管理層發言
Thank you. Welcome to Lineage's discussion of its fourth quarter and full year 2024 financial results. Joining me today are Greg Lehmkuhl, Lineage's President and Chief Executive Officer; and Rob Crisci, Lineage's Chief Financial Officer. Our earnings presentation, which includes supplemental financial information, can be found on our Investor Relations website at ir.onelineage.com. Following management's prepared remarks, we'll be happy to take your questions. Turning to Slide 2. Before we start, I would like to remind everyone that our comments today will include forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our filings with the SEC. These risks could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued today along with the comments on this call are made only as of today and will not be updated as actual events unfold.
In addition, reference will be made to certain non-GAAP financial measures. Information regarding our use of these measures and a reconciliation of non-GAAP to GAAP measures can be found in the press release that was issued this morning. Unless otherwise noted, reported figures are rounded, and comparisons of the fourth quarter of 2024 are to the fourth quarter of 2023 and comparisons of the full year 2024 are to the full year 2023. Now I would like to turn the call over to Greg.
Thanks, Evan, and thanks, everyone, for joining us today. Turning to the 2024 highlights on Slide 3, I'd like to start with a brief recap of our 2024 accomplishments. We executed the largest IPO of the year and the largest REIT IPO of all time. This enabled us to reduce our leverage to under 5x, which earned us investment-grade ratings at both Moody's and Fitch and positions us well to continue to deploy capital across our attractive pipeline of development and M&A opportunities. Financially, we delivered 4% adjusted EBITDA growth and 6% AFFO per share growth and initiated our dividend at an annualized rate of $2.11 a share. Operationally, we delivered a same warehouse physical occupancy of 78% despite a challenging external environment, driven by our high-quality assets in the locations most critical to our diversified customer base. As we reflect on 2024, we achieved the second year in a row of our all-time best safety performance, reinforcing our first corporate value of safety; record new business wins helping to offset the industry headwinds; best-ever truck turn times for our customers, the service metrics they care about the most; best warehouse labor productivity in our history, and this continued into the first quarter; the issuance of our 100th patent, demonstrating our unwavering commitment to innovation, automation, and data science.
We received market recognition and awards like the CNBC Disruptor 50 list for the fourth consecutive year; the Fortune's 2024 Change the World list for the second time; the Inc's 2024 Best in Business awards for the innovation and technology category; and the 2024 SmartWay Leader by the U.S. EPA in recognition for our dedication to sustainability through innovative freight solutions. Finally, we executed on our robust pipeline of development and M&A opportunities deploying $760 million of growth capital, including the opening of what we believe to be the most state-of-the-art and innovative fully-automated cold store in the world in Hazleton, Pennsylvania, which opened on time and is operating as expected; the acquisition of ColdPoint Logistics in Kansas City; and several other accretive acquisitions around the globe. I would like to sincerely thank all of our team members across the world for contributing to our success in 2024.
As we move into 2025, fresh and frozen food remains a growing segment, driven by strong long-term demand. The vast majority of food consumed in developed markets requires temperature-controlled warehousing at some point in its journey from farm to fork. At Lineage, our strategically-built network and cutting-edge technology give us a significant competitive advantage and positions us as the global leader in the cold chain. Operationally, we're seeing continued benefits from our focus on labor productivity, lean process excellence, and energy management, driving efficiency across our business. Speaking of efficiencies, our LinOS initiative is on track, and our early pilots are exceeding expectations. As a reminder, LinOS is our proprietary warehouse execution system that we've developed and already implemented in multiple automated facilities and have begun piloting in our conventional buildings.
The software uses patented and proprietary algorithms that are a result of many years of development and collaboration between our data science, technology, and operations teams. Our belief is that LinOS will transform warehouse operations, resulting in significantly higher performance for customers while accelerating efficiency improvements. Our early pilots are both exceeding our efficiency expectations and being positively received by our hourly team members and warehouse leadership. Our teams are genuinely excited about how this technology can transform our operations. In fact, I've been getting requests from general managers asking to be next on the list as the enthusiasm around this initiative spreads. In short, it's still early, but we're more excited than ever about LinOS, and we will provide more color moving forward as our pilots continue and we learn more. Before introducing our 2025 guidance, allow me to provide some color on the path traveled over the last few years.
