in the fourth quarter of 2019.
For the full year 2023 container volume decreased 13.7% year-over-year, primarily due to the CCX. volume in the first nine months of 2022 recall that we discontinued the CCF service in the third-quarter of 2022.
Please turn to slide 7. Currently in the transpacific marketplace, we continue to see steady US consumer demand. As is typical in the transpacific trade lane, our CLX and CLX plus vessels experienced light volume coming out of the Christmas and New Year period, but near capacity as we approach lunar new year.
We expect that post Lunar New Year period to be more traditional factories closed for a couple of workforce slowly returning to work as we did in the prior year. We decided not to sail the CLX plus vessels from Shanghai for a few weeks because the cargo package could be accommodated with a weekly CLX departure.
We currently expect volume demand to gradually recover over a four to six week period as factories return to normal post holiday for a full year 2024. We expect similar demand for our CLX and CLX-plus services at 2023 and average freight rates to be modestly higher and above pre-pandemic freight rate levels.
To date, our China service has seen a very limited effect from the supply chain disruptions caused by the Panama Canal drought and the events in the Red Sea, depending on the duration and evolution of these situations, it's possible we could see further impact on our expedited ocean services. We know more customers are evaluating their shipping options in light of these events, but we're not aware of any material changes to our customers' cargo routing. Regardless of the uncertainty of these and other events, we're focused on maintaining the two fastest and most reliable ocean services in the transpacific.
Lastly, on February 18, we renamed the CLX plus service to the max Mattson Asia Express CLX plus was introduced in 2022 accommodate extraordinary demand for Mattson's expedited transpacific service during the pandemic has had industry leading performance for the last four years. We've rebranded the CLX plus to Max to reflect this highly differentiated service, including our recently added six ship that provides scheduled flexibility to ensure a weekly departure from China. Mats is the only liner service in the transpacific trade lane, providing customers with this unique service element.
Please turn to the next slide in Guam. Matson's container volume in the fourth quarter of 2023 increased 2% year-over-year. The increase was primarily due to higher general demand. Volume in the fourth quarter of 2023 was 4.2% higher than the level achieved in the fourth quarter of 2019. For the full year 2023 container volume decreased 4.7% due to lower general demand in the near term, we expect continued improvement in the Guam economy with low unemployment rates and a modest increase in tourism for 2024, we expect container volume to approximate the level achieved last year.
Please turn to the next slide in Alaska. Matson's container volume for the fourth quarter of 2023 decreased 0.6% year-over-year. The decrease was due to lower export seafood volume from ADEX, partially offset by higher northbound volume due to an additional sailing and higher southbound volume due to higher domestic seafood volume compared to the fourth quarter of 2019.
Volume of the quarter was 20.3% higher for the full year 2024. We expect Alaska volume to approximate the level achieved last year.
Please turn to slide 10. The Alaska economy continues to show good economic growth and improvement in key economic indicators. Despite flattish growth in population in 2023, states saw widespread job growth across almost every industry and the Alaska Department of Labor projects continued job growth in 2024.
In the near term, we expect the Alaska economy to grow, supported by low and unemployment job growth and lower levels of inflation. The state's economy is also expected to benefit in the near and medium term from increased energy related exploration and production activity as well as significant infrastructure investment funded by the federal infrastructure bill by the inflation reduction.
Please turn to slide 11. Our terminal joint venture SSAT increased $3.1 million year-over-year to $4.1 million. The higher contribution was primarily due to higher lift revenue, partially offset by lower demurrage revenue. For the full year 2023, SSAT contributed $2.2 million, reflecting a year-over-year decrease of $80.9 million, primarily due to lower demurrage revenue in 2024. We expect contributions to be higher from increased lives volume.
Turning now to Logistics on slide 12. Operating income in the fourth quarter came in at $8.9 million for approximately $3.9 million lower than the results in the year-ago period due to the decrease was primarily due to lower contribution from transportation growth.
For the full year 2023 operating income was $48 million, reflecting a year-over-year decrease of $24.4 million. The decrease was due to a lower contribution from transportation, brokerage and supply chain management. For 2024, we expect operating income to be lower than the level achieved in 2023.
For transportation brokerage, we expect challenging business conditions at least through the first half of 2024. We expect demand for our freight forwarding, supply chain management and warehousing business lines to be comparable to 2023.
And I will now turn the call over to Joel for a review of our financial performance.
Job.
Okay.

