JBT - Earnings call transcript Q4 2019

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Operator

Good morning, and welcome to JBT Corporation's Fourth Quarter 2019 Earnings Conference Call. My name is Lindsay, and I will be your conference operator today. [Operator Instructions].

I will now turn the call over to JBT's VP of Investor Relations, Megan Rattigan, to begin today's conference.

Megan Rattigan

Thank you, Lindsay. welcome fourth and XXXX and everyone, call. conference morning, to quarter our year-end Good the Chairman, CFO, call Tom on me With are our Vice Giacomini; President Executive President Deck. and Brian and CEO, and

the of these JBT's our impact in includes GAAP we factors available documents call, that regarding press the statements in subject in use section release. In on filings safe X-K also today's language found filing. discussion will harbor non-GAAP Investor These yesterday's most be Also, and the today risk an website. Relations references our SEC measures. that are our A results. may measures comparable forward-looking certain to can are have press reconciliation measure to periodic of release information to yesterday's contain

to like call over the turn to I'd Tom. Now

Thomas Giacomini

XX%. and to Megan, XX% adjusted solid with earnings in our gains good XXXX. growth XX% while performance, is ahead an and expanded XXXX. posted income million morning. per while important compared were in Thanks, EBITDA, gauge adjusted share Net XXXX, grew of increased $XXX which earnings XX%, Reported JBT EPS

We continue growth enjoy to AeroTech. strong at

growth. solid but too from quarter we with throughout trade by along the to uncertainty. said, have order FoodTech's improvement business That it's of turnaround experienced enhanced the was operating as and activities, system the profitability. discussed order claim encouraging a through efficiency implementation we restructuring hurt commitments fourth soon conditions year, most delivered with FoodTech of XXXX, JBT issues our and

and JBT. margins a our we growth performing aftermarket has three and well. benefited resilient made stable acquisitions Moreover, of are create XXXX to more continue continued The business in the

and XX% XXXX, further margin to in EBITDA. post grow, capture adjusted ahead we to Looking a increase expect expansion

poultry revenue performance I'll turn the Brian XXXX. our talk recurring acquisitions strength Afterwards, on to I'll over provide XXXX stream. more JBT's to about geographic and the the show, trends, of guidance detail and in for recent more call

Brian Deck

morning, everyone. good and Tom, Thanks,

we As segment me for breakdown analysis of margins revenue X% FoodTech's and basis margins mix. environment detailed profitability, up growth higher let an were and time, expanded down due and our trends operating year. basis FoodTech uncertainty, release the quarter XX.X%. and the in trade growth, growth At to an an into expense business profit delivered performance and we adjusted incentive of points FoodTech's with organic by margins acquisitions, from XXXX jump XXX XXX Even provided points was year-over-year X%. to slightly contribution compensation fourth a EBITDA same product of hurt

to full performance revenue, X% XXXX's top by exceeded bolstered a organic with the XXX margins to points of able quarter. including on a strong XXX-basis-point segment expand of high operating adjusted profitability at expectations, EBITDA basis AeroTech, AeroTech's also for year profit We year, in expanded XX.X% record the a AeroTech's growth increase which XX%. margins. organic growth in XX.X% were of fourth in was the

XXXX, year full X%. FoodTech For declined orders

At AeroTech, XXXX. an the year-over-year year. exceptional gained for year off coming levels mentioned, the orders enjoyed Tom and a an declined quarter in year As X% of the pickup full gain fourth XX% fourth X% in the to highest in with quarter, the we

quarter of for $XX product lines. few fourth from into fixed for adjusted the that guidance. for million significant particular million a year-end XXXX. solid, in were with and our the conditions were there most orders with the Additionally, in year $XXX slipped Overall remains recent strength JBT's line AeroTech EBITDA

fourth discrete materialize. expected came our reported per $X.XX quarter that the in we tax $X.XX guidance a didn't to On fact of share the the line, in reflects This $X.XX share $X.XX. EPS under the per benefit

more also We incurred anticipated. than M&A costs

items reminder, not adjusted those of EPS. impact EPS As and both GAAP a

and -- interest $X.XX expense. $X EPS adjusted hand, primarily guidance to above tax This was range. of came $X.XX other due and the to On $X.XX our lower-than-expected in

JBT's full chain in was higher-than-anticipated challenges accounts AeroTech due guidance faced in and below XXXX we expected. at shortages not XXXX receivable the to supply million, and XXXX, light primarily $XX at AeroTech. and free year-end flow overcompensated deplete the as inventory In cash did of year by inventory levels

