Good day, and welcome to the Americold Realty Trust First Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Scott Henderson, VP of Capital Markets and Investor Relations. Please go ahead. Good afternoon. Thank you for joining us today for Americold Realty Trust First Quarter 2022 Earnings Conference Call. In addition to the press release distributed this afternoon, we have filed a supplemental package with additional detail on our results, which is available in the investor relations section on our website at www.americold.com. This afternoon's conference call is hosted by Americold's Chief Executive Officer, George Chappelle, Chief Commercial Officer, Rob Chambers, and Chief Financial Officer, Marc Smernoff. Management will make some prepared comments, after which we will open up the call to your questions. On today's call, management's prepared remarks may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. A number of factors could cause actual results to differ materially from those anticipated. Forward-looking statements are based on current expectations, assumptions, and beliefs, as well as information available to us at this time and speak only as of the date they are made, and management undertakes no obligation to update publicly any of them in light of new information or future events. During this call, we will discuss certain non-GAAP financial measures, including core EBITDA and AFFO. Full definitions of these non-GAAP financial measures and reconciliations to comparable GAAP financial measures is contained in the supplemental information package available on the company's website. Now, I will turn the call over to George. Thank you, Scott, and welcome to our First Quarter 2022 Earnings Conference Call. This afternoon, I will provide an update on the four near-term priorities that we are focused on, summarize our results, and then discuss our outlook for the remainder of the year. Rob will then provide an update on our recent customer initiatives, and Marc will review our financial results in more detail. Let me start with the four near-term priorities that we are focused on, which I outlined on our last earnings call. First, we have made great progress in repricing our warehouse business to offset inflationary pressures in our cost structure. As a reminder, exiting the first quarter, we committed to cover all known inflation incurred through the end of 2021, which I am pleased to say we have achieved. The progress of these pricing initiatives can be seen on page seven of our IR supplemental. Rent and storage revenue per economically occupied pallet in our same-store on a constant currency basis increased by 5.6%. Service revenue per throughput pallet increased by 6.3%. As the first quarter of this year progressed consistent with the broader economy, we have seen inflation continue to rise, and we expect that trend to continue. Our pricing initiatives are ongoing and are targeted at addressing the incremental inflationary pressures that have risen during the quarter. We will exit the second quarter at a run rate covering all known inflation incurred through the first quarter. As it relates to our cost structure, we have added tighter controls, created more robust processes, and strengthened our team to ensure that we have an accurate real-time view of each cost component. We are now in a much better position than we were in the third quarter last year and will not be surprised by meaningful movements in our cost structure again. Second, we continue to focus on labor management with the goal of optimizing our mix of permanent and temporary associates in our facilities. Our labor mix affects not only our wage rate structure but also our productivity and efficiency. Temporary associates cost more per labor hour and are less productive than permanent Americold associates. Prior to mid-2021, in the aggregate, we were staffed at approximately 70% permanent hours to 30% temporary hours in our warehouse portfolio. Throughout 2021, as the year progressed and the labor market became more challenging, this ratio moved closer to 60/40. Going forward, we are looking to hire more permanent Americold associates into our facilities and have implemented several new initiatives to achieve this goal, as well as taking action to increase retention. During the first quarter, while we made some modest improvement and we're closer to 65/35 for the quarter, we are still lower in our permanent associate mix by approximately 600 basis points versus first quarter 2021. We expect to see continuing improvement throughout the year as a result of our efforts, but it will certainly take time during this challenging labor environment. Please keep in mind that a new associate is not fully productive for approximately three months. Additionally, I'm pleased to share that we added a new Chief Human Resources Officer in the first quarter, Sam Charleston. Sam has deep expertise in HR and the food supply chain and will be overseeing our hiring and retention initiatives. Third, we're focused on differentiating our platform by providing best-in-class customer service. While relying on temporary labor during 2021, we were less productive and less efficient, and we know it negatively impacted customer service. Please note, I do not think this is an Americold specific issue. I believe this impacted all companies in the services industry that are dependent on skilled labor. The benefit of a productive, predominantly permanent workforce is servicing our customers at best in class levels and ultimately leads to increased market share. To improve our customer service, we've added a new leader, Dave Moore, Senior Vice President of Integration and Quality Assurance. Dave has extensive experience in our industry, having held leadership roles at Agro Merchants and Americold in the past, and we're thrilled that he has rejoined our team. Our final focus area is ensuring that our development projects are delivered on time and on budget and then deliver the appropriate returns. Since I joined the company, we have completed comprehensive reviews of all recently completed and in-process development projects. I'm pleased to report that the projects that have reached stabilization, inclusive of Chesapeake, North Little Rock, Columbus, and Savannah, are performing in line with disclosed stated yields in the supplement. I'm also happy to report that our Dunkirk project will be operational this month on time and on budget and is expected to stabilize as previously disclosed in our IR supplemental. As a reminder, this is a dedicated build to suit facility for a large private consumer packaged goods manufacturer with fixed commitment pricing structure and an initial 20-year term. Due to well-publicized global supply chain issues, component availability, and customer requested change orders, we have adjusted