Q1 2025 Lineage Inc Earnings Call
Good day and welcome to the linear its first quarter of 2025 earnings conference call.
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Speaker Change: I'd now like to welcome Evan Barbosa, VP Investor Relations to begin the conference Evan I bet here.
Evan Barbosa: Thank you.
Evan Barbosa: Welcome to Linda just discussion its first quarter 2025 financial results.
Greg Michael: Joining me today are Greg Michael Let me, just president and Chief Executive Officer, and Rob Crisci.
Speaker Change: As Chief Financial Officer.
Speaker Change: Our earnings presentation, which includes supplemental financial information can be found on our Investor Relations website, IR Dot one dot com.
Speaker Change: Following management's prepared remarks, we'll be happy to take your questions.
Speaker Change: Turning to slide two before we start I would like to remind everyone that our comments today will include forward looking statements under federal Securities laws.
Speaker Change: These statements are subject to numerous risks and uncertainties as described in our filings with the SEC.
Speaker Change: These risks could cause our actual results to differ materially from those expressed in or implied by our comments.
Speaker Change: Forward looking statements in the earnings release that we issued today along with the comments on this call are made only as of today and we will not be updated as actual events unfold.
Speaker Change: In addition reference will be made to certain non-GAAP financial measures information regarding our use of these measures and a reconciliation of non-GAAP to GAAP measures can be found in the press release that was issued this morning.
Greg Michael: Unless otherwise noted reported figures are rounded and comparisons of the first quarter of 2025 to the first quarter of 2024, now I would like to turn the call over to Greg.
Greg Michael: Thanks, Davin and thanks, everyone for joining us today today is a very exciting day for litigation as we announced a landmark agreement with our valued customer Tyson foods in total we expect to deploy approximately $1 billion of capital in the coming years on the acquisition of new Greenfield developments at once stabilized will generate over 100.
Greg Michael: Billion.
Greg Michael: The scale of these agreements on the road.
Greg Michael: <unk> would be the size of a top 10 global cold storage company.
Greg Michael: First we announced the definitive agreement to acquire and take over operations for Tyson foods cold storage warehouses for $247 million. These warehouses total approximately 49 million cubic feet with 160000 pallet positions and are located in Pottsville, Pennsylvania, Olathe, Kansas Rochelle, Illinois and told today.
Greg Michael: Arizona.
Greg Michael: Prior to closing the acquisition agreement.
Greg Michael: <unk> entered into an additional multiyear warehouse to design build and operate two next generation fully automated cold storage warehouses in major U S distribution markets, which Tyson foods will occupy the maker customer.
Greg Michael: We will add 80 million cubic feet at 260000 pallet positions into our portfolio.
Greg Michael: We expect to deploy over $740 million on these two greenfield developments with an expected yield of 9% to 11% stabilized.
Greg Michael: Under this warehouse agreement Tyson Foods will also begin storing product at our newly developed next generation fully automated facility, that's an anchor customer.
Greg Michael: Acquisitions are expected to close in the second quarter subject to customary closing conditions, we look forward to welcoming over 1000 existing Tyson foods employees.
Greg Michael: He is truly executing our proven integration process.
Greg Michael: We expect to break ground on a greenfield developments in the second half of this year as the new build warehouses opened targeted for late 2007 2028 to four existing acquired warehouses will transition to public multi client facilities are leading global facility network and world class automation expertise combined with our proprietary data science capabilities.
Greg Michael: Aligns really well with Tyson foods objective to enable a faster smarter and more integrated supply chain to meet the demands of an increasingly dynamic evolving and growing market.
Greg Michael: These landmark agreements showcase the multiple ways, we can do.
Greg Michael: We add value for our customers and we look forward to future opportunities to help them build resilience and more responsive supply chain.
Greg Michael: Turning to our first quarter highlights on slide four our first quarter results reflect normal seasonality I can see elevated inventory levels. We saw in the first half of 2024 as discussed at our last earnings call. Our total revenue was down 3% adjusted EBITDA down 7% same store warehouse NOI down seven 9%.
Greg Michael: 6% <unk> per share growth right now within the marketplace does come with trade offs. Despite the inventory reset our same store physical occupancy remained strong at 76, 5%. However, the quarter was impacted by lower revenue per throughput and occupied pallet, primarily driven by new business wins or rates.
Greg Michael: Customers resetting volume care achieved over levels, given lower industry occupancy. However, our team continues to control costs and improve productivity in an environment, where food companies are balancing the challenges of high interest rates shifting consumer sentiment and significant macroeconomic uncertainty.
Greg Michael: Evolving tariff policies in response to any customers are pausing their supply chain investments and maintaining lean inventory levels.
Greg Michael: Acutely focused on increasing their sales volumes, while working hard to lower their operating expenses.
Greg Michael: We are partnering with our customers to leverage our global scale and expertise to help them optimize their supply chains and navigate through this challenging period.
All in we are maintaining our previous guidance and expect to deliver adjusted EBITDA and <unk> per share growth for the full year as well as Richard just same store warehouse growth in the second half.
Greg Michael: We are excited to report continued progress on our Midwest pilots at our conventional buildings, which continued to exceed our expectations.
Greg Michael: As a reminder, the west is our proprietary warehouse execution system that we've already implemented multiple automated facilities.
Greg Michael: The software uses patented and proprietary algorithms is a result of many years of development 2025 is about testing and proving out these gains with a variety of facility profiles.
Greg Michael: A broader rollout starting in the next year.
Greg Michael: Personally really excited about this technology is one example of the innovative and bold thinking at the core of lineage.
Greg Michael: Im thrilled to see what a great complement it is to our lean methodologies that we've been implementing over the last decade. These methodologies in our productivity initiatives are expected to offset labor inflation and lower our cost structure. We are realizing some of those benefits now as our same warehouse cost of operations by 2% in the quarter. Despite the inflationary environment.
Greg Michael: We expect Midwest will supercharge those efforts in the future and create meaningful cost advantages versus our competition.
Greg Michael: We continue to execute on our robust pipeline of development and M&A opportunities, including the Tyson foods' agreements, which have already talked about the acquisition of three warehouse campuses Bellingham cold storage for $121 million, adding to our existing portfolio in the Pac northwest at $67 million of development spend in the quarter.
Greg Michael: Including completing a semi automated expansion are finally, Denmark facility ahead of schedule and breaking ground on our automated expansion project at our Bergen option facility in the Netherlands, which was completed just a cold store in Europe.
