Q1 2024 Americold Realty Trust Inc Earnings Call

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Operator: Greetings and welcome to Americold Realty Trust's first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Kevin Reed, Vice President, Investor Relations. Thank you, Mr. Reed. You may be

Greetings and welcome to the Americold Realty Trust's first quarter 'twenty 'twenty four earnings call. At this time all participants are in a listen only mode a brief.

Operator: A question and answer session will follow the formal presentation.

Operator: If anyone should the quiet all played out assistance during the conference. Please press Star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Mr. Kevin Reed Vice President Investor Relations. Thank you Mr. Reed you may begin.

Kevin Reed: Good afternoon. Thank you for joining us today for medical Realty Trust first quarter 2024 earnings Conference call. In addition to the press release distributed this afternoon, we have filed a supplemental package with additional detail on our results, which is available in the Investor Relations section on our website at Www dot.

Kevin Reed: Good afternoon. Thank you for joining us today for Americold Realty Trust's first quarter of 2024 earnings conference. In addition to the press release distributed this afternoon, we have filed a supplemental package with additional detail on our results, which is available in the investor relations section on our website at www.ir.americold.com. This afternoon's conference call will be hosted by Americold's Chief Executive Officer, George Chappelle, President of Americold, Rob Chambers, and Chief Financial Officer, Jay Wells.

Kevin Reed: IR Americold dot com.

Kevin Reed: Good afternoon conference call, so as to biomedical Chief Executive Officer, George Chappelle, President Americas, Rob Chambers, and Chief Financial Officer, Jay Wells management will make some prepared comments after which we will open up the call to your questions.

Kevin Reed: Management will make some prepared comments, after which we will open up the call to your questions. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. A number of factors could cause actual results to differ materially from those anticipated.

Kevin Reed: On todays call managements for band remarks may contain forward looking statements forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today.

Kevin Reed: A number of factors could cause actual results to differ materially from those anticipated.

Kevin Reed: Forward-looking statements are based on current expectations, assumptions, and beliefs, as well as information available to us at this time and speak only as of the date they are made, and management undertakes no obligation to update publicly any of them in light of new information or future events. During this call, we will discuss certain non-GAAP financial measures, including court EBITDA and AFFO. The full definitions of these non-GAAP financial measures and reconciliations to the comparable GAAP financial measures are contained in the supplemental information package available on the company's website. Now, I will turn the call over to George. Thank you.

Kevin Reed: Forward looking statements are based on current expectations.

Kevin Reed: Expectations assumptions and beliefs as well as information available to us at this time and speak only as of the date. They are made and management undertakes no obligation to update publicly any of them in light of new information or future events.

George: During this call, we will discuss certain non-GAAP financial measures, including core EBITDA and ASF.

George: The full definitions of these non-GAAP financial measures and reconciliations to the comparable GAAP financial measures are contained in the supplemental information package available on the company's lesser.

Kevin Reed: Now I will turn the call over to George.

George F. Chappelle: Thank you, Kevin, and thank you all for joining our first quarter 2024 Earnings Conference call. This afternoon, I am pleased to announce our financial results for the quarter and will highlight key operational metrics. I will then discuss our updated outlook for the remainder of the year. Rob will provide an update on our recent customer initiatives and growth activity, and Jay will provide a detailed walkthrough of our updated full year 2024 guide.

George: Kevin and thank you all for joining our first quarter 2024 earnings conference call.

Speaker Change: Good afternoon, I am pleased to announce our financial results for the quarter and will highlight key operational metrics I will then discuss our updated outlook for the remainder of the year.

George F. Chappelle: Rob will provide an update on our recent customer initiatives and growth activity and Jay will provide a detailed walk through our updated full year 2024 guidance.

George F. Chappelle: Let's begin with a snapshot of some key financial achievements for the quarter. We generated AFFO of $104.9 million, or $0.37 per share, an increase of over 28% on a per-share basis. Our performance on a constant currency basis was driven in large part by significant improvements in our same stored services margin, where we delivered a record first quarter of 10.7%. This was a 671 basis point improvement year over year, which resulted in an incremental $22 million of NOI, or roughly $0.08 a share, in the first quarter.

George F. Chappelle: Let's begin with a snapshot of some key financial achievements for the quarter.

George F. Chappelle: We generated <unk> of $104 $90 million or <unk> 37 per share an increase of over 28% on a per share basis year over year.

George F. Chappelle: Performance on a constant currency basis.

George F. Chappelle: Was driven in large part by significant improvements in our same store services margins, we delivered a record first quarter of 10, 7%.

George F. Chappelle: This was a 671 basis point improvement year over year, which resulted in an incremental $22 million of NOI or roughly <unk> <unk> per share in the first quarter as.

George F. Chappelle: As growth appears to be slowing across the industrial reed sector, we continue to demonstrate our ability to drive profitable organic growth across our platform. In the first quarter of 2023, we announced a $100 million strategic investment in our ERP infrastructure, which is showing early positive return. The system's first phase went live Monday of this week, and we've made numerous process improvements leading up to this launch that have resulted in enhanced revenue recognition, better labor and cost management, and helped drive our strong first quarter results.

George F. Chappelle: As growth appears to be slowing across the industrial REIT sector, we continue to demonstrate our ability to drive profitable organic growth across our platform.

George F. Chappelle: In the first quarter of 2023, we announced $100 million strategic investment in our ERP infrastructure, which is showing early positive returns.

George F. Chappelle: First phase went live Monday of this week and we have made numerous process improvements leading up to this launch that have resulted in enhanced revenue recognition better labor and cost management and helped drive our strong first quarter results. We are encouraged with the sustainable results to date and expect the system to deliver rich.

George F. Chappelle: We are encouraged by the sustainable results to date and expect the system to deliver returns in line with our previously disclosed expectations. It's important to note our new system comes with AI capability embedded in the software, which we can utilize and customize to ensure we exploit the technology to its maximum potential going forward. Now, to our priorities.

George F. Chappelle: Turned in line with our previously disclosed expectations.

George F. Chappelle: It's important to note our new system comes with AI capability embedded in the software, which we can utilize and customize to ensure we exploit the technology to its maximum potential going forward.

George F. Chappelle: Onto our priorities our laser focus on customer service has been one of the main reasons our properties stay in such high demand and this is evidenced in our same store economic occupancy, which helps solve it in the quarter at approximately 81%.

George F. Chappelle: Our laser focus on customer service has been one of the main reasons our properties stay in such high demand, and this is evident in our same store economic occupancy, which held solid in the quarter at approximately 81%. A key driver of our strong economic occupancy is continued progress selling fixed commitment contracts. Rent and storage revenue derived from fixed commitment storage contracts came in this quarter at 54.2%.

George F. Chappelle: A key driver of our strong economic occupancy has continued progress selling fixed commitment contracts rent and storage revenue derived from fixed commitment storage contract came in this quarter at 54, 2% 200 basis points higher than the previous quarter and a 24% increase over.

George F. Chappelle: 200 basis points higher than the previous quarter and a 24% increase over the first quarter of 2023. We continue to move customers to these contracts, which helps smooth out the seasonality in our business and also acts as a leading indicator of positive things to come as customers sign them in anticipation of volume growth in the future. Our second priority, labor management, is one in which we have made significant strides in recent quarters.

George F. Chappelle: The first quarter of 2023.

George F. Chappelle: We continue to move customers to these contracts, which helps smooth out the seasonality in our business and also acts as a leading indicator of positive things to come as customers assignment in anticipation of volume growth in the future.

George F. Chappelle: Our second priority Labor management is one in which we have made significant strides in recent quarters continued.

George F. Chappelle: Continued improvement in our hiring and retention metrics has resulted in a perm to temp hours ratio of 78-22, which is a three percentage point year-over-year increase in a company record, putting us well on our way to our publicly stated goal of 80-20. Additionally, we continue to make progress on our turnover, which is 40% and is now in line with pre-COVID levels and an 800 basis point drop since last quarter. Lastly, our percentage of associates with less than 12 months of service now stands at 29%.

George F. Chappelle: The improvement of our hiring and retention metrics have resulted in a firm to temp hours ratio of 70 822.

George F. Chappelle: Which is a three percentage point year over year increase and a company record putting us well on our way to our publicly stated goal of 820.

George F. Chappelle: Additionally, we continue to make progress on our turnover, which is 40% and is now in line with pre COVID-19 levels, and an 800 basis point drop since last quarter Lastly, our percentage of associates with less than 12 months of service now stands at 29%. This has improved 300 basis.

George F. Chappelle: This has improved 300 basis points since last quarter, and it's approaching the pre-COVID level of 23%. We introduced disclosure around labor management two plus years ago, and at the time, we said making progress was a prerequisite to establishing sustainable, reliable services, having now largely recovered our labor metrics to pre-COVID levels, supported by new leaders, systems, and processes, are saying store constant currency services margins significantly improved to 10.7%, which is a first quarter record for Americold, resulting in an incremental $22 million of NOI or roughly 8 cents of AFFO per share year over year.

George F. Chappelle: Points since last quarter and is approaching the pre COVID-19 level of 23%, we introduced disclosure around labor management, two plus years ago and at the time, we said, making progress was a prerequisite to establishing sustainable reliable services margins, having now largely recovered our labor metrics to pre.

George F. Chappelle: Covid levels supported by new leaders systems and processes, our same store constant currency services margin significantly improved to 10, 7%, which is a first quarter record for americold, resulting in an incremental $22 million of NOI or roughly eight.

George F. Chappelle: <unk> of <unk> per share year over year the.

George F. Chappelle: The commercial and operational infrastructure we have put in place gives us the confidence that improved service margins will be sustainable and sets us up extremely well as consumer demand increases. Moving to pricing, in the first quarter, same store rent and storage revenue per economically occupied pallet on a constant currency basis increased by 3.9% versus the prior year, and same store services revenue per throughput pallet on a constant currency basis increased by 10.8%.

George F. Chappelle: The commercial and operational infrastructure, we have put in place gives us the confidence that improved services margins will be sustainable and sets us up extremely well as consumer demand increases.

George F. Chappelle: Moving to pricing in the first quarter same store rent and storage revenue for economic occupied pallet on a constant currency basis increased by three 9% versus the prior year.

George F. Chappelle: And the same store services revenue per throughput pallet on a constant currency basis increased by 10, 8%.

George F. Chappelle: Both were driven by pricing we put in place in the second half of 2023, coupled with the general rate increases at the start of this year. However, pricing comps are expected to compress in the second half of this year, as we anticipate a relatively benign environment associated with inflation-based rate action.

George F. Chappelle: Both were driven by pricing we put in place in the second half of 2023, coupled with the general rate increases at the start of this year.

George F. Chappelle: Reising comps are expected to compress in the second half of this year as we anticipate a relatively benign environment associated with inflation base rate actions as always we will continue to take a surgical approach to our pricing initiatives to continue to drive margin dollars and increased margin percent.

