Americold Realty Trust, Inc.

Thank you for standing by. This is the conference operator. Welcome to the AmeriCold Realty Trust second quarter 2022 earnings call. As a reminder, all participants are in a listen-only mode, and this conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. As a reminder, please keep your questions to one question and one follow-up per person. I would now like to turn the conference over to Scott Henderson, SVP Capital Markets and Investor Relations. Please go ahead.

Good afternoon. Thank you for joining us today for AmeriCold Realty Trust's second quarter 2022 earnings conference call. In addition to the press release distributed this afternoon, we have filed a supplemental package with additional detail on our results, which is available in the investor relations section on our website at www.americold.com. This afternoon's conference call is hosted by AmeriCold's Chief Executive Officer, George Chappell, Chief Commercial Officer, Rob Chambers, and Chief Financial Officer, Mark Smirnoff. Management will make some prepared comments, after which we will open up the call to your questions. On today's call, management's prepared remarks may contain forward-looking statements. Forward-looking statements address matters that are subject to risk and uncertainties and may cause actual results to differ from those discussed today. A number of factors could cause actual results to differ materially from those anticipated. Forward-looking statements are based on current expectations, assumptions, and beliefs, as well as information available to us at this time and speak only as of the date they are made. And management undertakes no obligation to update publicly any of them in light of new information or future events. During this call, we will discuss certain non-GAAP financial measures, including core EBITDA and AFFO. Full definitions of these non-GAAP financial measures and reconciliations to the comparable GAAP financial measures are contained in the supplemental information package available on the company's website. Now, I will turn the call over to George.

