Lineage (LINE) Q4 2025 Earnings Call Transcript

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DATE

Wednesday, Feb. 25, 2026 at 8 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — W. Gregory Lehmkuhl
• Chief Financial Officer — Robert C. Crisci
• Head of Investor Relations — Ki Bin Kim

TAKEAWAYS

• Total revenue -- Flat year over year, with segment performance matching or slightly exceeding internal expectations.
• Adjusted EBITDA -- $327 million, a 2% decline, with the full-year figure down 2.3% to $1.3 billion.
• Adjusted funds from operations (AFFO) -- $214 million and $0.83 per share, both flat year over year but ahead of internal forecasts, driven by lower maintenance capital expenditures and improved cash tax planning.
• AFFO per share (full year) -- $3.37, an increase of 2.4% year over year.
• Occupancy -- Same store physical occupancy improved sequentially by 400 basis points to 79.3%, although year over year physical occupancy declined by 50 basis points.
• Same store NOI -- Down 5% year over year, with the full year reporting minus 5.8% growth.
• Warehouse segment pricing -- Same store rent and storage revenue per pallet increased by more than 1.5% year over year; total warehouse segment grew by over 3% despite macroeconomic headwinds.
• Throughput volumes -- Declined 2.8% and services revenue per throughput pallet decreased 70 basis points over the last year.
• Container volumes -- Decreased 9% year over year, weighing on warehouse segment profitability due to softer volume and lower price mix.
• Global Integrated Solutions (GIS) segment -- Fourth quarter NOI rose 15% year over year; full-year NOI grew nearly 10% and EBITDA reached $251 million, up 9% for the year; fourth quarter NOI margin climbed 470 basis points to 19.5%.
• Growth capital investments -- $170 million deployed during the quarter in development projects; total of 24 facilities under construction or ramping, representing over $1 billion of capital committed.
• Dispositions -- Noncore Santa Maria, CA asset sold at a mid-6% cap rate for $60 million, with management referencing comparable recent private cold storage transactions around 6% cap rates.
• Leverage -- Net debt ended at $7.7 billion; net debt to adjusted EBITDA was 6.0x, with an adjusted net debt to transaction-adjusted EBITDA ratio of 5.2x after accounting for development pipeline capital.
• Cost-savings initiatives -- Management targets $50 million plus in annualized admin and indirect cost reductions by the end of the year, with expectations that half may be realized in 2026.
• 2026 guidance -- Same store NOI growth forecasted at minus 4% to minus 1%; adjusted EBITDA between $1.25 billion and $1.3 billion; AFFO per share expected between $2.75 and $3.00; warehouse NOI growth guided between minus 2% and plus 1%; GIS NOI growth assumed between 0% and 2%.
• Admin expense guidance -- For 2026, admin costs anticipated at $465 million to $480 million, factoring in field cost shifts, inflation, and higher bonuses, partially offset by the outlined cost-saving measures.
• Liquidity -- Total liquidity of $1.9 billion, including a $700 million eurobond issued at a 4.125% coupon and a $1.25 billion floating-to-fixed forward swap at 3.15% through Feb. 2028.
• Warehouse supply trends -- CBRE data indicated a cumulative 14.5% supply increase in U.S. public refrigerated warehouses since 2021, with consumer demand up only 5%, resulting in a 9.5% excess capacity; Lineage's average physical occupancy was 75% in 2025, 300 basis points below 2021 figures.
• Asset idling -- Ten sites idled in the previous year, representing around 1% of supply, with negligible impact on NOI and occupancy; management does not anticipate similar opportunities in 2026.

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RISKS

• Container volumes declined 9% year over year, and that trend has continued into the first quarter, creating an explicit import/export headwind for the business.
• Management guided for 2026 same store NOI growth of minus 4% to minus 1%, and full-year warehouse segment NOI growth guidance allows for a potential decline of up to 2%.
• Ongoing customer mix and volume shifts—particularly reduced import/export and softer service mix—are cited by the CFO as continued drags on revenue per pallet and warehouse margins.
• Guidance for GIS segment projects modest growth of 0% to 2% as management anticipates headwinds from lower fuel prices and cheaper trucking, both expected to weigh on margins and modal mix.

SUMMARY

Lineage (NASDAQ:LINE) delivered stable revenue and flat AFFO in its fiscal fourth quarter 2025 results while signaling a cautious outlook for 2026 due to persistent industry headwinds and competitive pressure. Management emphasized that occupancy recovery was underway, with sequential improvements, but acknowledged that physical occupancy remains below 2021 levels and at a lower base compared to the prior year. The company executed over $170 million in growth capital investments during the quarter, maintains substantial liquidity, and intends to continue pursuing asset optimization, including dispositions at private-market cap rates. Management expects to realize $50 million plus in annualized cost efficiencies by year-end, partially supporting 2026 profitability targets despite projected near-term NOI declines.

• Management disclosed that 65% of the warehousing revenue base was already contracted or repriced ahead of 2026, positioning Lineage to achieve targeted net pricing gains of 1%-2% absent upside from external catalysts.
• CBRE data referenced by management reveals that U.S. cold storage supply meaningfully outpaced demand since 2021, driving excess capacity and challenging market conditions for 15% of Lineage's NOI base, although the majority of U.S. markets have stabilized.
• Lineage highlighted strategic flexibility to capitalize on valuation gaps between public and private markets, referencing completed and potential future dispositions or joint ventures to unlock shareholder value.
• The CFO confirmed that lower maintenance capital expenditures and improved tax planning produced favorable AFFO results versus prior guidance, with half of these tax benefits expected to be sustainable going forward.

