MIDD - Earnings call transcript Q2 2020 | The Middleby Corporation

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Operator

Thank you for joining us today for the Middleby Corporation Second Quarter 2020 Conference Call. With us today from management are, Chief Executive Officer, Tim FitzGerald; Chief Financial Officer, Bryan Mittelman; and Chief Operating Officer, David Brewer.

We will start the call with comments from management and open for questions. Instructions on how to get in the queue will be given at that time.

Now I'd like to turn the call over to Mr. remarks. opening for FitzGerald ahead. go Please

Timothy FitzGerald

you, everyone quarter for second us for conference call. joining XXXX today our Thank

As I today. are middleby.com by slides found we clicking that our in to know begin, on the accompany want the to center our homepage, page call Investor They of be you can may at let or on the today, will we slides our discussion to page. but purposes, and meant refer not link informational the on the presentations webcast during The the right of for are call. side them lead and there

be COVID to continue in We ever-changing times the pandemic. with

we our Before have call continued I'd priority. top has the to who by our support start safety operations around get this earnings, into to world. employees remains thanking and our Their like been

business changes the quickly the to to environment. Our teams adapted conditions and new workplace

our for there to efforts was few Middleby transition, to around the grateful service this parts our team the uninterrupted for customers customer say, months. over like support world, technical shipping period. product the And the this past difficult you. and am virtually and was thank I'd entire During I during while extraordinary

business disruption levels the the Now maintained despite strong pleased all in we revenues. of decline sharp to ongoing segments three profitability to quarter, very the our business across and have were looking at operations

in Our actions reflected for measures results the to are quickly reset place posted our quarter. cost profitability structure and into put the

our confident While to the business in business ability conditions. environment remain we uncertain, navigate remains

trough quarter. what we allow We levels off see margin is we will into the expansion business profitability initiatives future quarters, carry financial for of which should our our discipline second and improve the believe as

rate consistent the performance, Commercial group, As Foodservice it and we order have quarter the improvement seen in the July. into to segment relates in throughout our

to retail improvement operations. order concepts. restrictions areas, and strong we've serve travel-related stores in XX% do some and Pizza indoor convenience market dine-in remain in was June in continue conditions. rate many other lessened compared casual were including concepts for activity prior and And dining also in states. and outlets as as Challenges healthcare, demonstrated had will quick July But dining confirming July the in only and outdoor year, to improvement down Our well.

We volatility future greater in order and expect than in orders to see perhaps July. declines reported

of and the as do and investments trends to However, improvement we be third COVID expect to critical. will remain, before have made Many second. more quarter proven relevant of we even improve the compared

Over in in invested operational year, the drive to heavily technologies we past kitchen. efficiency the

significant demand customers seen through solutions, for solutions operators carryout. We or ghost menu mobile contactless the and and kitchen committed supporting is the food delivery mobile we of as continuing and flexible delivery, have a as further product carryout supporting kitchens, carryout, offer We and increases cooking we with keep activities that curbside non-traditional product and stations solutions pickup IoT accelerate industry-leading developed emerge and station grown kitchen variety a equipment initiatives in and automation. of COVID, line platform automation during the of has for to commercial kitchen we locations in are such Despite strategic emerging ghost delivery we to kitchens by seeking this are modular systems ventless trends and addressing technology foodservice targeted period. challenges pickup Carter-Hoffmann food a non-traditional support and Delivery the hotter ordering, delivery. innovation have trends delivery with solutions delivery the to the locations, operators The around significantly revenue significantly for importance of drivers, and for this investment critical cabinet, broadest who pickup will now from driver. including expect

to solutions continuing More than is at to IoT. what a in We develop their team increase and kitchen. operation and remain analytics our fully is to measure ever, restaurant automation company, have investments to and Our data committed LXF, happening in work our reduce operators to labor customers efficiency. need with understand

Our platform lighting automates IoT of remotely commercial drives restaurant a comprehensive controls in open hardware active cloud-based provides equipment their and monitor and Open HVAC savings single processes all control, and brands safety kitchen. It food application. a entire monitors in through energy solution kitchen a kitchen and measure also automation. and operators software to

serve we they coffee better our brands the Group coffee beverage and Solutions enhance of in formation customers together We programs. Middleby the bring also continue platform. or in Seattle as recently, add Coffee our the announced to existing our to invest Most area their

have bean-to-cup, to Nitro coffee sales automated worldwide, be trends, Coffee traditional current and unique as we of continues supporting portfolio solution Brew, have place take most to such popular dedicated machines. a in market. We team Brew and lineup innovative espresso to a now product Cold the our

group. Moving to Residential on Kitchen the

return our previous the markets, levels order in UK was up worldwide point recent months of business. initial year, the locations rate July, from low of order during from seen retail and U.S. recovering most a three the April onset XX% closed decline for when COVID. In in growth both have to following were We the

home working, appears are existing COVID as terms Demand time construction. in the recovering and cooking be family upgrade While of more and consumers kitchens at are their homes schooling cause quickly to to to and market home. investments continues sales spending with as disruption, they indoor increasing new outdoor making is housing both