completion and stabilization dates to several in-process development projects. We have also made minor adjustments to total estimated capital costs on several projects and adjusted the yields on the upper end for one project, Atlanta phase one. These changes can be seen on page 34 of the IR supplemental. Finally, I'm pleased to announce that we've added a new senior leader, Anita Nanda, Senior Vice President of Global Development. Anita brings 25+ years of automation and development experience. Turning to our results, end consumer demand for temperature-controlled food remains strong, but COVID-related supply chain and labor disruptions continue to impact the global food supply chain. Throughout the first quarter, our customer's production was impacted by absenteeism due to the Omicron surge. Even after the Omicron wave receded, the labor market remains very challenged and continues to strain our customers' ability to produce at pre-COVID levels. Also, please note that Easter fell later in April this year versus earlier in April last year, which contributed to the increase in our economic and physical occupancy in the same-store pool for the month of March year-over-year. The seasonal Easter buildup occurring later this year versus last year is a meaningful driver for the slight economic occupancy improvement in the same-store pool in the first quarter of 2022 versus first quarter of 2021. On the cost side, we continue to see inflation in multiple aspects of our business, which I highlighted earlier. Additionally, our absenteeism increased during the Omicron surge, which increased our labor costs along with our heavier reliance on temporary associates. As I said earlier, not only do temporary associates cost more, but they are less productive than our permanent associates. For the quarter, our global warehouse same-store pool generated total revenue growth of 6%, while we experienced an NOI decline of 3.6%, both on a constant currency basis. AFFO per share was $0.26. The two main factors that led to these results were a meaningful increase in pricing combined with an even larger increase in our cost structure in the warehouse business. Let me quickly comment on stabilization of NOI contribution dollars within our same-store pool, which now represents 90% of the total properties in our warehouse segment. At this moment, we are focused on protecting NOI contribution dollars and not as much on NOI margin percentages. As you are well aware, NOI dollars are what drives AFFO per share growth. The four prerequisites for seeing NOI contribution dollars return to pre-COVID levels are, first, we need to continue our current pricing initiatives to offset inflation. Second, we need to integrate and fully commercialize recently added same store facilities. Third, we must achieve the proper mix of perm to temp hours ratio. Finally, we need occupancy and throughput volume to recover to pre-COVID levels. At this point, I want to highlight that we published our third ESG report in April, and it is available on our website. We cover numerous aspects of our approach to ESG in this report, but I will call attention to a few of our key objectives. We are committing to adhering to science-based targets for greenhouse gas emissions this year and will pursue a SBT verified carbon emission reduction goal to achieve net zero. We are also committing to achieve green building certifications on 50% of our portfolio by 2030. Additionally, this year we are launching an inaugural Global Diversity & Inclusion Culture Committee and are developing a three- to five-year diversity and inclusion strategy. These are just a few of the highlights. We are very proud of the progress we have made in our ESG journey and look forward to continuing to move forward in this area. Finally, last week, we announced that we partnered with Kraft Heinz, one of our largest customers, and Feed the Children, an organization Americold has sponsored for numerous years to deliver frozen potatoes to families across the nation living below the poverty line. Grocery prices have risen by almost 9% during the last 12 months, impacting millions of families. We are proud of the work we are doing with Kraft Heinz and Feed the Children to help families in this challenging environment. With that, I will turn it over to Rob. Thank you, George. As we discussed on our last two earnings calls, we increased the pricing of our warehouse business in order to address known cost increases. We said we would exit the first quarter with these price increases in place, and we have accomplished that goal. As George noted, some of these increases were implemented during the first quarter, meaning the full run rate will not be seen until 2Q results. However, we are continuing to see inflation in our cost structure in other areas, and we expect it to continue, as George discussed. We have implemented additional price increases, and we are being very targeted in our approach. As a reminder, approximately 30% of our warehouse revenue is with smaller customers where our pricing can be adjusted at any time with a 30-45-day notice. Approximately 70% of our warehouse revenue is with our top 100 customers. About half of these top 100 customers have contracts with formulaic mechanisms in place that allow for us to equitably adjust our pricing as long as there's been a demonstrable increase in cost. The remaining half of these customers have come to the table clauses that require good faith negotiation to increase price. As a reminder for our top 100 customers, we usually need to see the elevated costs for at least 60 days before we can trigger either our price increases or begin negotiations. These price increase conversations have been very rational as we are increasing rates to cover macro-level inflation. Outside of labor, power is our second largest expense. During the first quarter, power increased by approximately 18% in our same-store on a constant currency basis year-over-year. We're seeing the majority of this increase in our European portfolio within the same store, driven by the increase in the cost of energy due to the conflict in Ukraine. However, we are also seeing the cost of power and utilities increase in other global locations as well. In order to address this, we're in the process of instituting power and utility surcharges to our customers in the impacted facilities. The lag period here is approximately four weeks, which means we will see the outsized increases in power and utilities costs for this period of time before we pass it through to our customers. This incremental revenue will be reflected in the rent and storage revenue of our warehouse business on a go-forward basis. On to our commercialization efforts. At quarter end, within our global warehouse segment, rent and storage revenue from fixed commitment contracts increased on