Q3 2025 Lineage Inc Earnings Call

Speaker #1: Ladies and gentlemen , thank you for standing by . My name is Desiree and I will be your conference operator today . At this time , I would like to welcome everyone to the Lineage, Inc. third quarter 2020 Earnings Conference call .

Speaker #1: All lines have been placed on mute to prevent any background noise . After the speakers remarks , there will be a question and answer session .

Speaker #1: If you would like to ask a question during this time , simply press star , followed by the number one on your telephone keypad .

Speaker #1: If you would like to withdraw your question , press the star one . I would now like to turn the conference over to Kevin Kim , Head of Investor Relations .

Speaker #1: You may begin .

Speaker #2: Thank you . Operator . Welcome to the discussion of its third quarter 2020 financial results . Joining me today are Greg Lehmkuhle , President and Chief Executive Officer .

Speaker #2: And Robert Crisci Lineage, Inc. , chief Financial Officer . Our earnings presentation , which includes supplemental financial information , can be found on our Investor Relations website at IR .

Speaker #2: Com . Following management's prepared remarks , we'll be happy to take your questions . Turning to slide two . Before we begin , I would like to remind everybody that our comments today will include forward looking statements under federal securities law .

Speaker #2: 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 .

Speaker #2: 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 .

Speaker #2: 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 .

Speaker #2: Unless otherwise noted , reported figures are rounded and comparisons of the third quarter of 2025 are to those of third quarter 2020 . For now , I'd like to turn the call over to Greg .

Speaker #3: Good morning everyone . Thank you , Kevin , and welcome to the Lineage, Inc. family . We're thrilled to have you as many of you know , Kevin joined us from a distinctive career at Truist , bringing 20 years of experience in the real estate industry .

Speaker #3: Most recently as a leading sell side analysts . He's now two weeks into his new role , and we are already feeling his positive impact .

Speaker #3: Let me start by walking you through our agenda for this morning . First , I'll recap our third quarter performance , which came in slightly ahead of our expectations .

Speaker #3: Then we'll review occupancy and price , followed by our latest view of supply and demand for our industry . We know this is an important topic that many of you are interested in .

Speaker #3: Following my remarks , I will turn it over to Robert Crisci , who will walk through the details of segment performance , capital structure , and our updated guidance .

Speaker #3: I'll then return to share closing comments before we open up the line for your questions . Turning to our quarterly performance on slide four , total revenue increased by 3% and adjusted EBITDA increased 2% to $341 million , which is a quarterly record for the company .

Speaker #3: Total AFO grew 6% year over year , and we delivered AFFO per share of $0.85 , which declined 6% year over year . As a reminder , our IPO occurred in the third quarter of last year , which impacts the comparability of these periods .

Speaker #3: Looking at our business segments , global warehousing performed in line with expectations consistent with the outlook we shared on last quarter's call . Same store physical occupancy improved sequentially by 50 basis points to 75% , and we anticipate further occupancy gains in the fourth quarter .

Speaker #3: Consistent with the muted seasonal pattern we discussed last quarter, same-store NOI increased sequentially to $351 million from $340 million, although it declined 3.6% year over year.

Speaker #3: Same warehouse storage revenue per physical occupied pallet remained stable as expected , growing at 1% . Our global integrated Solutions business saw year over year NOI growth of 16% , led by our US transportation and direct to consumer businesses .

Speaker #3: In the quarter , we invested $127 million of growth capital , primarily in our development projects . We're pleased with the continued progress on these projects as a reminder , we have 25 facilities that are in process or ramping .

Speaker #3: We expect these assets to deliver 167 million of incremental EBITDA once stabilized in Q3 , we delivered in-line same store NOI and exceeded our adjusted EBITDA and AFFO per share guidance .

Speaker #3: However , we expect a lower fourth quarter than previously anticipated and are therefore moving to the lower end of our full year guidance range for both EBITDA and AFFO per share .

Speaker #3: This is largely driven by a $20 million decline in our outlook for same warehouse NOI , due to two primary factors . First , tariff uncertainty is impacting import export container volumes , leading to softer year end services revenue .

Speaker #3: Second , while our total occupancy outlook for the fourth quarter is unchanged versus our previous guidance , US occupancy is slightly lower due to import export volumes and less than expected .

Speaker #3: US new business hitting in the quarter . This is being offset by higher occupancy outside of the United States , where we are in lower margins .

Speaker #3: Despite these near-term headwinds , we remain focused on providing world class service to our valued customers by leveraging our industry leading network and cutting edge technologies .

Speaker #3: I'm confident that we are well positioned to grow as the food industry normalizes . New capacity is absorbed and our labor management and energy efficiency initiatives accelerate .

Speaker #3: Moving to slide five . As I mentioned , Q3 and Q4 , total occupancy are in line with our prior forecast . And pricing remains stable as expected .

