Greetings, and welcome to the Americold Realty Trust Second Quarter 2018 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Brad Cohen, ICR.

Good afternoon. We would like to thank you for joining us today for Americold Realty Trust Second Quarter 2018 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. On today's call, management's prepared remarks and answers to your questions 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. More information about these non-GAAP financial measures and reconciliations to the comparable GAAP financial measures is in the supplemental - is contained in the supplemental information package available on the company's Website. This afternoon's conference call is hosted by Americold's Chief Executive Officer, Mr. Fred Boehler; and Executive Vice President and Chief Financial Officer, Mr. Marc Smernoff. Management will make some prepared comments. Afterwards, we will open up the call to your questions. Now I'll turn the call over to Fred. Fred?

Thanks, Brad, and thank you and welcome to our second quarter 2018 earnings conference call. This afternoon, I will review our progress against certain key operating metrics and our external growth strategy. Marc will then summarize our recent results, review our balance sheet and provide an update on our liquidity position. After our prepared remarks, we will open up the call for your question. Americold is the world's largest owner and operator of temperature-controlled warehouses and is the only publically traded REIT focused solely on this business. Our size and scale combined with our focus on operational excellence, create a meaningful competitive advantage over our peers. As of June 30, our portfolios consists of 156 mission-critical facilities which serve approximately 2400 customers globally. Our 25 largest customers including leading food producers, distributors and retailers account for approximately 62% of our global warehouse revenue. Each utilizing multiple facilities across our network and having been with us, on average, for over 30 years. The second quarter of 2018 was strong for the company as we continued to execute on our strategy while taking steps to refine our portfolio and drive ongoing initiatives to support our customers in a manner that best positions us for long-term growth. Our performance continues to be supported by strong industry fundamentals with continued steady growth and demand in limited new supply. Barriers to enter and succeed in the temperature controlled real estate and logistics business remain high due to significant build costs, strategic locational requirements, strong customer relationships and proven operational expertise that is required in our industry. We are a partner of choice to many retailers, producers and distributors who rely on our infrastructure and expertise to drive down cost and efficiently operate their temperature controlled supply chain networks. Through a proactive portfolio management, we continually…

Thank you, Fred, and good afternoon, everyone. For the second quarter 2018 we reported revenue of $394.7 million, a 4% increase from the same quarter of the prior year. Total contribution or NOI was $98.2 million, a 9.2% increase from the same quarter of the prior year. On the expense side, SG&A in the second quarter totaled $27.5 million or approximately 7% of total revenue. This quarters SG&A represents our first full quarter as a public company. Core EBITDA was $73.6 million for the second quarter of 2018, an increase of 5.6% from the same quarter of the prior year. The year-over-year growth in core EBITDA was driven by a more favorable customer mix and continued operating efficiency gains. Our core EBITDA margin expanded by 30 basis points to 18.7% while overcoming incremental SG&A totaling $1.1 million year-over-year reflective of higher public company costs. We reported net income of $29.4 million compared to a net loss of $8.4 million for the same quarter of the prior year. This quarter's net income included $8.4 million in gains on the sale of our Thomasville, Georgia facility that Fred mentioned earlier. Excluding that gain, net income would have been $21 million. Our second quarter core FFO was $43.1 million or $0.29 per diluted share compared to $25 million for the same quarter of the prior year. Our second quarter AFFO was $39.8 million or $0.27 per diluted share compared to $19.7 million for the same quarter of the prior year. As a reminder, the full definition and reconciliation of core EBITDA, core FFO and AFFO to reported net income can be found in our supplemental. For the second quarter 2018, global warehouse segment revenues grew by 2.1% year-over-year to $287.7 million. Segment NOI grew 7.1% to $90.8 million compared to $84.8 million in…

Thanks, Marc. Overall, we are very pleased with our second quarter results. Fundamentals in the temperature controlled storage industry remain strong and supportive of our business. We continue to benefit from our industry-leading scale, technology and expertise as well as the progression of the Americold operating system. Through proactive portfolio management, we continually strive to optimize our network, to better service our customers and enhance our return. Finally, I'm really proud and want to thank the entire Americold team for their outstanding effort as we continue to execute on this strategy. Operator, this completes our prepared remarks. Please open the call for questions.