Thanks, Matt.
Please turn to slide 13 for a review of our fourth quarter and full year 2023 results. For the fourth quarter, consolidated operating income decreased $17.3 million year-over-year to $75.3 million, with lower contributions from ocean transportation and logistics of $13.4 million and $3.9 million respectively. The decrease in Ocean Transportation operating income in the fourth quarter was primarily due to lower freight rates in China and higher operating costs and expenses, including fuel related expenses, partially offset by higher volume in China and higher contributions from Alaska and Hawaii.
As Matt just noted, the decrease in Logistics' operating income was primarily due to a lower contribution from transportation brokerage. We had interest income of $9.8 million in the quarter due to higher investment rates on our cash and cash equivalents and deposits in the CCF as compared to the prior year period.
Interest expense in the quarter decreased $1.3 million year-over-year due to the decline in outstanding debt in the past year. The effective tax rate in the quarter was 26% compared to 20.4% in the year ago period. For the full year, consolidated operating income decreased $1.01 billion year-over-year to $342.8 million, with lower contributions from ocean transportation and logistics of $986.4 million and $24.4 million, respectively.
The decrease in Ocean Transportation operating income for the year was primarily due to lower freight rates and volume in China and a lower contribution from SSAT, partially offset by lower operating costs and expenses, including fuel related expenses, primarily related to the discontinuation of the CCX service and lower fuel costs and the timing of fuel related surcharge collections. The decrease in Logistics operating income was primarily due to lower contributions from transportation, brokerage and supply chain management.
Please turn to the next slide. This slide shows how we allocated our trailing 12 months of cash flow generation. For the LTM period, we generated cash flow from operations of approximately $510.5 million from which we used $76.9 million to retire debt, $195.5 million on maintenance and other CapEx, $52.9 million on new vessel CapEx, including capitalized interest and owners' items, $78.6 million in cash deposits and interest income and a Tcf net of withdrawals from us from milestone payments, $23.8 million in other cash outflows while returning approximately $200.2 million to shareholders via dividends and share repurchase.
Please turn to Slide 15 for a summary of our share repurchase program and balance sheet. During the fourth quarter, we repurchased approximately 0.5 million shares for a total cost of $47.9 million, including taxes. For the full year 2023, we repurchased approximately 2.1 million shares for a total cost of $158.2 million. Since we initiated our share repurchase program in August 2021. Through December of 2023, we repurchased 9.5 million shares or 21.9% of our stock for a total cost of approximately $755 million. As we have said before, we are committed to returning excess capital to shareholders and plan to continue to do so in the absence of any large organic or inorganic growth investment opportunities.
Turning to our debt levels, our total debt at the end of the fourth quarter was $440.6 million, a reduction of $9.7 million from the end of the third quarter. For the for the year, we have reduced total debt by $76.9 million.
I'm now going to walk through an update of a couple of financial items, so please turn to the next slide.
The cash balance in the capital construction fund at the end of 2023 was $599.4 million based on the remaining milestone payments of $899 million. Nearly two thirds of the program a year end was funded by restricted cash. And the CCF note that the two thirds figure excludes interest income on cash deposits that may be earned in future years. We currently expect to make milestone payments of $35.5 million in each of the second and fourth quarters of this year.
Also, we recently executed a strategy to term out a portion of the CCF cash deposits held in short-term US government money market funds with a purchase of approximately $450 million in fixed rate US treasuries to align with milestone payments in 2025, 2026 and 2027.
The effective yield of this fixed rate portfolio is 4.53% with an effective duration of 1.9 years. By executing this turnaround strategy, approximately half of the remaining $899 million in milestone payments are in fixed rate instruments, providing a greater certainty around the amount of tax deductible interest income we can expect to receive over the next few years and the balance of the deposits in the CCF remain and short-term investments of 90 days duration are less. Lastly, we continue to expect to receive a general corporate tax refund of $119 million for 2021 federal taxes.
Please turn to slide 17. The table on this slide summarizes our $248.4 million in capital expenditures. In 2023, we had capitalized construction expenditures of $52.9 million, which consisted of milestone payments and other related costs on our new Aloha Class vessels maintenance and other capital expenditures were $195.5 million, of which $71.9 million was for equipment to support network requirements and growth $66.1 million was for the NLNG. installations on the Daniel K. Inouye and commodity EVA and the LNG installation re-engining of Monaco and $57.5 million for other maintenance CapEx across a variety of projects.
Please turn to the next slide. Slide 18 shows the key capital expenditures planned over the next three years for 2024, we expect total CapEx of $255 million to $275 million, of which one and $110 million to $120 million is for maintenance and other CapEx, including Phase two and Phase three work at Sand Island in Honolulu and normal, quote course, capital expenditures to support our vessel, our vessels, shoreside operations and logistics businesses, $70 million - $80 million for LNG installations and reengineer Monaca and $75 million for new vessel construction expenditures, including capitalized interest and owners' items. The LNG projects from Monaca and Khumani Gila remain on track for the vessels to return to service later this year.
For 2025, we expect slightly lower year-over-year maintenance and other capital expenditures trending to our maintenance level of $80 million to $90 million in 2026. We also expect the remaining payments on the LNG projects in early 2025 and new vessel capital expenditures are projected to increase materially in 2025 and 2026 as our project advances into the construction phases on all three vessels at the Philly Shipyard with that.
Let me now turn to slide 19 and walk through our outlook for the full year and first quarter of 2024. For 2024, we expect year-over-year growth in Ocean Transportation operating income. Absent a significant change in trajectory of the US economy, we expect trade dynamics across all our trade lanes to be comparable to 2023. As consumer related spending activity is expected to remain stable.
For Logistics. We expect challenging business conditions for transportation brokerage at least through the first half of the year, which we expect to lead to lower year-over-year business segment operating income. As a result, we expect consolidated operating income to approximate the level achieved in the prior year with a quarterly seasonality pattern consistent with 2023.
In addition to this full year operating income outlook, we expect the following for the full year depreciation and amortization to approximate $180 million, inclusive of $24 million for dry-dock amortization, interest income to be approximately $35 million and interest expense to be approximately $8 million.
Other income to be approximately $7 million, an effective tax rate of approximately 22% and dry-docking payments of approximately $35 million. Interest income outlook you're providing is based on the current CCF deposits and cash and cash equivalents invested at current short term government money market rates as well as the CCF.
Fixed rate portfolio yielding 4.53%. This outlook does not factor in the cash and interest income from the expected tax refund for the first quarter of 2024, we expect Ocean Transportation operating income to be lower than the $27.8 million achieved in the first quarter of 2023 and Logistics operating income to be lower than the $10.9 million achieved in the first quarter of 2023.
As such, we expect consolidated operating income in the first quarter to be lower than the prior year. The first quarter has historically been our weakest period of the year due to seasonality in our Jones Act trade lanes in a slower period of activity in our China business due to the post Lunar New Year period as for logistics. As I noted earlier, we expect challenging business conditions for transportation brokerage, at least through the first half of the year.
I'll now turn the call back over to Matt Okay, fixture.