As part of our long-term planning cycle, we recently had our data scientists refresh our analysis of the core holdings of our North American warehousing business to shed light on recent trends. Now, no study is perfect, but our data suggests that, first of all, food consumption has not changed. In fact, our study showed that since 2021, our outbound pallet volume remains stable, fluctuating less than 1% annually. The volume just shifted between channels, for example, from food service to retail. And importantly, due to our diversification, it has minimal impact on us because we store pretty much everything. However, inventory holdings have fluctuated over the past several years. Here is a brief timeline of what happened. Back in 2020 and 2021, we saw supply chain chaos, production charges, port shutdowns, and the inventory was bled down. 2022 was the year where customers began to rebuild inventories quickly, leading to overbuilding.
That overbuilding continued into the third quarter of 2023 when the excess inventory began to unwind. That unwinding continued through the second quarter of 2024. Said another way, inventory levels remained elevated for the first half of 2024. Since then, we've experienced a more normal seasonal pattern, which is what we expect to continue moving forward. For 2025, we expect full year adjusted EBITDA of $1.35 billion to $1.4 billion, and AFFO per share of $3.40 to $3.60. To reiterate, our 2025 guidance assumes normal seasonality from today's historically low inventory levels with no market improvement. As always, our guidance excludes the impact of unannounced future acquisitions or developments. Our solid financial position, bolstered by a strong balance sheet, available cash, and significant debt capacity provides the opportunity to deploy over $1.5 billion in capital in 2025.
Thanks, Greg. Good morning, everyone, and thanks for your interest in Lineage. Starting on Slide 5 and looking briefly at our financial results for the fourth quarter. Our total revenue was $1.34 billion, flat versus prior year. Our adjusted EBITDA increased 10% to $335 million with the adjusted EBITDA margin increasing 210 basis points to 25%. Our AFFO for the quarter was up over 145% to $213 million and AFFO per share was $0.83, a 73% increase versus prior year. We did benefit from a one-time tax item in the quarter of approximately $13 million or $0.05, aiding our AFFO results. Also in the quarter, we deployed $329 million of growth capital, including the closing of our previously announced acquisition of ColdPoint Logistics. The integration is off to a great start, and we are proud to have the ColdPoint team as part of the Lineage family. Turning to our full-year 2024 results on Slide 6.
Our total revenue for full-year 2024 was $5.34 billion. Our adjusted EBITDA increased 4%. Importantly, our 2-year adjusted EBITDA CAGR is a strong 11% despite market headwinds, a testament to our ability to perform well in all market environments. Adjusted EBITDA margin increased 100 basis points to 24.9% in 2024 and is up 310 basis points over the past 2 years. AFFO was up 25% to $705 million and AFFO per share was $3.29, a 6.5% increase versus prior year. Turning to our global warehousing segment, which represented 87% of our total NOI in 2024. Full-year segment revenue grew 1% and total segment NOI increased 2% to $1.5 billion, delivering warehouse NOI margin of 39.5%, a 40 basis point increase. Since 2022, we've grown our total warehouse NOI margin by 390 basis points, driven by strong labor productivity improvements and continued operational execution. We operate highly efficient warehouses, thanks to our committed team members, lean processes, and innovative technology.
We believe we are on a long-term journey to reduce our cost structure, in particular our labor and energy expenses through operational excellence and the continued deployment of our proprietary technologies. We believe we're only getting started. Looking forward to 2025, we expect full-year segment NOI growth of 4% to 6% on a constant currency basis and 3% to 5% on an as-reported basis. We see same warehouse NOI growth of 2% to 5% on a constant currency basis and 1% to 4% as reported. As Greg outlined, we believe our market has stabilized after 2 years of unusual volatility driven by inventory rebalancing. Inventory levels remained elevated in the first half of 2024 and stabilized later in the year. Our guidance assumes normal seasonality for 2025 but no market improvement. We are well positioned for strong operating leverage on any incremental growth. In summary, we expect to drive continued growth and margin expansion in 2025, all before any benefit from our LinOS project, meaningful market improvement, or incremental capital deployment.
Shifting to Slide 8 and covering our global integrated solutions segment. We saw a slight decrease in total segment revenue, which came in at $1.5 billion, down 2% versus prior year. NOI was down 5%, and NOI margin decreased 50 basis points to 15.9%. As a reminder, our global integrated solutions segment offers value-added solutions to our customers, which increases stickiness and supports our warehouse business. While we saw declines in 2024 driven by global transportation trends and specific weakness in some European markets, we are well positioned for a rebound in 2025. This is aided by new business wins as we benefit from our customers taking advantage of our unique network and full suite of services, allowing us to partner with our customers to optimize their supply chains. For 2025, we expect full-year segment NOI growth of 5% to 10%. Turning to Slide 9, we ended the year with net debt of $6.5 billion.
