Q2 2025 Lineage Inc Earnings Call

There will be an opportunity to ask question.

To ask a question. Please press star followed by the number one on your Touchtone phone and to withdraw your question. Please press star one again it is my pleasure to turn the call over to Mr. Evan Barbosa, Sir you may begin.

Thank you welcome to let me just discussion of its second quarter 2025 financial results. Joining me today are Greg local vintages, President and Chief Executive Officer, and Rob <unk>.

As Chief Financial Officer.

Our earnings presentation, which includes supplemental financial information can be found on our Investor Relations website at IR Dot one dot com.

Showing management's prepared remarks, we'll be happy to take your questions.

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.

These statements are subject to numerous risks and uncertainties as described in our filings with the SEC.

These risks could cause our actual results to differ materially from those expressed in or implied by our comments.

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 will not be updated as actual events unfold. 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.

Unless otherwise noted reported figures are rounded and comparisons of the second quarter of 2025 are to the second quarter of 2024, now I would like to turn the call over to Greg.

Thanks, everyone for joining us today I'll start by going over our agenda for this morning.

First I'll recap, our second quarter performance, which was in line with our expectations next will cover our updated second half outlook, including our occupancy and price expectations for the remainder of the year.

After that we'll cover our guidance update which is a reduction versus our prior outlook driven by muted seasonal inventory levels.

I'll, then turn it over to Rob to reduce segment details and provide an update on our balance sheet lastly.

Lastly, I will summarize the quarter and turn it over to your questions.

Turning to our quarterly performance on slide four we delivered <unk> per share growth of 8% total revenue increased modestly by 1% and adjusted EBITDA decreased by 2%, reflecting the challenging market dynamics. We're currently navigating.

These dynamics are driven by persistently higher food prices interest rates tariff impacts in a general sense of uncertainty felt by our customers that are leading to reduced expectations around the balance of the year inventory build.

This updated outlook has led us to reduce our annual <unk> per share guidance to $3 20 to $3 40 compared to our prior range of $3 40 to $3 60.

Transitioning to our second quarter results, our global warehousing sector was in line with our expectations as we laid out last quarter's call.

Warehouse NOI was down 6% year over year, I guess elevated inventory levels, we experienced last year.

While these market dynamics are fluid is obviously difficult to predict we remain confident in our core business.

Saw sequential improvement during the second quarter, and our same store NOI, which increased from 336 to 343 billion.

Notably Q2 is normally the lowest seasonal occupancy quarter of the year.

We're also seeing storage revenue per physical occupied pallet stability as expected as I'll discuss more in a minute our globally integrated solutions saw 8% year over year segment NOI growth led by our U S transportation and direct to consumer businesses.

Across the company, we are acutely focused on partnering with our customers as they navigate through these turbulent times.

We will continue to work as strategic partners to help them to improve their supply chain efficiency.

Additionally, the rollout of <unk> now, it's six conventional sites continues to accelerate it performed above our expectations showing double digit productivity improvements.

We expect to have 10 conversions completed by year end guide I guess up to further accelerate the broader rollout in 2026.

Also during the quarter, we completed our inaugural $500 billion of investment grade bond offering.

Additionally, we executed on our M&A and development pipeline it accretively deployed $535 billion of growth capital, including closing our agreements with Tyson Foods. In addition to three smaller acquisitions.

Before moving onto a more detailed analysis of our performance I want to say a few words about our company.

The answer is positioned as the industry leader with broad and deep customer relationships, the largest network cutting edge technology.

World leader and warehouse automation.

Confident that we are well positioned to grow as the industry inventory stabilize new capacity is absorbed and our internal initiatives continue to gain traction.

I would also like to take a moment to sincerely. Thank all of our team members across the world for living our values as they deliver excellent service to our customers every day.

Moving to slide five when we met with investors in early June and Baby, we reaffirmed guidance based on what we were seeing in the marketplace at that time.

The Blue line on this chart shows our actual and projected physical utilization.

The Green line shows typical quarterly USDA seasonality for 2015 through 2019.

As before the Pip havent caused disruption in the normal seasonal pattern.

And the Red line shows 2025 actual USDA seasonality.

As you can see throughout much of the first half of the year, we were slightly above the pre pandemic USDA averages, which we see as a proxy for normal seasonality and informed our prior guidance.

Late in the second quarter with inventories historically started decline we saw muted seasonality occupancy.

This trend continued into the third quarter and we've only recently see the positive inflection in their inventories.

This delayed occupancy improvement combined with persistently high food prices tariff uncertainty.

Elevated customer inventory carried at cost drove our decision to lower outlook for the second half.

To be clear our occupancy projections is what changed.

As our assumptions around cost efficiencies.

Throughput.

Growth remained unchanged from our previous guidance all of that said, we still expect inventories to build through the third quarter and into the fourth quarter supporting sequential same warehouse NOI and adjusted EBITDA improvement in each quarter of the year.

Turning to slide six we had a number of questions about price in relation to our storage revenue for physical pallet. After we announced our first quarter results. A quick reminder, that our storage revenue per physical pallet consists of red storage and lost revenue.

As outlined at NAREIT, we expect to see stable trends for the balance of the year. This quarter, we saw nearly 5% sequentially.

Same warehouse storage revenue per physical pallet.

As you can see on the charts, there's always some short term volatility in this metric, which is driven by a number of factors, including rate volume guarantees inventory turns last rising volumes commodity mix exchange rates into the helm.

Additionally, we saw a sequential increase in our minimum storage guarantees increasing 290 basis points from Q1 to Q2 as the new business. We are winning he has a higher percentage of storage guarantees that our base.

While it remains a competitive environment about 90% of contracts to be renegotiated. This year have been completed giving us confidence in our stable price outlook for the balance of the year.

Moving to slide seven based on the factors I described today, we're lowering our full year 2025 outlook.

Coupled with the <unk> <unk> per share reduction of already outlined we're revising our full year adjusted EBITDA guidance to the range of $1 two nine to $1 34 billion down from our previous range of $1 35 to $1 4 billion.

Given the dynamics unfolding in the industry, we want to provide more clarity regarding our near term expectations and accordingly, we are initiating guidance for the next quarter for.

For Q3, we expect <unk> per share to be between 75% and 79.

And adjusted EBITDA to be between 326 and $336 million.

Some of the maintenance Capex spend move from the second quarter into the third quarter, which is reflected in our <unk> per share guidance.

It's obviously been a very tough road since our IPO with customer inventories rationalizing tariff uncertainty higher interest rates and food prices and new competition entering our market. We believe the industry demand is bouncing along the bottom right now.

Unfortunately, the uncertain macro backdrop is slowing our expectations of a broader market inflection in inventories in throughput.

Lowering guidance is both difficult and disappointing to us, but we remain focused on executing our business plan and driving shareholder value. We are also aligned with our investors as our management team has the majority of our compensation tied to long term equity incentives.

In summary, we believe we've turned the quarter and our business has begun to steadily improve in the short term, while we continue to invest to win in the long term.

Saw sequential NOI improvements in Q2, which is normally the lowest quarter of the year.

We expect this improvement to continue in the second half where same store NOI trending positively positioning us well for growth in 2026.

Speaker #1: Record ing recording sequential same warehouse at OI and adjusted Evan and Ruben in each quarter of the year. Turning to slide six, we had a number of questions about price in relation to our storage revenue per physical pallet after we announced our first quarter results.

To that end on slide eight allow me to outline some of the actions, we're taking to position lineage for long term success.

We're focused on driving competitive differentiation across three key areas.

Speaker #1: A quick reminder that our storage revenue per physical pallet consists of rent, storage, and blast revenue. As outlined in A-Read, we expect to see stable trends for the balance of the year.

<unk> customer success, leveraging our network effects and enhancing warehouse productivity.

Speaker #1: This quarter, we saw a nearly 5% sequential improvement in same warehouse storage revenue per physical pallet. As you can see on the charts, there's always some short-term volatility in this metric.

Starting with customer success, we're focused on addressing our customers' primary concerns which include optimizing supply chain costs increase efficiency and further improving service by marrying our globally integrated solutions offering with our expansive global warehouse network.

Speaker #1: Which is driven by a number of factors, including rate, volume guarantees, inventory turns, blast freezing volumes, commodity mix, exchange rates, and seasonality. Additionally, we saw a sequential increase in our minimum storage guarantees.

We're also enhancing our responsiveness and customer service consistency.

Through a new partnership with cognizant, we are elevating our customer care model through proven best in class technologies extended service hours and deep customer service expertise.

Speaker #1: Increasing 290 basis points from Q1 to Q2, as the new business we are winning has a higher percentage of storage guarantees than our base.

All while retaining the same team members as points of contact that our customers three years.

Speaker #1: While it remains a competitive environment, about 90% of contracts to be renegotiated this year have been completed, giving us confidence in our stable price outlook for the balance of the year.

Next on network effects, we are leveraging our best practices economies of scale investments of technology broad service offerings and presence across 19 countries to support the increasingly global needs of our customers.

Speaker #1: Moving to slide seven, based on the factors I described today, we're lowering our full year 2025 outlook. Coupled with the AFFO per share reduction I've already outlined, we're revising our full year adjusted EBITDA guidance to the range of 1.29 to 1.34 billion.

We're also using our scale to drive cost savings across our platform in areas, such as energy and insurance.

In markets experiencing excess capacity, we're proactively consolidating facilities to drive higher occupancy inefficiency as the industry leader, our scale and breadth position us to create value through network optimization efforts like these.

Speaker #1: Down from our previous range of 1.35 to 1.4 billion. Given the dynamics unfolding in the industry, we want to provide more clarity regarding our near-term expectations.

Finally regarding warehouse productivity I truly believe we have the best operating team in the business.

Speaker #1: And accordingly, we are initiating guidance for the next quarter. For Q3, we expect AFFO per share to be between 75 and 79 cents, and an justed EBITDA to be between 326 and 336 million.

<unk> has always been at the core of our operating culture. It has helped us deliver service excellence and consistent productivity gains over many years.

Speaker #1: Some of the maintenance capex spend moved from the second quarter into the third quarter, which is reflected in our AFFO per share guidance. It's obviously been a very tough road since our IPO, with customer inventories rationalizing tariff uncertainty, higher interest rates, and food prices, and new competition entering our market.

We expect <unk> to build on this foundation and accelerate efficiencies, while making lineage even better place to work.

As previously mentioned our ongoing little less pilots are continuing to show double digit productivity improvements, we look forward to sharing more financial details with investors by year end.

Lastly, our industry leadership and automation remains unmatched as illustrated by our agreements with Tyson foods discussed last quarter.

Speaker #1: We believe the industry demand is bouncing along the bottom right now. Unfortunately, the uncertain macro backdrop is slowing our expectations of a ader market inflection in inventories and throughput.

Simply put we will never stop working to earn the right to grow with our valued customers.

Speaker #1: Lowering guidance is both difficult and disappointing for us. But we remain focused on executing our business plan and driving our own revenue. We are also aligned with our investors as our management team has the majority of our compensation tied to long-term equity incentives.

