Lineage, Inc. Q3 FY2026 earnings call

Macroeconomic Environment: • Macro conditions remain challenging with elevated interest rates, fuel prices, and carrier costs. • International container volumes into the U.S. have declined significantly (down 18% in Q1, 15% in Q2, 8% in Q3), impacting throughput and seafood logistics. • Demand for fresh and frozen food remains solid, with frozen categories outperforming broader food industry trends due to value propositions.

Operational Execution & Supply/Demand: • Physical occupancy has grown year-over-year for two consecutive quarters, indicating market share gains and stabilizing inventory levels. • New cold storage supply growth is slowing substantially; annual additions are expected to drop from nearly 8 million sq ft in 2025 to ~3 million sq ft in 2026. • Lineage strategically idled 16 facilities (~3 million sq ft) since early 2025, contributing to industry capacity rationalization alongside competitors like AmeriCold. • Production-focused assets outside port-centric locations showed strength, growing same-store NOI by 5%.

Technology & Efficiency: • LinOS, the proprietary warehouse execution platform, is deployed at 18 sites and exceeding aggregate savings targets. • The $50 million cost takeout effort is ahead of schedule, with greater realization expected in 2026. • Administrative expenses were below guidance ($110 million vs. $120-125 million range) due to timing and reduced travel/training post-Big Bear incident.

Big Bear Incident: • The June 2025 fire at the Big Bear facility had an estimated $20 million impact on 2026 adjusted EBITDA and warehouse NOI. • Additional $5 million cost incurred from network-wide solar portfolio safety inspections and de-energization. • Insurance recoveries are underway, with $100 million approved and $200 million expected before year-end.

International Growth: • International operations continue to deliver solid performance and serve as a source of growth despite U.S. trade headwinds. • Seafood logistics faced significant pressure (NOI down >14% YoY) due to trade disruption and high fuel costs affecting fishing activities.

Global Warehousing: Total warehouse NOI was approximately $361 million. Same-store NOI declined 4.2% year-over-year to $342 million, driven by higher power costs and the Big Bear facility fire impact. Same-store revenue grew 0.4%, and physical occupancy rose 110 basis points to 76.2%. Net pricing achieved 1-2% within target range.

Global Integrated Services (GIS): GIS NOI was approximately $56 million, down 13.8% year-over-year. Revenue was $352 million, down 3.3% (up 5% excluding Spain disposition). Margin decreased 200 basis points to 15.9%, pressured by rising third-party carrier rates that outpaced customer price increases in North American transportation.

Adjusted EBITDA: Lowered full-year guidance to $1.25 billion - $1.27 billion (midpoint lowered by $15 million). Same-Store NOI Growth: Revised range to negative 3% to negative 2% (previously wider or less negative). Total Warehouse NOI Growth: Negative 2.5% to negative 1.5%. GIS NOI: Lowered to $231 million - $236 million (negative 8% to negative 6% growth). Administrative Expense: Lowered to $457 million - $463 million. Recurring Maintenance Capex: Lowered to $148 million - $155 million. AFFO per Share: Midpoint maintained but range narrowed to $2.86 - $2.98.

Trade Disruption: Ongoing international trade tensions and tariff announcements continue to suppress container volumes, negatively impacting GIS margins and seafood-related warehousing revenue. Carrier Rate Volatility: Unprecedented acceleration in third-party carrier costs has compressed GIS margins as contract rate increases lagged behind spot market spikes. Regulatory/Legal: A California legal settlement impacted GIS results by approximately $7 million in Q2. Operational Safety: The Big Bear fire caused significant financial damage and required complex remediation, though insured. Macro Headwinds: Elevated interest rates, fuel prices (oil above $100/barrel), and inflationary pressures on consumer spending create uncertainty for volume recovery.

Q: Analyst asked if political shifts (Democratic control) would catalyze container volume recovery in 2027 or if trade headwinds persist. / A: CEO noted potential relief for lower-income consumers via affordability mandates and pushback against tariffs, such as lifting tariffs on Canadian ag products and packaging materials. This could boost demand. However, current focus is on near-term stabilization rather than immediate large-scale volume rebounds, with some administrative relief already visible.