Total liquidity at the end of the year stood at $1.8 billion, including cash and revolving credit facility capacity. Our leverage ratio, defined as net debt to adjusted EBITDA, was 4.9x at the end of the year. Our strong balance sheet, available cash, and debt capacity provides the opportunity to deploy more than $1.5 billion of growth capital in 2025. We are excited to enter the new year with a reloaded balance sheet and a large pipeline of attractive acquisition and development opportunities that will allow us to continue to build on our position as the global industry leader. Turning to our 2025 guidance, which Greg already previewed. We expect full-year adjusted EBITDA of $1.35 billion to $1.4 billion; and AFFO per share of $3.40 to $3.60. As a reminder, this guidance excludes the impact of unannounced future acquisitions or developments. We have also included some additional modeling support on this page. We are very excited to deliver a strong year for our shareholders. With that, I'll turn it back over to Greg.
Thanks, Rob. I'll conclude on Slide 11. We capped this transformational year on a strong note, proving once again that our business is built to perform in any environment. Our focus on execution, cost efficiencies, and smart capital deployment has forged a solid path of growth for many years, and we're excited about the opportunities ahead. Looking forward, we're confident in the long-term demand drivers of the global food supply chain and our ability to lead the industry. With our unmatched platform, cutting-edge technology, broad customer reach, and over $100 million of incremental future NOI growth from previously completed or in-process development projects that have yet to stabilize, we're in a great position for compounding growth and long-term shareholder value creation. Our balance sheet remains strong, giving us the flexibility to invest in a robust pipeline of strategic opportunities. Like Rob said, we're just getting started. With that, let's open it up for questions.
分析師問答
Your first question comes from the line of Alexander Goldfarb from Piper Sandler.
So a question on just the industry overall. You guys talked about inventory levels normalizing after the post-COVID recalibration. You talked about also being at low levels. At the same time, there's tariff talk, there's still inflationary pressure, grocery prices, restaurant prices. So what gives you confidence that the food market, the cold storage market truly has settled out? And it sounds like there's some optimism in your tone that things could improve. What are some anecdotes that give you that confidence versus nervousness that the consumer is still under pressure, whether it's eating out or eating at home?
In our prepared remarks, we mentioned that despite the significant fluctuations in inventory levels over the past few years, our throughput in our core holdings remained relatively stable, changing by less than 1%. Inventory levels have varied significantly but settled in our core holdings during the third quarter of last year, following normal seasonal patterns since then. Current inventory levels are low compared to pre-COVID history. We are not being overly optimistic; instead, we expect things to return to a seasonal pattern from these historically low levels. The upside is that our customers are focused on boosting sales through promotional activities and discounting, which could exceed our guidance as we benefit from strong incremental margins and solid operating leverage. Therefore, we are not forecasting any optimistic changes; we are basing our guidance on the current market conditions.
Your next question comes from the line of Ki Bin Kim from Truist.
I appreciate your insights on the guidance provided. However, could you share additional details? Specifically, regarding occupancy, it seems like negative occupancy might be expected next year, as the first half of this year could be quite challenging. I'm not certain if that’s accurate, but any clarity you can provide on that and perhaps on pricing would be helpful.
Yes, for sure. So let me drill down a little bit on seasonality. So Greg covered a lot of this, right? It's been unusual in the last several years, given all the stuff Greg just talked about. So if we drill down just a little bit more. So if you look at our 2024 results by quarter for our new 2025 same-store pool, right, which is in the appendix, you actually see that last year, the NOI is almost exactly the same in each of the 4 quarters, like within $5 million or so. That's highly unusual. And that's the result of what Greg just said, which was last year in the first half, we still had elevated inventory levels and then normal seasonality began to the second half. So that dynamic, therefore, creates challenging comps for us in the first half of this year. The good news, as Greg mentioned, right, is that we feel the industry has stabilized at these lower levels. And as Greg also said, we're not assuming any improvement.