Now I would like to turn the call over to our CFO I. Appreciate thanks, Greg Good morning, everyone. Starting on slide nine and quickly recapping our segment performance in our global warehouse segment total revenue grew slightly and total NOI declined 4% to $357 million.

Speaker #1: In summary, we believe we've turned the corner, and our business has begun to steadily improve in the short term while we continue to invest to win in the long term.

Warehouse revenue was down 3%, while same warehouse cost of operations decreased 1% aided by our continued labor and energy productivity initiatives contribution from non same warehouse NOI grew 33% driven by acquisitions and developments that continue to ramp we received some positive contributions.

Speaker #1: We saw sequential NOI improvements in Q2, which is normally the lowest quarter of the year. We expect this improvement to continue in the second half for same-store NOI trending positively, positioning us well for growth in 2026.

Speaker #1: To that end, on slide eight, allow me to outline some of the actions we're taking to position Lineage for long-term success. We're focused on driving competitive differentiation across three key areas: delivering customer success, leveraging our network effects, and enhancing warehouse productivities.

From the Tyson Foods' agreements, which closed in June and we are off to a great start.

Additionally, we expect $109 million of incremental future NOI from previously completed and in process development projects that have yet to stabilize we have already spent over $1 1 billion of the $1 2 billion total investment on the project, where the future NOI benefit is yet to be realized in summary.

Speaker #1: Starting with customer success, we're focused on addressing our customers' primary concerns, which include optimizing supply chain costs, increased efficiency, and further improving service. By marrying our global integrated solutions offering, with our extensive global warehouse network.

We are well positioned to grow aided by the impact of these nearly completed development <unk>.

Shifting to slide 10.

Covering our global integrated solutions segment revenue was up 2% to $380 million and NOI was up 8% to $68 million. Our NOI margin was up 100 basis points to 17, 9%, we're seeing strong momentum in our U S transportation and direct to consumer businesses are <unk>.

Speaker #1: We're also enhancing our responsiveness in customer service consistency. Through a new partnership with Cognizant, we are elevating our customer care model through proven best-in-class technologies, expanded service hours, and deep customer service expertise.

Speaker #1: All while retaining the same team members as points of contact that our ustomers have known for years. Next, on network effects, we're leveraging our best practices economies of scale, investments in technology, broad service offerings, and presence across 19 countries to support the increasingly global needs of our customers.

<unk> continued to appreciate lineage as integrated solutions and unmatched global service offerings for the remainder of 2025, we expect this strong momentum to continue with double digit growth in the second half.

Moving to slide 11, we ended the quarter with net debt of $7 4 billion total liquidity stood at $1 5 billion, including cash and available capacity on our revolving credit facility, our leverage ratio defined as net debt to LTM. Adjusted EBITDA was $5 seven we will remain highly disciplined on future capital.

Speaker #1: We're also using our scale to drive cost savings across our platform in areas such as energy and insurance. In markets experiencing excess capacity, we're proactively consolidating facilities to drive higher occupancy and efficiency.

Speaker #1: As the industry leader, our scale and breadth position us to create value through network optimization efforts like these. Finally, regarding warehouse productivity, I truly believe we have the best operating team in the business.

Right.

We successfully completed our inaugural $500 billion investment grade bond offering which carried a five 5% coupon on a five year term.

Speaker #1: Being has always been at the core of our operating culture and has helped us deliver service excellence and consistent productivity gains over many years.

Our new bond has been well received by investors and is traded tighter since the offering.

Like to thank Michele della are World class Treasury team and our banking partners for the great execution on our inaugural deal.

Speaker #1: We expect LinOS to build on this foundation and accelerate efficiencies while making Lineage an even better place to work. As previously mentioned, our ongoing LinOS pilots are continuing to show double-digit productivity improvements.

Investment grade status with a key driver of our decision to go public and we are excited to have access to these markets moving forward.

With that I'll turn it back over to Greg to wrap up before opening it up to your questions.

Speaker #1: We look forward to sharing more financial details with you about that by the . Lastly, our industry leadership and automation remains unmatched as illustrated by our reements with Tyson Foods to uss last quarter.

In summary on slide 12, our Q2 results were in line with our expectations, we're lowering our guidance to our revised outlook regarding the seasonal inventory build pricing remained stable and importantly, we saw sequential revenue NOI and EBITDA improvements, which we expect to continue going forward.

Speaker #1: Simply put, we will never stop working to earn the right to grow with ur valued ustomers. Now I'd like to turn the call over to our CFO, Rob Crisci.

We are the global cold chain leader in providing the critical infrastructure for the food industry.

Speaker #2: Thanks, Greg. Good morning, everyone. Starting on slide nine and ickly recapping our segment performance, in our global warehouse segment, total revenue grew slightly and total NOI declined 4% to 367 million.

In industry with positive long term growth.

We're achieving meaningful progress on our internal initiatives such as our <unk> technology.

We are positioned to deliver strong operating leverage when the industry increase.

Speaker #2: Same warehouse revenue was down 3%, while same warehouse cost of operations decreased 1%. Aided by our continued labor and energy productivity initiatives. Contributions from non-same warehouse NOI grew 33%, driven by acquisitions and developments that continue to ramp.

Finally, our management team has never been more committed to delivering results and to driving long term shareholder value.

With that let's open it up for questions operator.

Thank you.

Speaker #2: We received some positive contributions from the Tyson Foods agreements, which closed in June, and we are off to a great start. Additionally, we expect $109 million of incremental future NOI from previously completed and in-process development projects that have yet to stabilize.

Ladies and gentlemen at this time, we will be conducting a question and answer session I would like to remind everyone to limit yourself from one question only.

To ask a question. Please press star on you touched on phone and to withdraw your question. Please press Star One again, our first question comes from the line of Mr. Alexander Goldfarb with Piper Sandler Sir Your line is open.

Speaker #2: We have already spent over $1.1 billion of the $1.2 billion total investment on these projects where the future NOI benefit is yet to be realized.

Hey.

Speaker #2: In summary, we are well-positioned to grow, aided by the impact of these nearly completed developments. Shifting to slide 10, and covering our global integrated solution segment, revenue was up 2% to 380 million and NOI was up 8% to 68 million.

Hey, good morning out there.

I guess for my one question.

Greg at NAREIT, you guys reiterated the guidance earlier this year clearly you had a chance at that point to revise down and just want to understand everything was tracking well until basically June 1st and then after that things fell off it just seems a little tough again, especially given that you guys had in <unk>.

Speaker #2: Our NOI margin was up 100 basis points to 17.9%. We are seeing strong momentum in our U.S. transportation and direct-to-consumer businesses. Our customers continue to appreciate Lineage's integrated solutions and unmatched global service offering.

Opportunity to revise then just curious what youre thinking and how things were trending then versus what materially happened subsequent to NAREIT that caused you guys to reduce the outlook.

Speaker #2: For the remainder of 2025, we expect this strong momentum to continue, with double-digit growth in the second half. Moving to slide 11, we ended the quarter with net debt of $7.4 billion. Total liquidity stood at $1.5 billion, including cash and available capacity on our revolving credit facility.

Yeah, Good morning, Alex and honestly great question.

And Youre right what changed is our occupancy guidance.

We had been trending in line with typical seasonality and I think everyone remembers we described and we described typical seasonality is the normal seasonal pattern.

Speaker #2: Our leverage ratio defined as net debt to LTM adjusted EBITDA was 5.7. We will remain highly disciplined on future capital deployment. In June, we successfully completed our inaugural $500 million investment-grade bond offering, which carried a 5.25% coupon on a five-year term.

We were referencing 2015 to 2019 before all the disruption of Covid when the normal seasonal pattern happen for.

Generations really before that disruption in that you start in Q1, you do drop to two a bottom in Q2, and then you build up to through Q3 and Q4.

Speaker #2: Our new bond has been well received by investors and has traded tighter since the offering. I'd like to thank Michelle Domas, our Cloud Treasury Dean, and our banking partners for the great execution on our inaugural deal.

So at NAREIT, we were trending actually in line with typical seasonality actually a little bit better than normal seasonality.

And how the USDA indicated the market was performance. So we were above the line as indicated on slide five in June when we typically see utilization in flat after bottoming in May and this year. We just started to see the typical seasonal uplift of utilization in late July.

Speaker #2: The estment-grade status was a key driver of our decision to go public, and we are excited to have access to these markets moving forward.

Speaker #2: With that, I'll turn it back over to Greg to wrap up before opening it up to your questions.

Speaker #1: In summary, on slide 12, our Q2 results were in line with our expectations. We're lowering our guidance due to our revised outlook regarding the seasonal inventory build. Pricing remains stable, and importantly, we saw sequential revenue, NOI, and EBITDA improvements, which we expect to continue going forward.

Which is obviously a leader of the usual in that pickup has been a little bit more gradual.

It typically is so we do still anticipate a seasonal uplift in the second half and we do see that happening now in the last couple of weeks, but because of the delay and because of the muted seasonal pattern that we're seeing today versus what we were seeing when we talked at NAREIT and because of the ongoing uncertainty around tariffs and elevated inventory carrying cost.

Speaker #1: We are the global cold chain leader in providing the critical infrastructure for the food industry—an industry with positive long-term growth. We're achieving meaningful progress in our internal initiatives, such as our LinOS technology.

We're just lowering our expectations on the magnitude of the uplift importantly, as you saw we did see sequential improvement in our same store NOI Q1 to Q2, and we expect to improve in each quarter of the year.

Speaker #1: We are positioned to deliver strong operating leverage when the industry improves. And finally, our management team has never been more committed to delivering results and to driving long-term shareholder value.

Speaker #1: In fact, let's open it for questions. Operator?

Thank you.

Yes.

Thank you. Our next question comes from the line of Ken.

Speaker #3: Thank you. Ladies and gentlemen, at time, we will be conducting a question and answer session. I would like to remind everyone to limit yourselves from one question only.

<unk> bin Kim from correct.

Go ahead.

Thanks. Good morning, maybe you can just start off with.

Higher level whats the.

Speaker #3: To ask a question, please press star on your touchstone phone. And to withdraw your question, please press star one again. Our first question comes from the line of Mr. Alexander Goldfarb with Piper Sandler.

The best argument you think you've heard from your clients in terms of why occupancy is too low or throughput of volume is too low today.

What I.

Speaker #3: Sir, your line is open.

I guess the industry players and yourself included might think what its normal going forward.

Speaker #4: Hey, good ning out there. I guess for my one question, Greg, you know at NARY, you guys reiterated the guidance from earlier this year clearly you had a chance at that point to revise down.

So what are the best argument for that.

Yes, I think.

As I mentioned on the prepared remarks, we believe the industry is bouncing along the bottom right now I mean food producers on their earnings calls and in all of our meetings continue to cite just HIFU pricing value seeking behavior from customers. Our view right. Now is the inventories have been under serious pressure for a couple of years now and then.

Speaker #4: And just want to understand, everything was tracking well until basically June 1st, and then after that, things fell off. It just seems a little tough, you know, again, especially given that you ys had an opportunity to revise then.

