Lineage, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our financial condition and results of operations should be read together with the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes included in our Prospectus. In addition, the following discussion contains forward-looking statements, such as statements regarding our expectation for future performance, liquidity, and capital resources, that involve risks, uncertainties, and assumptions that could cause actual results to differ materially from our expectations. Our actual results may differ materially from those contained in or implied by any forward-looking statements as a result of various factors, including those set forth below and those described under “Risk Factors,” in our Prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act. Management’s Overview We are the world’s largest global temperature-controlled warehouse REIT, with a modern and strategically located network of properties. Our business is competitively positioned to deliver a seamless end-to-end, technology-enabled experience for a well-diversified and stable customer base, each with their own unique requirements in the temperature-controlled supply chain. As of September 30, 2024, we operated an interconnected global temperature-controlled warehouse network, comprising over 85.0 million square feet and 3.0 billion cubic feet of capacity across 487 warehouses predominantly located in densely populated critical-distribution markets, with 313 in North America, 88 in Asia-Pacific, and 86 in Europe. We view, manage, and report on our business through two segments: • Global warehousing, which utilizes our high-quality industrial real estate properties to provide temperature-controlled warehousing storage and services to our customers; and • Global integrated solutions, which complements warehousing with supply chain services to facilitate the movement of products through the food supply chain to generate cost savings for customers and additional revenue streams for our company. Initial Public Offering On July 26, 2024, we closed our IPO of 56,882,051 shares of our common stock at a price of $78.00 per share, with a subsequent exercise in full by the underwriters of their option to purchase from us an additional 8,532,307 shares of common stock that closed on July 31, 2024. The net proceeds to us from the IPO were $4,873 million. In connection with the IPO, we terminated the operating services agreement between our subsidiary, Lineage Holdings, and Bay Grove Management. Additionally, we entered into a transition services agreement with Bay Grove Management, pursuant to which Bay Grove Management is expected to provide certain transition services to support capital deployment, mergers, and acquisitions activities for the three years following our IPO. Refer to Note 2, Capital structure and noncontrolling interests in the condensed consolidated financial statements included in this Quarterly Report for more information regarding our IPO-related transactions. Components of Our Results of Operations Global Warehousing Segment . Our primary business is owning and operating temperature-controlled warehouses. Revenue . Our global warehousing segment revenues are generated from storing frozen and perishable food and other products and providing related warehouse services for our customers. Storage revenues relate to the act of storing products for our customers within our warehouses. Storage revenues can be in the form of storage fees we charge customers for utilization of space in a warehouse, blast freezing fees we charge customers for utilization of specific ultra-cold spaces within a warehouse designed to rapidly reduce product temperature, and rent we charge customers for the lease of warehouse space pursuant to a lease agreement. Warehouse services fees relate to handling and other services required to prepare and move customers’ pallets into, out of, and around the facilities. As part of our warehouse services, we offer handling, case-picking, order assembly and load consolidation, quality control, re-packaging, and government-approved storage and inspection, among other services. Cost of operations . Our global warehousing segment cost of operations consists primarily of labor, power, and other warehouse costs. Labor comprises the largest component of the cost of operations from our global warehousing segment and consists primarily of employee wages (both direct and indirect) and benefits, excluding stock-based compensation. Changes in our labor 55 expense are driven by, among other things, changes in headcount, changes in compensation levels, and associated performance incentives, the use of third-party labor to support our operations, changes in terms of collective bargaining agreements, changes in customer requirements and associated work content, workforce productivity, labor availability, governmental policies and regulations, and variability in costs associated with employer-provided benefits. Our second-largest cost of operations of our global warehousing segment is electrical power utilized in the operation of our temperature-controlled warehouses. We may, from time to time, hedge our exposure to changes in power prices through fixed rate agreements. In addition, to the extent possible and appropriate, we may seek to mitigate or offset the impact of fluctuations in the price of power on our financial results through rate escalations or power surcharge provisions within our agreements with customers. We also look to implement energy saving alternatives to reduce energy consumption, including the installation of solar panels, state of the art refrigeration control systems, LED lighting, thermal energy storage, motion-sensor technology, variable frequency drives for our fans and compressors, and rapid open/close doors. Additionally, business mix impacts our power expense depending on the temperature zone and type and frequency of freezing required (e.g., blast freezing). Other warehouse costs include utilities other than power, insurance, real estate taxes, repairs and maintenance, rent under real property operating leases where applicable, equipment costs, warehouse consumables (e.g., pallets and shrink-wrap), personal protective equipment, warehouse administration, and other related facility and services costs. Global Integrated Solutions Segment . Our global integrated solutions segment provides our customers with a comprehensive approach to facilitate the movement of products along the supply chain. Revenues . Our integrated solutions revenues are primarily driven by transportation fees, which may also include fuel and capacity surcharges, to our customers for whom we arrange the transportation of their products. Within transportation, which is the largest component of our global integrated solutions segment, our core focus areas are multi-vendor less-than-full-truckload consolidation, drayage services to and from ports, transportation brokerage, and freight forwarding. We also provide rail transportation services and, in select markets, foodservice distribution and e-commerce fulfillment services. Cost of operations . Our global integrated solutions cost of operations consists primarily of third-party carrier charges, which are impacted by factors affecting those carriers, including truck and ocean liner capacity and driver and equipment availability in certain markets. Additionally, in certain markets we employ drivers and operate assets to serve our customers. Costs to operate these assets include wages (excluding stock-based compensation), fuel, tolls, insurance, and maintenance. Other Consolidated Operating Expenses . Depreciation and amortization expenses. Our depreciation and amortization expenses result primarily from the capital-intensive nature of our business. The principal components of depreciation relate to our warehouses, both owned and leased, including buildings and improvements, refrigeration equipment, racking, leasehold improvements, material handling equipment, furniture and fixtures, and our computer hardware and internal use software. We also incur depreciation related to owned transportation assets. Amortization relates primarily to intangible assets for customer relationships and finance lease right-of-use assets. General and administrative expenses. Our general and administrative expenses consist primarily of costs associated with administration of our global warehousing and global integrated solutions segments, including management wages and benefits, administrative, legal, business development, project management, sales, marketing, engineering, safety and compliance, food optimization, human resources, finance, accounting, network optimization, data science, and information technology personnel, transformational information technology expenses, equity incentive plans, communications and data processing, travel, professional fees, credit loss, training, office equipment, supplies, and, prior to our IPO, management fees paid to Bay Grove in accordance with the terms of the operating services agreement. Trends in general and administrative expenses are influenced by changes in headcount and compensation levels and achievement of incentive compensation targets. In connection with our IPO, we terminated the operating services agreement in order to internalize certain operating, strategic development, and financial services that were previously provided by Bay Grove under it, and entered into a transition services agreement with Bay Grove to provide certain of these services for a three-year term while we internalize such functions. Acquisition, transaction, and other expenses. Our acquisition, transaction, and other expenses consist of costs with a high level of variability from period-to-period and include professional fees associated with planned and completed business expansion activities, and acquisition integration costs. In addition, it includes expenses associated with our IPO, including costs related to public company readiness efforts and costs incurred as a result of our IPO in the third quarter of 2024 (see Note 2, Capital structure and noncontrolling interests to the condensed consolidated financial statements included in this Quarterly Report for further detail on costs associated with our IPO). These costs are expensed as incurred. It also includes employee-related expenses 56 associated with acquisitions, such as acquisition-related severance and consulting agreements and certain cash-based incentive awards given to employees of legacy companies in acquisitions. Restructuring, impairment, and (gain) loss on disposals. Our restructuring, impairment, and (gain) loss on disposals include certain contractual and negotiated severance and separation costs from exited former executives, costs relating to reductions in headcount to achieve operational efficiencies, and costs associated with exiting non-strategic operations. We record such costs when there is a substantive plan for employee severance or employees are otherwise entitled to benefits (e.g. in case of one-time terminations) and related costs are probable and estimable. It also includes gains (losses) on dispositions of property, plant, and equipment and impairments of long-lived assets, net of related gains on insurance recoveries. Key Factors Affecting Our Business and Financial Results Recent Trends in Our Global Warehousing Segment The following are key trends emerging in our global warehousing segment: • Strategic engagement with customers . Our strategic account management team works with our top customers to create a joint roadmap and action plan to meet their strategic supply chain needs. We have seen increased customer engagement with this approach over the last several