Please turn to slide 20 where I'll go through some closing thoughts. As I mentioned in my introductory comments, matches at a very good position operationally and financially, the strength of the Mattson brand is a testament to our market positioning across both business segments and the collective efforts of our employees to serve the needs of our customers.
We closed 2023 in a strong financial position. We have low cost investment grade balance sheet, which we view as a competitive advantage to pursue growth opportunities as they present themselves. Two thirds of the current remaining milestone payments and our new vessel build program is funded from the cash deposits and the capital construction fund.
We completed one LNG vessel project and by the end of the year, we expect the remaining two LNG vessel projects to be finished with those vessels back in service.
There will always be some degree of uncertainty and noise, but we remain focused on what we can control. First and foremost, focused on vessel schedule integrity, reliability of our operation and delivering high quality service for our customers.
This focus has served our company well for 141 years and remains the foundation of our success moving forward, we will continue to maintain discipline in our capital allocation strategy. We invest our capital for the long term to create value. In some cases, we are making capital decisions for many decades like our new Aloha class vessel build program.
We currently expect these vessels to be in service in late 2026 through 2027. After that, we do not expect to build any additional vessels until the mid 2030s. We have steadily built a portfolio of high-quality businesses through organic pursuits and acquisitions. We're always looking for natural extensions to our businesses and to leverage the Mattson brand. But we're also attentive to the returns on capital and long-term cash flow characteristics of pursuing growth.
And last but not least, we will continue to return capital to shareholders after funding our maintenance of capital expenditures long-term investments and dividends. Since 2021, when we initiated our share repurchase program, we repurchased 9.5 million shares or nearly 22% of that, then shares outstanding for $755 million.
Going forward, we expect to be steady buyers of our shares. And with that, I will turn the call back to the operator and ask for your questions.

Question and Answer Session

Operator

Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone one moment. While we compile the Q&A roster, and please wait for your name to be announced before we proceed with your questions.
Jacob Gregory Lacks, Wolfe Research.

Hey, Jacob.
Hi, Jay.
I just wanted to dig into the 1Q guidance a bit. I guess what's driving the lower year-on-year operating income intuition, we've seen a big increase in transpacific ocean spot rates to start the year. I know your expedited rates are a little different. Do you think there's just a pricing lag there? Or is there some other reason why this wouldn't impact your price as well?