[Operator Instructions]. One moment please while we poll for questions. Our first question comes from Joshua Dennerlein, Bank of America Merrill Lynch.

Curious to hear your take on maybe in tariffs placed on food, exports, how much of your business is export driven and has there been any tariffs that are on products in your warehouse? How do you think that would play out for you guys?

Yes, yes. Obviously, we're the guys that are storing it on behalf of the manufacturers and pushing it through the supply chain so we don't have a ton of control and expertise. But here's what I would say. Number one you've got to remember we've got a very diversified portfolio. So probably the biggest products that are being impacted right now would be pork and beef and just from a perspective that's about 7% of our overall business. Typically, what happens when you run into this situation is you'll get some pent-up demand, it will fill the warehouses. The impact for us is that's good. We get the passive income, the storage income associated with that. We would shut our labor if the throughput volume decreases and then ultimately we fully expect that the market will pick up again because, and I think the Wall Street article did a good job of kind of talking about this as well, that these manufacturers are going to find other markets to go into and I think that's a good thing for everybody into the future. So the product will start to flow again, we'll ramp up the labor to handle the throughputs and move the product through. So very negligible impact to us in terms of our results.

Okay, and then maybe switching gears to your development pipeline. You've had one project stabilize this year and another looks like it's hitting in 3Q. Any new projects in the works that kind of backfill that in development pipeline that you have?

Yes, so you're right. The Clearfield facility did stabilize at this point. We actually have two more that are being built right now under development. One is the facility that is going to be coming live in October. The beauty about that facility is once it comes live it's right in time for the harvest so it's going to fill up immediately. So great timing in terms of that facility coming up, so it won't take a full year to stabilize like a traditional build might. The other facility that's under development is our Chicago facility. And so we're well into that phase, and that facility will be ready for customer volume and start moving in the first quarter of 2019. Beyond that, we still have a very healthy pipeline of development opportunities, both customer-driven and market-driven types of opportunities. And I'd say that we are moving along with our process of negotiating. When you're dealing with customer build-to-suit types of opportunities, which is approximately about 60% of our pipeline, those tend to kind of move in and out based on those negotiations with those customers. So I'm very bullish on the pipeline that we have and the progress that we're making with those customers and hope to soon announce some other activity.

Our next question comes from Michael Carroll, RBC Capital Markets.

Yes. Can you guys talk a little bit about the Chicago development and when that gets completed, do you already have agreements with tenants that want to take space or how long does it take for that to get fully stabilized?

Yes. Thanks, Michael. Yes, that facility is what we call a market-driven opportunity. The way that came about is we looked at the capacity, the competitive landscape and like most core logistics markets, the capacity is pretty tight. So we looked at those demands, we looked at our large anchor tenants that we already have in the market and looked at their growth patterns as well as we tracked all of the inbound activities and needs into the marketplace through our Salesforce application. And so by combining all of that, we said, hey, the market can support this additional growth. So in the meantime as we're under development, we are working with our customers to secure new demands for that facility. Some of those will be locked up before the building opens and others will transition in over the course of the year. So we expect a full year and that is more typical of most of our builds; a full year to get stabilization.

Okay, then as you complete these development projects given process now and I know you did a good job describing the opportunities you have in the future. When do you expect to break ground on another project and given the tight market, are you willing to pursue one of these market-driven type facilities here in the near-term?

I think that is in our portfolio. It's a balancing act, right? So when we look at where we're going to spend our money, we're going to balance between the customer-driven opportunities as well as market driven. Obviously if I have a customer-driven opportunity with a long-term commitment, in the appropriate returns, that's probably going to get pulled ahead of a market-driven opportunity. So we kind of balance those as we look at all of the opportunities that are in front of us and we'll decide accordingly.

