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Operator: Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the PotlatchDeltic Fourth Quarter 2024 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I’d now like to turn the call over to Mr. Wayne Wasechek, Vice President and Chief Financial Officer for opening remarks. Sir, you may proceed.

Wayne Wasechek: Good morning. And welcome to PotlatchDeltic’s fourth quarter 2024 earnings conference call. Joining me on the call is Eric Cremers, PotlatchDeltic’s President and Chief Executive Officer. This call will contain forward-looking statements. Please review the cautionary statements in our press release, on the presentation slides and in our filings with the SEC regarding the risks associated with these forward-looking statements. Also, please note that a reconciliation of non-GAAP measures can be found in the appendix to the presentation slides and on our website at www.potlatchdeltic.com. I’ll turn the call over to Eric for some comments and then we’ll review our fourth quarter results and our 2025 outlook.

Eric Cremers: Thank you, Wayne. Good morning, everyone. Thanks for joining us. Yesterday, after the market closed, we reported total adjusted EBITDA of $232 million for 2024. These results reflect the strong performance of our Real Estate business and the stability provided by our Timberlands operations. Our Wood Products results for the year were challenged by a relatively weak lumber pricing environment, which only began to improve towards the latter part of the year. Despite market conditions, we remained focused on effectively managing our controllable operational metrics across all business segments. Additionally, we successfully achieved several strategic initiatives for the year, highlighted by the modernization and expansion of our Waldo sawmill.

Our Timberlands division generated adjusted EBITDA of $139 million for 2024. We harvested a total of 7.6 million tons across our Northern and Southern regions, which was in line with our plan at the beginning of the year. Despite overall softness in lumber markets, log markets in both Idaho and the Southern regions showed resilience. In Idaho, stronger cedar prices driven by regional demand bolstered our aggregate sawlog prices. As we move into the new year, we are seeing improvements in Idaho sawlog prices due to improved lumber prices, particularly under our indexed sawlog arrangements. Meanwhile, Southern sawlog prices remained relatively stable throughout the year, despite challenges stemming from measured mill consumption and a generally abundant log supply.

In our Wood Product segment, adjusted EBITDA was a loss of $8 million in 2024. However, the division’s financial performance shifted positively in the fourth quarter with $9 million in adjusted EBITDA on improved lumber prices. Our 2024 financial performance faced several market dynamics, including cautious buyer sentiment, ample lumber supply and soft demand in end markets. These factors exerted downward pressure on lumber markets. Later in the year, lumber markets became more balanced due to capacity curtailments, which we believe have contributed to the recent upward trajectory in lumber prices, with the Random Lengths Lumber Composite spot price increasing $37 or 9%, per thousand board feet in the fourth quarter alone. And in what is generally a seasonally weak period for lumber prices, the composite has held steady since the beginning of the year.

With a more balanced supply-demand dynamic, our 2025 outlook on lumber markets is cautiously optimistic, especially as we approach the spring building season. We shipped just over 1.1 billion board feet of lumber during the year, setting a new record for the company in annual shipment volume. This achievement came even while we incurred a brief period of downtime during the year at our Waldo sawmill to integrate new equipment for a modernization and expansion project. Regarding the Waldo, Arkansas sawmill modernization and expansion ramp-up, we are making excellent progress and are firmly on track to achieve the mill’s targeted production level by midyear. The successful completion of construction and the positive trajectory of the mill’s ramp-up is a testament to the team’s performance.

I would like to take this opportunity to thank the Waldo team for their dedication and effective execution of this project. As a reminder, we anticipate that the project will increase the mill’s annual capacity by 85 million board feet. Additionally, we expect recovery rates to improve by approximately 6% and cash processing costs to decrease by about 30%. Once we complete the ramp-up phase, we project that the mill will generate approximately $25 million in incremental EBITDA annually, assuming a mid-cycle sales environment. With the construction phase now behind us and major capital expenditures completed, our focus is on maximizing returns and generating strong cash flow from this strategic investment. Shifting to our Real Estate segment, this business had a very strong year, contributing $147 million in adjusted EBITDA.

In our rural real estate division, we sold over 57,000 acres at $2,300 an acre. Our Real Estate team is focused on pursuing opportunities that drive shareholder value beyond our regular recurring sales of Real Estate. This was exemplified by the sale of 34,000 acres of very young, average-aged, four-year-old Timberland for $57 million or $1,700 per acre in the second quarter of 2024. While we don’t anticipate a similar sale of this nature and magnitude in 2025, demand for our typical rural properties remains strong. We expect to continue capitalizing on opportunities to sell rural land at significant premiums to Timberland value. On the development side of our Real Estate business in 2024, we successfully closed on a $6 million sale of commercial land for $500,000 per acre and sold 135 residential lots at an average price of $146,000 per lot in our Chenal Valley master-planned community in Little Rock.