Speaker #3: Note that we typically see a sequential decline in storage revenue per pallet in the fourth quarter due to normal seasonal mix changes . Additionally , we saw sequential 180 bips increase in our minimum storage guarantees to 46.7 as our customers continue to want to secure space across our network .

Speaker #3: Turning to slide six . We understand that our industry is a specialized part of the real estate landscape , with limited publicly available data .

Speaker #3: Accordingly , we continue to collaborate with CBRE to provide insights into new supply growth for the cold storage industry . At this point , our analysis is focused on the US , where we have the most accessible data and in certain markets are seeing the most acute supply demand imbalance .

Speaker #3: Let me quickly walk through this slide . The upper left hand chart , labeled a , shows from 2021 through 2025 . Public refrigerated warehouse supply grew at approximately 14.5% on a square foot basis , which is weighing on occupancy and pricing in certain markets .

Speaker #3: Importantly , CBRE outlook for new capacity in 2026 is down substantially from recent levels to 1.5% . The upper right hand chart , labeled B , is based on Nielsen and Circrna data for fresh and frozen food volumes in both the retail and food service channels .

Speaker #3: The data shows demand for the food categories stored in our network grew cumulatively by 5% during the 2021 through 20 time period , to be clear , in spite of continued pressure from tariffs , consumer price inflation and other headwinds , end consumer demand for the products that flow through our network has been and continues to grow on the bottom left hand of the slide , we bring these two concepts together to calculate estimated excess capacity of approximately 9.5% for the US market over the last four years .

Speaker #3: Despite this , nearly 10% imbalance , our 2025 total estimated average physical occupancy is 75% , down only three points from 78% in 2021 .

Speaker #3: We are using our network size and the strength of our operations to perform relatively well in a very challenging environment . Looking forward , CBRE is expecting less new supply , which we believe is logical as further speculative development is not supported by current industry dynamics .

Looking to the fourth quarter, we now expect the same warehouse. Noi decline is a 3 to 6%, a reduction of approximately 20 million dollars at the midpoint versus our prior implied Q4 Outlook. Greg already outlined the main drivers behind this reduction including the impact of tariffs on Import and Export activity. We've been monitoring the Tariff situation closely and are cautiously optimistic about some of the recently announced trade agreements. Which should benefit both our customers and lineage

We continue to fight through the competitive environment as Greg discussed earlier, we feel good about the positive trend in occupancy and the return to more normal seasonality, this year, albeit somewhat muted. But

Trying to slide a diving deeper into warehouse efficiency. As we all know, the current inflationary environment has driven labor cost increases as a reminder. Labor is by far, our largest controllable costs at 1.5 billion dollars per year on a same warehouse bases. We've been able to hold labor costs flat over the last couple of years. This year throughput has declined. Low single digits making the progress, our operations team has made on labor per throughput pallet even more impressive.

You can see this on the right hand side, we remain hyper focused on lowering costs and increasing Warehouse efficiency. This benefits us both in the short term and will drive strong operating leverage on incremental growth.

Through 16% to 65 billion. Our noi margin was up 250 basis points to 17.9%. We continuing to see strong momentum in our us transportation and direct consumer businesses. Due to the value of these Integrated Solutions provide to our customers.

For the fourth quarter, we expect a strong momentum to continue with 10 to 15% growth.

Notably we benefited in the third quarter from approximately 4 million of noi that was previously expected for the 4th quarter.

We now see full year, noi growth of 8 to 10% versus prior range of age 12%. The slight reduction in the midpoint is due to less Trade Services, also, associated with lower import, export activity.

Really great your overall and solid execution by Greg, Brian and the global GIS team.

Turning the slide 10, we ended the quarter with total. Net debt of 7.55 billion total liquidity. At the end of the quarter, stood at 1.3 billion, including cash and revolving credit facility capacity.

Our leverage ratio defined its net debt to adjusted ibida was 5.8 at the end of the quarter, we remained highly disciplined on future Capital deployments. We continue to actively manage our interest rate exposure in light of our existing soaper, Hedges, that expire a year end. We have an opportunity, executing new Hedges and working to further. Optimize our investment grade balance sheet.

Kevin is urine expirations, we're providing a very early look for 2026 forecast interest expense to help with your modeling. At this time. We see approximately 340 to 360 million of total interest expense 2026, which is approximately 80 million higher than this year.

A little more than half of the increase is due to the expiring Hedges. And the remainder is due to our recent Capital deployment, which we anticipate will drive, attractive risk, adjusted returns, and further support for customers during growth.

Turn to the guidance slot.

We are initiating Q4 with Eva of 319 to 334 million. And as info for share of 68 cents to 78 cents for the full year, Eva is 1290 to 1305 and asfo per share is 320 to 330. In short, we are going to the lower end of our previous ranges on adjusted evida and the afo per share.