Viking demand. introductions, and under demand supporting well Recent increased with growing this an including offerings stations and received, seen have well our We increased as storage beverage have cold been machines, counter our refrigeration ice for beverage. need food built-in in product for

high our kitchen. of we launched virtual initiative as are levels our their quarter, successfully the showroom with During for researching activity customers brands

showroom virtual introduced drivers challenging it made effects equipment. enter the remain healthy we and demand and our engage installations see disruptive our for and features kitchen design, quarters. consultation with our from staff are We new we their Food as offering Processing resulting for. technology one-on-one overall restrictions a the and product to tour get from are Jamie team. continuing of demand will In Chef remains a and appointment, secure Chicago customers they to opportunities market develop provides our are well full and with and and orders business residential COVID, have stability continue recent innovations where of travel The to for go the to vikingrange.com and over demonstrate Despite the upcoming as attention designers Group, strong looking several personal Customers new products the past segments. into the the performance positioned they we years, near-term backlog and with to can complete

summary, was We are interest for employee a everyone, labor food and quarter our for address also from suppliers for challenging this safety seeing and resulting growing customers, and automation to production issues us, COVID. In partners. availability facilities

the history industry demonstrated resilient. However, we as be remain to foodservice optimistic has

to We environment. this actions necessary manage the have respond as are immediate market through we opportunities And period. the a during result, taken to current to positioned

investments to financial to We well our discussion. long-term remain into leading and position like us my call Bryan we Those the comments. this are committed I'd growth for over are prepared period turn the confident the strategies. to advancing

Bryan Mittelman

Tim. Thanks,

were expense in the share acquisitions. items proud year. which For earnings well Adjusted second non-operating exceeded which $X.XX, report at each QX per profitability amortization in beginning our release the as was pension I'm was of the $X.XX reconciliation press EPS, set and our impacted noted negatively of to by expectations for at versus the the pandemic. back we the from as the segment $X.XX excludes GAAP quarter, $X.XX income prior other

declined also represented a XX% We first reduce as commitment basis debt delivered so XXX was only from on revenues, COVID nearly XXXX. million. or of XX% organically and the adjusted done EBITDA our XX% our significantly of quarter Total decline having impacted $XX points nearly million to sequential $XX Revenues results. net over by of company

In aggressive period strong we little XXX service still a margin actions are benefiting but revenue programs margins took. than over are residential, to points food and over XX.X%. leading basis of impact generated and over from the EBITDA. XX% recent by the XX%, nominally acquisition. Commercial down excluding Processing, declined our EBITDA organically, we XX% swift but the saw were profitability when of entered We We position. to we Food less our EBITDA executing generated revenues adjusted this organic expanded with down of clearly XX% adjusted still we In maintain and revenues

We to the acquisitions. margin XX% able excluding nearly are gross rates deliver FX of impact and of

quarter of SG&A XXXX in year increase we or comp it approximately of expenses, either as charges prior our having timing approximately $X $X relatively implementations. this excluding the the necessary terms globally. be expense year. expense million as of approximately net at are in as we'll $X conclude we programs steps permanent various decrease bad reserves debt for government This QX taken. In incurring million was low we charges to virtually million was zero $XX of equity acquisitions, stock of third options million large compared from million furlough on program quarter, in higher also the to be saved meaningful seeing the More of higher of QX the when and Restructuring to given leveraged $X

management we very know, a experienced you team. have As

through to when through and the cash the we crisis, this profitability While decisions. cost demonstrating have unique immediately make once tweak our skills manufacturing challenges, presenting And crises maximize again further pandemic The to before. flows our successfully plans managed have structure, managing that footprint. is we difficult to adversity we team is reduced having and redeveloping facing

is We investment portfolio and ensure continue our focus growth. most the also for customers, products, our opportunities areas profitable of to analyze to on

stronger be as release, presentation, a our this about changes revenue that We to find shares information also year-over-year noted, about segment to basis you sales environment our press as reported Tim quarter. posted analyses. website with from in on Along the information will than well geographic as the emerge We've will additional able for organic ever. a

to the as brief performance. seek I'll details segment keep QX it relatively to my on relates comments So

and food commercial These in declined XX%, almost over achieved challenges, and revenues FX delivered profitability For of impacts. we spite of margins acquisition the organically. XX% EBITDA of while were excluding service, topline XX% gross levels of

again, XX%. Residential of organic of of our sales Moving over XX% on margins XX% was UK. with over gross and basis, Yet segment. a the we organic delivered levels we EBITDA decline to in On adjusted decline the experienced high

resist cannot talk As I mentioning I our residential, about I've before, products. done awesome whenever

still my cooking As most has given cooking. our borderline Brava enjoying we're Brava infatuation in The now device, outdoor Chicago a usage. family land, the good but weather know, daily you sees with of

for challenger family a However, favorites emerged. has

also the Napoli Lynx loved Oven. We

While I that than do is do most frequent more menu pizza, admit item. it much can our

all our residential of available all having my virtual backyard, distanced through am I are you showrooms. of to with While pondering visits socially appointments

I'm night. very chefs Our missing to brand will up spoiler Rothong, I ambassadors currently. cannot and being are including able was much creations Jackie their last definitely who on victorious all amazing, them. alert, sample keep with Chopped

some QX, have within well brands to in hosting. the EBITDA So groups. them segment, see reviewed Brewtech we we available Margins I our think quarter. do to I Ss and rates, capacity insights modest want expanded please before of I did where bakery virtually. some variability as case, with provide two Food any adjusted Relations visit go discussing which decline beneficial was In on Investor based while section website. on in to as Also to presentation those it the additional of to and In at protein, upcoming Processing organic saw start the order need Having on procure the so, mix we shared products order refrigeration X%, briefly here personally probably margins. between

rather food only then April XX% and in down July being commercial We rates by rates XX% that order consistently this with and trend improving to for perfectly June will were recently. lag saw were down we started week-to-week, more has between service, For throughout revenue moderated the is XX%. align but order The quarter. not while down the the relatively orders revenues. the short orders improvements Recall in segment,