Greg Michael: I would like to give a shout out to our finance and accounting team for enhancing our quarterly close process, resulting in a speaking to you today a week earlier than our last 10-Q in the fall there hard work echoes across the organization and I would like just purely take all of our global team members for their contributions during the first quarter.
Speaker Change: Now I'd like to turn the call over to our CFO I appreciate.
Speaker Change: Thanks, Greg Good morning, everyone, starting on slide five and looking at our financial results for the first quarter. Our total revenue was $1 two 9 billion down 3%, our adjusted EBITDA decreased 7% to $304 million with adjusted EBITDA margins out of 110 basis points to 23, 5% our <unk> for the quarter was.
Speaker Change: Up 48% to $219 billion and <unk> per share was 86.
A 6% increase versus prior year aided by lower than expected tax expense and the timing of our annual maintenance Capex back.
Speaker Change: Next slide shifting to our global warehousing segment.
Speaker Change: The four year view on this slide does a good job of pointing to the multiyear trends we've talked about in February inventory levels were elevated the last couple of years.
Speaker Change: Can drive 22% same warehouse NOI growth in the first quarter two years ago.
Speaker Change: Exit inventory appears to have stabilized and we are now seeing more typical seasonality as revenue declined sequentially from the fourth quarter representative of a more normal pattern.
Speaker Change: Average revenue per pallet has been challenged for the reasons Greg mentioned.
Speaker Change: We have been controlling costs, well through sustainable labor productivity improvement, even before realizing future benefits around our <unk> technology.
Speaker Change: Turning to the outlook for the remainder of the year, we continue to expect normal seasonality with the second half outpacing the first half however, since our February call the macroeconomic uncertainty driven largely by the U S tariff announcements.
Speaker Change: Some hesitancy among our customer base in the short term, notably about 15% of our U S throughput volume directly tied to import export some of our customers earn a wait and see mode, making it difficult to predict near term activity.
Speaker Change: We expect year over year declines in Q2, similar to Q1 as comps remained challenging in Q2, which by the way is typically the lowest quarter of the year from a seasonal perspective, we anticipate growth to return in the second half driven by normal seasonal increases and easier comps however, given the macro.
Speaker Change: Uncertainty it is difficult to predict the level of which we will grow in the second half.
Speaker Change: Supply chain disruption, sometimes boost customer inventory levels, but it's too early to tell with confidence what's going to happen, we will have more visibility and it will be better able to quantify growth as tariff policy stabilized and we look forward to updating you next quarter.
Speaker Change: Turning to slide seven and covering our global integrated solutions segment segment revenue was down 3% to $348 million NOI was down 3% to $57 million with NOI margin flat at 16, 4% as expected we saw new business that we won in the second half of 2024, starting to come online in the first quarter.
Speaker Change: We see strength in this segment as our transportation and other value added services are increasingly sought after by our customers. Our 2025, we expect strong momentum to continue with sequential growth throughout the year easy.
Speaker Change: Easier comps later in the year should help drive strong double digit growth in the second half.
Speaker Change: Turning to slide eight we ended the quarter with net debt of $6 7 billion total liquidity at the end of the quarter stood at $1 7 billion, including cash and revolving credit facility capacity or.
Speaker Change: Our leverage ratio defined as net debt to adjusted EBITDA was $5 two at the end of the quarter.
Speaker Change: Our strong balance sheet available cash and debt capacity continues to offer us flexibility to take advantage of attractive capital deployment opportunities moving forward. Our landmark agreement with Tyson Foods are Great example, and we look forward to continuing to take advantage of our attractive pipeline of accretive opportunities.
Speaker Change: Turning to slide nine we are maintaining our 2025 guidance with our adjusted EBITDA range in millions of $13 50 to 1400.
Speaker Change: <unk> per share of $3 40 to $3 60.
Speaker Change: Our guidance includes contributions from our recently announced acquisition of approximately $25 million of adjusted EBITDA and <unk> <unk> per share for the balance of the year. However, we believe it appropriate to maintain previous guidance to account for the near term uncertainty we are seeing in the core business as our customers remain.
Speaker Change: Tentative given evolving tariff Paul we continue to be well positioned for growth in the second half of the year.
Speaker Change: As a compound or it's nice to have some strategic capital deployment to help fill the gap created by some of this near term uncertainty.
Speaker Change: Importantly, the Tyson Foods' agreement helped increase our base and position us well for incremental growth in 2026 and beyond both from the acquisition and down the road from the Greenfield development.
Speaker Change: Lastly, we've included some additional modeling support on this page most assumptions remain unchanged with the exception of higher interest due to the new capital deployment and lower tax expense related to some of our international operations with that ill turn it back over to Greg to wrap up before turning it over to your questions.
Greg Michael: Thanks, Rob I'll conclude on slide 10.
Greg Michael: Our achievements this quarter demonstrate our strength and ability to create value through strong customer relationships.
Greg Michael: Landmark agreements with Tyson foods, representing approximately $1 billion in total capital deployment.
Greg Michael: <unk> significantly enhanced our platform and add to our global leadership position our acquisition of three warehouse campuses for Bellingham Cold storage has strengthen our presence in our key markets, while our <unk> and Bergen absolute expansion showcased customer led growth across our global markets.
Greg Michael: They need just competitive advantages continue to differentiate us in the market. We remain committed to growing these advantages through our technology first approach exemplified by our progress on Midwest. Looking ahead, we see significant opportunities for growth with a robust pipeline of strategic acquisitions and Greenfield development opportunities.
Greg Michael: As I reflect on the challenges in our environment today I am heartened that at its core the needs of the business that is built to weather the storm we.
Greg Michael: We have the largest platform driving significant network effects. The best assets are industry leaders in technology automation and data science and are the most diversified geographically and across our more than 13000 customers. We provide the most comprehensive set of services with our globally integrated solutions segment, we are leaders in lean operational excellence.
Greg Michael: Believe we remained the acquirer of choice in the industry demonstrated again by today's announced landmark agreements with Tyson foods, we have the balance sheet and attractive cost of capital to take advantage of market opportunities through strategic M&A and capital deployment.
Greg Michael: Because of these structural and distinct advantages as the industry leader I'm confident that we are well positioned to win and to deliver long term compounding growth to create shareholder value.
Greg Michael: Lastly, I want to thank our over 26000 team members around the world for the Great work that you have to safely serve our customers every single day.
Greg Michael: With that I'll open it up to questions operator.
