Lineage, Inc.

Ladies and gentlemen, thank you for joining us and welcome to Lineage's first quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you'd like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Kee Bin Kim, head of investor relations. Please go ahead.

Thank you. Welcome to Lineage's discussion of its first quarter 2026 financial results. Joining me today are Greg Lemko, Lineage's President and Chief Executive Officer, and Rob Lemaster, Chief Financial Officer. Our earnings presentation, which includes supplemental financial information, can be found on our investor relations website at ir.onelineage.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 will include forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our findings 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 the 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, The important figures are rounded in comparison to the first quarter of 2026 or to the first quarter of 2025. Now, I would like to turn the call over to Greg.

Thanks, Keevan, and good morning, everyone. Let me walk through our agenda for this morning. First, I'll provide key highlights from Q1. Then I'll share our latest view on cold storage and industry dynamics. Following my remarks, I will turn it over to Rob Lemasters, who will walk through the details of our segment performance, capital structure, and expense management initiatives. I'll then return to share closing comments before we open up the line for your questions. Turning to our quarterly performance on slide form, overall, the first quarter came in better than our expectations and reinforces our view that the business is stabilizing as we manage through the industry headwinds we've highlighted over the past couple of quarters, including elevated new supply and trade-related challenges. During the first quarter, total revenue was flat year-over-year and adjusted EBITDA increased by 3.3% to $314 million. Total AFFO was $201 million, or $0.78 per share, representing a year-over-year decline driven primarily by the expiration of prior year interest rate hedges consistent with our 2026 guidance. On a comparable basis, excluding this impact, AFFO per share was essentially flat. Turning to core operations, our results were solid and better than we expected. Same-store physical occupancy sequentially declined by 290 basis points to 76.4, in line with our expectations. Our economic occupancy of 82% also continues to track nicely at a similar spread to physical occupancy. Through a collaborative and proactive approach with customers, we've right-sized guaranteed space to appropriate levels. Stabilizing occupancy trends are consistent with our direct customer dialogue and with commentary from food producers on recent earnings calls. I will provide more color on these food industry trends in a minute. In terms of customer rate, our seams to our rent, storage, and blast revenue per physical pallet increased 2.2%, the fourth consecutive quarter of year-over-year increases. As a reminder, rate per pallet is impacted by mix, seasonality, and FX, resulting in normal quarter-to-quarter variability. Same-store warehouse services for throughput pallet was modestly more positive than expected, driven by mix and strong performance from our international business. As an update, we continue to feel positive about realizing net price increases of 1% to 2% this year. Finally, we continue to see some softness in same-store throughput, in line with both prior trends and our expectations for the first half, primarily reflecting lower import-export container volumes across seafood and other key commodities. Container volumes declined 17% year-over-year in Q1, following a 9% decline in the fourth quarter of 2025, underscoring the persistence of these headwinds. While exports were down significantly, this quarter's import decline was even more pronounced, partly reflecting a difficult comp in Q1 2025, resulting from a pull ahead of imports prior to tariff actions last April. Overall, in spite of some of these factors, our 0.9% same-store NOI decline year-over-year was a welcome improvement from prior trends. Turning to our outlook, we're maintaining our 2026 guidance as we continue to expect annual same-store NOI contraction of negative 4 to negative 1% and AFFO of $2.75 to $3 per share. While we're not changing guidance, we have increased conviction in achieving the midpoint of guidance on the heels of a solid first quarter and increased stability we are seeing across our portfolio. Rob will share further guidance details later in the call. So overall, the portfolio is showing signs of stabilization with modestly better than expected results across most regions. While first quarter trends were encouraging, we believe additional time and consistency are required to confirm the durability of these patterns versus normal variability in customer volumes. We remain cautiously optimistic as we build on these trends through 2026, supported by disciplined execution and productivity improvements. Turning to capital investments, which is a compelling driver of upside to our medium-term growth model. In the quarter, we invested $130 million in growth capital, primarily in development projects. As a reminder, we have 22 facilities that are under construction or in the process of ramping and stabilizing, and we are pleased with their continued progress. We've already invested $1.2 billion of capital in these projects, and we expect them to deliver over $150 million of incremental EBITDA to our current run rate once stabilized, a meaningful impact to our earnings base in the future. As discussed last quarter, we continue to make solid progress on our strategic portfolio review and have increased confidence in the breadth of options available to enhance balance sheet capacity and drive shareholder value. Our earlier view indicates many attractive options. All options we are exploring would highlight the continued disconnect between private and public valuations for high-quality storage assets. We look forward to updating you in future quarters as we learn more. Our LinOS technology implementation, now at 11 conventional facilities, continues to gain momentum and is still expected to roll out