So drilling down again, normal seasonality. So if we look at pre-pandemic data back when our industry was more normal, Q1 generally declines from Q4, then Q2 generally declines a little bit from Q1. Q3 jumps up a fair amount, and then Q4 is typically the peak aided by the holiday season and then it starts to come back down and get into Q1 and we sort of start at 0 again. So we see this year as a normal year and expect our results to follow that trend. So if you break that out into sort of first half, second half, generally, in a normal year, you'll get 47% to 48% of your NOI EBITDA in the first half and 52%, 53% in the second half, and that's what our guidance assumes.
Your next question comes from the line of Ronald Kamdem from Morgan Stanley.
I have two questions. First, could you provide more detail on the same-store NOI guidance for the warehouse segment? Specifically, how much of that is driven by top line growth versus expense savings? And for my second question, regarding the $1.5 billion of capital deployment, can you share more about the pipeline and the types of opportunities you are considering?
So I'll start with pricing. In terms of pricing, we expect to get inflationary level pricing. We are most focused on being long-term partners with our customers, and we treat each customer in the market uniquely. At times, we'll trade volume for price if it makes sense for us. And then we expect to continue to get productivity improvements, energy efficiencies and synergies.
And then on the pipeline, yes, I mean, the pipeline is exciting, right? None of this is in our guide. We have the capacity. We're not saying we're going to deploy $1.5 billion; we're saying we have the capacity, as we laid out between our available debt and where our ratios are to do that. And there's a ton of development opportunities. There's a ton of M&A opportunities. If you look back over the past couple of years, we spent about $750 million each year in terms of growth capital. As you know, we've been working hard to get our balance sheet in the right position, get the IPO done so we can really accelerate the growth of this company, and we're there. And we're super excited about that. And we're working on a lot of exciting things that we hope to tell people about here in the near future.
Your next question comes from the line of Nicholas Thillman from Baird.
I wanted to focus a bit on pricing, specifically on a per pallet basis. It appears that while you aggressively set prices in 2023, they are now relatively flat. As you consider 2025, are you open to adjusting prices for new customer acquisition to prioritize occupancy? What is your perspective on this?
Yes, I'll just emphasize what I mentioned earlier. Over time, we believe we can achieve price increases that keep pace with inflation. We are analyzing each market and the supply and demand dynamics specific to them, and we are working to collaborate with customers to ensure that we remain a valued partner for the long term. With that being said, we are experiencing inflationary-level pricing in nearly all of our markets and feel confident in our ability to maintain that. It can be challenging to observe this through external metrics, as even minor shifts in commodity mix can obscure the improvements in pricing.
Your next question comes from the line of Todd Thomas from KeyBanc.
I wanted to follow up on capital deployment. I realize guidance does not include anything incremental that has not been announced. But how should we think about the mix of equity and debt to fund future investments from here with leverage ending the year at just under 5x on a net debt to adjusted EBITDA basis? And then separately, I was just curious if you could talk about the yield pickup related to the $1.3 billion of completed and in-process projects, that $101 million of NOI, that opportunity. How should we think about the cadence of that incremental NOI coming online during 2025?
Yes. Regarding the $1.5 billion, that figure is based solely on funding with cash and debt, excluding equity. We certainly see numerous opportunities to expedite that with equity, and if the conditions are favorable, we would be open to considering it. However, this is heavily influenced by the share price and the timing of share issuance, so for now, we are planning on using debt and cash. Concerning my second point, we have several impressive buildings recently opened, including Hazleton, and many projects are in progress. We previously mentioned a figure above $100 million; approximately a quarter of that is anticipated to be recognized this year, with the rest in subsequent years. We also expect consistent yields from these projects, which are crucial for our growth. It's important for everyone to recognize that this is a significant component of our operations, and there are many completed projects that haven't yet impacted our financials.
Your next question comes from the line of Jeremy Kuhl from Goldman Sachs.
Regarding occupancy, any concerns about the gap between economic and physical occupancy? How do you guys think about the spread between those 2 metrics?
Yes. I mean, our spread is relatively tight between physical and economic, and we see that absolutely as a good thing. We think long-term customers do not want to pay for space that they're not using, and we feel that, that's a great place to be.
Your next question comes from the line of Blaine Heck from Wells Fargo.
Can you guys talk about supply and whether you're seeing pressure on rates driven by new supply in any specific markets? And then looking forward to 2025 and beyond, what do deliveries or completions look like broadly? I guess, will we continue to have supply pressure this year?