Greg Michael: Thank you we will now begin the question and answer session.
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Greg Michael: In the interest of time and to ensure we address as many questions as possible today, we will limit questions to one and one follow up and lines will be muted. After this thank you for your understanding.
Greg Michael: Your first question comes from the line of Caitlin Burrows with Goldman Sachs. Please go ahead.
Caitlin Burrows: Hi, good morning, everyone.
Speaker Change: Maybe you mentioned in the prepared remarks that 50% is throughput is directly tied to the import export business. So is the other 50% consumption or can you go through that and I think we've just been surprised on how volatile the food business can be.
Speaker Change: Can you give us some more color on how that food imports exports business is able to be so volatile and similar for consumption like how does economic uncertainty impact customer inventory and throughput I guess, that's a lot, but hopefully it all ties together well.
Speaker Change: Sure Hi, Kayla and good morning, just just to clarify so it's 15% one five correct.
Speaker Change: I heard 50, Sir Thank you yeah, Yeah, no no worries and then I will turn over to Greg I think the well the tariffs have created significant uncertainty in the short term.
Speaker Change: The consumption really hasnt changed so and it really hasnt impacted overall occupancy too much.
Speaker Change: At this point, there's certainly against short term uncertainty given the tariffs that are customers are are not making major supply chain decisions in large part because of the tariffs, but I don't think its driving substantial volatility so far yet.
Speaker Change: Yeah.
Speaker Change: Got it and then maybe just if you could.
Speaker Change: Realized 15 is a different scale than 15, but that import export business.
Speaker Change: Is it just that certain foods center being confined less today than they would have been previously or how does that actually ended up like happening in impacting you.
Speaker Change: Yes, so I have met with 20 customers literally just in the last few weeks.
Speaker Change: And I think the biggest single impact as customers are delaying major decisions and it's just creating hesitancy or customers waiting for more clarity before they make major decisions like we are to expand the operations where to build plants where to source long term transportation, whether that be domestically two boards or internationally in the forwarding space or.
Speaker Change: <unk> were to shift position and build inventories.
Speaker Change: The kind of rapid change in Nook tariff policies. It has caused some call. It short term disruption for example, our customers have rerouted inventory that's been in flight on the way to two destinations like China for example, Alaskan seafood, which generally comes to the Pac northwest after being processed in China.
Speaker Change: That was headed to China for processing his either come back to the U S for processing orbit rerouted to other southeast Asian countries, like India or Vietnam for for processing in the protein space, we've seen certain proteins. We've.
Speaker Change: We've seen the export levels come down, but importantly, when you talk about volatility even though some export levels will come down in specific proteins.
Speaker Change: Production and manufacturing levels have actually remained very steady.
Speaker Change: Sumption has remained steady at just a little bit more of that of that production is being is being routed to the U S versus versus overseas.
Speaker Change: Out of 20 customers literally only one of beef producer in Australia that I've met with a couple of weeks ago was was not worried about the U S tariffs because he said the U S has such a beef shortage because of the herd is so small right now he basically said no matter, what our prices to export to the U S Americans could eat cheeseburgers.
Speaker Change: But everybody else has said tariff was at the top of their list.
Speaker Change: Thank you.
Speaker Change: Yes. The question from Brendan Lynch Barclays. Your line is open.
Brendan Lynch: Great. Thanks for taking my question.
Brendan Lynch: On the assets that you're acquiring from Tyson can you talk about where they are in the supply chain and.
Brendan Lynch: What their level of commitment to you is over the long term for those specific assets.
Brendan Lynch: Yeah, I'll, just say, it's a long term agreement a multi year agreement, we can't disclose specific.
Brendan Lynch: Attributes of the actual agreements themselves.
Brendan Lynch: The assets that we're acquiring are a mix between the production and distribution.
Speaker Change: Very good. Thank you more on the just Laura more slanted towards the distribution side, though.
Speaker Change: Great. Thanks.
Speaker Change: Your next question is from the line of Simeon can now from Bank of America. Please go ahead.
Speaker Change: Good morning, everybody, Greg I guess, just maybe talk around.
Speaker Change: Occupancy rate I mean occupancy was down as we would have thought maybe a little bit even more but how to think about the cadence of occupancy as we go through the year I know you talked about a recovery in the second half sort of any color on that would be helpful.
Yeah, certainly so we talked at length last quarter about how there was a multi year inventory stocking that that concluded in the third quarter of last year and since then we reported last quarter that we've seen that more normal seasonality.
Speaker Change: That holds true through this quarter, we are seeing normal seasonality despite the tariff.
Speaker Change: Uncertainty and what that means is we were elevated in the first half of last year in the first half comp. This year is very challenging, but we would expect to see normal seasonality in the second half, which would give us elevated levels from last year or versus right now.
Speaker Change: I guess as a follow up to that I mean, what gives you the confidence of that sort of returned back to.
Speaker Change: Seasonality I know the comps get easier in the second half, but you kind of highlighted the delays in decision making by customers.
Speaker Change: And I guess, what are you seeing in changes to that customer behavior to kind of give you that confidence given the uncertainty.
Speaker Change: Yeah, Great Great question, So our data science team studied the last.
Speaker Change: 10 years of our data for what we call core inventory holding exceeds the customers, where we never we neither one new business door, nor nor lost any business.
Speaker Change: <unk> built that up from the SKU level in the actual facilities and.
Speaker Change: From that we derive what we consider normal seasonality across our global network and that historical pattern of normal seasonality kind of how inventories change month to month resumed in the third quarter of last year and that stayed consistent with that historical trend through the first quarter of this year.
Speaker Change: Of course things could change, we're not trying to predict the future. We're just saying that so far our data shows that.
Speaker Change: It's Richard again, the inventory Destocking.
Speaker Change: Included in the third quarter of last year.
Speaker Change: Thank you.
Speaker Change: Yes, a question from Michael Carroll with RBC. Your line is open.
Michael Carroll: Yes. Thanks, Greg can you provide some more color on your storage and service rental rates I know both looked like they were down a decent amount year over year and sequentially I guess, what's driving this weaknesses as lineage cutting rates to win market share or is there a mix shift I guess, what's going on with those numbers.
Michael Carroll: Yeah, Great Great question. So so let me let me just kind of provide a quite a bit of color on what we're seeing in the industry right now in response to your question.
Michael Carroll: There's a lot there's a few things going on at the same time here first of all inventory occupancy declined to the Destocking I just reviewed.
