Yahoo Finance The Middleby Corp (MIDD) Q1 2024 Earnings Call Transcript Highlights: Navigating Market ...
Revenue: $927 million for Q1 2024.
Adjusted EBITDA: $186 million for Q1 2024, with a margin of 20%.
GAAP Earnings Per Share (EPS): $1.59 for Q1 2024.
Adjusted EPS: $1.89 for Q1 2024.
Commercial Foodservice Revenue: Down 4% organically over the prior year.
Food Processing Revenue: Nearly $163 million, second best Q1 ever for this segment.
Residential Revenue: Organic decline of 22% versus 2023.
Operating Cash Flow: Nearly $141 million for Q1 2024, best first quarter ever.
Free Cash Flow Conversion: Around 135% for the trailing 4 quarters.
Total Leverage Ratio: Down to 2.4x.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Improving order activity and expectations for continued improvement throughout the year.
Strong market position in new and large product categories such as beverage and ice, with early-stage traction in game-changing innovations.
Residential business showing growth in order rates, particularly in the luxury market, with new product innovations driving potential future growth.
Food Processing business experiencing a healthy backlog and a growing pipeline for expansions and upgrades, focusing on automation and sustainability.
Strong overall profitability in Commercial and Food Processing segments despite revenue declines, with expectations for margin expansion from operational efficiencies and new product innovations.
Negative Points
Challenging first quarter influenced by the housing market, interest rate environment, and price cost pressures impacting restaurant and food processing customers.
Slow start to the year in Commercial Foodservice due to longer lead times for permitting and construction, and economic pressures on restaurant operating costs.
Significant market challenges in the Residential segment, with a notable decline in organic revenue and margins impacted by strategic investments.
Cautious customer behavior in Food Processing, monitoring food costs and interest rate impacts, leading to cautious project commitments.
Expected restructuring charges in Q2 as part of cost management efforts in response to market conditions, indicating ongoing challenges.
Q & A Highlights
Q: Can you comment on the price realization in the Commercial Food Services segment in the first quarter? Was the negative organic growth purely volume-driven, or was there a mix of both price and volume? A: (Bryan E. Mittelman, CFO) The negative organic growth was mostly volume-driven. There have been many price actions recently, and a modest price increase is planned. The decrease was not due to a reduction in price but rather a lack of typical price increases at the year's end, influenced by ongoing evaluations of price-cost dynamics.
Q: Regarding the upcoming price increase in June for the Commercial segment, can you discuss its rationale and how distributors are reacting? A: (Steven P. Spittle, Chief Commercial Officer) The price increase has been communicated and is expected to be effective. It's a thoughtful, SKU-by-SKU and customer-by-customer approach, impacting both general market and chain customers. The increase is anticipated to be sticky and should reflect positively by early third quarter.
Q: What are the expectations for the new Invoq Combi oven, and what features does it include? A: (James K. Pool, Chief Technology & Operations Officer) The Invoq Combi oven is designed with novel features like fitting full-size combi pans in a half-size oven, which reduces space and energy requirements. It includes a highly efficient steam on-demand feature, improved wash cycles, and additional shelf space, enhancing its production capacity and overall efficiency. The oven is now being distributed in the U.S. and Europe.
Q: How are the strategic changes or normalization from crisis impacting the Commercial Food Services segment, particularly with reference to new store investments by chains like Shake Shack? A: (Bryan E. Mittelman, CFO) The comments were not specific to any single chain but reflected a broader industry trend where large QSRs have started the year slower in completing projects due to various delays. However, these chains remain committed to their build plans for the year.
Q: Can you provide a breakdown of the performance in the Residential segment, particularly how grills, Viking, and AGA performed in the quarter? A: (Bryan E. Mittelman, CFO) The quarter was challenging across all brands with significant year-over-year declines, particularly noted in the U.S. domestic premium and European markets. The grill segment saw a different buying pattern with later and more reserved purchasing by customers.
Q: What are the expectations for residential margins, and what is needed to support double-digit margins in this segment? A: (Bryan E. Mittelman, CFO) Achieving closer to $190-$200 million in revenue would likely see margins nearing double digits. The business continues to evaluate costs and has made significant operational investments, which should drive positive increments as volumes recover.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
