Americold’s (NYSE:COLD) stock price is down 65% in the last five years. This sort of move is unusual for a business that's so necessary and stable in the long-term sense of the word. In any short window of time, cold storage volumes have vicissitudes, but over any long stretch of time, the trend is consistently up. The world has used significantly more cold storage each decade than the previous decade, and there's a strong consensus that we will use it even more going forward. This leads us to a juxtapositi ...

Financial Data and Key Metrics Changes - Q2 AFFO per share was $0.36, with the first half performance largely on track despite ongoing market pressures [8][25] - Same store economic occupancy declined slightly in Q2 compared to Q1, with expectations for a decrease of approximately 250 to 450 basis points for the year [4][26] - Same store rent and storage revenue for economic occupied pallets increased by approximately 1% year over year, while same store services revenue for throughput pallets increased by 4% [6][11] Business Line Data and Key Metrics Changes - Rent and storage revenue from fixed commitments remained at 60% for the quarter, reflecting the quality of mission-critical assets [5][12] - Warehouse services margins improved by 90 basis points year over year to 13.3% for the quarter, indicating enhanced productivity from a well-trained workforce [5] - The company successfully converted over 80% of previously announced $200 million probability-weighted sales, although occupancy ramp for new customers is taking longer than expected [14] Market Data and Key Metrics Changes - The storage market remains highly competitive, with pricing pressure expected to continue into the second half of the year [38][41] - The company is experiencing demand headwinds due to factors such as interest rates, tariffs, inflation, and excess capacity, impacting occupancy rates across the industry [8][26] - The international business, particularly in Asia Pacific, is performing well with occupancy rates above 90% [94] Company Strategy and Development Direction - The company is focused on controlling costs, improving efficiencies, and capturing new business, particularly in the retail and QSR segments [9][69] - Several key development projects were completed in Q2, including expansions in Allentown and Kansas City, which are expected to drive future growth [17][19] - The company is actively pursuing alternative growth opportunities in underserved geographies, particularly in Asia Pacific [23][94] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautious outlook for the second half of the year, anticipating continued pressure on occupancy levels and pricing [8][26] - The company is taking a conservative view of the market, removing the traditional seasonal inventory build from forecasts [8][26] - Management emphasized the importance of operational excellence and value-added services as differentiators in a challenging market [41][69] Other Important Information - The company completed a $400 million public bond offering to repay a portion of outstanding borrowings, maintaining a total liquidity of approximately $937 million [29][30] - The company is rationalizing its portfolio by selling underperforming assets, with plans to exit six more facilities [31][32] Q&A Session Summary Question: How competitive is the current pricing environment? - The storage market remains very competitive, with pricing pressure expected to continue until occupancy growth returns [36][38] Question: Can you provide details on fixed commitments and customer contracts? - Fixed commitments are structured as multiyear agreements with fixed monthly fees, allowing customers to secure space during peak seasons [43][45] Question: What factors are impacting revenue growth in the second half of the year? - Revenue growth is being suppressed by pricing pressure and multiple demand headwinds, including interest rates and inflation [50][52] Question: How is the company managing capital deployment and return hurdles? - The company aims for a return on invested capital of 10% to 12% for new developments, focusing on low-risk projects [57][59] Question: What is the outlook for occupancy in Q3 and Q4? - The company does not expect any seasonal uplift in occupancy for the second half of the year, with Q3 likely to mirror Q1 and Q2 [63][64] Question: Are customers integrating their cold chain needs more? - Some large customers are maximizing their own cold storage capacity, which is a normal business practice, but this is not significantly impacting demand [72][74]