Despite a challenging interest rate environment, the number of residential lot sales we achieved this year aligns with our historical average. This year’s sales volume highlights the desirability of living in the Chenal Valley community, along with the premium lot offerings we brought to the market. In 2024, we made meaningful progress on our natural climate solutions initiatives and are excited about the potential value these opportunities will create in the future. Over the course of 2024, we doubled our solar options under contract and the associated net present value of these contracts. By year end, we had solar option contracts covering over 35,000 acres with an estimated net present value exceeding $400 million. We continue to see strong demand for solar projects and do not anticipate this opportunity to subside under the new U.S. administration.

Solar energy can play a crucial role in addressing America’s growing energy needs and its pursuit of energy independence. On lithium development, we continue to pursue opportunities to lease subsurface rights on our land in Southwestern Arkansas, where the smack over formation is partially located. We are currently negotiating a brine lease agreement, which we expect to execute in the coming weeks. The ultimate potential of this and other emerging opportunities in the region will depend on several factors, including the determination of royalty rates and future pricing and demand for lithium. Regarding forest carbon offsets, we are engaged with a couple well-respected project developers to pursue high-quality carbon projects under either a, quote, build-to-suit scenario for an identified buyer or a broader market opportunity.

Given the complexity and care necessary in developing a high-quality, high-transparent carbon project, we don’t expect to bring this project to market this year. In addition to these projects, we are actively exploring other long-term natural climate solutions opportunities, such as carbon capture and storage. We believe these initiatives will ultimately increase demand for our rural land, likely driving Timberland values higher. Moving on to our capital allocation strategy, in 2024, we deployed a balanced and disciplined approach while navigating the challenging lumber markets and macroeconomic uncertainty. Our priorities were centered around returning capital to our shareholders through our quarterly cash dividend and value-enhancing share repurchases, investing in high-return capital projects, such as the Waldo modernization project, and making an accretive Timberland acquisition.

For the year, we paid $142 million in cash dividends. With our stock trading at levels we believe are well below our estimated net asset value, share repurchases were an attractive option for capital allocation. In the fourth quarter, we purchased $8 million of our common stock, bringing our full-year repurchases to $35 million, averaging $41 per share. This leaves us with $90 million remaining under our repurchase program. Our solid financial position, coupled with our liquidity profile, allows us to continue being opportunistic with capital deployment as we move into 2025. Turning our attention to the U.S. housing market, although the Federal Reserve issued three interest rate cuts totaling 100 basis points since September, the rate on the 30-year fixed mortgage actually increased over this period.

As a result, the home-buying market is still somewhat depressed, as elevated mortgage rates continue to influence near-term demand and hold back construction activity. Regarding supply, although existing home inventory has risen, it is still below historical levels, as existing homeowners wanting to move are continuing to choose to stay in their current homes due to the lock-in effect of their low mortgage rates. Despite this market landscape, the single-family home building segment has remained relatively resilient, as single-family starts have held near 1 million units on a seasonally adjusted basis throughout 2024, bolstered by large homebuilders providing incentives such as interest rate buy downs. On the other hand, the multifamily home building segment remains anemic, as an oversupply of multifamily units, combined with the restrictive construction financing environment, continues to limit multifamily starts.

While these trends highlight the current state of the housing market, the long-term housing fundamentals continue to remain strong. These fundamentals are supported by an undersupply of homes, favorable demographics and growth in household formations. We believe that improved housing affordability, once low mortgage rates take hold, coupled with these strong fundamentals will create significant positive momentum for lumber market demand, fueling growth. Looking at the repair and remodel segment, which is the largest demand driver for lumber, activity has remained subdued, particularly in the do-it-yourself sector. Several factors have weighed on this segment, including a cautious buyer sentiment under an uncertain economic backdrop, suppressed housing turnover and higher financing costs for discretionary home improvement projects.

Despite these challenges, the leading indicator of remodeling activity published by the Joint Center for Housing Studies at Harvard University predicts modest gains in 2025 for home remodeling, as a solid labor market and rising home values are anticipated to support greater activity. Looking at our own business, we are seeing strong takeaway from our big box retail customers, such as Home Depot, Lowe’s and Menards. Additionally, medium- to long-term fundamentals for R&R remain favorable, as a number of structural drivers are expected to support the sector, including an aging housing stock with a median age over 40 years, home equity levels at historic highs and people continuing to work from home. As we look ahead in 2025, we are optimistic about the prospects of improving lumber markets driven by capacity reductions, supportive consumer sentiment, and a solid employment backdrop.

Regardless of market fluctuations, we remain committed to executing our strategy and maximizing operational and financial performance across all of our business segments. Additionally, we continue to focus on our core corporate responsibility initiatives around forest, planet, people and performance. With a strong balance sheet, ample liquidity and a disciplined approach to capital allocation, we are well positioned to deliver long-term value for our shareholders. I will now turn it over to Wayne to discuss our fourth quarter results and our 2025 outlook.

