LINE earnings call transcript, November 9, 2026

3% in the first quarter and about 2% in the second. The trend is better, but international container volumes into the U.S., same-store NOI, declined 4% year-over-year. As we said last quarter, the third- was the toughest 2025 quarterly comparison and it was expected to be the low point of our same-store NOI change for 2026. All that being said, we're winning new business in what remains a competitive environment and that's what an industry- leading network and service offering does. Within GIS, trade-related disruption and elevated carrier costs continue to pressure results. Although we acted quickly to adjust carrier rates and our fuel surcharges automatically reset. The unprecedented acceleration of third-party carrier costs increased faster than we anticipated. We are continuing to increase our rates with customers to match the current environment and we expect margin recovery over the next couple of quarters. Importantly, across both of these segments, international businesses have been a real source of growth. Great job to our teams in each of those regions. Given what we've seen since our last earnings call and what we anticipate for the remainder of the year, we're adjusting our full-year guidance. We now expect adjusted EBITDA of $1.25 billion to $1.27 billion, which lowers the midpoint by $15 million. We're taking down the high end of our same-store NLI growth range to negative 3% to negative 2% and reducing GIS and OI.

while favorably adjusting administrative expense. On AFFO per share, we're holding the midpoint but narrowing the range to $286 to $298, helped by tighter control of contributors to AFFO that do not impact adjusted EBITDA. We never liked guiding toward the lower end of the targets we set at the start of the year. Going in, we knew the industry was working through headwinds, including industry oversupply and softer trade. This year also brought surprises that were not contemplated. Our initial guidance, including the fire at our Big Bear facility in Los Angeles, which we now estimate at a $20 million impact to warehouse NOI and adjusted EBITDA in 2026 and the California legal settlement in GIS. We mentioned last quarter at roughly $7 million. Excluding just those two items, we would be forecasting to end the year towards the upper end of our initial full-year adjusted EBITDA and the FFO guidance range. Turning to slide 5. Two of our core KPIs are moving in the right direction, giving us confidence that market conditions are stabilizing despite ongoing macroeconomic as-wins. Same store of physical occupancy increased and has grown year-over-year for two consecutive quarters, which we think illustrates that we're gaining market. share from our competitors. Bruport remains negative, but the decline narrowed from 3.2% in Q2 25 to 1.1%. While we don't expect a perfectly linear recovery, the trend is encouraging and supports our view that the

the the the the the the Turning to slide 6, I'll provide an update on U.S. supply and demand. On the left, much of the new supply came from private developers and smaller players, and it is slowing substantially. Annual additions. Peaked at nearly 8 million square feet, or 4% in 2025, and are expected to be 3 million square feet this year, or under 2% of market capacity. In the face of this new capacity, as of October, we strategically... idled 6 to 25, totaling approximately 3 million square feet and over 200,000 power positions. Also, keep in mind that just between us and amounts publicly announced by AmeriCold, nearly 9 million square feet, or 4% in 2025, of U.S. cold storage capacity has been idled over just the past two years. The same macroeconomic conditions that affected us are also affecting smaller competitors and their access to capital, which should limit new supply growth going forward. On the right, fresh and frozen food demand remains solid. The categories we serve continue to grow faster than the broader food industry, supported by favorable long-term trends. Frozen food remains a compelling option for value. And aligns with growing demand for convenient protein-focused meals. On the bottom of the slide, household spending on fresh and frozen products has outgrown total food spending across several key categories. So new supply is flowing. Demand remains stable, and we've developed a playbook to win in this environment.

Now, turning to slide 7. Our international import-export volumes are about 15% of our global warehouse throughput and also affect our drainage business at GIS. Let's look at two trade-offs.

First, as you can see on the chart at the top of the page, lineage same-store container volumes began a march down following the April 2025 tariff announcements. This year, they were down 18% in the first quarter, 15% in the second quarter, and 15% in the second quarter. And 8% in the third. The decline has been narrowing, and with easier comparisons in the fourth quarter, we expected that trend to improve slightly. Second, the indicators at the bottom of the page, diesel prices, trucking capacity, container pricing, and interest rates have all trended unfavorably throughout the year. Early this year, the industry appeared to be adjusting to the impacts of the tariff announcements, but trends in the late summer and early fall suggested that recovery could be delayed. Oil then jumped to above $100 a barrel, compared to just $75 when we spoke last quarter. As a result, we no longer assume any meaningful improvement in these trends during the fourth quarter. Next, I'll address the question. You may be asking, why is LINEAGE being disproportionately impacted by macro trends? The answer is that we intentionally created this network by securing high-quality assets in some of the most difficult places to build so we could support our customers as they operate in a globally interconnected food supply chain. That positioned us in major population centers and critical port locations, where, in a normal trade environment, we have delivered superior growth alongside our customers.

