This is the PotlatchDeltic session. My name's Buck Horne. I'm the Raymond James Housing and Timber REIT analyst, as well as I cover everything basically residential as well as building products related. PotlatchDeltic is the third-largest timber REIT in the United States, with acreage across the U.S. South and the Pacific Northwest and into Idaho, which is one of their sort of specialty markets. Also one of the top 10 lumber producers in the United States as well, with a large-scale manufacturing operation. We're gonna talk, talk lumber, talk a little, you know, housing dynamics that are out there. I've got Eric Cremers to my right, the CEO. Wayne Wasechek is the CFO of PotlatchDeltic. We're gonna do a little opening salvo with, you know, kind of company overview, and then we'll fire away with some, some Q & A. Yeah, thanks, Buck. And, so PotlatchDeltic, we are the third-largest timber REIT in the United States. As a timber REIT, we have our headquarters up in Spokane, Washington, but we own 2.2 million acres of highly productive timberland. About 600,000 of those acres are up in Idaho, where we are the single largest private landowner in the state. And then we have about 1.6 million acres spread across really six southeastern states, ranging from Arkansas over to South Carolina. And with those 2.2 million acres, we harvest around 7.5 million tons per year. And of that 7.5 million tons, roughly 20% is produced in Idaho, and the remaining 80% is produced down in those southeastern states. So one of our business units is our timberlands business unit. We have another business unit called Wood Products. As Buck mentioned, we are the 10th largest lumber producer in the United States. We produce right around 1.1 billion board ft of lumber across six mills. Those six mills are located in St. Maries, Idaho, Bemidji, Minnesota, Gwinn, Michigan. We have a sawmill in Ola, Arkansas, one in Warren, Arkansas, and one in Waldo, Arkansas. Now, we also have an industrial-grade plywood mill in our wood products division, and that mill is located up in St. Maries, adjacent to our lumber mill. And with our plywood mill, we produce specialty industrial-grade plywood that goes in things like boats and cars and truck trailers, things like that. That's our second business unit. Lastly, we have a real estate business unit. And that real estate business unit really does two different things. One is, it is the sale of how I'd characterize raw land for higher and better use values. And by higher and better use, or HBU as we commonly refer to it, we're selling land at values significantly higher than what the land would be worth if left in a timber-growing state. So think about a conservation outcome, for example. It could be an adjacent landowner wanting to protect their viewshed. It could be a solar opportunity. If a solar developer comes in and says, "Gee, your location is perfect for a solar farm, PotlatchDeltic, we would like to buy, that, that land from you." A wide variety of potential outcomes that for that part of our, our real estate business. And we sell roughly 1% of our acres each year of the 2.2 million. Roughly 1%, or more or less 20,000, is typical for us, for our HBU sales program. Now, I will tell you that there are some years when we sell a lot more and some years when we sell a few less. This year, we will sell more. We announced in the first quarter a 34,000-acre sale to FIA, which is a TIMO, Timber Investment Management Organization. We sold four-year-old trees. So these trees won't reach maturity for another 20-25 years and have cash flow for 20-25 years. Yet we, we sold them for $58 million, or $1,700 per acre. So that's the second part of our or the first part of our real estate business is the sale of raw land. We also have a master plan community in Little Rock, Arkansas. This is not something that we as a company would go out and do ourselves. We inherited this master plan community when we completed the Deltic merger back in 2018. Deltic had spent $275 million, more or less, developing Chenal. It is the best place to live, in my opinion, in Little Rock, Arkansas. It's a very well organized, well designed, a lot of green space, golf courses, tennis courts, all that, master plan community. We don't do any vertical development in Chenal. We simply create residential lots. We sell about 130-150 residential lots per year. And then we also sell commercial acreage. So, you know, Whole Foods comes to town, or Costco is a better example. They just came to town. You know, they'll buy a handful of acres at anywhere from $300,000-$500,000 per acre. So it's another, it's the second part of our real estate business that's got very attractive economics and produces a lot of a lot of cash flow for us. We have an investment-grade balance sheet. Our borrowing costs all in are at 2.3%. So, relatively low leverage at the end of the day. We're also excited about a new business unit that's just getting started up in our company, called Natural Climate Solutions. Companies are trying to find a way to get to net zero and certainly carbon