years, a trend we expect to continue as we expand strategic customer relationships. • Automation . We have industry-leading automation capabilities and believe our automated facilities can provide lower cost and more customized solutions to our high-case volume customers, thereby improving the customer experience and driving customer retention. Market Conditions Our business is impacted by general economic and market conditions, as well as by national and international political, environmental, and socio-economic events. Significant factors impacting our business have included: • Inflation and Customer Rate Increases . In response to significant inflationary impacts in recent years across wages, energy, and other operational costs, we implemented customer rate increases to offset such impacts to our operating results. We believe that higher food costs continue to impact end-consumers’ buying decisions for certain commodities. As inflation eases, we expect to see relief across operational cost pressures and volumes, both on-hand and throughput. • Occupancy and Throughput . Coming out of the global pandemic, we experienced higher physical occupancy levels through the first half of 2023, particularly in North America, significantly driven by customers increasing production and inventories in response to supply chain backlogs in recent years. Beginning in the second half of 2023, customers began rationalizing inventory levels in response to continued higher interest rates and inflation, which is driving changes in customer demand. As our customers adjust to these new demand levels, we have seen lower throughput volume across our network. Over the long-term, we believe that end-consumer demand will remain consistent with historic levels. • Labor . Following headwinds in recent years from wage inflation, labor shortages, and team member turnover, our team has focused on strategic initiatives to decrease turnover through our stock-based compensation awards, higher wages, engagement best practices, and training to help retain talent. Retention has improved due to these internal efforts and macroeconomic factors. • Power Costs . Following increased power costs in prior years, particularly in our European operations, our power costs in 2023 and 2024 have stabilized. We have generally been able to pass increased power costs through to our customers, mitigating the impact of such cost increases on our operating results. Refer to Part II, Item 1A. “Risk Factors” for additional information. 57 Foreign Currency Translation Impact on Our Operations Our consolidated revenues and expenses are subject to variations caused by the net effect of foreign currency translation on revenues and expenses incurred by our operations outside the United States. Future fluctuations of foreign currency exchange rates and their impact on our consolidated financial statements are inherently uncertain. Our primary currency exposures are to the euro, Canadian dollar, British pound sterling, and Australian dollar. Revenues and expenses are typically denominated in the local currency of the country in which they are derived or incurred, which partially mitigates the net impact of foreign currency fluctuations on our operating results and margins. Focus on Our Operational Effectiveness and Cost Structure We are focused on further enhancing our operational effectiveness and cost structure. This includes the following: integrating acquired businesses and their assets onto common information technology systems; instituting key health, safety, leadership, and training programs; implementing standardized operational processes; developing and deploying proprietary and third-party operating systems; and capitalizing on the purchasing power of our network. We employ multiple strategies to maximize labor productivity, including the following: instituting lean operating principles, driving standard work processes, visual management, just-in-time management, and quality processes; optimizing the mix of permanent and temporary team members; optimizing shifts relative to throughput; and focusing on increased engagement and retention. We seek to maximize energy efficiency in our warehouses by using the latest technology and alternative energy generation practices. The technologies we deploy include variable frequency drives, refrigeration control systems, rapid close doors, motion sensor technology, LED lighting, and “flywheeling”— an innovative process that leverages machine learning and artificial intelligence to manage energy load based on predictions of peak demand. We also generate alternative sources of energy primarily through the deployment of solar, battery capacity, and linear generators. These initiatives have allowed us to reduce our consumption of kilowatt hours, optimize rates, and reduce overall energy costs. How We Assess the Performance of Our Business Segment Net Operating Income or “Segment NOI” We evaluate the performance of our business segments based on their net operating income relative to our overall results of operations. We use the term “segment net operating income” or “segment NOI” to mean a segment’s revenues less its cost of operations (excluding any depreciation and amortization, impairment charges, general and administrative expenses, stock-based compensation expense, restructuring and impairment expense, gains and losses on sale of assets, and acquisition, transaction, and other expenses). We use segment NOI to evaluate our segments for purposes of making operating decisions and assessing performance in accordance with Accounting Standards Codification (“ASC”) 280, Segment Reporting . We also analyze the “segment NOI margin” for each of our business segments, which we calculate as segment NOI divided by segment revenues. Same Warehouse Analysis We define our “same warehouse” population annually at the beginning of the current calendar year. Our same warehouse population includes properties that were owned, leased, or managed for the entirety of two comparable periods and that have reported at least twelve months of consecutive normalized operations prior to January 1 of the current calendar year. We define “normalized operations” as properties that have been open for operation or lease after development or significant modification, including the expansion of a warehouse footprint or a warehouse rehabilitation subsequent to an event, such as a natural disaster or similar event causing disruption to operations. In addition, our definition of “normalized operations” takes into account changes in the ownership structure (e.g., purchase of a previously leased warehouse would result in a change in the nature of expenditures in the compared periods), which would impact comparability in our global warehousing segment NOI. Acquired properties will be included in the “same warehouse” population if owned or leased by us as of the first business day of the prior calendar year and still owned by us as of the end of the current reporting period, unless the property is under development. The “same warehouse” pool can also be adjusted during the year to remove properties that were sold or entering development subsequent to the beginning of the current calendar year. As such, the “same warehouse” population for the period 58 ended September 30, 2024 includes all properties that we owned at January 1, 2023 which had both been owned and had reached “normalized operations” by January 1, 2023. We calculate “same warehouse NOI” as revenues for the same warehouse population less its cost of operations (excluding any depreciation and amortization, general and administrative expenses, stock-based compensation expense, restructuring and impairment expense, gains and losses on sale of assets, and acquisition, transaction, and other expense). We evaluate the performance of the warehouses we own, lease, or manage using a “same warehouse” analysis, and we believe that same warehouse NOI is helpful to investors as a supplemental performance measure because it includes the operating performance from the population of properties that is consistent from period to period, thereby eliminating the effects of changes in the composition of our warehouse portfolio on performance measures. The following table shows the composition of our warehouse portfolio as of September 30, 2024. Total warehouses (1) 468 Same warehouse facilities 411 Non-same warehouse facilities 57 __________________ (1) Excludes 19 warehouses in our global integrated solutions segment as of September 30, 2024. We categorize warehouses as part of our global integrated solutions segment if the primary business conducted in those warehouses is within our global integrated solutions segment. Same warehouse NOI is not a measurement of financial performance under GAAP. In addition, other companies providing temperature-controlled warehouse storage and handling and other warehouse services may not define same warehouse or calculate same warehouse NOI in a manner consistent with our definition or calculation. Same warehouse NOI should be considered as a supplement, but not as an alternative, to our results calculated in accordance with GAAP. We provide reconciliations of these measures in the discussions of our comparative results of operations below. Economic Occupancy of Our Warehouses We define average economic occupancy as the aggregate number of physical pallets on hand and any additional pallet positions otherwise contractually committed and paid for by customers for a given period divided by the approximate number of average physical pallet positions in our warehouse for the applicable period. We estimate the number of contractually committed pallet positions by taking into account the actual pallet commitment specified in each customer’s warehouse agreement and subtracting the physical pallets on hand for that customer. We regard economic occupancy as an important driver of our financial results. We plan to expand our use of minimum storage guarantees that pay us minimum or fixed storage fees for pallet positions whether or not a minimum number of pallet positions are physically occupied. We actively seek to enter into minimum storage guarantees when establishing new customer agreements, renewing existing customer agreements or upon a change in the anticipated profile of our customer. We believe that transitioning certain customer contracts from on-demand, as-utilized structures to minimum storage guarantee structures will drive segment NOI growth and consistency by maintaining our storage revenues during periods of lower inventories. Physical Occupancy of Our Warehouses We define average physical occupancy as the average number of physical pallets on hand divided by the estimated number of average physical pallet positions in our warehouses for the applicable period. We estimate the number of physical pallet positions by taking into account actual racked space and by estimating unracked space on an as-if-racked basis. We base this estimate on a formula utilizing the total cubic feet of each room within the warehouse that is unracked divided by the volume of an assumed rack space that is consistent with the characteristics of the relevant warehouse. The number of our pallet positions is reviewed and updated quarterly, taking into account changes in racking configurations and other warehouse attributes. We regard physical occupancy as an important driver of our financial results. Throughput at Our Warehouses The level and nature of throughput at our warehouses is an important factor impacting our warehouse services revenues. Throughput refers to the volume of inbound pallets that enter our warehouses plus the volume of outbound pallets that exit our warehouses, divided by two. Higher levels of throughput drive warehouse services revenues in our global warehousing segment, 59 as customers are typically billed transactionally for these services. The nature of throughput may be driven by the expected inventory turns of the underlying product or commodity. Throughput pallets can be influenced by both customers’ production as well as shifts in demand preferences. Customers’ production levels, which respond to market conditions, labor availability, supply chain dynamics, and consumer preferences, may impact inbound pallets. Similarly, a change in inventory turnover due to shift in consumer demand may impact outbound pallets. 