an absolute dollar basis to $367 million, compared to $307 million at the end of the first quarter of 2021. On a combined pro forma basis, we derive 39.8% of our rent and storage revenue from fixed commitment storage contracts. Within our global warehouse segment, we had no material changes to the composition of our top 25 customers who account for approximately 49% of our global warehouse revenue on a pro forma basis. Additionally, our churn rate remained low at approximately 3.3% of total warehouse revenues. Finally, I'm very proud of our Americold associates who allowed us to execute a successful Easter season for our customers and the role we played in delivering holiday cheer to millions of consumers. Our mission at Americold is to help our customers feed the world. We continue to find new and innovative ways to partner with our customers to fulfill that mission. In the first quarter of 2022, we grew our business with 80% of our top 25 customers year over year. Our existing relationships with that strategic tier of customers averages over 30 years. Our comprehensive suite of solutions across both the infrastructure and services segments of our business continue to provide a compelling value proposition to our customers and led to several large new business contracts with both food manufacturers and retailers that were executed during the quarter. Our pipeline for both global development and business plan for existing infrastructure remains strong as customers continue to look for ways to improve their supply chains. We're grateful for the opportunity to support our customers' growth initiatives through the strength of our platform. Now, I'll turn it over to Marc. Thank you, Rob. For the first quarter, we reported total company revenue of $706 million, which reflects an 11% increase in growth across all segments of our business, principally driven by our warehouse segment. Total company NOI was $158 million, a 1% increase reflecting continuing challenges in the macro operating environment and inflationary pressure. Our total company NOI margin decreased by 234 basis points to 22.4%. Corporate SG&A totaled $58 million for the first quarter of 2022, as compared to $45 million for the prior year. As we discussed on our last call and in line with our expectations, we had increases in our annual performance-based cash compensation and in our stock compensation expense, primarily driven by the one-time retentive stock grant awarded in the fourth quarter. Additionally, as discussed and in line with our expectations, we had increases in our IT spend, insurance, legal and professional fees, travel, combined with other inflationary pressures, which were partially offset by synergies from our recent acquisitions. Core EBITDA was $111 million for the first quarter of 2022, a decrease of 5.9% year-over-year. Our core EBITDA margin decreased 284 basis points to 15.7%. Our first quarter AFFO was $69 million or 26 cents per diluted share. Now I will turn to our results within our global warehouse segment. For the first quarter of 2022, global warehouse segment revenue was $541 million, an increase of 11% compared to the prior year. This growth was driven by our pricing initiatives in the same-store pool, paired with recent acquisitions and the ramp of recently completed development projects. Warehouse segment NOI was $146 million for the first quarter of 2022, an increase of 0.1%. The increase is driven by recently completed acquisitions, primarily offset by lower contribution in our same-store pool. Additionally, approximately $2 million in startup costs related to our development projects are also weighing on these results. Global warehouse segment margin was 27% for the first quarter of 2022, a 307 basis point decrease compared to the same quarter the prior year. Now I'll turn to our same-store results within our global warehouse segment. For the first quarter of 2022, our same-store global warehouse segment revenue was $483 million, up 4.5% year-over-year and 6% on a constant currency basis. This was driven by increased revenue in both rent and storage and warehouse services. Same-store global warehouse NOI was $139 million, down 4.7% year-over-year and a decrease of 3.6% on a constant currency basis. This was driven by NOI growth in the rent and storage portion of our business, offset by lower contribution from the warehouse services portion. Same-store global warehouse NOI margin decreased 276 basis points to 28.8%. For the first quarter, same-store global rent and storage revenue increased by 5.2% year-over-year and increased by 6.4% on a constant currency basis. This was driven primarily by rate escalation and a modest increase in economic occupancy. Our same-store economic occupancy was 77.6%, which reflects an increase of 22 basis points from last year's first quarter economic occupancy, partially related to the timing of the Easter buildup and offset by continued food production challenges, but stable end consumer demand. The slight occupancy increase was coupled with a 5.6% increase to our constant currency same-store rent and storage revenue per economic pallet, driven by our pricing initiatives and rate escalation. Our same-store global rent and storage NOI increased by 3% year-over-year and 4% on a constant currency basis. This was due to previously described revenue growth, partially offset by the inflationary pressure on costs inclusive of power, facility maintenance, property taxes, and other facility costs year-over-year. Same-store global rent and storage NOI margin decreased 100 basis points to 61.9% due to the same factors. Same-store global warehouse services revenue for the first quarter increased by 3.9% year-over-year and 5.7% on a constant currency basis. This revenue growth was driven by our pricing initiatives, which increased our constant currency same-store warehouse services revenue for throughput pallet by 6.3%, partially offset by changes in business mix. This revenue growth was also partially offset by a 0.6% decline in throughput, driven by the challenged food production environment and the timing of Easter. Our same-store warehouse services NOI margin was 4.5% for the quarter, a decrease of 411 basis points from the prior year. This was primarily driven by higher costs of labor and other service costs due to elevated inflation. Now turning to our balance sheet. At quarter end, total debt outstanding was $3.2 billion. We have total liquidity of $657 million, consisting of cash on hand and revolver availability. Our net debt to pro forma core EBITDA was approximately 6.6x. At this point, we have spent approximately $423 million on development projects in process, which reflects almost one turn of leverage. Now let me discuss our outlook for the remainder of 2022. We are maintaining our guidance for AFFO per share in the range of $1-$1.10. Please refer to our IR supplemental for detail on the additional assumptions embedded in this guidance. While George and Rob already provided an update on the current environment, let me provide some additional commentary around our guidance. We expect food manufacturing to continue to be challenged for the remainder of the year, primarily driven by labor constraints. We expect to continue to see inflationary pressures in the near term. Given this inflationary environment, our ongoing pricing initiatives and the embedded lag for the full year on a constant currency basis, we expect same-store revenue growth will exceed our previous guidance. We now expect it to be 0%-2% positive. However, this higher revenue growth is being offset by higher inflationary costs, and as a result, we are not changing our NOI contribution dollar expectations. While there are no changes to our maintenance capital expenditure range, please keep in mind that the first quarter tends to be one of the lower quarters in terms of dollar spend within the year. Finally, please keep in mind that our guidance does not include the impact of acquisitions, dispositions, or capital markets activity beyond that which has been previously announced. Now let me turn the call back to George for some closing remarks. Thanks, Marc. Over the past few months, I have had the opportunity to meet hundreds of our associates and cannot be more impressed with their dedication and passion to service our customers. As I look forward to meeting more of our associates, it's clear to me they are what makes us a best-in-class service provider in the cold storage industry. I'm extremely proud of their work and cannot express my gratitude to them enough. Thank you again for joining us today, and we will now open up the call for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. We please ask that you limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question will be from Samir Khanal from Evercore ISI. Please go ahead. Good afternoon, everybody. George, maybe talk about kind of what you're hearing from your customers. I know you talked about the labor, you know, kind of situation being challenged, but, you know, if you compare that to, let's say, 60 days ago when you provided guidance, I mean, do you think it sort of. I mean, where would you compare that to? I guess, I just wanna kind of get an idea of what the customers are saying to you here from a labor perspective. What they're saying to me from a labor perspective is that the situation has not got better. They still do not have enough labor to produce at levels that they historically would be capable of. They're trying everything they can to get people. They're just struggling as we are and mentioned in our earnings release here. I don't see any improvement yet. I see a lot of effort. I see people focused on it. Our customers are certainly focused on it, but with very little results to date. Okay. Then I guess my second question is around maybe to Marc on the average occupancy, which, when you look at it year-over-year, was pretty stable, right? Maybe even up a little bit, but I know you guys have talked about sort of being down about sort of 100-200 basis points. How should we think about that cadence of occupancy throughout the year? Yeah. I think the Q1 results, as I mentioned in my prepared remarks, were really impacted by just the timing of Easter. You know, if you look more broadly at the macroeconomic conditions and what our manufacturing clients have been saying in their public releases, that they're struggling to increase production, just as George had mentioned. The macro, especially the U.S., is our largest component of our portfolio. If you look at the USDA data, you'll see year-over-year declines. I think the macro environment is still challenged. However, what you see in our Q1 results is roughly a lift due to timing of where Easter fell. I think, you know, if you- Got it. If you step back and you normalize, I think we're holding to our volumetric guidance of down roughly 100-200 basis points for the year. Okay. That hasn't changed. Okay, got it. All right. Thank you. The next question comes from Dave Rodgers from Baird. Please go ahead. Yeah, good afternoon, everybody. George, maybe somewhat akin to that question, I wanted to ask about kind of what's your expectation longer term of how long it'll take to refill the channel? You know, when you have these labor issues, you have, you know, poultry stock and the like, all kind of lower than they were. You know, when do you guys kinda build back to the point where you're comfortable kinda getting back to those pre-COVID levels? Yeah, we really haven't set a timeframe because we really can't say when the labor force will show up and get back to work in the food industry. I think everybody in the food industry is surprised that it's gone this long. We would've expected, you know, the workforce that was there two years ago to be back by now. It's not. As I mentioned, all the companies I've spoken with, our top customers, they're all doing all they can to find people. It's just very difficult. Exactly what we're experiencing. I can't say when it will happen. I can say all of our customers are very motivated for it to happen. There's unmet demand at retail that they know they can capture. They've all said they could sell more if they could produce more. I think if you look at those earnings releases, that's a very consistent statement. They couldn't be more motivated, but I can't predict when the labor force will show back up. Maybe on that labor topic as a follow-up. I mean, you know, I know you're trying to drive more permanent labor. If this continues to persist where you just have lower goods, lower throughput, one, do you need to add more labor, or is it just a shift in the labor? Two, you talked about kind of market share. Do you think you lost market share with your performance last year? How much do you think you can gain back? Well, I'll focus on the last part first. Our churn rate says we did not lose market share. Our churn rate has been very consistent. It stayed in the 3% level right through the last few years. We don't know of any large customer we have lost. It's simply that our customers are producing less for the reasons I mentioned. When it comes to our labor, we don't need to reduce labor. We need to move labor from temporary associates to permanent associates. You can see in the numbers we made some progress. We got to 65/35 off a base of 60/40, so we made 5 percentage points of difference in our permanent workforce as it relates to our temporary workforce. We said we've historically been at 70/30 permanent people, and I've said I'd like to get to 80/20. We'll continue trying to hire people and reduce our dependence on temporary labor, and we can do that now. It's not required