Good morning, and welcome to the Lineage Logistics Second Quarter 2025 Earnings Call. It is my pleasure to turn the call over to Mr. Evan Barbosa. Sir, you may begin.

Thank you. Welcome to Lineage's discussion of its Second Quarter 2025 Financial Results. Joining me today are Greg Lehmkuhl, Lineage's President and Chief Executive Officer; and Rob Crisci, Lineage's Chief Financial Officer. Our earnings presentation, which includes supplemental financial information can be found on our Investor Relations website at ir.onelineage.com. Following management's prepared remarks, we'll be happy to take your questions. Turning to Slide 2. Before we start, I would like to remind everyone that our comments today will include forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our filings with the SEC. These risks could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. In addition, reference will be made to certain non-GAAP financial measures. Information regarding our use of these measures and a reconciliation of non-GAAP to GAAP measures can be found in the press release that was issued this morning. Unless otherwise noted, reported figures are rounded, in comparisons of the second quarter of 2025 to the second quarter of 2024. Now I would like to turn the call over to Greg.

Thanks, Evan, and thanks everyone for joining us today. I'll start by going over our agenda for this morning. First, I'll recap our second quarter performance, which was in line with our expectations. Next, we'll cover our updated second half outlook, including our occupancy and price expectations for the remainder of the year. After that, we'll cover our guidance update, which is a reduction versus our prior outlook, driven by muted seasonal inventory levels. I will then turn it over to Rob to review segment details and provide an update on our balance sheet. Lastly, I will summarize the quarter and turn it over to your questions. Turning to our quarterly performance on Slide 4, we delivered AFFO per share growth of above 8%. Total revenue increased modestly by 1% and adjusted EBITDA decreased by 2%, reflecting the challenging market dynamics we're currently navigating. These dynamics are driven by persistently higher food prices, interest rates, tariff impacts, and a general sense of uncertainty from our customers that are leading to reduced expectations around the balance of the year inventory build. This updated outlook has led us to reduce our annual AFFO per share guidance to $3.20 to $3.40 compared to our prior range of $3.40 to $3.60. Transition to our second quarter results. Our global warehousing segment was in line with our expectations as we laid out in last quarter's call. Same warehouse NOI was down 6% year-over-year against elevated inventory levels we experienced last year. While these market dynamics are fluid and obviously difficult to predict, we remain confident in our core business. We saw a sequential improvement during the second quarter in our same-store NOI, which increased from $336 million to $343 million. Notably, Q2 is normally the lowest seasonal occupancy quarter of the year. We're also seeing storage revenue for physical occupied pallet stability as expected as I'll discuss more in a minute. Our global integrated solutions saw 8% year-over-year segment NOI growth led by our U.S. transportation and direct-to-consumer businesses. Across the company, we are acutely focused on partnering with our customers as they navigate through these turbulent times. We will continue to work as strategic partners to help them to improve their supply chain efficiency. Additionally, the rollout of LinOS, now at 6 conventional sites, continues to accelerate and perform above our expectations, showing double-digit productivity improvements. We expect to have 10 conversions completed by year-end, setting us up to further accelerate the broader rollout in 2026. Also during the quarter, we completed our inaugural $500 million investment grade-bond offering. Additionally, we executed on our M&A and development pipeline and accretively deployed $535 million in growth capital, including closing our agreements with Tyson Foods in addition to 3 smaller acquisitions. Before moving on to a more detailed analysis of our performance, I want to say a few words about our company. Lineage is positioned as the industry leader with broad and deep customer relationships, the largest network, cutting-edge technology, and is a world leader in warehouse automation. I'm confident that we are well positioned to grow as the food industry inventory stabilizes, new capacity is absorbed, and our internal initiatives continue to gain traction. I would also like to take a moment to sincerely thank all of our team members across the world for living our values as they deliver excellent service to our customers every day. Moving to Slide 5. When we met with investors in early June at NAREIT, we reaffirmed guidance based on what we were seeing in the marketplace at that time. The blue line on this chart shows our actual and projected physical utilization, whereas the green line shows typical quarterly USDA seasonality from 2015 through 2019, the years before the pandemic caused disruption in the normal seasonal pattern, and the red line shows 2025 actual USDA seasonality. As you can see, throughout much of the first half of the year, we were slightly above the pre-pandemic USDA averages, which we see as a proxy for normal seasonality and informed our prior guidance. Late in the second quarter, with inventories historically started to decline, we saw muted seasonality in occupancy. This trend continued into the third quarter, and we've only recently seen a positive inflection in their inventories. This delayed occupancy improvement, combined with persistently high freight