Financial Data and Key Metrics Changes - The Q1 2025 AFFO per share was $0.34, aligning with expectations, despite facing unusually high counter-cyclical inventory levels last year [18] - The board approved a 5% increase in the quarterly dividend to $0.23 per share, reflecting confidence in operational resilience and cash flow generation [18] Business Line Data and Key Metrics Changes - Same store economic occupancy declined approximately 270 basis points sequentially from Q4 2024, reflecting a return to normal seasonality and ongoing market softness [9] - Rent and storage revenue from fixed commitment contracts increased to 60%, achieving a goal set three years ago, which was under 40% at that time [9][22] - Same store rent and storage revenue per economic occupied pallet increased approximately 2% year-over-year, while same store services revenue per throughput pallet increased over 3% [12][20] Market Data and Key Metrics Changes - The Michigan consumer sentiment index is now below levels seen during the 2008 financial crisis, indicating a significant drop in consumer confidence [7] - Economic occupancy is expected to range from negative 200 basis points to flat compared to 2024, with throughput volume expected to range from negative 1% to positive 1% [34] Company Strategy and Development Direction - The company is focused on four key operational priorities, including customer service, which remains a top priority to accelerate market share growth [8][20] - A high-quality, low-risk development pipeline of about $1 billion in opportunities is being managed, with several projects announced, including expansions in Canada and New Zealand [13][14] - The company is strategically exiting five facilities this year to consolidate business into owned locations, reducing costs significantly [36] Management's Comments on Operating Environment and Future Outlook - Management noted that while direct impacts from tariffs are modest, indirect impacts on consumer confidence are significant, leading to a revised outlook for the year [8][48] - The macroeconomic environment is changing, with expectations for AFFO per share now between $1.42 and $1.52 for the year [32] - The company remains confident in its ability to create long-term value despite current challenges, leveraging improved operating efficiencies and strategic partnerships [42] Other Important Information - The company completed a public bond offering of $400 million with an interest rate of 5.6%, which will be used to repay a portion of revolver borrowings [39] - The acquisition in Houston was driven by a significant retail customer win, increasing capacity in the market by approximately 36,000 power positions [26] Q&A Session Summary Question: Impact of tariffs on demand - Management indicated that while direct impacts from tariffs are modest, indirect impacts on consumer confidence are significant, leading to a slowdown in expansion plans among customers [48] Question: Pricing strategy amidst demand headwinds - Management expressed confidence in maintaining pricing due to the value provided to customers, despite observing pricing pressure from competitors [50] Question: Monitoring the spread between physical and economic occupancy - Management noted that fixed commitments have grown to 60% of revenue, indicating continued customer engagement despite the gap between physical and economic occupancy [58] Question: Development projects and lease-up expectations - Management clarified that several projects are not demand-driven but are aimed at improving supply chain efficiency, with no risk to ramp-up expected [66] Question: Q1 results compared to initial guidance - Management stated that Q1 results were in line with expectations, and the change in full-year guidance was due to overall seasonality and timing of new business [72]

Company Overview - Lineage Logistics (NASDAQ:LINE) is the global leader in cold storage with 3.1 billion cubic feet of dedicated real estate and has seen its stock price drop from $78 at IPO in June 2024 to $59.66 [1][3] - The current valuation at $59.66 represents a 17X multiple on consensus 2025 AFFO of $3.51, indicating that the stock has become more interesting at this lower price [3] Industry Overview - Demand for cold storage has been steadily increasing, driven by global food demand and a higher share of food distributed via temperature control [6][7] - The USDA projects continued growth in global food demand through 2050, influenced by population and income growth [7] - The cold storage industry is currently experiencing oversupply due to a significant increase in capacity (over 40% since 2019) and a slowdown in new building projects due to higher interest rates [18][24] Growth Potential - Lineage Logistics is positioned for growth through three main sources: occupancy recovery, margin expansion, and accretive consolidation [20][21] - Current physical pallet occupancy is at 78%, with potential for significant improvement as inventory levels normalize [19][25] - The company has a margin of 39%, with opportunities for improvement through operational efficiencies and automation [27][29] Operational Efficiency - Lineage is implementing a proprietary software called LinOS to optimize warehouse operations, which is expected to enhance efficiency and reduce labor costs [30][31] - The company currently has 82 out of 488 warehouses automated, with plans for further automation to improve margins [30] Market Position - As the market leader, Lineage has synergies in its customer network and can spread overhead costs over a larger revenue base, enhancing its competitive advantage [29] - The fragmented nature of the cold storage industry presents opportunities for Lineage to acquire smaller competitors and improve their operational efficiency [32] Long-term Outlook - The long-term fundamental outlook for cold storage remains strong, with Lineage's market leadership and operational efficiencies positioning it for potentially explosive growth [40] - The company anticipates a return to normal seasonality in inventory levels, which could significantly impact occupancy rates and overall performance [25][26]