Thanks for the question. So I'll start just by saying we're in a market that grows long term globally, a very stable market, as I talked about. Our throughput pallets on core holdings have not changed a lot. It is an attractive industry for that reason. And it's not surprising we've seen new investment over the last few years. So as we discussed last quarter, like you mentioned, there are some new competitors and even speculative developers that have entered our space. In the current construction cycle, that new capacity peaked in 2023. It came down by about 50% in both 2024 and 2025 levels versus 2023, and we expect those new deliveries to continue to decrease over time. It's also important to mention that the capacity that's been added over the last few years has been built at the highest cost to build in history, absolutely, for sure. And we don't expect those build costs to decline from the current levels because of inflation, land costs, entitlement, and just the complexity of building, especially with automation.
And so as such, it's very hard for these smaller newer players to succeed at anything below market prices in a market with rising capital costs. And we actually expect some of these businesses to underperform and some to fail, and we're seeing evidence of that in the marketplace. And we expect some of these dislocations to create opportunities for us as we continue to position ourselves as an acquirer of choice in the industry. And when you compare us to these new entrants, I mean, we have very distinct advantages. We have huge scale advantages. We have the network effects that come with that. We are the world leader in cold storage automation. We have proprietary technology like Lineage Link and LinOS. We have C-level customer relationships with over 13,000 customers around the world. And we have our GIS segment where we can support their cold chain from farm to fork, where none of these other competitors can do that. So long story short, we feel great about our ability to compete.
Your next question comes from the line of Steve Sakwa from Evercore ISI.
Could you maybe just talk a little bit about the pricing that you're seeing on the acquisitions that you're maybe looking at? Like how has that changed? And with your cost of capital changing, how are you thinking about pricing on new deals going forward?
Yes. So obviously, the market here has been challenged the last few years and that you sort of see a little bit of that in the public valuations, and it also flows through the private valuations. Ultimately, we're going to make the best decisions to drive long-term value for our shareholders with the highest risk-adjusted returns. So there's always a good arbitrage opportunity for anything that we do. So in the near term, that accrues directly to our shareholders. And then as we improve the businesses over time, that also will accelerate those returns. And so really no changes versus how we've done this in the past. We definitely benefit from having the balance sheet that we have today and that lower cost of capital, and that gives us an advantage, and being #1 in the industry gives us a huge advantage. And so like I said, we're excited about the opportunities here. And if we can take advantage of any market dislocations in the near term, we certainly will.
Your next question comes from the line of Michael Carroll from RBC.
Greg, I wanted to circle back on your LinOS comments. I know you indicated that the pilot tests are showing strong initial results. Can you help us understand what that means? I guess what did these pilots prove? And are you seeing better revenue growth and better margins at those assets? I guess, how can we clarify that comment that you're seeing stronger results than you expected?
Yes. Great question. The LinOS initiative is definitely on track. The early pilots are exceeding our expectations, and we're really excited about it. This year is focused on demonstrating the technology's functionality and implementing it across various facility types, such as docks, high reach, and case pick, to prepare for a broader rollout next year. We believe this technology can fundamentally transform our operations, and we're seeing early signs of that potential. I have a great story from our first pilot. During the initial rollout of LinOS in Chicagoland earlier this year, our COO, Jeff Rivera, observed the operation and saw LinOS effectively managing the workflow. One experienced team member, a 30-year reach truck driver who had only been using the technology for two days, gave Jeff a thumbs up and said it was fantastic. The excitement and optimism within our company and leadership team have never been higher. That said, it's still early, and we prefer to wait for more proof points before providing additional details, but we are very eager to share more as the year goes on.
Your next question comes from the line of Daniel Guglielmo from Capital One Securities.
I know you have a mix of large and small customers with the top 25 customers making up about 1/3 of revenues. As we continue to come out of this customer demand kind of trough, are you seeing a divergence in the speed at which large customers are occupying space versus your smaller customers? Or are there any trends of note between the 2?
I would say no. Our customer base has been very stable over the past 12 months, and we expect that to continue. Importantly, with our scale, we serve all commodities, customers, and regions in which we operate. This diversification is a significant part of our story. Any unexpected shifts could benefit some areas while potentially impacting others, but we are highly diversified, and it is not a concern for us.
Your next question comes from the line of Michael Goldsmith from UBS.
I appreciate some of the background on the supply, but just maybe to ask a little bit more directly. Will competitive supply for 2025, will that be lower, higher or the same than last year?