prices, tariff uncertainty, and elevated customer inventory carrying costs drove our decision to lower our outlook for the second half. To be clear, our occupancy projection is what changed as our assumptions around cost efficiencies, price, throughput, and GIS growth remained unchanged from our previous guidance. All that said, we still expect inventories to build through the third quarter and into the fourth quarter, supporting sequential same warehouse NOI and adjusted EBITDA improvement in each quarter of the year. Turning to Slide 6. We had a number of questions about price in relation to our storage revenue for physical pallet after we announced our first quarter results. A quick reminder that our storage revenue per physical pallet consists of rent, storage, and blast revenue. As outlined at NAREIT, we expect to see stable trends for the balance of the year. This quarter, we saw nearly 5% sequential improvement in same warehouse storage revenue per physical pallet. As you can see on the chart, there's always some short-term volatility in this metric, which is driven by a number of factors, including rate, volume guarantees, inventory turns, blast freezing volumes, commodity mix, exchange rates, and seasonality. Additionally, we saw a sequential increase in our minimum storage guarantees, increasing 290 basis points from Q1 to Q2 as the new business we are winning has a higher percentage of storage guarantees than our base. While it remains a competitive environment, about 90% of contracts to be renegotiated this year have been completed, giving us confidence in our stable price outlook for the balance of the year. Moving to Slide 7. Based on the factors I described today, we're lowering our full-year 2025 outlook. Coupled with the AFFO per share reduction I've already outlined, we're revising our full-year adjusted EBITDA guidance to the range of $1.29 billion to $1.34 billion, down from our previous range of $1.35 billion to $1.4 billion. Given the dynamics unfolding in the industry, we want to provide more clarity regarding our near-term expectations. Accordingly, we are initiating guidance for the next quarter. For Q3, we expect AFFO per share to be between $0.75 and $0.79 and adjusted EBITDA to be between $326 million and $336 million. Some of the maintenance CapEx spend moved from the second quarter into the third quarter, which is reflected in our AFFO per share guidance. It's obviously been a very tough road since our IPO with customer inventories rationalizing, tariff uncertainty, higher interest rates and food prices, and new competition entering our market. We believe the industry demand is bouncing along the bottom right now. Unfortunately, the uncertain macro backdrop is slowing our expectations of a broader market inflection in inventories and throughput. Lowering guidance is both difficult and disappointing for us, but we remain focused on executing our business plan and driving shareholder value. We are also aligned with our investors as our management team has the majority of our compensation tied to long-term equity incentives. In summary, we believe we've turned the corner and our business has begun to steadily improve in the short term, while we continue to invest to win in the long term. We saw sequential NOI improvements in Q2, which is normally the lowest quarter of the year. We expect this improvement to continue in the second half with same-store NOI trending positively, positioning us well for growth in 2026. To that end, on Slide 8, allow me to outline some of the actions we're taking to position Lineage for long-term success. We're focused on driving competitive differentiation across 3 key areas: Delivering customer success; leveraging our network effects; and enhancing warehouse productivity. Starting with customer success. We're focused on addressing our customers' primary concerns, which include optimizing supply chain costs, increased efficiency, and further improving service by marrying our global integrated solutions offering with our expansive global warehouse network. We're also enhancing our responsiveness and customer service consistency. Through a new partnership with Cognizant, we are elevating our customer care model through proven best-in-class technologies, expanded service hours, and deep customer service expertise, all while retaining the same team members as points of contact that our customers have known for years. Next, on network effects, we're leveraging our best practices, economies of scale, investments in technology, broad service offerings, and presence across 19 countries to support the increasingly global needs of our customers. We're also using our scale to drive cost savings across our platform in areas such as energy and insurance. In markets experiencing excess capacity, we're proactively consolidating facilities to drive higher occupancy and efficiency. As the industry leader, our scale and breadth position us to create value through network optimization efforts like these. Finally, regarding warehouse productivity, I truly believe we have the best operating team in the business. Lean has always been at the core of our operating culture. It has helped us deliver service excellence and consistent productivity gains over many years. We expect Lineage to build on this foundation and accelerate efficiencies while making Lineage an even better place to work. As previously mentioned, our ongoing LinOS pilots are continuing to show double-digit productivity improvements. We look forward to sharing more financial details with investors by year-end. Lastly, our industry leadership in automation remains unmatched as illustrated by our agreements with Tyson Foods discussed last quarter. Simply put, we will never stop working to earn the right to grow with our valued customers.