credits, carbon offsets, carbon capture and storage. Given our 2.2 million acres of land that we own, there's a significant opportunity for us going forward with that new business unit. So I'm gonna stop, pause there, Buck, and turn it over to you. Well, yeah, no, I appreciate that. I think it's interesting 'cause I think we should highlight and maybe just dive in a little bit further on, you know, the things you're doing around enhancing value to the timber portfolio. I mean, one of your peers came out with a very thorough investor deck last week, talking about how, with all the investor interest about carbon neutrality or carbon mitigation, I mean, it's really transforming how investors think about the embedded value in timberland. And now you can't necessarily do all of these different things in the certain geographies, whether that's solar in one location or wind or carbon capture, sequestration, a lot of different things are around that. How do you, you know, you think about the historical valuation framework for U.S. South timber, it's still like $2,000-$2,200 an acre or something like that. The economic outcomes, if you can start to enhance it with a solar lease or a carbon capture, you know, agreement or something like that, it really significantly changes the economics. Just wondering, you know, as we think through your portfolio, you know, and maybe the industry at large, I mean, are we on the cusp of a significant revaluation of how we think about what timber should trade for because of the embedded optionality? Yeah, I think you raise a really interesting point, Buck. Historically, timberland has been all about, "Gee, what's my harvest volume gonna be and what price am I gonna get from the logs that I produce?" And that's the old way of thinking about timberland. The new way of thinking about timberland is not only do you get those benefits from the harvesting and the selling of logs, but you also get optionality if you own timberland with these new revenue streams. And let me just give you one example. I mean, I mentioned earlier that we have 1.6 million acres of land in the Southeast. The Southeast is a real hotbed right now for solar development, for renewable energy. A lot of companies are out making net zero pledges and people are trying to decarbonize, you know, their energy production. Certainly solar is one great way to do it. So with our 1.6 million acres in the South, we have currently got 20,000 acres that are under option contract to sell to a developer at prices roughly the equivalent of $10,000 per acre. I say roughly the equivalent of because if we some scenarios we're gonna lease the acres and some scenarios we're gonna sell the acres. But think $10,000 an acre is a net present value for an acre going into a solar farm. We got 20,000 acres that are under option. We have another 20,000 acres that we're in discussions with developers over. We think there's another 20,000 acres that we own that have the potential to be solar farms. So the three different buckets add up to 60,000 acres of our 1.6 million acres in the South. If you think of it in terms of our entire 2.2 million acres, it's roughly 3% of our acres have good applicability towards solar. At $10,000 an acre, those 60,000 acres are worth $600 million. I think about 3% of our acres going into solar farms are worth roughly 15% of our enterprise value. Our enterprise value is a little bit less than $4.5 billion right now. So that's just one of the new revenue streams, income streams available to timberland owners. There's others. There's carbon capture and storage. There's carbon offsets. There's we have lithium deposits. We're exploring lithium deposits in South Central Arkansas. Just a wide variety of new opportunities that previously people didn't think about when they were valuing timberland. and so the reference point that I just gave you, 3% of our acres are now worth 15% of our enterprise value. To me, it's staggering. It's a serious disconnect with where valuations are at today. So yeah, so I think it's an exciting time to be a large timberland owner. That's for sure. That's a great data point, actually. So that's really cool. And I'm gonna take it up on another thing you just mentioned. But, you know, you're starting to see some real announcements start to kind of come together around the carbon capture and sequestration, the kind of the underground pore space that's, you know, whether you're in certain geological locations or whatnot, but, you know, partnering with really significant energy companies that are willing to put in, you know, a lot of infrastructure and capital that you guys don't have to pay for. Have you guys done the geological work or, you know, is there a process of like surveying underground what percentage of your acreage may be, you know, acceptable for things like carbon capture and sequestration? Yeah. Wait, you want that one? Yeah, I mean, we, we potentially have some excellent opportunities in carbon capture and sequestration. You know, if you look at our land in Mississippi, Arkansas, and parts