In expected terms of some the first into customer accounts XXXX. receivable, payments of large rolled quarter

problem-solving demand. Looking tackle inventory ahead, issue the operating better tool and applying JBT are align with we to the AeroTech's system set

XXX% improved we quarter of flow such, free conversion cash in cash in compared are As than and performance XXXX with flow the of committing first year-ago period. to more XXXX the

to the look restructuring of industrial XX%, economic recurring at back, JBT due of operational along XX% along of operating the EBIT expanded challenging environment. efforts, our despite in -- of of This predominantly pace margins is have margins JBT's ahead XXXX, the with improvement activities the to and increasing progress mix framework enhanced a our profitability. Elevate benefit implementation year have efficiency adjusted from pre-restructuring versus Taking system strategy our JBT's with the these revenue. EBITDA step we our When outlined baseline

is me coronavirus. to certain impact transition Let to to XXXX, uncertainties to for related guidance the subject now which -- the from

a we the revenue from X%. foreign X% X% growth to That year, total of to a organic benefit completed flat includes JBT from For acquisitions exchange. X% $X.XX performance, FoodTech anticipate and headwind

expect we organic X% growth X%. AeroTech, to of At

in We the will Prime half the XXXX, mid-XXXX. of be second FoodTech and will revenue flow. revenue in in year-over-year digits order half its completed the anticipate expect pick first based mid-single organic on FoodTech XXXX to forecasted down by organic we of bolstered up Proseal growth be acquisitions While

gains with in flattish year versus solid of half the half For including in back a AeroTech, tougher XXXX, we comps. given the see organic foresee QX, first -- double-digit growth XXXX, we revenue strong

to of expand further and AeroTech. EBITDA FoodTech terms to expect margins to adjusted profitability, to at we XX.X% XX.X% In XX.X%, XX.X%

per $X.XX a JBT's on an and $X.XX guidance diluted basis year share is on to adjusted earnings $X.XX for GAAP full to $X.XX basis.

of approximately a at XX% midpoint. gain of adjusted forecasting year-over-year $XXX EBITDA which to are million, We $XXX million the represents

reported expect revenue quarter, the million $XXX EPS For and of to $X.XX of $X.XX, million, adjusted to to $X.XX. first we $X.XX $XXX EPS of

With back the to call I'll that, Tom. turn

Thomas Giacomini

Thanks, Brian.

Expo, and Processing known As recently XXXX poultry know, you Production the otherwise many the of International as we show. attended

While the as XXXX. market China's poultry not export show, the U.S. with bolster was it prospects. in lifting XXXX restriction more improvement customer on industry Potential was of should total upbeat optimistic the enthusiasm than as

of risk. Speaking of mitigate China, the employees health and with the outbreak of the our is working we're the of actively importance safety region and coronavirus, to in utmost

number as investments XXXX although We for supply moving impact a region. disruptions and JBT. that could are a general also The recently a of at feedback customers about still in We planned headwind the forward, coronavirus concerned the from were be indicated chain sought of had feedback slower business planned for current investments of difficulties given delayed in trajectory XXXX pace, virus safe of and China's worsen, subsequent increasing the to customers food China. for interfacing the into accelerate opportunities with JBT. year. to be likely term, adoption could processing was in practices, Longer this modern If is end the situation these potential

broadly. with uncertainty continued for enjoying continued At quarter, and technologies. FoodTech, fourth growth. food producers U.S. Asia As the struggling by low strengthen America to business particularly North be markets with meals preservation higher for more in geographic impacted by and At Europe demand to more we the expanding. But side, stable, convenience trends prices. poultry ready exports Conditions the market to have wars demand. as airport experiencing mobile investment. with a trends China. bit the the challenging fixed is affected strong military side very could trade industry-wide are infrastructure on are improve I AeroTech, driven on mentioned, The this as airfreight was equipment

food electric product support emissions-free with and poultry life; waste a packaging Proseal customers' XXXX: thus of of solutions and LEKTRO, basis, Moreover, sealing valuable the and strategic equipment gears environmentally footprint talk X completed Let acquisitions Prime. part plastics, solutions minimizes the about minimizing resource. reuse, me are our use for X LEKTRO's trade provides while ground in we friendly and solutions. aviation on by as that the JBT. JBT extending a provide Prime's switch complements On operating water Proseal's the use focus support customers. equipment. X shelf technology processing for environmental expands provides our each well reduces reducing all of All