Servicing consumers without stock outs, which nobody Volvo handle.

Speaker #4: Just curious, you know, what you're inking, you know, and how things were trending then versus what materially happened subsequent to NARY that caused you guys to reduce the outlook?

Would be very difficult at even lower levels and so we definitely feel we're bouncing off the bottom there are some data positive data points out there like the beef herd counts, which are obviously still below the 2021 levels.

Speaker #2: Yeah, good morning, Alex. And honestly, great question. And you're right. What changed is our occupancy guidance. We had been trending in line with typical seasonality.

Stabilized based on the 2025, USDA data and <unk> data showed that restaurant industry.

Speaker #2: And I think everyone remembers we described and we described typical seasonality as the normal seasonal pattern of, you know, we were referencing 2015 to 2019, before all the disruptions of COVID, when the normal seasonal pattern happened for, you know, generations really before that disruption.

A whole industry gained momentum after a slow start to the year also our customers are pushing very very hard for us to increase volumes through incentives and their sales efforts and if those incentives are successful or we get any interest rate relief either one of those things could act as a stimulus stimulus for increasing inventories moving forward.

Speaker #2: And that, you know, you start in Q1, you drop to a bottom in Q2, and then you build up to through Q3 and Q4.

Do you think.

<unk> drugs are having a significant impact on volume for occupancy.

Speaker #2: And so at NARY, we were trending actually in line with typical seasonality, actually a ittle bit better. The normal seasonality and how the USDA indicates the market was performing.

We don't in our customers don't I mean, certainly if you look at our commodity mix of.

Heavy and proteins seafood fruit and veg.

Speaker #2: So we were above the line, as indicated on our slide five. In June, when we we typically see utilization in fact after bottoming in May, and this year, you know, we just started to see the typical seasonal uplift of utilization in late July, which is obviously later than usual.

Those are areas, where people are eating more of not less.

We think long term.

If the drugs work and hopefully they do and dramatically impact diabetes deaths that people will live longer than people would have more in the long term.

Alright, Thank you guys.

Speaker #2: And that pickup has been a little bit more gradual, than it typically is. So we do still anticipate a seasonal uplift in the second half, and we do see that happening now.

Of course.

Thank you. Our next question comes from the line of Mr. Michael <unk> from Evercore. Please go ahead.

Great. Thanks, I appreciate the comments earlier on the line OS pilot I.

Speaker #2: In the last couple of weeks, but because of the delay and because of the muted seasonal pattern that we're seeing today, versus what we were seeing when we talked at NARY, and because of the ongoing uncertainty around tariffs and elevated inventory carrying costs, we're just lowering our expectations on the magnitude of the uplift.

I don't know you said you kind of quantify the benefits of that later in the year, but maybe can you give us any anecdotal examples of initiatives, you're undertaking and maybe some of the benefits you've seen from the implementation of these pilot six or 10 facilities. However, many it's Ben.

Speaker #2: Importantly, as you saw, we did see sequential improvement in our same-store NOI Q1 to Q2, and expect to improve in each quarter of the year.

Yes, we have six implemented so far will be 10 by the end of the year.

Speaker #4: Thank you.

All I can say is this is our initiatives. It's exciting it's on track, it's exceeding expectations and we're seeing double digit total labor productivity improvements across the six lines saw site. So to remind everyone. <unk> is our proprietary warehouse execution system. This started many years ago from a vision and a belief.

Speaker #3: Thank you. Our next question comes from the line of Ken. Key Ben Kim from Truist. Sir, please go head.

Speaker #5: Thanks. Good morning. Maybe we can just start off a little bit higher level. You know, what's the the best argument you think you've heard from your clients in terms of why occupancy is too low or throughput volume is too low today?

From Sudarsan to tie our CIO and Elliott Wolf, our chief data scientist and their teams that we can re imagine the way warehouses run and that technology and data science are the enablers and so <unk> through our own proprietary algorithms optimizes literally every resource and movement that happens in the warehouse much like air traffic control.

Speaker #5: versus what I guess the industry players and yourselves included might think what is normal going forward. So what the best arguments for that?

Speaker #2: Yeah, I think, you know, as I mentioned on the prepared remarks, you know, we believe the industry is bouncing along the bottom right now.

If you will from from how trucks are loaded and unloaded to where product is put away to directing each task in the building with the result of optimizing performance for customers and dramatically increasing our warehouse efficiency and so we have the evidence now that this vision is coming to life and can fundamentally change our competitive competitive position over time.

Speaker #2: I mean, food producers on their earnings calls and in all of our meetings continue to cite just high food pricing and value-seeking aviors from customers.

Speaker #2: You know, our view right now is that inventory has been under serious pressure for a couple of years now. And that servicing consumers without stockouts, which nobody will handle, would be very difficult and even lower levels.

Its impact on customers' cost and even our employee experience and most great things take time window asset no different in this year is about proving out the functionality and getting it rolled out to different types of facilities before a much broader and accelerated rollout next year and the year after and so.

Speaker #2: And so we definitely feel we're bouncing off the bottom. There are some data, you know, positive data points out there, like the Beefherd counts, which are obviously still below at 1.21 levels, that appear to stabilize based on the 2025 USDA data.

Speaker #2: And Circana's data showed that restaurant industry being the whole industry gained after a slow start to the year. also, you ow, our customers are pushing very, very hard for to increase volumes through incentives and their sales efforts.

Our increase increasingly excited about how this can.

Just fundamentally transformed our operations because we see the benefit now across the <unk> sites not only indirect labor, which was the primary focus but also an indirect labor employee benefits energy safety employee turnover. The employee experience training expense, we even think it's going to materially lower both our capex and our facility.

Speaker #2: And if those incentives are successful or we get any interest rate relief, either one of ose things could act as a stimulus, a stimulus for increasing inventories moving forward.

Speaker #4: Do you think GLP-1 drugs are having a significant impact on volumes or occupancy?

Maintenance expense overtime as were more efficient in the use of our facilities and our material handling equipment and so overtime, we think it will materially lower our cost structure helps us compete and improve what we already have.

Speaker #2: We don't, and our customers don't. I mean, certainly, if you look at our commodity mix of, you know, heavy in proteins, seafood, food, and veg, those are areas where people are eating more of, not less of.

Excellent service for our customers. So so we are highly encouraging and we believe with the west is going to be everything we thought it would be <unk>.

Speaker #2: And we think long-term, you know, if the drugs work and hopefully they do, and dramatically impact diabetes, deaths that people will live longer and people will eat more in the long term.

Can't wait to share a lot more detail around kind of financials and and how these algorithms work.

Around the NAREIT conference later this year.

Great. Thank you.

Speaker #4: All right. Thank ou, guys.

Of course.

Speaker #2: Of e.

Our next question comes from the line of Brendan Lynch from Barclays. Please go ahead.

Speaker #3: Thank you. Our next question comes from the line of Mr. Michael Griffin from Evercore. Please go head.

Great. Thanks for taking my question.

Speaker #5: Great, thanks. Appreciate the comments earlier on the line OS pilot. I don't ow, you said you'd kind of quantify the benefits of that. Later the year, but maybe can ou give us any, you know, anecdotal examples of initiatives you're undertaking and maybe some of the benefits you've seen from the implementation of these pilots, you ow, six or ten facilities, however many it's been?

Greg you mentioned this a bit in your prepared remarks, but can you discuss the pricing strategy in the second quarter for rent storage relative to the first quarter. It looks like you recaptured the trend line on slide six which was a little bit of a surprise given it sounded like you were giving some price concessions in the first quarter to get volume. So maybe just what has changed and where.

Or we should expect going forward.

Yeah.

Speaker #2: Yeah, it's been we have six implemented so far. 'll do ten by the end of the year. And, you know, all I can say is this is our initiative.

The short answer is nothing has changed.

Explain why so we communicated over the last quarters results and at NAREIT that we thought pricing levels will be stable for the balance of the year.

Speaker #2: It's exciting. It's track. It's exceeding expectations. And we're seeing double-digit total labor productivity improvements across the six sites. So to remind everyone, you know, LinOS is our proprietary warehouse execution system.

In our prepared remarks today, we discussed that there is always some short term volatility in this metric and you'll see that on slide six.

Which is driven by a number of factors and I'll repeat.

Right or price is certainly a piece of that but also volume guarantees inventory turns glass rising volumes commodity mix geographic mix exchange rate and seasonality can all impact the way this metric fluctuates quarter to quarter and so yes, the pricing was up for rent storage and blast.

Speaker #2: This started many years ago from a vision and a belief from Siddhartha Thai, our CIO, and Elliot Wolf, our chief data scientists, and their teams, that we can reimagine the way warehouses run.

Speaker #2: And that technology and data science are the enablers. And so LinOS, through our own proprietary algorithms, optimizes literally every resource and movement that happens in the warehouse, much like air traffic control, if you will, from how trucks are loaded and unloaded to where product is put away, to directing each task in the building with the result of optimizing performance for customers and dramatically increasing our warehouse efficiency.

5% sequentially.

But much like we werent concerned that it went down a little bit last quarter, we're not over celebrating this quarter of the sequential 5% because it's not all price. This quarter was benefited by European FX had elevated volume guarantees, which while they were reset in the first quarter given the resetting inventory levels.

Speaker #2: And so we have the evidence now that this vision is coming to life, and can fundamentally change our competitive position over time, given its impact on customers, cost, and even our loyee experience.

The second quarter is normally it is this year likely to be the lowest occupancy quarter of the year. So youre collecting a little bit more about volume guarantees, which elevates your rent storage and blast per occupied pallet and so long story short nothing has changed we got our 232% to 3% price, we see the pricing environment is competitive but stable.

Speaker #2: And, you know, most great things take time, and LinOS is no different. And this year is about proving out the functionality and getting it rolled out to different types of facilities before a much broader and accelerated rollout next year and the year after.

We wouldn't we're not concerned about this element for the balance of the year.

Speaker #2: And so, you know, we're increasingly excited about how this can just fundamentally transform our operations because we see the benefit now across the six sites—not only in direct labor, which was the primary focus, but also in indirect labor, employee benefits, energy, safety, employee turnover, the employee experience, and training expense.

And is consistent with our prior guidance.

Okay very good thank you.

Yes.

Thank you. Our next question comes from the line of Ronald Camden from Morgan Stanley. Your line is open.

Hey, Thanks, so much just a quick two parter just can you talk a little bit more about sort of throughput.

Speaker #2: We even think it's going to maturely lower both our capex and our facility maintenance expense over time as we're more efficient in the use of our facilities and our material handling equipment.

It was down same store three two this quarter, which decelerated from.

In the last quarter number just help us think about sort of what's happening.

Speaker #2: And so, you know, over time, we think it'll maturely lower our cost structure, help us compete, and improve what we already have as an excellent service for our ustomers.

On that front as product just being stuck somewhere in the supply chain.

That's number one and then the second comment is just updated thoughts on supply in the industry.

Speaker #2: So, we’re highly encouraged, and we believe LinOS is going to be everything we thought it would be. We can’t wait to share a lot more details around the financials and how these algorithms work at the NARY conference later this year.