for more volume. It's simply changing the employee mix we have today. Okay, thank you. The next question is from Michael Mueller with JP Morgan. Please go ahead. Yeah, couple of follow-ups here. For the Easter reference, can you tell us what the comparable number would have been ex-Easter impact or best guess there? Can you let us know at the end of April what that comp looked like as well? That's the first one. Yeah. As I said, when you step back and you look at all the numbers, everything all together, it's roughly trending to within our guidance range, which is roughly 100-200 basis points down so that you can see the impact of the Easter shift on Q1 also. Got it. That's gonna be comparable now. Okay. Then on the expense side, you talked about a few things, power, contract labor, and then just inflationary costs. If we're thinking about what's changed in terms of the higher expenses on a go-forward basis, when you look at those three categories, power, contract labor, timing, and then just general inflation, is it more skewed to one of those items than the other, or is it just kind of a third? Yeah. I think it's a little function of the geography. I think what you'd see in North America, the inflationary pressure is probably more seen in labor. If you look in Europe, probably the inflationary pressure is more seen in power. It's a little geographic specific in terms of what we're seeing. Obviously, the bulk of our dollar spend is the labor spend dwarfs the other categories, so obviously we're very focused on that category in particular. Our top two spend categories being labor and power are the ones we're watching the most. Got it. Thank you. The next question is from Manny Korchman from Citi. Please go ahead. Hey, everyone. Can you remind us in your conversations with your customers, if you've approached the customer or contractually you've gotten them to increase their revenues to cover these cost increases, what happens now? If you know, costs were up 5%, now we're here a quarter later, five months later, whatever that is, and they're up another 5%, is that another contractual increase, or is it at some point does the new contract need to reflect what's actually happening, and then you're on the hook for whatever happens, future of that? Hey, Manny. This is Rob. What happens is we have that same conversation that we had previously again. We go back, we demonstrate the fact that costs have moved since we did our last price increase. Depending on either whether it's formulaic or a come to the table discussion, we end up, you know, demonstrating that we've seen that cost increase and then implementing the next rate increase to cover that. Thanks. Have you seen any changes in whether it be consumer or customer demand geographically and by geographically, I mean both in the U.S. and Europe, but also just within different markets in the U.S.? I mean, it's been fairly consistent on our largest customers' earnings releases that they know there is unmet demand. Our largest retail customers are still saying they hit large out-of-stock conditions. All of our larger customers have said they can sell more if they can make more. That hasn't changed. I think consumer demand in retail was recently quoted as being remained at elevated levels versus food service. It has not changed in the last quarter. It's Michael Bilerman. I just had a follow-up question about sort of how this may sort of end, just from the standpoint of, you know, as a consumer, we all probably are gonna realize that everything's gonna cost us more because all of these increased costs just keep on going through the entire chain and which is affecting the inflation that we're all seeing, and it just keeps on going until perhaps it doesn't, and we're potentially going into a recessionary environment if the Fed has too much of an impact. What's gonna happen if we do go into a recession? I guess do your customers then come back to you and your costs start to go up? How does this sort of play out if we go on the other side of this? Because it sounds like you're gonna play catch up for a period of time, and you're gonna try to keep on passing all these costs through as they go up. What happens when we go to the flip side of things? Well, if we go to the flip side of things, I mean. Well, first, let me start with, that's the reason we need to be able to price quickly to offset inflation, right? We wanna compress the time between we recognize the incremental inflation and we price for it. That's important to us to eliminate a long lag that could impact us when things turn around. I mean, is it conceivable that if the scenario you just mentioned played out, that we would give price decreases if inflation did recede? We would. I mean, we've been pricing simply to offset inflation. That's why the NOI has not changed with the pricing. We're simply offsetting costs. If costs were to reduce, we would be in a position where, sure, we would look at giving price decreases. I don't see that in the near future, but again, we're trying to just offset cost as it occurs. Should an environment materialize where cost decreases, I would expect we would get pressure from our customers to reduce our pricing, and we would do that. Yes. And let me, just building on that comment, that's why for power, which tends to be a more volatile cost, that's why we use a surcharge mechanism, so they can be turned on and turned off depending on the movement in those costs. I think on a macro basis, as you think about it, if we start to slow down, and you move into a recession, you see lower inflationary pressure, eventually the inflation will fall back within our normal course GRIs that are embedded in our base contracts, and that will reduce the need to have to be kind of continually repricing the business. You know, the last thing I also just wanna remind on that is one of the benefits of our platform is we do serve the food industry, which is a consumer staple, which tends to be more recession-resistant than other areas of the economy. Yeah, go ahead. Sorry. I was just gonna add on, I don't see labor rates reducing. I don't see that ever happening. As you know, that's the lion's share of our costs and most likely inflation. I don't see that happening. I think Marc highlighted probably the most common thing where we put in a power surcharge for a period of time, and then we remove the surcharge if power backs down. Right. Yeah, no, I mean, everything is always unprecedented 'cause, but you're in a position right now, right, where you know, I don't know what stops this virtuous cycle. At some point, do the customers just sort of balk at the inflationary pressures, you know, themselves? It's a tough situation for, I guess, you know, each party to be in. Neither is happy, right? That's, I guess, you can both be upset. That's, I think that's pretty