We see total and same warehouse NOI about $20 million lower than previous guidance for the reasons mentioned earlier.

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

Rob has walked you through our updated guidance and I want to reaffirm that while we were operating at a challenging environment, We Believe lineage remains positioned to win as outlined in detail in our prior earnings call. We're focused on driving competitive differentiation across 3, key areas, delivering customer success leveraging, our Network effects, and enhance.

Ing Warehouse productivity.

Before summarizing and turning it over for your questions. I'd like to provide a quick update on lytos our proprietary Warehouse execution system. As of today, we deployed the platform in 7 conventional sites and the results have exceeded our expectations. We're seeing double-digit productivity improvements, in key metrics like units per hour translating to higher output and lower unit costs.

We expect to complete 10, deployments by year, end setting the stage for an accelerated rollout to 2026.

We look forward to sharing more details at nit, where we'll be hosting an in-person and webcast at investor Forum on Monday, afternoon to separate.

The presentation will focus on operational excellence and our lindos technology.

Turning to slide 13 and in summary it's obviously been a very bumpy road since our IPO. Last July, for our external investors, and for our lineage team who are also owners of our company.

But when I take a step back and look at the company, I see the largest best position player in a mission, critical business, where underlying consumer demand has been growing even in the face of some of the worst Food inflation in decades.

This is a great company in a resilient long-term industry. That is clearly facing short-term challenges due to excess Supply and macro headwinds like tariffs,

the cash flow generation of our company remains strong. Our trading valuation is currently about half of the replacement cost of our assets and we believe we have an unmatched portfolio of buildings in critical markets for

While Q4 will be challenged due to near-term headwinds, there are green shoots of optimism, including less new supply coming online, growing demand, and potential global trade policy resolution.

In the meantime, we will continue to focus on the areas of our business that are under our control, becoming a leaner smarter company investing in our people processes and Technology.

And when the industry doesn't select, we will come out stronger than ever.

Finally, I want to thank our Global team members for their dedication and commitment to our customers.

Operator. I'd like to open it up for questions now.

Thank you. We will now begin the question and answer session if you have dialed in and would like to ask a question. Please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to make sure your questions seem to press star 1. Again, if you are called upon to ask your question and are listening via speaker phone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question.

With your request for today's session. That you please leave me to 1 question and Ricky for any additional questions. Thank you.

And our first question comes from the line of Kaitlyn borrows with Goldman Sachs, your line is open.

Hi, good morning everyone. Um, I was wondering if you could talk a little bit more about that expected. Lower us new business in 42. I guess how important is new business versus existing business throughout the year and in 42 specifically and how has new business fared to date? And are you suggesting some change for 4q? Or is it more of the same? Thanks.

Good morning Caitlyn. Thanks for your questions. So let me just provide a little more color on the, on the lower on both the TA and the new business front. So I think we're all sick of hearing about tariffs at this point, but we're definitely seeing the Tariff on certainty impact import export volumes more than we did earlier this year. And certainly, more than when we were guiding, uh, last quarter. So, this has been specifically impactful in our in our West us business unit. Where the where, the ocean import export container volumes are down about 20%, but where from where they were trending, you know, most of the Year through July and back when we gave guidance and this is, this is lucrative business with substantial. That's the soil Revenue like services for Customs documentation bonded, fees last freezing, uh, for example, in our, in our Seafood category, you know, many customers ordered back in the summer and are bleeding down their inventory right now, awaiting tariff resolution, and they're telling us that there's, you know, while there's a possibility, they'll reorder by year end, it's more likely going to be after

The first of the year and that's what our gate, that's what our guide is based on. We're also forecasting that this impact of container volume not only hits warehousing, seems to not going to lie, but it also is GIS in the fourth quarter as we provide a lot of drainage around the ports for our customers in the RGS segment. But to your question more specifically on the new business side, you know competition in certain U.S. markets is impacting new business. While we continue to expect to have a record new business year overall.

We continue to have a very strong pipeline. We're just forecasting a little bit less than than we were previously guiding to to to hit in the fourth quarter. And obviously, you know the contribution margin on new business is very high given the fixed cost nature of our business and therefore a relatively small change in new business. Revenue has an outsized impact on ADI and that that happens, you know, the other way, when we land a lot of new business,

Thanks.

Ever, the next question comes from the line of Michael Goldsmith with UBS. Your line is open.