of Alabama, they have the appropriate geological formations. So I think pore space and at the appropriate depths. You know, really when you think about carbon capture and storage, there's really kind of two factors, two big factors that come into play. So one, you have the geological formations. Again, mentioned, pore space and at the right depths. And then two, think about, you know, where the location of the storage is going to happen. You know, if you think about the emitter, right? In this example, an oil and gas refinery, you know, that would be the source of the capture. So those are really the two big factors of potential CCS opportunity. For us, we've done geological assessments and we've, you know, we have a very good, the geology is there for CCS. And now we're just in the process of, you know, discussing with various suitors on potential opportunities. We're under a couple NDAs with these companies, which we really can't provide any other details, but certainly it's a potential great opportunity for us. But even if you sign these agreements, it's, you know, one of the beauties of CCS is it's not gonna, you still get the value of harvesting the trees on top of the land, right? You don't lose any of the surface operations, right? Right. Yeah. Yeah, we own the surface rights and it's a subsurface that you're looking at with CCS. Let's dive into lumber a little bit here. What are your thoughts? I mean, it's been an interesting market dynamic. It feels like the industry's still wrestling with a little bit of kind of overcapacity in terms of some of the new capital that's come in over the past couple of years to build sawmill infrastructure. When do we start to normalize industry capacity, you know, and when can we get a uptick in lumber prices again? That's a great, great question. Tell me, tell me what your crystal ball says? Yeah, so, lumber is a very volatile commodity. Lots of things, either on the supply side or the demand side, can move the price of lumber. The reference point for lumber prices is the Random Lengths composite index, which means it covers a lot of species and a lot of different dimensions. The composite bottomed back in October at $366 per 1,000 board ft. And as we sit here today, we're right around $400 per 1,000 board ft. So as a 1.1 billion board foot producer, that roughly $35 uplift in lumber prices is worth about $35 billion to our P&L. Now, what I would tell you is that, at $400 per 1,000 board ft, these are not great times for lumber producers. You know, we, the country, had an inflation problem. The Fed jacked up interest rates. As the Fed jacked up interest rates, basically the housing market got soft. And of course, new residential construction is the second largest market segment for lumber. So demand for lumber got soft in new residential construction, and that's what caused prices to go down. I think from where we sit today, we've reached our bottom, which was back in October. The U.S. had a very cold January. You guys remember the winter weather and that weather that hit across the U.S., construction slowed pretty much everywhere. And now we're starting to get out into spring. And the Fed's talking about interest rate cuts. RISI, one of the pundit forecasting firms of the industry, has got a price forecast to the year that's 7% higher than last year's prices. And then next year they've got another 7% higher lumber prices. So lumber, according to them, could be up to $460-$470 by next year, which is, you know, a pretty sizable swing from the $360 price that we had in October. So I think we're with a lot of curtailments, a lot of closures that we've seen. We've seen 2 billion board ft come out of the market in the past 12, 18 months. Several mills have been closed across North America. High cost mills have been closed. And I think things are gonna start to tension up again as the Fed starts cutting rates and housing starts start moving higher again. Certainly, if you listen to what the homebuilders are saying, whether it's Toll Brothers or Tri Pointe or Taylor Morrison, you know, almost everyone is saying the same thing, which is that the underlying demand, the fundamental demand for housing is there in this country. There's just a little bit of an affordability problem. A lot of that is driven by higher, higher interest rates. As rates come down, hopefully demand comes back. Certainly concur with that outlook and, you know, see a very long runway for what we think is kind of a controlled growth scenario. Certainly we need a lot more houses. When maybe think about your cost structure, in terms of your manufacturing costs and the investments you've made into technology and just sawmill upgrades and Waldo expansion. Just walk us through how you think, you know, you position your capacity to be profitable even or you at least break even at these very depressed lumber prices. Yeah, so we've got a rigorous capital program, putting money back into our mills to keep them competitive, constantly trying to lower their cost structure. And as Buck mentioned, one of our biggest