INDUSTRY GLOSSARY

• AFFO: Adjusted funds from operations—an REIT-specific cash flow metric reflecting recurring income, net of maintenance capital expenditures and normalized for nonrecurring items.
• NOI: Net operating income—property-level profit, calculated as revenue minus direct operating expenses, before deducting corporate expenses, interest, or taxes.
• Cap rate: Capitalization rate—a ratio used to value real estate, reflecting annual net operating income divided by the asset’s value or transaction price; lower cap rates generally signify higher valuations.
• LinnOS: Lineage's proprietary warehouse automation and execution technology platform aimed at increasing operational efficiency and cost savings.
• GIS: Global Integrated Solutions—the company’s segment offering value-added cold-chain logistics services, such as transportation and foodservice.

Full Conference Call Transcript

W. Gregory Lehmkuhl: Thank you, Ki Bin, and good morning, everyone. Let me start by first thanking our valued customers and all our incredible team members at Lineage, Inc. who did an outstanding job driving efficiencies and executing on significant new business wins in the quarter and throughout 2025. I am truly grateful to be working alongside such an outstanding group of men and women each and every day. I will walk through our agenda for this morning. First, I will recap our fourth quarter performance, which came in line or slightly ahead of our expectations on all key metrics. Then we will discuss our 2026 outlook, followed by our latest view of cold storage supply and demand.

Following my remarks, I will turn it over to Robert C. Crisci, our new CFO, who started back in November and has already made meaningful contributions to the business. Rob will walk through the details of our segment performance, expense management initiatives, capital structure and our outlook for 2026. I will then return to share some closing comments before we open up the line to your questions. Turning to quarterly performance on slide four. During the fourth quarter, total revenue was flat year over year and adjusted EBITDA decreased 2% to $327,000,000. Total AFFO of $214,000,000 and AFFO per share of $0.83 were flat year over year but both ahead of our expectations.

AFFO this quarter was propelled by better management of maintenance capital expenditures and more advanced cash tax planning relative to our initial expectations. I continue to push the team to optimize every aspect of our business to drive cash flow generation. Rob will expand on these efforts later in his remarks. Full year 2025 adjusted EBITDA declined 2.3% year over year to $1,300,000,000 and full year AFFO per share increased 2.4% year over year. Looking at the underlying business drivers. We saw further occupancy stabilization in the fourth quarter.

Same store physical occupancy improved sequentially by 400 basis points to 79.3%, further signaling that our business is returning to a more normalized seasonality just as we anticipated when providing second half guidance last year. Year over year physical occupancy was down only 50 basis points and improved cadence compared to the first half. That being said, we are entering 2026 at a slightly lower occupancy level compared to last year. Encouragingly, our economic occupancy continues to track nicely with our physical occupancy. Occupancy. And we expect to maintain a similar spread between the two metrics to what we observed throughout 2025. Look to partner with our customers to manage the seasonal ebb and flow of their inventory levels.

And we are comfortable that our physical versus economic occupancy spread is both appropriate and sustainable. As a reminder, we have largely navigated the volume guarantee adjustments stemming from customers' multiyear inventory destocking post COVID. During the quarter, we grew rent and storage revenue per pallet year over year by more than 1.5% on a same store basis and by over 3% for the total warehouse segment despite headwinds from the industry's challenging macro environment. Throughput volumes declined 2.8% in warehouse services per throughput power was down 70 basis points as a result of lower import/export volumes we highlighted as a concern in our third quarter call. Our container volumes for the fourth quarter were down 9% year over year.

This softer volume and lower price mix weighed on profitability resulting in lower margins for the warehousing sector. Overall, same store NOI was down 5% year over year but was in line with our guide. We continue to see early signs of stabilization in many areas of our business. And in fact, many geographies are stable or growing, including Europe, Asia Pac, Canada, and most U.S. regional markets. While we are not out of the woods yet, we believe we will continue to build on these trends throughout 2026 and drive further productivity to address this temporary new normal.

We plan to deliver significant incremental new business given our strong performance for customers, strategically located assets, and our unmatched breadth of service offerings. Turning to our Global Integrated Solutions segment. In the fourth quarter, GIS saw year over year NOI growth of 15%, led by our U.S. Transportation and foodservice businesses. This rounds out a really great year for the global GIS team who delivered nearly 10% year-over-year growth in 2025. Great job to Greg Bryan and the entire GIS team. Turning to capital investments, which is a compelling driver of upside to our medium term growth model.

In the quarter, we invested $170,000,000 of growth capital primarily in our development and we are pleased with the continued progress on these projects. As a reminder, we have 24 facilities that are under construction, or in the process of ramping and stabilizing. These projects represent over $1,000,000,000 of previously invested capital, a significant amount of our future asset mix. We expect these assets to deliver over $150,000,000,000 of incremental EBITDA once stabilized. A considerable addition to the Lineage, Inc. earnings base. Also, we are not just growing to grow. We are constantly looking to manage our portfolio of assets. In December, we sold a noncore asset in Santa Maria, California, at a mid-6% cap rate for $60,000,000.

This is consistent with several other recent private cold storage transactions that were executed around a 6% cap, further reinforcing the strength and resilience of private market valuations for our real estate. We are actively looking at numerous options take advantage of the mispricing between the public and private markets to enhance shareholder value. We think this makes sense, especially as you consider that most recent research implies that we traded over a 35% discount to our NAV, over an 8.5% implied cap rate, and in our view an even larger discount to the replacement cost of our portfolio.

We have plenty of attractive opportunities to redeploy this capital into our balance sheet to further enable strategic acquisitions, customer led developments, and capital return strategies. This is a very active work stream, and we look forward to updating you in future quarters. We believe these efforts will not only highlight the mismatch between private and public valuations, but also position us to continue to consolidate the U.S. market as opportunities present themselves. Turning now to our outlook for 2026. We expect same store NOI growth of negative 4% to negative 1%, adjusted EBITDA of $1,250,000,000 to $1,300,000,000 and AFFO per share of $2.75 to $3.00 per share.