Wayne Wasechek: Thank you, Eric. Beginning on Page 4 of the slides, total adjusted EBITDA for the fourth quarter was $53 million, an increase from $46 million in the third quarter. This quarter-over-quarter increase was driven by higher lumber prices and improved cost recovery in our Wood Product segment. I will now review each of our operating segments and provide more details on our fourth quarter results. Information regarding our Timberland segment can be found on Slides 5 through 7. This segment contributed $34 million in EBITDA to our fourth quarter results, which was moderately lower compared to the third quarter. In Idaho, our harvest volume for the fourth quarter was 345,000 tons. This volume is seasonally lower than the 427,000 tons we harvested in the third quarter.

Idaho sawlog prices were 4% higher per ton in the fourth quarter compared to the third quarter, reflecting increased prices for indexed sawlogs, which reached their highest price point this year in the fourth quarter. In the South, we harvested 1.5 million tons in the fourth quarter, consistent with our harvest volume in the third quarter. Our Southern sawlog prices moderated slightly lower in the fourth quarter as compared to the third quarter. This price decline was primarily driven by mix, with a higher volume of smaller diameter sawlogs and a lower volume of hardwood sawlogs in the fourth quarter. Moving to the Wood Product segment, shown on Slides 8 and 9. Adjusted EBITDA for the fourth quarter was $9 million, an increase of $18 million from the third quarter.

The increase was driven by higher average lumber prices and improved cost recovery. In the third quarter, we incurred the planned downtime and the restart of the Waldo, Arkansas sawmill for the expansion and modernization project. By the fourth quarter, the mill was operational, and as we have progressed through the ramp-up curve, our per unit manufacturing costs and log recovery has significantly improved. We expect to complete the ramp-up phase by mid-year. Our average lumber price realizations increased $43.11 from $402 per thousand board feet in the third quarter to $445 per thousand board feet in the fourth quarter. In comparison, a Random Lengths framing lumber composite average price was approximately 12% higher in the fourth quarter compared to the third quarter.

It’s important to note that a regional mix and product mix differs from the composite, and there’s also a timing difference between our sales and the composite. Lumber shipments increased by 16 million board feet, rising from 267 million board feet in the third quarter to 283 million board feet in the fourth quarter. This increase in shipment volume was due to higher production from the Waldo sawmill following the planned outage in the third quarter. Next, let’s look at the Real Estate segment on Slides 10 and 11. The segment generated adjusted EBITDA of $19 million in the fourth quarter, compared to $32 million in the third quarter. In a Real Estate business, in a rural real estate business in the fourth quarter, we sold 5,900 acres at an average of $2,900 per acre.

Notably, our fourth quarter results included a conservation land sale in Alabama for nearly $10 million at $2,500 an acre. We continue to capitalize on a healthy demand for rural real estate, particularly for recreational purposes and conservation outcomes. In the development side of a Real Estate business, we sold 45 residential lots at an average price of $100,000 per lot in the fourth quarter. Demand for lot offerings has remained steady across each of our price points. The fourth quarter included a higher mix of smaller lots compared to the third quarter, which featured a significant number of premium lots. Turning to our capital structure, summarize some Slide 12. At year end, our total liquidity was $451 million, which includes $152 million of cash on our balance sheet, as well as availability on our undrawn revolver.

We repurchased 180,000 shares at $42 per share for a total of $8 million in the fourth quarter. We have $90 million remaining on our $200 million repurchase authorization. Additionally, we refinanced $176 million in debt that matured in the fourth quarter. By utilizing $125 million of notional forward starting interest rates costs within our portfolio, we achieved a weighted average interest cost of 3.2%, which is net of estimated patronage. This strategy enabled us to reduce our annual interest cost by $150,000 and maintain our total weighted average cost of debt at approximately 2.3%. Under the refinance, we also spread the term loan maturities over three outer years, smoothing out our debt maturity ladder. We have $75 million of notional forward-starting interest rate swaps available for future debt refinancing, which will allow us to maintain a lower cost of borrowing.

Capital expenditures were $20 million in the fourth quarter. This amount includes Real Estate development expenditures, which are included in cash from operations in our cash flow statement. I will now provide some high-level outlook comments. The details are presented on Slide 13. We plan to harvest approximately 7.4 million tons in our Timberlands segment 2025, with about 80% of the volume coming from the South. The modest decline in our planned annual harvest volume compared to the 7.6 million tons harvested in 2024 is attributed to normal variability in our harvest plan and due to our land sales activities. Harvest volumes in the North are expected to be seasonally lower in the first quarter at levels comparable to those in the first quarter of 2024.

We anticipate Northern sawlog prices to increase by approximately 5% in the first quarter due to higher cedar and index sawlog prices. In the South, we plan to harvest 1.4 million tons in the first quarter and we expect our Southern sawlog pricing to remain relatively stable. We plan to ship 1.2 billion board feet of lumber in 2025. This projected shipment volume includes ramping up to the expanded nameplate capacity at our Waldo, sawmill by midyear. In the first quarter, we expect to ship between 270 million board feet of lumber to 280 million board feet of lumber. Our average lumber price thus far in the first quarter is $448 per thousand board feet, which is roughly 1% higher compared to our average lumber price in the fourth quarter. This is based on approximately 90 million board feet of lumber.