Good morning. Thanks a lot for taking my question. Craig, can you provide an update on on the pricing strategy during the quarter? Just given given some of the demand that has been, that, that you talked about? And then, you know, also the the supply. So, just trying to get an update on how how you've approached pricing as a lever, uh, to maintain occupancy. Thanks.

yeah, we we've been, um,

You know, first of all I want to start by saying in Q2 we provided for the first time a multi-year uh Revenue per pallet chart both on both our services and rest storage and blast. And I think it's really important that I reinforce this, every quarter, that the metric that we all look at externally, uh, is going to be volatile quarter to quarter if driven by a number of factors. Rate is certainly a piece of it. Put volume guarantees inventory to its last freezing volumes commodity events exchange rate. Seasonality all play in to that.

You know, trade volume for Price, we're talking to each customer uniquely. And again, in aggregate, we saw in that price increases this year

Next question comes from the line of Steve sakoa with evercore isi. Your line is open.

Uh, thanks. Good morning. Um, Greg. I appreciate the uh, added color you provided on the excess capacity. Um, and you know, it's nice to see that you guys didn't take as big of a hit on occupancy, but, you know, given that there's still a lot of excess capacity I guess in the market overall.

Um, and there's still some new Supply to come on in, in 26, I guess to sort of what are your expectations looking forward? Kind of on that physical occupancy and, and how is that excess capacity, kind of being absorbed in priced in the marketplace, against the, you know, existing, uh, stock.

Yeah great, great question. So you know, at the at this point, the new Supply is really just trickling in. You saw the CBRE, you know, uh forecast for next year's 1.5%, new capacity, you know. We think that will say the same or go down over time as it just doesn't make sense to add more capacity speculatively in this market. And so when we look at our, you know, this is really a US phenomenon. It's not really the same situation outside of the US and and some markets remain challenged like, you know, I've talked about Jacksonville and Miami and in Prior calls, Chicago has had a lot of new new capacity and we're having to, you know, work through that.

Uh, new Supply getting getting on boarded, but we are actually more optimistic about some key markets that that have had, you know, new capacity delivered in the last couple of years, like, like New Jersey, Dallas and Houston. We basically absorbed that new capacity, we've worked through our book of business, we've kind of fought the fight, and, and now we're building back inventories in those markets. And so, you know, I I think, uh, it's marketed by

Market and, uh, you know, once the once the supply gets delivered and we kind of, you know, have those discussions with our book of business in that market, we think it's kind of a reset and we can build up from there and that's what we're seeing in the markets that that I just discussed.

Next question comes from the line of Craig mailman with City, Caroline is open.

Hey guys. Um

Just as we, as we think about this, the third consecutive guidance, cut we've had, I'm just kind of curious. If you guys are having this much trouble underwriting your own portfolio. Like how do we get comfortable with yields on the capitol? You're deploying into development and potential Acquisitions that? You know we're not going to be a couple hundred basis points kind of below proforma here because looking at your schedule you still have a a lot to stabilize in terms of the portfolio. I think only about 15% kind of stabilized here. Um and just a second 1 to go sneak it in here. Just

Have you guys thought about it is is a re maybe the right structure for this company. Given the fact that you guys are more of a 3pl than you are a real estate company. And, you know, it might be beneficial for you to be able to retain capital or redeploy that

There's some thoughts there.

Yeah, so so certainly, you know, the last thing we want to be doing is sitting here lowering the fourth quarter and the fact is our industry has been challenged and with the new Supply and very, very hard to predict given, you know, we talked to our, our 15,000 customers every month, about them forecasting, their volumes, and what they're going to do, and it's very difficult for them to predict and you heard that from the producers in their in their quarterly releases. So it's, you know, we're the recipient of that of that short-term volatility. Again, the, underlying demand for our products is growing not shrinking and we think that's good for the long term. As we absorb this, this new Supply, um, and get back to kind of equilibrium in the market. And as I mentioned, in the prepared remarks, we're not sure exactly when that is. But we feel very good about our positioning about our technology about all the things that we can control, um, are going well on the, on the new uh, new developments. I mean, we we track this every quarter, it's 1 of my kpis for my bonus.

Ordered our customers are telling us their container volumes are going to be now 20% and our largest business unit. And that's the, that's most of the type of things that we, that are very, very difficult or impossible to predict. And all we can do is, is, you know, execute our plan control, our controllables treat our customers, great treat our team members, great and uh and work through this challenging time. Yeah. And I would say, you know, we we do,

Structure for us, we have an incredible.

Outweigh the, you know, there really aren't very many night as of being a read so we're very very happy to hear reads. Yeah. We we if you could choose to pay taxes or not we're going to choose not

Next question comes from the line of Ronald Camden with Morgan Stanley. Your line is open.

I don't really helpful breadcrumbs on 2026 with the interest.

Uh, guidance and so forth. Uh, I just going back to the question of excess capacity. I was just wondering if, if you could sort of think about the next 12 to 18 and and, and this sort of environment, what what can you control? And what, what do you think? Sort of the pricing versus occupancy impact? Uh, uh, can be and so forth. So what if you sort of seeing and then sort of environment? Thanks.