projects right now is a $130 million investment into our Waldo, Arkansas sawmill. It's going to significantly increase production capacity from roughly 200 million ft per year to nearly 300 million ft per year. It's also gonna lower the cash processing costs of the mill significantly. And all told, we think that $130 million investment is gonna yield an incremental $25 million of EBITDA to the company. And it will make that sawmill one of the top decile mills in the U.S. South. So it'll be one of the most competitive mills that exist in North America, if not the world. Now we're also putting capital into our, our other mills, discrete projects, whether it's an auto grader or continuous kiln, new trim sorter, new saw line. We're constantly looking at each mill, trying to think through how can we improve the mill's competitive performance. 'Cause you don't ever want to get caught with a mill in the fourth quartile. 'Cause what tends to happen to those mills is when you get into a downturn, they start hemorrhaging cash and then they, they wind up closing. So you need to keep investing in your mills, keep them competitive. And we routinely find projects that are in roughly the 15% IRR kind of, kind of range. This Waldo expansion is an exception. It's a 22% IRR. So certainly that's the kind of investment that we, that we like to make to keep our mills competitive. Going forward, how do you think about your kind of a NAV position where the balance sheet has a lot of capacity right now? But how do you think about the optionality of, you know, buying back your stock versus another investment in, you know, the sawmill or an upgrade cycle? I mean, how do you, how do you balance the trade-off and the opportunity to, to buy your stock at such a big discount today? Wayne, you want that one? Yeah, I mean, you know, when we think about capital allocation, our capital allocation strategy, you know, we're very judicious. I mean, we're opportunistic. We're patient. You know, we're very judicious when we deploy capital. So first and foremost, our regular dividend to shareholders is sacrosanct. So that's our first priority. Then after that, you know, that's where we, you know, think about share repurchases, wood products, CapEx, Timberland M&A. And that's, it's constantly changing. The environment's changing. You know, we're constantly evaluating what those priorities are. Always discussions with our board on, you know, what actions we're considering when it comes to capital allocation. You know, you think about, I mentioned, Timberland M&A. Just this last quarter, we completed a $31 million Timberland acquisition for 16,000 acres in Arkansas. It, you know, we're gonna take about an 8-8.5 IRR on that, which is, you know, well above our cost of capital. Real, real IRR. Yeah, real IRR. So when we think about that, you know, that's a priority that we had, you know, when we compare to alternatives, when we think about share repurchases or their options. You know, Eric mentioned our Waldo mill expansion. Well, we're constantly thinking about wood products CapEx and, you know, whether it's, you know, smaller discretionary projects that have, you know, met our hurdle rate on IRR or, you know, there may be an opportunity at one of our mills to do another large scale, Waldo-like expansion that we've done. And we're currently, you know, evaluating that opportunity. So really we can constantly look at what our capital allocation priorities are. Yeah, and over the last year, year and a half, certainly share repurchases with our stock being under pressure because of low lumber prices. Share repurchases have become more attractive to us. We've bought back, I don't know, $80 million worth of stock in the past year, year and a half. And, we think we're buying at a 25% discount to NAV. We think it's a, it's a bargain. But we're not gonna, we're not gonna spend all of our money at, at, at one shot. We're gonna, we'll spread it out over time. Just to follow up on the M&A point, I mean, are we starting to see some more transactions, you know, more portfolios come to market this year? Do you think it's gonna loosen up? I mean, one of your larger peers is, you know, for reasons to partially deleverage their own balance sheet is bringing to market, saying they're gonna bring to market quite a bit of acreage over the next 18 months or so. How appealing or interesting is, you know, timber M&A to you, you know, given current cost of capital? Yeah, that's a good question, Buck. You know, our timberland is selling for, you know, what I would characterize as, as record prices. We talked earlier about the optionality of owning timberland, all these future, revenue and income streams that are, that are coming to people that own, that own timberland. Most people are not bringing their timber to market right now. And they're not bringing it to market because they see much brighter times ahead. I think this one competitor, Rayonier that Buck mentioned, really they've got a different set of issues. They got a balance sheet that's upside down, and they need to get it