Shifting to Real Estate, we expect to sell approximately 26,000 acres of rural land and 130 residential lots in Chenal Valley during 2025. For the first quarter, we plan to sell approximately 7,000 acres at an average price of $3,100 per acre and approximately 10 residential lots at an average price of $100,000 per lot. Additional details regarding Real Estate can be found on the slide. We estimate that net interest expense will be approximately $2 million in the first quarter and about $10 million per quarter for the remaining quarters in 2025. Interest expense is lower in the first quarter, as this is when we receive our annual patronage payments from the Farm Credit banks. These amounts also include non-cash interest charges and our net estimated interest income, which we expect to be lower in 2025.

Regarding capital expenditures, we are planning to spend between $60 million to $65 million in 2025. This range excludes a final closeout payment of $6 million for the Waldo, sawmill project and any potential Timberland acquisitions. With the construction of the Waldo modernization and expansion project completed, our planned level of capital expenditures for 2025 returns us to a more normal spending level. Overall, we estimate our first quarter 2025 total adjusted EBITDA will be in line with our fourth quarter results. This forecast anticipates slightly higher average lumber and indexed sawlog prices and an increased level of rural land sales activity, balanced out by seasonal decline in Timberland harvest volumes. That concludes our prepared remarks.

Rob, I’d now like to open the call to questions.

Operator: Thank you. [Operator Instructions] Your first question comes from the line of George Staphos from Bank of America. Your line is open.

George Staphos: Thanks, everyone. Good morning. Thanks for all the details, guys.

Eric Cremers: Good morning.

George Staphos: And congratulations on the year. I guess the first question I had, I know you attributed it to normal variability in the harvest profile and that is pretty much all-encompassing, but if you step back and say where you were six months ago, would you have been expecting to harvest only about 7.4 million tons for 2025? On the margin, things look like they’re getting better. You said your cautiously optimistic pricing is up in lumber. Is there anything else behind normal seasonality, excuse me, normal variability, in terms of why we weren’t seeing a little bit more in terms of timber harvest? A related question, just in general, on harvesting. We’ve seen in the cellulose markets a bit more of a premium than normal on softwood versus hardwood again in the pulp markets. Are you seeing any of that filter into demand for softwood, pulpwood and in turn demand in the next couple of quarters?

Wayne Wasechek: Yeah. George, this is Wayne. So taking your first question on the harvest volumes for 2025, it really comes down to a couple things. So, as we discussed in our prepared remarks, first, it’s normal variability of our harvest volumes. Every year we have fluctuation, it can fluctuate either way a couple 100,000 tons. Second thing is land sales activities. Now, our land management practices always aim to maintain a sustainable harvest profile, but that’s impacted by forest growth rates, how we maximize NPV generated by our Timberland harvest. But now, on the land sales activity, we’re portfolio managers, we’re always looking at options to generate attractive returns. For example, in Q4, we sold a larger tract for conservation purposes.

This was at a premium that Timberland valued at almost three times TMV and we had that initially in our 2025 harvest plan. Now, which we had to adjust our 2025 outlook because of that land sale. So, it really comes into play, those two pieces.

George Staphos: Understood. And just on softwood, and in particular pulpwood, if you can talk a little about what you’re seeing there, just with the perspective of what’s going on the pulp markets.

Wayne Wasechek: Yeah. On the pulp side, certainly that hardwood volume has an impact on our pricing, our average pricing from period-to-period, given a level of how much hardwood is in the mix. Certainly, I think right now, what we saw in the fourth quarter on the pulpwood side, it depends, each market is unique. I think some of our markets, we saw a little bit elevated mill inventories on the hardwood side, which pricing may have come down maybe 1 percentage or 2 percentage points. On the flip side, we also saw other markets that were more tensioned and pricing was actually up several basis points. So, it really depends on the unique market where we’re at overall. So, and I think that’ll hold true as we continue to move forward on the hardwood.

George Staphos: Okay. So, what you’re saying, Wayne, is you’re not really seeing any sort of greater-than-normal versus recent period demand for softwood, pulpwood, given what we’re seeing in terms of the cellulose markets themselves kind of steady as she goes at this juncture, that would be fair?

Wayne Wasechek: Yeah. Yeah. That’s right.

George Staphos: All right. So, based on all that dialogue, I would imagine you’re not seeing much in the way of log cost inflation over the next couple of quarters in the Wood Products business, but how would you have us think about that across the geographies? And then, kind of my last question, and it’s one you get periodically and we all appreciate how thoughtful you are about capital allocation at Potlatch, but you talk about buying stock back opportunistically, you talk about being portfolio managers, you talk about the fact that the NAV is much higher than the current value. Why do you have to be necessarily opportunistic with your buybacks? Why not just — if — with things getting better and the NAV being where it is relative to the price as you see it, why not be a little bit more aggressive there? Thanks, guys. I’ll turn it over.