Okay. And then Fred, last quarter, you did a good job highlight some acquisition opportunities that you're looking at. Can you kind of give us an example of the type of deals you're looking at right now and do you have a pipeline today?

Yes, I think very similar to what I said last quarter. Obviously, once we went public, the phone started ringing both on the inbound and on the outbound side, and we continue to have a healthy pipeline of opportunities. We are talking to folks. We are assessing and doing the diligence, and I think the things that I called out last quarter, and I would echo it again, is we're not interested in acquiring just for the sake of getting big. So we're really focused on the diligence and making sure that we're going to be bringing quality portfolios into our infrastructure. Again, a key difference between us and some others in the market is we believe in full integration, and I think that's important as we go forward. And we kind of want to stay true to that course. So a lot of conversations going on, we'll see what happens.

Our next question comes from Bill Crow, Raymond James.

The market-driven opportunities or spec development, I guess we might call it, there was an announcement recently in, I think, Dallas that there was ground broken on a new facility there. I'm just wondering if this is a - this is relatively rare in the cold storage, refrigerator storage business. I'm just wondering if it's picking up speed, if we've got - because fundamentals are so good, we're seeing more spec development?

Yes, and I know exactly which development project you're speaking to of course, that is the only one I can name that's not being put up by a core operator within the industry, right? So this is a developer that's developing and hoping that somebody will take tenancy of that facility. I don't know how successful they'll be, again, that's not the model typically. So I think we'll see how they do. Again, I think the importance here is people are looking for, our customers, are looking for people that have the expertise associated with managing temperature controlled environments. It's not as simple as operating a dry operation, or a dry facility. So I think also one-off facilities that don't have a broader network associated with them are going to be harder to fill.

Yes, okay. And then I just want to hit the tariff subject one more time. It just seems like there's a lot of talk about it which maybe that's overblown or maybe - is that just going to different facilities which would still be good for you it seems if it's filling up competitors facilities with beef, pork, etc., is that fair or is it just this talk that's just overblown?

Well, I think a lot of talk is overblown but what I would say in all legitimacy is look, the manufacturers produce, something comes up or all of the sudden the tariff pops up and they're probably caught with some level of inventory that's in process, that's going to be stored a little bit longer. But what most of them do and I think what we've seen with some manufacturers is they just scale back their manufacturing at that point. So they'll scale it back, they'll wait until they buy new markets and then turn it back on. I really do think it's a temporary thing.

Yes, two quick ones. I think you said the cap rate on the sale was 6.6%. If that's correct, is that...

6.8%.

6.8%, I'm sorry. How do you think that is representative to the value of say the majority or portfolio?

I'm not going to discuss the overall value of the portfolio. What we can say is that that asset was in a fairly tertiary market and not core to the overall portfolio as a whole.

Okay. Finally for me, should we assume that the seasonality in earnings that we've discussed at the time of the IPO should still hold true and that third-quarter and second quarter are reasonably similar to one another before we get a little bit of hockey stick in the fourth quarter? Does that still hold true?

Yes, Thanksgiving and Christmas haven't moved. So in all seriousness, the big builds usually start to happening in time for Thanksgiving so you start to see the ramp up at the end of Q3 and then into Q4 and then you see it kind of purge out at the end of Q4. So I don't really see that changing, it's been pretty constant for years.

Our next question comes from Mike Mueller, JPMorgan.

Can we - going back for a second to that acquisition question, if we're thinking about the opportunities that you're looking at and the pipeline that you're evaluating, would you say cap rates are similar to that, the one that you sold or sub seven on a trailing 12-month?

I think as we said in the past, I think we're seeing cap rates on really range kind of in that mid-5 to 8 and we're still seeing cap rates remain in that area and it's really specific based on the location, size, scale of the operation, who the underlying customers are and the nature of those contracts. So there's a lot of variables that go into it. We evaluate all of those. As Fred mentioned, we're very diligent in our approach to M&A.