Rob will provide future guidance details in a moment, but I will share the macro assumptions that inform our guidance. In 2026, we expect 1% to 2% net pricing increase in our warehousing segment. While it is only February, we have already worked through 65% of our warehousing revenue base. We also expect our business to track to normal seasonality in 2026, albeit entering the year at a slightly lower occupancy level than we entered 2025. We anticipate that the industry will continue to digest new supply and remain competitive. Our observations mirror what many food producers and distributors are saying. Global food demand remains stable as highlighted by the recently published Surcana and Nielsen data.

But the consumer continues to exhibit value seeking behavior, trade down activity, and incrementally shifting their spend from restaurants to retail. Given that we ultimately serve the end customer, whether they choose to eat at home or at a restaurant, buy national or store brands, demand in our business in the long run remains stable. And as I mentioned, we believe that we are past the inventory drawdown after COVID, and remain optimistic that the categories we serve will continue to grow.

Overall, we are assuming a similar operating environment as 2025 and not building into our guidance any upside from potential catalysts such as tariff resolution, interest rate reductions, a stronger consumer, or the benefits to the consumer from pending tax relief. In the meantime, we are not standing by waiting for a stimulus. Lineage, Inc. remains focused on controlling the controllables and driving efficiencies wherever possible. Rob will discuss this more later, but he has helped accelerate our efforts and we expect to remove $50,000,000 annualized admin and indirect cost by the end of this year.

These savings will not discourage our investments in our sales, our customer support team, nor our prudent technology investments to stay the industry leader in automation and warehouse execution. We are using this challenging time in the industry to become a better, leaner company with even more positive operating leverage in the future. Turning to Slide five. As a reminder, last quarter we collaborated with CBRE to gain additional insights into new supply and demand trends within the industry. At this point, our analysis is focused on U.S. markets where we have the most accessible data.

To recap the analysis we put out recently, CBRE data shows that from 2021 to 2025, U.S. public refrigerated warehouse supply increased 14.5% on a square foot basis, while consumer demand for these categories stored in our network grew 5%. That implies a 9.5% excess capacity across the U.S. over four years. Even so, Lineage, Inc.'s 2025 average physical occupancy was 75%, only 300 basis points below its 2021 level, despite tariffs, reduced U.S. agricultural exports and inventory destocking. A testament to our network scale, hardworking commercial team, and the customer's desire to align with the industry leader.

Looking ahead, new supply in 2026 is expected to slow significantly, which is logical given the current environment just does not support speculative development. To further mitigate supply side challenges, we are idling buildings where appropriate and finding alternative real estate uses. We also think competitor weaknesses, and asset obsolescence could help ease industry capacity. On the demand side, potential catalysts such as tariff resolution, tax stimulus, moderating food inflation, and lower interest rates could serve as meaningful tailwinds to our business. Moving to slide six, using the latest CBRE data, we take a closer look at when the new supply has come online and its magnitude. As new supply is added to the market, customers naturally reassess their options.

They decide whether to stay with Lineage, Inc. or to switch providers. In the near term increases competitive pressure. What we have observed is that this customer switching largely occurs in the one to two years after new supply comes online. Then, markets typically begin to stabilize. To break this down, we are focusing on a subset of our U.S. assets that have been in the same store pool since 2021 and represent over a half $1,000,000,000 of our U.S. NOI. The top chart, shown in green, reflects markets that have seen less than 15% cumulative new supply over the last four years. Many of these markets have high barriers to entry. Constrained land, challenged permitting, and high building costs.

And together, they represent over 60% of our U.S. portfolio. NOI growth in these markets has been relatively insulated from new supply pressure, though they were impacted by inventory destocking coming out of COVID in 2023 and 2024 as well as other macro factors like declines in import/export volumes and tariffs. Now that customers have rationalized their inventories, we are seeing stabilization in 2026. The next two charts represent markets that have experienced more than 15% cumulative new capacity in the last four years.

We further split these into early cycle supply markets, shown in blue, where most of the new capacity was delivered in 2022 and 2023, and late cycle supply markets, shown in gray, where most of the new capacity was delivered 2024 and 2025. The early cycles chart in blue saw on average same store NOI declines in 2023 and 2024. But thereafter, these markets saw slight organic NOI growth in 2025 and are forecasted to be relatively flat 2026. To be clear, these markets still carry new capacity overhang. But NOI has begun to stabilize as the inventory destocking is behind us and as the markets absorb the new supply, leading to market rent equilibrium.

Importantly, in many cases, customers who originally left for lower prices have since returned to our network because of our service. With limited incremental new supply over the past couple of years, and with inventory destocking behind us, we have a more favorable outlook for this group, which accounts for 21% of our sampled NOI. Combined, the low new supply markets and the early cycle supply markets make up 85% of our U.S. NOI and both groups have demonstrated improved NOI stability. Something we expect to continue in 2026. Finally, the gray chart at the bottom represents the late cycle supply segment.

These are places where we are seeing the most competitive pressure today as the new supply was delivered more recent. And we expect this competitive pressure to continue into 2026. These markets make up only about 15% of our U.S. NOI in this pool. Importantly, across the U.S. overall, and especially in these late cycle supply markets, we expect to see a significant decline in due deliveries in 2026. And as the supply is digested, we expect to regain opportunities to grow with our customers. Net, this data shows while a small portion of our portfolio is navigating a temporary supply demand imbalance, 85% of our NOI the U.S. is on stable footing.

