Americold Realty Trust, Inc.

Greetings, and welcome to the AmeriCold Reality Trust fourth quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone wants to require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your hosts, Scott Henderson, Senior Vice President, Capital Markets, and Investor Relations.

Good afternoon. Thank you for joining us today for AmeriCold Realty Trust's fourth 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 that 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 to speak only as of the date they are made. 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 Vida 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 fourth 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 discuss the current market conditions that are underpinning our 2023 guidance. Rob will provide an update on our recent customer initiatives, and Mark will comment on our capital markets activity, along with a detailed walkthrough of our full year 2023 guidance. Turning to our four near-term priorities. First, we continue to effectively reprice our warehouse business to offset inflationary pressures in our cost structure. and protect margin dollars. Additionally, as our longer-term customer agreements come up for renewal, we are repricing these agreements, which will move us back towards our historical warehouse margin percentages. For the fourth quarter, rent and storage revenue per economic occupied pallet in our same store on a constant currency basis increased by 8.9% versus the prior year. Service revenue per throughput pallet increased by 9.8%. During the fourth quarter, we saw inflationary pressures in our business begin to moderate sequentially. However, we continue to implement targeted pricing and power surcharge initiatives to address known inflation, and we will exit the first quarter at a run rate covering all known inflation incurred through the fourth quarter. Moving through the first quarter, we expect the majority of inflationary pressures to continue to be in power costs, in select markets, and in certain warehouse supply costs. As such, we will maintain our targeted pricing and power surcharge initiatives. Consistent with our last call, at this time and based on current market conditions, we do not anticipate significant moves in our overall labor rates going forward. As I mentioned previously, 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, and we are in a strong position to take action quickly if required. Second, we are focused on differentiating our platform by providing best-in-class customer service. We are continuing 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. As I have mentioned on previous calls, we strongly 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. For the fourth quarter 2022, our same store economic occupancy increased by 634 basis points over fourth quarter 2021 to 85%, a level not seen since the fourth quarter 2019, a pre-COVID year. We operated efficiently and provided best in class customer service at this level. and we believe we can continue to drive occupancy higher than pre-COVID levels. We cannot underscore enough the importance of our customer service initiatives, which are helping drive our strong incremental occupancy and market share gains. 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 fourth quarter, we are very pleased to have achieved a perm to temp hours ratio of 73.27. This is 11 points higher than our fourth quarter 2021 levels and 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. Next, our turnover rate is still significantly elevated when compared to both last year and pre-COVID levels, but we are making improvements. Normalizing for the exit of a large retail customer and the corresponding associates in our third-party managed segment, we ended December 2022 at an annualized turnover trend approximately 17 percentage points higher than that of December 2021. Compared to December 2019, a pre-COVID year, we were approximately 22 percentage points higher. On a sequential basis, we improved our turnover rate slightly from the third quarter. As a result, For the near future, we expect to continue to be staffed with a relatively higher ratio of newer associates who take time to move up the learning curve, which impacts our productivity and corresponding service margins. 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. During the fourth quarter, we opened two new facilities, one in Dublin, Ireland, and one in Barcelona, Spain. Both projects are ramping to expected stabilized returns in line with our underwriting. Additionally, please note, throughout 2022, we have taken significant steps to enhance the quality and expertise of our development platform. We have revamped our process on how we are executing current projects and how we evaluate new projects. We have also significantly enhanced our development team. We have recruited best-in-class talent from strong global automation organizations such as Dematic, Siemens, and Vondelande, to name a few. We have five automated facilities coming online this year. and we look forward to each of them being a productive part of the food supply chain in support of our customers in creating shareholder value. Our capabilities around underwriting, capital deployment, and operating our developments have vastly improved. In short, our development platform is much stronger than it was at the start of 2022. Given the enhancements we have made in our development team, and the strong improvement in occupancy across several key markets, we have identified certain critical markets where customer demand is outstripping capacity. We are actively underwriting customer-driven expansions in these select markets, which Rob will discuss momentarily. Turning to our full-year results, for 2022, we delivered AFFO per share of $1.11 on the higher end of our increased guidance range. This performance was primarily driven by our global warehouse same-store pool, which generated revenue growth of 8.5% and NOI growth of 6.7% versus prior year, both on a constant currency basis. Our strong same-store revenue results were driven by a combination of our ongoing pricing initiatives and sustainable economic occupancy growth, partially offset by reduced throughput volumes. Rent and storage revenue per economic occupied pallet in our same store on a constant currency basis increased 7.3% versus prior year. Service revenue per throughput pallet increased by 7.7%. As for occupancy, we delivered a 345 basis point increase in economic occupancy over the prior year. This increase in occupancy is attributable to two factors. First, Our food manufacturers continue to ramp production levels. And second, our intense focus on customer service led to an enhanced win rate on customer opportunities. In addition to new business, our customers publicly recognized AmeriCold's performance. Let me give you a few examples. Unilever awarded AmeriCold's Sykeston, Missouri facility with its Ice Cream Site of the Year Award. Butterball awarded our Russellville, Arkansas facility with its Site of the Year Award. And in Australia, Yum! Brand's Kentucky Fried Chicken business awarded us with its Supplier of the Year award, to name a few. We appreciate this recognition, and we look forward to continued progress around our customer service initiatives. In summary, throughout 2022, we significantly repriced our warehouse business, drove strong improvements in economic occupancy, improved our customer service, and were laser focused on controlling the controllable, in the face of a challenging labor and power environment. We are very pleased with the progress we have made this year, thanks to the hard work of our 15,000-plus associates. Now on to current market conditions that are underpinning our 2023 guidance, which Mark will go through in more detail. For full year 2023, we expect our economic occupancy to continue to improve, driven by food manufacturers continuing to ramp production and our best-in-class customer service. However, given the continued inflationary environment coupled with a broader slowdown in end consumer spending, we do expect lower throughput volumes as end consumers reduce overall basket sizes and the amount of pantry stocking. From a pricing standpoint, we expect to continue to cover inflation to benefit from our normal course annual rate escalations, to reprice our longer-term agreements that come up for renewal, and lastly, to underwrite new business appropriately. From an operational standpoint, we anticipate continued headwinds from a challenging labor market. As a result, we expect higher than average turnover in our facilities to continue throughout 2023. The impact of this will be continued pressure on service margins. Additionally, we are expecting improved NOI contribution from our development projects as they ramp up throughout 2023. Lastly, we expect base interest rates to keep increasing in 2023, which impacts the cost of our floating rate debt. Against this backdrop, we are guiding to a full year 2023 AFFO per share range of $1.14 to $1.24. During the course of this year, we will be accelerating the integration of global acquisitions through the implementation of new best-in-class cloud-based back office systems to enable standard processes, capture synergies, and implement the AmeriCold operating system. This new technology will position us well for growth globally, reduce time to integrate future acquisitions, and provide enhanced business analytics to further optimize our existing business. Mark will go into more detail in his section of today's call. Lastly, let me comment on our ESG initiatives, which is a key priority for us here at AmeriCold. Last year, we disclosed that we completed our submission to the carbon disclosure project for 2022. We recently received our inaugural carbon disclosure project score of C, which is in line with supply chain companies within CDP's defined peer set. We are committed to transparency around our ESG initiatives, and are pleased to be part of the CDP's annual process going forward. Additionally, I'm pleased to report that 19 of our facilities in the United States were certified Energy Star last year, making us a 2022 premier member of Energy Star's certification nation. To become certified, buildings must meet strict energy performance standards set by the U.S. Environmental Protection Agency. We are committed to certifying additional facilities in 2023. With that, I will turn it over to Rob.