You got it.

So we talked about this concept of core holdings in the last quarter and we define that as volumes from customers that have not meaningfully meaningfully changed their business with us over the last four years. So.

Speaker #4: Great. Thank ou.

Speaker #2: Of course.

Speaker #3: Our next question comes from the line of Brendan Lynch from Barclays. Please go head.

When business, we didnt lose business they are consistent and that represents over 70%, 70% of our of our global warehouse holdings. So as we talked about core holdings have been under pressure since the beginning of the inventory.

Speaker #5: Great. Thanks for taking my question. Greg, you mentioned this a bit in your prepared remarks, but can you discuss the pricing strategy in the second quarter for rent and storage relative to the first quarter?

Wind coming out of Covid, starting in 'twenty three.

Speaker #5: Looks like you recaptured the trend line on that slide six. Which was a little bit of a surprise given it sounded ike you were giving some price concessions in the first quarter to get volume.

And as a reminder, and as we explained on the last call. The total outbound pallets on an annual basis have remained remarkably flat over the last few years in this quarter. As you mentioned, we did see throughput balance down 3% in our same store warehouse portfolio year over year, but we would expect that given the <unk>.

Speaker #5: So maybe just what has changed and what we should expect going forward.

Speaker #2: Yeah, the short answer is nothing has changed. And let me explain why. So we communicated over the last quarter's results and at NARY that we thought pricing levels would be stable for the balance of year.

Elevated inventory levels, we saw last year and if you look sequentially.

Throughput was up about 1% and so our view is the core holdings remained under pressure due to the items I've already mentioned higher food prices elevated inventory carrying costs higher interest rates and just the uncertainty around tariffs.

Speaker #2: In our prepared remarks today, we discussed that there's always some short-term costs in this metric, and you'll see that on slide six. Which is driven by a number of factors, and I'll repeat them.

Speaker #2: You know, rate or price is certainly a piece of that, but also volume guarantees, inventory turns, last freezing volumes, commodity mix, geographic mix, exchange rates, and seasonality can all impact the way this metric fluctuates quarter to quarter.

On the supply side I think.

We all know that it's not a super transparent industry like the other.

Sectors.

And it's not widely tracked by third party brokers and things are published they talk about <unk>.

Speaker #2: And so, you ow, yes, the pricing was up for rent storage and blast. 5% sequentially. But much like we weren't concerned that it went down a little bit last quarter, we're overselebrating this quarter of the sequential 5% because it's not all price.

Supply and demand in our space. So we've been working collaboratively with CBRE to create a database of new announcements this year and what that database and data shows that we peaked.

Speaker #2: This quarter was benefited by, you know, European FX and elevated volume guarantees, which, while they were reset in the first quarter, given the, you know, the resetting inventory levels, the second quarter is normally, and is this year likely to be, the lowest occupancy quarter of the year.

Good openings peaked in 'twenty, three and we have seen elevated levels in the two years. Since then the latest information we have now shows that over the last two years, 3% to 4% capacity came online each year and we now expect 2025 to be at a similar level. However, announcements for 2006 deliveries.

Speaker #2: So you're collecting a little more volume guarantees, which elevates your rent storage and blast per occupied pallet. And so, again, long story short, nothing has changed.

Are showing a substantial decrease in new volume coming online versus the past few years, our data right now shows about 1% new supply being delivered in 2000 and of course that could change as new announcements are made but we certainly anticipate.

Speaker #2: We got our 2 to 3% price. We see the pricing environment is competitive and stable, and we wouldn't, you know, we're not concerned this element for the balance of the year.

Speaker #2: And it's consistent our prior guide.

Speaker #4: Okay, very good. Thank you.

Drop going forward and so just one more data point as you guys probably already all know.

Speaker #3: Thank you. Our next question comes from the line of Ronald Camden from Morgan Stanley. Your line is open.

He has served a similar pattern of construction in the broader industrial warehousing sector.

Speaker #5: Hey, thanks so much. Just to click two-parter, just can you talk a little more about sort of throughput, was down, same store, 3.2, this quarter, which decelerated from from from from the last quarter number?

Wherever there was roughly a three year period of elevated new supply post COVID-19 and that has now returned to historical levels.

Okay.

Helpful. Thank you.

Worse.

Speaker #5: Just help us think about sort of what's happening or on that front as product just being stuck somewhere in the supply chain, is number one.

Thank you. Our next question comes from the line of.

Michael Goldsmith from UBS Your line is open.

Good morning, Thanks for taking my question can you walk through the assumptions that underpin the third quarter and fourth quarter guidance and what gives you confidence in the material step up in trends, we expected in the fourth quarter. Thanks.

Speaker #5: And then the second comment is just updated thoughts on supply in the industry. Thanks.

Speaker #2: You got it. so, you know, we talked about this concept of core holdings in the last quarter. And we we defined that as volumes from customers that have not meaningfully changed their business with us over the last four years.

Why don't I start just yet so just to talk about the biggest assumption that gives us.

Speaker #2: So, you ow, we didn't win business. We didn't lose business. They're consistent. And that represents over 70 to 70% of our of our global warehouse holdings.

Confidence is continued progress on the internal initiatives.

Productivity savings on energy savings on on all the things that we're doing across our company to to drive efficiency and new business.

Speaker #2: So, as we talk about core holdings have been under pressure since the beginning of the inventory unwind, coming out of COVID, starting in '23, and as a reminder, and as we explained on the last call, the total outbound pallets on an annual basis have remained remarkably flat over the last few years.

And.

The occupancy that we the reason we changed our guidance is the occupancy expectation.

Being more muted than we were previously guiding to but we are we are already seeing that we bounced off the bottom in occupancy and we are climbing into the season that we would expect to climb into.

Speaker #2: In this quarter, as you mentioned, we did see throughput pallets down 3% in our same-store warehouse portfolio year over year, but we would expect that given the the the, you know, elevated inventory levels we w last year.

Although it just be a couple of months later than we anticipated.

Our price assumptions, our productivity assumptions are almost everything else stayed the same tariffs have a little impact but.

Speaker #2: And if you look sequentially, the throughput was up about 1%. And so, you know, our view is the core holdings remain under pressure due to the items that I've already mentioned, higher food prices, elevated inventory carrying costs, higher interest rates, and just the uncertainty around tariffs.

That's really what shapes, yes, that's right, yes, and so we're trying to give you a little bit more.

Data here. So we gave you a slide five which is our occupancy guide for the rest of the year, which mirrors everything that Gregg said.

And I think there is confidence in the fourth quarter versus the third quarter, which is very similar to what we saw last year. So we talked about starting to see normal seasonality in the second half of last year.

Speaker #2: on the supply side, you know, I think we we all know that that it's not a super transparent industry like some other, sectors. and it's not, you know, widely tracked by third-party brokers and ings are published that talk , supplies in our space.

And that's embedded in our guide here. So I think we feel really good about it and we lowered for all the reasons, Greg set but again, it's shut the occupancy in our industry and it is evolving and we feel really good that we are now sequentially improving.

Speaker #2: So we've we've been working, collaboratively with CBRE to to create a database of of new announcements, this year. And what that database and data shows is that we peaked that new openings peaked in '23.

Ed.

And that's a great place to be.

Hey, guys.

Yes.

Is it jumped as much as it has in prior years than theirs.

Speaker #2: And we've seen elevated levels in the two years since then. The latest information we have, now shows that over the last two years, three to 4% capacity came online each year.

Well.

Will be seen as conservative I guess.

Trying to take a prudent view given what we see.

Speaker #2: And we now expect 2025 to be going get a similar level. However, announcements for '26 deliveries, are showing a substantial decrease in new volume coming online versus the past two years.

Thanks again.

Yes.

Our next question comes from the line of EMEA panel from Bank of America. Please go ahead.

Speaker #2: Our data right now shows about 1% new supply being delivered in '26. And of e, you know, that could change as new announcements are made, but we certainly anticipate a drop going forward.

Yes. Thank you good morning, everybody I guess, Greg you know help us understand how to think about the rebound or the inflection in occupancy I mean.

Clearly there is very little visibility from our side here right. So.

Speaker #2: And so, you know, just one more data point as you guys probably already all know, we observed a similar pattern of construction in broader industrial warehousing sector, where where there was roughly a three-year period of elevated new supply post-COVID, and that has now returned to historical levels.

Is it the macro is that the health of the consumer what should we be paying attention to.

As we think about the timing of the inflection.

And then at this point I think folks are trying to understand what the trajectory of growth even it looks like into 'twenty. So.

Help us understand kind of what you track and that would be helpful. Thanks.

Speaker #5: Helpful. Thank ou.

Speaker #2: Of course.

Sure I mean, the number one thing we track is our conversations with customers and our own occupancy and if you think about our second half guide we did see us come off the bottom and we've had a.

Speaker #3: Thank you. Our next question comes from the line of Michael Goldsmith from UBS. Your line is open.

Speaker #6: Good morning. Can I talk for taking my question? Can you walk through the assumptions that underpin the third quarter and fourth quarter guidance? And what gives you confidence in the materials step up in trends expected in the fourth quarter?

A few weeks off of there are a couple of weeks of increase which which trends.

Like you did last year, where we saw substantial often.

Speaker #6: Thanks.

Occupancy increases going in the late third quarter into the fourth quarter, and so that underpins our guidance as far as when the industry will start to rebound I think again, our customers' inventories are we feel about as low as they can be while still servicing the consumer.

Speaker #2: How do I start? Just yeah, go ahead. So just to talk about the biggest assumption that gives us, confidence is, you know, continued progress on internal initiatives on on productivity savings, on energy savings, on on all the things that we're doing across our company to to drive, you know, efficiency and and new business.

Everybody is looking to stimulate.

Speaker #2: and, you ow, the occupancy that we, you know, the reason we changed, guidance is is the occupancy expectation, being more muted than than we were we were previously guiding to.

New demand.

And.

Interest rates and.

Tariff deals getting finalized both actors could active stimuli or or increased inventories.

Speaker #2: But we are we were already seeing, you know, that we bounced off the bottom in occupancy, and we are climbing into the season that we would expect to climb into.

Okay. Thank you.

Thank you. Our next question comes from the line of Todd Thomas from Keybanc capital markets. Your.

Speaker #2: although it'd just be a couple of ths later than we anticipate. Our price assumptions are productivity assumptions are, almost everything else stayed the same.

Your line is open.

Hi, Thanks.

I guess two questions. One just a follow up are you able to provide.

Speaker #2: Tariffs have a little impact, but, that's really what changed, Rob.

Speaker #5: Yeah, that's right. Yeah. And so, you know, we we try give you a little bit e, data here so we gave you slide five, which is our occupancy guide for the rest of the year, which which mirrors everything that Greg said.

For July.

Any detail around occupancy or some of the specific drivers around warehouse storage and in the services segment in any specific updates regarding July specifically it sounds like there was a little bit of a pickup here later in the month.