Despite macro headwinds, I am confident that we are well positioned to grow over time as the food industry normalizes. New capacity is absorbed, and our commercial, energy, admin, and productivity initiatives, including LinnOS, continue to accelerate. Now let me turn it over to Robert C. Crisci. Rob, welcome to Lineage, Inc.

Robert C. Crisci: Thanks, Greg, and good morning, everyone. I joined Lineage, Inc. a little over three months ago, and it has been great meeting our talented team members and many of the investors on this call. These past three months have confirmed my view that Lineage, Inc. is a world class organization, and I look forward to actively engaging further with you all in the months to come. Now on slide seven, you can see our global warehouse set. In the fourth quarter, total warehouse NOI declined 2.4% year over year to $373,000,000 while same store NOI declined 5% year over year to $340,000,000, both in line with our previously provided guidance.

In our same warehouse segment, as Greg highlighted, we grew our rent, storage, and blast revenue per physical pallet by 1.7% year over year. Also saw an impressive sequential growth in our physical utilization of 400 basis points to 79.3%, signaling further evidence of a return to the more normal seasonality Greg forecasted last summer. Conversely, throughput volumes were slightly softer, down 2.8% year over year, services revenue per throughput pallet down 70 basis points. For the full year, total warehouse NOI declined 3.3% to $1,480,000,000 while same store NOI growth was minus 5.8%.

While our occupancy has been stable, services mix and throughput volume continue to be weighed down by lower import export volumes, related to the shifting tariff announcements during the second half of the year. Keep in mind, volume shifts in certain higher value commodities can incrementally impact results given the attachment of higher value added services. Shifting to slide eight. Global Integrated Solutions segment's EBITDA grew 15% to $61,000,000 in our fourth quarter and was up 9% to $251,000,000 for the full year 2025, continuing this division's great trends all year. Our fourth quarter NOI margin for GIS improved by 470 basis points to 19.5%. We are continuing to see strong momentum in our U.S.

Transportation and food service businesses, due to the value these integrated solutions provide to our customers. As a reminder, we see solid longer term upside in the combined offerings of our GIS businesses and our warehouse segment. Our ability to bring to market a global network of assets to offer customers an end to end solution is unique and rewarded by our customers. Turning to September adjusted EBITDA declined 2.4% year over year to $327,000,000 and full year adjusted EBITDA declined 2.3% to $1,300,000,000, both in line with our expectations. Fourth quarter AFFO per share was flat compared to the prior year at $0.83. And full year AFFO per share grew 2.4% to $3.37 per share.

Both ahead of our expectations and consensus. As we progress through the wrap up of 2025, our first full year as a publicly traded REIT, our tax team was able to successfully enhance its tax planning initiatives to substantially drive upside to our guidance. We finished the year with a current tax expense for AFFO of $15,000,000 versus our prior guidance of $30,000,000 to $35,000,000. Our fourth quarter tax expense was better than our expectations by approximately $18,000,000 or $0.07 per share. On a go forward basis, we expect about half of that beat to be sustainable.

Hats off to our tax team for driving continuous improvement in our tax structure. $0.04 of nonrecurring tax benefits, ultimately, even if we excluded we still came in above the high end of the guidance range. In addition, our heightened cash flow focus allowed us to better manage recurring maintenance capital expenditures allowing us to come in slightly lower than our guidance at $56,000,000 for the quarter. We know investors focus on same store NOI and so do we. But we are also focused on driving every lever of efficiency and cash generation not just same store metrics. We are proud to see our team members also focused on EBITDA and AFFO output.

To that end, today, I want to announce that we have accelerated our internal efforts to drive efficiencies on our admin and indirect expense cost base. We see opportunities to further streamline our organization while continuing to fully support our team members in the field. We have line of sight to $50,000,000 plus of annualized cost savings by year end 2026 by streamlining and centralizing select functions. We have been studying this opportunity for a couple quarters and believe we can prudently rightsize and combine teams to drive immediate savings and speed up decision making. We see about half of this hitting 2026, and we will describe how we layer this into our guidance further in my prepared remarks.

Turning to Slide 10. We ended the quarter with total net debt of $7,700,000,000 and total liquidity of $1,900,000,000. During the quarter, we issued $700,000,000 of seven-year eurobonds at a 4.125% coupon and locked in a $1,250,000,000 floating to fixed forward swap at a rate of 3.15% through February 2028. These fourth quarter transactions come on the back of our inaugural $500,000,000 bond offering issued at a coupon of 5.25% in June 2025. We appreciate the confidence of our fixed income investors and our investment grade rated balance sheet. We welcome all these new global fixed income investors to our call, and I look forward to meeting you in the coming months.

On leverage ratios, you can see here that our net debt to adjusted EBITDA was 6.0 times at the end of the quarter. Also on this slide, we added what we hope is a helpful supplemental disclosure commonly asked for by our investors. This metric adjusted net debt to transaction adjusted EBITDA adjusts for the $1,000,000,000 of capital investments made into our development pipeline, the corresponding non-stabilized NOI and the NOI tied to intra-quarter acquisitions or dispositions. Under this methodology, which is consistent with the reporting practices of other top companies within the REIT sector, like Prologis and First Industrial, our leverage is 5.2 times.

Also, keep in mind that our development projects have been significantly derisked given most of these projects are anchored by customers with long term commitments. Thanks to our new great leader of investor relations Ki Bin Kim, who many of you know from his prior life. You will notice this and other supplemental disclosure enhancements now into the future. Our Santa Maria site. A great example of. Finally, I would be remiss to not mention the sale the shareholder value enhancing transactions we are evaluating.