Thanks, Greg. Good morning, everyone. Starting on Slide 9 and quickly recapping our segment performance. In our Global Warehouse segment, total revenue grew slightly and total NOI declined 4% to $367 million. Same warehouse revenue was down 3%, while same warehouse cost of operations decreased 1% aided by our continued labor and energy productivity initiatives. Contribution from non-same warehouse NOI grew 33%, driven by acquisitions and developments that continue to ramp. We received some positive contributions from the Tyson Foods agreements, which closed in June, and we are off to a great start. Additionally, we expect $109 million of incremental future NOI from previously completed and in-process development projects that have yet to stabilize. We've already spent over $1.1 billion of the $1.2 billion total investment on these projects where the future NOI benefit is yet to be realized. In summary, we are well positioned to grow, aided by the impact of these nearly completed developments. Shifting to Slide 10 and covering our global integrated solutions segment. Revenue was up 2% to $380 million, and NOI was up 8% to $68 million. Our NOI margin was up 100 basis points to 17.9%. We are seeing strong momentum in our U.S. transportation and direct-to-consumer businesses. Our customers continue to appreciate Lineage's integrated solutions and unmatched global service offering. For the remainder of 2025, we expect this strong momentum to continue with double-digit growth in the second half. Moving to Slide 11. We ended the quarter with net debt of $7.4 billion. Total liquidity stood at $1.5 billion, including cash and available capacity on our revolving credit facility. Our leverage ratio, defined as net debt to LTM adjusted EBITDA was 5.7. We will remain highly disciplined on future capital deployment. In June, we successfully completed our inaugural $500 million investment-grade bond offering, which carried a 5.25% coupon on a 5-year term. Our new bond has been well received by investors and has traded tighter since the offering. I'd like to thank Michelle Domas, our world-class treasury team, and our banking partners for the great execution on our inaugural deal. Investment-grade status was a key driver of our decision to go public, and we are excited to have access to these markets moving forward. With that, I'll turn it back over to Greg to wrap up before opening it up to your questions.

In summary, on Slide 12, our Q2 results were in line with our expectations. We're lowering our guidance due to our revised outlook regarding the seasonal inventory build, pricing remains stable. And importantly, we saw sequential revenue, NOI, and EBITDA improvement, which we expect to continue going forward. We are the global cold chain leader in providing the critical infrastructure for the food industry, an industry with positive long-term growth. We're achieving meaningful progress on our internal initiatives such as our LinOS technology. We are positioned to deliver strong operating leverage when the industry improves. And finally, our management team has never been more committed to delivering results and to driving long-term shareholder value. With that, let's open it up for questions.

Our first question comes from the line of Mr. Alexander Goldfarb from Piper Sandler.

I guess for my one question, Greg, at NAREIT, you guys reiterated the guidance from earlier this year. Clearly, you had a chance at that point to revise down. And just want to understand everything was tracking well until basically June 1. And then after that, things fell off. It just seems a little tough, again, especially given that you guys had an opportunity to revise them. Just curious what you're thinking and how things were trending then versus what materially happened subsequent to NAREIT that caused you guys to reduce the outlook?

Alex, honestly, great question. And you're right. What changed is our occupancy guide. We had been trending in line with typical seasonality. And I think everyone remembers we described typical seasonality as the normal seasonal pattern of we were referencing 2015 to 2019 before all the disruptions of COVID, when the normal seasonal pattern happened for generations really before that disruption and that you start in Q1, you dropped to a bottom in Q2 and then you build up through Q3 and Q4. And so at NAREIT, we were trending actually in line with typical seasonality, actually a little bit better than normal seasonality and how the USDA indicated the market was performing. So we were above the line, as indicated on our Slide 5. In June, when we typically see utilization inflect after bottoming in May. And this year, we just started to see the typical seasonal uplift of utilization in late July, which is obviously later than usual, and that pickup has been a little bit more gradual than it typically is. So we do still anticipate a seasonal uplift in the second half, and we do see that happening now in the last couple of weeks. But because of the delay and because of the muted seasonal pattern that we're seeing today versus what we were seeing when we talked at NAREIT and because of the ongoing uncertainty around tariffs and elevated inventory carrying costs, we're just lowering our expectations on the magnitude of the uplift. Importantly, as you saw, we did see sequential improvement in our same-store NOI Q1 to Q2, and we expect to improve in each quarter of the year.

Our next question comes from the line of Ki Bin Kim from Truist.

Maybe we can just start off at a higher level. What's the best argument you think you've heard from your clients in terms of why occupancy is too low or throughput volume is too low today versus what, I guess, the industry players and yourselves included might think what is normal going forward. So what are the best arguments for that?

Yes. I think as I mentioned in the prepared remarks, we believe the industry is bouncing along the bottom right now. I mean food producers on their earnings calls and in all of our meetings continue to cite just high food pricing and value-seeking behavior from customers. Our view right now is that inventories have been under serious pressure for a couple of years now and servicing consumers without stock outs, which nobody will handle would be very difficult at even lower levels. And so we definitely feel we're bouncing off the bottom. There are some positive data points out there like the beef herd counts, which are obviously still below the 2021 levels, that appear to stabilize based on the 2025 USDA data, and Circana's data showed that the restaurant industry gained momentum after a slow start to the year. Also, our customers are pushing very, very hard to increase volumes through incentives and their sales efforts. And if those incentives are successful or we get any interest rate relief, either one of those things could act as a stimulus for increasing inventories moving forward.

And do you think GLP-1 drugs are having a significant impact on volumes or occupancy?

