Americold Realty Trust, Inc. Q3 FY2025 earnings call

Key Points

• Congratulated George Chappelle on retirement and highlighted his key priorities.
• Rob Chambers discussed visiting regions, engaging with customers, and the company's unique position across all 4 nodes of the cold chain.
• Detailed each supply chain node: production advantaged facilities (close to production, long-term agreements, high occupancy), 4 distribution centers (multi-tenanted, speculative development pressure), retail distribution centers (high services content, growing, in-sourced), and port facilities (multi-tenanted, leveraging strategic partnerships).
• Financial results for Q3: AFFO per share $0.35, rent and storage revenue per economic pallet increased sequentially and year-over-year, services revenue per throughput pallet increased, customer churn in low single digits, rent and storage revenue from fixed commitments held steady at 60%.

Production advantaged facilities make up about 30% of capacity and revenue. 4 distribution centers account for approximately 50% of capacity and 40% of revenue. Retail distribution centers are 10% of capacity and 20% of revenues, and port facilities are about 10% of both capacity and revenues. Same-store economic occupancy was 75.5%, down year-over-year but flat sequentially. Same-store throughput increased slightly sequentially due to the start of the annual agricultural harvest. Same-store NOI contracted from the prior quarter primarily due to seasonal increases in power costs.

Guidance

• Reiterated guidance for the remainder of the year.
• Anticipate pricing pressure in 2026, with a headwind of about 100 to 200 basis points in pricing, particularly in the 4 distribution node.
• Expect economic occupancy to decrease by approximately 200 to 300 basis points in 2026 due to lower space commitments as customers manage inventory.
• Focus on customer-driven and strategic partnership projects, maintain dividend and investment-grade profile, and balance development pipeline with these priorities.

Risks

• Industry challenges from lower consumer demand, increased supply, and competitive pricing.
• Excess speculative capacity in the 4 distribution node continuing to impact pricing and occupancy.
• Uncertainty in demand recovery affecting customer inventory planning and contract renewals.

Q: Samir Khanal from Bank of America asked about throughput over the next 12 months and ground observations.

A: Robert Chambers and Jay Wells responded that demand is challenged due to lower and middle-income consumers, throughput will still be challenged into next year, and customers are hesitant to build inventory until sustained demand increase is seen.

Q: Greg McGinniss from Scotia asked about margin decline and cost control.

A: Robert Chambers said they control costs by managing direct labor to throughput, Project Orion progress, and evaluating low occupancy sites.

Q: Michael Carroll from RBC Capital Markets asked about sales pipeline and fixed commit renewals.

A: Robert Chambers stated sales pipeline is a bright spot but slower to materialize, and fixed commit renewals are spread throughout the year.

Q: Michael Griffin from Evercore ISI asked about fixed commit negotiations and P&L impact of offline facilities.

A: Robert Chambers said negotiations balance price, volume, contract length, etc., and offline lease facilities have minimal P&L impact with customers moved to owned infrastructure.

Q: Blaine Heck from Wells Fargo asked about customer cost pressures and inventory planning.

A: Robert Chambers said customers are debating when to build inventory, hesitant to build due to uncertain demand, and discussing innovation and promotional activity.

Q: Blaine Heck also asked about new competition exits and acquisition opportunities.

A: Robert Chambers said new market entrants face challenges, exits may become opportunistic, but Americold focuses on growing business.

Q: Michael Goldsmith from UBS asked about excess capacity absorption and pricing from low occupancy facilities.

A: Robert Chambers discussed absorbing capacity through new business initiatives, and pricing in low occupancy facilities depends on various factors.

Q: Nicholas Thillman from Baird asked about portfolio age and stock repurchases.

A: Robert Chambers said development projects take longer in current environment but will meet stabilized returns, and stock repurchases are balanced with meeting customer growth and maintaining dividend/investment-grade profile.

Q: Todd Thomas from KeyBanc Capital Markets asked about economic occupancy risks beyond 2026 and portfolio mix.

A: Robert Chambers said renewals depend on market conditions, and the company will lean more into production advantaged and retail locations, focusing on strategic partnerships.

Q: Brendan Lynch from Barclays asked about expanding into other food and nonfood categories and power cost risks.

A: Robert Chambers discussed opportunities in other categories like floral, pharma, pet food, and initiatives to manage power costs through solar, LED lighting, and maintenance.