revenue I've success One contacts with increased year-over-year, important Internet PRoCARE also is real-time of our XX% of of stream, of was importance cloud-based XX% the our monitoring. it provides represented indicated recurring XXXX. initiative some and iOPS, FoodTech, of strength installed in in factor revenue. expanded by in operations JBT's PRoCARE revenue service JBT's that the XX% the Things which revenue penetration base powered In sales. and XXXX, equipment PRoCARE At new

small of system benefits a for expansion in revenue, JBT. percentage recurring and While PRoCARE is optimizes service regular it's customers. our visits, uptime still With our yield PRoCARE customers

efficiently. enable us to operate contracts service PRoCARE's -- JBT, organization For enables more our

to X the total secular the XX% with we X% growth Looking with JBT, growth X to of organic of opportunities beyond about cycle an for -- XXXX, annual through remain growth and acquisitions. X% optimistic

to remain disciplined provides recurring revenue growing Our committed enhances that an We higher active and stream and M&A competitive margins position. our program stability.

we businesses. continue capture margin expansion across expect our Finally, both to to

With that, questions. call open we'll your the Operator? to

Operator

[Operator Instructions].

comes Baird. Our first R.W. Mig Dobre with question from

Joseph Grabowski

for morning. Mig on Grabowski Joe this It's

just order function underlying the in assuming that in in You you're sort improve? just mid-single-digit organic comparisons? mathematically, half. Or first sort are if growth demand half? the expecting comparisons easy trends. the second in to So Are forecasted half, What Is it you negative is second mentioned a half? mid-single-digit the of guess of seeing FoodTech second you're mostly you of the again, in positive easier I assuming

Thomas Giacomini

business view to kind we say I XXXX, last particular, conditions of the third and rate back we us growth through more allow that's would about some year. that the the this We will our half it's quarter half about challenging that also. what had the order year in second terms talked the of in mild And and trajectory back the recover of organic call orders. improvement of of in some of see on the in

Joseph Grabowski

to orders in expecting the Or it a that half orders shipments that you the function of the half? in convert quarter? the you're fourth will first second Is in saw

Thomas Giacomini

It's solid us the of year start XXXX expect benefit was half -- the a get orders the in some quarter to but a we Sure. front certainly help to also. on fourth book

Joseph Grabowski

Great.

And in I question, $XX are the expected Okay. my all restructuring of by of confirm, savings savings incremental just how the quarter? And XXXX, $XX restructuring in follow-up you can incremental million those then of FoodTech? guess million do flow sort savings,

Brian Deck

a for decent there's the million, and to So [indiscernible] comparable amount it's $XX fairly still between AeroTech, Aero. of revenue Food -- the

we You'll back some maybe in in by of -- will numbers mainly of the coming half the and a programs into little in QX, success savings and the savings with year on front success be see bit the effectively the those have a half, the in more because comparable basis those QX.

Operator

CL from with next Godfrey King. Our comes George question

George Godfrey

get for AeroTech a down. to wanted -- there, organic growth to of wanted the you spend global of and lot in build-out that here been is like on would crisis Tom. trend about a the came infrastructure we The going us? I that is now second the organic I sense or rate obviously, a a more it's out to mid-teen number XXXX. the completed digit but growth FoodTech, be of sort in the the coming rate still on each behind good probably to year, been we're growth the has talk growth But Do growth post-financial time GDP that

Thomas Giacomini

growth would of our a the say, those I continuing we've -- nice see years. number prior which outsized more provide investment. in George, has years infrastructure around business, recovery helped of I AeroTech had Sure. it's still some in rates

so it that propel see you, continue in around can us. the You will airports to

coronavirus in that a help we're air build. in bit which groundbreaking to bit two we the in and continue strength, But mobile, benefit into right now. performance business. continues the flow ship the of and headwind The We've e-commerce. a last there's type this a enjoyed to And other technologies military, that situation year that year And book certainly, seeing as the be franchise shorter of of really of particular financial invest then just of tends particularly by back material that of have a to half a terms that some slower. doesn't being been elements great AeroTech, and

certainly to to overall, that owning part So a franchise to be say be it's comparables. our quite business. about optimistic great we tough of a couple we those it's would of continue some But and gets having -- really lapping of years and just it that and start outside I following enjoy AeroTech growth,