As Greg mentioned, we will explore every opportunity to address the valuation mismatch between the public and private markets and or partial monetization action, including joint ventures, that help generate capital that highlight the locked up potential our world class portfolio. On page 11, let us discuss our outlook for 2026. We are initiating 2026 guidance with same store NOI growth of minus 4% to minus 1%, total warehouse NOI growth of minus 2% to plus 1%, GIS NOI growth of 0% to 2%, adjusted EBITDA of $1,250,000,000 to $1,300,000,000 and AFFO per share of $2.75 to $3.00 per share.

You can also see the additional guidance details we have provided in the past, including admin of $465,000,000 to $480,000,000, stock based comp of $125,000,000, interest expense $340,000,000 to $360,000,000, current tax expense for AFFO calculations of $20,000,000 to $30,000,000 and recurring CapEx a $170,000,000 to $180,000,000 dollars. Further, we expect our same store NOI cadence to start the year at the lower end of our annual range see improvement into the second half. Supporting this outlook will be the ramp of our development projects and the 2025 purchased M and A coming online throughout the year. We will also see acceleration of our productivity and SG&A as we move through the year.

As we centralize as an optimized same store NOI. Ultimately, our guidance for admin is $465,000,000 to $480,000,000. Which contemplates the field cost shifts, inflation, higher 2026 bonus. These items will be off by the cost savings initiatives we outlined. Together, these fact factors and the typical seasonal shift from Q4 to Q1 will result in adjusted EBITDA in the 2026 following a sequential decline comparable to that experience in the Eurobond offerings we did in the middle of 2025. Five. '26 and allow us to focus on continuing to sure the orders Lineage, Inc. remains extremely well positioned to exit these challenges as an even stronger company by increasing our future operating leverage across the business.

Allow me to summarize the four key points. First, our industry is showing signs of normalization, with the return normal seasonality many markets stabilizing after customer inventory destocking largely behind us, and many markets stabilizing after digesting new already in progress productivity issues. Including the OS, that are expected to offset inflation again this year. Third, while not built into our we will continue to look for opportunities to unlock value further enhancing our liquidity. This will maintain our investment grade rating and enable us to opportunistically take advantage of strategic investment opportunities. Before turning it over to your

Robert C. Crisci: Savings. We outlined a three. In December of a $100,000,000 run rate savings. Three to five years.

Ki Bin Kim: When I take a step back and look at our company,

Robert C. Crisci: The second element of how we thought about our guidance is that while we are seeing great, net price put out to the market, we have the same factors that impacted us in 2025 in terms of mix, in terms of import ex or just as we look out. So that ultimately will be a little bit of a drag of our rep revenue per pallet, if you will. Again, we are seeing net pricing of 1% to 2%. That blends just slightly lower. And then the final factor as we thought about it is just you know, we are fighting inflation overall at the company. We are doing a lot on the productivity side.

So we are really striving to keep NOI margin, if you will, flat, but that of course, you have just minor pressure there. We saw a little bit of that in 2025. So those three factors really kinda blend up and we will see a good pattern as we evolve through the year. As we said, we are starting at the low end. But all the initiatives that Greg outlined really sets us up nicely as we kinda move through year.

Operator: We will now begin the question-and-answer session.

Michael Goldsmith: Good morning. Thanks a lot for taking my question. Can you talk through the impact of idling assets? How many assets did you idle during the quarter? Did that have a positive impact on occupancy, and if you can quantify that? And then also, if you are idling, just to try to get a better understanding of kinda what has been moving in and out of the same store pool and the financial specs, what are the add backs?

W. Gregory Lehmkuhl: Sure. Thanks, Michael, and good morning. So last year, we idled 10 sites, and the benefits are obvious. Can, you know, move labor, move the customers to adjacent sites, and lower overall cost and increase our occupancy in the in the receiving sites. This you know, for 2026, because our physical occupancy is relatively strong, we do not think we will see quite as many opportunities in 2026 as 2025. And the overall impact on the on the, you know, on the NOI and the occupancy was pretty negligible. We took out less than 1% around 1% of our supply.

And as far as we treat how we treat these, and roll up to you know, we do not add back any of these costs. They roll into our non same store pool. AFFO and EBITDA accordingly.

Operator: Your next question comes from the line of Caitlin Burrows with Goldman Sachs. Your line is open. Please go ahead.

Caitlin Burrows: Hi, good morning everyone. On dispositions, the noncore SoCal disposition you did, what made that property noncore, and how representative is the mid 6% cap rate in the U.S.? And then are you willing to sell international assets? And what types of cap rates are you seeing in the international assets?

W. Gregory Lehmkuhl: Good morning, Caitlin. So the SoCal asset, would say, was kind of a medium quality asset. Our U.S. portfolio. It was a single user and did not support any of the surrounding public customers in that region. And so the user wanted to purchase it, was a reasonable price for us, reasonable valuation, so we decided to go ahead and, you know, achieve a little bit of liquidity there. As far as other dispositions, you know, Rob will probably portfolio to optimize. And talk about this on other questions, but we are looking at the entire certainly analyzing the public versus private disconnect in valuations. And kinda more to come on that as the year progresses. Nothing to announce today.

Robert C. Crisci: I guess I would just comment. I had a group add some new kinda look at the overall environment and what we are seeing in terms of transactions and actually pleasantly surprised with some of the comps that I am seeing out there that we have been tracking. Over the past year, you know, we have seen over a billion dollars at least of transactions that we. That is DHL or ColdLink or otherwise. And, of course, we are familiar the multiple we saw on our on our property. We are really seeing, you know, strong mid teens EBITDA multiples. Now sometimes these are in certain geographies. But that ultimately translates into those low 6% to mid six cap rates.