Eric Cremers: Yeah. So, thanks, George. I’ll answer those questions. So, on the log cost side as it relates to Wood Products, we did have a little bit of a favorable P&L effect here in the fourth quarter. I think our benefit was about $2 million. Going out into 2025, we expect log costs to be relatively flat across the whole company. There will be a little bit of benefit in Q1. We’re estimating it to be about $1 million. But generally, across the whole business, we expect things to be relatively flat for the year in terms of log costs for Wood Products. Now, regarding capital allocation, I think, we’ve said in the past that, we’re never going to move fast on any one capital allocation opportunity. We move slow and steady, and we do that intentionally.

And the reason is, as we sit here today, we can look at it and say, yeah, wow, with a $41, $42 stock price, we’re trading well below NAV. And certainly by virtually every analyst, we are trading well below NAV. But that doesn’t mean it can’t trade even lower. And we’re in this period of time where who knows what Trump is going to do with these tariffs and what’s going to happen to the world economy and what’s going to happen to interest rates and housing. And so we always want to remain open to having options down the road. And if we spend our cash hoard now buying back stock, that means we can’t take advantage of an even bigger opportunity down the road. So while I find today’s prices attractive, they could get even more attractive and they could also get less attractive if markets play out the way we planned.

But I think you can look at our $200 million repurchase authorization and see that we put our money where our mouth is and we’ve bought back $110 million of stock now. So slow and steady wins the race, in our mind, as it relates to capital allocation.

George Staphos: Okay. We appreciate the thoughts. Thanks, Eric.

Eric Cremers: Thanks.

Operator: Your next question comes from a line of Ketan Mamtora from BMO. Your line is open.

Ketan Mamtora: Thank you very much. Perhaps to start with, pretty good progress on getting those unit costs down with the startup of Waldo and certainly more than what you were expecting. I’m just curious, as we move into Q1 and into the first half of 2025, how much more do you think you’ve got coming at you in terms of lower unit costs?

Eric Cremers: Yeah. So quarter-over-quarter, I do think there’s more room for us to push unit costs down and certainly you’ll see that as we move into Q1. We expect costs to come down, not as much as we saw Q3 to Q4, but there’s probably another couple million dollars of costs to come down and then when we get to Q2 we expect to have Waldo fully operational. So we won’t see further benefit as we get to Q2. But there’s a little bit more room here in Q1.

Ketan Mamtora: Understood. Okay. That’s helpful. And then, switching to Timberland deal activity, Eric, I’m curious kind of what you are seeing out there in the market right now. And as you think about your portfolio, curious kind of what is your appetite for larger deals?

Eric Cremers: Yeah. Ketan, that’s a good question. The Timberland M&A market, it’s pretty quiet right now. Over the past several years, generally $3 billion to $4 billion that Timberland changes hands each year and I think last year only something like a $1 billion traded hands. I continue to think sellers are holding off on marketing their properties, maybe waiting for housing to improve, lumber prices to improve, interest rates to come down or for maybe carbon deals to become more mainstream. And to your second question about will we do more large deals, I think we would certainly be open to doing large Timberland deals. The one caveat is it has to be at a price that creates shareholder value. And we’re not going to chase the Timberland deal, if it comes in with the IRR that’s less than our cost of capital and our cost of capital today at the low end sits at around 6% real.

So, while our competitors may make Timberland acquisitions and do it at prices that drive IRRs below cost of capital, that’s not something we’re going to do. And I do think there will come a point in time where things will get back into balance. Either prices will come down in the M&A market or returns are going to come up to justify a higher price, one of the two. But we’ve been on the sidelines for the past couple of years and I think we’ll continue to be on the sidelines until something changes.

Ketan Mamtora: That’s helpful. And then just one final question from me. We’ve seen a number of sort of pulp and paper mill closures here in the U.S. South over the last few years. I’m curious, from a Timberland perspective kind of the impact for you guys and also as we think about sawmills and finding a home for those chips, how do you think about that as you think about the next two years, three years, five years?

Wayne Wasechek: Yeah. I think when we look at it, each market, Timberland market, is very unique. Each individual one is unique. So we look at it market-by-market. When we look at M&A deals for Timberlands, we’re certainly looking at what’s the current market look like? How tensioned is it? Where do we think it’s going to go? And that certainly plays into how we put together our long-term harvest profile, either our current one or when we’re doing M&A deals. So I think we certainly factor that in on our viewpoint of what markets look like. But it’s definitely market-by-market and very — each one is unique. So, but I think, overall, we have a positive outlook. We think, generally, the markets will become more tensioned, just with all the opportunities out there, from biofuels to emerging technologies for uses Timberland and Timberland byproducts. So I think we’re still very optimistic and positive about the outlook.