60 Results of Operations Comparison of Results for the Three Months Ended September 30, 2024 and 2023 Global Warehousing Segment The following table presents the operating results of our global warehousing segment for the three months ended September 30, 2024 and 2023. Three Months Ended September 30, 2024 2023 Change (in millions except revenue per pallet) Warehouse storage $ 508 $ 515 (1.4) % Warehouse services 464 445 4.3 % Total global warehousing segment revenues 972 960 1.3 % Power 58 58 — % Labor (1) 352 352 — % Other warehouse costs (2) 179 183 (2.2) % Total global warehousing segment cost of operations 589 593 (0.7) % Global warehousing segment NOI $ 383 $ 367 4.4 % Total global warehousing segment margin 39.4 % 38.2 % 120 bps Number of warehouse sites 468 457 Warehouse storage (3) Average economic occupancy Average occupied economic pallets (in thousands) 8,078 8,127 (0.6) % Economic occupancy percentage 82.0 % 84.3 % (230) bps Storage revenue per economic occupied pallet $ 62.85 $ 63.36 (0.8) % Average physical occupancy Average physical occupied pallets (in thousands) 7,431 7,485 (0.7) % Average physical pallet positions (in thousands) 9,849 9,635 2.2 % Physical occupancy percentage 75.4 % 77.7 % (230) bps Storage revenue per physical occupied pallet $ 68.32 $ 68.79 (0.7) % Warehouse services (3) Throughput pallets (in thousands) 13,188 12,948 1.9 % Warehouse services revenue per throughput pallet $ 32.21 $ 31.31 2.9 % __________________ (1) Labor cost of operations excludes $1 million of stock-based compensation expense for the three months ended September 30, 2024. (2) Includes real estate rent expense of $25 million and $24 million for the three months ended September 30, 2024 and 2023, respectively, and non-real estate rent expense (equipment lease and rentals) of $3 million and $5 million for the three months ended September 30, 2024 and 2023, respectively. (3) Warehouse storage and warehouse services metrics exclude managed sites. Global warehousing segment revenues were $972 million for the three months ended September 30, 2024, an increase of $12 million, or 1.3%, compared to $960 million for the three months ended September 30, 2023. The increase in revenues was driven by an approximate $17 million increase from acquisitions and an approximate $15 million increase from our recently 61 completed and in-progress expansion and development projects. This growth was offset by a $15 million decrease from other non-same warehouse sites, including closed facilities, and a $5 million decrease in our same warehouse pool. The decrease in our same warehouse pool was primarily driven by lower utilization and throughput volumes, partially offset by a favorable increase in rates. In addition, the foreign currency translation of revenues earned by our foreign operations had a $3 million favorable impact compared to the three months ended September 30, 2023. Global warehousing segment cost of operations was $589 million for the three months ended September 30, 2024, a decrease of $4 million, or 0.7%, compared to $593 million for the three months ended September 30, 2023. The cost of operations for our same warehouse pool decreased $13 million, representing decreases across labor and other warehouse costs. In addition, there was a $10 million decrease in cost of operations from other non-same warehouse sites, including closed facilities. These cost decreases were offset by increases of approximately $11 million from the additional facilities we acquired in connection with the above-mentioned acquisitions and approximately $8 million related to our recently completed and in-progress expansion and development projects. In addition, the foreign currency translation of cost of operations from our foreign operations had a $3 million unfavorable impact compared to the three months ended September 30, 2023. Global warehousing segment NOI was $383 million for the three months ended September 30, 2024, an increase of $16 million, or 4.4%, compared to $367 million for the three months ended September 30, 2023. The segment NOI for our same warehouse pool increased $8 million or 2.4%, attributable to revenue and cost of operations factors previously described. In addition, segment NOI was positively impacted by approximately $7 million related to our recently completed and in-process expansion and development projects as they continue to ramp up prior to stabilization and approximately $6 million related to the above-mentioned acquisitions. These were offset by a $5 million net decrease from other non-same warehouse sites, including closed facilities. 62 Same Warehouse Result The following table presents revenues, cost of operations, same warehouse NOI, and margins for our same warehouses for the three months ended September 30, 2024 and September 30, 2023. Three Months Ended September 30, 2024 2023 Change (in millions except revenue per pallet) Warehouse storage $ 441 $ 455 (3.1) % Warehouse services 402 393 2.3 % Total same warehouse revenues 843 848 (0.6) % Power 50 50 — % Labor 306 311 (1.6) % Other warehouse costs 150 158 (5.1) % Total same warehouse cost of operations 506 519 (2.5) % Same warehouse NOI $ 337 $ 329 2.4 % Total same warehouse margin 40.0 % 38.8 % 120 bps Number of same warehouse sites 411 411 Warehouse storage (1) Economic occupancy Average occupied economic pallets (in thousands) 7,005 7,172 (2.3) % Economic occupancy percentage 84.1 % 86.0 % (190) bps Storage revenue per economic occupied pallet $ 62.92 $ 63.50 (0.9) % Physical occupancy Average physical occupied pallets (in thousands) 6,461 6,604 (2.2) % Average physical pallet positions (in thousands) 8,331 8,341 (0.1) % Physical occupancy percentage 77.6 % 79.2 % (160) bps Storage revenue per physical occupied pallet $ 68.22 $ 68.95 (1.1) % Warehouse services (1) Throughput pallets (in thousands) 11,272 11,471 (1.7) % Warehouse services revenue per throughput pallet $ 32.45 $ 31.29 3.7 % __________________ (1) Warehouse storage and warehouse services metrics exclude managed sites. Economic occupancy at our same warehouses was 84.1% for the three months ended September 30, 2024, a decrease of 190 basis points compared to 86.0% for the three months ended September 30, 2023. Our economic occupancy at our same warehouses was 650 basis points higher than our corresponding average physical occupancy of 77.6%. Economic occupancy was lower than the prior year due to lower physical utilization as customers rationalized their inventory during continued economic pressures driven by higher interest rates. Same warehouse storage revenues per economic occupied pallet decreased 0.9% period-over-period, primarily driven by a change in our business profile due to customer rationalization of inventory. Throughput pallets at our same warehouses were 11.3 million pallets for the three months ended September 30, 2024, a decrease of 1.7% from 11.5 million pallets for the three months ended September 30, 2023. The decrease was the result of lower turns due to continued economic pressures driven by higher interest rates. Same warehouse services revenue per throughput pallet increased 3.7% compared to the prior year, primarily driven by a change in our business profile due to customer rationalization of inventory. 63 Non-Same Warehouse Results The following table presents revenues, cost of operations, non-same warehouse NOI, and margins for our non-same warehouses for the three months ended September 30, 2024 and 2023. Three Months Ended September 30, 2024 2023 Change (in millions except revenue per pallet) Warehouse storage $ 67 $ 60 11.7 % Warehouse services 62 52 19.2 % Total non-same warehouse revenues 129 112 15.2 % Power 8 8 — % Labor 46 41 12.2 % Other warehouse costs 29 25 16.0 % Total non-same warehouse cost of operations 83 74 12.2 % Non-same warehouse NOI $ 46 $ 38 21.1 % Total non-same warehouse margin 35.7 % 33.9 % 180 bps Number of non-same warehouse sites (1) 57 46 Warehouse storage (2) Economic occupancy Average occupied economic pallets (in thousands) 1,073 955 12.4 % Economic occupancy percentage 70.7 % 73.8 % (310) bps Storage revenue per economic occupied pallet $ 62.41 $ 62.36 0.1 % Physical occupancy Average physical occupied pallets (in thousands) 970 881 10.1 % Average physical pallet positions (in thousands) 1,518 1,294 17.3 % Physical occupancy percentage 63.9 % 68.1 % (420) bps Storage revenue per physical occupied pallet $ 69.02 $ 67.62 2.1 % Warehouse services (2) Throughput pallets (in thousands) 1,916 1,477 29.7 % Warehouse services revenue per throughput pallet $ 30.80 $ 31.44 (2.0) % __________________ (1) Refer to our “Same Warehouse Analysis,” which describes the composition of our non-same warehouse pool. (2) Warehouse storage and warehouse services metrics exclude managed sites. 64 Global Integrated Solutions Segment The following table presents the operating results of our global integrated solutions segment for the three months ended September 30, 2024 and 2023. Three Months Ended September 30, 2024 2023 Change (in millions) Global Integrated Solutions segment revenues $ 363 $ 369 (1.6) % Global Integrated Solutions segment cost of operations 307 306 0.3 % Global Integrated Solutions segment NOI $ 56 $ 63 (11.1) % Global Integrated Solutions margin 15.4 % 17.1 % (170) bps Global integrated solutions segment revenues were $363 million for the three months ended September 30, 2024, a decrease of $6 million, or 1.6%, compared to $369 million for the three months ended September 30, 2023. The decrease was due to lower volumes and the sale of a European subsidiary which occurred in September 2023, offset by increases from acquisitions. In addition, the foreign currency translation of revenues earned by our foreign operations had a $3 million favorable impact compared to the three months ended September 30, 2023. Global integrated solutions segment cost of operations was $307 million for the three months ended September 30, 2024, an increase of $1 million, or 0.3%, compared to $306 million for the three months ended September 30, 2023. The net increase included the above-mentioned acquisitions, partially offset by lower costs driven by volumes, cost controls, and the above-mentioned sale of a European subsidiary. The foreign currency translation of cost of operations from our foreign operations had a $2 million unfavorable impact compared to the three months ended September 30, 2023. Global integrated solutions segment NOI was $56 million for the three months ended September 30, 2024, a decrease of $7 million, or 11.1%, compared to $63 million for the three months ended September 30, 2023. Foreign currency translation had a $1 million favorable net impact compared to the three months ended September 30, 2023. Other Consolidated Operating Expenses Three Months Ended September 30, Change 2024 2023 % (in millions) Other consolidated operating expense: Depreciation and amortization expense $ 210 $ 188 11.7 % General and administrative expense $ 143 $ 122 17.2 % Acquisition, transaction, and other expense $ 592 $ 19 n.m. 1 Restructuring, impairment, and (gain) loss on disposals $ 8 $ 4 n.m. _______________ (1) n.m. (not meaningful) throughout this Quarterly Report is used in place of percentage changes where the change is excessive, involves a comparison between income and loss amounts, or involves a comparison to zero. Depreciation and amortization expense . Depreciation and amortization expense was $210 million for the three months ended September 30, 2024, an increase of $22 million, or 11.7%, compared to $188 million for the three months ended September 30, 2023. The increase was primarily due to information technology investments, acquisitions, and greenfield and expansion projects. General and administrative expense. General and administrative expenses were $143 million for the three months ended September 30, 2024, an increase of $21 million, or 17.2%, compared to $122 million for the three months ended September 30, 2023. The increase was primarily driven by higher stock-based compensation expense related to our annual grants. We expect our general and administrative expenses to stabilize over time and generate operating leverage. For the three months ended September 30, 2024 and 2023, general and administrative expenses were 10.7% and 9.2% of total revenues, respectively. 