to at least 20 facilities this year. Each quarter, we gain more confidence in our three- to five-year target we shared in December of generating $110 million of OPEX savings. Turning to slide five and looking at U.S. supply and demand trends, particularly for those who are new to our story, and as we've shown in past presentations, from 2021 to 2025, U.S. public refrigerated warehouse supply increased approximately 15% on a square foot basis, while consumer demand for the categories we serve grew about 5%, resulting in roughly 10% excess capacity. Despite this, Lineage delivered average physical occupancy of approximately 75% in 2025, down only 300 basis points from our 2021 level. This performance reflects the strength of our network, our commercial execution, and customer preference to partner with the industry leader. As Lineage and the industry sought to digest this new capacity, on the right, you can see how those recent supply additions impacted our markets. This analysis focuses on Importantly, what we've seen is that after new supply is delivered, market rents adjust fairly quickly, reaching a new equilibrium, and tend to stabilize from those levels after a period of market digestion. And so, you can see that approximately 85% of that U.S. asset NOI is located in markets with limited new supply growth or in markets that have had higher supply growth but earlier in the cycle, where market rents have adjusted and stabilized. Markets with low supply growth, shown in green, represent more than 60% of that U.S. portfolio. These high barrier markets have remained resilient, and NOI is steady after COVID destocking and other headwinds. Markets with greater than 15% new supply delivered during 2021 to 2025 are split between early and late cycle. Early supply markets, shown in blue, had new supply delivered in 22 and 23. After seeing NOI pressure in 23 and 24, performance stabilized at 25 and is expected to remain stable this year. These markets represent 21% of that U.S. NOI. Together, low new supply and early supply markets comprise approximately 85% of the U.S. NOI that are clearly demonstrating stabilization. Late supply markets, shown in gray, saw supply delivered primarily in 2024 and 2025 and are experiencing near-term competitive pressure. These markets represent approximately 15% of US NOI, and we expect them to show a similar pattern as early cycle markets over time. Furthermore, with new deliveries expected to decline sharply in 2026, we anticipate conditions to improve in the medium term. Looking ahead, new supply is expected to slow significantly not support speculative development. Across the industry, we believe we will see increasing examples of asset repurposing, potential competitor assets or bankruptcies, and asset obsolescence cutting into excess capacity overhead. We are also actively managing supply through selective idling, having idled 10 facilities in 2025 and planning another handful this year. On the demand side, resolution of tariffs, normalizing food inflation, easing geopolitical uncertainty leading to a rebound in container volumes, expanding our customer base with new product categories like candy and flowers, and lower interest rates all represent potential upside that we have not baked into guidance, but could emerge as a welcome tailwind. In summary, we've worked through much of the new supply, and while a limited portion of our portfolio is managing a near-term supply imbalance, the vast majority of our U.S. NOIs are on more stable footing. As excess capacity is absorbed and the food industry normalizes, we are well positioned for sustained growth. As a reminder, demand improvement should create additional upside given the inherent operating leverage in our business that could be further compounded by productivity and cost measures. Turning to slide six, to help contextualize some of the challenges we and other large food companies are navigating today, we want to share a few charts that illustrate the trends we discussed on recent calls. The chart on the left shows days of inventory outstanding across many of our key food production, distribution, and retail customers in the frozen and refrigerated categories in which we participate. While the data has limitations and encompasses more than just temperature-controlled segments, it is directionally consistent with our customer dialogue that the COVID-driven inventory build and subsequent destocking cycle have largely played out. Inventory days have flattened and converged to historical norms. The middle chart illustrates U.S. food import volumes of key agricultural commodities, which historically have been a meaningful driver of warehouse services in our network. After a multi-decade period of growth, volumes have declined recently due to tariffs and geopolitical uncertainty. This dynamic helps explain why throughput remains pressured year over year, but we believe that in the long run, U.S. agricultural trade will once again serve as a tailwind to our industry. Importantly, incremental volume in this category is highly margin-accretive, operating leverage in our network. As volumes recover, we would expect meaningful flow through to EBITDA. Finally, the chart on the right reinforces a simple point. Even through geopolitical shocks and recession, food demand has remained resilient, and it continues to support long-term growth. While we're not immune to disruptions, the food industry has proven to be among the most durable and steadily growing categories, delivering a roughly 2% CAGR in inflation-adjusted food sales over the past 25 years. Like many of you, we're closely monitoring the situation in the Middle East, and we've assessed the potential impact on our business. We have limited exposure to the Middle East, and we expect the near-term impact to be largely net neutral for both our warehouse and GIS segments. And specifically, with respect to energy costs, we are largely insulated in 2026 and 2027 through a combination of in-place hedges, surcharge mechanisms, regulated utility exposure, and on-site solar generation. energy management, and efficiency. Like all of you, we're hoping for a swift and peaceful resolution to the conflict. With that, let me turn it over to Rob LeManistris.