George F. Chappelle: As always, we will continue to take a surgical approach to our pricing initiatives to continue to drive margin dollars and increase margin precision. Moving to development, I'm very happy to report progress on our two strategic partnerships. First, we broke ground last week in Kansas City on a $127 million project on the Canadian Pacific Kansas City Railway. This is the inaugural project in our partnership and will deliver unique value-added services enabling lower cost, reliable, and more environmentally-friendly storage and transport across much of North America. Second, we broke ground earlier this week in Dubai in support of our partnership with DP World. The $35 million project will support both the local Dubai market and the surrounding area redistribution.

George F. Chappelle: We are very pleased to have both partnerships' inaugural projects under active construction. Lastly, today, we are announcing a new lower risk, highly accretive expansion in Sydney, Australia. The 36 million US dollar project will support a large Australian retailer already located on the site as we enable their growth. We expect this expansion to be completed in Q1 of 2026. Turning to our full-year guidance, as a result of the progress we have made driving organic growth through improvements in productivity, labor management, and pricing, in combination with our ability to manage our variable cost structure, we are raising our full-year 2024 AFFO per share guidance to a new range of $1.38 to $1.46, with a midpoint of $1.42, an increase of five cents per share.

George F. Chappelle: Moving to development I'm very happy to report progress on our two strategic partnerships for US we broke ground last week in Kansas City on $127 million project on the Canadian Pacific, Kansas City Rail line.

George F. Chappelle: This is the inaugural project and our partnership and we will deliver unique value add services, enabling lower cost reliable and more environmentally friendly storage and transport across much of North America.

George F. Chappelle: Second we broke ground earlier this week in Dubai in support of our partnership with DP World of $35 million project will support both the local Dubai market and the surrounding area redistribution.

George F. Chappelle: We are very pleased to have both partnerships inaugural projects under active construction.

George F. Chappelle: Lastly, today, we are announcing a new lower risk highly accretive expansion in Sydney, Australia.

George F. Chappelle: The 36 million U S. Dollar project will support a large Australia retailer already located on the site as we enable their growth. We expect this expansion to be completed in Q1 of 2026.

George F. Chappelle: Turning to our full year guidance as a result of the progress we have made driving organic growth through improvements in productivity labor management and pricing in combination with our ability to manage our variable cost structure. We are raising our full year 2024, <unk> per share guidance to a new range.

George F. Chappelle: And the $1 38 to $1 46, with a midpoint of $1 42, an increase of <unk> <unk> per share.

George F. Chappelle: This represents an approximately 12% increase from 2023 and an approximately 28% increase from 2022. Additionally, at the midpoint of the new range, our same store NOI growth guide has increased roughly 300 basis points to over 11%. Before I turn it over to Rob, let me comment on RVSG. In April, we posted our fifth annual ESG report on our website. We are very pleased to publish the most comprehensive report in the cold storage industry.

George F. Chappelle: This represents an approximately a 12% increase from 2023 and an approximately 28% increase from 2022 at the midpoint of the new range. Our same store NOI growth guide has increased roughly 300 basis points to over 11%.

George F. Chappelle: Before I turn it over to Rob Let me comment on our ESG initiatives in April we posted our fifth annual ESG report on our website. We are very pleased to publish the most comprehensive report in the cold storage industry. Ah report focuses on our efforts in promoting energy excellence through innovation and new technology adoption.

George F. Chappelle: Our report focuses on our efforts in promoting energy excellence through innovation and new technology adoption, investing in our associates, and giving back to our community. I encourage you to read this robust sustainability report as it details Americold's sustainability goals and our unwavering commitment to corporate responsibility. With that, I will turn it over to Rob.

George F. Chappelle: Investing in our associates and giving back to our communities I encourage you to read this robust sustainability report as it details americold sustainability goals and our unwavering commitment to corporate responsibility with that I will turn it over to Rob.

Rob: Thank you George.

Robert Scott Chambers: As George mentioned, I will provide an update on our recent customer initiatives in the Growth Act and the Pricing Initiative. We remain very focused on our pricing initiatives and are working diligently to ensure that we both offset inflationary pressures and price our business to reflect the value of the service we provide to our customers. In the first quarter, same store rent and storage revenue per economic occupied pallet on a constant currency basis increased by 3.9% versus the prior year, 5% excluding the reduction of certain power surcharges.

Rob: George mentioned I will provide an update on our recent customer initiatives and growth activity.

Robert Scott Chambers: Pricing initiatives.

Robert Scott Chambers: We remain very focused on our pricing initiatives and are working diligently to ensure that we both offset inflationary pressures and price our business to reflect the value of the service we provide to our customers.

Robert Scott Chambers: In the first quarter same store rent and storage revenue per economic occupied pallet on a constant currency basis increased by three 9% versus the prior year.

Robert Scott Chambers: 5%, excluding the reduction of certain power surcharges.

Robert Scott Chambers: Same store, constant currency services revenue per throughput pallet increased by 10.8%. Our pricing actions in 2024 are driven first by as our longer-term customer agreements come up for renewal. We continue to revisit our pricing structures in order to ensure renewals are priced at market rates, inclusive of the inflationary impacts over the past several years.

Robert Scott Chambers: I'm store constant currency services revenue per throughput pallet increased by 10, 8%.

Robert Scott Chambers: Pricing actions in 2024 are driven by <unk>.

Robert Scott Chambers: First.

Robert Scott Chambers: As our longer term customer agreements come up for renewal.

Robert Scott Chambers: We continue to revisit our pricing structures in order to ensure renewals are priced at market rates inclusive of the inflationary impacts over the past several years.

Robert Scott Chambers: We have made great progress in this area. Second, we continue to benefit from our in-place annual contractual rate escalations on these current customer agreements. The majority of our annual increases, or GRIs, for 2024 went in during Q1. Third, as it relates to longer-term agreements.

Robert Scott Chambers: We have made great progress in this area.

Robert Scott Chambers: Second we continued to benefit from our in place annual contractual rent Escalations on these current customer agreements.

Robert Scott Chambers: The majority of our annual increases or <unk> for 2024 went in during Q1.

Robert Scott Chambers: Third as it relates to longer term agreements, we will maintain our in year targeted pricing in power surcharge initiatives to address non inflation, which has moderated in certain areas of our business.

Robert Scott Chambers: We will maintain our in-year targeted pricing and power surcharge initiative to address known inflation, which is moderated in certain areas of our business. And fourth, all new business and shorter-term agreements are being priced with a current and forward view of our cost structure. Within our global warehouse segment, we had no material changes to the composition of our top 25 customers, who account for approximately 50% of our global warehouse revenue on a pro forma basis. Our churn rate continues to remain low at approximately 3% of total warehouse revenues, consistent with historical churn rates.

Robert Scott Chambers: And fourth all new business and shorter term agreements are being priced to current and forward view of our cost structure.

Robert Scott Chambers: Within our global warehouse segment, we had no material changes to the composition of our top 25 customers.

Robert Scott Chambers: Who account for approximately 50% of our global warehouse revenue on a pro forma basis.

Robert Scott Chambers: Our churn rate continues to remain low at approximately 3%.

Robert Scott Chambers: Total warehouse revenues consistent with historical churn rates.

Robert Scott Chambers: We have also continued our upward trajectory regarding fixed commitments.

Robert Scott Chambers: We have also continued our upward trajectory regarding fixed commitment. This quarter, rent and storage revenue derived from fixed commitment storage contracts came in at 54.2%, an increase of $21.1 million on an annual basis. 12th straight quarterly record for America.

Robert Scott Chambers: This quarter rent and storage revenue derived from fixed commitment storage contracts came in at 54, 2%.

Robert Scott Chambers: An increase of $21 1 million on an annual basis.

Robert Scott Chambers: 12th straight quarterly record for Americold.

Robert Scott Chambers: Growth and development.

Robert Scott Chambers: Growth and Development. Regarding growth, we continue to evaluate and execute on development opportunities across the three primary areas of focus we have mentioned in the past, our CPKC and DP World collaborations, expansion projects, and customer-dedicated Build to Suit Development with regard to our strategic collaboration. First, as George mentioned last week, we broke ground on our flagship development with CPKC and Kansas. As a reminder, we're building a conventional multi-customer major market distribution center on CPKC's Intermodal Terminal in Kansas City that will have approximately 22,000 pallet positions. 14 million cubic feet for a total investment of $127 million.

Robert Scott Chambers: Regarding growth, we continued to evaluate and execute on development opportunities across our three primary areas of focus we have mentioned in the past.

Robert Scott Chambers: Our CPE Casey and DP world collaborations expansion projects.

Robert Scott Chambers: Customer dedicated build to suit developments.

Robert Scott Chambers: With regard to our strategic collaborations burst as George mentioned last week, we broke ground on our flagship development well see dkc in Kansas City.

Robert Scott Chambers: As a reminder, we are building a conventional multi customer major market distribution center.

Robert Scott Chambers: <unk> intermodal terminal in Kansas City that will be approximately 22000 pallet positions.

Robert Scott Chambers: <unk> thousand 14 million cubic feet for a total in Boston about $127 million.

Robert Scott Chambers: We also broke ground on our flagship building.

Robert Scott Chambers: We also broke ground on our flagship building with our other strategic partnership, DP World. As a reminder, in December, we announced our plans through our RSA JV to build a conventional multi-customer major market distribution center in Dubai. D.P. World's Port of Jebel Ali Free Zone for 35 million U.S. dollars. This development in Jebel Ali will be the first of its kind to combine Americold's global temperature-controlled infrastructure with DP Worldport's infrastructure and end-to-end logistics solutions. This strategic combination will result in unprecedented optimization of temperature-sensitive food flows in and out of the countries of the Gulf Cooperation Council and provide redistribution opportunities across the region.

Robert Scott Chambers: Other strategic partnership DP World.

Robert Scott Chambers: As a reminder, in December we announced our plans through our RSA JV to build a conventional multi customer major market distribution center in Dubai and.

Robert Scott Chambers: DP World Port of Jebel Ali Free zone from 35 million U S dollars.

Robert Scott Chambers: This development in Jebel Ali will be the first of its kind to combine americold global temperature controlled infrastructure with.

Robert Scott Chambers: With DP world support infrastructure and logistics solutions.

Robert Scott Chambers: The strategic combination will resolve in unprecedented optimization of temperature sensitive food flows in and out of the countries on the Gulf Cooperation Council.

Robert Scott Chambers: I'll provide redistribution opportunities across the region.

Robert Scott Chambers: Our collaboration with CPKC and DP World illustrates Americold's unique ability to create value by working with our global leaders in adjacent areas of the supply chain. We expect our investment in these partnerships to grow significantly over the next few years as we continue to identify opportunities to jointly grow our business. Through these relationships, we have a $500 million to $1 billion potential development pipeline. With respect to expansion and major markets, as George mentioned, today we are announcing a new dedicated conventional expansion project in Sydney, Australia, anchored by one of the country's largest grocers.