65 Acquisition, transaction, and other expense . Acquisition, transaction, and other expenses were $592 million for the three months ended September 30, 2024, an increase of $573 million compared to $19 million for the three months ended September 30, 2023. The increase was primarily due to costs associated with our IPO, including internalization costs and stock-based compensation expense. For further detail on costs associated with our IPO and stock-based compensation, see Note 2, Capital structure and noncontrolling interests and Note 15, Stock-based compensation to the condensed consolidated financial statements included in this Quarterly Report. Restructuring, impairment, and (gain) loss on disposals . Restructuring, impairment, and (gain) loss on disposals were net expenses of $8 million for the three months ended September 30, 2024, an increase of $4 million compared to net expenses of $4 million for the three months ended September 30, 2023. The increase was related to higher impairment expense primarily related to properties sold or classified as held for sale and higher severance costs. Partially offsetting these increases, the three months ended September 30, 2024 also included a net gain of $5 million related to a fire which occurred at the Company’s warehouse in Kennewick, Washington (see Note 17, Commitments and contingencies in our condensed consolidated financial statements included in this Quarterly Report for details). Other Income (Expense) The following table presents other items of income and expense for the three months ended September 30, 2024 and 2023. Three Months Ended September 30, Change 2024 2023 % (in millions) Other income (expense): Interest expense, net $ (82) $ (126) (34.9) % Gain (loss) on extinguishment of debt $ (6) $ — n.m. Gain (loss) on foreign currency transactions, net $ 14 $ (5) n.m. Equity income (loss), net of tax $ — $ (2) n.m. Other nonoperating income (expense), net $ 1 $ (19) n.m. Interest (expense), net. We reported a net interest expense of $82 million for the three months ended September 30, 2024, a decrease of $44 million, or 34.9%, compared to $126 million for the three months ended September 30, 2023. The average effective interest rate of our outstanding debt was 5.8% for the three months ended September 30, 2024, a decrease from 6.2% for the three months ended September 30, 2023, primarily due to the substantial debt repayments with IPO proceeds. When taking into account income (expense) generated from hedging instruments, the average effective interest rate of our outstanding debt was 4.2% for the three months ended September 30, 2024, a decrease from 4.8% for the three months ended September 30, 2023. Gain (loss) on extinguishment of debt. We reported a net loss on debt extinguishment of $6 million for the three months ended September 30, 2024, related to unamortized deferred financing costs previously capitalized for the Delayed Draw Term Loan (DDTL), which was repaid on July 26, 2024. There was no gain (loss) on debt extinguishment recognized for the three months ended September 30, 2023. For additional information regarding our debt, see Note 9, Debt in our condensed consolidated financial statements included in this Quarterly Report. Gain (loss) on foreign currency transactions, net. We reported a net foreign currency exchange gain of $14 million for the three months ended September 30, 2024, compared to a net loss of $5 million for the three months ended September 30, 2023. The increase in foreign currency exchange gain was due was due to more favorable foreign currency exchange rates against the U.S. dollar, with the largest impacts driven by the Euro and Australian dollar. Equity income (loss), net of tax. We reported less than $1 million of net income (loss) from equity method investments for the three months ended September 30, 2024, compared to a net loss of $2 million for the three months ended September 30, 2023, primarily related to our investment in Emergent Cold LatAm Holdings, LLC. Other nonoperating income (expense), net. We reported $1 million of other nonoperating income for the three months ended September 30, 2024, an increase of $20 million compared to net expenses of $19 million for the three months ended September 30, 2023. During the three months ended September 30, 2023, the Company recognized a net loss of $21 million on 66 the sale of Erweda BV, a European subsidiary. For additional information regarding the divestiture, see Note 4, Business combinations, asset acquisitions, and divestitures in our condensed consolidated financial statements included in this Quarterly Report. Income Tax Expense (Benefit) Income tax benefit for the three months ended September 30, 2024 was $45 million, which represented an increase of $40 million from an income tax benefit of $5 million for the three months ended September 30, 2023. The tax benefit in 2024 was principally created by the release of a $24 million valuation allowance on deferred tax assets relating to net operating losses carryforwards in the U.S., the tax-effect of pre-tax earnings in various jurisdictions, tax adjustments related to REIT activity, and withholding taxes paid in various jurisdictions. The tax expense (benefit) in 2023 was principally created by tax-effect of pre-tax earnings and losses in various jurisdictions, tax adjustments related to REIT activity, and changes to uncertain tax positions. Our income taxes are discussed in more detail in Note 8, Income taxes to the condensed consolidated financial statements included in this Quarterly Report. The Organization for Economic Co-operation and Development (“OECD”) has issued Pillar Two Model Rules introducing a new global minimum tax of 15% intended to be effective on January 1, 2024. While the U.S. has not yet adopted the Pillar Two rules, various other governments around the world are enacting legislation. In 2024, we expect to incur insignificant tax expenses in connection with Pillar Two and are continuing to evaluate the potential impact on our business in future periods. 67 Comparison of Results for the Nine Months Ended September 30, 2024 and 2023 Global Warehousing Segment The following table presents the operating results of our warehouse segment for the nine months ended September 30, 2024 and 2023. Nine Months Ended September 30, 2024 2023 Change (in millions except revenue per pallet) Warehouse storage $ 1,534 $ 1,545 (0.7) % Warehouse services 1,373 1,337 2.7 % Total global warehousing segment revenues 2,907 2,882 0.9 % Power 155 156 (0.6) % Labor (1) 1,062 1,042 1.9 % Other warehouse costs (2) 538 550 (2.2) % Total global warehousing segment cost of operations 1,755 1,748 0.4 % Global warehousing segment NOI $ 1,152 $ 1,134 1.6 % Total global warehousing segment margin 39.6 % 39.3 % 30 bps Number of warehouse sites 468 457 Warehouse storage (3) Average economic occupancy Average occupied economic pallets (in thousands) 8,121 8,214 (1.1) % Economic occupancy percentage 82.8 % 85.6 % (280) bps Storage revenue per economic occupied pallet $ 188.87 $ 187.87 0.5 % Average physical occupancy Average physical occupied pallets (in thousands) 7,504 7,656 (2.0) % Average physical pallet positions (in thousands) 9,803 9,597 2.1 % Physical occupancy percentage 76.5 % 79.8 % (330) bps Storage revenue per physical occupied pallet $ 204.39 $ 201.56 1.4 % Warehouse services (3) Throughput pallets (in thousands) 39,239 38,437 2.1 % Warehouse services revenue per throughput pallet $ 32.08 $ 31.93 0.5 % _______________ (1) Excludes $1 million of stock-based compensation expense for the nine months ended September 30, 2024. (2) Includes real estate rent expense of $75 million and $71 million for the nine months ended September 30, 2024 and 2023, respectively, and non-real estate rent expense (equipment lease and rentals) of $12 million and $16 million for the nine months ended September 30, 2024 and 2023, respectively. (3) Warehouse storage and warehouse services metrics exclude managed sites. Global warehousing segment revenues were $2,907 million for the nine months ended September 30, 2024, an increase of $25 million, or 0.9%, compared to $2,882 million for the nine months ended September 30, 2023. The net increase was primarily driven by $47 million from acquisitions and approximately $46 million from our recently completed and in-progress expansion and development projects, partially offset by a $41 million decrease in our same wareh ouse pool and a $27 million decrease from other non-same warehouse sites including closed facilities. The decrease in our same warehouse pool was primarily driven by 68 lower utilization and throughput volumes, partially offset by a favorable increase in rates. In addition, the foreign currency translation of revenues earned by our foreign operations had a $1 million favorable impact compared to the nine months ended September 30, 2023. Global warehousing segment cost of operations was $1,755 million for the nine months ended September 30, 2024, an increase of $7 million, or 0.4%, compared to $1,748 million for the nine months ended September 30, 2023. The net increase was primarily driven by $28 million from acquisitions and $25 million from our recently com pleted and in-progress expansion and development projects, partially offset by a $31 million decrease in our same warehouse pool and a $15 million decrease from other non-same warehouse sites including closed facilities. The decrease in our same warehouse pool was driven by lower power and other warehouse costs. The foreign currency translation of cost of operations from our foreign o perations had a $1 million unfavorable impact compared to the nine months ended September 30, 2023. Global warehousing segment NOI was $1,152 million for the nine months ended September 30, 2024, an increase of $18 million, or 1.6%, compared to $1,134 million for the nine months ended September 30, 2023. Global warehousing segment NOI was positively impacted by approximately $21 million related to our recently completed and in-process expansion and development projects as they continue to ramp up prior to stabilization and approximately $19 million related to the above mentioned acquisitions. These were offset by a decrease from our same warehouse pool of $10 million, or 1.0%, attributable to the revenue and cost of operations factors previously described. In addition, there was a $12 million net decrease from other non-same warehouse sites including closed facilities. 