Americold Realty Trust, Inc.

Greetings and welcome to the Maricold Realty Trust first quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kevin Reed, Vice President of Investor Relations. Thank you, sir. You may begin.

Good morning. Thank you for joining us today for Maricold Realty Trust 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.ir.americal.com. This morning's conference call is hosted by AmeriCorps' Chief Executive Officer, George Chappell, President of AmeriCorps, Rob Chambers, and Chief Financial Officer, Jay Wells. 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 and speak only as of the date that 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. The 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, Kevin, and thank you all for joining our first quarter 2025 earnings conference call. This morning, I am pleased to provide an update on our four key priorities, our financial results for the quarter, and some key operational metrics. Rob will then discuss our customer service initiatives and development activity. And finally, Jay will summarize our capital position and liquidity, as well as provide additional details on our outlook for the year. Before we dive into the quarter, I want to briefly discuss our current view on the potential impacts of tariffs on our business. Based on our team's research, we believe the direct impacts are relatively modest, although this is obviously somewhat of a moving target. Total import export activity in our business is generally small in the single digits in terms of a percentage of our revenue and primarily within North America. In addition, it appears that U.S. MCA compliant goods, that includes food grown and produced in Canada and Mexico, are exempt from the national emergency tariffs. On a product basis, produce is the largest imported category into the U.S., but fresh and frozen produce is only approximately 1% and 4% of our revenue respectively, and most is domestically sourced as very little of our business is import-export. Seafood is the second largest imported category in total, and here, too, we have very limited exposure in our product mix. In general, our products tend to be center of the plate, relying heavily on proteins, potatoes, and prepared foods. These products historically have been more insulated from demand fluctuations, than more expensive higher-end steak and seafood products. However, beyond the direct impacts, the ongoing trade rhetoric and changing tariff situation has already had an impact on consumer confidence, causing our customers to adjust their product portfolios and driving inventory levels down. In fact, the Michigan Consumer Sentiment Index, a monthly survey that expresses how consumers feel about their finances, the general business environment, and the economy's future is now below the level seen during the 2008 financial crisis and nearing levels last seen during the peak of COVID. This was reinforced with the recent contraction in the first quarter GDP. The timing and magnitude of these indirect impacts are nearly impossible to quantify at this point and largely outside of our control. Given these increased headwinds, we thought it was prudent to adjust our outlook for the year to reflect these risks. Despite these near-term challenges, our team continues to execute very well, and we delivered a strong start to the year, largely due to the many improvements we have made to the business over the past few years. As always, we remain laser focused on our four key operational priorities, continuing to control what we can control, and partnering with customers to win their business every day. Now let me discuss the progress we've made on these priorities, starting with customer service. On last quarter's call, we highlighted several of the awards and recognition that we have received from customers over the past year. Continuing to provide best-in-class service and unparalleled value is especially critical during a time when customers are holding lower levels of inventory and wanting to turn it faster. As anticipated, same-store economic occupancy in the first quarter declined approximately 270 basis points sequentially from Q4 of 2024, reflecting a return to normal seasonality and ongoing market softness. Notably, our rent and storage revenue from fixed commitment contracts increased again this quarter to 60%, achieving our previously stated goal. As a reminder, three years ago, this metric was under 40%, reflecting over 2,000 basis points of growth since we identified this as a top priority. This is a testament to our industry leadership and commercial excellence and reflects the collaborative sales approach we take with customers to create a win-win environment. Customers value having fixed commitment contracts that ensure availability of space for their products. Additionally, we continue to make progress capturing new business within our sales pipeline, which Rob will discuss later in the call. Turning to labor, our efforts to improve hiring practices, training, and engagement have resulted in a much more stable and productive workforce. For example, we increased our perm to temp hours ratio to 78.22, up sequentially from 75.25 in the fourth quarter. This ties our previous record set in Q1 of last year. Associate turnover continues to come down and finish the quarter at 29%, an improvement of approximately 300 basis points from 32% in the fourth quarter. Our third metric, the percentage of associates with less than 12 months of service, also improved 200 basis points from the prior quarter to 20%. The continued progress across all three of these labor metrics demonstrate the success of our focus on employees. As a result, our same-store warehouse services margins in the quarter improved by 110 basis points year-over-year to 11.2%, which based on the seasonality of our business, keeps us on track to deliver service margins in excess of 12% for the year.