Speaker #5: and, you ow, I think there's confidence in the fourth quarter, versus the third quarter, which is a y similar pattern to what we saw last see normal seasonality in the second half of last year.

Second question, though is around the dynamic between.

Speaker #5: and that's embedded in our guide here. So, you know, I think we feel really good about it. And, you know, we lowered for all the reasons, Greg said.

The softness that you experienced in the warehouse business relative to Gis, which grew 8% in the quarter can you talk about some of the growth drivers for Gis in the period and what's behind this.

Speaker #5: But again, it's just occupancy and it's our industry and it's it's evolving. And we feel ally good that we are now sequentially improving and, you ow, and that's a great place to be.

The sharp acceleration in the second half of the year.

Sure Yes.

Speaker #6: Thank ou.

So we're just closing out July but it starts with occupancy levels were back now above April may right. So it's back to that again as you'll see in our chart you start to move up we just started moving up several leading later right than they used to have less months with more things in.

Speaker #2: And if it jumps, as much as, you know, it has in prior years, then there's, you know, then we'll be seen as conservative, I guess, but.

Speaker #2: Try to take a preview, given what we're eing.

Speaker #6: Thanks again.

In the warehouse and that's what led to the guidance, but we are seeing what we expected, which is which is good to see and.

Speaker #3: Our next question comes from the line of Samir Connell from Bank of America. Please go head.

And then we're just taking a more muted view on the slope of the trend that balance of the year given that it happened late and we're trying to be prudent with our guidance on the Gis side I got to say I've never been more proud of our of our Gis team around the world. They are doing a fabulous job, we have better players on the field. It remains you guys know on the on the trucking.

Speaker #7: Yeah, thank you. Good morning, everybody. I guess, Greg, you know, help us understand how to think about the rebound or the inflection in occupancy.

Speaker #7: I an, clearly, there's very little visibility from our side here, right? So, you know, is it the macro? Is it the health of the consumer?

Speaker #7: What should we be paying attention to? As we think about the timing of the inflection, and then at this point, I think folks are trying to understand, you know, what that trajectory of growth even looks like into '26.

Side of the business on all the services, we provide in our Gis group, which are very complementary to our to our warehousing business and very critical to our customers' total supply chain.

Speaker #7: So, you ow, help us understand kind of what ou track and that would be helpful. Thanks.

Optimization, but this team is doing a phenomenal job sales teams doing a great job selling new business and I think we're just doing a better job than ever talking to our customers about their end to end cold chain and Edwin.

Speaker #2: Sure. I mean, the number one thing we track is our conversations with customers and our own occupancy. And if you ink about our second half guide, we did see, you know, us come off the bottom and we've had, you know, a few weeks of or a couple of weeks of increase, which which trends, you know, like it did last year, where we saw substantial occupancy increases going in the late third quarter into the fourth quarter.

Some of them a few years ago didn't even know that we have these services and now we're the services have developed team strengthen the technologies strengthened in the coupling of the warehouse with the with the Gis services has gotten stronger and so.

Expect this trend to continue for the foreseeable future as Theyre just gaining momentum.

Speaker #2: And so that that underpins our guide. As far as, you know, when the industry will start to rebound, I think, you know, again, our our customers' inventories are we feel about as low as they can be while still servicing the consumer.

Alright, thank you.

Our next question comes from the line of Craig Melman from Citi. Please go ahead.

Speaker #2: everybody's looking to stimulate, you know, new demand. And, interest rates and and, tariff deals getting finalized, both act as could act as stimuli for for increased inventories.

Hey, Good morning, guys just wanted to circle back on inventories and kind of.

How you guys are viewing them going forward.

Heard your comment that.

A pretty common refrain over here in the last couple of quarters from you and your peer that it doesn't feel like inventories can get any lower for your tenants and yet we're still seeing kind of.

Speaker #5: Okay, thank ou.

Speaker #3: Thank you. Our next question comes from the line of Todd Thomas from T-Bank Capital Markets. Your line is open.

Occupancy from a nominal perspective.

Speaker #5: Hi, thanks. I guess two questions. One, just a follow-up. Are you able provide for July any detail around occupancy or some of the specific drivers around warehouse storage and and the services segment?

Stay pretty muted.

Well when consumers under pressure there shrink <unk>, so even though.

People are spending the same amount youre getting less you are spending you are seeing.

Fast food companies like Mcdonald's see tepid sales because the value proposition isn't there I guess is it wishful thinking at this point to think that.

Speaker #5: And any specific updates regarding July specifically, it sounds ike there was a little bit of a pickup here late later in in the month.

Speaker #5: second question, though, is is around the dynamic between the softness that you experienced in the warehouse business relative to GIS, which which grew 8% in the quarter.

<unk>.

The trend to seasonality should be confused with an inflection nominal inventory levels have been kept we have both where you get that seasonality, but youre just off a base thats going to materially improve given the outlook and given the financial situation of a lot of people in the country I mean, I'm just trying to.

Speaker #5: Can you talk about some of the growth drivers for GIS in in the period and and and what's behind the the sharp acceleration in the second half of the year?

Speaker #2: Sure. Yeah. Yeah, so, you know, we're just closing out July, but, you know, in terms of occupancy levels, you know, we're back now above April, May, right?

To kind of circle the square here because.

It just feels like the USDA data has been year over year negative for over two years and yet.

Speaker #2: So it's it's back to that, again, as you see in our chart, you start to move up. We just started moving up, you know, several days later, right?

When we hear from you and your peers just.

I didn't say things are going to get better that it doesn't happen right in the post Covid World is just different I don't know if thats technology improvements on the tenant side I don't know if this district patients <unk> ones.

Speaker #2: And then you just have less months with more things in the in the in the warehouse. And that's what led to the guidance cut.

Speaker #2: But we are seeing what we expected, which is which is good. Yeah. And then we're just taking a more muted view on the on the slope of the trend, if that balance of the year, given that it happened late and and we're trying to be prudent with our idance.

It is but it just doesn't feel like the needle is moving back on inventory levels. Despite that consisted comment that just doesn't feel like inventories could shrink anymore and still service the end user.

Speaker #2: On the GIS side, I got to say, I've never been more proud of our of our GIS team around the world. They're doing a fabulous job.

Speaker #2: We have better players on the field. It remains a, you guys know, on the on the trucking side of the business, on on all the services we provide in our GIS group, which are very complementary to our to our warehousing business and very ical to our customers' total supply chain optimization.

So fairpoint certainly in our guide does not assume any inflection in the underlying environment or that kind of general.

Consumption inventory levels get better for the balance of this year. There is no doubt the consumer is still under pressure because of high food prices high interest rates uncertainty.

Speaker #2: But this team's doing a phenomenal job. The sales team's doing a great job selling new business. And and I think we're just doing a better job than ever talking to our ustomers about their end-to-end cold chain.

And that's putting pressure on overall food sales.

Speaker #2: And and when we and, you ow, some of them a few years ago didn't know that we had these services and now we're the services have developed, the team's strengthened, the technology's strengthened, and the coupling of the warehouse with the with the GIS services has gotten stronger.

The seasonality, we talked about we saw last year, even in this tough environment and we are guiding to EBIT of more muted downturn that we saw last year and so we think we're being conservative we're not depending on any inflection for all the reasons that you pointed out.

Speaker #2: And so, you know, I would expect this to this trend to continue for the foreseeable future as they're just gaining momentum.

Thank long term, leading up to the 2020 call. It 22.

Fresh and frozen food consumer preference, it's shifting that direction.

Speaker #5: All right. Thank ou.

<unk>.

Speaker #3: Our next question comes from the line of Craig Millman from Citi. Please go ahead.

Consumers want to eat healthy.

The majority of our food and fits in that category and we think the long term trend in the data.

Speaker #8: Hey, good morning, guys. Just want to circle back on inventories and kind how you ys are viewing them going forward. I mean, I just heard your comments that, you ow, a pretty common refrain over here in the last couple of arters from you and your peer that it doesn't feel like inventories can get any lower for your tenants.

People like <unk> and other other organizations feel that there'll be growth in the long term, but we are bouncing off the bottom right now and we're not trying to.

<unk> or dictate when we think that's going to change.

But that said all of our.

Speaker #8: And yet, we're still seeing kind of occupancy from a nominal perspective stay pretty muted. The low-end consumers under pressure, they're rinkflation. So even though, you know, people are spending the same amount, you're getting less for what you're ending.

We saw sequential improvement in our results in the third versus second quarter, we expect to see that third and fourth despite the challenging environment. The technology, we're putting in place. We think is a game changer for our business. Our GFS segment is doing very well, we're doing a great job controlling costs in every aspect of our business around the world and we think our network.

Speaker #8: You're eing fast food companies like McDonald's see tepid sales because the value proposition isn't there. I guess, is it wishful thinking at this point to think that, you ow, the the trend to seasonality should be confused with an inflection in nominal inventory levels?

Our technology, our customer relationships our Gis.

<unk> service offering puts us in a great position to win in the long term and we do still feel despite the fact, we don't know when that.

The volumes at the consumer of fresh and frozen will start to grow again at some point, yes. That's right everything you said, which I think are fair points. It's currently reflected in our numbers. So that's what's been happening we are seeing things getting better slowly we're doing everything we can on our end to control what we can control.

Speaker #8: I mean, can't we have both where you get that seasonality, but you're just off a base that's not going to materially improve given the outlook and given the financial situation of a lot of people in the country?

Speaker #8: I mean, I'm just ying to kind of circle the square here because we're it just feels like the USDA data has been year-over-year negative for over two years.

And so I think.

Any change to any of the things that you said is upside opportunity and we're not expecting any of that to happen. This year in our guide, but we do think over the long term there is quite a bit of upside opportunity, but we're going to work and wait to see it happen and we think we will leave this year with good momentum do you think that sequentially each quarter with momentum going into next year, obviously, we're not guiding next.

Speaker #8: And yet, you know, when we hear from you and your peer, it's just tenants say things are going to get better, that it doesn't happen.

Speaker #8: Right? And the post-COVID world is just different. I don't know if it's technology improvements on the tenant side. I don't know if it's the shrinkflation, GLP-1s.

Next year right now, but we feel good about all of the internal initiatives, we're doing new business with customers. The way we are.

Speaker #8: Whatever it is, but it just doesn't feel like the needle is moving back on on inventory level despite that consistent comment that it just doesn't feel like inventories can shrink anymore.

Our partnerships with customers are only strengthening and we think that will benefit a bit of a benefit us long term.

Great. Thank you.

Our next question comes from the line of Mark.

Speaker #8: And still, service to the end user.

Michael Carroll from RBC.

Please go ahead.

Speaker #2: So fair point, certainly. And our guide does not assume any inflection in the underlying environment or that kind of general consumption inventory levels get better for the balance of this year.

Thanks, Greg can you provide some color on where cold storage companies are currently trading or at least being valued in the private market.

Has private market valuations changed as much as we've seen in the public markets I guess, what's the right valuation metric that these assets for trade I mean should we be thinking about EBIT EBITDA ranges.