Michael Carroll: Again normal seasonality has resumed but we will have tough comps in the first half of this year.
Michael Carroll: In the first quarter of this year.
Michael Carroll: The inventory levels of core holdings are down and so in the first quarter of this year, our customers have reset volume guarantees at a lower level to match their inventory needs and then certainly over the last couple of years. Some new capacity has come online and in select markets and so in this challenging environment, we have been.
Michael Carroll: Focused on keeping our physical inventory high.
Michael Carroll: Mentioned on the last earnings call that we are willing to trade volume for price strategically when it makes sense for the long term health of the business.
Michael Carroll: Our sales team has actually done a great job managing the situation by winning a lot of new business, which is largely offset to core holdings decline that we that we just talked about and I think thats illustrated by in a declining environment, our physical inventories only down only down 1%.
Michael Carroll: As you as you suggest part of the tradeoff to win some of that new business has been to work strategically with our customers on price now now all that said.
Michael Carroll: There is pressure and uncertainty in the short term.
Michael Carroll: And the marketplace definitely remains competitive we believe that once you've returned to again normal inventory holdings in seasonal patterns, even without some kind of inventory rebound, which were not counting that we're guiding to.
Michael Carroll: And the year over year pricing headwinds that you're seeing in our numbers.
As the year progresses as the year progresses as customers have largely reset their volume guarantees now that happens majority in the first quarter and inventory levels have stabilized.
Michael Carroll: So when we when we look forward as Rob talked about in his prepared remarks, we see a similar environment in the second quarter to the first quarter and a return to same store growth in the second half and we're not we're not providing.
Michael Carroll: <unk> same store growth figure for the second half only because of the macro uncertainty. There is that there is a number of things in the short term that could impact us by a few points in either direction, but we are confident in the midterm that we're going to be fine just because of the scale and diversification of our network.
Speaker Change: Okay, so with the minimum resets storage numbers coming down impacting that rent number does that does that all kind of already in the numbers in <unk> I believe you kind of highlighted that so we should think about that kind of at a good level today, not any incremental weakness and could be.
Michael Carroll: <unk> backup over time, maybe in line with inflation.
Michael Carroll: Yes, I think in general it's obviously I think that's very fair I mean, I think that makes sense. Mike. We were just there is uncertainty right around all the stuff we talked about it. So we just wanted to be super careful because where we learn more every day.
Michael Carroll: We think we'll have a really really good year in a really nice second half.
Michael Carroll: We're challenged to quantify for all the reasons, we talked about but I think I think in large part that kind of price or volume guarantee reset has happened in the first quarter that will cascade through the year, but then.
Michael Carroll: We would expect to get normal price increases and not have.
Michael Carroll: Guarantees drop a bunch next.
Michael Carroll: Next year, because we're at very lean inventory levels throughout the industry and the Destocking has concluded.
Michael Carroll: Okay, great. Thank you.
Michael Mueller: Your next question comes from the line of Michael Mueller J P. Morgan. Please go ahead.
Michael Mueller: Yeah, Hi, I guess first can you talk about some examples of where you're seeing customer pauses are you seeing it more with producers or is it more from retailers just some color on that would be great.
Michael Mueller: I would say it's more for.
Michael Mueller: Or for producers that retailers is the consumption in the U S isn't changing.
Michael Mueller: And it's more about kind of our.
Michael Mueller: Outside of Tyson, making structural changes contracting with forwarders for just for certain international lanes for a year and locking down price when there's so much volatility because they.
Michael Mueller: <unk> on the export side or imports I don't know exactly.
Michael Mueller: Here there'll be sourcing certain products or will it be shipping certain products. What we know is that food flows like water around the world and people are going to eat everywhere and.
Michael Mueller: No matter what happens, we think it will be could be well positioned.
Michael Mueller: Got it Okay and then.
Michael Mueller: Second question, how the acquisition and development required returns change when youre dealing with.
Michael Mueller: Kind of somewhat of an anchor customer or tenant as opposed to just.
Michael Mueller: More and more normal course, one off activity.
Michael Mueller: I would say these are.
Michael Mueller: All the deals that we announced today are in line with our historical expectations we'd.
Michael Mueller: We love the customer.
Michael Mueller: We think we're going to be able to help a ton with our technology and automation. We think we can really target with Abbott and streamline their supply chain, even more than that.
Michael Mueller: Deals are accretive to us in line with past deals.
Michael Mueller: And it's very much a win win for both parties that we work really closely over many many months on this on this on these agreements end.
Michael Mueller: We very much want our customers do well and we think we will do well and it's a that's a wonderful thing.
Michael Mueller: Got it okay. Thanks.
Speaker Change: Your next question is from the line of Craig Mailman from Citi. Please go ahead.
Craig Mailman: Hey, good morning, guys.
Craig Mailman: Just wanted to follow up on kind of the changing assumptions here I mean, if it hadn't been for the Tysons deal you essentially would have lowered guidance hereby by five.
Craig Mailman: What's the biggest pressure point as you guys reevaluated kind of the risk of tariffs is it.
Craig Mailman: Further erosion in occupancy rate margins kind of what's the.
Craig Mailman: What worries you the most of a visibility perspective.
Craig Mailman: I think it's just the unknown and the uncertainty of the tariffs I mean again, we're all over the world. We can support consumption in all the major markets.
Craig Mailman: We operate but our customers are telling us they're not sure what theyre going to do they don't know where they're going to build inventories. They don't know how theyre going to direct trade flows and that could have a short term disruption.
Craig Mailman: Even though we're very confident will support their their needs in the medium and long term. So given that uncertainty given 19 of the 20 clients I have met with said, we don't know what's going to happen with our supply chain. We think it's prudent to reinforce our overall guidance with the with the acquisition.
Craig Mailman: New cash flows, but not try to get specific when none of our customers know exactly what's going to happen.
Craig Mailman: As I said in the prepared remarks. There is also an upside opportunity here to right, which is also difficult to predict but normally more inventory tends to get to the system anytime you have disruption we've seen that many times over our history.
Craig Mailman: Yeah, So Brexit Cobra et cetera, So I just think again.
Speaker Change: It's just hard to predict as Greg mentioned, I mean, we're going to be within a range, but it could go a few points one way or the other and so we really want to see more and we'll update everyone as we see things here.
Craig Mailman: Into the next quarter and second half of the year.
Craig Mailman: I mean, there has been supply chain disruptions in the past like like port strikes like Covid.