Eric Cremers: And on the residual side, Ketan, I would just say, our — we’ve got a great team that handles the residuals that come out of a sawmill and we’ve got supply arrangements into consuming pulp mills in the various areas that we operate in. It’s challenging. I feel like every year, I see lower and lower residual costs as pulp markets continue to dry up. But there are — like Wayne said, there are a number of new technologies coming, whether it’s bioplastics or sustainable aviation fuel or pellets or Drax has got this carbon capture and storage BECCS project they’re working on to spend $12.5 billion in the South. I do think people see an opportunity to utilize low-cost pulpwood in a variety of applications and it’s just going to take time for all those facilities to get built.

Ketan Mamtora: Thank you. That’s very helpful. Good luck in 2025. I will turn it over.

Eric Cremers: Thanks. Thanks.

Operator: Your next question comes from the line of Michael Roxland from Truist Securities. Your line is open.

Nico Piccini: Thank you, Eric and Wayne, for taking my questions. This is Nico Piccini on for Michael Roxland. I guess starting out, the new U.S. administration has suspended funding from the Inflation Reduction Act and the Infrastructure Investment and Jobs Act while also suspending offshore and onshore wind power leasings and paused some of the approvals, permits and loans. Do you have any early read on the impact of natural climate solutions, mainly around CCS and wind? Because as I understand, I think solar has been left out from a lot of those pauses and temporary holds?

Eric Cremers: Yeah. So we’re following this, needless to say, very, very closely. I do think that some areas of NCS are more vulnerable than other areas of NCS from government cutbacks. And my sense — our sense, is that solar is going to be unscathed. I think lithium is going to be just fine. I think carbon credits gets a little bit dicier. Now you’re at the beck and call of what do companies want to do to pursue their net zero initiatives that they have and there may be less government pressure on them to pursue net zero. So that could change the outlook for carbon offsets. And then I think CCS is the most vulnerable of all the different NCS opportunities and that one to me is going to be highly dependent on government subsidies. So I do think it does vary from category-to-category. And thankfully, most of the near-term opportunity for us is in solar and lithium and those two are continuing to move on down the track.

Nico Piccini: And maybe just, sorry, for some further clarification, what for solar specifically gives you confidence that it won’t be dragged into this in the future?

Eric Cremers: Well — yeah. I think something like, I’ve heard that like 80% of the money is getting spent in red states at the end of the day and I read that 18 House members sent Speaker Johnson a letter saying don’t touch this money. So, I haven’t heard Trump say anything negative about solar. I’m sure he’s not happy about solar panels being manufactured in China, by and large. But he’s really come out pretty publicly against offshore wind, as well as lithium, EV mandates. But those two areas get the most of the attention from him and not the other areas. Nobody really knows what’s going to happen in the end, but it’s just a — it’s a bit of a guess right now, reading between the lines. But he seems to be after the EV mandate and so we’ll see how that plays out.

Wayne Wasechek: Yeah. And I would add that on the solar side, even post-election, we continue to see strong interest from solar developers. We’ll continue to pursue additional option contracts with these developers. And yeah, we just — yeah, continue to see that strong activity at the election.

Eric Cremers: Yeah. And just…

Nico Piccini: Okay.

Eric Cremers: … to give you a sense of it, I mean, we’re at 35,000 acres, as we said in our prepared remarks now. Our plan has is by the end of the year to be at something like 45,000, 46,000 acres under solar options. So like Wayne said, we see no slowdown in that part of our business.

Nico Piccini: Understood. So it sounds like solar’s maybe safer and then forest carbon and CCS on the other end of that spectrum.

Eric Cremers: Yeah. Correct.

Nico Piccini: Perfect. I appreciate the call. I’ll turn it over. Thank you.

Eric Cremers: Thanks.

Operator: Your next question comes from a line of Gregory Andreopoulos from Citi. Your line is open.

Gregory Andreopoulos: Hey. Good morning, gentlemen. Just…

Eric Cremers: Good morning.

Gregory Andreopoulos: … a quick one on Southern log prices — good morning — for 2025. We’ve seen some with products capacity come out of more coastal Southern markets this year. Would you say you’re more positive on those coastal markets or more of the inland markets in 2025 in terms of year-over-year log price growth? And then based on your view there, does that inform your decision on 2025 harvest plans for inland, legacy PCH lands versus the coastal lands you acquired in the CatchMark deal?

Wayne Wasechek: Yeah. On the — looking at pricing for 2025, we would — our view would be that, the coastal area, Timberlands have more of an opportunity to increase in pricing. Those are the more tension markets for us. So when, with a little more pricing demand pickup, we would see pricing move there first on our inland side and Gulf South. We haven’t seen prices, even with a softer demand dynamic, those prices have remained a little more stable. So we wouldn’t see those have as much price appreciation as the coastal areas. From a harvesting profile perspective, we have solid demand across our portfolio in the South. And yeah, that hasn’t — the pricing or where we see it going has an influence where a harvest plan is. We maintain a long-term sustainable harvest yield and plan, and yeah, we’re focused on that.