Robert Scott Chambers: Our collaboration with CDK C and D P world illustrate americold unique ability.

Robert Scott Chambers: Value by working with our global leaders in adjacent areas with supply chain.

Robert Scott Chambers: We expect our investment in these partnerships to grow significantly over the next few years as we continue to identify opportunities to jointly grow our business.

Robert Scott Chambers: Through these relationships, we have a 500 million to a 1 billion dollar potential development pipeline.

Robert Scott Chambers: With respect to expansion in major markets as George mentioned.

Robert Scott Chambers: We are announcing a new dedicated conventional expansion project in Sydney, Australia.

Robert Scott Chambers: Anchored by one of the country's largest crushers.

Robert Scott Chambers: This expansion will add mission-critical infrastructure in a capacity constrained market, currently operating at greater than 90% occupancy, and is anticipated to add approximately 13,400 incremental pallets to our current capacity of roughly 18,700 pallets in that market. The total investment will be approximately 36 million U.S. dollars. We're excited about both the CPKC and DP World developments and the Sydney expansion and look forward to updating you on other future plans. We continue to make progress, accelerating the five development projects that were completed last year.

Robert Scott Chambers: This expansion will add mission critical infrastructure in a capacity constrained market.

Robert Scott Chambers: Currently operating at greater than 90% occupancy and.

Robert Scott Chambers: And is anticipated to add approximately 13400 incremental pilots.

Robert Scott Chambers: So our current capacity of roughly 18700 pounds in that market.

Robert Scott Chambers: The total investment will be approximately 36 million U S dollars.

Robert Scott Chambers: We are excited about both CPE, Casey and DP World developments.

Robert Scott Chambers: And the Sydney expansion and look forward to updating you on other future plan soon.

Robert Scott Chambers: Three of these automated facilities are supporting food manufacturing in Atlanta, Georgia, Russellville, Arkansas, and Spearwood, Australia, and our proven solutions are performing well and delivering in line with expectations. Our two customer-dedicated automated retail distribution facilities in Lancaster, Pennsylvania, and Plainville, Connecticut, while completed, continue to ramp, albeit slower than expected. As we stated last quarter, we are being thoughtful in the ramp-up, given the level of complexity and the importance of customer service. We are very encouraged by the significant and sustainable organic growth that we are delivering, as well as the pace and scale of our inorganic growth activities. Now, I'll turn it over to Jay.

Robert Scott Chambers: Automation update.

Jay: Continue to make progress ramping the five development projects that were completed last year.

Robert Scott Chambers: Three of these automated facilities are supporting food manufacturing.

Robert Scott Chambers: Onto Georgia, Russellville, Arkansas, and Speer with Australia.

Jay: Proven solutions are performing well and delivering in line with expectations.

Jay: Our two customer dedicated automated retail distribution facilities in Lancaster, Pennsylvania, and playing ball, Connecticut, while completing continue to ramp, albeit slower than expected.

Jay: As we stated last quarter, we are being thoughtful in our ramp up given the level of complexity and the importance of customer service.

Jay: We're very encouraged by the significant and sustainable organic growth we are delivering as.

Jay: As well as the pace and scale of our inorganic growth activities now.

Robert Scott Chambers: Now I'll turn it over to Jay.

Jay: Thank you Rob today, I'll discuss our capital position liquidity and update our full year guidance, beginning with our balance sheet at the end of the quarter total net debt outstanding was $3 $2 billion, we had total liquidity of $732 5 million.

Jay Wells: Today I will discuss our capital position, liquidity, and update our full year guidance, beginning with our balance sheet. At the end of the quarter, total net debt outstanding was $3.2 billion.

Jay Wells: We had total liquidity of $732.5 million, consisting of cash on hand and revolver availability, and our net debt to perform a court EBITDA was approximately 5.4 times. As we discussed last quarter, our previously announced expansion in Allentown, Pennsylvania, our Greenfield developments in Kansas City, Missouri, and Dubai, and our new expansion project in Sydney, Australia, will increase investment spend in the second quarter of this year. Please see page 33 of the IR supplement for additional details on our development projects.

Jay Wells: Consistent with cash on hand, and revolver availability and our net debt to pro forma core EBITDA was approximately five four times.

Jay Wells: As we discussed last quarter, our previously announced expansion in Allentown, Pennsylvania, our Greenfield developments in Kansas City, Missouri in Dubai, and our new expansion project in Sydney, Australia will increase investments than in the second quarter of this year.

Jay Wells: Please see page 33 of the iron supplement for additional details on our development projects.

Jay Wells: Tipping for a full year of 2024 guidance, we are increasing our FFO per share to the range of $1.38 to $1.46, an approximate 4% increase at the midpoint and approximately a 12% increase from 2023's AFO per share results, for reviewing individual components of this guidance that are set forth on page 35 of the IR supplement. Let me quickly remind everyone of the new 2024 same-store goal for the global warehouse segment. This pool now has 226 facilities, which is approximately 96% of the total number of properties in our warehouse segment. Summary of the 2024 Same Stroke Pool Historic Performance for the first quarter of 2023 is presented on page 32 of the IR subcommittee.

Jay Wells: For a full year of 2024 guidance, we are increasing our <unk> per share to the range of $1 38 to $1 46.

Jay Wells: An approximate 4% increase at the midpoint and approximately a 12% increase from 2023 <unk> per share result.

Jay Wells: Before reviewing the individual components of this guidance that are set forth on page 35 of the Iron supplement let me quickly remind everyone of the new 2024 same store pool for the global warehouse segment.

Jay Wells: This fall now has 226 facilities, which is approximately 96% of the total number of properties in our warehouse segment.

Jay Wells: A summary of the 2024 same store pool historic performance for the first quarter of 2023 is presented on page 32 of the IR supplement.

Jay Wells: We have 10 facilities that are in our 2024 non same store pool.

Jay Wells: We have 10 facilities that are in our 2024 non-same store pool. Now, turning to the individual components of our updated AFFO guidance, and starting with our global warehouse segment, we still expect full-year 2024 same store concurrency revenue growth to be in the range of 2.5 to 5.5%. Let me provide more detail around the key drivers of this updated guide.

Jay Wells: Now turning to the individual components of our updated <unk> guidance and starting with our global warehouse segment. We still expect full year 2024 same store constant currency revenue growth to be in the range of two five to five 5%.

Jay Wells: Let me provide more detail around the key drivers of this updated guidance.

Jay Wells: With respect to occupancy and throughput volumes, we still expect economic occupancy to be in the range of zero to a decline of 100 basis points compared to 2023, and throughput volumes to decrease at the range of 1% to 3%, as we are forecasting improved transit throughput versus a 7.6% decline in the first quarter of 2024. With respect to pricing, we still expect constant currency rent and storage revenue for economic occupied pallet growth to be in the range of 3 to 4 percent, and Compto Currency Service revenue for throughput pallet growth to be in the range of 7-8%.

Jay Wells: With respect to occupancy and throughput volumes, we still expect economic occupancy to be in the range of zero to a decline of 100 basis points compared to 2023 and throughput volume to decrease in the range of 1% to 3%.

Jay Wells: As we are forecasting an improved trend in throughput versus the seven 6% decline for the first quarter of 2024.

Jay Wells: With respect to pricing, we still expect constant currency rent and storage revenue for economic occupied pallet growth to be in the range of 3% to 4% in constant currency service revenue or throughput pallet growth to be in the range of 7% to 8%.

Jay Wells: As a reminder, the pricing guidance reflects our continued pricing and power surcharge initiative to cover known inflation. It also reflects our annual contractual escalation and GRI step-ups and the commercialization of market-based pricing for contracts that we underwrite or renew. For the full year, we are increasing our same-store-concurrency NOI growth to now be in the range of 9.5% to 13%. This increase is being driven by higher services

Jay Wells: As a reminder, the pricing guidance reflects our continued pricing power surcharge initiatives to cover known inflation.

Jay Wells: It also reflects our annual contractual escalation in GRS step ups and the commercial.

Jay Wells: <unk> of market based pricing for contracts that we underwrite arena.

Jay Wells: For the full year, we are increasing our same store constant currency NOI growth to now be in the range of nine 5% to 13%.

Jay Wells: This increase is being driven by higher services margins.

Jay Wells: Just three to six months ago, our hope was to exit 2024 with a run rate services margin of 9%. Based on productivity and pricing, supported by new systems and processes, we now believe we can deliver services margins of 9% for the full year of 2020. Regarding the new 2024 non-same-store pool, as can be seen on page 30 of the IRS supplement, the new non-same-store pool generated negative $3.5 million of NOI in the first quarter of 2024.

Jay Wells: Just three to six months ago, our hope is to exit 2024, with a run rate services margin of 9%.

Jay Wells: Based on productivity and pricing supported by new systems and processes. We now believe we can deliver services margins of 9% for the full year 2024.

Jay Wells: In regards to the new 2024, non same store pool as can be seen on page 30 of the iron supplement.

Jay Wells: Non same store pool generated negative $3 5 million.

Jay Wells: NOI in the first quarter 2024.

Jay Wells: For the full year 2024, we now expect the non-fame store pool to generate NOI in the range of negative $7 million to positive $1 million. As Rob previously mentioned, our automated retail distribution facilities in Lancaster, Pennsylvania, and Plainville, Connecticut are ramping slower than expected.

Jay Wells: For the full year 2024, we now expect our non same store pool to generate NOI in the range of negative $7 million to positive $1 million as Rob previously mentioned, our automated retail distribution facilities in Lancaster, Pennsylvania, and Plainville, Connecticut are ramping slower than expect.

Jay Wells: However, we still anticipate to deliver our stated return on invested capital.

Jay Wells: However, we still anticipate delivering our stated return on investment capital. Turning to our managed and transportation segments, NOI. For the full year, we're lowering the expected range from $45 to $50 million to a new range of $42 million to $47 million versus approximately $48 million of NOI in 2023 due to continued softness in the freight market. Regarding SG&A expense for the full year, we still expect total SG&A to be in the range of $247 million to $261 million, inclusive of $23 million to $25 million of stock compensation expense and $5 million to $7 million of ERP amortization.

Jay Wells: Turning to our managed and transportation segments NOI for the full year, we are lowering the expected range from $45 million to $50 million to a new range of 42 million to $47 million versus approximately $48 million of NOI in 2023 do.

Jay Wells: Due to continued softness in the freight market.

Jay Wells: Regarding SG&A expense for the full year, we still expect total SG&A to be in the range of $247 million to $261 million inclusive.

Jay Wells: Inclusive of 23 million to $25 million of stock compensation expense, and 5 million to $7 million ERP amortization, but.