So we are feeling good about it. I would not say there is any comment we have about specific geographies per your exact question. We will really look as Greg said, as are we the best owner of that asset or not? And so we will be going through an evaluation just of our whole portfolio as we always do. We will we will be looking very unemotionally at that and, frankly, see the opportunity to create capacity, you know, for opportunities that we are almost sure will present themselves.

We do not we do not currently have anything on the docket now, but we are looking hard at as this industry turns, really having the firepower to do whatever we wanna do.

Operator: Your next question comes from the line of Alexander David Goldfarb with Piper Sandler.

Alexander David Goldfarb: Hey. Good morning. It is just going back to the topic of customers switching. You mentioned sort of one to two years after you know, a tenant takes a new facility that they may end up switching. We have been hearing about this for quite some time. Just wanna get a sense. Is this more of a talking point, or are you seeing, like, tangible or anecdotal evidence where, hey, in the past six months, we have seen a noticeable uptick in people moving out of new entrants into your facilities? Just trying to see as the supply ebbs, how much this is really a tailwind versus just something that, you know, is a talking point, as I say.

W. Gregory Lehmkuhl: Thanks, Alex, and happy birthday to you. So as we talked about in the in the prepared materials, you know, we are seeing a clear trend. So in the U.S. where we are seeing really the only region in the world where we are seeing you know, the excess supply, sixty plus percent of our markets are have not seen you know, excess new supply. We had to work through the destocking, but those have been on stable ground for some time, and we expect them to be on stable ground in 2026.

Where we are see you know, directly to your question, and why we feel so good about our ability to compete in the medium term is because markets like New Jersey, Dallas, Houston, where this new supply hit earliest, you know, we did take a hit there, and now we are seeing this is not anecdotal. We are a lot of customers come back to us because of our because of all the instructional advantages. Markets go through this cycle and we are seeing ourselves starting to win again, gives us confidence that we can kinda work through this last wave, and the new supply being delivered in '26 and beyond is.

And so even without, you know, supply absorption, which we think there is lots of reason to believe that happen, you know, faster than some may fear. We think we can win in this existing environment.

Operator: Next question comes from the line of Blaine Matthew Heck with Wells Fargo.

Blaine Matthew Heck: Great. Thanks. Good morning. More of a high level question. There has been a lot of attention paid to the impact of AI on different businesses over the last several weeks and months. I know you guys have done a lot on the technology enhancement and data analytics sides already, but in general, you know, how do you see your business being impacted by AI? Whether that be on the warehouse or GIS side?

W. Gregory Lehmkuhl: So I am glad you asked that. We have been thinking a whole lot about this. I mean so, certainly, you know, AI promises to make supply chains more efficient. That could potentially reduce storage needs over time. But supply chains take a long time to change and optimize, and what we are seeing right now is that customer inventory levels are effectively at the bottom given you know, a couple of years of destocking after COVID, high interest rates, food inflation, international trade chaos driven by the But the tariffs. All for all these reasons, our customers' inventories are very low.

When you when you take a step back and you think about our industry and AI, you know, we think we are one of the most insulate between when food is produced and when it is consumed. An AI cannot change when food is produced or when it is consumed so cold storage is durable and essential in the long term, even in the world of AI. Millions of examples of this, but think about a frozen chicken, frozen french fries, steak, we do not think those will ever you know, ship directly from a processing plant. Directly to somebody's home. And AI cannot change the seasons nor when seasonal products are harvested.

So they will always need to be stored. AI is not gonna change the need for people to eat, I am pretty sure. That is a durable trend. And, you know, our industry has hard expensive assets required to operate our industry, and AI cannot create nor replicate those. And if AI does change how consumers behave, so if there is more online shopping, more multichannel, that just generally increases the need for warehousing. Because of more SKUs and assets. So for more than ten years s works out works out native. API performance. We are all we are also already using AI in cold storage automation. For our entire automation stack.

I think everybody knows we are the world leader. For our energy management initiatives that have shown over many years to offset energy inflation, and we are also using AI in our computer vision in our in a technology we call the Lineage Eye. In our most tech board forward where warehouses, and that is technology that basically identifies what the pallet is and its contents and streamlines the inbound process. And makes our receiving work more accurate and efficient.

We are also best as and maybe this is the most important one we are best positioned to leverage and robots get certified for cold and they are quickly getting there, we are ready to interweave those into our into our workforce. And gain efficiency. Faster than anybody else in our space we feel. We are also you know, I think we proved we are effective acquirers and developers. And could apply AI tools to the acquired companies. And developments better than any other company. And lastly, far and away you know, we have the largest dataset of warehousing data and probably the biggest dataset of temperature controlled transportation data other than arguably C.H.

Robinson and we can harvest that data to provide our customers with insights and help them optimize their supply chain overall. And so overall, you know, yes, could this help customers, you know, optimize their supply chains over ten years? Sure. But we think we are very much insulated from disruption as an industry. And we see upside across the business here at Linneage.

Operator: Your next question comes from the line of Michael Albert Carroll with RBC Capital Markets.

Michael Albert Carroll: Greg, can you provide us some color on the seasonal pickup that was delivered this past quarter? And how would you qualify that pickup? Was it more muted than normal seasonal patterns or was it in line with the historical patterns? And if it is more in line, can we assume that the inventory destocking is probably behind most of these customers? Or I guess how should we think about this occupancy being higher than expected probably in the fourth quarter at least versus consensus estimates?

W. Gregory Lehmkuhl: Yes. Michael, good question. I mean, we kind of to a normal seasonal pattern. The uptick happened a little bit later. In the you know, it happened in July versus June. And then it hit as normal. So I think to things that things that are really important takeaways here we believe inventory destocking is behind us. We believe our customers' inventory are at our very, very low end levels given all the macro pattern in 2026, and that is what our guidance is based on.