backlog changes have instance, an impact. For

June market margins improve to in and XX%, decline showed earlier key July EBITDA over being a and to tremendous levels. expect positively conditions. there's will we XX%. we but believe revenues given Residential impacted order resurgence tremendous path Tim after July a persist. pent-up Nonetheless, were again, noted, the QX, orders up orders down rates it mind between to volatility to July disclosed, a we while on to is still as we see June the X% are as a strong keep disruption were demand the have we by recovery. QX expect in We has Volatility after April QX seen and risk continue, expect word decline, do in orders

for rates expect July consider and is up Margins as our our much Food levels declines. were. I've the and product possibility as backlogs, to our be expand having it’s there but don't in to we and impacted is environment Nonetheless, from revenues mentioned increase thinking about be times impact nominal recall orders reported has as As fill expectation we will revenue prudent adjusted even volatility a the QX that acquisition EBITDA. levels, Processing. few greater growth,

basis. four For QX business. be now or two XX%, minus rates of I the July. appropriate months a from this forecast and up relative on is not minus demonstrate would It order of minus XXXX make months, sample. XX% to lumpiness to comp any easy were know share past determination in the X%, to one I a the the XX%,

to a that dangerous However, admittedly markets. use in these is word

in with only disruption have seeing U.S. the are back of with occurring, of limited outside are is especially even the and businesses the being customer's arisen. some cancellations beginning to installations, levels difficulties year. about but encountered our Delays Backlog We

near-term quarters my expectation So flat to year. relatively the is remainder QX the of for to be for sequential

receivable So environment a strong cash million leverage capital well Optimizing flows, accounts We on the capital operations with benefits from changes. flow, focal as liquidity. from elaborate remains cash some benefits generated having point. three net $XX want working to working from current I key as do covered segments, other in the our and lower levels

free capital We will cash will Overall, manage to below persist. levels. well continue prior generation flow expenditures positive year

has flow nearly million. the period, past Over cash level is $XXX credit that free the million, in $XXX record a defined months, us. exceeded for XX agreement For EBITDA is

Our Xx. leverage ratio below is now just

also million agreement. We borrowing have in $XXX under credit over capacity our

capital to borrow and Recall flows, credit and debt ensuring We've what we our this the year. revenue EBITDA, flexibility margins that given exceed to markets ability arrangements. demonstrate credit not we and industry-leading Xx have We confident bank Xx us generate strong the we up levels, than within results currently level our monitor declines. will We and were the structure. able options are would that any to below offered. for overall projected remainder closely cash be quarter expect had QX obviously better the we leverage believe While new and cash afford availability sufficient and in the yet current our formalized to for upcoming of arrangements year-over-year previously

us strong afforded markets financial opportunity also that patient. available of will benefit strength improved advantage we to currently better delivered take to financial our be However, and performance, from the options Having us. capital are ready to

capital. We access covenant. solely make a will we solution to investments. and strategic allow flexibility is implement sufficient us financial financial about not have to Any will It provide

demands continuity second we provide continue ensured customer costs. to In to will capital meet the the actions safety, and took We solid returns and as conclusion, responsibly over cut long-term. worked through quarter, deploy we to operations maintain to employee of

technologies. development in innovation further Additionally, of leading our invested we to

with to incredible from rise true also achieve Dave and away me. holds efforts employees I the industry-leading relentless unprecedented thank I generate along their Tim for for would sitting teams is here to who during and same to like six-feet challenge results times. So these outcomes. positive know We've our that the

We questions. please open will that, to continue Joel, best-in-class deliver the results. to With call

Operator

BMO. question comes you. Thank first Our from with Joel Instructions] Tiss [Operator

Your line open. now is

Joel Tiss

of guess, bit? delayed I coming distributor if I to or dealer – recovery anyway, that or any dumping don't So are just out one, the I distress would – you a seeing maybe of wondered little anything cause signs be channel the know inventory

Timothy FitzGerald

more I the more where guess, at our go say, we positioned stable we're think partners I as through concentrated. would period. well dealers least or they're pretty are, positioned strongest our well pretty revenues So And larger, this that's with, are I

mean I don't like credit that be are. distressed broad challenges well describing new and they're really there, do, think have and they've they're businesses might risk. to business we we not really of capitalized. environment, I this much They've through we got that. are kind got the but adjusting much certainly We kind of see seen managing like certainly you they including actions

concern from know been be I to really but perspective. our you, of would that hasn't So issue an some that a

Joel Tiss

think couple position momentum, give – now? from three in directions us period bit some with Can as a market of better examples guys then of of like take couple out play ability bit share share And about or could a you maybe you to little a from or you little that this a really offense. maybe in of much come you're this thinking years a of emerging

Timothy FitzGerald

those differentiated the IoT, across initiatives about is talking automation I kitchen, comments a beverage. brands there other as got on, trends, the solutions we're and mean, in ventless of we that are higher such Well, as invest and should new of time, been brains brought kind certainly right. trends. investment one these so not our things growing a comments, delivery, is many solutions help talking things emerging Those But again, the prepared our things that technologies, are it we've long I to so ROI address continually and which to which they cases, expand because to innovation. And in, opportunities. on us are and view right. They in of they're customers, do those so certainly, we the I positions for that certainly the higher broad-based as but continuing in And margin. said the of growth controls, mean, leadership feel about investing are portfolio, we we've number

had XX% we incremental. really order to we would a we've million some right are really had the through as I say right that does now carried which look now. year. What really I those we that was kind in to that need we've of I is down. not last mean, I adjusted do budget, is mean QX. look long-term. against $XX if dollars And of been shutting or future to where you $XX Delivery things demand And playing but because it our put the in see for rate carryout. we've at revenues mean committed like. this quickly what year, we've is of that run the those accelerated really mean, this driver. future, So them. rethinking is we their cost online restaurant structure, then although that been right the to to customers And only are million our more the the drive-thru things that the that is is getting now probably period, – come not starting all so operation that ahead, delivery, in I are