Yes, Jake, it's John. I'll take that. So they say we expect a little bit lighter volumes than we had last year. On the China business, the rates, as Matt mentioned, a little bit higher than we had in July than we were in the first-quarter. Of last year, but on a year-over-year basis, as the volume impact, that was probably the bigger the bigger change there, our Jones Act businesses are more or less in similar places on a year-over-year basis. So it's primarily the China business. And then the other part of your question there is the rate environment, Matt?
Matt can add in here too. But what we what we said here is that we haven't seen really any material impact on our China business based upon the Red Sea or other events of note in international ocean shipping. So even though some of the commodity price indices like the SCFI. And Asia, Europe rates are higher, that's not necessarily impacting our expedited segment.

Is that just seasonality in the year on year volumes being lower in the first quarter?

Yes. I mean, it's really it's really annual seasonality, yes, around post Lunar New Year. And we're seeing a little bit more a little bit less volume this year than last year..

So Jake, this is Matt.
I would just add a little more color. I think we see the pattern that's emerging in 2024 the first - around Lunar New Year, as Joe mentioned, to be much more traditional. The this is really the first year in four years of that, people have had a chance to return to their in their homes and are taking advantage of kind of a longer shutdown period that were abbreviated during the pandemic for various reasons.
And so it's more a return to normal than then, I would say anything that is of concern to us about our outlook, which is in part why we still think for the full year, we're going to have a year that looks a lot like on a consolidated basis, the year we just finished in 2023 Yes.

Okay, that's helpful. And then on a sequential basis in 4Q, it looks like operating expenses stepped up despite lower volumes. What are the big buckets driving that?

Well, the on the 4Q volumes were actually up quite a bit in China. So we did have higher terminal handling costs. And we also had we also had higher fuel costs, on particular, domestic trade lanes on the year-over-year basis. And there's also there's also an issue of year-over-year timing of collections.
So we are we had a little bit more collections on a timing basis in Q4 of 2022 a little bit less than 2023 as actual fuel price, fuel timing, fuel collections and volumes in the China business were the biggest drivers of that are some

I'll say, sequentially from 3Q to 4Q?

Oh sequentially?
Yes, the biggest issue there was fuel the timing of fuel and fuel oil Got it.

And then it seems like we've just in terms of broader ocean, it seems like we have seen a some shift of West Coast imports back or East Coast imports back to the West Coast? Is this impacting SSAT? It all does it. I'll get profitability back towards pre-COVID levels.

I guess what do we need again, as I say, yes, it's a good question, Jake.
It's a good question.
I think certainly we know our customers are looking closely at. We talked about the Red Sea. We talked about the drive and the Panama Canal, the ILA. contract renewal. These are all factors that I think are going to inform our customers' decisions around how they're going to route their cargo into the US imports and many of our customers have multiple distribution centers and can select where they want to have the imports focused.
And what I would say is while we know, customers are looking closely at least that various factors so far, we haven't seen any significant movement of customer moves in that direction, although nor have we seen any significant changes in deploying capacity by the international ocean carriers.
But I do expect that we will see at a minimum a return of that cargo, which moved off of the West Coast when the ILWU. contract was renewed in 2023. So we do expect some volume to return to the West Coast that had left during the ILW contract renewal of the extent and timing and amounts are unclear and not yet present, but we do we do expect have some increased volume as a result of some of that as the year progresses in 2024.

That's helpful. Thanks for your time, sir.

Thank you.

Thanks, Jane.

Operator

Ben Nolan - Stifel.

Fasial Ahmad, long-time at RBC. So I wanted to dig in a little bit on I know on the Slide number seven, you talk about demand for CLX and CLX plus or I guess the MaxArias now and to approximate what it was last year and it could just be me being you're seeing more into this news really there.
But normally you're talking about volumes approximating on year-over-year levels here sort of set demand. And I know you talked about adding a six ship service spare. Is it fair to say that you were there maybe were some demand that you missed out on because of whatever you didn't have enough equipment in place now you have a little bit more equipment. So actually, even if demand is equal, your volume could be higher next year or minus. We're reading too much into that.