Operator: Your next question comes from the line of Greg Michael McGinniss with Scotiabank.

Greg Michael McGinniss: Hey. Good morning. I just wanted to talk on the integrated solutions. You know, we saw the considerable margin improvement with the European disposition. Is there more room to run on that business? Can margin improve further from here?

W. Gregory Lehmkuhl: Yeah. I will I will take that in was just as you shedded that European business frankly did not have comparable margin to the overall base, you take that out, you take the revenue out. And really, as you start looking at the fourth quarter, that is the way to start thinking of the underlying business. So we still see opportunity overall. We see good growth in that business. So of course, we will leverage the cost there. But I think that is good run rate to kinda be thinking about margins and the profile going.

Operator: Your next question comes from the line of Craig Allen Mailman with Citi.

Craig Allen Mailman: Hey, good morning, guys. I just wanna circle back on the asset sales. Kind of market potential pricing for assets. I know you guys said the six cap was on a user sale. Just curious, was that already a triple net lease or were you guys kind of operating that? And what do you think that would have been on a kind of a true sale to an investor rather than a user? And also, Rob, I think you said pricing may be in the mid teens EV to EBITDA? Correct me if I am wrong, but you said that translates into the low six cap rates.

Could you kinda just bridge that comment and just provide as much color as you guys can? Thanks.

W. Gregory Lehmkuhl: Overall, it was a lease. So that was the property. It is always hard to say, you know, with the buyer and so forth, how would they play. So pay relative? We can keep cannot really go there. We think it was a good sale price overall. As I mentioned, we are seeing, you know, mid teens EBITDA multiples and low to mid 6% cap rates. Ultimately, I mean, it depends on the region they are sold. It depends on the mix. It depends on the buyer, as you say.

I am just trying to give you a general sense for what it is, but it really matters what geography you are in and so forth and who the buyer is.

Operator: Your next question comes from the line of Michael Anderson Griffin with Evercore.

Michael Anderson Griffin: On the March and going to help supply. Just curious your thoughts there.

W. Gregory Lehmkuhl: Sure, Michael. Let me take that question. It a little bit just to our thoughts on overall supply. And so we think there is a bunch of reasons why supply could get absorbed over time you know, faster than if you just take the new supply minus the 1% increase in end consumer demand. The first one is the one you highlighted there. It is just the you know, the alternative uses power with the utilities over time. So I think this is a really real opportunity. You know, it is not gonna dramatically change the supply picture in itself. In 2026.

But we are evaluating our global portfolio we calculate it how much excess power we have in a number of buildings already? We are looking to see how much more power we can get in areas that would be attracted to data center partners. Other things that could impact the supply picture are you know, we believe that some of the new entrants into our industry over the last four years based on our channel checks and direct conversations with some of these companies.

We think that they will exit the industry and we think some of those assets, especially in kind of the most oversupply markets, will not be you know, will not continue to be cold storage, and that will take out that will take out some supply. And where they are in good markets, you know, if a if a competitor that is failing has four buildings, we wanna be in the position to absorb too in the markets where we are we are we are we are full, and it would make sense to add those buildings to our to our network. The other thing I would like to highlight is the ops.

And so, you know, over the last couple years, coming out of COVID or during COVID, when every single pallet position, based in the U.S. and around the world was full. Because our customers were overstocking, if you will. It did not make sense to retire old assets because they could still cash flow. And despite the kind of structural advantages of a little less productivity, a little more high higher some of these buildings being shuttered and repurposed to residential or various other applications. And we, you know, we do not have perfect here, but we think that number could approach you know, up to 1% a year in the coming years.

Also, you know, we talked about this already, but the large operators have the advantage. Austin Gold basically have the advantage to idle facilities. And take supply out that way, you know, between us COVID, we took out 20 buildings last year. I think they said they are gonna take out another know, is nine or 10. Last week, and we will do more this year as well. So that will lead to some supply being absorbed.

And I think maybe most importantly, as I have already discussed, even in the current environment, we think the best capitalized operators with the best service, with the best long term reputation with the best technology, with the best scope of services, with the highest level customer relationships, are gonna win. And even in this environment, we can be successful.

Operator: Your next question comes from the line of Samir Upadhyay Khanal with Bank of America.

Samir Upadhyay Khanal: Good morning, everybody. I guess, Greg, I am sorry if I missed this, but when I look at the GIS segment, in your guidance for the year, 0% to 2%, I mean, is a decel. It, I think, 8% last year. Double digit in 4Q. Is it just sort of tougher comps or is there something I am missing? Thanks.

W. Gregory Lehmkuhl: Yes. Yes. It is I mean, we had a great year this year. So there are tougher comps. But there is a couple things I would highlight that are that are weighing on our on our guidance there. The first one is fuel. You know, fuel is down, and we actually you know, we mark up fuel like we do everything else. So when fuel declines, especially, you know, as is happening right now and is forecast to happen, in the first half year. That weighs on our on our on our results. Also, as, you know, trucks as fuel is down and trucking continues to be relatively inexpensive, our rail business does not do as well. You know?

Modal shifting happens, for economic reasons. And when truck is strong, rail is weakened. For those two reasons, we are a little bit more cautious on our guide in GIS for 2026.

Operator: Your next question comes from the line of Daniel Edward Guglielmo with Capital One Securities.

Daniel Edward Guglielmo: Hi, everyone. Thank you for taking my question. Can you give a quick update on the Lean journey?

W. Gregory Lehmkuhl: Can you just give us how call it call it a third of our revenue base being directly supported by a lean manager. We are taking those resources now and elevating them from a single building or two buildings to regional support. And we are also kinda joining their efforts with our lid OS. Deployment team. So we are so we are deploying technology and process at the same time and see you know, good results there even since the NAREIT conference. In December. And so we are committed to lean as a philosopher as a way to remove waste from our business. And we continue down the same path we have been on and continue to see good results.