straightened out. And one way to do that is to, to sell off some of their timberland. But I think the timberland market, if you set aside what Rayonier is doing, I think the timberland market's gonna be, I think it'll be relatively, relatively slow this year. Just because people see all this optionality coming and, and offsets and carbon capture and sequestration, just all these different opportunities that are starting to surface. Well, one of your larger M&A transactions was the CatchMark deal. That's you kind of, anniversary that at this point you kind of maybe, maybe learned some, some things about that, that acreage and that portfolio. As you've gone through that and just kind of stratified it out, you know, what, what I guess what have you learned through the process of, of, of integrating that portfolio? Wayne, you want that? Yeah, so thanks, Buck. Yeah, back in September of 2022, we acquired 350,000 acres in the Southeast. That's, you know, very good, some of the best timber markets in the South. It's in South Carolina, Georgia, Southeastern Alabama. And, you know, when we looked at that deal, first, you know, we thought we would achieve around $21 million in CAD, annual CAD synergies, which we have achieved that. And that's through a lot of different avenues, reducing debt leverage, also taking out corporate overhead. And then also they outsourced Timberland management. We insource it and, and saved, you know, significant savings from that insourcing. So we achieved our CAD synergies. And then you think about from the timberlands management side, you know, it's really hitting the targets that we established. We're about 1.6 million tons a year in harvest volumes. That's what we went in with our deal model. That we're hitting those targets and in the foreseeable future, similar levels. And on the particularly on the real estate side, so as Buck mentioned, we did a stratification of the acreage and we identified about 20% or 70,000 acres as really higher and better use, real estate opportunity. And, you know, it's a pretty high percentage of the acquisition, but given the markets that we're in, we're really near some highly populated areas, which really create some attractive real estate opportunities from, you know, recreational to conservation, to, you know, adjacent landowners having the opportunity to purchase these timberlands. And, you know, our CatchMark strategy was really to sell higher-acreage tracts, you know, say 1-5,000 acres to TIMOs, other forestry companies, you know, clear cutting the land and then selling it. Our approach is our strategy has been different. So we're really looking at smaller tracts, say 100-300 acres. And really getting higher and more attractive pricing on that real estate. And, you know, we've met and really exceeded what we had identified going into the deal. And, you know, we've already in just a little over a year, you know, realized over $25 million in real estate sales probably, I think around 19-20 transactions. And for the foreseeable future, we really see that being one of our main drivers of real estate is just from very attractive real estate properties. Any questions from the audience? A chance to jump in, anybody? Yeah, Daryl, by the way. I hear a lot of talk about the high margin of the South region with respect to lumber production. And yeah, you've seen some closures in the South, you know, closing. Can you just talk about the cost curve in the South and what are the factors behind it? Yeah, that's a, that's a good question. I mean, it, it's interesting to treat a whole region the same to say, oh, British Columbia's got lots of problems. They got a mountain pine beetle infestation. No mill can be competitive. Oh, the U.S. South has got the cheapest delivered fiber in the free world. It must be super competitive to have a sawmill in the South. But you have to really drill into each one of those regions more specifically. And you'll find super competitive mills in the U.S. South and you'll find fourth quartile mills that are gasping for their last breath in the U.S. South. And we've seen a handful of those close here over the past 12 months or so. Same thing up in British Columbia. You know, a lot of those mills, they, they truly are beyond the state of repair. There've been a number of closures up in B.C. and there will be more closures up in B.C. But some of those mills up there are super competitive. They can be really high volume and they can be located next to timber that's very attractive and there's not much competition for. So I think it's easy to generalize, which is the South is super competitive and British Columbia is not very competitive, but the reality is you really gotta drill down into the individual mill and how much capital has been put into that mill over time. And what it's the force, the approximate force to that mill, what do they look like? But good question. Anyone else? All right, I think I'm gonna leave it there for the time being. So really appreciate the time. Great presentation, guys. Thanks everyone for joining us. Thanks. Thanks.