Craig Mailman: Brexit, but there's really this is unprecedented I mean.
Craig Mailman: No one knows what's going to happen with global trade flow and I think we just feel.
Craig Mailman: Faithful, but we're not in consumer electronics or auto parts that can be.
Craig Mailman: Handicapped in the medium and long term from these changes and we are in the food and people are going to eat at where all of the world are diversified. So we think we're super well positioned versus <unk>.
Craig Mailman: Companies.
Craig Mailman: In the long term, but in the short term there could be a little a little volatility.
Craig Mailman: Okay, and then just on the.
The volume kind of resets here with customers in sort of the lower price points I mean, how much of that is happening with renewal agreements versus pricing pressure trying to poach clients from competitors to bring in new deals.
Craig Mailman: I would say on the volume guarantees it's.
Craig Mailman: What's happening with the volume guarantees as we're actually so our sales teams are doing a great job of getting new volume guarantees we have record new business. Despite the soft environment and the new business has more than 42% volume guarantees however, the.
Craig Mailman: The existing customers that kind of core holdings that we had volume guarantees with going into the first quarter, they've lowered those guarantees that that puts pressure on our revenue per occupied and throughput talent.
Craig Mailman: So while we love collecting revenue.
Craig Mailman: From customers.
Craig Mailman: We don't we actually don't think customers paying significantly more paying for significantly more space and they are using is beneficial for the long run and we like the relatively low gap between physical and economic for that reason, we think too big a gap as there's kind of a ticking time bomb frankly.
Craig Mailman: So we think we've worked through that and it will be more stable going forward.
Craig Mailman: Yeah.
Craig Mailman: And your next question comes from the line of Alexander Goldfarb with Piper Sandler Your line is open.
Speaker Change: Hey, good morning out there two questions first if we look at the non same store pool that seems to be where you guys are experiencing a much bigger occupancy dropped so just wanted to get a little bit more color. That's my first question.
Speaker Change: Yes, I mean, thats really related to the kennewick higher from last year.
Speaker Change: Yes, it's basically that's a big part of it in the first quarter.
Speaker Change: So 42 properties, where that occupancy drop was just.
Speaker Change: With a 15% drop was all driven by one property.
Speaker Change: Yes, and there is also a big bear so theres a couple a couple where we had.
Speaker Change: Incidents right with the fires that's the biggest driver.
Speaker Change: <unk> was one of our largest facilities.
Speaker Change: Okay.
Speaker Change: Same store because it was totally fall totally Paul yes, So I think thats, a big driver Alex.
Speaker Change: Okay and then the second question is we've been.
Speaker Change: For the past few quarters, we've been talking about this normalization of inventory levels.
Speaker Change: And obviously you guys have a lot of experience in the business, but it does seem that each quarter. It seems to be the next quarter. So just curious as you look at the normalization of inventory levels in the stable consumption that you guys.
Speaker Change: See in the food business.
Speaker Change: Is there something different about this cycle versus your 15 plus years in the business that seems to be taking longer for inventories to normalize because I mean COVID-19 was a few years ago presumably.
Speaker Change: Stocking occurred a few years ago.
Speaker Change: The tenants should've been back, especially pre April 2nd So just sort of curious why it seems to just be taking a little bit longer than what we initially spoke about I think it was back on the on your initial earnings call.
Greg Michael: Yes, so I'll start out over to Greg, but we actually from an occupancy level, we're pretty much right, where we expected for the first quarter. We saw normal seasonality as we talked about we saw the core holdings stabilize after the second quarter of last year. So actually let me ask from the occupancy standpoint, we are directly in line.
Greg Michael: Right with a tiny bit worse, as Greg talked about and that really what the driver we were actually pretty close to our internal models on Q1, so consistent with what we had told people and then I'll turn it over to Greg I would just reiterate what you said, we said very clearly last quarter, we thought normal neural occupancy and seasonal patterns resumed in the third quarter that remains true today and is reflected.
Greg Michael: And our numbers and as Rob.
Speaker Change: Set the Occupancies was right, where we frankly hoped it would be in the first quarter.
Greg Michael: Thank you.
Speaker Change: Your next question is from the line of Blaine Heck with Wells Fargo. Please go ahead.
Blaine Heck: Alright, great. Thanks, just a few with respect to the agreement with Tyson can you talk about the age and condition of the four properties that you acquired.
Blaine Heck: Whether they might need any redevelopment or repositioning as Tyson moves from those properties into hazelton and eventually the two new developments and then also what the yield is on the assets that are being acquired if you could share that.
Blaine Heck: Yes.
Blaine Heck: Yeah. So I think we talk about Dodge, 11% on the development in terms of the EBITDA contribution. So all of these acquisitions were low double digit EBITDA multiple.
Blaine Heck: On the acquisitions, we announced this quarter.
Blaine Heck: We did do of course complete due diligence and Tyson was totally open book on the condition of the assets. There generally in very good condition at any capex that we would need to put in is certainly figured into the overall deal and returns.
Speaker Change: Okay. Great. That's helpful. And then second question can you talk about how we should think about the sources of funding pass the cash that you guys hold on the balance sheet for the total spend on the acquisition and development agreement and maybe how you think about additional capacity or dry powder for investments.
Speaker Change: <unk> this deal the Bellingham acquisition with the additional spend on development underway and potentially any debt paydowns that you might be considering.
Speaker Change: Yeah sure. So I think this is all in line with our normal operating cadence where we.
Speaker Change: We spend money using our revolver.
Speaker Change: We saw the atomic capacity, we're solid investment grade company, we have the opportunity to do public bonds here moving forward, which is something we will certainly look at and then as we grow the business and we generate more EBITDA, we get more capacity, we generate more cash and you've got the flywheel that we've talked about so we still have capacity now.
Speaker Change: We're going to be very thoughtful in this market again, we're always going to be patient.
Speaker Change: And well and we will manage its investment grade balance sheet and continue to grow the business.
Speaker Change: Great. Thanks, guys.
Speaker Change: Your next question is from the line of Nick Thielman of Baird. Please go ahead.
Speaker Change: Hey, good morning, guys, maybe wanted to touch some on the variable costs within the business and the labor in particular I guess, what are you guys seeing on the labor front when it comes to wages or wage pressures have.
Speaker Change: Have abated at this point and then what are you guys kind of doing on the staffing levels with volume expected to be a little bit lower on the import export I guess, how are you adjusting to this type of environment.