Sure, so, so, you know, on the pricing side looking forward, you know, we are have a lot of, you know, our volume guarantees, for example, got reset in 25 earlier this year, in the first, and second quarter, after the big docking from Co that, I talked about, you know, the last several quarters. Um, and now we're kind of in a new. We're at a new we're at a kind of a more stable Point. Um, we are having conversations with customers already about 26 pricing, those those conversations obviously haven't been, haven't been wrapped yet, but despite the new Supply we discussed, we, we're targeting inflationary level increases and we believe that we're going to be able to achieve net increases in the low single digits for 26. And and we don't, we don't think we'll have to give up occupancy to achieve those, you know, those single digit price increases. Our our customers do understand that we have to pay our people more and there is inflation out there and you know, I don't we're not going to get 10% but but low single digits, we think is very, very achievable.

Even helpful Supply.

Next question comes from the line of Michael Carroll with RBC. Your line is open.

Yep, thanks, uh, Greg can you give us some color on how lineage was able to push their guarantee? Um, contracts up a little bit this quarter. I mean, is it abnormal to do this in the third quarter? And is that the reason why economic occupancy was a bigger, uh, sequentially in 3Q versus, uh, physical occupancy.

It was the reason and and the reason for the volume guarantee progress is some new customer, LED developments include long-term contracts with higher volume, guarantees than our average. Also our our sales team. I said that our I mentioned on the last question that our volume guarantees got reset at a lower level. You know, in the first and second quarter this year, we've kind of been through that pain if you will. And now on new business, our sales team is doing a phenomenal job. Broadening the customer base that are utilizing volume guarantees. So our new business, despite the challenges, and you know, in certain parts of the US, uh, we're seeing new business come in with higher, volume, volume volume guarantees than than our average.

So those are those are the 2 impacts.

Next question, comes from the line of Alexander. Goldfarb with 5% sander, your line is open.

Hey uh good morning. Uh and first uh Rob with the Double B, welcome aboard, Rob with the single B. Uh congrats on retirement and Ken. Welcome to the inside. Uh, Greg you mentioned that International is performing much better, uh, versus the US is it simply a matter of the excess Supply. And that's really the difference, or are there other things at work? I mean, they're always trade disputes from country to Country. They're always, you know, geopolitical things, you know, inflation tension, whatever, you know, happening overseas. So I'm just trying to isolate what

The key differences for why Global is performing, well versus the US. And I wonder if it's simply the supply or if there's other factors at work,

So so I don't want to overemphasize this. I mean the the occupancy in the US is a little bit lower than we were forecasting back and you know after Q2 and Europe is is a little bit

That's a different.

In import, export volume, and that's that's impactful. And just more broadly, uh, certainly in in the US in certain markets like the 1, I mentioned ear, the ones I mentioned earlier, there is competitive pressure in those and those are the 2. Those are the 2 uh the 2 big impacts versus what we thought before. Um, but again I mean it's it's, it's isolated markets. The the we are absorbing this capacity, we are keeping our occupancy up, despite the new Supply, and we're getting that price increases despite the new Supply. So we think in a very unpredictable and very challenged environment, the company's executing, as well as possible, and it's another benefit of having a very Diversified Global footprint, right? So we we can benefit from growth in other markets that, you know, to help balance out our our performance. So I think it's a positive for for cleaning a general.

Thank you.

Alex.

Next question comes from the line of tyo, okay? With Deutsche Bank, your line is open.

Uh yes uh good morning everyone. Um keep in. Welcome aboard Rob with the Double D. I was so, welcome aboard. Um,

First quarter in a while. You guys really haven't done much on the acquisition side, uh, just curious what you're seeing, uh, from that perspective. Uh, and also kind of curious again, is it just really more tied to your overall cost of equity right now that you've slowed down or kind of how you kind of look in our Acquisitions going forward?

Yeah, so, you know, we're highly disciplined as always on Capital appointment, you know, we're, we're cognizant of developments that we're working on. We see our leverage ratios there, you know, they're in a really good spot. Um, we don't, you know, obviously view our Equity as as a place that's anywhere, but very, very undervalued. So, you know, we're not into an issue with equity, and so we're managing the portfolio and we'll be real smart on Capital deployments.

You know, there's obviously a ton of opportunity out there and there's 4 things becoming available, you know, in the market, so we'll be opportunistic, but we're going to be, you know, uh, very disciplined.

Next question, comes from the line of Greg mcginness with Scotia back. Your line is open.

Hey, good morning. Uh, Greg. I was hoping to get some more insight into uh the earnings commentary regarding the Improvement in fresh and frozen frozen demand at lineage. Just seeing is that in reference to uh the Q3 seasonality Trend? Um, or is there something more broadly that you're seeing in the market?

Third-party data.