Speaker #2: There's no doubt the consumers still under pressure because of high food prices, high interest rates, uncertainty, and that's putting pressure on overall food sales.

Speaker #2: We, you ow, the seasonality we talked about, we saw last year, even in this tough environment, and we're guiding to even a more muted seasonality than we saw last year.

Each asset is different for each company is different but what's the typical EV to EBITDA range.

That cold storage companies are trading in the private market today or at least if this trade start were due date typically trade at.

Speaker #2: And so, we think we're being conservative. We're not depending on an inflection for all the reasons that you pointed out. We think long-term, you know, leading up to the to 2020, call it '22, you know, fresh and frozen food consumer preference, it's shifting that direction.

I mean, it's.

Obviously, an evolving metric, but right now there are probably trading higher than that yes for.

Appreciate it at multiples.

I think we're trading at 55% to 60% of NAV, we think it's.

Speaker #2: You know, consumers want to eat healthy. We, you know, the majority of our food fits in category. And we think that the long-term trend and the data that or the, you know, people like AFI and other organizations feel that they'll growth in the long term.

Obviously.

Undervalued assets or the private market to take a longer term view right and so the quality of the assets, but just the long term growth of this industry.

Yes.

Speaker #2: But we are bouncing off the bottom right now, and we're not trying predict or dictate when we think that's going to change. But that said, all of our, you ow, we saw sequential improvement in our results in the first in first to second quarter.

There's definitely a disconnect now as you know we've deployed a bunch of capital I think we're in a good place we've got a lot still to come as we mentioned in the prepared remarks in terms of NOI thats still still still developing.

In terms of <unk> and the acquisition. So we have deployed a lot of capital at attractive multiples now that's going to flow through our results. We're going to we're going to do our best here to improve sequentially and then we will continue to monitor the markets.

Speaker #2: We expect to see that in third and fourth despite the challenging environment. The technology we're putting in place we think is a game changer for our business.

Speaker #2: Our GIS segment's doing very well. We're doing a great job controlling costs in every aspect of our business around the world. And we think, you know, our network, our technology, our customer relationships, our GIS, service offering puts us in a great position to win in the long term.

But theres certainly at this point in time.

True long term value of our industry is not we don't we don't it's shown in the public valuations and private.

Speaker #2: And we do still feel despite the fact we don't know when that, you know, that that that volumes at the consumer of fresh and frozen will start to grow again at some point.

Different story.

Like what's the typical EV to EBITDA range that assets trade in the private market.

Compared to your valuation I guess, where does that typically go.

Speaker #2: Yeah, that's right. know, everything you said, which I think are fair points, is currently reflected in our numbers. So, that's what's been happening. We are seeing things getting better, slowly.

It really depends on region, there's so many dynamics, but there things trading double digit EBITDA 15 to 20 times EBITDA that we see.

Speaker #2: We're ing everything we can on our end to control what we can control. And so I think, you know, any change to any of the things that you said is upside opportunity.

In smaller transactions in Europe, and other places, it's that's a pretty big disconnect.

Wide range I would say.

Speaker #2: expecting any of that to happen this year in our guide. And we're not But we do think over the long term there is quite a bit of upside opportunity.

Speaker #2: But, ou know, we're going to wait to see it happen. Yeah. And we think we'll ave this year with good momentum. We think the season closure for each quarter is good momentum going into next year.

Thank you. Our next question comes from the line of from.

Gotcha.

Your line is open.

Speaker #2: Obviously, we're not guiding next year right , but we, you know, good about all the internal initiatives we're doing. Our new business with customers, the way we're, you know, our partnerships customers are only strengthening.

Thanks for taking the question two clarifications I guess this first one I'm still struggling to get a sense of like how conservative you truly are in the back half given kind of we're still seeing elevated inventory levels do you mind just from that chart you've provided like what is your actual occupancy build a distant number.

Speaker #2: And we think that'll efit us long term.

Speaker #5: Great. Thank ou.

Speaker #3: Our next question comes from the line of Mark. Mike Carroll from RBC, please go head.

Sequentially into the second half, whether physical or our economic if you can give and compare that to how how is how does that compare to say like pre COVID-19 historical trend just like how conservative you are like and give us the exact like occupancy occupancy from that chart and then just second question is.

Speaker #9: Yep, thanks. Greg, can you provide some color on where cold storage companies are currently trading, or at least being valued in the private market?

Speaker #9: I an, has private market valuations changed as much as we've seen in the public markets? I guess, what's right valuation metric that these assets are traded at?

And G&A.

Your G&A did come in I guess, it was a big benefit.

Speaker #9: I mean, should we be thinking EBITDA, EBITDA ranges, and I know it's each asset is different or each company is different, but what's the typical EBITDA, EBITDA range that cold storage companies are trading on the private market today or at least if it was trade start where do they typically trade at?

In <unk> versus we anticipated in the second half assumes a big pickup so cash G&A and like what is driving that in the second half. Thanks.

Yes, so slide five I mean thats exactly to answer your question, that's what slide five as tier four. So 2015 2019 is your pre Covid USDA seasonality, that's the Green line.

Speaker #2: I mean, it's obviously an volving metric, but right now they're probably trading higher than higher for sure in multiple. Yeah, I think we're trading at 55% to 60% of NAB.

We are embedding at the midpoint of our guide here, which is you can look at the chart basically call it 75% plus or minus in Q3 dollars 78 in Q4, so that is muted seasonality comparatist history, we think its prudent.

Speaker #2: We think it's obviously undervalued. That's our opinion. Yeah, you know, the private markets take a longer-term view, right? And so, you know, the quality of the assets, but just the long-term growth of this industry, you know, yes, there's definitely a disconnect.

We're not trying to be overly conservative or overly aggressive. This is what we see right now.

Our teams got to work hard to beat these numbers.

And in terms of G&A.

We're managing the company prudently and we have we think we there's rooms.

Speaker #2: Now, as ou know, we've loyed a bunch of capital I think we're in a good place. 've got a lot still to come as we mentioned in the prepared remarks in terms of NOI that's still still still developing.

Grow the business quite a bit at this level of G&A right, we expect to grow the business over a long term, we think we'll get great leverage in the short term, we're certainly going to look everywhere and to make sure. We're investing the right amount in the right areas and thats something that never changes.

Speaker #2: In terms Tyson and the acquisition. So we've deployed a of capital at attractive multiples. Now that that's going to flow through our results, we're going to we're ing to do our best here to to improve sequentially.

Yes.

We need to work on.

Speaker #2: And then we'll continue to monitor the markets. But there's certainly at this point in time, ou know, the the sort of true long-term value of our industry is not we don't we don't feel shown in our in the public valuations.

Thank you. Our next question comes from the line of Blaine Heck from Wells Fargo. Please go ahead.

Great. Thanks. Good morning, just following up on guidance can you give us a little bit more color on what's driving the episode decline expected in the third quarter versus Q2, despite the increased occupancy same store EBIT.

Speaker #2: And private, you know, a different story. I think.

Speaker #9: What's the typical EBITDA, EBITDA range that assets trade at in the private market? I guess compared to your valuation, I guess where does that typically go?

Is that all driven by Capex seasonality or is there anything else going on there and then with respect to the fourth quarter.

Speaker #9: You know.

Speaker #2: It really depends on region. It's just so many dynamics, but there are things trading double-digit EBITDA up to 15, 20 times EBITDA that we see, you know, in smaller transactions in Europe and other places.

Pretty wide range between 78, and <unk> 94 cents. So can you just share your thoughts on what key drivers would result in <unk> coming in towards the upper or lower end of that range.

Speaker #2: It's a pretty big disconnect at this point. Yeah. Wide range, I would say.

Yes, Q3 is just timing of Capex here, but so some of the Capex. We expect in Q2 pushed into Q3, I think we're still working to get better at being even every quarter. We used to have an annual budget process. The team is doing a great job, but we're just there is still some seasonality in maintenance capex, which over time will work to remove but we definitely have higher maintenance capex in Q.

Speaker #3: Thank you. Our next question comes from the line of Vikram Mahotra from Mizuho. Your line is open.

Speaker #10: Thanks for taking the question. There are two clarifications. I ess this first one, I'm still struggling to get a sense of like conservative you truly are in the back half given kind of we're still seeing elevated inventory levels.

Three in Q4.

Hi numbers.

I mean in terms of yes in terms of the range I mean I think.

Speaker #10: Do you mind just, you know, that chart you've provided, like what is your your actual occupancy build just the number sequentially into the second half, whether physical or economic, if you can give?

It really depends on occupancy thats the biggest driver as Greg mentioned price is stable our cost controls are in place. Our team will work hard at market occupancy is lower to take out costs to make sure that we can still produce as higher EBITDA in April whatever we possibly can but we just thought it was prudent because again you are in an industry here that's inflect.

Speaker #10: And compare that to, you ow, how how is how does that compare to say like pre-COVID historical trends, just like how how conservative you are, like what and give us the act like occupancy number from that chart.

From a seasonality standpoint, and it's just a week or two change.

Speaker #10: And then just second clarification is GNA. Your GNA did come in, I guess it was a big benefit in 2Q versus we anticipated. And second half assumes a big pickup.

Can drive.

Very different results and so we wanted to give you again, we're trying to be as transparent as we can show you here is what we see here is that we're assuming and and then obviously people can make their own determinations from there but.

Speaker #10: So cash GNA, like what is driving that in the second half? Thanks.

Speaker #2: Yeah. So, you ow, slide five, I mean, that's exactly to answer your question. That's what slide five is here for. 2015 to 2019 is your pre-COVID USDA seasonality.

That's our goal this up this column.

Okay. Thanks.

Speaker #2: That's green line. What we are embedding at the midpoint of our guide here, which is you can look at the charts basically, you know, call it 75% plus or minus in Q3, 78% in Q4.

Our next question comes from the line of Banbury, Alex from Goldman Sachs. Please go ahead.

Hi, Good morning, maybe just back to the private market valuation discussion I know you guys have only been public for a year, but I guess, how do you think about.

Speaker #2: So that is muted seasonality compared to history. We think it's prudent. Like we're , you know, we're not trying to be overly conservative or overly gressive.

And that being private versus public and do you think it or under what circumstances do you think it would be better for shareholders to take the company private.

Speaker #2: Basically, what we see right now, our team's going to work hard to beat these numbers. but in terms of GNA, you know, again, we're we're aging the company.

Speaker #2: You know, prudently and and we're we have we think there's, you know, room to to, you ow, grow the business quite a bit at this level of GNA, right?

Certainly it's been up it's been a mess.

The prepared remarks, I think we went public at a very interesting time as the industry was resetting.

Speaker #2: We expect to grow the business over a long term. We think we'll get great leverage in the short term. You know, we're certainly going to look everywhere and to make sure we're investing the right ount in the right areas and and that's something that never changes.

That said I think.

Getting our investment grade rating, having access to the.

Speaker #2: It's, you know, something will continue to work on.

Hello markets.

Better still veterans.

Public space.

Despite tough quarters like this so yes, I think thats right getting the cost of capital having the ability to issue equity moving forward for accretive opportunities. We're continuing to do that I think we're going to look hard at how do we compound and grow this company and having that flexibility to be an investment grade company.