We don't, and our customers don't. I mean certainly, if you look at our commodity mix of heavy in proteins, seafood, food, and vegetables, those are areas where people are eating more of, not less of. And we think long term, if the drugs work, and hopefully, they do and dramatically impact diabetes deaths, then people will live longer and people will eat more in the long term.

Our next question comes from the line of Mr. Michael Griffin from Evercore.

Appreciate the comments earlier on the LinOS pilot. And I know you said you'd kind of quantify the benefits of that later in the year. But maybe can you give us any anecdotal examples of initiatives you're undertaking and maybe some of the benefits you've seen from the implementation of these pilot 6 or 10 facilities, however many it's been?

Yes, we have implemented 6 so far and we'll aim for 10 by the end of the year. Our initiative is exciting and on track, exceeding expectations. We're seeing double-digit improvements in total labor productivity across the 6 sites. To remind everyone, LinOS is our proprietary warehouse execution system. It originated from the vision of Sudarsan Thattai, our CIO, and Elliott Wolf, our Chief Data Scientist, along with their teams, who believe that we can transform warehouse operations using technology and data science. LinOS optimizes every resource and movement in the warehouse, similar to air traffic control, overseeing everything from truck loading and unloading to product placement and task direction, ultimately enhancing performance for customers and vastly increasing our warehouse efficiency. We now have evidence that this vision is materializing and can significantly alter our competitive position over time by impacting customer costs and improving employee experience. Great initiatives take time, and LinOS is no exception. This year is focused on proving its functionality and rolling it out to various facility types before a broader implementation next year and in the following year. We are increasingly thrilled about its potential to fundamentally transform our operations, with benefits already visible across the 6 sites, not only in direct labor—which was our main focus—but also in indirect labor, employee benefits, energy savings, safety, employee turnover, experience, and training expenses. We anticipate it will significantly reduce both our capital expenditures and facility maintenance costs over time due to more efficient use of our facilities and material handling equipment. Over the long term, we believe it will substantially lower our cost structure, help us stay competitive, and enhance our already excellent service for customers. We are highly optimistic and believe LinOS will meet our expectations, and we look forward to sharing more details about the financials and the workings of these algorithms at the NAREIT conference later this year.

Our next question comes from the line of Brendan Lynch from Barclays.

Greg, you mentioned this a bit in your prepared remarks but can you discuss the pricing strategy in the second quarter for rent, storage relative to the first quarter? It looks like you recaptured the trend line on that Slide 6, which was a little bit of a surprise given it sounded like you were giving some price concessions in the first quarter to get volume. So maybe just what has changed and what we should expect going forward?

Yes. In short, nothing has changed. We previously communicated that we expected pricing levels to remain stable for the rest of the year. In our remarks today, we mentioned that there is often some short-term volatility in this metric, as shown on Slide 6, influenced by various factors. While the rate or price is one factor, others include volume guarantees, inventory turns, last reason volumes, commodity mix, geographic mix, exchange rate, and seasonality, all of which can cause fluctuations from quarter to quarter. Pricing for rent, storage, and blast did increase sequentially. However, just as we weren't overly concerned about a slight decrease last quarter, we are not overjoyed about this quarter's sequential 5% increase since it isn't solely due to price. This quarter benefitted from favorable European exchange rates and high volume guarantees, which were adjusted earlier in the year because of changes in inventory levels. Typically, the second quarter is the lowest occupancy period of the year, so increased volume guarantees raise the rent, storage, and blast per occupied pallet. In summary, nothing has changed. We are achieving our 2% to 3% price target. The pricing environment remains competitive but stable, and we have no concerns about this aspect for the remainder of the year, aligning with our previous guidance.

Our next question comes from the line of Ronald Kamdem from Morgan Stanley.

Just a quick 2-parter. Just can you talk a little bit more about sort of throughput was down same-store 3.2% this quarter, which decelerated from the last quarter number. Just help us think about sort of what's happening on that front? Is product just being stuck somewhere in the supply chain, is number one. And then the second comment is just updated thoughts on supply in the industry.

You got it. We discussed the concept of core holdings last quarter, which refers to volumes from customers whose business with us has remained stable over the past four years. We haven't gained or lost any business from them, and these core holdings account for over 70% of our global warehouse assets. Since the start of the inventory unwind following COVID in 2023, core holdings have faced pressure. As mentioned previously, annual outbound pallets have stayed fairly consistent over the last few years. This quarter, we saw throughput pallets decrease by 3% in our same-store warehouse portfolio compared to last year, which we anticipated due to the high inventory levels we experienced last year. However, sequentially, throughput was up about 1%. We believe core holdings are under pressure because of higher food prices, increased inventory carrying costs, rising interest rates, and uncertainty surrounding tariffs. As for the supply side, it's worth noting that this industry lacks transparency compared to others, and it's not well tracked by third-party brokers. We have been working with CBRE to build a database of new announcements this year. That data indicates that new openings peaked in 2023, with high levels observed over the past two years. Currently, we see that 3% to 4% capacity has come online each year for the last two years, and we expect 2025 to be similar. However, projections for 2026 show a significant decline in new volume compared to recent years, with about 1% new supply expected that year. This forecast may change with new announcements, but we foresee a downward trend. Additionally, we've noted a similar trend in the broader industrial warehousing sector, which experienced a three-year period of increased construction post-COVID and has now reverted to historical levels.

