Americold Realty Trust Q3 2026 Earnings Call Transcript

Americold Realty Trust (NYSE:COLD) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Americold Realty Trust reported strong Q3 2026 results with significant improvements in physical and economic occupancy, throughput, and pricing while reducing G&A expenses.

The company closed a $1.3 billion joint venture with EQT, allowing for substantial debt repayment and reducing interest expenses by nearly $50 million annually.

Future outlook includes increased AFFO guidance for 2026, continued strategic initiatives in portfolio management, and potential growth in non-food categories and international markets.

Full Transcript

Rich

Available on the company’s website. Please note that all warehouse financial results are in constant currency and reflect the third quarter 2026 same store pool, which excludes the sites contributed to the EQT joint venture unless otherwise noted. Now I’ll turn the call over to Rob for his prepared remarks.

Scott Robert Chambers (Chief Executive Officer)

Thank you, Rich, and thank you all for joining our third quarter 2026 earnings conference call. I’m very pleased to report that Americold Realty Trust had another strong quarter. A combination of continued industry stabilization along with best-in-class execution and continued market share gains has allowed us to deliver increases across all of our key operating metrics. Our third quarter results also demonstrate the ongoing successful execution against our five strategic priorities, which are strengthening our operating and financial foundation.

While the operating environment remains challenging, our efforts are yielding visible results, and we have seen a multi-quarter improvement in key metrics across the business. I could not be more proud of our team. I’d like to spend some time discussing our results for the quarter and the progress on these key priorities. Then Chris will discuss the details of our outlook for the rest of the year. Starting with our Q3 operating metrics, we once again saw meaningful year-over-year improvements in physical occupancy, economic occupancy, throughput, and pricing—both storage and handling—and all while bringing down our total G&A expense. Physical occupancy for the quarter was 70%, a 460 basis point improvement year over year and up 150 basis points sequentially.

This continues the rebound we saw last quarter and is largely attributable to a more stable environment combined with the onboarding of new customer wins and ongoing market share gains as customers continue to gravitate towards the higher-quality service offerings that Americold Realty Trust provides. Along with these strong occupancy gains, we also saw throughput pallets increase 410 basis points in the quarter. From an economic occupancy perspective, we also saw increases both year over year and on a sequential basis.

Economic occupancy in the quarter was 78.5%, up 210 basis points over the prior year and up 160 basis points compared to Q2. The gap between physical and economic occupancy this quarter was 850 basis points, a healthier and more sustainable long-term level for the business. Our revenue from fixed commitments came in at 57%, a solid result given the ongoing industry pressures, while further demonstrating the value of our fixed-committed contract structure to customers.

Our churn rate in the quarter also remained low at 2.2%. While we are encouraged by these trends, it’s important to note that end consumer demand remains pressured and customers are continuing to manage inventory levels in line with historically low demand. As a result, we would still characterize the current environment as stabilizing, but not yet inflecting. Turning to our price performance, we saw rent and storage revenue per economic pallet increase by 120 basis points this quarter while services revenue per throughput pallet increased by 190 basis points. Both are ahead of our expectations, and our commercial teams have done an excellent job of navigating through this environment and maintaining our pricing discipline across varying market conditions. This is a testament to our operational excellence as well as the value of the comprehensive range of solutions that we provide for our customers.

Importantly, this consistent approach has allowed us to preserve our pricing structure and therefore has us well positioned for a more stable operating backdrop. While today’s pricing environment is more competitive than it was several years ago, we remain focused on balancing occupancy, pricing, and long-term customer relationships. The strong operating performance allowed us to achieve a record handling margin this quarter of 15.9%. This is an incredible accomplishment, as only a few short years ago our handling margins were in the low single digits. This achievement was made possible by a targeted strategy to drive retention and productivity, increase our value-added service offerings, and leverage our technology investments for a more efficient cost structure. We remain committed to receiving fair value for the mission-critical services that we provide to customers and continuing to protect price in a competitive and inflationary environment.

I also want to highlight the strong performance of our transportation business in the quarter. Our large food customers remain focused on improving efficiency and minimizing costs, and for most customers transportation is a much larger percentage of their cost profile than warehousing costs, so taking miles out of their supply chain offers compelling savings. Our solutions teams are equipped with tools to help customers optimize their supply chain, consolidate inventory within our network, and take out transportation miles in the process to deliver bottom-line savings.

Many of our facilities have multiple vendors, and our transportation is purpose-built around a consolidation offering that gives customers access to preferred truckload rates even if they individually have less-than-truckload volumes. We operate this type of multi-vendor consolidation program for several of our large retail customers. Our transportation segment NOI is up 23% this year, showing the attractiveness of this service offering. Additionally, we utilize an industry-standard fuel surcharge mechanism that reprices the business weekly to offset any volatility and margin impacts from changes in fuel prices.

