Americold Realty Trust, Inc.

Greetings and welcome to the AmeriCold Realty Trust third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Scott Henderson. Please go ahead.

Good afternoon. Thank you for joining us today for AmeriCold Realty Trust third 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 risks 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. 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 Corrie Bada 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 third quarter 2022 earnings conference call. This afternoon, I will provide an update on our four near-term priorities and summarize our financial and operating results. I will then comment on our outlook for the remainder of the year. Rob will provide an update on our recent customer initiatives, and Mark will provide an update on our investment and capital markets activity, along with a detailed walkthrough of our guidance for the remainder of the year. Turning to our four near-term priorities. First, we continue to demonstrate we can reprice our warehouse business to offset inflationary pressures in our cost structure, and protect margin dollars. For the third quarter, rent and storage revenue per economic occupied pallet in our same store on a constant currency basis increased by 8.1% versus the prior year's quarter. Service revenue for throughput pallet increased by 7.7%. As a reminder, some of these price increases were implemented during the third quarter, meaning the full run rate will not be seen until fourth quarter results. During the third quarter, the majority of the inflationary pressures were in power costs, property taxes, and warehouse supplies costs. We have implemented additional targeted pricing and power surcharge initiatives to address this known inflation, and we will exit the fourth quarter at a run rate covering all known inflation incurred through the third quarter. Moving through the fourth quarter, we expect the majority of the inflationary pressures to continue to be primarily in power costs, particularly in our international markets and in warehouse supplies costs. As such, we will continue to revisit our pricing and power surcharge initiatives. Please note that at this time and based on current market conditions, we do not anticipate significant moves in our labor costs going forward. As a result of our pricing initiatives, We are pleased to see progress in the recovery of our global same-store warehouse NOI margin, which for the quarter was 29.4%. This was an increase of 125 basis points, driven by an improvement in services NOI margin, which increased 116 basis points from the prior year on a constant currency basis. Second, we are focused on differentiating our platform by providing best-in-class customer service. We are beginning to see a positive shift in our customer service levels with the increase in our perm to temp ratio, which I will discuss momentarily. As we expected, our service levels are improving as our newer associates get more familiar with the AmeriCold operating system and our workforce ratio improves. We expect this trend to continue with our efforts to reduce turnover. I firmly believe that servicing our customers at best-in-class levels will ultimately lead to increased market share and has meaningfully contributed to our recent increase in occupancy. Third, we continue to focus on labor management with the goal of optimizing our mix of permanent and temporary associates in our facilities while also reducing our turnover rate. As we have mentioned in previous calls, temporary associates cost more per labor hour and are less productive than permanent AmeriCold associates. Higher turnover is also costly and drives inefficiencies in our business. During the third quarter, we are very pleased to have achieved a perm to temp hours ratio of 72-28. This is 10 points higher than our third quarter 2021 levels and slightly better than our pre-COVID levels of 70-30. We are making progress toward our longer-term goal of achieving a consistent 80-20 ratio. Our turnover rate is still significantly elevated when compared to both last year and pre-COVID levels. We ended September this year at an annualized turnover trend approximately 21 percentage points higher than that of September 2021. Compared to 2019, a pre-COVID year, we were approximately 33 percentage points higher. A stable, well-trained workforce is critical to operating efficiently and returning to pre-COVID margins in our warehouse services business. Our final focus area is ensuring that our development projects are delivered on time and on budget and then deliver the underwritten returns. This quarter, we are pleased to announce that we have completed our projects in Dublin, Ireland and Barcelona, Spain, and we are currently inbounding our customers' products into both of these facilities. We expect these projects to stabilize during the timeframes and at the return levels disclosed. Turning to our third quarter results, AFFO per share was 29 cents, an increase of 7.4% compared to prior year. This performance was principally driven by our global warehouse same-store pool, which generated total revenue growth of 9.6% and NOI growth of 14.4%, both on a constant currency basis. This same store revenue and NOI growth was a result of our pricing initiatives combined with a 437 basis point increase in economic occupancy over the third quarter 2021, partially offset by declining throughput volumes of 1.3%. On the cost side, the majority of inflation continues to be in our power and warehouse supplies costs. In certain markets, we have also seen larger increases in property taxes. Additionally, while our associate turnover ratio remains significantly elevated, which negatively impacts our productivity and efficiency, we did see improvement in our same-store warehouse services NOI margin, primarily driven by our pricing initiatives. On the whole, in the same-store pool, we were able to drive NOI growth higher through a combination of, first, higher pricing across our warehouse business to overcome increasing costs, and second, increased economic occupancy, which is very accretive to our bottom line. Now let me comment on a specific customer agreement within our third-party managed segment, which, as a reminder, is a segment that generates approximately 2% of AmeriCorps' total company NOI. After a strategic review of this part of our business, we have made the decision to exit a relationship with a national retailer for whom we manage four facilities, and have no ownership in the land, buildings, equipment, or any other assets. This management agreement generates approximately 1% of AmeriCold's total company NOI. The operations for this retailer consume a vast amount of time and energy for little economic benefit. Of AmeriCold's 16,000 plus associates, approximately 2,500, or 16% of our company's associate base, is dedicated to this retailer's business. To put this in context, 16% of our associates support 1% of our total company NOI. On or around December 1st, we are ending our management agreement with this retailer and are in the process of transitioning the business and associates to new third-party service providers. This will enable us to focus our attention on labor management in our core warehouse business, where we own, operate, and utilize our assets to create value for our customers and shareholders, and where we generate approximately 92% of AmeriCold's total company NOI. On an annual basis, this agreement with this retailer contributes approximately $300 million in revenue and $8 million in NOI to AmeriCold. This equates to a 2.7% NOI margin. the lowest margin business we have at our company, and in fact, the total company NOI margin increases by 235 basis points when we exit this business. This $8 million in annual NOI translates to approximately 3 cents per share in annual AFFO. We do not expect any material impact in this fiscal year. The remaining businesses in the managed segment adds value to our company and shareholders, and we have no plans at this time to exit what remains. As a result of the progress we have made in our operations, combined with a recovering global food supply chain, we are increasing our full year 2022 AFFO per share guidance to the range of $1.08 to $1.12. Mark will provide commentary around the individual components. Despite no shortage of macro headwinds, high inflation, challenging labor market, continued disruption in the global supply chain, and increasing base interest rates, to name a few, we are very pleased with our progress year to date and expect continued operational improvement for the rest of the year. We are deeply committed to providing best-in-class customer service, and the results show up in our incremental occupancy improvement throughout the year. We continue to be laser-focused on our pricing initiatives to cover known inflation. As it relates to our cost structure, We have added tighter controls, created more robust processes, and strengthened our team to ensure that we have an accurate, timely view of each cost component. In short, we are a better operating company today than we were one year ago. Lastly, before I hand it over to Rob, let me comment on our ESG initiatives, which is a key priority for us here at AmeriCorps. I am happy to report we recently received our 2022 Gresby score of 75, which is an improvement of 12 points versus last year's score. Additionally, against our peer set, we also improved our rank to second versus third last year. We are very pleased with this outcome and look forward to continued progress in our ESG journey. One example of this continued progress is our recently completed refinance of our senior unsecured credit facilities. In this refinance, we incorporated a sustainability-linked pricing component tied to our annual Gretzky rating. With that, I will turn it over to Rob.