Jay Wells: For the full year, we still expect Core SG&A to be in the range of $219 million to $229 million. Turning to our interest expense for the full year, we are lowering our interest rate expense range to approximately $135 million to $143 million, a reduction of $6 million at the mid-term. With respect to full-year cash taxes, there was no change to the 2024 cash taxes range of $9 million to $12 million. As a reminder, most of the corporate income taxes we pay at Americold relate to our international operations.

Jay Wells: For the full year, we still expect for SG&A to be in the range of $219 million to $229 million.

Jay Wells: Turning to our interest expense for the full year, we are lowering our interest rate expense range to approximately $135 million to $143 million a reduction of $6 million at the midpoint.

Jay Wells: With respect to full year cash taxes. There is no change to the 2020 for cash taxes range of $9 million to $12 million. As a reminder, most of the corporate income taxes, we pay on a miracle relate to our international operations.

Jay Wells: Q1 2024 maintenance capital expenditures were $17.9 million, a $1.7 million increase versus Q1 2023. However, there was no change to our Maintenance Capital Expenditure Guide. As a reminder, for the full year, we expect this investment to be approximately $80 million to $90 million. Regarding developments, we reiterate our expectation to announce development starts aggregating between $200 million to $300 million in 2024. Please keep in mind that our guidance does not include the impact of acquisitions, dispositions, and capital markets activity beyond that which has been previously announced, and please refer to our IR supplement for detail on the additional assumptions embedded in this guidance. Now, let me turn the call back to George for some closing remarks.

Jay Wells: Q1, 2020 for maintenance capital expenditures was $17 $9 million and $1 $7 million increase versus Q1 2023.

Jay Wells: There is no change to our maintenance capital expenditure guidance as a reminder, for the full year. We expect this investment to be approximately 80 million to $90 million.

Jay Wells: Regarding developments, we reiterate our expectation to announce development starts aggregating between $200 million to $300 million in 2024.

Jay Wells: Please keep in mind that our guidance does not include the impact of acquisitions dispositions capital markets activity beyond that which has been previously announced and please refer to our iron supplement for detail on the additional assumptions embedded in this guidance now.

Jay Wells: Now, let me turn the call back to George for some closing remarks.

George F. Chappelle: Thanks, Jay. It's been a great quarter for growth at Americold. Breaking ground on developments with our two strategic partners, CPKC and DP World, in addition to announcing a strategic expansion in Sydney, Australia, we continue to fuel our development pipeline for future profitable growth. What really separates Americold from most industrial reefs is the ability for our logistics operating company to generate organic growth through delivering mission-critical services in the global food supply chain as efficiently as possible.

George: Thanks, Jay it's been a great quarter for growth in Americold with breaking ground on developments with our two strategic partners see PKC and DP World. In addition to announcing a strategic expansion in Sydney, Australia, We continue to fuel our development pipeline for future profitable growth.

George F. Chappelle: What really separates Americold for most industrial REIT is the ability for our logistics operating company to generate organic growth through delivering mission critical services in the global food supply chain as efficiently as possible. The labor metrics, we have disclosed in track for over two years now have correlated to the increased Maher.

George F. Chappelle: The labor metrics we've disclosed and tracked for over two years now have correlated to the increased margins we said would come with a productive, stabilized workforce, which has allowed us to accelerate our 9% services margins goal by almost a full year. The improvement in metrics speaks to the sustainability of warehouse services results and the solid foundation we have built beneath it. The early returns on process improvement as part of our ERP implementation speak to the productivity and organic growth still ahead of us, even as we guide towards a second double-digit year of NOI growth in our same store pool.

George F. Chappelle: And as we said would come with a productive stabilize workforce, which has allowed us to accelerate our 9% services margins go like almost a full year.

George F. Chappelle: The improvement in metrics speaks to the sustainability of a warehouse services results and the solid foundation, we have built believe them.

George F. Chappelle: The early returns on process improvement is part of our ERP implementation speak to the productivity and organic growth still ahead of us even as we guide towards the second double digit year of NOI growth in our same store pool.

George F. Chappelle: It's worth noting our results are accelerating at a time when consumer demand has been receding. When consumer demand does accelerate, we believe our investments in new systems and processes will prepare us to grow profit faster and more sustainably than many other operators. I want to give thanks to the over 15,000 associates around the world for their unwavering support and dedication who bring their best-in-class customer service with them every day. For this, I say thank you for all your efforts. We could not do this without you. Thank you again for joining us today, and we will now open the call to your questions.

George F. Chappelle: It's worth noting our results are accelerating at a time when consumer demand has been receding when consumer demand does accelerate we believe our investments in new systems and processes will prepare us to grow profit faster and more sustainably than many other operators.

George F. Chappelle: I wanted to give thanks to the over 15000 associates around the world for their unwavering support and dedication and who bring their best in class customer service with them every day.

George F. Chappelle: So this I say thank you for all your efforts we could not do this without you.

George F. Chappelle: You again for joining us today, and we will now open the call for your questions operator.

George F. Chappelle: Yeah.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keyboard. The confirmation tone will indicate your line is in the question queue. You may press start to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys.

Speaker Change: Thank you.

Speaker Change: We will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad are.

Operator: Confirmation tone will indicate your line is in the question queue human start to if you would like to move your questions from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys as a reminder, please restrict yourself to one question and one follow up.

Operator: As a reminder, please restrict yourself to one question and one follow-up. One moment, please, while you poll for questions. The first question comes from the line of Samir Khanal with Evercore ISI. Please go ahead.

Operator: One moment, please pull for questions.

Samir Upadhyay Khanal: The first question comes from the line of Somebody's Canal, but Evercore ISI. Please go ahead.

George F. Chappelle: Hey, good afternoon, George. Maybe on the occupancy front, maybe tell us, like, in one key, where occupancy ended up versus your expectations? And I guess how should we think about the cadence of the trajectory of occupancy through the balance of the year. Thanks.

Samir Upadhyay Khanal: Hey, good afternoon, George maybe on the occupancy front.

George F. Chappelle: Let me tell us like in <unk>, where did occupancy ended up versus your expectation.

George F. Chappelle: And I guess, how should we think about the cadence or the trajectory back Betsy.

George F. Chappelle: Through the balance of the year.

George F. Chappelle: Yeah, good question, Samir. It came in 345 basis points below the prior year, which was exactly in line with expectations. If you look at the path to the midpoint of our current guide, our revised guide, we would have to increase economic occupancy by 400 basis points sequentially over the next three quarters. We think that's very achievable, and that's why we haven't changed our occupancy guide, so we feel really good about it. Yeah, keep in mind; we

George: Good good questions Samir it came in 345 basis points.

George F. Chappelle: Below prior year that was exactly in line with expectations.

George F. Chappelle: If you look at the path to the mid point of our current guide our revised guide we would have to increase economic occupancy 400 basis points sequentially in the next three quarters. We think that's very achievable and that's why we haven't changed our occupancy guidance. So we feel really good about it yeah keep in mind, we are laughing.

George F. Chappelle: Yeah, keep in mind we are lapping a bill that is not normally part of our seasonality, and what you're really getting back to is more of a normal seasonality of our office that you've seen here.

George F. Chappelle: Bill that is not normally as part of our seasonality and where you're really getting back to as more of a more normal seasonality of our off let's say that you've seen here.

George F. Chappelle: Okay, got it. And I guess the other topic, you know, investors are focused on is clearly throughput. So maybe talk about kind of what you're seeing. How do you think throughput will sort of, will play out, you know, let's say in the second quarter? I know you've talked about an improvement in the second half. Is that sort of what you're still expecting? All right.

George F. Chappelle: Okay got it and I guess the other topic.

George F. Chappelle: You know investors are focused on is clearly throughput so maybe talk around kind of what you're seeing.

George F. Chappelle: How do you think throughput will sort of.

George F. Chappelle: It will play out, let's say in the second quarter.

George F. Chappelle: You've talked about an improvement in the second half is that sort of what you're still expecting.

George F. Chappelle: It is, Samir. And you know, we were down 760 bpsi over here in the first quarter. That was exactly in line with where we said we would be. We said the first quarter would very closely mirror the fourth quarter of last year, and it did. We're not revising the guide because we think it's very much in line with the original guide we put out, but one piece of good news is that in April, for the first time, we saw a year-over-year improvement in throughput.

Speaker Change: Oh it is.

George F. Chappelle: And you know we were down 760 bps year over year in the first quarter that was exactly in line with where we said we would be we said the first quarter wood.

George F. Chappelle: Very closely mirrored the fourth quarter of last year and it did and we're not revising.

George F. Chappelle: And the guard because we think it's very much in line with the original guidance, we put out but one piece of good news is really in April for.

George F. Chappelle: For the first time, we saw a year over year improvement in throughput. So if you remember we signaled that that might happen closer to the end of the second quarter, we're seeing it a little bit more towards the beginning of the second quarter. So that's some positive news.

George F. Chappelle: So, if you remember, we signaled that that might happen closer to the end of the second quarter. We're seeing it a little bit more towards the beginning of the second quarter, so that's some positive news. No change to the guide, in line with our previous expectations, but a little bit of positive news comes through in April.

George F. Chappelle: No change to the guidance in line with our previous expectations, but a little bit of positive news comes through in April.

Speaker Change: Thank you next.

Operator: Thank you. The next question comes from the line of Josh Dennerlein with Bank of America. Please go ahead.

George F. Chappelle: Next question comes from the line of Josh <unk> with Bank of America. Please go ahead.

George F. Chappelle: Yeah, guys, thanks for the time. I just want to explore the ERP rollout more. Just when did that come online in the quarter? And then, I guess, as we think about the balance of the year, what kind of improvements or things should we be looking out for as it kind of is fully rolled out? And that goes into that.

Joshua Dennerlein: Yeah, Hey, guys. Thanks for the time I just wanted to explore the ERP rollout more.

George F. Chappelle: Could you kind of what when did that come on line in the quarter and then like.

George F. Chappelle: Yes, as we think about the balance of the year, what kind of improvements or where things should we be looking out for as you as you kind of just fully rolled out and goes into the system.

George F. Chappelle: Yeah, I'll maybe hand it over to Jay for a couple comments, but it didn't go live in the first quarter. It went live on Monday of this week, actually.

Speaker Change: Yeah, I'll, maybe hand, it over to Jay for a couple of comments, but it didn't go live in the first quarter went live on Monday of this week actually what we cited for the improvements that impacted the first quarter, a very positively where since the first of the year, we've been working on process change and process improvement.

Jay Wells: Ahead of the implementation of the new software.

George F. Chappelle: What we cited for the improvements that impacted the first quarter very positively were, since the first of the year, we've been working on process change and process improvement ahead of the implementation of the new software. To make the software as effective as possible, we needed to change the way we work to match the software, and starting that work at the beginning of the year accelerated results that we believed the system would have brought, but the process improvement brought them quicker.