So some that. stay of are that here customers trend our and to is adjusting for

So been thing, the and we're I sales well in that. mention say, I positioned uniquely really in evolving didn't but pretty call, would other as well. processes calls that we've our other this for

engage customers. to So and I us. very users digital, so important That's training support and end investments we marketing, educate in mean, tools, with those can better

doing effective year. through that second it's types think quarter more very communication difficult and and and to the is Continue with customers we’re of that. So are that been do see those as to important, we've something on last increasingly I get face-to-face, airplanes

not were world coming into that thinking things how we are but last through to this So help get those really even accelerate about where only the be we year. period, and are year to wanted going this us

Joel Tiss

the take to And time. last don't all I up one, then one want

that share Or with serve your menu sense a from the going surge there's maybe a wisdom, lead where of guys of a five years? all next be can to same to You like there of over think to more casual of a a to three lot what maybe think really of you are an like quick thing seeing could some you changes give couple anything opportunity decades Just us out? more the little space? business of take years of

Timothy FitzGerald

Yes.

of that service decades because got than this to I locations, is, through wisdom you period, in the right. to right. of it yes, even more he's second going mean, do. the XX% is kick I'll So if traffic I But Dave limited answer through look a

of the casual, mean So non-traditional. I it the quick fast serve, is kind certainly, retail offering. C-stores,

drive-thru a So geared out. towards take in that because shift there's really that are delivery, and direction they

those we’re probably I because think of as rethought, where are I positioned things looking technology bit dine-in really So segments. customers think we I mean, kind that solutions those us the a and is bodes that that kind and for that shifted for well of into pile the is – mentioned goes

David Brewer

Yes.

the this operation, and Let you counting me and to Thanks outside experience. years on that, as restaurant of development business, United for engineering then States. comment processing about that said that. three XX was running the of add I plants, in restaurant and quarters years, the decades the beverage food

that would food and XX here as say of up technology So the of lowering we've speeding adoption and comment. for I've Middleby, costs for at I thanks watched speed lowering The service pushed last years, costs. labor

During weeks just for this ago, was restaurant couple of their customer speed service, drive-thru and in for convenience reset they've profitability. a and of menu crisis, I for a

And talked franchisees, so past over franchisees making money sold before. – are the the three more I've different dollar ever the per franchisees than weeks to XX

commissary right months. have They're is their to and making six into the their on anything. drive-thru going increase and is profitability. quick ever while how they and And in guys what service dollar love making the of are learning before, than the last money learnings they go. customers, sold business per These to and their more Thanks And and through that safely delivery. employees puck, than not let in their they so huge the That's We of far the the years is two from and success in about talked Now new adoption. years promoting Well, in ahead Ghost weren't dark we saying, up with carryout our the what? ago kitchens, three now. that about a guess a we've were what? idea. original to care had permanently carryout thinking past That learning operationally competitors two attracted to They in the kitchens, they're side remember that the are going Tim the are translates developing and think even that can through occurred all been years to money over ability Everybody solution we last – love the operates kitchens, care a right what year-ago. change kitchen food that were and delivery take automation ago. everybody, guess it take about more answer it marketplace. serve or how coming four so of the I now operators this to years.

So bringing and systems it's exciting of right future improve years. that's controls, the see processes to and present, and ever exciting probably seen of XX now most the It's around restaurant one reeks operator. the I've change. times of to the We're it technology profitability the automation and to

Joel Tiss

much. Thank you awesome. so That's

Timothy FitzGerald

you want talk And to me let's Food Processing, But can the same go. if tell about you story. I

Joel Tiss

all I don't Yes. want to take the up time.

Timothy FitzGerald

All right. Appreciate Thanks, it. Joel.

Operator

you. Thank

comes next with Mig Our Baird. from Dobre question

is line now open. Your

Mircea Dobre

taking the for morning, Thanks guys. question. Good Yes.

I'm at the looking for at By way, slide slide order with looking all deck. trends. there. detail thanks I'm the So the in recent

in little in as sort first any you have XX% as seeing with context virus, California the kind July you're trends your have. across the that. that just business us that the was imagine imagine the seen a rest flat operating Florida, on also explain noticed around then that there looking from demand the there harder foremost, And of point what a we've Because and this, at would of a in and states decline that Are more been Texas standpoint? of country, between, are in get to verticals the my hit like would or variance have that still pre-COVID getting around to side they're wondering, folks say, I'm down variance So question you the equipment? are I'm parts little here levels country to bit that looking within travel would that's of that versus dining, I the that you're improvement? Can July, this operating you and tell on – casual I closer if of sequential the the demand its that to and things outright the versus back. some a related guess your mix, the kind I like distributors that leisure maybe maybe some to various

So realize but you a understand I of of here. kind that's humoring it'd of thank be some me the for moving helpful to kind pieces here. lot,

Bryan Mittelman

sort through it. trying I'm to

I parts… think

Timothy FitzGerald

Yes.

as of you it kept jot it. started I I'll So because some I'm to sure going, down forget