and do so again. However, from an international trade perspective, the past two years has been very challenging, particularly because the disruption has been concentrated in parts of the food supply chain where lineage holds the strongest market position. As a reminder, this two-year impact followed 20 years of consistent growth in international trade. Also, Lineage is the largest cold chain provider supporting the seafood industry. As you know from our commodity mix charts, this represents roughly 13 percent. Due to the international trade disruption and container rates, NOI from seafood customers dropped over 14 percent year-over-year in the quarter and accounted for about half of our 4.2 percent same-store NOI decline. Conversely, once trade conditions improved, seafood could become one of the largest drivers of earnings growth, supported by attractive economics and storage, handling, and value-added services. Despite these headwinds, there were areas of relative strength. in parts of our network outside of the port-centric assets. The production advantage segment of our portfolio is more removed from global trade dynamics and more insulated from the headwinds on the slide. This portion of our network grew same store and a lot. by 5% in the third quarter. Our international operations also continue to deliver solid performance. The overall food industry remains resilient and the macro headwinds are concentrated in the U.S. import-export segment.

All that said I would not trade our portfolio for a little growth in the near term. We are the industry leader in occupancy with over 80% economic occupancy and the port warehouses we have around the world remain some of the best quality assets and are poised to outperform when the macro trade environment. The operating leverage in our network works in both directions. Incremental volume is highly accretive so the timing of the recovery is something we are watching closely. With that, let me turn it over to Rob who will give you more detail on the course.

soft container volumes, we expect muted seasonality in the second half at just 3% sequential growth. Turning to GIS on slide 9, GIS NOI was approximately 56 million, down 13.8%. and below our expectations. Revenue was 352 million, down 3.3%, but up 5% excluding last year's Spain transportation disposition. GIS margin was 15.9%, down 200 basis points. Macro pressure was concentrated in our North American transportation business, which represents a little over half of the segment's revenue, where we coordinate freight for warehouse customers through consolidation, dredge, and brokerage services. We buy capacity. from carriers on contract and in the spot market, price out to customers mostly on fixed terms, and earn the spread. We began pushing through contract rate increases earlier this year, achieving pricing gains in the five to six percent. While execution was strong, the market continued to tighten, with rates moving higher into the eight percent to ten percent range by the third quarter, leaving us effectively playing catch-up. As a result, we are lowering our full yield. Year-to-date GIS NOI outlook to 231 million to 236 million, or negative eight percent to negative six percent, from negative four percent to negative two percent previously. Year-to-date GIS NOI is down about five percent, excluding the seven million legal settlement in the second quarter, against a strong 2025 comparison when full year NOI grew nine percent. As we reprice contracts and secure capacity, we expect GIS margins to recover.

immediately over the next couple of quarters, just as they have in the past when going through periods of volatility. It's important to point out that while we experience a headwind when carrier rates increase, we will enjoy a proportional tailwind when they decline. At the end of the day, food needs to be stored and delivered to the end customer and our GIS business offers even more compelling value to our customers during periods of elevated transportation rates, given their propensity to seek more cost effective solutions. Turning to slide 10, third quarter revenue was down 1% year over year. Adjusted EBITDA was approximately 317 million, down 7% year over year. FFO was 188 million, or 73 cents per share, down 14.1% year over year, driven by lower adjusted EBITDA and higher interest expense, largely related to the expiration of hedges, administrative expenses. Excluding stock-based compensation was approximately 110 million, below the low end of our 120 million to 125 million quarterly guidance range. Part of that was timing. With management's attention dedicated to the Big Bear response, we traveled less and pushed out training and other expenditures. As our outlook became more cautious, we also scrutinized discretionary spending. So while this is a favorable result for admin, we caution against extrapolating this run rate. That said, our 50 million cost-taken is ahead of schedule as a greater portion of that within 2026. We have therefore lowered full year administrative expense guidance again to 457 million to 463 million, which implies

120 million in the fourth quarter. On recurring maintenance capital expenditures, we've lowered full year guidance to 148 million to 155 million from 160 million to 170 million. Collecting procurement savings, project batching, and improved processes for repositioning material handling equipment across the network. Further, lower taxes and disciplined cash management by our finance team also helped cash flow, driving AFFO ahead of- despite an in-line adjusted EBITDA result. Next is an update on a capital structure that you can find on slide 11. The figures on this slide are as of September 30, and a few things have moved since quartering, so I'll cover those as well. We ended the quarter with- of approximately $8.1 billion and total liquidity of approximately $371 million. Net debt to adjusted EBITDA was 6.4 times, and our transaction adjusted ratio was 5.6 times. Two things drove the- changes in those metrics since last quarter. First, we retired approximately $1 billion of maturities, which we funded on our revolve. Second, we incurred more than $200 million of costs on Big Bear, primarily to complete cleanup activities and preserve the remaining- half of the structure. This came ahead of the insurance proceeds that we now expect in Q4 to offset those outlooks. Now, let me explain what we've accomplished since quarter end. In October, we qualified as a direct eligible- borrower under the farm credit system, reflecting our important positioning within the food and agribusiness sectors. Last week, we closed the $500 million seven-year unsecured term loan led by CoBank that ranks-