69 Same Warehouse Results Nine Months Ended September 30, 2024 2023 Change (in millions except revenue per pallet) Warehouse storage $ 1,325 $ 1,367 (3.1) % Warehouse services 1,190 1,189 0.1 % Total same warehouse revenues 2,515 2,556 (1.6) % Power 133 136 (2.2) % Labor 922 923 (0.1) % Other warehouse costs 449 476 (5.7) % Total same warehouse cost of operations 1,504 1,535 (2.0) % Same warehouse NOI $ 1,011 $ 1,021 (1.0) % Total same warehouse margin 40.2 % 39.9 % 30 bps Number of same warehouse sites 411 411 Warehouse storage (1) Economic occupancy Average occupied economic pallets (in thousands) 7,038 7,286 (3.4) % Economic occupancy percentage 84.3 % 87.3 % (300) bps Storage revenue per economic occupied pallet $ 188.22 $ 187.61 0.3 % Physical occupancy Average physical occupied pallets (in thousands) 6,499 6,772 (4.0) % Average physical pallet positions (in thousands) 8,350 8,342 0.1 % Physical occupancy percentage 77.8 % 81.2 % (340) bps Storage revenue per physical occupied pallet $ 203.81 $ 201.86 1.0 % Warehouse services (1) Throughput pallets (in thousands) 33,586 34,259 (2.0) % Warehouse services revenue per throughput pallet $ 32.34 $ 31.84 1.6 % _______ (1) Warehouse storage and warehouse services metrics exclude managed sites. Economic occupancy at our same warehouses was 84.3% for the nine months ended September 30, 2024, a decrease of 300 basis points compared to 87.3% for the nine months ended September 30, 2023. Our economic occupancy at our same warehouses was 650 basis points higher than our corresponding average physical occupancy of 77.8%. Economic occupancy was lower than the prior year due to lower physical utilization as customers rationalize their inventory during continued economic pressures driven by higher interest rates. Same warehouse storage revenues per economic occupied pallet increased 0.3% period-over-period, primarily driven by a change in our business profile due to customer rationalization of inventory. Throughput pallets at our same warehouses were 33.6 million pallets for the nine months ended September 30, 2024, a decrease of 2.0% from 34.3 million pallets for the nine months ended September 30, 2023. Th is decrease was the result of lower turns due to continued economic pressures driven by higher interest rates. Same warehouse services revenue per throughput pallet increased 1.6% compared to the prior year, primarily driven by a change in our business profile due to customer rationalization of inventory. 70 Non-Same Warehouse Results Nine Months Ended September 30, 2024 2023 Change (in millions except revenue per pallet) Warehouse storage $ 209 $ 178 17.4 % Warehouse services 183 148 23.6 % Total non-same warehouse revenues 392 326 20.2 % Power 22 20 10.0 % Labor 140 119 17.6 % Other warehouse costs 89 74 20.3 % Total non-same warehouse cost of operations 251 213 17.8 % Non-same warehouse NOI $ 141 $ 113 24.8 % Total non-same warehouse margin 36.0 % 34.7 % 130 bps Number of non-same warehouse sites (1) 57 46 Warehouse storage (2) Economic occupancy Average occupied economic pallets (in thousands) 1,083 928 16.7 % Economic occupancy percentage 74.5 % 73.9 % 60 bps Storage revenue per economic occupied pallet $ 193.11 $ 189.94 1.7 % Physical occupancy Average physical occupied pallets (in thousands) 1,005 884 13.7 % Average physical pallet positions (in thousands) 1,453 1,255 15.8 % Physical occupancy percentage 69.2 % 70.4 % (120) bps Storage revenue per physical occupied pallet $ 208.10 $ 199.29 4.4 % Warehouse services (2) Throughput pallets (in thousands) 5,653 4,178 35.3 % Warehouse services revenue per throughput pallet $ 30.49 $ 32.66 (6.6) % __________________ (1) Refer to our “Same Warehouse Analysis,” which describes the composition of our non-same warehouse pool. (2) Warehouse storage and warehouse services metrics exclude managed sites. 71 Global Integrated Solutions Segment The following table presents the operating results of our global integrated solutions segment for the nine months ended September 30, 2024 and 2023. Nine Months Ended September 30, 2024 2023 Change (in millions) Global Integrated Solutions segment revenues $ 1,094 $ 1,126 (2.8) % Global Integrated Solutions segment cost of operations 916 946 (3.2) % Global Integrated Solutions segment NOI $ 178 $ 180 (1.1) % Global Integrated Solutions margin 16.3 % 16.0 % 30 bps Global integrated solutions segment revenues were $1,094 million for the nine months ended September 30, 2024, a decrease of $32 million, or 2.8%, compared to $1,126 million for the nine months ended September 30, 2023. The decrease was due to lower volumes and the sale of a European subsidiary which occurred in September 2023, offset by increases from acquisitions. In addition, the foreign currency translation of revenues earned by our foreign operations had a $5 million favorable impact compared to the nine months ended September 30, 2023. Global integrated solutions segment cost of operations was $916 million for the nine months ended September 30, 2024, a decrease of $30 million, or 3.2%, compared to $946 million for the nine months ended September 30, 2023. The decrease was due to lower volumes, cost controls, and the above-mentioned sale of a European subsidiary, offset by increases from the above-mentioned acquisitions. The foreign currency translation of cost of operations from our foreign operations had a $4 million unfavorable impact compared to the nine months ended September 30, 2023. Global integrated solutions segment NOI was $178 million for the nine months ended September 30, 2024, a decrease of $2 million, or 1.1%, compared to $180 million for the nine months ended September 30, 2023. Foreign currency translation had a $1 million favorable net impact compared to nine three months ended September 30, 2023. Other Consolidated Operating Expenses Nine Months Ended September 30, Change 2024 2023 % (in millions) Other consolidated operating expense: Depreciation and amortization expense $ 640 $ 557 14.9 % General and administrative expense $ 394 $ 361 9.1 % Acquisition, transaction, and other expense $ 612 $ 45 1260.0 % Restructuring, impairment, and (gain) loss on disposals $ 23 $ 11 109.1 % Depreciation and amortization expense . Depreciation and amortization expense was $640 million for the nine months ended September 30, 2024, an increase of $83 million, or 14.9%, compared to $557 million for the nine months ended September 30, 2023. The increase was primarily due to information technology investments, acquisitions, and greenfield and expansion projects. General and administrative expense . General and administrative expenses were $394 million for the nine months ended September 30, 2024, an increase of $33 million, or 9.1%, compared to $361 million for the nine months ended September 30, 2023. The increase was primarily due to higher stock-based compensation expense related to our annual grants and other costs associated with our information technology infrastructure and expanding operations. We expect our general and administrative expenses to stabilize over time and generate operating leverage. For the nine months ended September 30, 2024 and 2023, general and administrative expenses were 9.8% and 9.0% of total revenues, respectively. 72 Acquisition, transaction, and other expense . Acquisition, transaction, and other expenses were $612 million for the nine months ended September 30, 2024, an increase of $567 million compared to $45 million for the nine months ended September 30, 2023. The increase was primarily due to costs associated with our IPO, including internalization costs and stock-based compensation expense. For further detail on costs associated with our IPO and stock-based compensation, see Note 2, Capital structure and noncontrolling interests and Note 15, Stock-based compensation to the condensed consolidated financial statements included in this Quarterly Report. Restructuring, impairment, and (gain) loss on disposals . Restructuring, impairment, and (gain) loss on disposals were a net expense of $23 million for the nine months ended September 30, 2024, an increase of $12 million compared to a net expense of $11 million for the nine months ended September 30, 2023. The increase was related to higher impairment expense primarily related to properties sold or classified as held for sale and higher severance costs. In addition, the nine months ended September 30, 2024 included a net gain of $4 million related to a fire which occurred at the Company’s warehouse in Kennewick, Washington (see Note 17, Commitments and contingencies in our condensed consolidated financial statements included in this Quarterly Report for details). Other Income (Expense) The following table presents other items of income and expense for the nine months ended September 30, 2024 and 2023. Nine Months Ended September 30, Change 2024 2023 % (in millions) Other income (expense): Interest expense, net $ (369) $ (357) 3.4 % Gain (loss) on extinguishment of debt $ (13) $ — n.m. Gain (loss) on foreign currency transactions, net $ 5 $ (9) n.m. Equity income (loss), net of tax $ (3) $ (2) 50.0 % Other nonoperating income (expense), net $ 1 $ (19) n.m. Interest (expense), net. We reported a net interest expense of $369 million for the nine months ended September 30, 2024, an increase of $12 million, or 3.4%, compared to $357 million for the nine months ended September 30, 2023. The average effective interest rate of our outstanding debt was 6.4% for the nine months ended September 30, 2024, an increase from 5.8% for the nine months ended September 30, 2023, due to higher interest expense prior to substantial debt repayments with IPO proceeds. When taking into account income (expense) generated from those hedging instruments, the average effective interest rate of our outstanding debt was 5.1% for the nine months ended September 30, 2024, an increase from 4.5% for the nine months ended September 30, 2023. Gain (loss) on extinguishment of debt. Gain (loss) on debt extinguishment was a loss of $13 million for the nine months ended September 30, 2024, as the result of various debt refinancing arrangements. There was no gain (loss) on debt extinguishment recognized for the nine months ended September 30, 2023. For additional information regarding our debt, see Note 9, Debt in our condensed consolidated financial statements included in this Quarterly Report. Gain (loss) on foreign currency transactions, net. We reported a net foreign currency exchange gain of $5 million for the nine months ended September 30, 2024 compared to a net loss of $9 million for the nine months ended September 30, 2023. The increase in foreign currency exchange gain was due to more favorable foreign currency exchange rates against the U.S. dollar, with the largest impacts driven by the Euro. Equity income (loss), net of tax. We reported a net loss from equity method investments of $3 million for the nine months ended September 30, 2024, as compared to $2 million net loss for the nine months ended September 30, 2023. The increase in net loss was primarily related to our investment in Emergent Cold LatAm Holdings, LLC, partially offset by a gain recognized from our investment in Ndustrial.io. Other nonoperating income (expense). We reported $1 million of other nonoperating income for the nine months ended September 30, 2024, compared to net expenses of $19 million for the nine months ended September 30, 2023. During the nine months ended 73 September 30, 2023, the Company recognized a net loss of $21 million on the sale of Erweda BV, a European subsidiary. For additional information regarding the divestiture, see Note 4, Business combinations, asset acquisitions, and divestitures in our condensed consolidated financial statements included in this Quarterly Report. Income Tax Expense (Benefit) Income tax benefit for the nine months ended September 30, 2024 was $48 million, which