Jay Wells: To make the software as effective as possible we needed to change the way we work to match the software and starting that work.

George F. Chappelle: In the beginning of the year.

George F. Chappelle: <unk> accelerated results that we believe the system would have brought but actually the process improvement brought them quicker.

George F. Chappelle: We believe the system is 100% on track to deliver the returns that.

George F. Chappelle: That we identified when we when we made everybody where the investment so we're right on track with the plan and Jim.

George F. Chappelle: It had a pretty good job, but to give you a couple of examples I mean before you turn on a new billing system, you're going to improve your processes associated with doing so we actually saw.

George F. Chappelle: Billing incremental type of value added services under the new processes that we otherwise would not have done so that was the benefit we saw in the quarter.

George F. Chappelle: Improving our procurement processes and.

George F. Chappelle: And reducing costs. We also saw benefits in labor match. We also saw benefits. So it was different process improvements you want you want to do before you roll out of an ERP implementation, we have not forecasted any benefits in the quarter that I've seen.

George F. Chappelle: These $2 million of benefit in the quarter of just pure process improvement and now that the service the system, that's going live receiving more benefits as we move through the year.

George F. Chappelle: And we believe the system is 100% on track to deliver the returns that we identified when we made everybody aware of the investments. So we're right on track with the plan. And now that the system is going live, you know, we're seeing even more benefits as we move through the year.

Speaker Change: One follow up to that what.

George F. Chappelle: One follow-up to that, what benefits are assumed in the guide as far as the rollout from here? It sounds like you picked up an incremental $2 million in 1Q that you weren't forecasting. Just kind of curious, like, what the ERP itself was including as far as, like, a benefit? I would say that

George F. Chappelle: What benefits are assumed in the guide as far as the rollout from here. It sounds like you picked up an incremental $2 million of <unk> that you weren't forecast I'm, just kind of curious like what.

George F. Chappelle: ERP itself like when you were initially putting out guy was including as far as like a benefit.

George F. Chappelle: I would say that all of those benefits, Josh, primarily hit the handling area of our business. And one of the reasons that our handling business has done so well in increasing the margins along with all the workforce metrics that have come in line like they said they would are these process improvements that Jay is talking about. We have budgeted those originally in our original guide in the handling area of the business because much of the improvement helps there.

George F. Chappelle: I would say that all of those benefits.

George F. Chappelle: Josh primarily hit the handling area of our business and in one of the reasons that are handling business has done so well.

George F. Chappelle: Increasing the margins along with all the workforce metrics that have come in line with what they said they would.

George F. Chappelle: These profit process improvements that Jay is talking about.

George F. Chappelle: We have budgeted those originally in our original guide and the handling area of the business because much of the improvement helps there. It's part of our incremental guide to now 9% of the year accelerating that objective by a full 12 months.

George F. Chappelle: It's part of our incremental guide to now 9% of the year, accelerating that objective by a full 12 months. We're now guiding to 9%, and you can assume that the systems benefits that drive the handling increase are all embedded in that guide. It's a component to getting us now to 9% handling margins a full year ahead of when we thought we could achieve it.

George F. Chappelle: Now guiding to 9% and you can assume that the system benefits that drive the handling increase are all embedded in that guide I'd say, it's a component to getting us now to 9% and handling margins a full year ahead of when we thought we could achieve it.

Speaker Change: Thank you.

Operator: The next question comes from the line of Vince Tibone with Green Street. Please go ahead.

George F. Chappelle: Next question comes from the line of wind seaborne with Green Street. Please go ahead.

Vince James Tibone: Hi, Good evening, you mentioned, you're now expecting throughput margins of 9% for the full year, even though margins were 10, 7% in the first quarter. So is there any seasonality with margins we should be thinking about or are you. Just you know maybe being a little conservative with the guide just any color on how we should think about the service margin trend.

Vince James Tibone: As the year progresses would be would be helpful.

George F. Chappelle: Yeah, thanks for that, Vince, and you're right regarding nine, which, you know, just a few short months ago was very aspirational, and now it's part of our plan, so I feel really good about getting to nine. I just want to say that, in truth.

Vince James Tibone: Yeah, Thanks for that Vince and Youre right were guiding to nine which just a few short months ago was very aspirational and now it's part of our plan. So I feel really good about getting to nine I just want to say that you have in terms of making a commitment in our guidance.

George F. Chappelle: Much different place than we were six months ago. It is slightly down from $10 seven in the first quarter, but.

George F. Chappelle: These process improvements, we just mentioned.

George F. Chappelle: Our early days right in terms of the impact we think getting to a 9% platform based on.

George F. Chappelle: Margins for our handling platform based on the systems and process improvements now is not in any way conservative quite frankly.

Vince James Tibone: It's a very strong guide considering where we were in the sustainability of margins is something we need to be very confident and we harvest the 9% level, but just maybe being a little conservative having turned on the actual systems literally Monday of this week and typically I think most people would expect a slight productivity loss when you.

George F. Chappelle: You turn on a new system I think that's pretty typical and then a quick rebound so there's a little bit of that but I would focus on our guide to 9% and handling margins for the year.

George F. Chappelle: Which again not that long ago was an aspirational target.

Vince James Tibone: Great. That's all really helpful color and then just switching gears a little like I'm looking at page 23 of the supplemental and I noticed physical occupancy was at its lowest level in 'twenty one.

George F. Chappelle: Great, that's all really helpful color. And then, just switching gears a little, like I'm looking at page 23 of the supplemental, and I noticed physical occupancy was at its lowest level since 21. Just can you discuss some of the drivers there? I mean, you mentioned a weaker consumer, but I thought a slowdown in end demand could actually kind of lead to higher occupancy levels. Or are there any notable trends in food production that have really changed? Just any color on the kind of physical occupancy side of things would be great. Yeah, I

George F. Chappelle: Just can you discuss some of the drivers there I mean, you mentioned a weaker consumer but I saw a slowdown in end demand could actually kind of lead to higher occupancy levels or are there any notable trends in food production. You know that have really changed just any color on the kind of physical occupancy side of things it would be great.

George F. Chappelle: Yeah, I'd say the biggest impact on the physical occupancy side goes back to a comment Jay just made where we were lapping a counter-seasonal level of inventory last year. So last year, I believe our economic occupancy was around 84.4% at the end of the first quarter. Incredibly high, driven by manufacturers producing ahead of demand as they finally had the labor to do that and wanted to create some space between customer service and their production facilities.

Speaker Change: Yes, I'd say the biggest impact on the physical offer occupancy side, Vince goes back to a comment Jay just made where we were lapping a counter seasonal level of inventory last year. So last year I believe our physical and economic occupancy was around 84, 4% at the end of the first quarter and <unk>.

George F. Chappelle: Credibly high driven by manufacturing manufacturers producing ahead of demand as they finally had labor to do that and wanted to create some space between customer service and their production facilities, we're lapping that now.

George F. Chappelle: We're lapping that now, and as I said, we landed economic occupancy almost exactly where we thought it would. We said we'd replicate the fourth quarter economic occupancy, and I think we did that. We brought it down about the same amount year over year, and we're not changing our guide because, you know, if you look at where we are in the first quarter, it's about a 400 basis point improvement to get to the midpoint of our guide over the next three quarters, seasonality should do that. So that's really the story on occupancy.

George F. Chappelle: And as I said, we landed economic occupancy almost exactly what we thought it would we said would replicate the fourth quarter economic occupancy and I think we did that we brought it down about the same amount year over year.

George F. Chappelle: And we're not changing our guidance because if you look at what we had in the first quarter. It's about 400 basis point improvement to get to the midpoint of our guide over the next three quarters seasonal seasonality should do that so that that's really the story on occupancy.

George F. Chappelle: Yeah.

Speaker Change: Thank you next.

Operator: Next question comes from the line of Nick Thillman with Baird. Please go ahead.

George F. Chappelle: Next question comes from the line of Nick Tillman with Baird. Please go ahead.

George F. Chappelle: Hey, good evening, George. Maybe you could touch a little bit on the throughput dynamics and the service margins. I think last quarter, you guys kind of mentioned something along the lines of you thought throughput was going to be down like seven and a half percent kind of where it came in, but that service margins could actually erode a little bit. Is that is more a function of like some of the GRIs and stuff that you guys have in place that's been able to drive it and with the labor, I guess, break down the components of that that are really driving that?

Nicholas Patrick Thillman: Hey, good evening, George maybe touching a little bit on but throughput dynamics and the service margins I think last quarter, you guys kind of mentioned something along the lines of you thought throughput was gonna be down like seven 5% kind of where it came in but that service margins could actually erode a little bit is that is this more a function of like some of the <unk>.

George F. Chappelle: You guys have in place that's been able to drive it and with the labor I guess break down the components of that are really driving that that's sort of margin.

George F. Chappelle: Yeah, you hit the components. I mean, first of all, you're correct about the throughput. [inaudible] But the big story has really been productivity. I mean, we've reached levels of permanent hours, permanent associate hours in our system that are now 78%, significantly higher than the last two quarters. We've reached retention levels to be at pre-COVID levels.

George: Yes, you've hit the components I mean first of all Youre correct. The three.

George F. Chappelle: Throughput.

George F. Chappelle: Came in exactly where we said it would this quarter, we said it would be very much like before.

George F. Chappelle: Quarter, but.

George F. Chappelle: Throughput margins are driven by the exact two components. You mentioned first is price we set our price and handling was up 10, 8% in the quarter year over year that is certainly going to drive margins no question about it.

George F. Chappelle: But the big story has really been in productivity I mean, we've reached levels of permanent hours permanent associate hours in our system that are now 78%.

George F. Chappelle: Significantly higher than the last two quarters with reached.

George F. Chappelle: Retention to be at pre Covid levels, I mean, the workforce has become more stable more time and job.

George F. Chappelle: I mean, the workforce has become more stable, more time and job, more engaged, and more productive. So it is both of those driving over 10% year over year in productivity driving the margins. I'm not sure we've split that out in the past, and I don't have a split handy, to be honest.

George F. Chappelle: More engaged and more productive so it is both of those the pricing over 10% year over year in the productivity.

George F. Chappelle: Driving the margins I'm, not sure, which split that out in the past and I don't have a split handy to be honest I don't think so no.

George F. Chappelle: I don't know. All I would say is, you know, the over delivery and the quarter. We did hit the labor margin, the metrics that George had discussed. And what happened was it really translated into NLI much quicker than we expected. So we saw the benefits of labor really coming through well, where overall temporary labor was down significantly. It really started seeing the efficiencies in our perm labor. So that was really, you know, what got us to over deliver and get our handling margins up above 9% quicker than expected.

George F. Chappelle: All I would say as you know the over delivery in the quarter was we did hit the labor margin metrics that George had discussed.

George F. Chappelle: What happened was it really translate into NOI much quicker than we expected. So we saw the benefits of labor really coming through well, where overall temp labor was down significantly and it really started seeing the efficiencies on our current labor. So that that was really what got us to over deliver.

George F. Chappelle: I get that are handling margins up above 9% quicker than expected and maybe just to follow up on the throughput. We did say in April for the first time, we saw a year over year improvement that would be.

George F. Chappelle: And maybe just to follow up on the throughput, we did say in April for the first time that we saw year-over-year improvement that would be showing up a few months earlier than we had thought in our original guide. So there is reason to believe that the throughput could improve. But our guide is up significantly, not dependent on that happening.

George F. Chappelle: Showing up a few months earlier than we had thought in our original guidance. So there is reason to believe that the throughput could improve.

George F. Chappelle: But our guide.

George F. Chappelle: <unk> is up significantly.

Speaker Change: Oh not dependent on that happening.

George F. Chappelle: That's very helpful. And then just, I know we touched on occupancy and kind of the counter seasonality, counter seasonality kind of in the first quarter, but more so just looking at economic occupancy and looking at Europe in particular, I understand there are not as many fixed commitments, but that rakes down around like 900 basis points, quarter over quarter. So is there anything in Europe, in particular, that's really driving those occupancy levels down in particular? I know there's probably not as many fixed commits in those specific geographies, but just some commentary on that area of the market in particular would be helpful.

Speaker Change: That's very helpful. And then just I know, we touched on occupancy and kind of a counter seasonal Isle of counter seasonality kind of in the first quarter, but more so just looking at I cannot economic occupancy and looking at Europe in particular, I understand they're not as many six commitments, but that rates down around like 900 basis points.

George F. Chappelle: Quarter over quarter. So is there anything in Europe in particular, that's really driving those occupancy levels down in particular, I know, there's probably not as many fixed commit in those specific geographies, but just some commentary on that area of the market in particular would be helpful.

George F. Chappelle: Yeah, you're 100% right. There's not as much fixed commit there. I would say, just in general, the economic environment in Europe is not as healthy as in the U.S., and the throughput declines, and in some cases, occupancy declines, have been more pronounced. Having said that, our business has grown in Europe over the last two years, but from an NOI perspective. So we're managing the business much like we manage the business in the U.S. We're maintaining price points.

George F. Chappelle: Yeah, you're 100% right, there's not as much fixed commit there I would say just in general the economic environment.

George F. Chappelle: And Europe is not as healthy as in the U S and.

George F. Chappelle: The throughput declines and in some cases occupancy declines.

George F. Chappelle: The clients have been more pronounced that having said that our business has grown the last two years in Europe from an NOI perspective, so we're managing the business much like we manage the business in the U S. We were maintaining price points, we're trying to get the labor to match the throughput where we're doing our best to fill the pipeline.

George F. Chappelle: We're trying to get the labor to match the throughput. We're doing our best to fill the pipeline, but it is an economy that is recovering at a slower pace than the U.S. But again, we're happy with the business. You can see the results last year in the SUP, and you can see what we're projecting for this year, and it is a business that's contributing at least in line with the pace we're growing same-store NOI at 11% now.

George F. Chappelle: But it is in the economy that are.

George F. Chappelle: <unk> is recovering at a slower pace than the U S.

George F. Chappelle: And again, we're happy with the business you can see the results last year and stuff and you can see what we're projecting for this year and it is a business thats contributing at least in line with the pace. We're growing same store NOI at 11% now and I'd say, probably with a pipeline of new business is probably the best it's been in a while so I think we've got a very good pipeline.

George F. Chappelle: And I'd say the pipeline of new business is probably the best it's been in a while. So I think we've got a very good pipeline to fill up our warehouses in Europe.

George F. Chappelle: To fill up our our warehouses in Europe.

Speaker Change: Thank you <unk>.

Operator: Thank you. The next question comes from the line of Mike Mueller with J.B. Malkin. Please go ahead. Yeah, hi.

George F. Chappelle: Next question comes from the line of Mike Mueller with JP Morgan. Please go ahead.

Michael William Mueller: Yeah, Hi, I'm going back to the service margin questions, if youre expecting throughput volumes to improve in two age what are the factors that are driving the margins down relative to what you had in <unk> was there anything I guess abnormal contributing to the 10% to 11% margin printed in the quarter.

Michael William Mueller: Yeah, I would say getting back to the guide on throughput we have not changed.

George F. Chappelle: Yeah, I would say, getting back to the guide on throughput, we have not changed. It's the same as the original guide we had. I was just saying in terms of our outlook, very recent new news, right, our actual results for April indicate that for the first time, the year over year throughput is actually positive. So I wasn't signaling that that was built into the guide. We're still on our original guide. The margin improvement we've made is all about our pricing, the progress we've made with our workforce, and the early returns on system process improvement ahead of not going live with our ERP system.

George F. Chappelle: The same as the original guide we had I was just saying in terms of our outlook very recent new news right. Our actual results for April indicate that for the first time at the year over year throughput is actually positive. So I wasn't signaling that that is built into the guide we're still on our original guide the margin improvement we have made us all.

George F. Chappelle: All about our pricing.

George F. Chappelle: Yes, we've made on our workforce and the early returns on our system process improvement ahead of Mako and live with our ERP system.

George F. Chappelle: You know, again, the decline in services margins from 10.7 to 10.9, I kind of view it as we made an commitment to get to 9%, and we've fulfilled that commitment, at least from a perspective of what we're doing. There were no material one-timers that elevated the handling margin in Q1.

George F. Chappelle: Again, the decline in our services margins from 10 to seven to 10 nine I kind of view. It is we've made a commitment to get to 9% and with fulfilled our commitment at least from what our perspective of what we're committing to in our guidance almost a year ahead of time, So I view, the 9% is a massive <unk>.

George F. Chappelle: Improvement in our company $22 million worth of incremental NOI in the first quarter, which you can you can we said that was worth one point to $100 million and if you do the math, it's going to end up pretty close to $100 million. So we feel really good about it the declined from 10 seven to nine 9% in the guide.

George F. Chappelle: Simply relates to turning on the new system.

George F. Chappelle: Having to train thousands of people on how to use it and expecting a slight.

George F. Chappelle: Productivity decline as we do that I think every ERP implementation plans plans on that happening we're no different.

George F. Chappelle: And then secondarily is as Jay said, you know we've seen run rates that are drastically different than the handling margin area. As a result of everything I just mentioned and we just have to figure out where the baseline is but we believe it's at least 9% yeah.

George F. Chappelle: And to answer your other question on on one timers that benefit or handling margin in Q1, there were no material one timers that elevated the handling margin in Q1.

Speaker Change: Got it okay. Thank you.

Speaker Change: Thank you.

Operator: The next question comes from the line of Craig Mailman with Citi. Please go ahead.

George F. Chappelle: Next question comes from the line of Craig Mailman with Citi. Please go ahead.

Operator: Yes.

George F. Chappelle: Guys, I just want to circle back to the expense savings here. I'm looking through it and clearly, labor is a big piece of it. Other service costs are another big piece of it. I know you've talked a couple times about lower temporary workers, and I get that. But as you can, can you kind of walk through the other pieces of it?

Craig Allen Mailman: I wanted to circle back to the expense savings here as I'm looking through clearly labor is a big piece of the other service cost is another big piece of it.

George F. Chappelle: I know you've talked a couple of times about lower temporary workers and I get that but as you can you kind of walk through the other pieces of it I mean are you guys cutting hours. How are you guys managing kind of that labor piece beyond just more permanent workers and also on the on the.

George F. Chappelle: I mean, are you guys cutting hours? How are you guys managing kind of that labor piece beyond just more permanent workers? And also on the other cost side of things? You know, I noticed your depreciation for non-real estate is down. I mean, interest expenses that are you guys just spending less or deferring costs on equipment or maintenance or other things that, you know, ultimately, I guess everyone's trying to get the ramp down and in service margins here from this quarter down to nine.

George F. Chappelle: Other cost side of things I noticed your your depreciation for non real estate is is down I mean interest expenses down are you guys just spending less or.

George F. Chappelle: Deferring costs and equipment or maintenance or other things that you know.

George F. Chappelle: Ultimately I guess everyone's trying to get at the ramp down in in service margins here from this quarter down to nine I mean is a lot of this just deferring cost that you're also going to need to put back into the system as throughput doesn't improve I'm, just trying to get a sense of kind of putting everything in a pause.

George F. Chappelle: I mean, a lot of this is just deferring costs that you're ultimately going to need to put back into the system if throughput does improve. I'm just trying to get a sense of kind of putting everything in a pot, kind of can you walk through really the what's driving this with specific examples?

Speaker Change: Got it.

George F. Chappelle: Can you walk through really the whats driving this with specific examples.

Speaker Change: I don't know how specific I can get craig's on on on the call here, but I can walk through the components of our handling services margins improvement and explain why we think they're very very sustainable at the 9% level, regardless of the throughput guidance I'll. Just note again, we haven't changed our throughput.

George F. Chappelle: I don't know how specific I can get Craig on the call here, but I can walk through the components of our Handling Services Margins Improvement and explain why we think they're very, very sustainable at the 9% level, regardless of the throughput guide. And I'll just note again, we haven't changed our throughput guide. It's exactly the same as the revised guide.

George F. Chappelle: It's exactly the same as the revised Scott, it's driven in first part by pricing.

George F. Chappelle: It's driven in the first part by pricing. Pricing was increased to, I think, 10.8% year over year in our handling environment. So there's the first component, which is higher pricing for the same services.

George F. Chappelle: Pricing.

George F. Chappelle: Was increased I think 10, 8% year over year in our handling environments. So there is the component first component, which is higher pricing for the same services to us our workforces become productive and what I've always described about that is that if it takes five people to move 50 pallets an hour and you then turn that into <unk>.

George F. Chappelle: Two is that our workforce has become productive. And what I've always described about that is that if it takes five people to move 50 pallets an hour, and you then turn that into three people to move 50 pallets an hour, you're doing the same work content with fewer people. That's what we've achieved. There are a thousand tactics along the way as to how we've achieved it.

George F. Chappelle: Three people to move 50 pallets and how are you doing the same work content with less people. That's what we've achieved there is a.

George F. Chappelle: <unk> thousand tactics, along the way as to how we've achieved it there is some big movers like our retention improvement to pre COVID-19 levels, our workforce, having more time in their jobs with turnover declining et cetera, all the metrics that we've talked about already so it's really a combination of those things combined with now new.

George F. Chappelle: There are some big movers, like our retention improvement to pre-COVID levels, our workforce having more time in their jobs with turnover declining, et cetera, all the metrics that we've talked about already. So it's really a combination of those things combined with new processes and a new ERP system laid on top of it, which gave us some unexpected early returns, as we mentioned in the prepared remarks. So I don't know that I can go into a lot more detail than that, but those are the broad components, and they all come together to create outsized handling margins.

George F. Chappelle: [noise] processes in our new ERP system layered on top of it which gave us some unexpected early returns as we mentioned in the prepared remarks. So I don't know that I can go into a lot more details than that but those are the broad components and they all come together to create.

George F. Chappelle: Outsized handling margins, then I understand you're using the words 10, 7% to 9% is a decline that's mathematically correct I understand that but I just remind everybody again. This is an objective that we said was aspirational just three or six months ago and now we're saying it's here it's in our guide and that's going to do.

George F. Chappelle: And I understand using the words 10.7% to 9% is a decline, but that's mathematically correct. I understand that.

George F. Chappelle: But I just want to remind everybody again, this is an objective that we said was aspirational just three or six months ago, and now we're saying it's here, it's in our guide, and it's going to deliver a huge amount of NOI, and that's why we're excited about it. Yeah, and on the two other couple, on interest expense. The driver of that is, one, we're generating a small amount of incremental cash flow that's going to be applied against the revolver that will improve interest rates, but also, with the projects that we've announced, there is a little bit of interest expense being moved to capital. So that's really the driver.

George F. Chappelle: <unk> incrementally a huge amount of NOI and that's why we're excited about it.

George F. Chappelle: On the two other couple on interest expense and a driver of that is one we're generating a small amount of incremental cash flow that's going to be applied against the revolver that won't prove interest, but also with the projects that we've announced there is a little bit of interest expense being moved to capital. So that's really the driver so it's its own.

George F. Chappelle: So its overall cash tax interest is not going down significantly. It's more based on the projects we've announced and worked with on the computations. We have a little bit more capitalized interest. And on other costs, held to our guidance on the maintenance CapEx, we're not reducing it. We actually spent 1.7 million more in Q1 on maintenance CapEx, which is generally our light quarter, but we will spend the remainder to get to the 80 to 90 million of CapEx for the remainder of the year, so it will go up the remaining three quarters. But we did spend more this quarter than we did the prior year, so we're not cutting any type of spend to deliver on these numbers.

George F. Chappelle: They're all cash tax interest, it's not going to have significant it's more based on the projects we've announced and.

George F. Chappelle: And worked with the computation, we'd have a little bit more capitalized interest and on other cost and it will help to our guidance on the maintenance Capex were not.

George F. Chappelle: Reduce it we actually spent $1 7 million more in Q1 on maintenance Capex, which is you.

George F. Chappelle: Generally our late quarter, but we will spend the remainder to get to the $80 million to $90 million of Capex for the remainder of the year. So it will go up the remaining three quarters, but we did spend more this quarter than we did Q1 of prior year. So so we're not cutting any type of spend to deliver on these numbers.

George F. Chappelle: Okay, so if we see you guys kept throughput the same, so throughput, feature expectations, and it's at the zero end or even positive by the end of the year, right, which, again, I think your initial expectations had assumed, or at least implicitly assumed, some rate cuts that maybe aren't going to happen. So the consumer could say a little weaker, but just let's say you're plus zero to three versus zero to negative three. Are the margins still able to stay at 9% with potentially higher needs for labor? Is that kind of how it works? Or do If you get a rapid increase in throughput, do margins suffer in the near term, as you guys have?

Speaker Change: Okay. So if we see you guys kept throughput the same so throughput feature expectations or that's at zero and or even positive by the end of the year right, which again I think your initial expectations had assumed or at least implicitly assumed.

George F. Chappelle: Some rate cuts that maybe aren't going to happen. So the consumer it could stay a little weaker but just let's say your last year of the three versus zero to negative three.

George F. Chappelle: Are the margins still able to stay at 9% with potentially higher needs for for labor is that kind of how it works or do it.

George F. Chappelle: If you get a rapid increase in throughput do margins suffer in the near term.

George F. Chappelle: As you guys have.

George F. Chappelle: Labour side.

George F. Chappelle: The commitment and credit on the 9% margin aligns with our current plan. There's no danger that we see of anything being compressed with throughput going up or down. But to be clear, we have not changed our throughput guide. Our throughput guide in our initial guide compared to the guide now is identical. We haven't changed the numbers. We mentioned a little bit of positive news around April, but it's not new news, not in our guide

Speaker Change: The commitment Craig on the 9% margin aligns with our current plan. That's a I don't there's no danger that we see of anything being compressed with throughput going up or down but to be clear, we have not changed our throughput guy that throughput guy.

George F. Chappelle: In our initial guide.

George F. Chappelle: Compared to the Guy right now as I've done it but we haven't changed the numbers I did mentioned a little bit of positive news around April New news is not in our guide and it was the first month throughput increase year over year doesn't mean, it'll happen next month, but again, we're looking for positive signs on throughput here isn't that's one we found very very recently with April having just.

George F. Chappelle: It was the first month throughput increased year over year. Doesn't mean it will happen next month, but again, we're looking for positive signs on throughput here, and that's one we found very, very recently with April having just closed. Our guide remains the same. If throughput changes, it's not going to change our margin profile. We're managing the business in line with the variable nature of the throughput, and we've now done it at a level that gives us 100% confidence in the 9% margins for the remainder of the year.

George F. Chappelle: Close so.

George F. Chappelle: Our guide remains the same if throughput changes its not going to change our margin profile, we're managing the business in line with the variable nature of the throughput with now I've done it at a level that gives us 100% confidence in the 9% margin for the remainder of the year.

Operator: Thank you. The next question comes from the line of Ki Bin Kim with Truist Securities. Please go ahead.

Speaker Change: Thank you next question comes from the line of keeping Kim.

Speaker Change: Securities. Please go ahead.

George F. Chappelle: Thank you, good afternoon. On the labor efficiency that you're achieving, maybe you can wrap that around a different set of KPIs, like services provided per employee or worker idle times. Maybe that's come down, maybe something a little bit closer to the ground.

Speaker Change: Thank you good afternoon, just a follow up on the.

Speaker Change: Previous questions.

Speaker Change: On the labor efficiency that you're achieving and maybe you can wrap around different set of Kpis like services provided per employee or work worker idle times.

Speaker Change: Maybe that's come down maybe something little closer to on the ground.

George F. Chappelle: Hi.

George F. Chappelle: I don't have any of that.

George F. Chappelle: I don't even have any of that data to disclose even. I will remind you of the metrics that we've been disclosing for over two and a half years. We said we'd have to improve for us to improve our services margin. They all have improved.

Speaker Change: I don't have any of that data to disclose even.

George F. Chappelle: I will remind you the metrics that with we've been disclosing for over two and a half years, we said would have to improve for us to improve our services margin. They all have improved our our permanent employee content and the company has never been higher.

George F. Chappelle: Our permanent employee content in the company has never been higher at 78%. Our retention is now back to pre-COVID levels. We're climbing up the ladder of associates who have been in the job for greater than 12 months. That's probably more of a timing issue than anything else right now.

George F. Chappelle: 78% retention is now back to pre COVID-19 levels or clot were climbing up the ladder of associates in the job for greater than 12 months, that's probably more of a timing issue than anything else right. Now we believe we're actually at pre COVID-19 levels. So those are our disclosures around labor, we said when they improve the services margin would approve.

George F. Chappelle: We believe we're actually at pre-COVID levels. So those are our disclosures around labor. We said when they improved, the services margin would improve. We said they correlate really, really well, and they have improved, and we've delivered record services margins. So I think our labor disclosure is very sufficient to track the performance of the margins and the handling area of the company, and it's proven to be very accurate this quarter.

George F. Chappelle: We said they correlate really really well and they have improved and we have delivered record services environment. So I think our labor disclosure is a very sufficient to track the performance of the margins and the handling area of the company and it's proven to be very accurate this quarter.

Speaker Change: Okay and going back to your throughput comments about it being positive slightly in April.

George F. Chappelle: Okay, and going back to your three pro comments about it being positive slightly in April. Do you think that was concentrated to any kind of particular tenant that might have had, I don't know, like a big harvest or something, or was that pretty wide across the system? And second to that, your physical accuracy being down 760 basis points. If you can provide an April update on that as well, thank you.

George F. Chappelle: Do you think that was.

George F. Chappelle: Concentrated to any kind of particular tenant that might've had I don't know like a big harvest or something or was that pretty wide across the system.

George F. Chappelle: And second to that your physical occupancy being down so much at 60 basis points.

George F. Chappelle: If you could provide an April update on that.

Speaker Change: Well thank you.

George F. Chappelle: I would say our physical occupancy, and maybe I'll ask Rob to comment on this, we would expect the gap in physical occupancy in a normal seasonal year to be the widest between fixed commits and the physical at this time of year, at the end of the first quarter, and then go from a seasonal flow there. But maybe, Rob, if you want to comment on the fixed commit impact, that would be good.

George F. Chappelle: I would say, our physical occupancy and maybe I'll ask Rob to comment on this we would expect the GAAP in physical occupancy and a normal seasonal year to be widest.

Rob: Between fixed commits.

George F. Chappelle: The physical exactly this time of year at the end of the first quarter and then go from a seasonal flow there, but maybe Rob if you want to comment on.

Rob: The fixed cost did impact that would be good.

Rob: Sure. So so that's right George I mean, our expectation is that gap is going to be.

Robert Scott Chambers: Sure. So, that's right, George.

Robert Scott Chambers: I mean, our expectation is that gap is going to be the widest now, this time of year. I think our expectation as we go through the rest of the year is that the gap between physical and economic occupancy will close. As far as whether or not we saw, you know, any specific customer or any specific node in the supply chain, it was maybe there was a bigger gap. I would say, you know, protein is one sector and you see that in our customers' earnings releases, where protein is one that's down more than others like our consumer packaged goods or our retail sector. So, you know, we want to see continued improvement in the protein sector, and we think we'll see the gap between physical and economic occupancy close between now and

Rob: Widest now this time of year I think our expectation as we go through the rest of the year or is it that the gap between physical and economic occupancy will.

Robert Scott Chambers: We will close as.

Robert Scott Chambers: As far as whether or not we saw.

Robert Scott Chambers: Any specific.

Robert Scott Chambers: Customer or any.

Robert Scott Chambers: Any specific node in the supply chain or it was maybe there was a bigger gap I would say you know protein is the one sector and you see that in our customers' earnings releases where protein.

Robert Scott Chambers: There's one that's down more than others like our consumer packaged goods or retail sector. So we want to see continued improvement in the protein sector and we think we will see the gap between physical and economic occupancy close between now and the end of the year.

Robert Scott Chambers: Thank you next question comes from the line of Michael Kevin with RBC. Please go ahead.

Operator: Thank you. The next question comes from the line of Michael Carroll with RBC. Please go ahead.

Michael Albert Carroll: Yeah. Thanks, I just wanted to focus on the full year guide I mean, if you annualize the first quarter number I think that would put you above the new range that you set out and I know <unk> is usually the low point in the year, you expect throughput to trend a little bit higher you expect occupancy to rebound with seasonality.

George F. Chappelle: Yeah, thanks. I just wanted to focus on the full year guide. I mean, if you annualize the first quarter number, I think that would put you above the new range that you set out. And I know one cue is usually the low point of the year; you expect throughput to trend a little bit higher, and you expect occupancy to rebound with seasonality. It seems like even the non-established NOI was peaking on the negative side.

George F. Chappelle: Audi.

George F. Chappelle: It seems like even the non established NOI was peaking to the negative side this quarter and it should recover so why didn't you not increase your guidance by more I guess why does that imply the quarterly run rate should trend a little bit lower throughout the year.

George F. Chappelle: And I'll take this one, you know, as I mentioned earlier, maintenance capex no higher than Q1 of last year was only 17 points. So that means we're going to incur another $69 million at the midpoint.

Speaker Change: And I'll take this one.

George F. Chappelle: As I mentioned earlier, our maintenance capex, though higher than that.

George F. Chappelle: Q1 of last year, it was only 17 point.

George F. Chappelle: So that means we're going to incur at the midpoint and another $67 million of maintenance Capex and the following three quarters. So that does cause a reduction in <unk> and part of why it's more flattening out for the remainder of the year within our guidance.

George F. Chappelle: Okay.

George F. Chappelle: Okay, and then typically, that doesn't happen in the past. Because, I mean, if you look at historically, you're showing your occupancy kind of offsets that, as your occupancy is right around 80% today. And it's implying that's probably going to go up a few hundred basis points when that occupancy offsets that capex increase.

Speaker Change: Okay, and then that typically doesn't happen in the past because it's I mean, if you look at historically I mean, you're you're showing your occupancy kind of offset that as your occupancies.

George F. Chappelle: Around 80% today and in its implying that it's probably going to go off a few hundred basis points wasn't that occupancy offset that that capex increase.

George F. Chappelle: I don't I don't really this is George I don't understand that point, Mike I mean, we have an occupancy guys that sit in our revised guidance and we have to hit the mid to hit the $1 42, everything else would fall in line with that and one of the anomalies that as is in our business as we typically have a very low capex spend in the first quarter because project.

George F. Chappelle: I don't really know. This is George. I don't understand that point, Mike.

George F. Chappelle: I mean, we have an occupancy guide that's in our revised guide, and we have to hit the midpoint to hit the $1.42. Everything else would fall in line with that. And one of the anomalies that is in our business is we typically have a very low CapEx spend in the first quarter because projects tend to start a little later in January and ramp up after the new year, etc. And as Jay said, if you flow the remaining CapEx for the three quarters, we believe that accounts for everything that you're describing as the reason why you can't just multiply the $0.38 by 4 and get to a number for the year versus what we're projecting.

George F. Chappelle: They tend to start a little later in January and ramping up after the new year et cetera.

George F. Chappelle: And as Jay said, if you flow the the remaining capex for the three quarters, while we believe that account for everything that Youre describing is the is the reason why you can't just multiply the 30 854 and get you a number for the year versus what we projected.

George F. Chappelle: Sure.

George F. Chappelle: Thank you next question comes from the line of Todd Thomas with Keybanc Capital Markets, Inc. Please go ahead.

Operator: Thank you. The next question comes from the line of Todd Thomas with KeyBank Capital Markets, Inc. Please go ahead.

Todd Thomas: Hi, Thanks, good afternoon.

Operator: Hi, thanks. Good afternoon.

Todd Thomas: First I just wanted to follow up on occupancy.

George F. Chappelle: First, I just wanted to follow up on occupancy. You know, it looked like that counter-cyclical build continued into the second quarter last year. So, you know, within the full year economic occupancy guidance that you maintained, you know, flat to down 100 basis points, do the year over year occupancy headwinds worsen in the second quarter before improving, or do you see the improvement beginning sooner than that? And then, you know, I guess just following up, I wanted to see if you could discuss what you're seeing so far in the second quarter to that end in terms of economic occupancy as we're through the first week or so of May.

Todd Thomas: It looked like that counter cyclical build.

George F. Chappelle: Continued into the second quarter last year.

George F. Chappelle: So you know within the full year economic occupancy guidance that you maintain flat to down 100 basis points to the year over year occupancy headwinds did they worsen in the second quarter before improving or do you see the improvement beginning sooner than that and then I guess just following up I wanted to see if you could discuss what you see.

George F. Chappelle: So far in the second quarter to that end in terms of economic occupancy is where were through the first week or so in may.

George F. Chappelle: I would say when it comes to economic occupancy, the way I look at it is if you take where we ended the year at the end of the first quarter, which was 345 basis points down from the prior year and exactly in line with where we believed it would end, it was driven by the counter seasonal inventory. That's the drop in occupancy; we've explained that, etc. If you look at the remaining part of the year, the next three quarters, we would have to sequentially improve.

George F. Chappelle: I would say when it comes to economic occupancy the way I look at it is if you take where we ended the year at the end of the first quarter, which was 345.

George F. Chappelle: Basis points down from part of the year and exactly in line with where we believed it would and.

George F. Chappelle: It was driven by the kind of seasonal inventory that's the drop in occupancy we've explained that et cetera. If you look for the remaining part of the year. The next three quarters, we would have to sequentially improve occupancy economic occupancy over that time period 400 basis points to get to our midpoint guidance we're very.

George F. Chappelle: Office of Economic Occupancy, over that time period, 400 basis points to get to our midpoint guide. We're very comfortable with that within the context of a year that is back to our kind of seasonal environment. So that's how we view the guide going forward, and that's why we.., why we are comfortable with the guide and have not changed it. When it comes to April and economic occupancy, I don't have any data on that.

George F. Chappelle: Comfortable with that within the context of a year that is back to a kind of a seasonal environment. So that's how we view the guide going forward and that's why we.

George F. Chappelle: Why we are comfortable with the guidance have not changed it.

George F. Chappelle: When it comes to April and economic occupancy I don't have any data on that I mentioned the throughput data because it was something we were tracking but I don't have any data on economic occupancy for April other than to say, it's in line with our guidance for the year because if it wasn't we would have been aware of that.

George F. Chappelle: I mentioned the throughput data because it was something we were tracking, but I don't have any data on economic occupancy for April other than to say it's in line with our guide for the year because if it wasn't, we would have been aware of that.

George F. Chappelle: Okay, and then, you know, the fixed commitment level, you improve that again by 200 basis points. Is there more upside than you previously thought in terms of where you think that can be, you know, in terms of fixed commits across the portfolio?

George F. Chappelle: Okay and then.

George F. Chappelle: The fixed commitment level.

George F. Chappelle: Prove that again by 200 basis points is there is there more upside than than you previously thought in terms of where you think that can be you know in terms of fixed commenced across the portfolio.

Robert Scott Chambers: Rob, why don't you take that one when you are close to it?

George F. Chappelle: Rob why don't you take that one where you were closer to that.

Robert Scott Chambers: Yeah, I mean, we've said that we can get that into the 60s. And so, that in and of itself is a relatively wide range, but that's still what our target is. You know, there's always going to be a portion of this business that is going to be transactional. Right now, we have a line of sight to getting fixed commitments into the 60% range, and I think that's what we're comfortable with at the moment as our target.

Rob: Yeah, I mean, we we've said that we can get that.

Robert Scott Chambers: Into the sixties, and so I mean that that in and of itself is a relatively wide range, but that's still what our target is.

Robert Scott Chambers: You know theres always going to be up a portion of this business that is going to be transactional right. Now we have a we have a line of sight to getting fixed commitments into the 60% range and I think that's what we're comfortable with.

Robert Scott Chambers: We're okay with a portion of this business being transactional, but right now, we're focused on getting this into the 60s. Thank you. The next question comes from the line of Yung Ku with Wells Fargo. Please go ahead.

Yung Ku: At the moment as our as our target.

Yung Ku: We're okay with a portion of this business being transactional.

Yung Ku: But right now we're focused on getting getting us into the sixties.

Operator: Thank you. The next question comes from the line of Yanku with Wells Fargo. Please go ahead.

Yung Ku: Thank you next question comes from the line of young Cool with Wells Fargo. Please go ahead.

Yung Ku: Alright, great. Thank you I just wanted to go back to guidance specifically your non same store NOI guidance.

Yung Ku: There was about a $6 million swing up the net point.

Yung Ku: Provide some background in terms of what drove that change and then how much of that is due to revenue versus opex.

Operator: I'll take a little bit on this one and then hand it over to you, Rob. I mean, as Rob mentioned on the call, it's really looking at our retail automated facilities in Plainfield and Lancaster, which we are being very discreet about in our ramp up there. And it is not pushing out the Not much, but a slower ramp up, but let me hand it over to you, Rob, if you want to add more color to that. Yeah, what I would say...

Yung Ku: I'll take a little bit on this one as I hand, it over to Rob I mean, as Rob mentioned on the call. It's really looking at our retail automated facilities in painful in Lancaster, which where we are being very discrete and a ramp up there and it is not pushing out stable.

Rob: They've ability dates it's not pushing out the return on invested capital. It is just a much.

Operator: Yeah, not much but a slower ramp up but let me hand, it over to you Rob if you want to add more color to that.

Robert Scott Chambers: Yeah, what I would say is, you know, we delivered five automated facilities last year, and three of them supporting food manufacturing are all ramping up in line with our expectations. And then there are our two retail developments in Pennsylvania and Connecticut that are progressing and ramping up, but they are ramping up slower than we had previously anticipated as we fine-tune the automation. And so, you know, we've made a decision with our customers jointly to slow that ramp.

Rob: Yeah, what I would say is we delivered five automated facility last year and three of them supporting food manufacturing are all ramping up in line with our expectations and then it's our two retail developments in Pennsylvania and Connecticut.

Robert Scott Chambers: At.

Robert Scott Chambers: Are progressing and ramping up but ramping up slower than we had previously anticipated as we fine tune the automation and so we've made a decision with our with our customer jointly to slow that ramp so.

Robert Scott Chambers: So specific to the question about whether it's really more of a revenue or a cost side, it's really going to be on the revenue side, which will flow down to earnings because we'll see less volume through those facilities than we had originally planned in our guide. But I think we think that taking more time now to optimize the automation will allow for a more smooth ramp and, ultimately, to be able to continue to hit our stabilization dates and returns.

Robert Scott Chambers: Specific to the question about is it really more of a revenue or a cost side, it's really going to be.

Robert Scott Chambers: On the revenue side, which will flow down to the earnings because we will see less volume through those facilities that we had originally planned in our in our guide, but I think we we think that taking more time now to optimize the automation will allow for a more smooth ramp and ultimately to be able to continue to hit our stabilized.

Robert Scott Chambers: <unk> dates and returns.

Speaker Change: Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Operator: Yeah.

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Operator: Yeah.

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Operator: Okay.

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Operator: Yes.

Operator: Yeah.

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