Gregory Andreopoulos: Understood. Thank you. Just one quick follow-up on solar. So, you mentioned doubling your option contracts from 200 million to 400 million NPV or above $400 million NPV. Is there any way to quantify your ambitions for 2025 in terms of options? And then kind of relatedly, when should we start expecting these option contracts to convert into full lease agreements? Is that 2025, 2026 or further down the line?

Eric Cremers: Yeah. So our plan this year anticipates us getting another 10,000 to 12,000 acres under option for the year, which would have an NPV of approximately $151 million. So by year end, we expect to be somewhere 45,000, 47,000 acres or roughly $575 million of net present value. That’s not the end of the opportunity for us in solar. There’ll be more beyond what we get done this year and we’ll talk about that at a later date. But in terms of when we see these options actually get exercised, we don’t anticipate one getting exercised this year. I do think two to three could get exercised next year. That’s about the earliest we can see one happening. And then 2026, we might or 2027 we might see quite a few get exercised, but it’ll really start happening next year, not this year.

Gregory Andreopoulos: Got it. Thank you very much.

Operator: Your next question comes from a line of Mark Weintraub from Seaport Research Partners. Your line is open.

Mark Weintraub: Thank you. So a couple of follow-ups. One, is there any meaningful contribution you expect in 2025 from any of the natural climate solution profit pools or is that now likely 2026, 2027?

Eric Cremers: No. Mark, we’re getting option payments as we sit here today. It’s probably, I don’t know, $4 million more or less. Those option payments. So we’re getting money today as we sit here for doing absolutely nothing and we manage that Timberland at our own free will. So that’s where we sit here today. We’ll get a little bit more when we get this first lithium brine lease executed. But this is not big money. The big money will come at a later date, but we’re getting a little bit as we sit here today.

Mark Weintraub: Gotcha. Second, in terms of mix, just remind us, what was the sawlog mix in the U.S. South in 2024? Is that similar to what we’re expecting in 2025 or is there a change, and if there’s a change, why the change?

Wayne Wasechek: No. We don’t expect a mix, I think, in the sawlog volume and we were roughly around 55%, and we continue to, our outlook is near that 55% level. That’s in the U.S. South. And our mix — our sawlog mix in Idaho is very heavily weighted towards sawlog and we don’t see that changing that drastically.

Mark Weintraub: Okay. Good. Just one point of clarification. So stumpage in the U.S. South, is that considered upward or is that a mix?

Wayne Wasechek: That’s a mix. So it’s both sawlogs and pulpwood. And on our outlook, when I give our outlook guidance there where the 55% of sawlogs, well, that includes stumpage as well.

Mark Weintraub: Okay. Gotcha. All right. And then lastly, you’ve kind of raised a little bit about tariffs and obviously we also have the potential for likelihood of higher duties from Canada later this year as well. Can you maybe just provide a little bit more color on your thoughts of potential impacts from those variables recognizing there’s uncertainty?

Eric Cremers: Yeah. So there’s a lot of moving pieces right now, as you can imagine, in terms of the lumber price outlook, Mark, and a lot of it stems from this possibility of tariffs. What we do know is that duties are going to go up. It was going to be August and I think the government has pushed it back to November, but the lumber duties from Canada to the U.S. are going to go up from 14% to somewhere between 25% and 30% and I heard one firm estimate it could go as high as 40%. So duties are going to go up no matter what. There is a potential for tariffs to go up any day depending upon what Trump decides to do. And I think what that’s going to do is that’s going to — is it’s going to raise the floor on pricing for the Canadians.

And I heard a large Canadian producer a week or two ago make a comment that if there’s a duty put in place, they plan on raising their prices to their U.S. customers to capture 100% of that duty. Now, will they be able to get all that 100% of whatever the duty is or not? Who knows what will ultimately wind up happening, but their plan is to pass that along to consumers. And I’m frankly a little bit surprised that lumber markets haven’t moved on some of this talk because that — we’re not very far away from that. I think Trump’s talked about a February 1st tariff date. Now, he’s known to talk a lot and then choose to do other things, but we really haven’t seen much lumber price movement as it relates to the potential for tariffs.

But I think as we move through the year, the trend is going to be for prices to move higher, even without that tariff, given that the duty is going to be increasing pretty significantly come November. And as you know, BC produces, I don’t know, 6 billion board feet of lumber today and Canada exports, I don’t know, 25% of the U.S. market needs Canadian lumber. Roughly 25% of U.S. consumption comes from Canada. And I think after these duties get passed along, the BC mill, the median BC mill is going to need north of $500 lumber just to break even. And SPF today, Western’s probably, I don’t know, $450 more or less. So, when I think about the lumber price outlook, to me the risk is clearly to the upside from here, not to the downside. And this Canadian producer that I referenced at the start of my comments, they talked about lumber prices fluctuating between $425 and $500 for the year, and that actually feels like a reasonable forecast to me.

Mark Weintraub: Really interesting time. Thank you very much.

Eric Cremers: Thanks.

Operator: Your next question comes from a line of Matthew McKellar from RBC Capital Markets. Your line is open.