represented an increase of $40 million from the income tax benefit of $8 million for the nine months ended September 30, 2023. The tax benefit in 2024 was principally created by the release of a $24 million valuation allowance on deferred tax assets relating to net operating losses carryforwards in the U.S. which are now expected to be utilized, the tax-effect of pre-tax earnings in various jurisdictions, tax adjustments related to REIT activity, and withholding taxes paid in various jurisdictions. The tax benefit in 2023 was principally created by the tax-effect of pre-tax earnings and losses in various jurisdictions, tax adjustments related to REIT activity, and changes to uncertain tax positions. Our income taxes are discussed in more detail in Note 8, Income taxes to the condensed consolidated financial statements included in this Quarterly Report. Non-GAAP Financial Measures We use the following non-GAAP financial measures as supplemental performance measures of our business: segment NOI, FFO, Core FFO, Adjusted FFO, EBITDA, EBITDAre, and Adjusted EBITDA. We also use same warehouse and non-same warehouse metrics described above. We calculate total segment NOI (or “NOI”) as our total revenues less our cost of operations (excluding any depreciation and amortization, general and administrative expense, stock-based compensation expense, restructuring and impairment expense, gain and loss on sale of assets, and acquisition, transaction, and other expense. We use segment NOI to evaluate our segments for purposes of making operating decisions and assessing performance in accordance with ASC 280, Segment Reporting . We believe segment NOI is helpful to investors as a supplemental performance measure to net income because it assists both investors and management in understanding the core operations of our business. There is no industry definition of segment NOI and, as a result, other REITs may calculate segment NOI or other similarly-captioned metrics in a manner different than we do. The table below reconciles total segment NOI to net income (loss), which is the most directly comparable financial measure calculated in accordance with GAAP, in each case for the three and nine months ended September 30, 2024 and 2023. Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2024 2023 2024 2023 Net income (loss) $ (543) $ (50) $ (671) $ (39) Stock-based compensation expense in cost of operations 1 — 1 — General and administrative expense 143 122 394 361 Depreciation expense 156 137 478 402 Amortization expense 54 51 162 155 Acquisition, transaction, and other expense 592 19 612 45 Restructuring, impairment, and (gain) loss on disposals 8 4 23 11 Equity (income) loss, net of tax — 2 3 2 (Gain) loss on foreign currency transactions, net (14) 5 (5) 9 Interest expense, net 82 126 369 357 (Gain) loss on extinguishment of debt 6 — 13 — Other nonoperating (income) expense, net (1) 19 (1) 19 Income tax expense (benefit) (45) (5) (48) (8) Total segment NOI $ 439 $ 430 $ 1,330 $ 1,314 We calculate EBITDA for Real Estate, or EBITDAre, in accordance with the standards established by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, defined as earnings before interest income or expense, 74 taxes, depreciation and amortization, net loss or gain on sale of real estate, net of withholding taxes, impairment write-downs on real estate property, and adjustments to reflect our share of EBITDAre of partially owned entities. EBITDAre is a measure commonly used in our industry, and we present EBITDAre to enhance investor understanding of our operating performance. We believe that EBITDAre provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and useful life of related assets among otherwise comparable companies. We also calculate our Adjusted EBITDA as EBITDAre further adjusted for the effects of gain or loss on the sale of non-real estate assets, gain or loss on the destruction of property (net of insurance proceeds), other nonoperating income or expense, acquisition, restructuring, and other expense, foreign currency exchange gain or loss, stock-based compensation expense, loss or gain on debt extinguishment and modification, impairment of investments in non-real estate, technology transformation, and reduction in EBITDAre from partially owned entities. We believe that the presentation of Adjusted EBITDA provides a measurement of our operations that is meaningful to investors because it excludes the effects of certain items that are otherwise included in EBITDAre but which we do not believe are indicative of our core business operations. EBITDAre and Adjusted EBITDA are not measurements of financial performance under GAAP, and our EBITDAre and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDAre and Adjusted EBITDA as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. Our calculations of EBITDAre and Adjusted EBITDA have limitations as analytical tools, including the following: • these measures do not reflect our historical or future cash requirements for maintenance capital expenditures or growth and expansion capital expenditures; • these measures do not reflect changes in, or cash requirements for, our working capital needs; • these measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness; • these measures do not reflect our tax expense or the cash requirements to pay our taxes; and • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and these measures do not reflect any cash requirements for such replacements. We use EBITDA, EBITDAre, and Adjusted EBITDA as measures of our operating performance and not as measures of liquidity. The table below reconciles EBITDA, EBITDAre, and Adjusted EBITDA to net income (loss), which is the most directly 75 comparable financial measure calculated in accordance with GAAP, in each case for the three and nine months ended September 30, 2024 and 2023. Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2024 2023 2024 2023 Net income (loss) $ (543) $ (50) $ (671) $ (39) Adjustments: Depreciation and amortization expense 210 188 640 557 Interest expense, net 82 126 369 357 Income tax expense (benefit) (45) (5) (48) (8) EBITDA $ (296) $ 259 $ 290 $ 867 Adjustments: Net loss (gain) on sale of real estate assets 2 5 5 7 Impairment write-downs on real estate property 4 1 9 2 Allocation of EBITDAre of noncontrolling interests (1) — (2) (2) EBITDAre $ (291) $ 265 $ 302 $ 874 Adjustments: Net (gain) loss on sale of non-real estate assets — (1) (2) (3) Other nonoperating (income) expense, net (1) 19 (1) 19 Acquisition, restructuring, and other 470 20 496 50 Technology transformation 5 — 15 — (Gain) loss on property destruction (5) — (4) — Interest expense and tax expense from unconsolidated JVs 2 — 4 2 Depreciation and amortization expense from unconsolidated JVs 2 1 5 4 (Gain) loss on foreign currency exchange transactions, net (14) 5 (5) 9 Stock-based compensation expense 160 8 171 19 (Gain) loss on extinguishment of debt 6 — 13 — Allocation adjustments of noncontrolling interests (1) (1) — (1) Adjusted EBITDA $ 333 $ 316 $ 994 $ 973 76 We calculate funds from operations, or FFO, in accordance with the standards established by the Board of Governors of the NAREIT. NAREIT defines FFO as net income or loss determined in accordance with GAAP, excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated operating real estate assets, plus specified non-cash items, such as real estate asset depreciation and amortization, in-place lease intangible amortization, real estate asset impairment, and our share of reconciling items for partially owned entities. We believe that FFO is helpful to investors as a supplemental performance measure because it excludes the effect of depreciation, amortization, and gains or losses from sales of real estate, all of which are based on historical costs, which implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, FFO can facilitate comparisons of operating performance between periods and among other equity REITs. We calculate core funds from operations, or Core FFO, as FFO adjusted for the effects of gain or loss on the sale of non-real estate assets, gain or loss on the destruction of property (net of insurance proceeds), finance lease ROU asset amortization real estate, non-real estate impairments, acquisition, restructuring and other, other nonoperating income or expense, loss on debt extinguishment and modifications and the effects of gain or loss on foreign currency exchange. We also adjust for the impact attributable to non-real estate impairments on unconsolidated joint ventures and natural disaster. We believe that Core FFO is helpful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, but which do not directly relate to our core business operations. We believe Core FFO can facilitate comparisons of operating performance between periods, while also providing a more meaningful predictor of future earnings potential. However, because FFO and Core FFO add back real estate depreciation and amortization and do not capture the level of recurring maintenance capital expenditures necessary to maintain the operating performance of our properties, both of which have material economic impacts on our results from operations, we believe the utility of FFO and Core FFO as a measure of our performance may be limited. We calculate adjusted funds from operations, or Adjusted FFO, as Core FFO adjusted for the effects of amortization of deferred financing costs, amortization of debt discount/premium amortization of above or below market leases, straight-line net operating rent, provision or benefit from deferred income taxes, stock-based compensation expense from grants under our equity incentive plans, non-real estate depreciation and amortization, non-real estate finance lease ROU asset amortization, and recurring maintenance capital expenditures. We also adjust for Adjusted FFO attributable to our share of reconciling items of partially owned entities. We believe that Adjusted FFO is helpful to investors as a meaningful supplemental comparative performance measure of our ability to make incremental capital investments in our business and to assess our ability to fund distribution requirements from our operating activities. FFO, Core FFO, and Adjusted FFO are used by management, investors and industry analysts as supplemental measures of operating performance of equity REITs. FFO, Core FFO and Adjusted FFO should be evaluated along with GAAP net income and net income per diluted share (the most directly comparable GAAP measures) in evaluating our operating performance. FFO, Core FFO, and Adjusted FFO do not represent net income or cash flows from operating activities in accordance with GAAP and are not indicative of our results of operations or cash flows from operating activities as disclosed in our condensed consolidated financial statements included elsewhere in this Quarterly Report. FFO, Core FFO, and Adjusted FFO should be considered as supplements, but not alternatives, to our net income or cash flows from operating activities as indicators of our operating performance. Moreover, other REITs may not calculate FFO in accordance with the NAREIT definition or may interpret the NAREIT definition differently than we do. Accordingly, our FFO may not be comparable to FFO as calculated by other REITs. In addition, there is no industry definition of Core FFO or Adjusted FFO and, as a result, other REITs may also calculate Core FFO or Adjusted FFO, or other similarly-captioned metrics, in a manner different than we do. 77 The table below reconciles FFO, Core FFO, and Adjusted FFO to net income (loss), which is the most directly comparable financial measure calculated in accordance with GAAP, in each case for the three and nine months ended September 30, 2024 and 2023. Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2024 2023 2024 2023 Net income (loss) $ (543) $ (50) $ (671) $ (39) Adjustments: Real estate depreciation 89 82 265 238 In-place lease intangible amortization 1 2 6 6 Net loss (gain) on sale of real estate assets 2 4 5 7 Impairment write-downs on real estate property 4 — 9 2 Real estate depreciation, (gain) loss on sale of real estate and real estate impairments on unconsolidated JVs 1 1 2 3 Allocation of noncontrolling interests — — (1) — FFO $ (446) $ 39 $ (385) $ 217 Adjustments: Net (gain) loss on sale of non-real estate assets — (1) (2) (3) Finance lease ROU asset amortization - real estate related 17 18 53 53 Other nonoperating (income) expense, net (1) 19 (1) 19 Acquisition, restructuring, and other 473 19 500 50 Technology transformation 5 — 15 — (Gain) loss on property destruction (5) — (4) — (Gain) loss on foreign currency transactions, net (14) 5 (5) 9 (Gain) loss on extinguishment of debt 6 — 13 — Core FFO $ 35 $ 99 $ 184 $ 345 Adjustments: Non-real estate depreciation and amortization 93 81 294 243 Finance lease ROU asset amortization - non-real estate 8 5 21 16 Amortization of deferred financing costs 5 4 16 14 Amortization of debt discount / premium 1 — 1 1 Deferred income taxes expense (benefit) (47) (16) (71) (48) Straight line net operating rent (1) 2 (3) 4 Amortization of above market leases — — — 1 Amortization of below market leases — — (1) (1) Stock-based compensation expense 160 9 171 19 Recurring maintenance capital expenditures (45) (48) (123) (119) Allocation related to unconsolidated JVs 1 1 4 2 Allocation of noncontrolling interests (2) — (1) (1) Adjusted FFO $ 208 $ 137 $ 492 $ 476 78 Liquidity and Capital Resources As of September 30, 2024, we had $409 million of cash and cash equivalents and $1.7 billion available under our Revolving Credit Facility (net of outstanding standby letters of credit in the amount of $66 million, which reduce availability). We currently expect that our principal sources of funding will include: • current cash balances; • cash flows from operations; • our credit facilities; and • other forms of debt financings and equity offerings. Our liquidity requirements and capital commitments primarily consist of: • operating activities and overall working capital; • capital expenditures; • development and acquisition activities; • capital contributions; • debt service obligations; and • stockholder distributions. On July 26, 2024, we closed our IPO of 56,882,051 shares of our common stock at a price of $78.00 per share, with a subsequent exercise in full by the underwriters of their option to purchase from us an additional 8,532,307 shares of common stock that closed on July 31, 2024. The net proceeds to us from the IPO were $4,873 million. As of September 30, 2024, we expect that our funding sources as noted above will be adequate to meet our short-term liquidity requirements and capital commitments for the next 12 months. On February 15, 2024, we closed on our $2,400 million Delayed Draw Term Loan, the proceeds from which we used to repay our CMBS 4 loan on April 9, 2024, prior to maturity. During the three months ended September 30, 2024, we used a portion of the net proceeds from our IPO to repay the Delayed Draw Term Loan, our CMBS 5 loan, and a portion of our outstanding borrowings under the Revolving Credit Facility, investing the remaining cash into money market funds. For more information regarding these debt facilities refer to Note 9, Debt in the condensed consolidated financial statements included in this Quarterly Report. We expect to utilize the same sources of capital we will rely on to meet our short-term liquidity requirements to also meet our long-term liquidity requirements, which include funding our operating activities, our debt service obligations and stockholder distributions, and our future development and acquisition activities. Dividends and Distributions We are required to distribute at least 90% of our taxable income (excluding capital gains) on an annual basis in order to continue to qualify as a REIT for federal income tax purposes. Accordingly, we intend to make, but are not contractually bound to make, regular quarterly distributions to stockholders from cash flows from our operating activities. All such distributions are at the discretion of our board of directors. We consider market factors and our performance in addition to REIT requirements in determining distribution levels. Amounts accumulated for distribution to stockholders are primarily invested in interest-bearing accounts, which are consistent with our intention to maintain REIT status. As a result of this distribution requirement, we cannot rely on retained earnings to fund our ongoing operations to the same extent that other companies which are not REITs can. We may need to continue to raise capital in the debt and equity markets to fund our working capital needs, as well as potential developments in new or existing properties or acquisitions. In addition, we may be required to use borrowings under our Revolving Credit Facility, if necessary, to meet REIT distribution requirements and maintain our REIT status. 79 During the three months ended September 30, 2024, the board of directors of the Company declared a prorated quarterly cash dividend of $0.38 per share of common stock. The dividend was payable to shareholders of record as of September 30, 2024 and was paid on October 21, 2024. The dividend is prorated for the period commencing on July 26, 2024, the date the Company’s initial public offering was consummated, and ending on September 30, 2024, representing an annualized dividend rate of $2.11 per share. Outstanding Indebtedness The following table summarizes our outstanding indebtedness as of September 30, 2024 (in millions): As of September 30, 2024 Fixed rate $ 2,190 Variable rate—unhedged 324 Variable rate—hedged 2,500 Total debt $ 5,014 Percent of total debt: Fixed rate 43.7 % Variable rate—unhedged 6.5 % Variable rate—hedged 49.9 % The variable rate debt shown above bears interest at interest rates based on various one-month rates of which SOFR, BBSW, and CDOR are the most significant, depending on the respective agreement governing the debt, including our Revolving Credit Facility and Term Loan A. As of September 30, 2024, our debt had a weighted average term to maturity of approximately 4 years, assuming exercise of extension options. For further information regarding outstanding indebtedness, please see Note 9, Debt in the condensed consolidated financial statements included in this Quarterly Report. Senior Unsecured Notes The following table provides details of outstanding Senior Unsecured Notes (balances in millions): Aggregate Principal Amount at Issuance Maturity Date Stated Interest Rate (1) September 30, 2024 Borrowing Currency USD Series A Senior Notes $300 300 August 20, 2026 2.22 % $ 300 Series B Senior Notes $375 375 August 20, 2028 2.52 % 375 Series C Senior Notes €128 137 August 20, 2026 0.89 % 143 Series D Senior Notes €251 269 August 20, 2031 1.26 % 280 Series E Senior Notes £145 183 August 20, 2026 1.98 % 194 Series F Senior Notes £130 164 August 20, 2028 2.13 % 174 Series G Senior Notes €80 86 August 20, 2027 3.33 % 89 Series H Senior Notes €110 118 August 20, 2029 3.54 % 123 Series I Senior Notes €50 54 August 20, 2032 3.74 % 56 Total Senior Unsecured Notes $ 1,734 __________________ (1) Interest on our Senior Unsecured Notes is payable semi-annually in arrears. 80 The Senior Unsecured Notes are the joint and several obligations of Lineage Inc., Lineage OP, LP, Lineage Logistics Holdings, LLC, Lineage Logistics, LLC, certain U.S. subsidiaries that guarantee or otherwise becomes liable, as a borrower or a co-borrower or otherwise, under any of our material debt facilities and, in the case of Senior Unsecured Notes denominated in currencies other than the U.S. dollar, Lineage Treasury Europe B.V. and certain non-U.S. subsidiaries that guarantee or otherwise becomes liable, as a borrower or a co-borrower or otherwise, under any of our material debt facilities. The Senior Unsecured Notes rank pari passu with our other senior unsecured indebtedness, including the Revolving Credit Facility and Term Loan A, and are subordinated to any of the obligors’ existing and future secured debt. We may prepay the Senior Unsecured Notes in full or in part, at any time, subject to notice requirements and minimum principal amount requirements, at 100% of the principal amount so prepaid, and the make-whole amount determined for the prepayment date with respect to such principal amount, and accrued interest to the date of prepayment. In the event of certain changes in tax law, Lineage Logistics, LLC or Lineage Treasury Europe B.V. may prepay the Senior Unsecured Notes at 100% of the principal amount so prepaid, and a modified make-whole amount and accrued interest to the date of prepayment. Upon a change of control or becoming subject to sanctions, Lineage Logistics, LLC must offer to prepay the entire unpaid principal amount of the Senior Unsecured Notes and accrued interest to the date of prepayment. The note purchase agreements governing the Senior Unsecured Notes contain covenants that, among other things, limit our ability to incur additional debt, create liens against our assets, make acquisitions, pay dividends or distributions on our stock, repurchase our stock, merge or consolidate with another entity, transfer or sell assets, enter into transactions with affiliates, change our line of business, enter into negative pledges, and conduct activities that would result in us being subject to sanctions or violating sanctions. The note purchase agreements also require us to maintain a total leverage ratio, unsecured leverage ratio, secured leverage ratio, and fixed charge coverage ratio each quarter at the same levels as those set forth in the Revolving Credit and Term Loan Agreement. As of September 30, 2024, we were in compliance with our covenants under the note purchase agreements. The note purchase agreements governing the Senior Unsecured Notes also contain customary events of default, including defaults in the payment of principal, interest or fees, defaults in compliance with the covenants set forth in the note purchase agreements, cross-defaults to certain other indebtedness, and bankruptcy and other insolvency defaults. Security Interests in Customers’ Products By operation of law and in accordance with our warehouse customer contracts (other than leases), we typically receive warehouseman’s liens on products held in our warehouses to secure customer payments. Such liens typically permit us to take control of the products and sell them to third parties in order to recover any monies receivable on a delinquent account, but such products may be perishable or otherwise not available to us for re-sale. Our credit loss expense relating to customer receivables was $3 million and $4 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and December 31, 2023, we maintained allowances for uncollectible balances of $8 million and $7 million, respectively, which we believed to be adequate. Maintenance Capital Expenditures and Repair and Maintenance Expenses Lineage prides itself on maintaining its facilities, fleet and railcars at a high standard. We regularly update long-range maintenance plans by asset to ensure that our assets maintain the high quality and operational efficiency that our customers expect from us. Maintenance Capital Expenditures Maintenance capital expenditures are capitalized funds used to maintain assets that will result in an extended useful life. This includes the cost to purchase and install, repair, or construct assets when it results in a useful life longer than one year and the installed cost per asset is over a de minimis threshold. Maintenance capital expenditures are related to both our global warehousing segment and global integrated solutions segment, including information technology, and are all, in management’s judgment, recurring in nature. These expenditures include maintenance performed multiple times over the lifetime of the facility or asset, such as replacing or repairing roofs, refrigeration systems, racking, material handling equipment, and fleet. These expenditures also include information technology maintenance to existing servers, equipment, and software. 