Lineage, Inc.

Good morning and welcome to the Lineage Logistics second quarter 2025 earnings call. At this time, all participants are in a listen-only mode to prevent any background noise. After today's presentation, there will be an opportunity to ask questions. To ask questions, please press star followed by the number one on your touch-down 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 Lineage's discussion of its second quarter 2025 financial results. Joining me today are Greg Lemko, Lineage's president and chief executive officer, and Rob Preci, Lineage's chief financial officer. Our earnings presentation, which includes supplemental financial information, can be found on our investor relations website at .onelineage.com. Following 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 issue 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, Evan, and 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, we'll 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 seesaw inventory levels. I will then turn it over to Rob to review segment details and provide an update on our balance sheet. Lastly, I will summarize the quarter and turn it over to your questions. Turning to our quarterly performance on slide four, we delivered ASFO per share growth of 8%. Total revenue increased modestly by 1% and adjusted even then 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, and 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 ASFO per share guidance to 320 to 340 compared to our prior range of 340 to 360. Transition to our second quarter results, our global warehousing segment was in line with our expectations as we laid out last quarter's call. Same warehouse that aligns down 6% year over year against elevated inventory levels we experienced last year. While these market dynamics are fluid and obviously difficult to predict, we remain confident in our core business. We saw sequential improvement during the second quarter in our same store NOI, which increased from 336 to 343 million. Notably, Q2 is normally the lowest seasonal occupancy quarter of the year. We're also seeing storage revenue for physical occupying and talent stability as expected, as I'll discuss more in a minute. Our global 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 terminal times. We will continue to work as strategic partners to help them to improve their supply chain efficiency. Additionally, the rollout of LIDLF, now its six conventional sites, continues to accelerate and perform above our expectations, showing double digit productivity improvements. We expect to have 10 conversions completed by year end, setting us up to further accelerate the broader rollout of 2026. Also, during the quarter, we completed our inaugural $500 million investment rate bond offered. Additionally, we executed on our M&A and development pipeline and creatively deployed $535 million in growth capital, including closing our agreements with Tyson Foods in addition to three smaller acquisitions. Before moving on to a more detailed analysis of our performance, I want to say a few words about our company. We need to position as the industry leader with broad and deep customer relationships, the largest network, cutting edge technology, and as a world leader in warehouse automation. I'm confident that we are positioned to grow as the food industry inventory is stabilized, 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 Navy, 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, whereas the green line shows typical quarterly USDA seasonality from 2015 through 2019, the years before the pandemic 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, when inventories historically started to climb, we saw muted seasonality in occupancy. This trend continued into the third quarter, and we've only recently seen a positive inflection in their inventories. This delayed occupancy improvement combined with persistently high food prices, tariff uncertainty, and elevated customer inventory costs drove our decision to lower our outlook for the second half. To be clear, our occupancy projection is what changed as our assumptions around cost efficiencies, price, throughput, and GIS growth remain unchanged from our previous guidance. All that said, we still expect inventories to build through the third quarter and into the fourth quarter, supporting sequential same warehouse NOI and adjusted even end rooming 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 palette after we announced our first quarter results. A quick reminder that our storage revenue per physical palette consists of rent, storage, and blast revenue. As outlined in Day Read, we expect to see stable trends for the balance of the year. This quarter, we saw nearly 5% sequential improvement in same warehouse storage revenue per physical palette. As you can see on charts, there's always some short-term volatility in this metric, which is driven by a number of factors, including rates, volume guarantees, inventory terms, blast freezing volumes, commodity mix, exchange rates, and season housing. 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 has a higher percentage of storage guarantees than 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 ASFO 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, 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 Q3, we expect ASFO per share to be between $0.75 and $0.79, and an adjusted EBITDA to be between $326 and $336 million. Some of the maintenance FX spend moved from the second quarter into the third quarter, which is reflected in our ASFO 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 that industry demand is bouncing along the bottom right now. Unfortunately, the uncertain macro backdrop is slowing our expectations of a broader market and we are also seeing a lot of inflation in inventories and throughput. Lowering guidance is both difficult and disappointing for 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 corner and our business has begun to steadily improve in the short term, while we continue to win in the long term. 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, with same-store NOI trending positively, positioning us well for growth in 2026. To that end, on slide 8, 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 productivity. 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 global integrated solutions offering with our expansive global warehouse network. We're also enhancing our responsiveness and customer service consistency. Through a new partnership with Cognosys, we are elevating our customer care model through proven -in-class technologies, expanded service hours, and deep customer service expertise, all while retaining the same team members as points of contact that our customers 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. We're also using our scale to drive cost savings across our platform in areas such as energy and insurance. In markets experiencing access capacity, we're proactively consolidating facilities to drive higher occupancy and efficiency. 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. Bean has always been at the core of our operating culture. It has helped us deliver service excellence and consistent productivity gains over many years. 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. 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. Simply put, we will never stop working to earn the right to grow with our valued customers. Now I'd like to turn the call over to our CFO, Rob Creechie. 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 $367 million. Same 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 from the Tyson Foods agreements, which closed in June, 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 these projects, where the future NOI benefit is yet to be realized. In summary, we are well positioned to grow, aided by the impact of these nearly completed developments. Shifting to slide 10, covering our global integrated solution 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 are seeing strong momentum in our U.S. transportation and -to-consumer businesses. Our customers continue 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 a revolving credit facility. Our leverage ratio, defined as net debt to LTM adjusted EBITDA, was $5.7. We will remain highly disciplined on future capital employment. In June, we successfully completed our inaugural $500 million investment grade bond offering, which carried a .25% coupon on a five-year term. Our new bond has been well received by investors and has traded tighter since the offering. I'd like to thank Michelle Domas, our world-class treasury team, and our banking partners for the great execution on our inaugural deal. The investor grade status was 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 question. 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 improvement, which we expect to continue going forward. We are the global 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 Midwest technology. 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. With that, let's go to another question. Operator?

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

To

ask a question, please press star on your touch-tone 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.

Hey, good morning out there. I guess for my one question, Greg, you know, at NAIRY, you guys reiterated the guidance from 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, you know, especially given that you guys had an opportunity to revise then. Just curious, you know, what you're thinking, you know, and how things were trending then versus what materially happened subsequent to NAIRY that caused you guys to reduce the outlook.

Yeah, good morning, Alex, and honestly, great question. And you're right, what changed is our occupancy guide. We had been trending in line with typical seasonality, 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, 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. And so at NAIRY, 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 performing. So we were above the line, as indicated on our slide five. In June, when we typically see utilization in-flat 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, 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 in the last couple 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 NAIRY 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. 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.

Thank you.

Thank you. Our next question comes from the line of Ken Kee Ben Kim from Truist. So, Dave, go ahead.

Thanks. Good morning. Maybe we can just start off a little bit on a higher level. You know, what's 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 versus what, I guess, the industry players and yourself included might think what is normal going forward? So, what are the best arguments for that?

Yeah, I think, you know, as I mentioned on the prepare remarks, you know, we believe the industry is bouncing along the bottom right now. I mean, food producers on their earliest calls and in all of our meetings continue to cite just high food pricing and value seeking behavior from customers. You know, our view right now is that inventories have been under serious pressure for a couple of years now and that servicing consumers without stockouts, which nobody will handle, would be very difficult at even lower levels. And so, we definitely feel we're bouncing off the bottom. There are some data, you know, positive data points out there like the B-perd counts, which are obviously still below the 2021 levels, that appear stabilized based on the 2025 USDA data. And CIRCANA's data showed that restaurant industry, the whole industry gained momentum after a slow start to the year. Also, you know, our customers are pushing very, very hard for 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 for increasing inventories moving forward.

Do you think

GLP-1 drugs are having a significant impact on volumes or occupancy?

We don't and our customers don't. I look at our commodity mix of heavy in proteins, seafood, food and veg, those are areas where people are eating more of, not less of. 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.

All right. Thank you,

guys. Thank you. Our next question comes from the line of Mr. Michael Griffin from Evercore. Please go ahead.

Great. Thanks. Appreciate the comments earlier on the Lino S pilot. I don't know, you said you'd 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, you know, six or 10 facilities, however many it's

been. Yeah, it's

been, we have six implemented so far, we'll do 10 by the end of the year. And, you know, all I can say is this is our initiative is exciting, it's on 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, Lino S is our proprietary warehouse execution system. This started many years ago from a vision and a belief from Sadarsin Tattai, our CIO, and Elliot our chief data scientists and their teams, that we can reimagine the way warehouses run, and that technology and data science are the enablers. And so Lino S 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. 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 costs, and even our employee experience. And, you know, most great things take time and Lino S 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. 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, training expense. We even think it's going to materially 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. And so, you know, over time, we think it will materially lower our cost structure, help us compete and improve what we already have as an excellent service for our customers. So we're highly encouraged and we believe Lino S is going to be everything we thought it would be. And we can't wait to share a lot more detail around kind of financials and how these algorithms work around the Navy Conference later this year. Great. Thank you.

Of course. Our next question comes from the line of Brandon Lynch from Barclays. Please go ahead.

Great. Thanks for taking my question. Greg, you mentioned this a bit in your prepared marks, but can you discuss the pricing strategy in the second quarter for rent and storage relative to the first quarter? Looks like you recaptured the trend line on that 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 what we should expect going forward?

Yeah. The short answer is nothing has changed. Let me explain why. So we communicated over the last quarter's results and at NAERE that we thought pricing levels would be stable for the balance of the year. In our prepared remarks today, we discussed that there's always some short term volatility in this metric, and you'll see that on slide six, which is driven by a number of factors. I'll repeat them. Rate or price is certainly a piece of that, but also volume guarantees, inventory turns, blast raising 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 5% sequentially, but much like we weren't 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 and elevated volume guarantees, which while they were reset in the first quarter, given the resetting inventory levels, the second quarter is normally, and is this year likely to be the lowest occupancy quarter of the year. So you're collecting a little bit more volume guarantees, which elevates your rent, storage, and blast per occupied pound. And so again, long story short, nothing has changed. We got our two to 3% price. We see the pricing environment is competitive and stable, and we wouldn't, you know, we're not concerned about this element for the balance of the year, and it's consistent with our prior guide.

Okay, very good. Thank you.

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

Hey, thanks so much. Just to quick two-parter, just can you talk a little bit more about sort of throughput was down same store 3.2 this quarter, which decelerated from the last quarter number. Just help us think about sort of what's happening on that front as product just being stuck somewhere in the supply chain is number one. And then the second comment is just the thoughts on supply in the industry. Thanks.

You got it. So, you know, we talked about this concept of core holdings in the last quarter, and we define that as volumes from customers that have not meaningfully change their business with us over the last four years. So, you know, we didn't win business, we didn't lose business, they're consistent, and that represents over 70% of our global warehouse holdings. So as we talked 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. 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, you know, elevated inventory levels we saw last year. 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. On the supply side, you know, I think we all know 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 things are published that supply 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 is that we peaked, that new openings peaked in 23. 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, 3% to 4% capacity came online each year. And we now expect 2025 to be at a similar level. However, announcements for 26 deliveries 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 26. And of course, you know, that could change as new announcements are made. But we certainly anticipate a drop going forward. And so, you know, just one more data point, as you guys probably already all know, we observed a similar pattern of construction in the broader industrial warehousing sector, where there was roughly a three-year period of elevated new supply post-COVID. And that has now returned to historical levels.

Helpful. Thank you.

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

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 and trends expected in the fourth quarter?

Thanks. Why don't 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 productivity savings, on energy savings, on all the things that we're doing across our company to drive, you know, efficiency and new business. And, you know, the occupancy that we... You know, the reason we changed our guidances is the occupancy expectation being more muted than we were previously guiding to. 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, although it'd just be a couple months later than we anticipated. Our price assumptions, our productivity assumptions, are almost everything else. State-same tariffs have a little impact, but that's really what changed. Yeah, that's right. Yeah. And so, you know, we try to give you a little bit more data here. So we gave you slide five, which is our occupancy guide for the rest of the year, which mirrors everything that Greg said. And, you know, I think there's confidence in the fourth quarter versus the third quarter, which is a very similar pattern to what we saw last year. So we talked about starting to see normal seasonality in the second half of last year. 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, but again, it's just occupancy and it's our industry and it's evolving. And we feel really good that we are now sequentially improving. And, you know, and that's a great place to be. 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 try to take a pre-view, give an oversee.

Thanks again.

Our next question comes from the line of Samir Kunel from Bank of America. Please go ahead.

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. I mean, 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? 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 the trajectory of growth even looks like in the 26th. So, you know, help us understand kind of what you track and that would be helpful.

Thanks. 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, you know, a lot come off the bottom and we've had, you know, a few weeks of, or a couple of weeks of increase, which trends, you know, like it did last year where we saw substantial occupancy increases going in the industry will start to rebound. I think, you know, again, our customers inventories are, we feel, about as low as they can be while still servicing the consumer. Everybody's looking to stimulate, you know, new demand and interest rates and tariff deals getting finalized, both act as, could act as stimuli for increased inventories.

Okay. Thank you.

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

Hi, thanks. I guess two questions. One, just a follow up. Are you able to provide for July any detail around occupancy or some of the specific drivers around warehouse storage and in the services segment and any specific updates regarding July specifically? It sounds like there is a little bit of a pick up here later in the month. The second question though is around the dynamic between the softness that you experience 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 the sharp acceleration in the second half of the year? Sure. Yeah.

So, you know, we're closing out July, but in terms of occupancy levels, we're back now above April, May, right? So 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 weeks later, right? And then you just have less months with more things in the warehouse and that's what led to the guidance cut. But we are seeing what we expected, which is good to see. Yeah. And then we're just taking a more muted view on the slope of the trend throughout the year, given that it happened late and we're trying to be prudent with our guidance. On the GIS side, I've got to say I've never been more proud of our GIS team around the world. They're doing a fabulous job. We have better players on the field. It remains, as you guys know, on the trucking side of the business on all the services we provide in our GIS group, which are very complementary to our warehousing business and very critical to our customers' total supply chain optimization. But this team's doing a phenomenal job. The sales team's 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 -to-end cold chain. And some of them a few years ago didn't even know that we have these services and now we're, the services have developed, the team's strength and the technology's strengthened, and the coupling of the warehouse with the GIS services has gotten stronger. And so, I would expect this trend to continue for the foreseeable future as they're just gaining momentum.

All right, thank you.

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

Hey, good morning guys. Just want to circle back on inventories and kind of how you guys are reviewing them going forward. I mean, I just heard your comment that, you know, a pretty common refrain over here in the last couple 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 occupancy from a nominal perspective stay pretty muted. The low end consumer is under pressure, their shrinkflation. So even though, you know, people are spending the same amount, you're getting less for what you're spending. You're seeing, you know, fast food companies like McDonald's see pepid sales because the value proposition isn't there. I guess, is it wishful thinking at this point to think that, you know, the trend to seasonality should be confused with an inflection and nominal inventory levels. 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. I mean, I'm just trying 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 yet, you know, when we hear from you and your peer, it's just, I didn't say things are going to get better that it doesn't happen. 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 ones, whatever it is, but it just doesn't feel like the needle is moving back on inventory level, despite that consistent comment that it just doesn't feel like inventories could shrink anymore and still serve as the end user.

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. There's no doubt that consumers still under pressure because of high food prices, high interest rates, uncertainty, and that's putting pressure on overall food sales. 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. 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 leading up to the 2020, call it 22, fresh and frozen food, consumer preference, it's shifting that direction. Consumers want to eat healthy. The majority of our food fits in that category. And we think that the long-term trend and the data that people like AFI and other organizations feel that they'll be gross in the long term, but we are bouncing off the bottom right now and we're not trying to predict or dictate when we think that's going to change. But that said, we saw sequential improvement in our results in the first and second quarter. We expect to see that in third and fourth despite the challenging environment. The technology we're putting in place we think is the game changer for our business. Our GIS segment is doing very well. We're doing a great job controlling costs in every aspect of business around the world. And we think our network, our technology, our customer relationships, our GIS 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 volumes at the consumer of fresh and frozen will start to grow again at some point. Yeah, that's right. 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. We're doing everything we can on our end to control what we can control. 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 wait to see it happen. Yeah, and we think we'll leave this year with good momentum. We think the T-sequentials for each quarter into this momentum going into next year. Obviously we're not dying next year right now, but we feel good about all the internal initiatives we're doing, our new business with customers, the way we're, you know, our partnerships with customers are only strengthening and we think that'll benefit us long term.

Great, thank you.

Our next question comes from the line of Mark. Mike Carroll from RBC. Please go ahead.

Thanks, Greg. Can you provide some color on where cold storage companies are currently trading or at least being valued in the private market? I mean, 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 are traded? I mean, should we be thinking about EBITDA ranges? And I know it's each asset is different or each company is different, but what's the typical EBITDA range that cold storage companies are trading on the private market today or at least if it's trade star, where do they typically trade at? I mean, it's obviously an evolving metric, but right now they're probably trading higher than the higher, yeah, for sure in multiples. Yeah, I think we're trading at 55 to 60 percent of NAB. We think it's, you know, obviously undervalued. That's our, yeah, you know, the private market is like a longer term view, right? And so, the quality of the assets, but just the long term growth of this industry, you know, yes, 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 NLI that's still developing, in terms of Tizen and the acquisition. So, we've deployed a lot of capital at attractive multiples. Now that that's going to flow through results, we're going to do our best here to improve sequentially, and then we'll continue to monitor the markets. But there's certainly, at this point in time, you know, the sort of true long term value of our industry is not, we don't feel shown in the public valuations. And private's a different story.

What's the typical EV to range that

assets trade at in the private market, I guess, compared to your valuation?

I guess, where does that typically go?

You know, it really depends on region. It's so many dynamics, but there are things rating double digit EVITA up to 15, 20 times EVITA that we see, you know, in smaller transactions in Europe and other places. It's a pretty big disconnect. Yeah, wide range, I would say.

Thank you. Our next question comes from the line of Zikram Mahotra from Mizuho. Your line is open.

Thanks for the questions. I have 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, you know, from that chart you provided, like what is your actual occupancy bill, just a number sequentially into the second half, whether physical or economic, if you can give, and compare that to, you know, how does that compare to say like pre-COVID historical trends, just like how conservative you are, and give us the exact occupancy from that chart. And then just second clarification is GNA. Your GNA did come in, I guess it was a big benefit in two Q versus we anticipated in the second half assumes a big pickup. So cash GNA, like what is driving that in the second half? Thanks.

Yeah, so, you know, slide five, I mean, that's exactly to answer your question. That's what slide five is here for. So 2015-2019 is your pre-COVID USDA seasonality. That's the 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 and Q4. So that is muted seasonality compared to history. We think it's prudent. Like we're not, you know, we're not trying to be overly conservative or overly aggressive. This is what we see right now. Our team's going to work hard to beat these numbers. You know, and in terms of GNA, you know, again, we're managing the company, you know, prudently and we're, we have, we think there's, you know, room to, you know, grow the business quite a bit at this level of GNA, right? We expect to go to 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 make sure we're investing the right amount in the right areas. And that's something that never changes. It's something we'll continue to work on.

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 ASFO decline expected in the third quarter versus Q2, you know, despite the increased occupancy, same store in Evita? 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. So can you just share your thoughts on what key drivers would result in ASFO coming in towards the upper lower end of that range?

Yeah, Q3 is just timing of capex. So we, some of the capex we expect in Q2 push 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's doing a great job, but we're just, 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. Evita, your time numbers. I mean, 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. 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 as EVA, that ASFO number as we possibly can. But we just thought it was prudent because again, you're in an industry here that's inflecting from a seasonality standpoint and it's just, you know, a week or two change, you know, can drive, you know, very different results. And so we wanted to give 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 assuming. And, you know, and then obviously people can make their own determinations from there, but that's our goal. This column.

Okay, thanks.

Our next question comes from the line of Kate Van Boros from Goldman Sachs. Please go ahead.

Hi, good morning. Maybe just back to the private market evaluation discussion. I know you guys have only been public for a year, but I guess how do you think about the option of being private versus public and do you think it, or under what circumstances or do you think it would be better for shareholders to take the company private?

Certainly, it's been a, I mentioned in the prepared remarks that we went public at a very interesting time as the industry was resetting. You know, that said, I think getting our investment grade rating, having access to the to the capital markets, we're better than, we're still better in the public space despite, you know, tough quarters like this. So, yeah, I think that's right. You know, it's getting the cost of capital, having the ability to issue equity, moving forward for creative opportunities. We're going to, you know, we're continuing to do that. Like we're going to look hard at, you know, how do we compound and grow this company and having that flexibility to be an investment grade company is huge. So I think that, you know, I think the future is very bright, even though obviously the first year has been, has been tough. Yeah, I mean, we, if you look at our guidance, we see sequential improvement. We think, you know, our mission is to help the stock rebound through our performance as fast as it's, as it's come down. 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 marketplace where we can, you know, we can, we can generate, you know, alpha through those deals. So we're, there's still a ton of opportunities even, even at these levels.

Got it.

Thanks. Thank you. Our next question comes from the line of Omar, Omar Tayo, Boko Sonia from Doi Kidan. Please go ahead.

Yes. Good morning. We've talked a lot about just, you know, customer trends and the USDA data, just kind of curious, the occupancy decline and everything you're seeing in regards to more tempered outlook. Is this all US, US centric or are you also seeing similar trends in your international business as well?

Yeah, we're, we're really, I mean, we want to show the USA data because it's something people look at. It's just, you know, it represents the trend. But the point is that it's not necessarily our entire portfolio that track nor us for that matter. I mean, it's not, as we put on the slide, about 40% of our portfolio is reflected in USDA trends, but, you know, it's not necessarily the same as the other countries that we're seeing in the United States throughout the world. Yeah, I think we're seeing, you know, inventories hold up better in other regions, both in Europe and Australia, which is our largest market and, you know, so the US is driving the, you know, the year over year occupancy decline. Gotcha.

Thank you.

Hey, good morning. I'm curious on, you know, this, this occupancy and whether the lower seasonal occupancy you're experiencing is ratable across all categories or if there's specific categories that are under more pressure. And if you could comment on the more import export focus category specifically as well, that would be appreciated.

So it is, it is pretty broad based, I would say. The pressure we're seeing, I'll comment a little bit, you know, about tariffs. We're certainly seeing, you know, chicken sell well and the beef herd is low. Those are two categories that are, that are, you know, mixed. Seafood, the, the, inventories have stabilized, but the end sales are at a pretty low historic level. You know, 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 and kind of managing through with their buys on the tariff policies. You know, one of the things that we were hoping to see as a result of tariff negotiations is, you know, is to open up new markets for U.S. exports as, you know, the U.S. is the most produce, the most efficient producer of food in the world. I mean, for example, agriculture and particularly proteins is one of America's last great exports. You know, the U.S. is extremely competitive in the protein space on the world stage and many of these markets have been either partially closed or closed to U.S. protein imports in recent, until recent trade deals are, are, are finalized and, and, you know, we're closed historically. So, you know, as an example, the UK and Australia just opened up their markets to U.F. beef imports. 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 know, a lot of new exports in the short term, because our beef herd is so low in the midterm, you know, long-term, certainly could. And, you know, we're looking for more deals like this to help stimulate production in the U.S. Yeah. So to quantify, we did go through and, and really try to quantify our tariff impact and all of our review calls. We've got about a $10 million dollars, our estimate, NOI headwind in the second half 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,

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

Okay. Thank you. Are you, are you not worried about the use of like growth hormone in our beef that's going to limit exports?

I think the protein space will adapt to that and, and figure it out. Okay. Thank you.

Thank you. Our next question comes from the line of Michael Muller from Jake and Morgan. Please go ahead.

Yeah. 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, we did the bond deal. We, we're, 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 and in 2026 versus 2025 because of the expiring swap. So 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 different areas. The bond deal, you know, take advantage of the investor grade markets. We have the opportunity to do, you know, potentially financing in different, in different currencies and we'll get you to all we can to make sure we have the lowest cost of capital.

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

$750 million. And I think it's about 3.2%.

Okay. Okay. Thanks. Thanks.

Our next question comes from the line of Nick Stillman from Barrett. Please go ahead.

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 standpoint. 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.

Yeah,

I mean,

there's

obviously a number of new competitors. You know, we, there is, there had been some discounting going on, you know, and some are more aggressive than others. Most are very rational on price, I'd say. And there's a few that are discounting in areas where, you know, where supply is greater than demand. I mean, I think, as I mentioned, you know, we see the waning of new supply coming online and, you know, demand increasing for any reasons that we already talked about will probably be the primary driver of that absorption over time. But also, you know, both us and another company are consolidating buildings, which are, you know, taking some capacity out of the market. Also, there's a lot of old inventory in the US and geographies around the world 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.

Hopeful. Thank you.

Our next question comes from the line of Vince Kebone from Green Street. Be still ahead.

Hi, good morning. Can you discuss the current rollout plans for Lin OS over the next several years? And also, like, what percentage of your facilities are you targeting for Lin OS? Or is it all of them? And then what is just like a realistic, you know, implementation timeline to get, you know, all these potential efficiencies flowing through the portfolio?

Yeah, well, yeah, I mean, if I had an individual facility, it's pretty fast. I mean, as Greg mentioned, we, you know, during the pilot week, we quickly see, you know, gains within weeks. 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. We are literally working every day on how we can further accelerate our implementation. You know, we'll have 10 done this year, and we look to dramatically increase that number in the coming years. 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. Yeah, but it should be the rates for each. Yeah, the majority of our conventional facilities eventually will be on Lin OS. Absolutely. And new acquisitions will go immediately on to to Lin OS, including 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 know, transform our existing conventional facilities. We're very excited. And we'll I know we've been talking about it for the past year. But you know, we'll start to have benefit in our numbers in 26. And it'll accelerate from there. As Greg mentioned, around DayRate, we plan to give a bunch of detail around this. Yeah, we'll probably do a special session around DayRate to provide a lot more detail and color on

what we're seeing. Great. That's 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 investment has already been made. If you can just talk a little bit about, you know, is there a capex associated with this?

Yeah, I mean, majority of the tech investment hasn't been made. There's, you know, some operating costs when you're, you know, when you're going and having people on site and training people. But it's not material. No, you should not expect a capex bubble from Midwest implementation.

Great. Thank you.

Thank you.

Our last question comes from the line of Daniel Guglielmo from Capital One Securities. Please go ahead.

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

So our wage increases are implemented for the majority of our markets on April 1st. That's probably what you're seeing. You know, that's that we in our guidance and what we're seeing is continued productivity improvement, even outside of of of LIDOS. You know, we have a ton of levers we're pulling and a myriad of productivity initiatives that impact that labor line outside of just lead at LIDOS that we always talk about to increase labor productivity. Things like daily labor planning is being implemented throughout the US. To start with, we're implementing next generation labor management system that both of these things are just designed to match the labor dynamically to the facility activity. And so we're seeing good productivity trends, you know, even before the LIDOS implementation. And those act as a perfect foundation for the LIDOS rollout as we accelerate next year. And same warehouse labor was down year over year, same warehouse cost of operations was down year over year.

Okay, thank you.

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

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 again on our next call.

This concludes today's conference call. We now disconnect.