And I think that is why you know, you will see, you know, year over year, we expect to offset inflation through those efforts and other productivity initiatives even before LIN OS gets meaningful to our financial results.

Operator: Your next question comes from the line of Todd Michael Thomas with KeyBanc Capital Markets.

Todd Michael Thomas: Hi. Thanks. Good morning. I wanted to see if you are able to share a January or year to date occupancy update. And then I think you commented that the 600 basis point spread between physical and economic occupancy is expected to be stable throughout the year. And that you are through a good portion of the volume based guarantees and resets this year. Last year, there was a little bit of volatility moving from 4Q to 1Q. So I was just wondering if you can provide a little bit more detail on where you are at in that process.

W. Gregory Lehmkuhl: Sure. So January has come in line with our with our forecast. You know, for modeling purposes, keep in mind that the first quarter is a seasonally soft quarter. Historically, if you just look at kinda pre COVID U.S. data, the first quarter would be down, you know, three ish percent in occupancy. From Q4. And we and, again, we think the seasonal pattern this year will reflect more normal times. And so we would expect a step down from Q4 to Q1. Also, you know, weighing on our Q1 is the is the ongoing know, reduction in the in the trend in import export container volume.

If you look at Q4, import export volume was down 9% year over year, and that trend has continued into the first quarter. Which we expect to be a headwind for us. With regard to the volume guarantees and the spread between physical and economic occupancy, 400 to 600 basis points is our normal. We would expect to hold that trend through the year. And I think, you know, as we have discussed in prior calls, know, we effectively mark to market the majority of our business each year. So there is no big you know, resetting coming here in January. We have already worked through 65% of our revenue base as we sit here today. On our contract negotiations.

And that just gives us more confidence that the volume guarantee spread will be or the economic fiscal spread will be consistent, and we will be able to achieve that net new pricing increases of 1% to 2%.

Robert C. Crisci: Yeah. I might just comment that it is, you know, the one of the lowest levels we have seen. If you look at our supplemental, we go back over several quarters, you look at our same store data, that 6% really factor that just trying to work through your economic versus physical. And so think the team has done a great job as I come in that others maybe have to contend with here of working that through and not having that as a headwind for the future.

Operator: Your next question comes from the line of Brendan James Lynch with Barclays.

Brendan James Lynch: Good morning. Thanks for taking my question. Wanted to ask on the evolving tariff situation and how it is going to impact your business. I think post Liberation Day, there was some concern around seafood in particular. So if the current 10% or I guess it is now 15% blanket tariff better or worse than the tariff policies that have been in place since April?

W. Gregory Lehmkuhl: Yeah. Great question. I mean, our seafood customers are very opportunistic, I would say. And when they order and it dry you know, the tariffs drive that, the ocean rates drive that, the sales prices here. In the U.S. drive that. And, you know, we will we will see what happens with the with the supreme court hearing. Obviously, it is being challenged multiple ways. I think the bear or the bull case there is that tariffs could be lowered on China and Brazil, which could be meaningfully increasing trading partners with us given where they have sat the last couple of years and the tariff rates they have been experiencing. But it is just really hard.

It is really hard to know. As all these are still being challenged in the in the state federal courts. I think, you know, we are if we look at, you know, import export, we are we are at a if you look at multiple years, of both the import and export side. We are at historic low right now, and that is hurting us. It as so much of our real estate is in you know, high value, hard to replace port markets around the world.

Operator: Your next question comes from the line of Omotayo Tejumade Okusanya with Deutsche Bank.

Omotayo Tejumade Okusanya: Yes. Good morning, everyone. The $50,000,000 of savings that was discussed just wanted to kind of get some clarification around that. Is that mostly G&A type expenses? Is it more of a focus on kind of cost of operations in terms of labor and power? And also hello?

Robert C. Crisci: Hi, Kyle. We can hear you.

Omotayo Tejumade Okusanya: Perfect. I also wanna kinda get a sense of in terms of…

Robert C. Crisci: It is both an admin thing as well as an indirect, if you will, are seeing opportunities at the indirect side at the sites. You know, these are exercise that we have frankly been looking at for a while. We have been growing quite rapidly as a company. I came in to the middle of an exercise that was being done to really look across the company and say, where can we sort of centralize? Where can we optimize? Where can we bring some productivity, are there overlapping functions that are actually happening at the sites versus an admin?

We are also looking to deploy different technologies in AI and just frankly figure out how to make do more with less. And so these are never easy decisions. The timing of how we actually see that playing out in 2026 we are roughly think about a half of that, but, you know, we will see how the year goes. And we need to progress through all those initiatives. But, again, it is about $50,000,000. You know, just to touch on how the site level expenditures happen versus the admin. We talked about that 100 basis points.

So we went out to the sites and at corporate and sort of try to do an inventory, and we saw some opportunity at the site to essentially bring some of those costs in. Would have optimized them anyways, frankly, at the site. And so as we combine those and actually bring those into corporate, sort of saying that is gonna be a net impact. If we had not sort of brought that into corporate, that would have been a net impact of about 100 basis points. I would not be surprised if we actually figure out how to optimize that even more and bring that at the low lower impact, if you will.

On a pro forma basis to something like 75 basis points. But that gives you a sense for both the $50,000,000 as well as how we see that playing in the admin.

Operator: There are no further questions at this time. I will now turn the call back to Ki Bin Kim, Head of Investor Relations for closing remarks.

Ki Bin Kim: Thank you everyone for joining the fourth quarter conference call. Have a good week. And we are around if you have any questions. Thanks, everybody.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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