So kind maybe it. unpacking of

So the thing right. is parts, first

counterintuitive you kind So demand see as back did of that we would the you equipment, which to were QX, drop original be servicing it might but think in be kind that restaurants think would really down, given shut was of mandate. April, entirely

much discretionary their were such not And was were. even So expenses like business people service maintenance restaurants as equipment. where turning on things we preventative programs, the were their cutting

uncertainty. as we period were coming were So in things of off a kind those of

So – right into as of serve, of the look through as of went are mean, certainly fairly on there's we lot QX, then certainly busy I some and kind restaurants quarter, we the opening, the now. a that restaurants quick are

the I mean, plate. they would happen really trucks come their was service to There I to on of bit weren't blip destocking b) when no world. service. it the say Then little sure to was was mean, want agents really the channel demand of was kind refill didn't particularly services a) back going so in levels. up. I relative So to what

of are the down, to back will hard and up, levels So getting it's be Maybe that July right. kind we be pre-COVID, into say. kind to service less anticipate that QX, but to similar not of it will

the equipment as quarter. much as down was it in So

as of we think tailwind bit there So of kind I a a that into – little is QX. come

Mircea Dobre

to just better sorry, down much down saying a clarify, quarter I'm XX in were as number as July? than and equipment So in this that parts maybe you're

Timothy FitzGerald

Yes.

July parts know not the number. I So do

of giving a were you to I'm macro in parts So kind you would down view expect more akin than was. equipment of QX what

services typically resilient. say, You be can

to channel QX, levels, on situation in be is back the have not in better pre-COVID than will destocking going maybe immediate and disruption. QX. in it was but be We QX in in much It the a it

right. positive. that's So a All

kind So already forgetting… of

Bryan Mittelman

activity. distribution Geographic

Mircea Dobre

geographic, yes. The

Timothy FitzGerald

Yes.

as up surprising all you think So Northeast the that month-to-month, when is mean, so into and places of week so as of yes, and shutdown down. a we you about I same, at what we most. restrictions the there there obviously it new California, in Florida. so are governor couple but Dallas, again the the as added the to that not look kind Yes, you retrenching place. are California, and maybe a yes, of But like in the started is dine-in actually have back improve regions later. that, because weeks are In some one as a seeing then seeing down and of of week-to-week put is as the hotspots that's are move kind restaurants performing shot restrictions dichotomy much even or actually down that

So and the of about, And systems that that. but dynamics have here do you think of we starting to the I going and think quarter be. open I period level eat takeaway going driven through I while about to want mean, up be of the a volatility that from I kind a we're we third up the avenues, whether we've different here kind hotspots what the of to is implications to going school to think a can talked to ways for people do by they're that because finding out – we're and the COVID as whack-a-mole in come of go because down think

transparent month-over-month think I very the because order your been have necessarily which about predict business it's that's now, other where think difficult very would think, We So as July question. don't that rates. we giving to right – was –

So real you tell we kind of time what's can in happening.

to that June. start seen good not kind that continue of that, kind doesn't the is order around as positive this in where as that July we've a we've as the it's July. levels think July. expectation not fashion stay Our We better and June, I we period QX, necessarily from to we lows of trend bounce get perhaps think in what better are then probably we recently as But at than in than seen

happens. what see we'll Although

have into So the retail, we happened of was technologies our mentioned of July, some bring had had menu on, thing had just there is our those that we've in that's have we've kind and casual. had initiatives product have more And we've the had in C-stores, there some restaurant were back levels start recent working in new the some that in I other activities I are we adoptions that online. in strategic in fast customers remodel. kind pre-COVID thing of that some them those we've coming development on for customers that gone other of confidence – some in mean, seeing them

So customers elements there are store. rooms employee there opportunity and be thinking their dining refreshing remodel this as well. of cases, about who can it to are In some safety taking and and

June did April we activities were in of I'll July and So was again, say, and May initial through certainly July. those not April that we have into went And as May. and just shock kind in the also

in dine slide in. was remember a don't got with we've that right. I though, the April, that all down even shut at deck, even in where So we're

country, in got except of so So have seating everywhere available, across open restrictions you've to of six-foot really capacity the you and then full not even great has XX% states, dine and to outdoor for anything a much from capacity. pretty though it's couple

XX although that pickup. and was that more offering So start days dining customers are at that allowing It's and driving revenues on there casual great, dine also really it's is our more to looking not them in, ago. that not curbside allowing

Mircea Dobre

you color. quarter in on call the us XXX a you, you. it, side, you progression link points compression help volume. mean, forward, the had in change going That's think here, decline the at looking margin I in for in year-over-year about maybe there follow-up, volume the XX% half? Obviously, are decline a of compression a gross to the that. kind of getting Thank Bryan. volume basis way the my to can good going back margin forward. Right. better is Thank On for you year-over-year great maybe Then

Bryan Mittelman

each margin No, dollar the where trough improve right. contribution – right. from what we've I'd for But impact are, like better margins I better, from of slightly the slightly mean forward say the be from going slightly better should each get seen, so better performance here, – we it will than right. should

kind start I'd would guess, kind the I how that modeling tweak what you already, to worked to that – sense better a QX would if of make out, I with want me. of and So it seen side slightly we've than math to

Mircea Dobre

lower margins gross a on So detrimental margin forward. side going

Timothy FitzGerald

Right.

Bryan Mittelman

Yes.

Mircea Dobre

Great. Thank you for luck. that. Good

Timothy FitzGerald

Thanks.

Operator

Thank you.

from question KeyBanc with comes Capital next Our Markets. Jeff Hammond

now open. is line Your

Jeffrey Hammond

Hey. morning, Good guys.

Timothy FitzGerald

Hey, Jeff.