Speaker #3: Thank you. Our next question comes from the line of Blaine Heck from Wells Fargo. Please go ahead.

Speaker #11: Great. Thanks. Good morning. Just following up on guidance, can you give us a little more color on what's driving the ASFO decline expected in the third quarter versus Q2?

It is huge so I think that.

Speaker #11: You know, despite the increased occupancy, same-store and EBITDA, is that all driven by capex seasonality or is there anything else going on there? And then with respect to the fourth quarter, it's a pretty wide range between 78 cents and 94 cents.

I think the future is very bright even though obviously the first year has been at the top I mean, we if you look at our guidance, we see sequential improvement we think.

Our mission is to help the stock rebound through our performance as fast as it is it has come down and we think we can do that we think we're very well positioned.

Speaker #11: So can you just share your thoughts on what key drivers would result in ASFO coming in towards the upper or lower end of that range?

And even at even at the current.

Deflated stock level, we're still seeing accretive deals in the marketplace, where we can we could we could generate.

Speaker #2: Yeah, Q3 is just timing of capex. So we some of the capex we expect in Q2 pushed Q3. I think we're still working to get better at being even every quarter.

Alpha through through those deals.

Speaker #2: We used to have an nual budget process. The team's doing a great job, but we're there's still some seasonality in maintenance capex, which over time will work to remove but we definitely have higher maintenance capex in Q3 and Q4 than we did the four-year guide numbers.

There's still a ton of opportunities even even at these levels.

Got it thanks.

Yes.

Thank you. Our next question comes from the line of Omar <unk>.

Okay from Deutsche Bank. Please go ahead.

Speaker #2: I mean, in terms yeah, in terms of the range, I mean, you know, I think, there's, you know, it really depends on occupancy. That's the biggest driver.

Yes, good morning.

We've talked a lot about just customer trends in the USDA data.

Speaker #2: As Greg mentioned, price is stable. Our cost controls are in place. You know, our team will work hard if occupancy is lower to take out costs and make sure we can still produce as high of EBITDA for whatever we possibly can.

Just kind of curious the occupancy decline and everything.

Ross to a more tempered outlook at.

All U S U S centric.

Speaker #2: But we just thought it was prudent because, again, you're in an ustry here that's inflecting from a seasonality standpoint. And it's just, you ow, a week or two change, you ow, can drive, you know, very different results.

You also see similar trends in your international business as well.

Yes.

I mean, we wanted to to the USA data because it's still I think people look at it is just it represents the trend, but the point is that it's not necessarily our entire portfolio of the track nor use for that matter I mean, it's about as we put on the slide about 40% of our portfolio as reflected in USDA trends, but there is seasonality throughout the world I think we're seeing that.

Speaker #2: And so we wanted to ive you, again, we're trying to be as transparent as we can and show you, here's what we see. You know, here's what we're uming.

Speaker #2: And, you ow, and then obviously people can can make their own determinations from there. But that's that's that's that's our goal of this this call.

Speaker #11: Okay, thanks.

Inventories hold up better than other regions, both in Europe, and Australia, which is our largest market.

Speaker #3: Our next question comes from the line of Freightman Burroughs from Goldman Sachs. Please go head.

Davidson.

So.

<unk> is driving the.

Speaker #12: Hi, good ning. Maybe just back to the private market valuation discussion. I know you guys have only been public for a year. but I guess how do you think , the option of being private versus, public?

The year over year occupancy decline.

Gotcha. Thank you.

Yes.

Thank you. Our next question comes from the line of Greg from <unk> Capital. Please go ahead.

Speaker #12: And do you think or under what what circumstances or do you think it would be ter for shareholders to take company private?

Yes.

Hey, good morning.

I'm curious on.

Speaker #2: Certainly, it's been a it's been a I mentioned in the prepared remarks, I think we went we went public at a very interesting time as the industry was resetting.

Yeah.

Occupancy and whether the lower seasonal occupancy you're experiencing is ratable across all categories or if there's.

Speaker #2: you know, that said, I think, getting our our investment grade rating having access to the to the capital markets. we're better in the we're still better in the in the public space.

Pacific categories that are under more pressure and if you could comment on the more important expert focused category, specifically as well that'd be appreciated.

Speaker #2: despite, you ow, tough quarters like this. So yeah, I think that's right. You know, getting the cost of capital, having the ability to issue equity, moving forward for for a creative opportunity.

So it is it is pretty broad based I would say.

The pressure we're seeing.

I'll comment a little bit about tariffs, we're certainly seeing you know.

Speaker #2: We're going to, you know, we're ing to do that. Like we're we're going to ok hard at, you know, how do we compound and grow this company?

Chicken sell well in the beef herd is low those are two categories that are that are.

Speaker #2: And having that flexibility to be an investment grade company, is is huge. So I think that, you ow, I I think the future is very bright, even though obviously the first year has been has been tough.

Mixed.

Seafood.

The inventories have stabilized but.

Speaker #2: Yeah. I mean, we we if you look at our guidance, we see quential improvement. We think, you know, our our mission is to help the stock rebound through our performance as fast as it's as it's come down.

And sales are at a pretty low historic level.

Sure.

And a lot of these are of course on the import export side are a result of of tariff policies of our customers are constantly redirecting product around the world.

Speaker #2: And and we think we can do that. We think we're very well positioned. and even at, you know, even at the current, you know, deflated stock level, we're still seeing a creative deals in the ketplace where we can, you know, we can we can generate, you know, alpha through through those deals.

And kind of managing through that with their buys on the tariff policies.

One of the things that we were hoping to see as a result of tariff negotiations.

As to open up new markets for U S exports as.

Speaker #2: So we're there's still a ton of opportunities even even at these levels.

The U S is the most produced the most efficient producer of food in the World have been for example, agriculture in particularly proteins as one of America's last great exports.

Speaker #12: Got it. Thanks.

Speaker #3: Thank you. Our next question comes from the line of Omar. Omar Tayo. Focusonia from Deutsche Bank. Please go ahead.

So the U S is extremely competitive.

<unk> space on the World stage and many of these markets have been either partially closed or close to U S protein imports in recent.

Speaker #13: Yes. Good morning. We've talked a lot about just, you know, customer trends in the USDA data and, ou know, just kind of curious the occupancy decline and everything you're seeing in regards to a more tempered outlook.

<unk> recent trade deals are are finalized and we're closer to work with so.

An example, the UK and Australia, just opened up their markets to U S. Beef imports. If these deals get closed that are that are likely going to be in the near term here and while that would stimulate.

Speaker #13: Is this all US US-centric or are you also seeing similar trends in your international business as well?

Speaker #2: Yeah, yeah, we're ally we want to show the DA data because it's something people look at. It's just, you ow, it represents the trend.

A lot of new exports in the short term because RP first so low in the mid term long term it certainly could and we're looking for more deals like this to help stimulate production in the U S. So to quantify we do go through and really tried to quantify our tariff impacted all of our review calls we've got about a $10 million our estimate.

Speaker #2: But the point is that it's not necessarily our entire portfolio. The trend, nor US for that matter. I mean, it's about as we put it on the slide, about 40% of our portfolios reflect in USDA trends.

Speaker #2: But, you know, there is seasonality throughout the world. Yeah, I think we're eing, you know, inventories hold up better in in other regions both in Europe and and Australia, which is our our largest market in, you ow, the US.

<unk> headwind in the second half that's embedded in the guidance and the occupancy chart that you can see we do have some locations that have more inventory because of tariffs.

Speaker #2: So the US is driving the, you know, the year-over-year occupancy decline.

But then again enough that have lower to lead to a headwind overall, so we didn't want to give that number to give everyone a sense of sort of what we've been seeing.

Speaker #13: Gotcha. Thank you.

Speaker #3: Thank you. Our next question comes from the line of Greg from Scotia Capital. Please go ahead.

Okay. Thank you.

You're not worried about the use of growth hormone and our beef that's going to limit exports.

Speaker #14: Hey, good ning. I'm ious on, you know, this this occupancy and whether the lower seasonal occupancy you're iencing is radical across all categories or there's specific categories that are under more pressure.

I think the protein space will adapt to that.

Figure out frankly.

Okay. Thank you.

Yes.

Thank you. Our next question comes from the line of Michael Mueller from J P. Morgan. Please go ahead.

Speaker #14: And if you could comment on the more import-export-focused category specifically as well, that would be reciated.

Yes, Hi can you talk about the strategy to manage interest expense going forward after the caps and swaps burn off at year end.

Yeah for sure so we.

Speaker #2: So, it is it is pretty, broad-based, I would say. the pressure we're eing, I'll comment a little bit, you ow, about tariffs. We're certainly seeing, you ow, chicken sell well and the beef herd is low.

Did the bond deal.

We did a new swap here just recently so we are actively managing it.

There is about a $10 million per quarter headwind in Q in 2026 versus 2025 because of the expiring swaps. So we benefited a lot from them. We're glad we did on their expiring and we are working hard to mitigate that through a number of different areas. The bond deal you have taken against the investment grade markets, we have the opportunity to.

Speaker #2: Those are two categories that are that are, you ow, mixed. seafood, the the the inventories have have stabilized, but the end sales are at a at a pretty low historic level.

Speaker #2: you ow, and and a lot of these are, of course, on the import-export side are are a result of, of, of tariff policies. Our customers are constantly redirecting product around the world.

Do potentially financing in different in different currencies, and we'll look to you to do all we can to make sure we have the lowest cost of capital.

And real quick just a follow up was the new swap you mentioned was that just on the recent quarter and how significant is it.

Speaker #2: And and kind of managing through the, with their buys on on the tariff policies. You know, one of the things that that we were hoping to see as a result of tariff negotiations is, you know, is to open up new markets for US exports as, you ow, the US is the most the most efficient producer of food in the world.

$750 million and I think at about three 2%.

Okay.

Okay. Thanks.

Our next question comes from the line of Gregg Hillman from Baird. Please go ahead.

Speaker #2: I mean, for example, agriculture in particularly, proteins is one of America's last great exports. you know, the US is extremely space on the world stage.

Hey, Good morning, Greg maybe just wanted to get your comments on what Youre seeing from some of the smaller operators in the space today, and what Youre seeing there doing from a pricing standpoint.

Speaker #2: And many of these markets have been either partially closed or closed to US protein, imports in recent until recent trade deals are, are, are finalized.

Are you seeing them.

Starting to be under more pressure than you do you see them exiting the market I guess low commentary because it is you in a larger player.

Speaker #2: And, and you know, we're close historically. So, you know, as an example, the UK and Australia just opened up their markets to UF beef imports.

The small market share, but curious on kind of the more fragmented part of the industry.

Yes.

There's obviously a number of new competitors.

Speaker #2: If these deals get closed that are that are likely going to be, in the near term here, and while that won't stimulate, you ow, a lot of new exports in the short term because our beef herd is so competitive.

There is there has been some discounting going on and some are more aggressive than others. Most are very rational on price I'd say, there's a few that are discounting it areas where were we.