Going great. It's not our view. It's it's third party. Yeah, this is third-party data from from Nielsen, which is the retail data and then sirana is the rolled up food service data. So it's the full picture of food consumed to the United States from the 26th that we purchased this last quarter because we, you know, we had our data shows that that underlying demand was growing, but we didn't have third-party data. So we want to

We want to provide that every quarter and what that shows is continual growth in the categories that that we Supply in fresh and frozen frozen. It's, uh, you know, we, we very much believe it's accurate. And, and it's what we thought, despite the again, despite the, you know, on the elevated food inflation, the underlying categories continue to grow.

Next question comes from the line of Dan googly Elmo with capital 1. Your line is open.

Hi everyone. Um, thank you for taking my question. Um, you all mentioned the stronger international Trends versus the US, which does align um, some with what we've seen for other Global Brands, this earning season, can you just remind us what the rough Revenue breakdown is between the US and international and then are there certain International markets where you see opportunities to lean in.

Yeah. So overall, we're 7077030 sort of US versus rest of the world. Yeah. I I think, uh, Europe overall our European team is, is crushing it and, and winning it all in a lot of different markets in, in, in Europe. And we're excited about continued growth there. Both in the same store and, and, uh, and not the same store.

Next question comes from the line of Vikram Malhotra with miserable. Your line is open.

Uh morning thanks. Staying the questions and, you know, congrats everyone, on their new roles. Um, I guess this 2 classifications 1, um, on on just the numbers.

uh, maybe it's you can share some color on what you've seen in October specifically to keep sort of the

Examples like all the acquisition Acquisitions. We've done in the past 5 years, maybe just give us some overall sense of how uh underwriting how uh actual performance has trended versus on writing in terms of whether it's an oi growth or yields or anything else, just to give the give us a sense of what those uh, properties recently acquired are doing, thanks.

Sure. So, on the occupancy front, inter quarter, it's it's pretty much spot-on what we thought it would be after last quarter, so our total occupancy guy, and the seasonality that we predicted is happening in our Network. In fact, on Monday, I get the occupancy report every week. And for the first time in, I don't know, 8 quarters, maybe. Uh, the occupancy was higher than prior year total in in the same store, so that was great to see. And so we're seeing that Trend. It's it's a combination of um, you know, the new Supply kind of settling and US performing well in the marketplace. And again, on the pricing front what's, what gets us confidence? That we can get price. Next year is we got it this year and there was probably no harder year in our industry's history than this year. Uh, given the new Supply that's been delivered over the last couple, and we were able to get that new Pro net, net, uh, increases in price. And, you know, the initial conversations with customers are for next year that. They're, they're open to very modest price increases.

And we think we'll get that price on the on the m&a front. You know, we bought

You know, 70 companies in The Last 5 Years, it it it's varied by by region. And uh, and facility, um, you know, overall we're certainly happy with the Acquisitions of the network we've built as we think it's, uh, Irreplaceable and industry-leading. And you know, we don't break down each individual past Acquisitions. We roll that in up into Global admin and a lot of things change when we buy, but we certainly make progress on cost per activity. Uh occupancy uh as we as we roll companies into the lineage family.

Next question comes from the line of Blaine hack with Wells. Fargo, your line is open

Great, thanks, good morning. Um, just following up on Guidance. With respect to the fourth quarter, it's a relatively wide range between 68 and 78 cents. So can you just share your thoughts on what key drivers or line items are are kind of the biggest variables that could result in afo coming in, you know towards the upper or lower end of the range?

Yeah. So you know the biggest thing obviously we can manage is is the recurring maintenance capex. And um you know and for the fourth quarter it's always typically our seasonally highest quarter, we expect that again. Um, you know, that certainly can move 5 or 10 million dollars, you know, based on on spending. Um obviously things trying to why is the thing we care about the most and and, you know, we're working hard to as Greg mentioned. We, you know, so

October is looking okay, but that's embedded in our guidance. Um, you know, but certainly, if we have more uride activity, um, you know, that that that'll help because really Services revenue, and a lot of that is related to these tariffs and containers. And so, as Greg mentioned, that could certainly get a lot better at the end of the year. Um, but you know, we're just being very, very cautious based on what we see right now and it's hard to predict November December and to be your activity. Um, and so that was our thought process on the god.

Next question comes from the line of Michael Lewis, which is your line is open.

Yeah, great. Thank you. Um, well, we're welcoming people. I'll welcome, Rob. I'll of course. Welcome, uh, my good buddy and pal Kean and uh, and maybe welcome myself to to the covering the same as well. Um, my question. Thank you. Um, my question, I wanted to ask. I don't think anybody asked about, um, this lasting SNAP benefits. Right? So it'll, it'll be a temporary thing. I just wonder if there could be any impact on 4 q from that. Um, you know, surprisingly to me, I guess, 1 out of every 8 Americans is on food stamps. Um, is there any potential for that to cause anything in the numbers in 4k? If this drags on or is that not really a concern?