Jeffrey Hammond

here. color and performance Great great

this thing the any feel was Because back to clearly July want it's kind want we to I just step want in orders up. bit little plateau, July, but that there around better? what terms here. lumpiness you're a it channel function of a so caution getting to of that Was was come putting that in to were it were you unsustainable? we understand that, makes just – hearing of And and the just So

Timothy FitzGerald

retails, kind activities July. that C-stores, that I we were and fast volatility reiterate, see again, came we're casual, some and those pre-COVID. we that anticipating mean mean month June. And did from just I of certainly probably through rollouts mentioning I of again, Yes, were to business that's of Okay. July, the And that we with those initiatives retrenchment real mean, I stay maybe but some thinking north of

a those So bit pleased in again, that see little us we July. were come of through, to boost but gave

June. If you would out, we back still were to that ahead been have at

the reasons a down. on through we more So to of a as put gives dine-in one a bit why and It's closing bit, think was plus color. are locations that some you I number of retract hard go we maybe but might that think the that that, that August September little

going and other customers. of that on some – there things not we it engaging are we projects are again. it's the are with we're doesn't saw happen July, to that mean There out However,

we're So of come pre-COVID further. you kind Dave, color are want I know add some of back online. don't if to more the And we seeing broadly, some things

David Brewer

Yes.

But love But to to that. six continue months. month-by-month to starting. to us very I do be and I think of we'll next be competition. our nine over our connected. are discipline it's going and going connectivity financial tough your business outperform us think expectations, to and beating that – listen three to the We're customer the people because it's to the our it's operations And going it's three be allows to

come that out bottom buying of of is line the to terrible customer. solutions. this stop, connectivity start into positives they're start One the the and stop. great customers situation our have our and is And we're seeing But

very lumpy. think to business. be to tough it's so And aggressive It's business. be I going to going be It's going

outperform but to tough clearly our going we’ll months six of think be competition, it's nine to next the I for lumpiness.

Jeffrey Hammond

Yes.

can is leak the on the stuff when – I that just temporary and said temporary that of out back some think structural split just you start $XX confirm savings quarter, So in? cost to you think then you think million you what of versus starts and in to

Timothy FitzGerald

leak will levels it. back as It revenues Yes. business justify in and

You'll see million after $XX that's taking comp. Around comp arrear some or was increasing of it $XX reserves and stock from and and so commission. that again million of

changing other travel like. and about million million then around are and active feeling trade XX professional of the pieces So And advertising of actions $XX that people there were and to kind the related business. such and things and just in services probably shows additional in

call our know, like I'll the feels has to also my aren't it And same noted exact levels – they the and certainly I variable because as comments, before. a semi-permanent in it we as of side people that. I it most again, semi-permanent. know were is structural component forward say going So you

how of much more versus about becomes of call I'll much becomes be short-term So it it permanent how that variable. forthcoming will

Jeffrey Hammond

how but in stock I their resonating? Okay, of seems data, appliance kind in lot one on home of what's and react ability here. just people real on that homes your And you invest is great. home and final that's chart a this cetera? more of can it There's your as product et see and as you sanctuary Kitchen. see And And then just a time, investment Res like been the the ship, all and on just kind a there's ship about like just shift, to opportunity talk

Timothy FitzGerald

Yes. That's question. a great

up mean orders certainly, saw three do feel I in there, trend about demand July. demand this, So things in before. quarters the the in down were good pretty relative we in I significantly we're think obviously situation the pent-up We pretty mean, some there's do to environment.

to gets with to So have getting getting that projects that orders in expected May whether pulled completed, of happen some dealers, April, that's maybe period would things placed kind somewhat.

year. I in half a and for side that's is slides a things mean the recovery appliance back of couple kind the of of positive and there. industry a However, mean things, I got we've some the the overall on of seeing forecast

As the went was we market pretty the into period, good.

piece the when remodels, sales New our business of into home year, which activities, double-digit were then of we which coming home starts we're well. the is were up kind kind help support existing of doing strongest pretty

only a are bit kind year. three construction the down that months, of you as ahead say relative year, look surprising permits last would sales So June The of last period the I month to improvement. existing kind in and this actually data of like V-shaped. we're significant is of new over a at little new home X% last been there's the in

gives what of happen. of of you – kind that might bit a little So look ahead

eating schooled. time home, more and spending and in ordering you are you And again kids people a were, the we're what when cooking environment, then home element, that both that given add taking and even is, being the and seems refrigerator delivery, and it of the are lot at go are shifting, is at in it home, food reheating So at certainly we're good the but won't, of spending world indoor back dynamic we’re more other we're some may but we outdoor. pretty on then putting to it said people time where

seen really we've strength across different the So categories. product

cooking So refrigeration. it then got started and with and we've first indoor outdoor,

quite the throughout this maintain platform. it's brand. been to on with just we across really the of any I means. years, a much see introductions by of and being rest like about has into of us year going up that I mean pretty it, kind and the continued year commercial, it's over similar product for the to a last commercial, in past bit XX% into So that positive don't heavy mean, think baked the possible what being there ledger think I we the we side lifting several we of said But would then And new we're across talked much certainly year. the residential underneath

or And great that that investments team, sales come then time, is for exciting. years to time years our and long really a teams about three talked here So we've service infrastructure well we much because thanks with guess the long that a team there and being we've our light before. plays relative we were customer we've better period been through this because go got really of have to kind of kind is, able we've the that infrastructure. to And us also really support where for I we that it

a Now that the demand challenge. is you pointed out that

we so of just our number is did we pretty kind hard. as didn't things that we of – to caution were I that. one anticipate went into down With that this, that kind So and residential, locked say I the mean recover one orders as quickly. of we really

divisions, that's particularly I is of Lynx, when safety So have our Viking will employee say spot. hotter down which COVID we Mississippi, here. of some a unfortunately factory. locked at a been is a or And Number and number focus And cases real that's one. COVID, suspected two, residential the we

inefficiencies QX. had that into our have numbers, may running we've mean QX that and continue been I through So

only have actually to when ship also that's a demand not orders our our impacts that we So but increasing environment decreasing. profitability, ability not