81 The following table sets forth our recurring maintenance capital expenditures for the three and nine months ended September 30, 2024 and 2023. Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in millions) Global warehousing $ 38 $ 34 $ 92 $ 87 Global integrated solutions 1 9 10 18 Information technology and other 6 7 21 15 Maintenance capital expenditures $ 45 $ 50 $ 123 $ 120 Repair and Maintenance Expenses Repair and maintenance expenses are incurred when assets need repair or replacement and do not qualify as capital expenditures. If the work does not materially extend the useful life of the asset or the asset value is less than a de minimis threshold, it would be recorded as an operating expense under repair and maintenance expenses. Examples include ordinary repairs on roofs, racking, refrigeration, and material handling equipment. Project related expenses are excluded. The following table sets forth our repair and maintenance expenses for the three and nine months ended September 30, 2024 and 2023. Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in millions) Global warehousing $ 40 $ 35 $ 109 $ 102 Global integrated solutions 13 14 40 42 Repair and maintenance expenses $ 53 $ 49 $ 149 $ 144 Integration Capital Expenditures Integration capital expenditures are capitalized funds related to integrating acquired assets and businesses. Integration capital expenditures are one-time expenditures. These are typically acquisition-related costs, including maintenance on acquired assets that are beyond their useful life at the time of acquisition, rebranding expenditures, and information technology expenditures to standardize system usage across our business, and also include certain non-acquisition related costs, including safety and compliance projects to comply with any applicable policies, laws, or codes, such as installation of site security or a new fire suppression system, as well as freon to ammonia conversions. The following table sets forth our integration capital expenditures for the three and nine months ended September 30, 2024 and 2023. Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in millions) Global warehousing $ 14 $ 13 $ 32 $ 27 Global integrated solutions — 3 1 20 Information technology and other 5 1 18 12 Integration capital expenditures $ 19 $ 17 $ 51 $ 59 82 External Growth Capital Investments External growth capital investments include acquisitions, greenfield projects and expansion initiatives, information technology platform enhancements, and other capital projects which result in an economic return. We divide growth projects into the following categories: • Acquisitions: The purchase of an external company or facility. Also includes the purchase of the real estate of facilities we currently lease. • Greenfields and Expansions: Projects either to build a new facility, including the purchase of land, or to increase the size of an existing warehouse (as measured by cubic feet). The costs associated with construction and materials are included. • Energy and Economic Return: Energy return projects are intended to increase energy efficiency by decreasing the amount of kWh or fossil fuels consumed or reducing the cost to procure energy. Common examples include installing new LED technology, installing solar panels at a warehouse, and electrification of transportation fleet. Economic return projects require an investment of capital for a future cash flow and/or segment NOI benefit that is not an acquisition, greenfield, expansion, or energy project. Examples include addition of blast cells, racking replacement, re-rack for additional pallet positions, replacing freezer doors, purchasing compressors, buying out leased equipment, and purchasing new rail cars. • Information Technology Transformation and Growth: Capital investments focused on (a) warehouse operations efficiency – deploying technology that leverages advanced algorithms and artificial intelligence to increase labor productivity and higher utilization; (b) customer experience and service – building and implementing technology solutions to improve response times, automate common tasks, and offer seamless multi-channel support elevating both customer and employee experience; and (c) sales management, pricing and billing – creating and integrating IT systems to streamline sales processes, optimize pricing, and enhance billing accuracy and efficiency. The following table sets forth our external growth capital investments for the three and nine months ended September 30, 2024 and 2023. Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in millions) Acquisitions, including equity issued and net of cash acquired and adjustments $ 40 $ 8 $ 113 $ 24 Greenfield and expansion expenditures 66 56 197 220 Energy and economic return initiatives 24 23 71 91 Information technology transformation and growth initiatives 23 21 50 56 External growth capital investments $ 153 $ 108 $ 431 $ 391 We completed one acquisition in each of the three months ended September 30, 2024 and 2023, respectively, and three acquisitions in each of the nine months ended September 30, 2024 and 2023, respectively. Refer to Note 4, Business combinations, asset acquisitions, and divestitures of the condensed consolidated financial statements included in this Quarterly Report for more information regarding current period business combinations and asset acquisitions. The greenfield and expansion expenditures of $66 million and $197 million during the three months and nine months ended September 30, 2024, respectively, relate primarily to projects that remain under construction as of September 30, 2024. The greenfield and expansion expenditures of $56 million and $220 during the three months and nine months ended September 30, 2023, respectively, related primarily to projects that were completed in 2023 or are expected to be completed in 2024. Energy and economic return initiatives include $24 million and $23 million of corporate initiatives and smaller customer driven growth projects incurred during the three months ended September 30, 2024 and 2023, respectively. Energy and economic return initiatives include $71 million and $91 million of corporate initiatives and smaller customer-driven growth projects incurred during the nine months ended September 30, 2024 and 2023, respectively. 83 In implementing and developing new IT systems globally, we invested $23 million and $21 million during the three months ended September 30, 2024 and 2023, respectively, and $50 million and $56 million during the nine months ended September 30, 2024 and 2023, respectively. Historical Cash Flows The following summary discussion of our cash flows is based on the condensed consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below. Nine Months Ended September 30, 2024 2023 (in millions) Net cash provided by operating activities $ 446 $ 565 Net cash used in investing activities $ (536) $ (645) Net cash provided by (used in) financing activities $ 428 $ (10) Operating Activities For the nine months ended September 30, 2024, our net cash provided by operating activities was $446 million, compared to $565 million for the nine months ended September 30, 2023. The decrease was primarily due to a reduction in net income (loss) adjusted for non-cash items and unfavorable changes in working capital, most significantly in accounts payable, accrued liabilities, deferred revenue, and accounts receivable. Investing Activities For the nine months ended September 30, 2024, cash used in investing activities was $536 million. This was driven by $486 million in purchases of property, plant, and equipment, primarily for growth capital expenditures. In addition, we invested $113 million in the acquisitions of Entrepôt du Nord Inc, Luik Natie, and Eurofrigor. This was partially offset by $50 million of insurance proceeds related to a fire which occurred at the Company’s warehouse in Kennewick, Washington (see Note 17, Commitments and contingencies in our condensed consolidated financial statements included in this Quarterly Report for details). For the nine months ended September 30, 2023, cash used in investing activities was $645 million. This was driven by $605 million in purchases of property, plant, and equipment, primarily for growth capital expenditures, partially offset by $13 in proceeds from the sale of assets. In addition, we invested $29 million in our investment in Emergent Cold LatAm Holdings, LLC and $24 million in acquisitions, net of cash acquired. Refer to Note 4, Business combinations, asset acquisitions, and divestitures in the condensed consolidated financial statements included in this Quarterly Report for more information regarding current period business combinations and asset acquisitions. Financing Activities Our net cash provided by financing activities was $428 million for the nine months ended September 30, 2024. Cash provided by financing activities during 2024 was primarily driven by $4,879 million of proceeds from the issuance of common stock in our IPO (net of equity raise costs) and $540 million of net borrowings on revolving credit lines, partially offset by outflows of $4,606 million for net repayments of long-term debt and finance leases, $138 million for distributions, $75 million for redemption of OPEUs, $46 million for payment of deferred consideration liabilities, $45 million for financing fees, $46 million for the repurchase of common shares for employee income taxes on stock-based compensation, and $25 million for redemption of common stock. For further detail on transactions associated with our IPO, refer to Note 2, Capital structure and noncontrolling interests in the condensed consolidated financial statements included in this Quarterly Report. Our net cash used in financing activities was $10 million for the nine months ended September 30, 2023. Cash used in financing activities during 2023 consisted primarily of $72 million for repayments of long-term debt and finance leases, $33 million for payment of deferred and contingent consideration liabilities, and $35 million for distributions. The outflows were partially offset by $142 million of capital contributions (net of equity raise costs) and $12 million of net borrowings on revolving credit lines. 84 Off-Balance Sheet Arrangements As of September 30, 2024 and December 31, 2023, we had no material off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources. Critical Accounting Policies and Estimates The condensed consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates, assumptions, and judgments in certain circumstances that affect the reported amounts of assets, liabilities, and contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that we believe to be most appropriate and reasonable. Actual results may differ from these estimates under different assumptions or conditions. There have been no material changes to our critical accounting policies and estimates as described in our Prospectus. New Accounting Pronouncements Refer to Note 1 to our condensed consolidated financial statements included elsewhere in this Form 10-Q for more information regarding applicable new accounting pronouncements. 85