Our next question comes from the line of Michael Goldsmith from UBS.

Can you walk through the assumptions that underpin the third quarter and fourth quarter guidance? And what gives you confidence in the material step-up in trends expected in the fourth quarter?

Why don't I start just...

Yes, go ahead.

The biggest assumption that gives us confidence is the ongoing progress on internal initiatives, productivity savings, energy savings, and all the efforts underway across our company to enhance efficiency and generate new business. The reason we adjusted our guidance is due to our occupancy expectations being more subdued than we had previously indicated. However, we are already observing an improvement in occupancy, and we are entering the season we expect to see growth, although it may be a couple of months later than we initially thought. Our assumptions regarding prices and productivity remain largely unchanged. Tariffs have a slight impact, but that is fundamentally what has shifted. Rob?

Yes, that's right. Yes. And so we're trying to give you a little bit more data here. So we gave you Slide 5, which is our occupancy guide for the rest of the year, which mirrors everything that Greg said. I think there's confidence in the fourth quarter versus the third quarter, which is very similar to prior to what we saw last year. We talked about starting to see normal seasonality in the second half of last year, and that's embedded in our guide here. We feel really good about it, and we lowered for all the reasons Greg said. But again, it's just occupancy and it's our industry and it's evolving, and we feel really good that we are now sequentially improving, and that's a great place to be.

Our next question comes from the line of Samir Khanal from Bank of America.

I guess, Greg, help us understand how to think about the rebound or the inflection in occupancy? I mean, clearly, there's very little visibility from our side here, right? So is it the macro? Is it the health of the consumer? What should we be paying attention to as we think about the timing of the inflection? And then at this point, I think folks are trying to understand what the trajectory of growth even looks like into '26. So help us understand kind of what you track and that would be helpful.

Sure. The main metric we focus on is our conversations with customers and our occupancy levels. Looking at our guidance for the second half, we have seen some recovery, with a few weeks of increases similar to last year, where we experienced significant occupancy shifts from late third quarter into the fourth quarter. This supports our guidance. Regarding when the industry might begin to recover, we believe our customers' inventories are about as low as they can go while still meeting consumer demand. Everyone is eager to generate new demand, and finalizing interest rates and tariff agreements could provide the needed boost for increasing inventories.

Our next question comes from the line of Todd Thomas from KeyBanc Capital Markets.

I guess 2 questions. One, just a follow-up. Are you able to provide for July, any detail around occupancy or some of the specific drivers around warehouse storage in the Services segment? Any specific updates regarding July specifically? It sounds like there was a little bit of a pickup here later in the month. Second question though is around the dynamic between the softness that you experienced in the warehouse business relative to GIS, which grew 8% in the quarter. Can you talk about some of the growth drivers for GIS in the period and what's behind the sharp acceleration in the second half of the year?

Sure. So we're just closing out July. But in terms of occupancy levels, we're back now above April, May, right? It's back to that again, as you see in our chart, you start to move up. We just started moving up several weeks later, right? And then you just have less months with more things in the warehouse, and that's what led to the guidance cut. But we are seeing what we expected, which is good to see.

Yes. And then we're just taking a more muted view on the slope of the trend for the balance of the year given that it happened late, and we're trying to be prudent with our guidance. On the GIS side, I've got to say, I've never been more proud of our GIS team around the world. They're doing a fabulous job. We have better players on the field. It remains, as you guys know, on the trucking side of the business, on all the services we provide in our GIS group, which are very complementary to our warehousing business and very critical to our customers' total supply chain optimization. But this team is doing a phenomenal job. The sales team is doing a great job selling new business. I think we're just doing a better job than ever talking to our customers about their end-to-end cold chain. Some of them a few years ago didn't even know that we have these services, and now our services have developed, the team strengthened, and the technology strengthened, and the coupling of the warehouse with the GIS services has gotten stronger. I would expect this trend to continue for the foreseeable future as they're just gaining momentum.

Our next question comes from the line of Craig Mailman from Citi.