So people We've throughput safety other and a distance capacity how backlog our bit that think them. building factories, we in got increase less I employee thinking and can about it's in we've hard you've while when got ensuring has that the because been area. you been very easier do

a quarter. But as that's that I standpoint. challenges So It's the from order to that's a third production probably a COVID good mentioned, from that's an something, we priority of the problem in good not standpoint, have one have one. problem

impact could relative that to So incoming orders. revenues how rollout

Jeffrey Hammond

guys. Thanks Okay.

Operator

you. Thank

next Our comes Tim from question Citigroup. Thein with

Your line open. now is

Timothy Thein

Thanks. morning. Good

this to and is margins. from the margins there, at at looked at looking EBITDA morning that least the ever what think your question the just global probably it's I the is commercial compared First I widest And been. gap, the peers, on gap

got was curious, terms out hats you'd in about cost anything team. that engineering actions, was you or a mean side projects expenses call or benefit? you of Tim any to half? plus maybe won't you the maybe, So there restructuring out helped or you anything that as anything maybe would call off I'm that back that to pushed Just talked the the I maybe there just on repeat

Bryan Mittelman

to through. trying in certainly innovation comes But rather so as is were given engineering we demand that aggressive very in took the be actions and we did Well, were critical. the measured we will attack how we with continue we things adjust to

Timothy FitzGerald

mean, I one, profitability, right. I on Yes. things, we're would look, couple a of heavily say focused

some incremental volumes relative growth to We let to and the our goes that's kind we that So I line. increasing. business the kind say, of little how out of it'll to on, strength that come continue we'll fully take to there's a maybe There did although, sustainable also if focus delivering bit. this have that's in and so will something quarter certainly products, that's just costs lot took But it back add, the some the of – on one towards the not probably we probably the we out, will on. see And I'll Bryan operate it's the up. of clean But but mean, a it's urgency also not brands hallmarks. would that be and I I probably come think happening, bottom up relatively. I'll coming costs

kind some Like that. you I'll particularly to kick over it ask and I'll him, there's but netting to know So I debt. just there maybe bad comment on of

Bryan Mittelman

But mention, did of position restructurings bad indicate we our $X that take given did to sure expense, doesn't had reserves mean I market. write-offs. prudent the to we on in $X the it we million risks we debt million of make and took that a So in wanted

maybe not revenues can and orders that short-term, the online very recur. immediately fast back that had pace that back then have revenue may get before. full expenses bringing that afford generating we So in we to we and directly, provides point, to the that's Tim's improving where contributions one aren't To did however, with we

completely I we that, I you had just it's making things. think don't we looking that probably think think wasn't the I viewpoint chain efforts, were side and could things want of our We also supply too. say we case. the to stopped a about to balanced everywhere cost mean, the Now, as of sure and that important

commentary Dave have So here. add some let me

David Brewer

competitors. versus point. Thanks, glad Bryan. Yes. global separation I'm our you recognized Great And that

engineering first. customer people put showing these hold been maintain engineering, chain is manufacturing the I over feat there in making we're Middleby to supply time, The numbers. And and the work our the a service we a purchasing the in and me past half separating but allowed us going tell chose CEOs can we competition. calls that and our the are at remarkable and tell competition, think and competition. dozen And rolling to and the financial it's of customer on in from It's actually numbers. first supplied same great It's that had our customer thanking to you It's phone I specifically purchasing have I in manufacturing. from chain equipment end people that's take us done to and COOs performance our can you do products. because shutdowns. three a a not had outpacing these not up clearly difference supply months And performance to. is recognition financial outpacing delivery that users the for only We've I've our at of

Timothy Thein

the maybe with that from it. having you're they've Dave the the with you, And clearly staying of standpoint. relative traffic winners customers chain conversations is, Okay. tenor here volume Got what's been large and just your

I'm so hearing from backend? what menu the really don't plays the activity an count of their not what terms you're assuming plans? investment I into in you And overall the on standpoint, of is and that what new know store how activity but high just just a from are And pipeline list, in that hearing

David Brewer

Yes.

coin. that me give two Let you to sides

So we connected. are very

with a were customer of are the relations learning Our making of a I'm made menu, in ever us are friends the large connected life. speed some going we're to and lot it's than onto like months, they've but successful, to conversations and ones are like, anybody now the that since the come a because release lot. The not about in going now the and more people talking let's learning when franchisee. and the successful, have menu they're I management hold of that hey, operators customers service do it for spend franchisor front like, good industry I profitability. their on line on team being The we're next franchisees, to it's the very sales whether money money. And that more constantly or being about of what's and what figure that with sure than happen out we're I'm I'm they're going couple in are

using process their foodservice and around important. products up really around growing, their is C-stores and is connectivity automation grocery to that retail activity So stepping customers. are The more store to deliver