Thank you, Scott, and welcome to our second quarter 2022 earnings conference call. This afternoon, I will provide an update on the four near-term priorities that we are focused on, summarize our results, and comment on recent external growth activity. I will then discuss our outlook for the remainder of the year. Rob will then provide an update on recent customer initiatives, and Mark will review our financial results in more detail. Let me start with the four near-term priorities that we are focused on. First, we continue to make great progress in repricing our warehouse business to offset inflationary pressures in our cost structure. Exiting the second quarter, we committed to covering all known inflation incurred through the end of the first quarter, which we have achieved. The progress of these price initiatives can be seen on page eight of our IR supplemental. Rent and storage revenue per economic occupied pallet in our same store on a constant currency basis increased by 6.6%. Service revenue per throughput pallet increased by 7.9%. As a reminder, some of these increases were implemented during the second quarter, meaning the full run rate will not be seen until the third quarter results. As it relates to the second quarter, the majority of the inflationary pressures we saw were in power costs and in warehouse supplies costs. We have implemented additional targeted pricing and power surcharge initiatives to address this known inflation, and we will exit the third quarter at a run rate covering all known inflation incurred through the second quarter. Moving through the third quarter, we expect the majority of the inflationary pressures to continue to be both in power and warehouse supplies. If this is the case, we will continue to revisit our pricing and power surcharge initiatives. Second, we continue to focus on labor management with the goal of optimizing our mix of permanent and temporary associates in our facilities, while also significantly reducing our turnover rate. Temporary associates cost more for labor hour and are less productive than permanent AmeriCold associates. Higher turnover is also costly and drives inefficiencies in our business. As a reminder, prior to mid-2021, in the aggregate, we were staffed at approximately 70% permanent hours to 30% temporary hours on our warehouse portfolio. Throughout the back half of 2021, this ratio moved closer to 60-40. During the second quarter, we made significant improvement and returned to 70-30, However, our turnover rate is still significantly elevated when compared to both last year and pre-COVID levels. We ended June this year at an annualized turnover trend approximately 22 percentage points higher than that of June of 2021. Compared to 2019, a pre-COVID year and more in line with historical levels, we were approximately 30 percentage points higher than 2019. While higher turnover rates can be expected during this environment as we work to increase our perm to temp ratio, we certainly are very focused on reducing this metric. Please keep in mind that a new associate is not fully productive for approximately three months. We expect to see continuing improvement throughout the year as a result of our team's efforts, but it will certainly take time during this challenging labor environment to continue to drive our perm to temp ratio and reduce turnover. Third, we're focused on differentiating our platform by providing best-in-class customer service. While relying on temporary labor during 2021, we were less productive and less efficient, and we know it negatively impacted customer service. Additionally, throughout 21 and into 2022, we have had significantly higher turnover, which also negatively impacted customer service for the same reasons. Please note, as I said last call, I do not think these are AmeriCold-specific issues. I believe this labor market impacted all companies in the services industry that are dependent on skilled labor. The benefit of a productive, stable, and predominantly permanent workforce fully trained on the AmeriCold operating system is servicing our customers at best-in-class levels and ultimately leads to increased market share. Our final focus area is ensuring that our development projects are delivered on time and on budget and then deliver the appropriate returns. Our Dunkirk project became operational in the second quarter, on time and on budget, and it's on track to stabilize as disclosed in our IR supplemental. We continue to make progress in this area and look forward to successful delivery of our projects. Turning to the current operating environment and our second quarter results. A significant amount of our food manufacturing customers are beginning to see some improvement in the labor market, which has enabled them to begin ramping up their production levels. Additionally, while end consumer demand for temperature-controlled food remains strong, the challenging inflationary market has started to change consumer behavior. Some consumers are buying less at the grocery store as they are stretched by inflation. These two factors, Increased production by our food manufacturers combined with slightly less consumer buying has resulted in meaningful increases in both our physical and economic occupancy. For the quarter, in our same store pool, we saw economic occupancy increase by 288 basis points over second quarter 2021. This is the first time economic occupancy has increased year over year since the second quarter of 2020. As we have discussed, economic occupancy improvement is very accretive to the bottom line. We are encouraged by this and believe this improvement is sustainable throughout the remainder of the year. This occupancy improvement, which aligns directionally with the cold storage industry data provided by the USDA, demonstrates the mission critical aspect of our infrastructure and services within the temperature controlled food supply chain. Food manufacturers' product flows through our production advantage facilities, distribution centers, and retail distribution centers, and then it ultimately arrives at a grocery store or restaurant where it can be purchased by end consumers. On the cost side, while the majority of inflation is in our power and warehouse supply costs, we continue to see labor inflation in select markets. Additionally, even though we are moving more towards the historical perm to temp ratio in our staffing model, our turnover ratio is significantly elevated. This level of turnover negatively impacts our productivity and efficiency. It is also costly, as we have to recruit, hire, and train new permanent associates. All of these labor challenges are seen in our warehouse services margin. For the quarter, our global warehouse same-store pool generated total revenue and NOI growth of 8.1% and 3.1%, respectively, both on a constant currency basis. AFFO per share was 27 cents. The main factors that led to these results were a meaningful increase in pricing and occupancy, partially offset by continued inflation in our cost structure and labor inefficiencies in our services and warehouse business, and the strengthening of the U.S. dollar. Now let me turn to our external growth activity. We continue to execute on strategic investments and acquisitions that will help us better serve our customers on a global scale. Many countries within South America have a large agricultural and food-producing economies and have strong population growth. Today, we announced the recent formation of a Latin American-focused joint venture with Patria, an experienced Brazilian-based private equity firm affiliated with Blackstone. As a reminder, we are currently 15% partners with Patria in Superfrio, a Brazil-focused JV. LATAM, the name for this new JV, is focused on high-growth food production in Latin American countries outside of Brazil, such as Mexico, Chile, Uruguay, and Colombia. LATAM has its own professional management team, separate and apart from the SuperFrio platform. Under the terms of the agreement, the total equity commitment for this platform is just under $300 million, of which AmeriCorps' commitment is 15%. or 45 million U.S. dollars. AmeriCold has a seat on the board and retains the exclusive option to acquire our partners' 85% ownership starting in 2026. The investment period is expected to be over the next four to five years. AmeriCold has recently contributed its Chilean asset to seed the JV, which has effectively pre-funded the majority of our equity commitment. We are very excited about this new growth opportunity. Additionally, during the quarter, we completed the purchase of one port facility in Poland that we previously leased. As we've discussed in the past, we would prefer to own versus lease as it provides us with more control over our facilities over the long term. Also subsequent to quarter end, we acquired De Bruin Cold Storage in Tasmania, Australia. De Bruin consists of one facility totaling approximately 2 million cubic feet. and it is the largest cold storage operator in Tasmania. It is strategically located at the port of Burney and near the port of Devonport. De Bruin's customer mix includes dairy, potato, and seafood producers, and a significant amount of these customers are current customers of Ameri-Cold. Additionally, this acquisition has enabled Ameri-Cold to already win new business from a large quick service restaurant customer who is looking for a partner with a footprint in both Victoria and Tasmania. Finally, subsequent to core end, we also completed the purchase of one facility in New Zealand that we previously leased. On to full year guidance. At this point, we are maintaining our full year 2022 AFFO per share guidance in the range of $1 to $1.10. Mark will provide commentary around the individual components. We are encouraged by the recent success of our pricing initiatives in the improvement in occupancy and its positive effect on our core warehouse business. While we expect this to continue throughout the remainder of the year, the operational headwinds are as follows. A continued reduction of throughput volumes as inflation impacts and consumer buying habits. Continued inflation in our business, primarily power and warehouse supplies and select labor markets. with continued pricing offsets that will lag 30 to 60 days in most cases. Labor inefficiencies, an elevated turnover in our services and the warehouse business due to a challenging labor market, and uncertainty around COVID continues to be a potential disruption. Below the NOI level, we are also seeing the following macroeconomic headwinds. Higher interest expense on our floating rate debt due to increasing base rates, and a stronger U.S. dollar, which negatively affects earnings from international markets due to currency translation. Finally, as it relates to ESG, which is a key priority for us here at AmeriCorps, I am happy to report we recently completed our submission to the Carbon Disclosure Project in Gresby for 2022. We expect to receive our Gresby score in the fourth quarter and look forward to receiving our first CDP score later this year. With that, I will turn it over to Rob.