I want to go back to the topic of inventories and your perspective on them moving forward. I caught your point about how many of you and your peers have been saying for the past few quarters that it seems like inventories can't decrease any further for your tenants, yet occupancy levels remain relatively low. The lower-end consumer is facing challenges, and there's shrink inflation at play. So while spending might be stable, the value for that spending is diminishing. Fast food chains like McDonald's are experiencing sluggish sales due to a lack of compelling value. Is it unrealistic to think that seasonal trends could be mistaken for an actual change in inventory levels? Can we not have a situation where seasonality occurs, but from a base that isn’t likely to improve much, given the current outlook and financial difficulties many people are experiencing in this country? I'm trying to understand because it appears that USDA data has shown negative year-over-year trends for over two years now, yet you and your peers continue to suggest that tenants believe improvements are on the horizon, which often doesn’t materialize. The post-COVID landscape has changed. I’m not sure if it's due to tenant-side technological advancements or factors like shrink inflation and GLP-1s, but it feels like inventory levels aren’t really improving despite the ongoing assertion that inventories can’t possibly reduce any further while still meeting demand.

So fair point, certainly. Our guide does not assume any inflection in the underlying environment or that kind of general consumption inventory levels get better for the balance of this year. There's no doubt that the consumer is still under pressure because of high food prices, high interest rates, uncertainty, and that's putting pressure on overall food sales. The seasonality we talked about, we saw last year even in this tough environment, and we're guiding to even more muted seasonality than we saw last year. And so we think we're being conservative. We're not depending on an inflection for all the reasons that you pointed out. We think long term, leading up to the 2020, call it, '22, fresh and frozen food consumer preference is shifting that direction. Consumers want to be healthy. The majority of our food fits in that category. We think the long-term trend and the data from organizations feel that there will be growth in the long term. But we are bouncing off the bottom right now, and we're not trying to predict or dictate when we think that's going to change. That said, we saw sequential improvement in our results in the first and second quarter. We expect to see that in the third and fourth despite the challenging environment. The technology we're putting in place we think is a game-changer for our business. Our GIS segment is doing very well. We're doing a great job controlling costs in every aspect of our business around the world. We think our network, our technology, our customer relationships, our GIS service offering puts us in a great position to win in the long term. We do still feel, despite the fact we don't know when, that volumes at the consumer of fresh and frozen will start to grow again at some point.

Yes, that's right. Everything you said, which I think is a fair point, is currently reflected in our numbers. So that's what's been happening. We are seeing things getting better slowly. We're doing everything we can on our end to control what we can control. Any change to any of the things that you said is upside opportunity, and we're not expecting any of that to happen this year in our guide. But we do think over the long term, there is quite a bit of upside opportunity, but we're going to wait to see it happen.

Yes, and we think we'll leave this year with good momentum. We think we'll see sequential improvement each quarter and good momentum going into next year. Obviously, we're not guiding next year right now, but we feel good about all the internal initiatives we're doing, our new business with customers, the way our partnerships with customers are only strengthening, and we think that will benefit us long term.

Our next question comes from the line of Mike Carroll from RBC.

Greg, can you provide some color on where cold storage companies are currently trading or at least being valued in the private market? I mean, has private market valuations changed as much as we've seen in the public markets? I guess what's the right valuation metric that these assets are traded at? I mean, should we be thinking about EV-to-EBITDA ranges? I know it's because each asset is different, each company is different, but what's the typical EV-to-EBITDA range that cold storage companies are trading in the private market today or at least if trade starts or where do they typically trade at?

I mean, it's obviously an evolving metric. But right now, they're probably trading higher than the higher per share multiples. Yes, I think we're trading at a 55% to 60% of NAV. We think it's obviously undervalued. That's our view.

Yes, the private markets tend to have a longer-term perspective. There is a noticeable disconnect between the quality of the assets and the long-term growth of this industry. We have invested a significant amount of capital and believe we are in a good position. There is still much more to come, particularly regarding our net operating income related to Tyson and the recent acquisition. We have made these investments at attractive multiples, and we expect that this will positively impact our results moving forward. We are committed to improving sequentially and will continue to keep an eye on market trends. However, at this time, we believe that the true long-term value of our industry is not reflected in public valuations, whereas the private market tells a different story.

Like what's the typical EV-to-EBITDA range that assets trade in the private market, I guess, compared to your valuation? I guess where does that typically go?

It really depends on the region. There's so many dynamics but they're trading double-digit EBITDA to 15, 20x EBITDA that we see in smaller transactions in Europe and other places. It's a pretty big disconnect at this point.

Our next question comes from the line of Vikram Malhotra from Mizuho.

I have two points for clarification. First, I'm curious about how conservative your estimates are for the second half of the year, especially considering the elevated inventory levels. From the chart you provided, could you share your actual occupancy build for the second half, either physically or economically? Additionally, how does that compare to pre-COVID historical trends in terms of conservativeness? I would appreciate the specific occupancy details from that chart. The second clarification is regarding G&A. I noticed that your G&A came in better than expected in the second quarter, but the second half anticipates a notable increase. What factors are contributing to cash G&A in the latter half of the year?