Yes, let me take a crack at that. So from our expectation of what we know now and of course, we'll have two weekly departures for the for the full year 2024, as we did in 2023, except for the handful of CLX plus now max voyages post Lunar New Year when the expedited our expedited market demand could be accommodated by the single sailing of the CLX service.
So when I think what you'll see, we were effectively full once we ramped ourselves back up. And that's true after this post Lunar New Year period so we expect to sit there really is no fundamental changes in our expectation at this point about the number of voyages that six ship we've added, we do not expect will be the result in additional voyage that that vessel is there to standby as a reserve if either the CLX or the MAX service because of a weather event or some other circumstances, not able to sail to ensure an on-time departure that our customers rely on and are willing to pay for the premium rate structure.
So I don't think you're going to see it, but we're not thinking that there's going to be any significant additional capacity that's introduced in a very similar profile in terms of how it shifts are going to fill up as the year goes on.

Okay.
That's helpful.
And then if I could just sticking with the China side, you talk about in the on slide number seven, there are freight rates being a little bit higher in 2024 and you are in 2023. I'm curious how much of that is contract versus just sort of your expectation for what that, but what look like it was I'll take the first part of that.

First thing, which is that we're saying about we're not seeing the rates. We hire an entire year. What we're saying is right now, rates are at a higher only in January than they were last January, February. And then they and then they found their pricing level after Lunar New Year ramp up towards the end of February into March, April.
And then they were pretty consistent throughout the year as we reported throughout the year. So what we're seeing in general is that the overall demand on the volume and rates that should not be that and different in the China business though. But that said, January and February, the rates were higher than where we started. So that's the comment about rates for the whole year.
And then the company, then the question on contracts, we don't see a significant change in the percentage of contracts. So we certainly have important contract with our customers, but the majority of the freight still moves as freight forwarders on short term, short term, one to three week out basis.
Okay.

And then last for me, just on Alaska, you mentioned it a little bit from doing. We are anticipating perhaps a little bit more business from drilling activity and energy activity in Alaska. And that was had always been, as I recall a market where you so, you know, there might be more touch points you could add in time as part of the logistics program are either organically or inorganically. Are there opportunities emerging and to add to what you're doing in the Alaska business?

I thought yes, I think the short answer is yes. I think we as we as we talked about in our prepared comments, I do feel like Mattson since the acquisition five, six years ago have really focused on two areas of growth or three. One, of course, was the acquisition of Span Alaska in our logistics business. And that business has continued to grow faster than markets. We've invested in new distribution facilities by two in the States, what in Anchorage and one in Fairbanks that have led to strong growth in that segment. But on the ocean transportation side, really there are two segments that we are focused on.
One is the in the oil and gas segment, the Horizon Lines, our previous study companies had not focused very much on and we are now seeing it as a growing component of our freight flows. And right now about the dynamics in Alaska for exploration and production are good. And we're aware of our customers looking at large multiyear projects, and we expect to benefit from that additional volume of drilling and that production.
The other one, of course, is the seafood exports outside of the elution islands at Kodiak and Dutch Harbor, primarily to international seafood markets and buyers in Asia in our scope of services. And so those are the two verticals that we've seen most directly that we've grown ourselves until frankly, we continue to see more growth opportunities in both of those segments moving forward time.

I appreciate it.
Thank you.
Yes.

Okay. Thank you.

Thank you then.

Operator

Jack Lawrence Atkins, Stephens.

Hey, guys. This is Grant on for Jack. Thank you for taking my questions. You Matt, you mentioned natural extension to Mattson brand. You previously, I think you guys had talked about that likely would come coming within the Logistics segment. Could you maybe just kind of update us on what you're seeing related to logistics M&A targets? And or maybe are you seeing opportunities in other trade lanes like South China on the ocean transportation side, perhaps as it relates to the events in the Red Sea?

Yes, sure. Thanks. Thanks for the question.
I would say that we look at it brand extensions, I would say we would look to our past to look at both organic growth initiatives, whether it's our fleet of 53 foot rail boxes, a growth in and those rail services in and out of Mexico, for example, is a new vertical.
That's an organic growth initiative.
We've done some small tuck-in acquisitions in the Alaska service. And while we while we see valuations is continued to be elevated in logistics businesses, or based there financial forecasts on elevated profit forecasts that were born out of the pandemic boom, we do keep a watchful eye on good quality businesses that fit our investment profile I would say right now, there's well we're going to keep a close eye on it.
And we think valuations are still relatively elevated and beyond our underwriting capabilities and to your point about China. We have expanded our service offering connecting with partners to have direct services from Vietnam, which connect over Shanghai to meet our CLX or our MAC services. We expect continued growth in working with partners to expand the origins of our business out of China into a near much nearby markets. So those are just a couple of examples of ways in which we expect to continue to grow over time.
Okay.

Thank you, guys for the time.

Okay. Thank you.

Thank you, Brian.

Operator

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

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

Operator

Aloha, this does conclude today's conference call. Thank you all for joining. You may disconnect.