George Godfrey

to on quantify how you constructed? is next ongoing is maybe Or years Understood. activity? you the X And see pretty Is selling now? on X follow-up, that fit looking always the company the and just activity there that, discussion. versus just AeroTech where -- divesting for owning at or for There's that that enjoy you a FoodTech is Can business? cold is level strategic right the JBT that

Thomas Giacomini

and of year, look the that quite did part told We greatest of done and work Sure. we've George our being forward moving a to our looking of on into part value-creating and always work we're shareholders we us as has portfolio continue be optimistic about our creation we a portfolio for And XXXX and with as we're having it bit part at about understanding JBT. to the of is and talked this bullish last that, our offering. AeroTech AeroTech forward

Operator

Andrew with America. Obin from of comes question Bank next Our

David Ridley-Lane

sellers table Ridley-Lane David how Wondering is given Are on for looks come conditions? XXXX. Obin. willing to your market This pipeline for the prospective Andrew M&A less to

Thomas Giacomini

Sure.

M&A quarter active As we program a every at and JBT, at, disciplined every continue that and have working at you year. know we very

pipeline We provide and to more a our continue rich strategic allow for franchise the us see value-creating to comprehensive customers. JBT additions really and to solutions that

see As haven't meaningful being perspective, of thoughtful we're the do of And the pipeline, a acquisition. and to through the And we also valuations create post about from I businesses in willingness say conversations. perform value. an sense cycle how engage look in comments, the we of would my to will to, noticed the we at those and JBT about to earlier M&A we're I ability how for think JBT's talking continue retreat people

in amount Brian say generate as will to of we I cash a expectations, have mentioned, significant XXXX.

year complete pipeline. position. without that certainly beyond disciplined we're always good obviously in the need have but this some M&A capacity to a ability we that remain And increase the we to having nice leverage. our have So we're actively and working We

David Ridley-Lane

showing $XX cash Should just thank show capital cash fourth year? for comment, the think following working so on not shortfall million that Or year? flow. that up -- of we next or Okay. all next up the really quarter And you on that does color of free

Brian Deck

Right.

the we to and system operating through we JBT particularly So XXXX, do improvement as side on in expect in capital our work solve performance the inventory working some problem use that. tools better

more growth at see And you to do our when the better. performing inventory business. be of that's accounts going the function I receivable, our So of a look of

if on do So of use the a could see improving as do well. growth, it benefit deposit customer there cash. could would see we depending a indeed I the be, be see benefits of side, there on And we some orders,

David Ridley-Lane

And very one mix I normalized could in returning you that what XXXX imply that Okay. XXXX, -- levels? perhaps last do I in one, if was to FoodTech? your in of guidance does squeeze revenue contemplate some does strong for know more aftermarket guidance

Brian Deck

Right.

side side on a heavy expecting say normalized I back the quarters a So go to prior bit heavy -- more was third equipment fourth aftermarket was as little a little year. particularly bit was you little more strong quarter on rate the next the it were XXXX. little say in normalization second would the mix, third and XXXX. know, more to a in bit That a would I versus on quarters. those we're

Operator

next Tusa Steve comes Morgan. JP Our question with from

Steve Tusa

Can off to Maybe up million adjusted cash free if the $XXX we us start to from you guys XXXX, the XXXX could goes on $XX million? bridge million-ish. $XX I EBITDA know flow.

it the assume that, and But bridge to I rest of Just is part restructuring help kind us if a bridge be wanted helpful. of could you would the to improvement. of capital. that working

Brian Deck

Sure.

just on call as at So low somewhere to flow in our that XXXX top of mid start in had million income, paid $XX that the as XXXs it to the million, reminder we in XXXX. as And a in dollars. point, statement guidance, you that's with restructuring starting then, a XXXX, expensed pickup, just of million range net based was in our cash of $XX mentioned, cash the the, $XX in starting but

source XXXX. the do top another cash be will the source I a I in our think And there's for also on -- do And million cash year. -- I So inventory think as that. of think $XX a I and but of will deposits be then mentioned, of

at things those turning all add million you're cash of up, income north we flow. the of So into net looking something $XXX