Okay, and when you quote, just to clarify here, when you quote a cap rate and NOI, that's going to be the same basis that's in the supplemental here where it says service income as well as the rent storage, right?

That's correct.

Okay, and then for the occupancy dip, year-over-year down 140 bps or so, I may have missed it, can you just discuss the magnitude of the dip, was it - how much of it was abnormal versus normal and what's typical with occupancy in Q2 and if this is representative of it?

Yes, we don't view this - first of all, the change is material. I think as you look within the supplemental, you'll see the historic occupancy trend, I think, on Page 20. You'll see the second quarter historically is the lowest physically occupied occupancy. Obviously, we've been doing a lot as we mentioned in ramping up our fixed commitment so within our portfolio there's a tremendous amount of occupancy where we're being paid for that isn't represented by a physical occupancy. So hopefully, as we mentioned on earlier calls, more to come on that. We hope to improve our disclosures toward the end of the year. So a lot more to do.

So we should look at that as not really being down from an economic standpoint as it's not down 140 bps?

Right, I mean, yes, that's - yes, right. You see that reflected in the NOI growth, right?

Yes. I mean, you can see it in the rate, just wasn't true on the occupancy side. Okay. Got it. Okay.

[Operator Instructions]. One moment please while we poll for questions. Our next question comes from Dave Rodgers, Robert W. Baird.

Marc, maybe first question for you. I think you quoted churn on 3.4%, is that on a - was that just the quarter? Is that year-to-date? And is that on a square-footage basis or on a revenue basis?

That's year-to-date and on a revenue basis.

Did it change materially in the second quarter versus the first?

No.

Okay. So I guess I wanted to ask that question to ask this question. In terms of just kind of the improvement and margin, which I think has been one of the best stories since you've come public, it seems like, and this is a good thing, that you've been driving purposeful churn in the portfolio to kind of drive that low-end customer out and you're seeing that and what you just mentioned which is maybe a slight dip in occupancy and a higher drive forward in your average rent or average pallet revenue. One, I mean, it seems like that's true and kind of correct me if I'm wrong, and then I think the second part of that would really be how much of that is left? I mean, how much of that lower hanging fruit can you continue to drive up before you've kind of caught up to where you think you should be?

Yes, I think there's always going to be somebody at the bottom right? So I think we'll continue to prune as those opportunities - obviously we're not looking to get rid of any customers, that's the last thing we want to do and a churn rate of 3.4% is pretty low I think so we'd rather provide them with solutions and help them understand the value of what we do for them and get appropriately paid for what we do for them, right. So that's our key strategy. So the last resort is if I have a customer, obviously, that's more strategic in nature while the total contract, somebody that's growing with us. They're going to take precedence over somebody that's at the bottom of that rung and so that's kind of how we manage the portfolio.

And maybe just a follow-up to that, so with that comment in mind as well as product mix that you talked about on the press release and your comments earlier in terms of hoping to improve margin, how much of that combination is still left? I mean, obviously there's probably a terminal margin that you hit and then stabilize at some point but how close do you think you are to that and how much runway do we have maybe in time or in [indiscernible]?

As Fred mentioned, continuous improve - we're actively managing the portfolio with the mindset of continuous improvement and continuous focus on serving our customers and increasing our return that we're yielding off our assets.

Our final question comes from Ki Bin Kim, SunTrust Robinson Humphrey.

Just one point of clarification. The 140 basis points drop in occupancy percentage, is that what you considered occupied pallets or physical pallet solution?

That was physically occupied pallets. So overall, as we said, we don't view that as material, there is some seasonality in our business and there's some variability as a result of just our - what's underlying, as Fred mentioned what's going on with our customers and their customers. As we've said, we've worked for our commercialization and our efforts to really focus on the quality of the portfolio to active portfolio management to really post the type of returns that you saw in this quarter which is really designed on how do we continue to improve and optimize the portfolio to drive profitable growth?