As a result of this strong operating performance, we were able to deliver Q3 AFFO of $0.35 per share, which also outperformed our expectations. This marks our fifth straight quarter of either meeting or beating expectations, further demonstrating our consistent track record of execution across the business. Delivering on our financial commitments is a key priority for this management team, but beyond our quarterly financial results, we are also focused on unlocking long-term value for our shareholders, and next I’d like to spend some time discussing the progress we’ve made on advancing our key strategic priorities.

Certainly the most impactful accomplishment in the quarter, both financially as well as strategically, was the closing of our $1.3 billion joint venture with EQT on August 31. The proceeds from this transaction allowed us to immediately repay $1.15 billion of our outstanding debt and eliminate all of our 2026, 2027, and 2028 debt maturities, reducing leverage and enhancing our financial flexibility. Going forward, we will also benefit from reduced interest expense of nearly $50 million annually.

The JV assets are performing well, and as you can see by our Q3 same store results—which exclude the sites contributed to the JV—trends remain strong across the entire portfolio. Longer term, EQT is a large and sophisticated partner for Americold Realty Trust with substantial capital resources and cold storage experience. Together we have created a platform with the scale, expertise, and resources to pursue future growth opportunities, and I believe this will be an important strategic advantage for us going forward.

The 7% blended cap rate for this transaction also highlights the significant difference in public versus private market valuations and demonstrates the value that sophisticated private investors place on high-quality cold storage assets. We will continue evaluating any future portfolio and capital allocation decisions through the lens of maximizing long-term shareholder value. Turning to our second key priority, which is our ongoing portfolio management initiative, we completed the exit of three additional assets this quarter for total cash proceeds of about $50 million. Since beginning this program last year, we have exited a total of 13 sites and generated nearly $100 million in proceeds. In total, this represents approximately 210,000 pallet positions of capacity that has been removed from the industry, as the majority of these facilities were repurposed for other alternative uses.

We are continuing to methodically scrub the portfolio for assets that no longer meet our strategic or return objectives and have 14 sites that are currently available for sale, totaling another 330,000 pallet positions and several hundred million dollars in potential proceeds for additional deleveraging. Our third priority is to expand the aperture and drive greater utilization across our network by broadening the customers and product categories we serve. Americold Realty Trust has one of the most comprehensive and diverse network of locations and solutions in the industry, with facilities strategically located across all four nodes in the cold chain. This allows us to support customers in moving product from each stage—from production through to final distribution to consumers.

We think about leveraging these capabilities in three different ways. First is increasing the business we do with food manufacturers in sectors where we are underpenetrated, such as seafood and fresh produce. The second opportunity is to grow with customers in food distribution channels such as grocery, convenience, QSR, and e-commerce. Over the past year we have successfully established a retail footprint in Europe with wins at Geronimo Martins and Plus Retail, and we entered the convenience store sector in Australia with On the Run.

We are pleased to announce that during the third quarter we signed our first QSR customer in Europe with the Little Caesars brand. As part of this 4PL agreement, we will handle procurement, inventory management, and distribution to their stores for the next five years, leveraging our best-in-class QSR operating expertise. The breadth and scale of our portfolio, operational expertise in servicing demanding categories, and strong customer relationships position us well to take advantage of these opportunities.

The third avenue for growth is to explore new categories beyond food. As we have discussed in the past, we believe that our assets and capabilities are product-agnostic and therefore translate nicely to multiple other industries. As the demand for temperature-controlled logistics extends across a broad range of product categories—including pharmaceuticals, electronics, chemicals, aerospace and defense, and several others—many of these categories are among the fastest-growing sectors of the economy, and similar to food producers, these customers also need solutions that move products from production through distribution while maintaining a temperature-controlled environment.

Our efforts in this area are in the early stages, but we recently were awarded an attractive new piece of business with one of the world’s leading aerospace companies. These non-food categories significantly expand the overall potential market opportunity for Americold Realty Trust, often at a margin profile that is more compelling than our core food business. Our objective is not to transform the portfolio overnight, but rather to leverage our existing infrastructure and operating capabilities into adjacent categories where we can drive occupancy and maximize the value of our real estate assets for shareholders.

We have attractive leads in several of these sectors, and I look forward to giving you more updates in the future. On to our fourth key strategic priority, which is to maintain our disciplined approach to inorganic growth. Our legacy DFW expansion remains on track, as does our new customer-dedicated build for McCain. We have several additional opportunities in the pipeline that would be great candidates for our JV in North America, along with several in our international business. That said, the interest rate environment, rising construction costs, and current pricing environment all have us on the sidelines for now.