Yeah. And and keven's concern, because part of his comp package is food stamps. So um, yeah, let me, let me, let me start with with the snap, but I'll talk more broadly about the government shutdown. Um, so the just a little context on snap in overall in overall food consumption. So, in in 24 us consumers, uh, spent roughly 2.7 trillion on food and the and the SNAP benefits from the federal government were about 100 billion or about 4% of total food expenditures. But the data shows that for every dollar in change in SNAP benefits, the total food spending only changes about 30 cents.

It just goes back to normal, but even in the most dire case where SNAP benefits are completely eliminated. The impact on total food consumption would only be about 1%. And so, we do not see this being Amino

Meaningful impact in the short medium or long term as we don't think it'll totally go away and even if it did it's it's 1% of total consumption more broadly on the government shutdown. We are seeing other impacts. Um, for example, the the USDA cold, cold Source, survey that the Holdings report that you all report on every month or most of you do um isn't being issued during the shutdown. We are seeing import export border delays. So while Customs is operational the FDA, the EPA, the USDA all have reduced Staffing leading to delays in inspections and certifications and documentation. So we are seeing as a result of that, some increased dwell time since the ports. And terminals were seeing delays in export license approvals. Um, but I think most importantly, though, the USDA and the FDA actual food, inspections have been unaffected.

Next question comes from the line of Samir canal with Bank of America. Kill line is open.

Yeah, good morning everybody. Um, I, I guess Greg, you know, I was looking at the this chart on page 30, which is the the presentation you have up there.

Where you show economic and physical and 80% economic today. I mean, do you have data going back?

Prior to let's say, 21 and even 2020 just trying to see if there was any other time before 2020 or 21. Where occupancy was below 80%.

You know, it it's clearly been a problem forecasting occupancy in this business was trying to figure out, you know, how how today's levels compared to a historically.

You know before 2020 thanks.

Yeah, good, good question. And and uh, hey, this this this second half we are, we did forecast occupancy accurately to be clear, uh, but you're right. It is very, very challenging to, to, uh, to forecast it in this environment. And the answer is, it's very challenging to go back prior to 2020, because we bought so many new companies in that time frame and the same store pools so different. And so, um, you know, we I do think just, you know, from my memory not not supported by by like for like data there. There was certainly times prior to 2021 where our occupancy was lower than it is today.

I'm, I'm thinking about, you know, 2006060818, uh, back when we were just kind of still, a young company at much smaller, um, obviously different footprint, but we're, we're in Europe yet more Asia. But yes, there was times in our Core Business, where, where I E economic occupancy was lower

Next question comes from the line of Michael Muller with J.P. Morgan. Your line is open.

Yeah. Hi. Um, curious. What are your larger customers telling you at this time about volume, expectations for 2026 and have you seen any customers wanting to shrink their fixed commitment agreement chat.

So uh, 2026 is is you know, very difficult to predict and I think that's what our customers are telling us. You know, we're we're just in the midst of of our you know, we don't even have October numbers. Finally yet, we're just in the midst of our, our business unit of the presidents are working on their 26 budgets right now and and uh, and work with Finance team next week. And I'll see a roll up in in a couple of weeks. And, you know, certainly puts and calls as I said here today, but but hard to predict and that that hard to predict, uh, is driven by all the conversations we're having with our customers worldwide who see their business as hard to predict, and so, um, you know, it's, uh, we'll see, you know, we'll be continuing to have those conversations through the, through the budget cycle and, uh, and, you know, but as far as the volume guarantees, you know, as I mentioned Michael, the, a lot of them got reset in the first half of this year, and we think that we're at a very healthy, level of volume guarantees. Now, we're actually kind of, we kind of reset the bar and now we're making.

The progress, I wouldn't see those you know dropping a bunch more. I don't think we have kind of an overhang of incremental recess and new business that were that were

Earning, as I mentioned, is coming in with slight.

Higher volume guarantees than our average.

Next question comes from the line of Todd Thomas with Key Bank, Capital markets, your line is open.

Some some change around. Um you you know, tariffs here, how, how could this sort of play out in in the quarters ahead?

Yeah, yeah the answer is yes. I mean we were seeing uh consistent container volumes through July bounced around month to month but but it was pretty consistent and then you know, we saw it drop uh through September and that lower level is being uh speed.

As of this point and again, 20% in our, in our Western business unit is not slow and it is not driven by new business. It is driven by predominantly our Seafood customers that are holding off to reorder, um, and that's that's the impact. So, yes, are they going to reorder some point for Latin Easter? Absolutely. We're just not predicting. That's going to be in the in the fourth quarter.