accurate. Yes. All right. Thanks, guys. The next question is from Michael Carroll from RBC Capital Markets. Please go ahead. Yeah, thanks. George, can you provide us an updated view on how you're viewing the Russia-Ukraine conflict and how this could potentially impact your business? Is it still more of a trade route type issue, or is it starting to bleed into production concerns, either in Europe or the U.S. or how you're thinking about that? I would say, as we said last quarter, the number one issue we're seeing is power increases. Marc mentioned that when it comes to power, Europe is the location that has seen most of the increases. We're offsetting those with power surcharges. I'd say that is the number one issue we've seen, related to Ukraine. We have not seen any reduction in production levels. We haven't seen any material movement in inventory levels. It's really just the power that has been the significant driver. I think last time we talked, you were talking about how it could potentially change trade routes, and that could impact your business, positively or negatively. I mean, is it impacting trade routes at all? It is not. The port traffic in the ports in Central Europe where we maintain a presence really have not been impacted. I would say Poland is the one area that experienced a significant amount of disruption in the quarter related to the port, but it's a relatively small business for us there. In the main, Europe did fine in that area. Okay, great. Thanks. Yeah. The next question is from Ki Bin Kim with Truist. Please go ahead. Thanks. Good afternoon, everyone. Just to go back to a couple of points here, you know, there's a couple of things that are in flux right now. You're going to come back to the table and try to push another inflationary increase. You talked about the power surcharge. If I remember correctly, there's about a one-month lag period. So when you think about those two things together, what kind of improvement in same-store revenue should we expect as we go forward? Because I'm guessing that all those surcharges, new surcharges haven't been reflected in Q1 earnings. That's right. All the impact of all of those surcharges have not necessarily been impacted in Q1. What we would say is that the impact that you saw as it relates to pricing, the 5.6% on storage revenue for economic occupancy pallet and the 6.3% on the services side, you know, those were increases that, you know, started in the fourth quarter, continued into the first quarter, and will hit their full run rate now that we're outside of the first quarter in Q2. That largely offset the inflation that we knew about in the fourth quarter. With continuing inflation going on in Q1, you know, we've implemented another round of rate increases, which, you know, look more like 200 basis points or, you know, another 2%, that would go on top of what we've already implemented. Just a reminder, what we've implemented, you know, that 6% range, for us, when we get to full run rate of that, there's probably another 100 basis points there. So, we'll see the full impact of what we've done in Q4 and Q1 impact Q2, and then what we just did in Q2 will impact Q3. One point to make, though, is that we started this pricing initiative late Q3 and into Q4. When you get to the back half of the year, you know, we're comping against increases that started last year. Okay. Those were a lot of numbers. I just wanna clarify. When you said, is it 100 or 200 basis points improvement to that 6.3%? So- Warehouse services revenue per pallet? Yeah. That 6.3% that we've implemented, when that gets to full run rate, that looks more like another hundred basis points. Okay. On top of that. Uh. We've done increases in Q2. Okay. Next question. I mean, as we're about to slowly climb out of this labor shortage, inflationary environment, it seems like there might be another storm brewing. I'm not sure if you've had a lot of conversations with your food producers about this, but you know, obviously there's been a lot of changes in fertilizer costs and some severe weather patterns in the U.S. that might potentially impact crop fields. I think in West Texas and in the Great Plains, there's been about, you know, 40% of the field is considered, you know, very dry. So no soil moisture. If you look at some other states, you know, like in West Texas, up to 85% of that soil is unusable currently for production for crops. I'm not sure if you have any kind of broad thoughts about this and how this might play out as we get into rest of the year for non-protein production, but for all the base crops. Yeah, I have not had that conversation with our top customers. Really, my conversations have all been about labor availability, how quickly they can fully staff a facility, and how quickly they can fully ramp up a facility and drive production to levels of pre-COVID, so that I can be prepared to accept the inventory they'll produce. I have not heard nor have I asked, which may be why I didn't hear, that raw material issues could be affected by weather and drought. Although weather and drought are issues we face every year, at least in my experience in the food industry. I'm not sure how different this year will be, but I have not had any discussions with customers that would cite that as an issue they're facing at the moment. Okay. Thank you. The next question is from Anthony Powell from Barclays. Please go ahead. Hi, good afternoon. Just a question on the energy surcharge. Is that part of the same contract negotiations or that you have regularly as you increase costs, or is that something separate? Do customers have the ability to contest that in any way? Yeah. It's part of the same conversations that we have with our customers. I mean, it's you know, one that's more easily quantifiable than others. You know, that conversation generally is one that is you know, very fact-based and there's less of a lag between the time that we can put that in. It's part of the same conversation but an easy one to quantify. Got it. Thanks. Maybe bigger picture, I mean, it sounds like, you know, a lot of the food producers are waiting for labor to come back, but what if there's been a kind of a structural change in labor availability for, I guess, for food producing? You know, you're seeing union issues in a lot of different sectors. There's less immigration. If that's the case, is there a way for the industry to ramp up production with a permanently, I guess, lower labor availability going forward? I mean, I don't know of a way they can ramp up production without people. I mean, to operate food manufacturing lines, it requires people to operate them. I don't know a way they can do that. What I do know is that, when there is demand, consumer demand available for food producers to capture, they are both very motivated to do it. They will find a