Yes. Slide 5 illustrates our point clearly. The data from 2015 and 2019 reflects the pre-COVID USDA seasonality, represented by the green line. We are projecting that the midpoint of our guidance is around 75% in Q3 and 78% in Q4, indicating muted seasonality compared to historical trends. We believe this approach is sensible; we aim to neither be overly conservative nor overly aggressive. This is our current outlook. Our team is committed to exceeding these figures. Regarding G&A, we are managing the company carefully and see significant potential for business growth at this level of G&A. We anticipate long-term growth and expect to achieve good leverage in the short term. We will thoroughly assess our investments to ensure they are appropriately allocated, and that commitment will remain a constant focus.

Our next question comes from the line of Blaine Heck from Wells Fargo.

Just following up on guidance, can you give us a little bit more color on what's driving the AFFO decline expected in the third quarter versus Q2 despite the increased occupancy, same-store EBITDA, is that all driven by CapEx seasonality? Or is there anything else going on there? And then with respect to the fourth quarter, it's a pretty wide range between $0.78 and $0.94. So can you just share your thoughts on what key drivers would result in AFFO coming in towards the upper or lower end of that range?

Yes, the third quarter involves some timing with capital expenditures. Some of the capital expenditures we anticipated in the second quarter were pushed to the third. We're aiming for consistency across quarters, as we previously followed an annual budget process. The team is performing well, but there is still some seasonality in maintenance capital expenditures, which we intend to address over time. We expect higher maintenance expenditures in the third and fourth quarters, and we provided a full-year estimate. Regarding the range, it primarily depends on occupancy, which is the main factor. As Greg pointed out, pricing is stable and our cost management measures are in place. If occupancy decreases, our team will make adjustments to control costs to maximize our EBITDA and AFFO. We believe it’s wise to consider that our industry can be influenced by seasonal changes, and even a slight shift can lead to significantly different outcomes. We want to be transparent about our insights and assumptions, and we hope this information is helpful for you to make your own assessments.

Our next question comes from the line of Caitlin Burrows from Goldman Sachs.

Maybe we can return to the discussion about private market valuations. I understand you have only been public for a year. How do you view the choice between being private and public? Under what conditions do you believe it might be more advantageous for shareholders to take the company private?

Certainly, I mentioned in the prepared remarks that we went public at a very interesting time as the industry was resetting. That said, I believe obtaining our investment-grade rating and having access to the capital markets puts us in a better position in the public space, even during challenging quarters like this.

So yes. I think that's right. Getting the cost of capital, having the ability to issue equity moving forward for accretive opportunities. We're continuing to do that. We're going to look hard at how do we compound and grow this company and having that flexibility to be an investment-grade company is huge. I think the future is very bright even though, obviously, the first year has been tough.

Yes. If you look at our guidance, we see sequential improvement. We believe our mission is to help the stock rebound through our performance as quickly as it has declined. We think we can achieve that and are very well positioned. Even at the current reduced stock level, we are still encountering profitable opportunities in the marketplace where we can create value through those deals. There are still many opportunities available even at these levels.

Our next question comes from the line of Omotayo Okusanya from Deutsche Bank.

We talked a lot about just customer trends in the USDA data and just kind of curious, the occupancy decline and everything you're seeing in regards to a more tempered outlook. Is this all U.S. centric? Or are you also seeing similar trends in your international business as well?

Yes. We want to show you USDA data because it's something people look at. It represents the trend. However, it's not necessarily our entire portfolio that tracks U.S. trends. As mentioned on the slide, about 40% of our portfolios reflect USDA trends, but there is seasonality globally.

Yes. I think we're seeing inventories hold up better in other regions, both in Europe and Australia, which are our largest markets in Asia Pacific. So the U.S. is driving the year-over-year occupancy decline.

Our next question comes from the line of Greg from Scotia Capital.

I'm curious on this occupancy and whether the lower seasonal occupancy you're experiencing is ratable across all categories? Or if there are specific categories that are under more pressure? And if you could comment on the more import-export-focused category specifically, that would be appreciated.

So it is pretty broad-based, I would say, the pressure we're seeing. I'll comment a little bit about tariffs. We're certainly seeing chicken sell well and the beef herd as well. Those are 2 categories that are mixed. Seafood, the inventories have stabilized, but the end sales are at a pretty low historic level. A lot of these are, of course, out of the import-export side as a result of tariff policies. Our customers are constantly redirecting product around the world and managing through with their buys on the tariff policies. One of the things that we were hoping to see as a result of tariff negotiations is to open up new markets for U.S. exports as the U.S. is the most efficient producer of food in the world. For example, agriculture and particularly proteins is one of America's last great exports. The U.S. is extremely competitive in the protein space on the world stage, and many of these markets have been either partially closed or closed to U.S. protein imports until recent trade deals are finalized and have been historically closed. The U.K. and Australia just opened up their markets to U.S. beef imports if these deals get closed that are likely going to be in the near term here. While that won't stimulate a lot of new exports in the short term because beef is so low in the midterm, long term certainly could. We're looking for more deals like this to help stimulate production in the U.S.