Steve Tusa

it. Okay, got

those margins switching why FoodTech gears So down it's of were on quarter. I in were they a things. -- What combination the they think sense. -- Maybe year-over-year. fourth Makes

bit than it curious lower seems variance? expected. a little Just drove What the

Brian Deck

things. Sure. opposite the a year take There's amount had two those we year, incentive true-up year. Obviously, a And profitability. the nice really we of you accruals year, this One, at there of a kind for was compensation of would QX had effect. you last decent look as if all

were of also, then of terms we a did kind some margin within an points that overall, But within the say the margin And had there. the in FoodTech QX last quarter, we whammy expansion XXX say impact, at in even basis there's of year. versus have, cetera, year. equipment, double a lower that So et of equipment would mix. mix heavier another I we're decent-sized with of orders looking I benefits, for restructuring But little the pickup would next similarly bit more

So we've on with think that Elevate outlined. we we're strategy well our pace

Steve Tusa

the would one Got me it. cost, report you so last guys what be And types like of in maybe corporate? on also, costs M&A for the M&A

Brian Deck

Sure.

-- and have M&A the we in business units in costs do So both corporate. in and the

expenses diligence sponsored business transaction we all So all the in other typically, as if and a corporate, it expenses. the more well deal, the house mostly up it's, they'll inventory call I'll the business integration their expenses. ends and have as unit step-up units At

we'll be to corporate. at So be the our big studies also at that corporate. costs due typically, And one, That's outsource market third-party financial a diligence. we sometimes then tend do would attorney do of all

if banking there's past, So banking the in fees any. this fees, and

particularly have last on of M&A quarter the we a active the did in quarter, corporate function. activity out So

of when after So gave not third was just anticipated up guidance expenses it we busy very a we drove which the quarter, had those some previously that quarter.

Operator

[Operator Instructions].

Maria next Our Larry William comes from with Blair. De question

Lawrence De Maria

Just like XXXX? sort mid-single-digit aftermarket returning growth that a clarification Does growth negative of aftermarket in on to OE normal more FoodTech. the of imply for and kind organic

Brian Deck

Negative sorry. what is the organic I'm you're saying? equipment, on that

Lawrence De Maria

Yes, yes.

Brian Deck

organic would bit the half. front a mix equipment you aftermarket more the front in Yes, growth negative the in and little see certainly half, on

offsetting the half. mix goes, I equipment and think see have of some in that front stronger otherwise benefit of the think half back you'll the the we as I might a

Lawrence De Maria

Okay.

obviously, recent conversion you convert pushouts, quarters, FoodTech to about to a As it et more relates orders, in the market Is bit talked to getting orders, little longer time the cetera. normal? Are market? half And first shorter? the experiencing thus, some we and optimism times there closure order are the that your times trajectory? uncertainty Or conversion on in getting still of

Thomas Giacomini

expectation anything be have the to activity markets, product not in in I fourth get our front, to is in still in pipeline quarter, would to customers. back our getting we And not our from difficult better markets certainly say normal, enjoyed mild will that describe conditions although we of rate the a market which -- orders firm JBT but committed the say our half the is Larry, with But back continues that projects was sharpened. selling our we becoming improvement innovate even continues these more closure improvement the the back talk translation on within about we to some to all would FoodTech Yes, to I normal.

I can to together, within better those that as how a do even a company, revenues better. to you we're challenging guide orders back this our guiding factors so on. things we And ramp in some we bigger or the currently and what aren't much declaring you'd those affect and And would we try a are get position market to conditions, outcome we're see we're to that's on focused are than And we put a we some always normal the tell came year. to. markets there that

Lawrence De Maria

just I here. more If understood. one Okay, could in --

the comments are the on idea we AeroTech, right still or to potentially, Just is the table? that a to possibility, taking circumstances? off that monetizing AeroTech your eventually clarify given Or spinning

Thomas Giacomini

-- done, portfolio, we look market, creation makes the the continue to sense value we'll we always of also know, how currently, we with we you we work to from most Larry, when believe customers. our to perspective, what of the our business, that I say eyes our we've but for the Yes. And that of as be creation. go creates best analyze as to continue would allows JBT, us we at and evaluate. and value always partner value the the will evaluate to the shareholders But part and through our always best shareholder JBT, our lens

Operator

time. There are you. no Giacomini, I the to Tom Mr. back questions at call this turn over

Thomas Giacomini

solutions you program building to product be new positioning in development provider JBT strategic M&A a and accelerated our joining efforts, our aftermarket again Our franchise morning. this more investments better for us are to customers. valuable Thank

Operator

concludes call. conference This today's

You may now disconnect.

JBT Marel (JBTM) 20 Feb 202019 Q4 Earnings call transcript