way to get labor. I think you've seen in the marketplace some pretty creative programs being developed by some of the largest food companies in America. I'd expect that to continue. I ultimately think they will attract people back to that industry and produce to pre-COVID levels, if not higher, quite frankly, to capture as much of this incremental demand as they can. I believe they'll get there. I don't know of an alternative. I think that the programs you're seeing that are getting very creative are designed to attract people, and I think ultimately they will. If you look at the little slightly longer term, I think the one thing where you do see is bigger investment in automation going into manufacturing, which is also why we see strong demand for automation in the supply chain. Really this, the industry in total is looking for ways, how do we reduce the dependency on labor, especially if it stays, you know, tight like what we're seeing in the near term. All right. Thank you. The next question is from Joshua Dennerlein from Bank of America. Please go ahead. Yeah. Hey, everyone. If I'm understanding your ability to push through costs now or push through these costs onto the customers, is it fair to assume that same-store service margin has troughed and should either stabilize or kinda go up across the rest of the year? Yes. Definitely as you look at our results in the Q1 results, and I think we've been very clear that, you know, the cost that we saw and the pricing that we put in place for the cost we saw in last year's results would all be in place by the end of Q1, so you wouldn't see the full benefit, and that's definitely true as you look at our service margin. The other thing that I'd call out that's definitely impacted our service margin in Q1 is the impact of Omicron and the high level of absenteeism that we saw and the disruption that we saw as a result of Omicron. You know, as we move on, we are still seeing, as we said, inflationary pressure. As you also heard from our prepared remarks, we're much faster in a way of getting after it. Over time, our goal is to still recover, you know, our margin. Just as George mentioned his prepared remarks, the focus is to make sure we're recovering the dollars first. Ultimately, the dollars, you've heard us say that a number of times over the years, our focus is how do we actually grow four-wall cash flow more than focus on growing margin. We're focused on making sure we're recovering, you know, with price and offsetting costs and growing earnings. Okay. For passing along the cost quicker, what are you guys doing something different with the negotiated component where you have to come to the table and kinda come to an agreement with the customer? Are you just starting those earlier, or are you doing something different? Yeah. No real change to the commercial conversations. It is just kind of the way the industry operates. As George mentioned in his prepared remarks, I would say that we have better systems and processes in place to make sure that we identify, you know, those cost increases quicker. That would, you know, be our opportunity to recover faster, is to make sure that we have those processes in place to understand the cost changes faster. Yeah. The last thing I would just say to add to that is these inflationary pressures aren't unique to Americold. Our clients are feeling these same pressures. You know, inflation is top of mind for not only us, but obviously for our customers as well. Thanks, guys. The next question is from Vince Tibone from Green Street Advisors. Please go ahead. Hi. Good afternoon. Same-store constant currency expense growth is up over 10% in the first quarter. I understand the focus on improving labor efficiency and reducing reliance on temp labor, but it sounds like that's gonna take some time to play out and really see those full benefits. Revised guidance implies same-store expenses are only gonna be up 1%-2% for the full year. My question is, you know, I was hoping you can help me better understand how these expense trends are gonna reverse so quickly and actually decline on a year-over-year basis for the remainder of the year. Yeah. This builds off of what Rob had mentioned earlier. Just as you go through the year, the big step up in expense happened in the third quarter. As we move through the year, the actual expense comp will slow down. The change in expenses will slow down as you start to comp against the higher cost base that's already in place. We knew for Q1 and likewise for Q2, you know, you're comping a much higher expense base. When you get into Q3 and Q4, that's the real pain of that expense base is already in the baseline number, so the year-over-year growth will slow down. Got it. That's helpful. Do you have, like, a specific target, sorry if you already mentioned this, on when you think, you know, you can reduce the reliance on temp labor or get back to or exceed that 70-30 split of full-time to temp labor? We don't for the same reason we can't predict when the food industry recovers to pre-COVID production levels. Literally every week and sometimes every day of every week, we're running job fairs. We're trying to recruit permanent employees. We're converting temporary employees to permanent employees when they want to join Americold. We revised hiring practices, so we can hire on the spot. We've implemented second chance programs to attract people that maybe we wouldn't have attract as aggressively as in the past. We've created part-time positions, where before we really weren't interested in part-time labor. We're doing everything we can, and we're doing it every day. I just can't tell you when things will get back to normal, let's say. No, that's all fair. I mean, is there anything you can help me as I think about just the guidance? Like, so it sounds like guidance is probably assuming this is gonna take a while to play out and not really get the benefit in 2022. Is that fair? That's correct. That's how the guidance was constructed. Yeah. We've Vince, you heard us say in the past that 2022 is definitely a transition year, and our guidance for the year reflects that this is indeed a transition year. Got it. Thank you. The next question is from Bill Crow from Raymond James. Please go ahead. Good evening, guys. Thanks for taking the time. Question for you is there excess capacity over the long term in this industry? Do we just need to lose some capacity here to get occupancy back up a little bit? My opinion is no, there is no excess capacity. What there is is n o incremental excess capacity, let's put it that way, that didn't exist pre-COVID. The only difference is that large food manufacturers, and even smaller food manufacturers, are producing a lot less simply because they can't staff and operate their facility the same amount of hours per week they would have in the past. If, when that recovers, and again, I'm very confident it will because there's unmet consumer demand, which is really what every food manufacturer wants to satisfy. When that comes back, I think we go back to the environment we're in, where I don't think we were over capacity in the industry at all. George, you keep saying that they would sell more if they could, right? If they could manufacture more. What is that ratio of selling to inventory demand? Could that change? In other words, they've been on a just-in-time sort of inventory level at this point. What's to say they can't continue that and they could drive sales up 15% or 20%, but the incremental impact to your facilities may not be as big as it might have been in the past. Is that not something to worry about? I don't believe so based on my time in the food industry. I mean, retailers are all saying they still experience high degree of stock outs, empty shelves. Customer service levels are at 70%-75%. In my time, decades in the food industry, I've never seen customer service levels that low. All the customers I've talked to have said they're operating inefficiently because when you don't have the right amount of staffing in your facility, you can't operate normally, so they're operating very inefficiently. They don't like that. The amount of inventory that a food producer would put in the system, in my opinion, over the years, wasn't excessive. It was typically four to six weeks. I mean, that's not a ton of inventory. It wasn't like inventories were bloated in the supply chain to begin with. I, you know, what I see is when they find people, they'll go back to an operating model that's efficient for them, that they can manage better. They'll go back to four-six weeks of inventory, so they can service retailers at 98.5% or better, which are the industry standards that I lived by for a lot of years. Food will be back on shelves and consumers will be buying more than they buy today. That's what I see playing out. Thanks. My follow-up question is really just SG&A. I think if you go back three years, three or four years, you were $110 million and about 6.8% of revenues. Now we're up double that and nearly 8% of revenues. What should we think about as a stabilized, you know, target as a percentage of revenues, if that's the right way to think about it? Yeah. I think I commented on this at the year-end call. If you look at the core EBITDA excluding the stock comp expense, you know, we roughly have held flat and our guidance suggests that we hold flat at that historic trend as a percentage of revenue. Obviously, it's a much larger, more global business, but that percent of revenue has held flat. Where we've seen the slight pickup recently is in stock comp, but in particular, as we mentioned in the fourth quarter of last year, you know, we put in place a retentive stock grant. That was a fairly large grant focused on kind of leaders across our organization. The impact of that is being felt in this year's guide and this year's, you know, overall G&A expense. Shouldn't that percentage not hold flat, but actually go down as you've grown into this giant global company? I mean, are there no efficiencies to be gained through M&A transactions? No, there are. We don't disagree with that. We do believe over time, we will leverage our SG&A spend. Just, we've actually been investing in SG&A to support the growth that we've seen, and we have one of the largest development pipelines working that we've ever had as a company. We have several hundred million dollars of ongoing development projects that SG&A is supporting. You know, we have north of $1 billion of opportunities that are currently being underwritten, you know, by our team for future development. That's. We have been investing in the business as well. I agree in the normal state, we will start to see leveraging of that SG&A over time. Thanks for the time. Thank you. The next question is from Nate Crossett from Berenberg. Please go ahead. Yeah. Two little questions. First, just, you know, leverage is, I think, the highest it's been in a while. You know, you have investment grade ratings. Is there any risk that the agencies would change your ratings? Or when's the last time they reviewed your ratings? That'd be question number one. Number two, maybe just can you talk about the current acquisition environment? I don't think I saw any acquisitions this quarter. So maybe you can just kind of articulate what's going on there. Are you seeing opportunities? You know, what does pricing look like? Yes. I'll take the first part, and I'll have George comment on the acquisition environment. You know, we maintain active dialogue with the rating agencies. I think their last formal reviews, and you can see their press releases were completed. You know, at the end of last year, I think they're aware, and we've called out that, you know, our goal over the long term is to manage this business roughly around a 5x leverage level. And we do expect it to peak over that when we're in heavy periods like we are right now of development. You know, I commented, you know, in my prepared remarks, we have over a turn of leverage related to in-process developments today that are not yet gone operational and contributing. So obviously, as those developments move to online and start generating cash flow, we'll naturally de-lever. Also, we did see some impact to our leverage, you know, as a result of the impact of COVID and the supply chain challenges. Those two, we do think help us naturally de-lever over time as the business recovers. George, maybe you wanna comment on. Yeah. When it comes to acquisitions, we have a very strong pipeline. We are generally involved or contacted with almost every meaningful acquisition opportunity that comes up in our industry. It hasn't materially increased or decreased over the last quarter. We're a pretty discerning buyer. I mean, we wanna look at things that add capability, either pure customer capability or geographic capability. When we see something that we're very interested in, we will aggressively go after it. As of now, the pipeline is essentially what it was, and we're going through the process as we always do. Okay. What about just the pricing within the pipeline? Have you seen any changes, just given the change in rates, you know, cap rate-wise on potential deals or? I'm not sure we're involved in anything where we would see that at the moment. You know, the stages we're in, we wouldn't have seen that type of change. I don't know of any significant changes based on what you mentioned. Okay, I'll leave it there. Thanks. Ladies and gentlemen, this concludes our question and answer session and thus concludes today's call. Thank you very much for joining Americold Realty Trust First Quarter Earnings Call. You may now disconnect your lines. Take care.