Yes. To quantify, we did go through and really try to quantify our tariff impact in all of our review calls. We got about $10 million, our estimate NOI headwind in the second half. That's embedded in the guidance on the occupancy chart that you could see. We do have some locations that have more inventory because of tariffs, but then again, enough that have lower to lead to a headwind overall. We did want to give that number to give everyone a sense of what we've been seeing.

Our next question comes from the line of Michael Mueller from JPMorgan.

Can you talk about the strategy to manage interest expense going forward after the caps and swaps burn off at year-end?

Yes, for sure. We did the bond deal. We did a new swap here just recently. We are actively managing it. There is about a $10 million per quarter headwind in 2026 versus 2025 because of the expiring swaps. We benefited a lot from them. We're glad we did them; they're expiring, and we are working hard to mitigate that through a number of different areas, the bond deal, taking advantage of investment-grade markets. We have the opportunity to do potentially financing in different currencies, and we'll continue to do all we can to make sure we have the lowest cost of capital.

And real quick as a follow-up. Was the new swap you mentioned on the recent quarter and how significant is it?

$750 million. I think it's about 3.2%.

Our next question comes from the line of Nick Thillman from Baird.

Greg, maybe just wanted to get your comments on what you're seeing from some of the smaller operators in the space today, what you're seeing they're doing from a pricing standpoint? Are you seeing them starting to be under more pressure than you? Do you see them exiting the market? I guess, a little commentary because it is you and a larger player that have a decent amount of market share, but curious on kind of the more fragmented part of the industry.

Yes. I mean, there's obviously a number of new competitors. There has been some discounting going on. Some are more aggressive than others, most are very rational on price, I'd say. There are a few that are discounting in areas where supply is greater than demand. As I mentioned, we see the waning of new supply coming online and demand increasing for any reasons that we already talked about will probably be the primary driver of that absorption over time. Both us and another company are consolidating buildings, which are taking some capacity out of the market. There's also a lot of old inventory in the U.S. and geographies around the world that is becoming obsolete quickly and will come offline in the coming years, which will help offset some of the supply that's come online in the last couple of years.

Our next question comes from the line of Vince Tibone from Green Street.

Could you discuss the current rollout plan for LinOS over the next several years? And also like what percentage of your facilities are you targeting for LinOS, is it all of them? And then what is it just like a realistic implementation timeline to get all these potential efficiencies flowing through the portfolio?

Yes. Well, I mean, our individual facility, it's pretty fast. I mean, as Greg mentioned during the pilots, we quickly see gains within weeks.

Yes. We see gains generally the first week, which is amazing for a new technology I think, in any aspect of any business. But as far as the implementation, we'll share more later in the year. We are working. Based on how excited we are about it, we are literally working every day on how we can further accelerate our implementation. We'll have 10 done this year, and we look to dramatically increase that number in the coming years. It will probably take us 2 or 3 years to get the majority of our network converted. Again, we're working really, really hard to accelerate that given how excited we are. The majority of our conventional facilities eventually will be on LinOS. New acquisitions will go immediately onto LinOS, including the Tyson ones we just bought. This will provide more accretion for future M&A. It will make our new builds more productive and transform our existing conventional facilities. We're very excited, and I know we've been talking about it for the past year but we'll start to have benefit in our numbers in '26, and it will accelerate from there. As Greg mentioned around NAREIT, we plan to give a bunch of detail around this. We’ll probably do a special session around NAREIT to provide a lot more detail and color on what we’re seeing.

Our last question comes from the line of Daniel Guglielmo from Capital One Securities.

The labor expense line accelerated this quarter versus being flattish last quarter. Is there anything to call out there? Are there certain regions or countries where it's been harder to keep employees or where labor rates are rising faster than expected?

Our wage increases are being implemented in most of our markets starting April 1, which is likely what you're observing. However, in our guidance and what we're noticing, we see ongoing improvements in productivity. Beyond LinOS, we have numerous strategies and various productivity initiatives that affect labor costs apart from just LinOS. For instance, we're rolling out daily labor planning across the U.S. and introducing a next-generation labor management system. Both of these efforts are intended to align labor resources with facility activity in a dynamic way. We're experiencing positive productivity trends even ahead of the LinOS rollout, which will serve as a solid foundation as we gradually lower our pace next year.

And same warehouse labor was down year-over-year; same warehouse cost of operations was down year-over-year.

Thank you. That concludes our question-and-answer session. I will now turn the call over to Mr. Evan Barbosa, for closing remarks.

On behalf of the entire Lineage team, thank you for joining us today and for your interest in Lineage. We look forward to speaking with you again on our next quarterly earnings call.

This concludes today's conference call. You may now disconnect.