Speaker Change: Yes, so I'll start yes labor productivity is still a great story for us as we talked about I think we showed our same store.
Speaker Change: Housing costs down in the quarter.
Speaker Change: And that is driving helping us and it's all about labor productivity and lean and the things we're doing forever.
Speaker Change: Well I'm sure, we'll talk about <unk> and the opportunity there.
Speaker Change: But yes, no. It's a good story I think.
Speaker Change: We continue to have.
Speaker Change: A lot of positives here that are helping US yes, I would say certainly the labor front is stable and we're seeing wage increases of about three 5% a year.
Speaker Change: Which is in line with history.
Speaker Change: That's helpful. And then maybe just following up on an earlier question of the $25 million of EBITDA are you able to break that down between Tyson and the Bellingham acquisition.
Speaker Change: Yeah.
Speaker Change: No no I don't want to get into the details on that but.
Speaker Change: The absolute together like I said, we're at a low double digit EBITDA as you can kind of back into it.
Speaker Change: Great. Thanks.
Speaker Change: Your next question is from the line of Montana Acrosome Young from Deutsche Bank. Please go ahead.
Speaker Change: Hi, Yes, good morning, everyone.
Speaker Change: You could.
Speaker Change: Dive a little deeper into guidance really did it unseen.
Speaker Change: Again.
Speaker Change: <unk> from all the acquisition activity could you just talk a little bit about all the other moving parts whether it is okay.
Speaker Change: Now expecting slightly worse by X amount and operations, but we're picking up this amount from better cost just to kind of get a general sense of how guidance still kind of ends up being flat, but understanding some of the moving parts a little bit better.
Speaker Change: Yeah for sure. So it's really about all of the uncertainty that we talked about earlier.
Speaker Change: So there are a lot of moving parts, we have a lot of levers to pull we feel very confident in these guidance ranges that we gave you an adjusted <unk> per share theres lot of different ways to get there.
Speaker Change: And we will continue to execute throughout the year to make sure. We deliver these results are better but theres just a lot of moving pieces right I mean it is.
Speaker Change: It's tough to quantify everything because you can't predict the future.
Speaker Change: But we feel really good about these ranges and were aided by the acquisitions and we will execute well the rest of the year and we're certainly building substantial productivity improvements continuing through the year actually accelerating through the year.
Speaker Change: The price pressure that we saw in the first quarter will continue throughout the year and thats all baked into our assumptions.
Speaker Change: Okay. That's helpful. And then if I could ask a quick second question could you talk about the business in terms of how domestic performing relative to your international operations is one generally feeling better than the other or is there more risk given one or the other just kind of curious how thats shaping up.
Speaker Change: Yes, I think the price pressure that we saw with the volume guarantees resetting was kind of a U S phenomenon.
Speaker Change: And our both our Asia Pacific business at our European business is actually performing very well.
Speaker Change: And I believe has accelerating performance.
Speaker Change: While Gis are Gis segment was down year over year, you know, we're still guiding to 5% to 10% EBIT growth of that segment and we feel we feel good about that.
Speaker Change: Thank you.
Speaker Change: Your next question is from the line of Ronald Camden Morgan Stanley. Your line is open.
Ronald Camden: Hey, Great just two quick ones, so starting with sort of same store NOI.
Ronald Camden: The previous guidance, obviously, if a 2% to 5% constant currency.
Ronald Camden: The presentation says <unk> should be.
Ronald Camden: Sort of down as much as <unk>, if I'm understanding that correctly. So just trying to think about the cadence of that.
Ronald Camden: What's baked into the second half of the year. You know obviously you are operating exact number on it but how are you guys thinking about that.
Ronald Camden: Sat down and recovery in the second half of the year.
Ronald Camden: Yes, So I think as we said we are confident in growth in the second half of the year for all of the things we talked about the easier comps the seasonality I think that we're in.
Ronald Camden: Not sure how much it's going to grow and Thats why were being careful on giving ranges.
Ronald Camden: Thats, where we will continue to give you more information as we see it.
But that's really the as Greg mentioned, that's kind of the point, yes, those both of those.
Ronald Camden: Those are the key points.
Speaker Change: Great and then my second question is just just a little bit more color on what Youre hearing.
Ronald Camden: From tenants and sort of their level of inventory.
Ronald Camden: Sort of post tariffs and so forth and are there any sort of sectors whether it's.
Ronald Camden: Food seafood protein is there any one of our other that's better or worse position than any other.
Ronald Camden: Sort of post tariff.
Ronald Camden: Announcements thanks, so much.
Speaker Change: Yes, I would say there is there is wait and see.
Ronald Camden: Whether to change any inventory.
Ronald Camden: <unk> or level of holdings, our seafood business, we talked about that a lot last year.
Ronald Camden: That has stabilized and I think we're kind of at a normal consumption level in seafood and so we're seeing that.
Ronald Camden: We've seen those inventories down from the peak of Covid, but there is no longer downward pressure in that in that in that segment of our business.
Ronald Camden: Alright, thanks, so much.
Speaker Change: Our next question is from the line of Steve Stockpile of Evercore ISI. Your line is open.
Speaker Change: Yeah. Thanks, good morning.
Speaker Change: I don't know if you guys saw there was a major article about the Chinese had canceled the major I guess poor quarter from U S. Obviously, given the tariff situation and I'm just curious.
Speaker Change: How that sort of transaction ripples back through the system here in the U S.
Speaker Change: Could things like that in some cases put upward pressure on occupancy or how do you sort of think about that in light of the comments, Greg you sort of made about customer uncertainty with kind of the import export business.
Speaker Change: Yes, it's a really great question, so absolutely that could happen.
Speaker Change: All of the uncertainty that we have and the reason, we're not giving our same store exact number for the second half isn't all downside theres a lot of things that could happen here that could buoy, our our occupancy and results.
Speaker Change: Well I mean, China is a very large trading.
Speaker Change: With the U S. In the food space, we've spoken with our team a number of commodity experts.
Speaker Change: And I think importantly, though while China is a large partner they've been using non tariff trade barriers for a number of years. So this really isn't a new issue of wallets pronounce than it could have a bigger impact than past issues is not a new thing for our customers to deal with I mean first.
Speaker Change: We are both China was not renewing export licenses for a number of U S protein locations that compete with their domestic producers all of last year and our customers have been dealing with that.
Speaker Change: So customers that producers are already working to reader redirect their exports to different countries and thats exactly what they will do if the tariffs remain.
Speaker Change: If China's.