Speaker #2: low, in the midterm, you know, long-term, it certainly could. I mean, the protein And, you know, we're looking for more deals like this to help stimulate, production in the US.

Where supply is greater than demand I mean, I think as I mentioned, we see the waning of new supply coming online and demand increasing for any reasons that we already talked about will probably be the primary driver of that absorption over time, but also both us and another company.

Speaker #14: Yeah, so to quantify, we did go through and and really try to quantify our our tariff impacts on all our review calls. We've got about a $10 million dollars our estimate NOI headwind in the second half.

Speaker #14: That's embedded in the guidance and the occupancy chart that you can see. So, you know, we do have some locations that have more inventory because of tariffs.

Our consolidated buildings, which are taking some capacity out of the market also there is a lot of old inventory in the U S in geographies around the world.

Speaker #14: but but then again, enough that have lower to lead to a headwind overall. So we did want to ive that number to give everyone a sense of sort of what we've been, seeing.

Becoming obsolete quickly and will come offline in the coming years, which will help help offset some of the new supply that's come online in the last couple of years.

Speaker #14: Okay, thank you. Are you are you not orried about the the use of like growth hormone in our beef that's going to limit exports?

Helpful. Thank you.

Speaker #2: I think the protein space will adapt to that and and figure it out correctly.

Our next question comes from the line of Ben Nolan from Green Street. Please go ahead.

Speaker #14: Okay, thank ou.

Yes.

Speaker #3: Thank you. Our next question comes from the line of Michael Miller from JP Morgan. Please go head.

Hi, Good morning could you discuss the current rollout plan for <unk> over the next several years and also like what percentage of your facilities are you targeting for Lynn OS or was it all of them and then what is it just like a realistic implementation timeline to get all these potential efficiencies flowing through the portfolio.

Speaker #15: Yeah, hi. Can you talk about the strategy to manage interest expense going forward after the caps and swaps burn off at year-end?

Speaker #2: Yeah, for sure. So we, we did the bond deal. we we're we did a a new swap here, just recently. So we are actively managing it, there is about a $10 million dollar per quarter headwind in Q and in 2026 versus 2025.

Yes.

Yes, Im sorry, if I get a bit of a facility its pretty fast I mean, as Greg mentioned during the pilot we quickly see gains within weeks, yes, we see gains generally the first week.

Which is amazing for a new technology and I think in any aspect of any business, but.

Speaker #2: Because of the expiring swaps. So, and we we benefited a lot from them. We're glad we did them. They're expiring and we are working hard to mitigate that through a number of of of different areas.

As far as the implementation will share more later in the year on our we are working.

Speaker #2: The bond deal, you ow, take advantage of investment grade markets. We have the opportunity to do, you know, potentially financing in different in different currencies and and we'll we'll continue to do all we can to make sure we have the lowest cost of capital.

Just on how excited we are about it we are literally working every day on how we can further accelerate our implementation.

We'll have 10 this year and we look to dramatically increase that number in the coming years, it'll probably take us two years or three years to get the majority of our network converted.

Speaker #15: And real quick, to follow up, the the new swap you mentioned, was that, just on the recent quarter and how significant is it?

And again, we're working really really hard to accelerate that given how excited we are at but it shouldn't be the rates revision, yes. The majority of our conventional facilities eventually will be on the Nols absolutely in new acquisitions will go immediately onto <unk>.

Speaker #2: 750 million dollars. And I think it's about 3.2%.

Speaker #15: Okay. Okay, thanks.

Speaker #2: Thanks.

Speaker #3: Our xt question comes from the line of Nick Dillman from Barrett. Please go ahead.

Speaker #16: Hey, good morning. Greg, maybe just wanted to get your comments on what you're seeing from some of the smaller operators in the space today, what you're seeing they're doing from like a pricing standpoint.

Including the tightened once we just we just bought so this will provide more accretion for future M&A it'll make our newbuild.

More productive.

Speaker #16: are you seeing them starting to be under more pressure than you? do you see them exiting the market? I guess a little commentary because it is you and a larger player that have a decent amount of market share, but curious on kind of the more fragmented part of the industry.

Transform our existing special facilities, we're very excited and I know, we've been talking about it for the past year, but we'll start to have benefit in our numbers in 2006, and it will accelerate from there and as Greg mentioned around NAREIT, we plan to give a bunch of detail around this.

Speaker #2: Yeah, I an, there's obviously, a number of new competitors, you know, we there is there has been some discounting going on. You know, and some are more aggressive than others.

Probably do a special session around a REIT to provide a lot more detail and color on what we're seeing.

Great Thats really helpful. Thank you maybe just quick follow up is there any incremental capital we should be thinking about with this broader rollout or it's really more of a workflow system the tech.

Speaker #2: Most are are very rational on price, I'd say. and there's a few that are discounting in areas where where, you ow, where where supply is greater than demand.

Investment has already been made can you just talk a little guys out there are capex associated with this.

Speaker #2: I mean, I think as I mentioned, you know, we see the the waning of new supply coming online and and, you know, demand increasing for for any reasons that we already talked about.

I mean, the majority of the tanker vessels it hasnt made theirs.

Some some operating costs, when you're when you're going and having people on site and training people, but it's not material and the Guy you should not expect to Capex bubble from the Midwest supplementation.

Speaker #2: We'll ably be the primary driver of that absorption over time. But also, you know, both us and and and another company are consolidating buildings, which are, you ow, taking some capacity out of the out of the market.

Great. Thank you.

Thank you.

Speaker #2: Also, there's a lot of old inventory in the US and geographies around the world that's that's becoming obsolete quickly and will come offline in the coming years, which will help help offset some of the new supply that's come online in the last couple of years.

Our next question comes from the line of Danielle Guglielmo from capital One Securities. Please go ahead.

Hi, everyone. Thank you for taking my question.

Labor expense line accelerated this quarter versus being flattish last quarter is there anything to call out there or are there certain regions or countries, where it's been harder to keep employees, where labor rates are rising faster than expected.

Speaker #16: Helpful. Thank you.

Speaker #3: Our next question comes from the line of Vance Bowen from Green Street. Please go ahead.

Speaker #17: Hi, good morning. Could you discuss the current rollout plans for LinOS over the next several years? And also, like what percentage of your facilities are you targeting for LinOS or is it all of them?

So our wage increases are implemented for the majority of our markets on April one that's probably what you are seeing.

It said.

In our guidance and what we're seeing is continued productivity improvement even outside of the window as we have.

Speaker #17: And then what is it just like a realistic, you know, implementation timeline to get, you ow, all these potential efficiencies flown through the portfolio?

A lot of levers we're pulling.

Speaker #2: Yeah, well, yeah, I mean, if I hit a bit of a facility, it's pretty fast. I mean, as Greg mentioned, we, you know, during the pilots, we we quickly see, you know, gains within weeks.

A myriad of productivity initiatives that impact that labor line outside of just needed the dose that we always talk about to increase both labor productivity things like data daily Labor planning.

Speaker #2: Yeah, we see gains generally the first week which is amazing. For a new technology. And I think in any aspect of any business. But, as far as the implementation, we'll share more later in the year on our we are working based on how excited we are about it.

It is being implemented throughout the U S to start with we were implementing a next generation labor management system that that both of these things are just designed to to match the labor dynamically to the facility activity and so we're seeing good productivity trends, even before the little less implementation goes act as a <unk>.

Speaker #2: We are literally working every day on how we can further accelerate, our our implementation. you know, we'll we'll have 10 done this year and we look to dramatically increase that number in coming years.

Perfect Foundation for the <unk> rollout.

As we decelerate next gen. At the same warehouse labor was down year over year same warehouse cost of operations was down year over year.

Speaker #2: It'll probably take us, you know, two or three years to get the majority of our network, converted. and again, we're working really, really hard to accelerate that, given how excited we are.

Okay. Thank you.

First.

Speaker #2: Yeah, but it should e. Transformation. Yeah, the majority of our conventional facilities eventually will be on LinOS. Absolutely. And new acquisitions will go immediately on to to LinOS.

Thank you that concludes our question and answer session I will now turn the call over to Mr.

And then Nevada for closing remarks.

Speaker #2: including the the Tyson ones we just we just bought. So, you know, this will provide more accretion for future M&A. It'll make our new builds, more productive and, you ow, transform our existing conventional facilities.

On behalf of the entire lineage team. Thank you for joining us today and for your interest in lineage, we look forward to speaking with you.

And on our next quarterly earnings call.

This concludes today's conference call you may now disconnect.

Speaker #2: We're very excited. And I know we've been talking about it for the past year, but, ou know, we'll we'll start to to have benefit in our numbers in '26 and it'll celerate from there.

Speaker #2: And as Greg mentioned, around day rate, we we plan to give a bunch of detail around this. Yeah, we'll probably do a special session around day rate to provide a lot more detail and color on what we're eing.

Speaker #17: Great. That's really pful. Thank you. Maybe just quick follow-up. Is there any incremental capital we should be thinking with this broader rollout or it's really more of a workflow system, the tech investment has already been made, if you can just talk a little bit about, you know, is there a capex associated with this?

Speaker #2: Yeah, I mean, the ity of the tech investment has been made. There's, you know, some some operating costs when you're, you know, when you're going and having people on site and and training people.

Speaker #2: But it's it's not material. And again, you should not expect a capex bubble from LinOS implementation.

Speaker #17: Great. Thank ou.

Speaker #2: Thanks, man. Thank ou.

Speaker #3: Our last question comes from the line of Daniel Guglielmo from Capital One Securities. Please go head.

Speaker #18: Hi, everyone. Thank you for taking my question. The labor expense line, accelerated this quarter versus being flattish last quarter. Is there anything to call out there?

Speaker #18: Are there certain regions or countries where it's been harder to keep employees or where labor rates are rising faster than expected?

Speaker #2: So our our wage increases are are implemented, for the majority of our markets on April 1st. That's probably what ou're seeing. You know, that said, we in our guidance and what we're seeing is continued productivity improvement.

Speaker #2: Even outside of of of LinOS, you know, we have a ton of levers that we're pulling and and and a myriad of productivity initiatives that, in fact, that labor line outside of just lead and LinOS that we always talk about to increase both labor productivity, things like daily labor planning, is being implemented, throughout the US to start with.

Speaker #2: We're implementing a next-generation labor management system. That that both of these things are just designed to to match the the labor dynamically to the facility activity.

Speaker #2: And so we're seeing good, productivity trends, you know, even before the LinOS implementation. And and those act as a perfect foundation for the LinOS rollout, as we accelerate next year.

Speaker #2: Yeah. And same warehouse labor was down year over year. Same warehouse cost of operations was down year over year.

Speaker #18: Okay. Thank you.

Speaker #2: Of course.

Speaker #3: Thank you. That concludes our question and answer session. I will now turn the call over to Mr. Evan Barbosa for closing remarks.

Speaker #19: On behalf of the entire lineage team, thank you joining us today and for our interest in lineage. We look forward to speaking with you again on our next quarterly earnings call.