If you’re asking about new developments coming online, it’s lower. Yes, the competitive supply dynamics...
We would expect it to be consistent with last year. And new supply going down moving forward.
Your next question comes from the line of Omotayo Okusanya from Deutsche Bank.
A question about the USDA data indicates that inventory pressures persist in the business. There are ongoing discussions regarding inflationary pressures on food costs and recent trends showing weakened consumer sentiment. Given these factors, do you see them as dynamics that will continue to exert pressure for a while? Some of your comments today suggest that 2025 will be a year of market stabilization, but when I compare that to the demand-related data, I wonder if those pressures might last longer than anticipated.
I will make a brief comment. I reviewed the typical seasonal patterns and examined the USDA data as well. The USDA data indicates that the normal seasonality, at least for the past year, reflects what we discussed starting in the latter half of last year. Go ahead, Greg.
Yes. And I think it's just important to point out again that despite the inflationary pressures, our throughput in our core holdings has not changed. And so the pressure has really been more on inventory levels, and that peaked in the second quarter of last year. Since then, inventory levels in our core holdings have stabilized at a lower level, and that is what our guidance does not assume that there's any sort of rebound in throughput or inventory holdings. We assume things are where they are, they're not going to improve, and we feel we can perform in that environment. And just a little more on the USDA data. I think everybody knows this, but USDA data is based on a voluntary survey conducted via telephone to facility managers, and only a portion of the total cold stores in the U.S. report, and many can report inconsistently or only report for a portion of their warehouses. And so while it's an interesting data point, it's far from perfect. For us, 20% of our business is outside of the U.S. and only 40% of our commodity basket in the U.S. is reported through the USDA. So we don't believe that's a good predictor of our results in the short term, although it does certainly have correlation in the long term.
Your next question comes from the line of Michael Mueller from JPMorgan.
Curious, what do you see as more normalized longer-term physical and economic occupancy levels for your portfolio?
We strive to improve our physical and economic performance over time as we gain market share, and we believe we are making progress in that area. Our customers, particularly the larger ones, are focused on optimizing their supply chains. Several significant optimization initiatives are underway with our key customers. One top 10 customer recently finished a 7-month study and will be reconfiguring their North American supply chain. We learned earlier this week that we will receive a 50% increase in business from them as the year continues. We aim to gain more market share, and as we optimize our cost structure, implement LinOS, and pursue lean initiatives, we believe we can become the lowest cost provider offering the best service, the best scale, and the widest range of services, which should contribute to ongoing market share growth over time.
Yes. I think it's important to note that with decreased occupancy levels, we have room available to sell. Our business has significant potential for growth, allowing us to serve our customers without needing to build new facilities. This opportunity isn't included in our usual projections. We believe we can achieve mid-single-digit growth in same-store net operating income before considering the other positive aspects we’ve discussed, and we expect to see this in the latter half of the year and beyond. It's definitely an exciting time for us.
Your next question comes from the line of Viktor Fediv from Scotiabank.
This is Viktor Fediv on with Greg McGinniss. I'd like to ask, so at NAREIT, you highlighted a new focus on managing your SG&A expenses. Are you able to provide more clarity on the expectations around that for 2025 and how you plan to address going forward?
Yes, definitely. When you consider operating leverage, both operationally and in administration, it's a significant focus for us at the company. We experienced solid EBITDA growth even in a challenging market last year. We're consistently looking for ways to optimize our operations. We're increasing investments in certain areas while ensuring others remain appropriately scaled, which is crucial to our strategy. There will be a bit of growth in administrative expenses for 2025 due to our new status as a public company and associated costs that we didn't incur previously. However, apart from that, growth will be minimal. We've built this company with the intention of scaling significantly over the long term, and we've made some proactive investments to facilitate that. Moving forward, we anticipate being able to grow with limited incremental investment in administration. Our CEO and I are highly focused on this.
Your next question comes from the line of Vikram Malhotra from Mizuho.
I just wanted to clarify your comments on occupancy and NOI assumptions. You mentioned an NOI of around 47 percent for the first half and the rest in the second half, which seems to align with typical seasonality. To clarify, does this suggest that occupancy is expected to decline in the first half and then increase significantly in the second half, resulting in negative NOI growth in the first half based on the percentage you provided, with a substantial increase in the second half? Could you elaborate on that?