Next question comes from the line of Nick filmon with beard, your line is open.

Hey, good morning, everyone.

I'm just as we think about the excess capacity, you all highlighted, um, within the presentation

We're hearing a lot from the food manufacturers on. Um, restructuring, rationalizing. Uh, Supply chains. I was wondering if there's anything lineage has been doing on their own network, whether it be closing underutilized facilities or just rationalizing their footprint within the us being a large flare that could maybe close that Gap with access capacity.

We're just seeing on from a national picture.

Great. Great question. So so there's kind of 2 things going on with customers. Uh, the the first big 1 that the huge impact over the last couple years, was the destocking from coid. We think that's behind us, that's really good. That's fine. On a back to normal inventory levels or bouncing across the bottom. Um, but certainly, there's not more excess inventory that's being depleted. Uh, at this point, broadly, um, there's customers who have been optimizing their supply chains across my 30 year career and we are, you know, we're their Partners in helping them position, inventory properly to satisfy their customers requirements, a and help them determine, you know, how much to store, where, and how to transport those those products, uh, into our facilities and out, to, to their customers. And so, you know, Tyson's a great example of that, you know, we were right in the middle of their optimization and, uh, and were the recipient of for business, uh, given that optimization and we're having those conversations with customers all the time on the, uh,

On the, on the new Supply as far as kind of how it could come out. It's an excellent question. You know, we've idled 8 buildings so far this year we know some of our competition has as well. Um and we do that for obvious reasons we, you know, take out the labor, we lower the lower or eliminate the energy costs and we're able to move that business into adjacent facilities. And that's part of what's so great about having such a large dense network is that we have the opportunity to do this where where

Our competition doesn't. And so um if you look at other other ways that capacity is going to come out, you know we're idling. Others are idling old buildings that that have higher maintenance capex where that are not needed where we can, you know, move that product elsewhere. We also, you know, we also feel that some of the new operators are, are really struggling as they have a high basis in their properties, if they only assets and they're paying very high leases, if they, if they lease them and because they built it, you know, Peak construction cost uh timing and so we believe that that some of these companies are going to not succeed and and we plan to assess these opportunities for consolidation, uh, you know, and bring those facilities into our Network, as they present themselves, you know, I think an important caveat to that is is that not all warehouses are created equal and we're, you know, we're pretty good at at making strategic Acquisitions for the capacity. Uh, only when it makes sense for our Network.

We we also believe that some of the inventory that's been added was just added in the long in the wrong locations or it was, it was built in a way, you know, the actual development itself in the configuration of the building makes it fundamentally disadvantaged and we think it will just fail in the in the medium term. And so, you know, we think we think capacity will come out uh, that way as well. And we did see, you know, we did see um, you know, we are, we are hearing directly from some competitors that that they're struggling in a big way.

And there, there is instances where, where, uh, where companies have closed their doors as well.

Next question comes from the line of Tayo okusaga. With Deutsche Bank, your line is open

Some kind of large year-over-year increases kind of understanding, you've added kind of new assets over time, but just kind of curious, you know, are these newer assets. Just, again, Lower occupancy assets, but already fully staffed, or kind of what kind of happening on the non-sms. Short side to kind of have these really large jumps, even with the increased, uh uh number of facilities.

Yeah. Yeah, good question. Obviously, on the non-s store pool. Frankly, I wouldn't I wouldn't focus on it because there's so much going on there we have, you know, 25 buildings either ramping or or in development. And and we have to, you know, for example, in that labor line is our general manager, and our assistant manager, and our supervisors, that we hire them before, a pallet even hits the building. And so all these are indifferent phases of the J curve. And so, you'll see kind of abnormalities in that labor line, uh, until they move into the same store pool.

And our last question comes from the line of Caitlyn Burrows with common sex. Your line is open.

Oh, hi again. Um, I had a question on the pricing side, so 1 of the concerns I've heard from investors is that I think it's like half your portfolio is on 1 year agreement, so those were recently reset in 25 but the other half, that means they're on leases from a few years ago. Uh, maybe you could tell us how far back they go. But what's the risk of rent rolled out from those older contracts that were established a few years ago in 26 and is that incorporated into your view of what?

Single digit rate increase in 26 or is that 26? Low single digit price, increase only related to those 1 year agreements and the rest could be an incremental headwind

No, great question.

um, we don't see, you know, overhang from long-term agreements that are going to get reset at lower levels and definitely all those are included in our projections of low single digit net price increase

That concludes the question and answer session. I would like to turn the call back over to Mr. Kebin came for closing remarks.

Finished, thank you for joining us today.

We hope you will be able to attend our very investor Forum on Monday. December 8th.

Where we will highlight our operational excellence and unique little West platform.

We look forward to speaking with you again. Thank you, everyone.

Thanks everybody.

Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect