Lineage, Inc.

Hello, everyone. Thank you for joining us and welcome to Lineage fourth quarter 2025 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw the question, press star one again. I will now hand the call over to Keebin Kim, head of investor relations. Please go ahead.

Thank you. Welcome to Lineage's discussion. of his fourth quarter 2025 financial results. Joining me today are Greg Lemkuhl, Lineage's president and chief executive officer, and Rob Lemasters, chief financial officer. Our earnings presentation, which includes supplemental financial information, can be found on our investor relations website at ir.1lineage.com. Following management's prepared remarks, we'll be happy to take your questions. Before we start, I would like to remind everyone that our comments today would include forward-looking statements under federal securities law. These statements are subject to numerous risks and uncertainties as described in our filings with the SEC. These risks could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued today along with the comments on this call are made only as of today and will not be updated as actual events unfold. In addition, reference will be made to certain non-GAAP financial measures. Information regarding our use of these measures and a reconciliation of non-GAAP to GAAP measures can be found in the press release and supplemental package that was issued this morning. Unless otherwise noted, reported figures are rounded and comparisons of the fourth quarter of 2025 are to the fourth quarter of 2024. Now, I would like to turn the call over to Greg.

Thank you, Keevan, and good morning, everyone. Let me start by first thanking our valued customers and all our incredible team members at Lineage who did an outstanding job driving efficiencies and executing on significant new business wins in the quarter and throughout 2025. I'm truly grateful to be working alongside such an outstanding group of men and women each and every day. I'll walk through our agenda for this morning. First, I'll recap our fourth quarter performance, which came in line or slightly ahead of our expectations on all key metrics. Then we'll discuss our 2026 outlook, followed by our latest view of cold storage supply and demand. Following my remarks, I'll turn it over to Rob LeMasters, our new CFO, who started back in November and has already made meaningful contributions to the business. Rob will walk through the details of our segment performance, for 2026 i'll then return to share some closing comments before we open up the line to your questions turning to quarterly performance on slide four during the fourth quarter total revenue was flat year-over-year and adjusted evita decreased two percent to 327 million total affo of 214 million and affo per share of 83 cents were flat year-over-year but both ahead of our expectations affo this quarter was propelled by better management of maintenance capital expenditures relative to our initial expectations. I continue to push the team to optimize every aspect of our business to drive cash flow generation. Rob will expand on these efforts later in his remarks. Full-year 2025 adjusted EBITDA declined 2.3% year-over-year to $1.3 billion, and full-year AFFO per share increased 2.4% year-over-year. Looking at the underlying business drivers, we saw further occupancy stabilization in the fourth quarter. Same-store physical further signaling that our business is returning to a more normalized seasonality, just as we anticipated when providing second half guidance last year. Year-over-year physical occupancy was down only 50 basis points and improved cadence compared to the first half. That being said, we're entering 2026 at a slightly lower occupancy level compared to last year. Encouragingly, our economic occupancy continues to track nicely with our physical occupancy, and we expect to maintain what we observed throughout 2025. We look to partner with our customers to manage the seasonal ebb and flow of their inventory levels, and we are comfortable that our physical versus economic occupancy spread is both appropriate and sustainable. As a reminder, we have largely navigated the volume guarantee adjustments stemming from our customers' multi-year inventory destocking post-COVID. During the quarter, we grew rent and storage revenue per pallet year over year by more than 1.5% on a same-store basis and by over 3% for the total warehouse segment, despite headwinds from the industry's challenging macro environment. Throughput volumes declined 2.8% and warehouse services per throughput pallet was down 70 basis points as a result of lower import-export volumes that we highlighted as a concern in our third quarter call. Our container volumes for the fourth quarter were down 9% year over year. This softer volume and lower price mix weighed on profitability, resulting in lower margins for the warehousing segment. Overall, same-store NOI was down 5% year-over-year, but was in line with our guide. We continue to see early signs of stabilization in many areas of our business. And in fact, many geographies are stable or growing, including Europe, Asia-Pac, Canada, and most U.S. regional markets. While we're not out of the woods yet, we believe we will continue to build on these trends throughout 2026 and drive further productivity to address this temporary new normal. We plan to deliver significant incremental new business given our strong performance for customers, strategically located assets, and our unmatched breadth of service offerings. Turning to our global integrated solution segment, in the fourth quarter, GAS saw year-over-year NOI growth of 15%, led by our U.S. transportation and food service businesses. This rounds out a really great year for the global GIS team who delivered nearly 10% year-over-year NOI growth in 2025. Great job to Greg Bryan and the entire GIS team. Turning to capital investments, which is a compelling driver of upside to our medium-term growth model. In the quarter, we invested $170 million of growth capital primarily in our development projects, and we're pleased with the continued progress on these projects. As a reminder, we have 24 facilities that are under construction or in the process of ramping and stabilizing. These projects represent over a billion of previously invested capital and a significant amount of our future asset mix. We expect these assets to deliver over $150 million of incremental EBITDA once stabilized, a considerable addition to the lineage earnings base. Also, we're not just growing to grow. We are constantly looking This is consistent with several other recent private cold storage transactions that were executed around a six gap, further reinforcing the strength and resilience of private market valuations for our real estate. We're actively looking at numerous options to take advantage of the mispricing between the public and private markets to enhance shareholder value. We think this makes sense, especially as you consider that most larger discount to the replacement cost of our portfolio. We have plenty of attractive opportunities to redeploy this capital into our balance sheet to further enable strategic acquisitions, customer-led developments, and capital return strategies. This is a very active workstream, and we look forward to updating you in future quarters. We believe these efforts will not only highlight the mismatch between private and public valuations, but also position us to continue to consolidate the U.S. market as opportunities present themselves. Turning now to our output for 2026, we expect same-store NOI growth of negative 4 to negative 1, adjusted EBITDA of $1.25 to $1.3 billion, and AFFO per share of $2.75 to $3 per share. Rob will provide future guidance details in a moment, but I'll share the macro assumptions that inform our guidance. In 2026, we expect 1% to 2% net pricing increases in our warehousing segment. While it's only February, we've already worked through 65% of our warehousing revenue base. We also expect our business to track to normal seasonality in 2026, albeit entering the year at a slightly lower occupancy level than we entered 2025. We anticipate that the industry will continue to digest new supply and remain competitive. Our observations mirror what many food producers and distributors are saying. trade-down activity and incrementally shifting their spend from restaurants to retail. Given that we ultimately serve the end customer, whether they choose to eat at home or at a restaurant, buy national or store brands, demand in our business in the long run remains stable. And as I mentioned, we believe that we're past the inventory drawdown after COVID and remain optimistic that the categories we serve will continue to grow. Overall, we're assuming a similar operating environment as 2025 and not building into our guidance any upside from potential catalysts such as tariff resolution, interest rate reductions, a stronger consumer, or the benefits to the consumer from pending tax relief. In the meantime, we're not standing by and waiting for a stimulus. Lineage remains focused on controlling the controllables and driving efficiencies wherever possible. Rob will discuss this more later, but he has helped accelerate our efforts, and we expect to remove $50 million annualized admin and indirect costs by the end of this year. These savings will not discourage our investments in our sales, our customer support team, nor our prudent technology investments to stay the industry leader in automation and warehouse execution. We are using this challenging time in the industry to become a better, leaner company with even more positive operating leverage in the future. Turning to slide five, as a reminder, last quarter we collaborated with CBRE to gain additional insights into new supply and demand trends within the industry. At this point, our analysis is focused on US markets where we have the most accessible data. To recap the analysis we put out recently, CBRE data shows that from 2021 to 2025, US public refrigerated warehouse supply increased 14.5% on a square foot basis. while consumer demand for these categories stored in our network grew 5%. That implies a 9.5% excess capacity across the U.S. over four years. Even so, Lineage's 2025 average physical occupancy was 75%, only 300 basis points below its 2021 level, despite tariffs, reduced U.S. agricultural exports, and inventory destocking, a testament to our network-scale, hardworking commercial team and the customer desire to align with the industry leaders. Looking ahead, new supply in 2026 is expected to slow significantly, which is logical given the current environment just does not support speculative development. To further mitigate supply-side challenges, we are idling buildings where appropriate and finding alternative real estate uses. We also think competitor weaknesses and asset obsolescence could help ease industry capacity. On the demand side, potential catalysts such as tariff resolution, tax stimulus, moderating food inflation, and lower interest rates could serve as meaningful tailwinds to our business. Moving to slide six, using the latest CBRE data, we take a closer look at when the new supply has come online and its magnitude. As new supply is added to the market, customers naturally reassess their options. They decide whether to stay with lineage or to switch providers, which in the near term increases competitive pressure. What we've observed is that this customer switching largely occurs in the first one to two years after new supply comes online. Then, markets typically begin to stabilize. To break this down, we're focusing on a subset of our U.S. assets that have been in the same store pool since 2021 and represent over a half a billion dollars of our U.S. NOI. The top chart, shown in green, reflects markets that have seen less than 15% cumulative new supply over the last four years. Many of these markets have high barriers to entry, constrained land, challenged permitting, and high building costs. and together they represent over 60% of our U.S. portfolio. NOI growth in these markets has been relatively insulated from new supply pressure, though they were impacted by inventory destocking coming out of COVID in 2023 and 2024, as well as other macro factors like declines in import-export volumes and tariffs. Now that customers have rationalized their inventories, we are seeing stabilization in 2026. The next two charts cumulative new capacity in the last four years. We further split these into early cycle supply markets, shown in blue, where most of the new capacity was delivered in 2022 and 2023, and late cycle supply markets, shown in gray, where most of the new capacity was delivered in 2024 and 2025. The early cycles chart, in blue, saw on average same-store NOI declines in 2023 and 2024. But thereafter, these markets saw slight organic NOI growth in 2025 and are forecasted to be relatively flat in 2026. To be clear, these markets still carry new capacity overhead, but NOI has begun to stabilize as the inventory destocking is behind us and as the markets absorb the new supply, leading to market rent equilibrium. Importantly, in many cases, customers who originally left for lower prices have since returned to our network because of our service access. With limited incremental news supply over the past couple of years, and with inventory destocking behind us, we have a more favorable outlook for this group, which accounts for 21% of our sampled NOI. Combined, the low news supply markets and the early cycle supply markets make up 85% of our US NOI, and both groups have demonstrated improved NOI stability, something we expect to continue in 2026. Finally, the gray chart at the bottom represents the late cycle supply segment. These are places where we are seeing the most competitive pressure today as the new supply was delivered more recently, and we expect this competitive pressure to continue into 2026. These markets make up only about 15% of our US NOI in this pool. Importantly, across the US overall, and especially in these late cycle supply markets, we expect to see a significant decline in new deliveries in 2026. And as this supply is digested, we expect to regain opportunities to grow with our customers. Net-net, this data shows while a small portion of our portfolio is navigating a temporary supply-demand imbalance, 85% of our NOI in the U.S. is on stable footing. Despite macro headwinds, I'm confident that we are well-positioned to grow over time. As the food industry normalizes, new capacity is absorbed, and our commercial energy admin and productivity initiatives, including LinOS, continue to accelerate. Now let me turn it over to Rob Lemasters. Rob, welcome to Lineage.