So I think last quarter you mentioned the calendar shift and maybe timing of harvesting that contributed to the lower occupancy last quarter. I would have thought that might have reversed on a year-over-year basis this quarter. So what - I guess any color you can provide on that?

Yes, the types of crops that cause that tend to be annual crops when you see some sort of seasonality, therefore we always encourage people to look at our business over the longer term. Just so you know, so those crops, the seasonal crops that cause that will be coming in this summer and early fall. So you'll start to see some of the year-over-year depending on the size and scale of the crop.

Just to clarify that, you're saying that by the second half that should - the year-over-year...

Depending on the health of the crops that are coming in, correct. Yes.

So that should improve in the second half you're saying?

Yes. So what we're saying, look, if it's a wheat crop or a year, you really won't see any change of that until the following harvest of that particular crop, the next year and then as we said, we ultimately don't control the size and scale of the crop but what we're really focused on is through our commercialization efforts how we provide improved kind of visibility, stability and quality of our earnings and I think that's reflective of our results in this quarter.

Okay, and just going back to your earlier comments about customer mix. If I remember correctly, I thought the retention ratio was pretty near 100% unless our tenant went bankrupt. So a couple of questions here, I guess what do you mean by customer mix and for the [indiscernible] that did turn, did they leave just because a competing facility? Or what were some of the reasons behind that?

Well, I think, again, when we talk about customer mix, right, there's a number of factors that are involved and not every customer is equal, right? So we have 2400-ish customers. All of those range in different size and scale and different throughputs associated with them. So for example, a retail customer of ours is going to have a lot of flow through going through the sites, right, versus an agricultural site going to the other end of the spectrum, there's very little throughput, vault storage, right? So when we talk about mix, it's how much retail might we have, how much volume might we have flowing through the retail for example versus one of those agricultural folks. That's kind of an extreme example. We're not talking about replacing customers with different customers, necessarily, although there's a piece of that. It's how much volume is coming through Customer X versus Customer Y.

Okay, sorry to jump around a little bit here. The pallet solution - the throughput pallet solutions were down 440 basis points. Same reasons for the occupancy or was there some other element to that?

Yes. So as we said, that throughput is associated with the mix so just as Fred said, if we have a higher combination, in Fred's example of the grower versus the retailers, we'll see slower throughput. So again, that's not a metric that we get very fussed with. And as we called out, our overall services revenue grew by about 2.2%, and I think the really powerful thing that I don't want to lose sight of is if you look at the margin that we earned on that services, we increase the margin on that services business by 250 basis points in the quarter. So again, I think it shows that we're underwriting business better, we're being a lot smarter about the business we're taking in, how we structure that agreement, and we're delivering value to our customers but we're also delivering returns to the shareholders.

Okay, and the other services expenses, that dropped a little bit year-over-year which along with the revenue helped the NOI margin. Can you talk about what is in that category of other service expenses and is a kind of current run rate, beneficial run rate, should we expect that to continue?

Yes. So other services would include like the cost of the material handling equipment. Just the operating efficiencies within the warehouses. Those are the big things, we also have the repair and maintenance on that. Obviously we've focused around how are we improving the MAT fleet, its maintenance. Obviously we continue to focus more and more on preventative maintenance. We focused on making sure we improved the age of the fleet over the last couple of years, all of those initiatives are contributing to improve results over time.

Okay. And then since I'm last, if I can add one more please. The least - if I don't ask it, it won't be asked, right? [indiscernible] The lease accounting changes that are impacting REITs, basically the expensing of internal leasing costs and legal costs. I know you guys expense a lot of it. Do you expect to have an impact in 2019?

Not a material impact.

Ladies and gentlemen, we have reached the end of the question and answer session, and I would like to turn the call back to Fred Boehler for closing remarks.

Thank you. Yes, I appreciate everybody's time. Great questions this afternoon. Again, the business continues to perform well. And I'll just repeat it again. I'm very proud of what the team continues to do. We've got a long trend of success here and we're operating and executing to the plan that we have laid out. So look forward to talking to you next quarter.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.