peri-pusu with our bank debt. Importantly, this agribusiness-focused financing gives us a differentiated source of capital and access to long-term funding at attractive all-in rates below prevailing market levels for comparable debt structures. Proceeds were used to repay revolver borrowings, so the transaction is leveraged neutral, and it brings pro forma liquidity to approximately $870 million, not including insurance payments received since quarter end, which I'll touch upon now. On Big Bear, our insurers have approved $100 million of insurance payments since quarter end, and we expect to be approved for an additional $200 million before the end of the year. We carry $325 million of coverage and appreciate our insurance responsibility. Any recovery of lost profits will be excluded from the adjusted EBITDA line and is not contemplated as part of guidance. Separately, we are pursuing $1 billion of recovery through legal means from the third-party Big Bear Solar Operators. In our strategic portfolio review, we further narrowed our options and still plan to execute transactions that will create sizable cash proceeds early next year. We expect an outcome that further demonstrates the private market's appetite for high-quality cold storage assets. We have valuations in excess of how the public markets currently value our company. Recent examples of favorable transactions include our sale of a $29 million Salt Lake City asset to an existing customer at a low $6 million.

A mid-6% cap rate, consistent with a mid-6% cap rate on the Santa Maria sale last December, even in choppy macro conditions. Proceeds will go first to reducing leverage and funding our development pipeline. Taken together, then... ...assurance recoveries and the divestiture proceeds for adjusted 5.5 times meaningful progress towards our development pipeline. The pipeline, which stands at $1.1 billion invested across 17 projects, is expected to add $130 million of incremental NOI stabilization. The pipeline is approximately 73% pre-leased, up 200 basis points from the prior report. These development projects are low risk, as the majority are anchored by customers with long-term commitments. For example, our new state-of-the-art, fully automated facility in Hazleton continues to ramp in line with our expectations. Turning to our outlook on slide 12, as Greg said, we're updating our full year 2026 guidance. We now expect same-store NOI growth of negative 3% to negative 2%, total warehouse NOI growth of negative 2.5% to negative 1.5%, GIS NOI of $231 million to $236 million, or growth of negative 8% to negative 6%, administrative expense of $457 million. to $463 million, recurring maintenance capex of $148 million to $155 million, and adjusted EBITDA of $1.25 billion to $1.27 billion. That takes AFFO per share to $2.86 to $2.98. A narrower range with the same midpoint. The $15 million reduction at the adjusted EBITDA midpoint reflects three headwinds and one offset. First, as noted on the right side of this slide, we've raised our estimate.

of the Big Bear headwind to Warehouse NOI and adjusted EBITDA in 2026 from $15 million to $20 million. While the direct impact at the facility remains unchanged at $15 million, we now anticipate an additional $5 million related to a network-wide review of our solar portfolio prompted by the solar fire in June. During that review, some systems were de-energized for additional independent safety inspections. Solar providers are updating technology components and adopting enhanced maintenance procedures before the systems are re-energized. We plan to re-energize the majority of the rays by early 2027, but the lost solar generation will cost about $5 million. Split evenly between the third and fourth quarters. This impact alone is expected to reduce same-store NOI results by 75 basis points in the second half. Second, we've modestly lowered our expectations for same-store NOI results. Reflecting the muted seasonal uplift we discussed earlier and incremental pressure on our import-export business. Third is GIS. Continued carrier rate pressure and the effect of slower import-export activity on our drainage business have prompted a lower full-year outlook. Fourth, and as an offset, is our progress on administrative costs. Congratulations to the team on their hard work. Our $50 million cost reduction plan is ahead of schedule. And we expect to realize a greater portion of that within 2026, as I mentioned.

Altogether, we see these headwinds as transitory, and we expect them to normalize over time. Overall, our execution and balance sheet discipline should provide us the foundation to work through and position us favorably longer term. I'll turn it back to Greg for some closing thoughts.

across our network. LinOS is now at 18 sites, growing to 20 by year-end. Most importantly, we are now exceeding our savings targets in aggregate. As we look ahead to 2027, we're not standing still. We are intensely focused on commercial execution, operational continuous improvement, optimizing administrative expense, capital spending, and working capital. At the same time, we're leveraging our investments in technology, automation, and AI to drive productivity and efficiency. across our global network. We believe those initiatives, combined with our scale and operating discipline, position us to deliver meaningful margin improvement and value creation as market conditions normalize. Before we move to your questions, I want to thank our global team for their focus. We will continue executing on the fundamentals, investing strategically, and strengthening our position as the world's leading gold chain company. Operator, let's open it up for questions.

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