Speaker Change: Protectionist policies continue where the tariffs get larger so I mean, like we said food food flows like water around the world. If it's not exported to China will be export or somewhere else or it will be because it would be pointed to the domestic market here in the U S.
Speaker Change: But yes, there is upside as you as you point out.
Speaker Change: Okay. Thanks, and then maybe just.
Speaker Change: Alright did you want to say something else.
Speaker Change: No. Good proceed okay.
Speaker Change: The second question, just I guess as you think about the.
Speaker Change: Capital deployment in like this Tysons deal does the economic uncertainty maybe create more opportunities for you guys.
Speaker Change: As customers look to kind of shed costs and streamline their business and how are you thinking about those deals and maybe the return hurdles in light of kind of where your stock is traded since the IPO and uncertainty in the bond market or do you are you raising your investment hurdles and do you think this can create more opportunity.
Speaker Change: So we think it could we're always looking at risk adjusted return in our cost of capital is a key component of that calculation that we that we talk about every week.
Speaker Change: Our capital deployment call.
Speaker Change: But certainly if tariffs impact the global supply chain customers will shift their either production or distribution channels and we are in those rooms with those executive staffs, helping them decide and execute on any major supply chain changes and so Tyson is one that that was obviously.
Speaker Change: And well before these tariff these tariff policy changes, but.
Speaker Change: As things change, we tend to we tend to get even more valuable with our customers.
Speaker Change: Great. Thank you.
Speaker Change: Your next question is from the line of keeping King from tourist. Please go ahead.
Good morning, going back to that time since you're giving me ultimately what was the value proposition for Tysons was it just.
Speaker Change: Cost savings or the Nols are just more.
Speaker Change: Sustainable operations.
Speaker Change: Curious overall thank you.
Speaker Change: All the above I mean.
Speaker Change: Lower cost best technology, best automation, serving their dynamic customers better.
Speaker Change: Positioning their inventory of the optimal locations. These guys are really smart about how they plan their future supply chain and we were able to work with them for.
Speaker Change: Our full year on what that future supply chain should look like we also provide them with a lot of flexibility given that they're an anchor customer in these buildings and can flex inventory if needed to a certain extent.
Speaker Change: <unk> future proofs their supply chain Lino us with certainly.
Speaker Change: A piece of this and.
Speaker Change: We will be running in these automated buildings and we will convert to <unk> and the buildings that were that were purchasing from that but I'll just give a quick update while we're while we're on the topic or our pilots continued to go extremely well, we're seeing double digit productivity improvements in these buildings.
Speaker Change: And as we mentioned this is a year of just proving it out and then we'll roll it out more broadly over the next couple of years, but we're increasingly excited about how this technology can transform our operations.
Speaker Change: We're seeing.
Speaker Change: Real benefit not only in direct labor, but also an indirect labor benefits and energy and safety even in employee turnover and training expense. Even think this will lower our maintenance expense and capex as we will be we use our facilities.
Speaker Change: More efficiently and overtime.
Speaker Change: This will meaningfully lower our cost structure and create an even deeper moat between us and our competition.
Speaker Change: Prove the already outstanding service, we provide to our customers. So we're highly encouraged and this technology was a component of the deal with Tyson.
Speaker Change: Great. Thank you and on the trade uncertainties one of the things that administration I talked about is not just Paris, but perhaps improving the balance of trade through export, especially like agricultural exports I am not sure. If you and the food producers have had much dialogue with the administration, but.
Speaker Change: Any kind of insights you can share what.
Speaker Change: What this potential could be and how real does it feel like or would it be like all soybeans, saying that touch the cold storage warehouse. Thank you.
Speaker Change: Yes, I think it could impact us, but to try to predict how and why and where in which commodities. Yes, we can.
Speaker Change: I've met with many customers to hinted last just several weeks.
Speaker Change: And there is so much uncertainty I think it would be unwise for me to try to predict what's going to happen at this at this time, but.
Speaker Change: More next quarter.
Speaker Change: Okay. Thank you.
Speaker Change: Next question is from the line of Michael Goldsmith with UBS. Please go ahead.
Michael Goldsmith: Good morning, Thanks for taking my question how much room do you think your current tenants.
Michael Goldsmith: Their current commitments to utilize before they would need to take on more space.
Michael Goldsmith: Is there any thoughts there by customer by region by commodity.
Michael Goldsmith: Yes, I think I think where we are from an occupancy standpoint, there is a ton of room that we have to sell to customers and that's actually a really nice opportunity moving forward right with all the thing that we've done from a productivity standpoint.
Michael Goldsmith: Getting our costs are really good level here, having the space itself, having a market that is going to bounce back at some point gives us a ton of opportunity to drive really strong operating leverage moving forward, yes, and I think because the volume guarantees were just reset here in the first quarter customers are they have an appropriate amount of.
Michael Goldsmith: Space reserved for what they see in their business.
Michael Goldsmith: If there is any inventory inflection if theres any increase in consumer sentiment that leads to an uptick in sales and volumes. That's all upside for us in incremental margins are extremely strong and so we're kind of at a bottom and inventories right now and any any stimulus to rebuild or.
Michael Goldsmith: Sure.
Michael Goldsmith: We'll reposition just just hard for us.
Michael Goldsmith: And then just to follow up on <unk>.
Michael Goldsmith: How much supply delivered over the last year is yet to be absorbed and then also how much supply is set to be delivered in 2025 that is leased to the mi industry.
Michael Goldsmith: Yeah, Yeah, Great question, So certainly theres been new supply into the market over the last several years that new capacity peaked in 2023 with about 4% in the U S.
Oh.
Michael Goldsmith: Incremental pallet positions that came down by about 50% in 'twenty four and again. Similarly this year, so about 2% new pallet positions added in the U S. In 2425 and that new supply is expected to be cut in half again based on what's been announced so far and what we know is happening.
2026, so in 2026, the new pallet positions added in the U S will kind of be back to historical pre COVID-19 levels, but I think it's important to mention that that capacity. That's been added over the last several years has been has been built at the highest cost to build effort.
Michael Goldsmith: The cost of capital is obviously increase so it's hard for these smaller players to succeed at anything below kind of market prices.
Michael Goldsmith: And we expect some of these businesses to underperform and some to fail and we're definitely seeing evidence of that in the marketplace.
Michael Goldsmith: And we expect those sales dislocation to create opportunities for us to either grow organically or through acquisition and I think.
Michael Goldsmith: <unk> to these new entrants have such distinct competitive advantages, we have scale that create network effects, we have world class and leading automation, we have proprietary technology, even before the Linzess launch we have 13000 customer relationships will be a global farm to Fork service offerings and so we have a really deep mode I mean.
Michael Goldsmith: For example, I'd argue that if you think about this new capacity or new companies that have entered our space I think we're the only one capable of successfully signing and execute executing a deal like to the scale of a Tyson foods agreements.
Speaker Change: Thank you very much.
Speaker Change: Your next question is from the line of Todd Thomas with Keybanc capital markets. Your line is open.
Todd Thomas: Hi, Thanks. Good morning first question I, just wanted to follow up on the minimum volume guarantees, which decreased 200 basis points sequentially to 42% level.
Todd Thomas: That decrease occurred before the tariff announcements and I realize there is uncertainty around how inventory levels will trend in the near term.
Todd Thomas: The uncertainty around trade flows and inventory, but in terms of those changes I just wanted to clarify if that was predominantly a first quarter reset of sorts or whether you do expect that process to be ongoing throughout the year.
Todd Thomas: And whether or not the fixed commit the percentage of fixed commenced my fall further perhaps below 40%.
Todd Thomas: It is largely a first quarter phenomenon the majority of them get get reset in the first quarter and again they are reset at lower levels, but all the existing customer volume guarantees came down a little bit the new business. We're selling he has more than 42% average volume guarantees and so we would expect.
Todd Thomas: I don't think tariffs would have an impact on this if anything to Steve's point earlier.
Todd Thomas: If there is any stockpiling of inventory or things or have it can be held or <unk> or diverted back to the U S that are on the water that could lead to people.
Todd Thomas: Even more space and potentially come kind of out of cycle and ask for increase in volume guarantees. So we will see what happens we get a lot of uncertainty but.
Todd Thomas: Directly to answer your question. It is a majority first quarter phenomenon.
Todd Thomas: Okay, and then separate question on the Tysons transaction.
Todd Thomas: With regard to the existing facilities that will be transitioned to public warehouses will those warehouses.
Todd Thomas: Experienced a decrease in occupancy in 2007 or 2008 during that transition how will that handoff happen in.
Todd Thomas: I'm, just curious whether or not we should expect.
Todd Thomas: Those how those operations should should sort of trend during that transition period, if they need to sort of fill up and if there'll be.
Todd Thomas: Sort of operating in a way like lease up or development assets during that period.
Todd Thomas: We can't get to this all the details of the agreement, but we are.
Todd Thomas: A very smooth transition.
Todd Thomas: Anything else there because the public warehouse there could certainly be a bit of a J curve as youre Fisher filling up the new warehouse in a couple of years, but theres a theres a structured transaction around this that yes, certainly yes. The answer is yes, there'll be an occupancy decline when they depart and we will build it back up into a public facility, but all of that was certainly built in.
Todd Thomas: As we entered the agreement with Tyson foods.
Speaker Change: And your next question comes from the line of Vikram Malhotra from Mitsui. Please go ahead.
Vikram Malhotra: Morning, Thanks for the question.
Vikram Malhotra: Just going back to the guide I get it's very difficult to pinpoint where same store warehouse, so even with global solutions.
Vikram Malhotra: It's going to go but just trying to understand.
Vikram Malhotra: High level to keep the guidance that you must have baked something in.
Vikram Malhotra: Said, another way like a status where to go away tomorrow.
Vikram Malhotra: Would you still be hitting your original guide or is there. Some other offset like you maintain the guide what are the other components that you're.
Vikram Malhotra: Cutting.
Vikram Malhotra: Assuming kind of the same store comes in well below your original expectation.
Vikram Malhotra: Yes, it's real hard to predict what would happen if tariffs Scott.
Vikram Malhotra: Way Tomorrow.
Vikram Malhotra: I think if you just if you just do the simple math right and you and you look at our guide and you look at the $25 billion that were that were planning to get Youre, losing 25 million somewhere else right. So that gets you more.
Vikram Malhotra: More to the low end of our initial same store guide if youre going to go back to that but again, there is a ton of volatility theres upside downside.
Vikram Malhotra: We will we're very confident in the levers that we can pull on cost and everything else and so we are committed here to deliver these ranges.
Vikram Malhotra: Barring any sort of other economic thing that that.
Vikram Malhotra: Where the habit and our job here will be to do even better than that.
Vikram Malhotra: Got it and then I guess just talked a lot about opportunities on the external growth side, obviously tightened the solid deal wondering just <unk>.
Vikram Malhotra: Given kind of how the stocks performed and obviously the embedded value.
Vikram Malhotra: Considering a big buyback or even just other ways to kind of.
Vikram Malhotra: Highlight value.
Vikram Malhotra: Yes, I think that the board and the management team will always do whatever we think is the best interest of the shareholders and so we'll always evaluate all things that we could potentially do to drive shareholder value over the long term I mean, we're really focused here as you know on compounding growth and driving long term shareholder value.
Vikram Malhotra: That's what we did.
Speaker Change: Okay, and then just one if I can clarify like how much how much of this.
Speaker Change: I guess the challenge same store, you've got a big global portfolio of the scans et cetera are you able to share any like industry stats to kind of show, how maybe lineage portfolios outperforming even in this environment like you know what's happened to.
Speaker Change: Economic occupancy changes across the appeal of the just the overall growth any stats you can share that would highlight it's still outperforming fundamentally.
Speaker Change: Thanks.
Speaker Change: There is not really publicly or it's very fragmented industry practice.
Speaker Change: Transparent even in the U S whats left in the in.
Speaker Change: In the international markets I think we're getting that from the <unk> of our 250 salespeople around the world that are acutely aware of the capacity or occupancy of our other competitors in their markets.
Speaker Change: I personally visited with teams across 10 markets around the world actually more like 12, this year and met with our teams.
Speaker Change: Are very in tune with what's going on in the market and what customers are going where and what the capacity is on our competitors' buildings that based on that based on that until we think we're performing very well for both of us clients.
Speaker Change: Ladies and gentlemen, due does it constrain some time, we do need to conclude our Q&A session for today and I would like to turn the call back over to Evan Barbosa for closing remarks.
Speaker Change: On behalf of the entire Zumiez team. Thank you for joining us today and for your interest in line as we look forward to speaking with you again on our next quarterly call.
Speaker Change: Thanks, everybody.
Speaker Change: This concludes today's conference call. Thank you for joining US you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.