Lineage's Q1 2025 Earnings Call: Unpacking Contradictions in Inventory, Occupancy, and NOI Growth

Inventory levels and market stabilization, occupancy and pricing strategy, same-store NOI growth expectations are the key contradictions discussed in Lineage's latest 2025Q1 earnings call.



Revenue and Earnings Performance:
- Lineage reported total revenue of $1.29 billion for Q1 2025, representing a 3% decline, while adjusted EBITDA decreased 7% to $304 million, with adjusted EBITDA margin down 110 basis points to 23.5%.
- The decline was attributed to lower revenue per throughput and occupied pallet, driven by new business wins at lower rates and customers resetting volume guarantees due to decreased industry occupancy and high interest rates.

Strategic Agreements with Tyson Foods:
- Lineage announced a definitive agreement to acquire four Tyson Foods cold storage warehouses for $247 million and entered into a multiyear warehousing agreement for developing two next-generation fully automated warehouses, valued at over $740 million.
- These agreements are expected to generate over $100 million in annual EBITDA once stabilized, reflecting the company's strategic value to customers by enabling a faster, smarter, and more integrated supply chain.

Inventory and Market Dynamics:
- Lineage's same-store warehouse NOI was down 7.9% in Q1, primarily due to normal seasonality after elevated inventory levels in the first half of 2024 and lower revenue per throughput and occupied pallet.
- The company noted that inventory destocking concluded in the third quarter of 2024, indicating a return to normal inventory and seasonal patterns, although macroeconomic uncertainty is impacting short-term customer decisions.

Technological Innovations and Cost Control:
- Lineage continues to implement its proprietary LinOS warehouse execution system, demonstrating significant cost advantages through improved labor productivity and reduced indirect labor costs.
- The company maintained its cost structure, with same warehouse cost of operations declining 2% despite inflationary pressures, positioning it to offset future inflation and maintain competitive pricing.