Yes. I think if you analyze those figures, they appear to be flat or slightly down in the first half and then increase in the second half. I believe this reflects normal seasonality since inventory levels were high in the first half of last year. So, yes, this aligns well with what we have just discussed.
Your next question comes from the line of Ki Bin Kim from Truist.
I have two quick follow-up questions. First, what is the stock-based compensation assumed in your 2025 guidance? Second, I’m looking at Page 15 of your slide deck and I'm curious about the decline in non-same-store storage revenue. It seems that your economic occupancy dropped by 700 basis points, yet your average occupied pallets increased by 2.8%. This is a bit confusing.
We had some buildings shift between same-store and non-same-store classifications due to the solar fire last year, but there are many factors at play. Could you remind me what the first question was?
Stock-based comp...
Yes. I mean, I think we're at a normal run rate now at the end of the fourth quarter, right? A big part of the stock-based comp increase is our starting line, right, where we went to the entire company and offered equity to the majority of people. And I think that's driven a huge benefit, and it will help us in a million different ways. And so that's kind of in the base now. Part of the reason why we have all-time low good productivity.
Your next question comes from the line of Alexander Goldfarb from Piper Sandler.
I have two questions. First, could you provide an update on the expiration of the lockup period for pre-IPO investors and your current status regarding that? Second, Slide 5 of the presentation highlights the platform's outperformance compared to flat year-over-year revenue. Is this outperformance primarily due to acquiring new assets that you can integrate into your system, or are you also seeing similar results at existing centers? Additionally, do you believe this trend will continue, allowing the Lineage technology platform discussed at the IPO to be reflected in ongoing results, leading to sustained outperformance in metrics relative to top-line revenue?
Yes, thank you for the question. I appreciate you bringing it back to this. This is what we do. We are world-class operators. Our lean processes and technology are not just things we acquire; we are always improving. The essence of lean is continuous improvement, and we have implemented it across some of our companies, though not universally. The LinOS platform provides significant potential for growth. Therefore, we expect to outperform and continue driving margin improvement. As we mentioned on the call, we're just getting started, and there is a lot of opportunity ahead.
And as we get better, everything we acquire just becomes more accretive.
Yes. Bigger network, more places to take advantage of that. And then I want to also appreciate the question on the sell-down. So just some comments around that. So we don't see the sell-down process at all as a meaningful headwind, and I'll sort of give you some color on why. So Kevin and Adam, our founders, large individual long-term shareholders. They're obviously very, very aligned with the public market on making sure the settlement process aids our public investors and all of our investors. They control the settlement process. They plan to execute the organized sell-down over this 3-year period, starting with the IPO. They're very focused on long-term share price appreciation as are we all, increasing the public float and expanding our base of great long-term shareholders. We also have increased passive index ownership, right? We're around 30% index ownership now. And then again, thinking about the sell-down over time, only 30% of the company is publicly floated today. But of the remaining 70%, founders and management own a significant amount. And obviously, we expect all of those people to be long-term owners. So this is a very organized process over the next 2.5 years. There's no cliff dates and things that should worry people about this being a real headwind. Appreciate the question.
And your last question comes from the line of Jamie Feldman from Wells Fargo.
I believe your response to Alex may have addressed some of this, but the stock has not performed well since the IPO. In your discussions with investors, what do you think is most misunderstood? What do you see as the main concerns? And what would you say to help people feel more at ease, especially as we enter a new year and it seems like the business is stabilizing?
I believe there has been a misunderstanding regarding our growth. We are experiencing a 4% total EBITDA increase and a 6% increase in AFFO per share, despite facing significant challenges in the industry. Even in these tough conditions, we are still growing and are designed for growth. Currently, we are achieving the best customer performance in our history, with record new business wins, and our operational, safety, and energy management performances are all strong. As Rob mentioned, we will benefit from improved G&A leverage moving forward. We possess unique technology and automation that sets us apart from the competition, and we're committed to demonstrating our growth potential in the coming years. I feel we are not receiving the recognition we deserve for our achievements yet, but we are prepared to showcase our capabilities. While we've been navigating a complex rebalancing since going public, we expect to perform exceptionally well in the future.
Thanks. On behalf of the entire Lineage team, thank you for joining us today and for your interest in Lineage. We look forward to speaking with you again on our next quarterly earnings call.
Thanks, everybody.
This concludes today's conference call. Thank you for your participation. You may now disconnect.