Matthew McKellar: Good morning. Thanks for all the detail and for taking my question. You touched on it briefly in your prepared remarks.

Eric Cremers: Good morning.

Matthew McKellar: I was wondering if you could just provide a little bit more detail on your forest carbon initiative, including how project redesign under the core carbon principles has gone and what you’re thinking in terms of timeline to achieve a sale of credits, given that you’re not expecting any sales this year.

Eric Cremers: Yeah. Like you said in the prepared remarks, we’re certainly pursuing a carbon credit project. We’re actively working with carbon credit buyers and top quality developers to design a project. Now, this project — buyers can be a targeted specific buyer. So, a project that is build-to-suit just for them. So, we’re exploring that. But we’re also looking to a project for the broader market. So, we’ll see where the best opportunity lies. We’re still in the due diligence phase of identifying how to take this project. But nonetheless we’ll develop a high quality project and we feel that would demand certainly higher pricing. But I guess from a timing perspective keep in mind these projects. They’re very complex.

They take time to develop anywhere almost probably 18 months to two years. With that timeline, that puts us probably closer to the end of 2026 to bring a project to market. So, we’re really — there’s much work to do there. But we’re actively pursuing it.

Matthew McKellar: Okay. Thanks very much. And just one last cleanup for me. Can you give us a sense of when you expect better clarity on what the lithium royalty rates in Arkansas will be and what that the size of that opportunity looks for you?

Eric Cremers: Yeah. So, that’s a tough one for us, given that we’re highly dependent upon, well, two things. One is, lithium pricing. And if you go look at what lithium prices, how volatile they’ve been, you’ll get a sense for it. It’s really hard to forecast where lithium is going. But then the other big unknown is what does the Arkansas Oil and Gas Commission, what royalty rate do they set for mineral rights owners in Arkansas? The range is somewhere between 2% and 12%. And so, the order of magnitude of profits that we get from our lithium deposit could vary dramatically. So, it’s just — we’re at the mercy of AOGC and we expect — they were supposed to resolve this, I believe, in the fourth quarter of last year and then there was talk of the first quarter, and that seems to have slipped. And so, who knows? We’re at the mercy of the AOGC. But I think it will get resolved by the end of the year.

Matthew McKellar: Okay. Thanks very much for the help. I’ll turn it back.

Eric Cremers: Thanks.

Operator: Your next question comes from the line of Kurt Yinger from D.A. Davidson. Your line is open.

Kurt Yinger: Great. Thank you, and good morning, everyone.

Eric Cremers: Good morning.

Kurt Yinger: I wanted to start off with the home center business. Sounded like that was a point of strength in the order book. Are you seeing orders kind of up nicely year-over-year or just maybe tracking with what you would expect seasonally? And I guess as you talk to those customers, do you get the sense that that’s advantageous buying, just at what are still kind of relatively depressed prices or actual kind of sell-through activity that they’re seeing improving as well?

Wayne Wasechek: No. I think the home center business, to us, it looks like it’s starting to turn. It’s always been very strong, very steady, very stable for us. They’ll take every one of our premium studs that we produce. What — the thing that gives me the most confidence is saying the home center business is turning, and I think, in fact, the entire R&R market is starting to turn. If you look at the home center comp store sales forecast for 2025, now this is the analysts that cover Home Depot and Lowe’s because they’re publicly traded. Of course, those analysts spend their life studying what happens to Home Depot and Lowe’s. The consensus is for both of those two companies to have positive comp store sales in 2025 in the order of 1% to 2%.

Now, 1% to 2% may not sound like a lot, but over the past two years, comp store sales for those two companies have been running negative and I think at the worst point, they were negative 5% more or less. So for them to be turning positive gives me gives me confidence that that 2025 looks to be like a pretty good year and it’s consistent with what they’re telling us that they’re seeing in their business that they expect to have a strong year. So lots of things can happen. It’s early in the year, but we think the outlook looks pretty good for R&R.

Kurt Yinger: Got it. Okay. And then second, I just wanted to follow up on the Southern harvest expectations for this year and I appreciate the comments on variability and land sales. I guess as we look at the 5.9 million tons, how should we think about kind of a level set range kind of sustainably going forward from here and does that 5.9 million kind of fall at the low end, the middle? How should we think about that?

Wayne Wasechek: Yeah. I — yeah. Look, I won’t give specific guidance on future periods or years, but what I would say is we look ahead. We do maintain and analyze a long-term harvest profile and we will say over the next, for example, 25 years of our current land base. Some years it’s higher, some years it’s slightly lower. But over that period of time, our total harvest volume can range between 7.1 and 8.2 million tons. So as you’ll see over time, we’ll have some variability.

Kurt Yinger: Okay. Perfect. Thank you for the color. I appreciate it.

Operator: At this time, I’m assuring there are no more questions. I’ll now turn the call back over to Wayne Wasechek.

Wayne Wasechek: Thank you. I appreciate your interest in PotlatchDeltic and have a great day.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.