Finally, we continue to make great progress on our cost-savings initiatives. Our total SG&A in the quarter decreased by $7.5 million from the prior year, a reduction of nearly 11%. As a reminder, we announced a cost-savings initiative last year for $30 million consisting of two-thirds indirect labor and one-third SG&A. This program was completed by the first quarter of this year and was followed by our Fit for Purpose initiative in the second quarter, targeting an additional $25 million of cost savings primarily focused on SG&A. The benefits from Fit for Purpose are expected to be realized primarily in 2027. Both of these initiatives are enabled by our prior investments in our labor force and technology platform, which is delivering tangible results. A great example of combining technology, cost savings, and innovation is the opening of our Global Operations Command Center, or the GOCC, which we announced last week. This initiative centralizes the oversight of our automated warehouses around the globe into one single location here at our corporate headquarters in Atlanta.

The GOCC operates around the clock and enhances our operational resilience while delivering cost efficiencies versus a decentralized approach. Anita Nanda, who was recently promoted to our Chief Technology and Solutions Officer, was integral in the design and implementation of the project. Her experience in engineering, project management, technology deployment, and business transformation is a great asset to our company and supports our ability to pursue innovative solutions.

Based on our performance this quarter, we are increasing our full year 2026 AFFO outlook to a range of $1.31 to $1.33 per share. This is the second quarter in a row that we’ve been able to raise our guidance, further demonstrating our team’s consistent execution throughout the year. While we are certainly very pleased with the progress we have made, we remain mindful that the recovery we are seeing is still in its early stages. In this environment, we remain focused on controlling what we can control, executing on our five key priorities, and serving our customers well.

Now I’ll turn the call over to Chris to discuss our financials and outlook in further detail. Chris.

Chris (Chief Financial Officer)

Thanks, Rob, and good morning, everyone. I would like to take a few moments to provide some additional details on our Q3 results, the impacts of the EQT joint venture, and our updated full-year outlook. As Rob mentioned, we are very pleased with our performance this quarter, as the combination of occupancy and pricing gains contributed to a year-over-year increase in same-store warehouse revenue of 4.9% for the quarter. Combined with our disciplined cost execution, we were able to grow NOI slightly ahead of that rate at 5.5%.

Power costs remained elevated in the quarter, increasing 13% year over year and pressuring margins, but the impact on earnings was largely consistent with our expectations and partially mitigated through our ongoing surcharge mechanisms, procurement strategies, and operational efficiency initiatives. Handling margin in the quarter improved to 15.9%, an increase of 230 basis points from the prior year, reflecting increased productivity from the higher throughput as well as the benefits from our indirect labor initiatives earlier this year.

An important milestone this quarter was the successful closing of our joint venture with EQT in August. Americold received net proceeds of approximately $1.15 billion from the transaction, which were immediately used to pay down debt. As a result, we have eliminated all of our near-term maturities, with our next scheduled maturity in January of 2029. This provides us with substantial financial flexibility over the next several years along with a reduction in interest expense of nearly $50 million per year.

You can see the significant improvement in our balance sheet reflected in our leverage ratio for the quarter, which came in at 6.2 times, or 6.3 times including our pro rata share of debt at the JV level. This reflects a full-turn reduction in leverage from last quarter. Going forward, we are maintaining our rigorous capital allocation framework that prioritizes balance sheet strength while maintaining a high bar for incremental capital and a focus on opportunities that enhance shareholder returns. We are targeting a long-term stabilized leverage target of six times or below, supported by ample liquidity and our well-laddered debt maturity profile.

We benefit from having access to both public and private sources of capital, and I believe we are well positioned to weather the current interest rate environment with minimal impact to AFFO while being able to take advantage of future opportunities if and when they arise. The JV has also resulted in some changes to our financial reporting that I’d like to highlight for you. Briefly, you will note that both our Q3 same-store and non-same-store tables exclude the sites contributed to the joint venture. We have provided a recast of our prior period results on page 30 of the financial supplement for your convenience, along with a bridge of same-store, non-same-store, and total warehouse results on page 33. We also have two new revenue and expense lines on our income statement reflecting the gross-up of pass-through operating costs.

The net of these amounts is the management fee that Americold Realty Trust earns from the venture, roughly $1.5 million for the month of September and estimated at approximately $15 to $20 million annually. In addition, our 30% share of the venture’s income is recognized in the line item entitled Income (Loss) from Investments in Partially Owned Entities on the income statement. Accordingly, our 30% share of the JV’s AFFO is included in our consolidated AFFO, and we have added a supplemental adjusted EBITDA disclosure that includes our share as well.

Finally, you will note that there is a gain on the contribution of these assets of $714 million, net of a current tax impact of $7.3 million. This measure is excluded from AFFO; however, it reiterates the substantial and attractive value of assets. Finally, I would like to discuss some of the details behind our increased outlook for the year. Based on the ongoing stabilization we are seeing in the market, combined with our strong price and occupancy performance over the first three quarters of the year, we now expect blended pricing to be up approximately 100 basis points in the fourth quarter, with economic occupancy increasing about 100 to 150 basis points sequentially in line with normal seasonal trends.

Our commercial teams have done an excellent job of managing through this year’s contract renewals while maintaining the correct balance between price, occupancy, and customer retention. Based on these assumptions, we have raised our same-store revenue guidance to a range of $2.06 to $2.1 billion and now expect our same-store NOI to range between $680 to $700 million, an increase of approximately $13 million at the midpoint and bringing us to essentially flat on a year-over-year basis.

Finally, as Rob mentioned, we expect AFFO this year of between $1.31 and $1.33 per share. As a reminder, we’ll begin to feel the dilutive impact from the joint venture beginning this quarter, which will somewhat dampen AFFO in the fourth quarter. We estimate the headwind would have been approximately $0.10 this year, assuming that it had closed on January 1st, and will be approximately $0.11 next year. Based on this, we expect roughly a $0.03 impact in Q4 and approximately $0.07 to $0.08 of incremental dilution in 2027.

Our other guidance components remain largely the same from our Q2 update on August 6, 2026. Next, I’d like to pass it back to Rob for some closing remarks.

Scott Robert Chambers (Chief Executive Officer)

Thanks, Chris. As I mentioned earlier, I’m extremely proud of our team’s performance this year, and I believe we are making tangible and long-lasting improvements to our business that will benefit Americold well into the future. At this point in the year, I know many of our investors are turning their attention to 2027, so I wanted to share some of my initial thoughts. Strategically, I expect that our priorities will remain largely the same: continue to strengthen our balance sheet, maintain a rigorous approach to capital allocation, drive efficiency by leveraging our past investments in people and technology, and increase utilization across our network by expanding the customers and categories we serve.

End consumer demand in our core categories, while stabilizing, remains low by historical standards. There are some constructive trends on both the demand side, including increased innovation and promotional activity, and on the supply side with fewer new announcements and expected deliveries. However, inflation remains elevated and we don’t foresee a meaningful change in consumer behavior. That perspective is largely consistent with what we are hearing across our customer base.

In fact, we recently received the results of our fourth annual Customer Perception Study, which ran through the end of September. Over 300 customers participated, and I’m very pleased that we received another record engagement score, our third in a row, reinforcing our view that Americold Realty Trust leads the industry in customer satisfaction. This year, we asked customers for their view on inventory levels over the next 12 months. The results were insightful, with 27% planning to increase inventory, 54% planning to remain stable at current levels, 6% planning for decreases, and 13% uncertain.

Given the large sample size, we believe the results are generally representative of the market and reflect the stabilizing trends we have experienced over the past two quarters. While encouraging, we are maintaining a conservative and realistic view of the market until we see clear signs of inflection and are therefore planning for the demand environment in 2027 to look broadly similar to 2026. Beyond the demand environment, I also want to share some perspectives on the expected cadence of earnings in 2027, as we will have some unique items affecting the timing of our results, particularly in the early part of the year. First, as Chris mentioned earlier, we will have approximately $0.07 to $0.08 of incremental dilution from the EQT JV spread across the first eight months of the year.

Second, consistent with normal seasonal trends, we expect a decrease in occupancy from Q4 to Q1, and beyond our typical seasonality, we are also seeing some movement among a handful of our retail customers to rationalize portions of their logistics requirements amid industry consolidation. As these transitions are expected to occur at the start of the year, we expect some throughput impacts that we anticipate will be offset by the positive impact of new customer wins later in the year.

Lastly, the first quarter will also reflect an elevated level of SG&A consistent with normal trends. Based on these factors, we would expect that AFFO per share will be the lowest in Q1 and build sequentially throughout the year. Against that backdrop, our focus remains on the areas we can control, with self-help initiatives and continued execution against our key priorities being the primary drivers of performance. Overall, I’m very encouraged by the progress we are making, and our actions are producing meaningful results. We have improved our key operating metrics, strengthened service margins, reduced our cost structure, materially deleveraged the balance sheet, and have continued improving the quality and productivity of the portfolio.

And our long-term value proposition remains compelling. We own a diverse network of mission-critical temperature-controlled infrastructure across all four nodes of the cold chain. This differentiation has allowed us to outperform the market this year and is valuable and difficult to replicate. We have earned our reputation as a trusted provider of high-quality solutions through years of consistent execution for many of the world’s leading food producers, and we have significantly improved our financial position with the opportunity to take advantage of white space in our core, adjacent, and new sectors of the market to drive occupancy across our network and deliver durable cash flows. I believe we have the right assets, people, and strategy to continue building on this progress and create additional value for our customers and shareholders.

We will issue our formal guidance for 2027 during our fourth quarter earnings call as we typically do, and remain committed to maintaining the transparency that our investors appreciate. With that, I would like to turn the call over to the operator for questions.

OPERATOR

We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press star then two. We ask that you limit yourself to a single question at this time and to rejoin the queue if you have any follow-ups. We will pause one moment to assemble our queue.

Our first question today comes from Michael Goldsmith of UBS. Please go ahead.

Michael Goldsmith (Analyst at UBS)

Good morning. Thanks a lot for taking my question. You’ve seen improving trends over the last few quarters, and physical occupancy and throughput have continued to improve despite end consumer demand remaining pressured. So maybe can you separate how much of that improvement is coming from broader industry stabilization versus market share gains and new customer wins? Thanks.

Scott Robert Chambers (Chief Executive Officer)

Sure. Thanks, Michael. We’re really pleased, obviously, with the performance across all the metrics. Occupancy is particularly compelling, and this quarter to be able to deliver the 460 basis point improvement in physical occupancy year over year we think is a great story. It’s certainly coming from a variety of places. I would say, you know, we do continue to see the industry stabilize, which is great news. But largely that would be something that would be driving a kind of flat to slightly up physical occupancy for the broader industry.

The vast majority of what we’re seeing in terms of our occupancy gains are coming from market share gains and coming from new business wins that we’ve been able to achieve over the last one to two years. So, you know, we’re encouraged by the stabilization, but we’re really proud of the outperformance that we’ve been able to achieve. And it really goes back to the last, you know, three, four quarters. I mean it’s been a multi-quarter improvement going back to Q3 of last year. So I think the strategy that we have is working. I think clearly customers are gravitating towards that higher-quality service offering that Americold Realty Trust is able to offer. The depth and the breadth of the value-added services that we have are really resonating with our customers, and our overall value proposition is winning the day in a relatively stable environment.

So I would attribute it mostly to those two items. And then when we think about our portfolio management initiatives, maybe about 50 basis points of occupancy related to those.

OPERATOR

Our next question comes from Michael Griffin of Evercore ISI. Please go ahead.

Michael Griffin (Analyst at Evercore ISI)

Great. Thanks so much. Rob, I think you mentioned in your prepared remarks you’ve got 14 sites totaling $300 million of potential proceeds you could look to dispose of. I’m just curious, it might be early stages, but any kind of sense you can give us on pricing for these potential dispositions, how it might compare to the EQT joint venture, and then more broadly if you’ve seen any change in either buyer appetite or the transaction market, given the volatility that we’ve seen in interest rates over the past couple of months.

Thank you.

Scott Robert Chambers (Chief Executive Officer)

Thanks. So it is going to vary pretty widely because if you think about the assets that we have available for sale, I mean we’ve been pretty public about the fact that we have a few — that one in Lancaster and one in Connecticut — that are certainly kind of first-generation type that we think would be assets that would be probably at a different pricing point than maybe other conventional assets in different markets. So it’s a pretty wide range and it would be hard to give you any, you know, discrete expectation around some of those.

We did report, obviously, this quarter that we had three sites that we exited and we were able to generate nearly $50 million in proceeds. That brings the total up to about $100 million of the sites that we’ve already exited. So it can be a wide range depending on the type of the asset and the location. I think given the fact that many of these sites were low NOI sites, low occupancy sites, you know, they’re not going to be at the same type of, you know, multiple or cap rate that we contributed sites to the JV at, given that those were facilities that are operating and generating, you know, expected cash flow.

So yeah, we think that portfolio management initiative has been very meaningful to us and we’re excited about the opportunity to generate those proceeds for delevering. But, you know, we wouldn’t expect them to be at the cap rates that we contributed assets into the JV for.

OPERATOR

Our next question comes from Victor Feviv of Scotiabank. Please go ahead.

Victor Feviv (Analyst at Scotiabank)

Good morning. Yeah, thank you for taking my question. So same-store services NOI margin improved considerably quarter over quarter and year over year. Can you elaborate on the trends here and do you expect to continue to see some improvement in that number? Thank you.

Scott Robert Chambers (Chief Executive Officer)

Thanks. We’re thrilled with the performance on the services margins. I think it is just a great story for Americold Realty Trust. As you know, we were in the low single digits just a few years ago, and to be able to take that from that position and bring our services margins up to now a record 15.9% is really a testament to operational execution and the strategy that we put in place. There are a variety of ways that contributed to that. One is we said we were going to continue to add new value-added services within the portfolio that make the business more attractive, less commoditized, and we’ve been able to do that and that resonates with our customers. We’re finding that our customers are asking us to do more services for them on their behalf, and that really helps drive up the revenue per throughput pallet which helps drive up service margins.

Retention and productivity has been a great story. It’s an area where we put a tremendous amount of focus on, and we now have a workforce that’s as tenured as it’s ever been, as senior as it’s ever been, and as productive as it’s ever been. We’ve also looked at streamlining our regional overhead model, which we accomplished this year. And then we’re really leveraging the technology investments. We’ve talked a lot about those technology investments over the last few years, and they’re delivering real, tangible results.

This is not about talking about something that may happen into the future. This is talking about right here, right now — we’re delivering tangible results on the technology investments that we’ve made. And all of those things have allowed us to bring the services margins up to a record level despite being in an environment where inflation is still high. And if you look at our pricing, while we feel like we’ve led the industry in terms of pricing discipline, we’re still not where we want to be in terms of our year-over-year increases there.

So to be able to accomplish that in an inflationary environment where pricing is not yet where we want it to be, I think is just another reason to point to the operational execution being very strong. You know, we set a long-term target of, you know, hey, could we get to 15% for the year? I don’t think we’re going to come off of that. Again, this is one quarter. And while we’re very pleased with the performance for the quarter, we have to stay at it every quarter to continue to drive it.

OPERATOR

Our next question comes from Blaine Heck of Wells Fargo. Please go ahead.

Blaine Heck (Analyst at Wells Fargo)

Great, thanks. Good morning, Rob. I was hoping you could talk a little bit more about the non-food category additions and specifically how the stabilized yield or general economics on these spaces compares with your traditional food storage economics when you take into account any cost to convert the space for non-food use and any downtime for that process.

Scott Robert Chambers (Chief Executive Officer)

Thanks, Wayne. Yeah, we think this is a great growth opportunity for Americold Realty Trust over the mid to long term. I want, you know, we remain obviously very focused on continuing to grow in food, but we think opening the aperture on what we can store in our facilities is a great organic growth opportunity for us going forward. We would consider our facilities product-agnostic. We think that customers that are in these other adjacent sectors need the same types of services, the same types of nodes in the supply chain as food producers.

So we do see it as opportunistic. You know, we’ve been able to make some small inroads. We mentioned this quarter that we had a win in the aerospace and defense sector. And we see that, we see pharmaceutical, we see chemicals, we see electronics all as opportunities where Americold Realty Trust can play over the medium and longer term. The economics and early indications are that there’s the opportunity for many of these deals to be more compelling, potentially, than just food, given the fact that oftentimes the cost of goods sold of those products are going to be in excess of what you see for food. And so customers are willing to pay a higher percentage of that cost of goods sold for their logistics cost. So, you know, early days, I don’t — you know, I look forward to being able to provide more updates into the future.

But we’re also finding that the requirement, the overall requirements aren’t that much different. I mean, yes, sometimes there may be incremental certifications, there may be a requirement for some redundancy in refrigeration, but the overall architecture of our facilities generally supports this business very well. And we think that it can be a nice growth avenue long term.

OPERATOR

Our next question comes from Samir Khanal of Bank of America. Please go ahead.

Samir Khanal (Analyst at Bank of America)

Good morning, everybody. I guess, Rob, you know, how are you thinking about pricing next year as contracts reset? Right. I mean, physical occupancy is up here, but pricing is still down, right. I would assume there’s a function of customer mix here and pricing is competitive. So how are you thinking about pricing into next year? Thanks.

Scott Robert Chambers (Chief Executive Officer)

Yeah, I think you described it right, Samir. I mean, so it’s still a competitive environment. You know, we think about pricing in a variety of different ways. I mean, first of all, if you’re a customer that’s in your intra-contract period, you know, we’re going to go through and we’re going to follow the agreements, right? So we’ll have general rate increases next year for customers that are on long-term agreements. If you are a customer that is on a warehouse rate agreement where the business is repriced, you know, generally at the beginning of the year, we’ll have increases tied to those agreements.

And then it’s what happens upon renewal and how do you attract new business. And I think those will be competitive. Certainly our commercial teams have done a great job because we just don’t lead with price in the conversations. We lead with our value proposition and that is really kind of winning the day. And so, you know, I would expect the pricing environment — I mean, we’ve been kind of low single digits, and I don’t think, you know, there’s no reason to believe that we would be outsized relative to that. But at the same time, the inflationary environment is going to mandate that we go out and we find a way to drive price. So we’ll issue our formal guidance, you know, when we get to our call in 2027. But, you know, thinking about it in the context of, you know, how the current trends look is not a bad way to at least start thinking about it.

OPERATOR

The next question comes from Todd Thomas of KeyBanc Capital Markets. Please go ahead.

Todd Thomas (Analyst at KeyBanc Capital Markets)

Hi. Thanks. Good morning. Rob, you mentioned that some retail customers are looking to rationalize their logistics networks at the start of 27. What does that mean for Americold? What are you anticipating that activity to look like? And can you talk about the impact that might have on throughput and occupancy, which have both been improving throughout the year?

Chris (Chief Financial Officer)

Yeah, I think it’s prudent for us to think about churn getting to a point that’s consistent with where it’s been historically. We’ve benefited a lot this year from lower churn rates. So as we go into next year, there’s always puts and takes in the business. A lot of transitions tend to happen at the beginning of the year, and then you win new business as you go throughout the course of the year. So really what we wanted to do is sensitize folks to the normal cadence and timing of earnings expectations as we go through the year. Now that we’re in a normal seasonal trend, we would expect that there’ll be a decrease in occupancy from Q4 to Q1. Some of that will be driven by normal seasonal trends, some of that will be driven by customer transitions, and then that’s backfilled with new business wins as we go throughout the course of the year.

I don’t think anything outsized to really have to worry about. But at the same time, when the business is a little more retail focused, it tends to have a throughput impact that sometimes your food producer business doesn’t. So the goal is just to sensitize everybody to the normal cadence of earnings with Q1 being the lowest, and then as we go throughout the year it would grow from there.

OPERATOR

The next question comes from Michael Carroll of RBC Capital Markets. Please go ahead.

Michael Carroll (Analyst at RBC Capital Markets)

Thanks, Rob. I wanted to touch on the non-food categories again. How different is this business versus Americold Realty Trust’s traditional business? I mean, can these products be stored in a multi-customer building right next to—maybe we could take that aerospace customer that you mentioned. Are they going to be looking to take space in an existing building? Does the product need to be frozen, or are they just looking for a more temperate environment, maybe somewhere in the southern part of the U.S.?

Scott Robert Chambers (Chief Executive Officer)

Yes. So I’ll just speak broadly because every deal is different. The deal that we won in the quarter will be an opportunity that goes into an existing facility where product would be in the same building as we have food product. As an example in this instance, depending on customer requirements, some customers may say, hey, look, we’re fine in the same building, but we need to devise a wall or we need to be in our own separate chamber. So there are different requirements depending on the customer and depending on the commodity.

This one, the customer is fine with it being in a facility with other food. And so I think longer term there’s an opportunity to both grow organically—meaning put these products in facilities that we already have with other products—and grow inorganically. I think it could lead to development opportunities down the line. And when we take the total addressable market of some of these categories, it can be 2x what we see with food in terms of a market.

So it just makes sense for us to start exploring these. I think our existing network and our existing capabilities in many instances will work very, very well for these products. And in other instances, it may lead to some inorganic growth. And we would welcome.

OPERATOR

The next question comes from Nick Joseph of Citi. Please, go ahead.

Nick Joseph (Analyst at Citi)

Thanks. You touched on the industry stabilization, but that the operating environment hasn’t inflected yet. What early indicators are you monitoring to forecast potential inflection, and what are those showing today?

Scott Robert Chambers (Chief Executive Officer)

Well, first of all, if you go back now, we’re encouraged by the fact that we’re on five straight quarters here where we’ve seen the occupancy trends improve. So that certainly gives us a lot of confidence that the environment is stabilizing. As we mentioned in the prepared remarks, we just got done with our customer perception study, which was very broad. We had over 300 customers respond, and I do think the results were very insightful. To see that 81% of our customers either planned on growing or having the same level of inventory over the course of the next year is something that we find very encouraging.

But I think for true inflection, you need an inflationary environment to start to get to a point where you have consumers that end up with more disposable income. So while it seems like there’s some stabilization as well, we haven’t yet seen it turn the other way to a point where we feel comfortable declaring an inflection. I think we’re more focused on controlling what we can control and making sure that our self-help initiatives are drivers of growth again next year just like they have been this year.

So we’ll continue to listen to our customers, we’ll continue to look at retail sales data, we’ll continue to watch the inflation data, we’ll continue to watch the USDA data, look at our customers’ earnings releases and have that dialogue. And for now we’re going to continue to take a prudent approach to what we think the business is going to do next year.

OPERATOR

The next question comes from Michael Muller of JP Morgan. Please go ahead.

Michael Muller (Analyst at JP Morgan)

Yeah, hi, thanks, Rob. You mentioned that some of the non-food uses that you’re pursuing can have better margins than food uses. Can you walk through some of the mechanics behind that, and do those users tend to use a similar amount of services as well as the traditional food users?

Scott Robert Chambers (Chief Executive Officer)

So a lot of it comes down to storage. When it comes to the storage as an example, I would say the cost to store the product may not necessarily change a whole lot. But if you think about the cost of goods sold, there’s an opportunity on that end to drive price on that side of the equation. So I think the cost profile on the storage side is relatively similar, but I think there’s a price opportunity on the handling side of the equation. What we’re finding in early days is that the general kind of bring the product into the facility, store it, then replenish it and stage it for outbound—the cost to do that is very similar to food. But there are both pricing opportunities and incremental value-added service opportunities. And so, when you put the combination of pricing and the opportunity for incremental value-added services, we see more compelling economics in many instances. Again, early days, so hard to really talk too much more discreetly than that.

But we’re encouraged by a lot of these wins that we’re starting to see and the pipeline is firming up. And when we look at the overall total addressable market, it’s definitely a growth opportunity for us longer term.

OPERATOR

The next question comes from Nick Tillman of Baird. Please go ahead.

Nick Tillman (Analyst at Baird)

Hey, good morning, Rob. You touched a little bit on evaluating the portfolio and harvesting potential value where you see fit. Maybe just an update on the trends you’re seeing in Europe and the Asia Pacific and then thoughts around those portfolios longer term—on holds or exploring sales. Just comments there would be helpful.

Scott Robert Chambers (Chief Executive Officer)

Well, let me start by saying both those businesses are performing very well. Our Asia Pacific business and our Europe business are both performing very, very well. They’ve been able to grow occupancy year over year. They’ve grown pricing year over year. They’ve grown NOI year over year. So we think we have platforms in both geographies that have been delivering growth and will continue to be able to deliver growth. Beyond that, I would just lead you back to the comments in the prepared remarks. It says we’ll continue to evaluate all potential capital allocation, capital-raising opportunities through the lens of maximizing shareholder value. And like any good company, we’re always looking at our portfolio for ways to do that.

OPERATOR

The next question comes from Rob Simone of Compass Point. Please go ahead.

Rob Simone

Hey, guys. Morning. Thanks for taking the question. I was wondering if you could comment a little or provide some detail on what the, either the total or the same store—I guess it would have to be same store, but same portfolio—what the NOI growth was within the EQT JV year over year. Thanks a lot. Appreciate it.

Chris (Chief Financial Officer)

I think if you look, we did provide a breakout in the back of the joint venture results. So if you look at page 30, we did recast the historical portfolio for the new same store. But if you look at the bottom of that page, we did also provide some details on the joint venture results going back the last seven quarters. So I would refer you to that. And then also, I would also take a look at the additional reconciliation we provided, which was new this quarter on page 33, which does break out the three buckets essentially: same store, non-same store, and the sites contributed to the partially owned entity.

So we tried to provide some additional detail and color on that. If you have additional questions, we can certainly take that offline.

OPERATOR

Our next question comes from Alexander Goldfarb of Piper Sandler. Please go ahead.

Alexander Goldfarb (Analyst at Piper Sandler)

Hey, good morning down there. Just going back to the customer survey comments that you provided, which were quite helpful. What’s the feedback been on food inflation? Obviously we had diesel that ran up—hopefully it’s coming down, but still elevated. Did any of your customers talk about the impact as far as either higher prices that they’re passing through or how that affects consumer demand, or is it just the overall consumer? I’m just trying to understand—is it overall inflation in the economy impacting the demand for the food products, or is there concern that food prices will go up further because of diesel, and therefore that survey that you had and some of the feedback reflects sort of prospective thoughts on where food pricing may go?

Scott Robert Chambers (Chief Executive Officer)

Yeah, I mean, certainly the inflationary environment is broad, right? It’s across a vast majority of categories, whether it’s gas, whether it’s food, whether it’s home prices, whether it’s interest rates. So I think the inflationary environment is pretty broad. Both food manufacturers and grocery retailers are trying to find ways to keep prices as consistent as possible for consumers to drive volumes. I think food manufacturers acknowledge that their cost inputs are up, so it’s very difficult for them to truly bring price down at the moment.

But at the same time, retailers are really pushing back on food manufacturers to not bring price increases to them to pass on to consumers. And you see that in a number of different big grocery retailer announcements. So there’s some push and pull there on the food side of the equation. I think generally both the manufacturers and the retailers are doing everything they can to keep prices pretty consistent here for consumers because they know that driving volume is the key to driving growth in terms of profitability in their P&Ls. And so at the moment, I think we would still categorize the environment overall as inflationary. And at the same time, consumers have been living with this for a while and they’re finding ways to adjust and overcome.

So we’re not predicting that the environment is going to get worse from here, but we’re also going to work really hard to make sure that we’re not counting on just an inflection to be able to deliver growth.

OPERATOR

This concludes the question and answer session and brings us to the end of our call. Thank you for attending today’s presentation. You may now disconnect.

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