So they're in shopping groceries. for

–white to of giving not cruise guys ready dine-in, So the trusted late dealers, run fine so year, equipment tablecloth next They're C-stores, pull helping end partners, them. users going and to they're going partners, to lot they're is better to with I shine the that's And big, and our our globally. refurbishing, while The connected their and here. them kitchen ever. is lines engineering But through as and that to better other huge that to be active, a and getting but to a our cases revamping our launches months our wait. channel are them stronger in we and our to the and think the ways through to, emerge their can going businesses. and our in them performance between are customers large the refurbishing. difference in solutions they're areas. not the we've But going sell with they're our this the in the to it's These directly pull channel trusted and we'll up a are we three, going they're to going We're than is nine some stay six, the to company and competitors manufacturing ability reemerge connectivity customer, stronger, deliver purchasing ability where they – tough us really for gotten stay in succeeding testimony it struggling really chains people solutions

Timothy Thein

All for right. time. Thanks the

David Brewer

Tim. Thanks,

Operator

you. Thank

Our next & King question comes from Associates. Todd Brooks with C.L.

now is Your line open.

Todd Brooks

Hey. everybody. Good afternoon,

part for Just a question two you.

If on you look and – is at XX. Slide this

of typically builds, at you made much strong? being fast look XX% business look little If the and if that a up maybe bit to that the you back So that fueled of year, is of lesser by XX%, segments over by last extent, remain new QSR, how currently casual. pizza,

Timothy FitzGerald

store probably don't couple as kind markets quite and emerging one, is it we in that have comments, of just you down coming. So a of think about make I'll where that broken detail. growth international,

probably and the kind from that not coming outside segment, stores only a world new of the emerging the have happening? in U.S. piece market. So You where but an it's of is of oversize

disrupted and the would America such picking more markets up. come specifically, markets feel other I to In I where confident some we of back such Asia on China So as we longer activity going that's expect mean, some in seeing that are we're that the of But Brazil, as India, near-term, the Latin think term. occur.

greater coming – of geographic is mix third – a think than if know certainly it's I store. I like the is from So a what our don't third new

half international. is So activities store of it be from our new might

pretty know But how the So I that it out. I think certainly breaks I well. in bodes actually think U.S., don't

independence, what's you've less less in Although dining. got is over happening in casual time,

those C-stores new going more So of of there. the what kind with to on openings were was really, over that cause store be time, QSR, trends

but I clearly So to it's the base, entirely that's be looking the not at, think than map. impacted more off going installed

Todd Brooks

looks the in builds, at whatever of said, the aren’t Okay. quickly just from casual how like the you and and that takes segments, as – – that hole the of filled menu pandemic thinking industry the channels? emerging some that I'm whether drive the probably be of ghost But the kind business? net sort And the could than and you're next menu disruption. if the side hole the of to question, And much back maybe looking second how once virtual, some hole also realities some if independents just can puts you as much about it's think But new then XXXX, whatever the international over secondly, of just healthier balance build, seen any you driven new out through sheet is you. the of year at locations. of opportunities I'm part we've more combination with trying as by Thank for of the the some like, emerging talk some can just activity new and operators?

David Brewer

take initial me let wrap can Well, and you it shot an Yes. Tim. up,

frankly, everybody filled of lot the how are taking this call operate. reset we industry I to are and like our are known openings. – a think the of just restaurant they right. to just that It's store at hole will period be on customers Middleby, They're measurements this like advantage of slow new

their come that will their performance. they in fill in back so And in business and void performance,

so implied I chain restaurants and regional customers agree system. with are think it think going a they kitchen use a the that a customers, dark smart how ghost customers and smart you that's or your better will and that an kitchen whether run point the be, is the effectively they I or and about their chain to differently, create operating of commissary

employees, safety customer that I maintain in to service their and year. to distancing employees, that's existing for better not and kitchens year with will importantly, and back for be fill their void fill going think next filled technology, for their only going better following to They're it customers. their in more the and that but happen

the filled. I'm activity think be so tons out bring our there of really I so performance that will corporations back customers seeing that financial void void by their about. And talking smart that by can they that filling of on void you're filling

Timothy FitzGerald

think to happen agree what's in are right That's with locations, I is invest their I answer. going add. tough they I now, mean, it's think to good going I mean, but a I’ll predict existing right. to I store Yes. Dave.

going to they're of stores. the are they going to the the get bring be first and technology going new be So with. There some working that's to to priority before we're concepts that

is they And that well them because this mobile as opportunity of unique trends – the a right after have also, a kitchen, see a of It's Some will it's we're relatively there's that differentiated working they actually small operators do Dave they operators, is store same number, going that. adopting advantage. guys. but this large It those going also very those practices. are kind we're reality to this are if dozen to that openings least, alluded the the very kitchen with and actively. at to And accelerate be, ghost only an existing with but not some to positioned say engaged difficult overall very for the the how now of it's that is

that the over or the two. next actually think I here revenues year impact bigger opportunity So will that's

Todd Brooks

you, Okay. Great. both. Thank

Operator

you. Thank

Our question Seaport. with Walter comes from Liptak next

is line now Your open.

Walter Liptak

going reductions. was cost what we're year. Hey. it just us them little questions. talked I presentation, my think the detail, Bryan you bit the taking back can guys. for was you wonder I do because Thanks Good quick late. follow-up for to I the your And in a half on think a with want make some the might And about I'll But in running provide I quarter. restructuring second small on? of restructuring be if more alluded for the how charge to morning,

Bryan Mittelman

The I quick yet. is and can't blunt answer no,

elaborate I this it think it of and at some of be to finality such, need going forthcoming, that necessary will we not actions given clear take time. decisions impacts employee I've the to around made but I'm steps and it

Walter Liptak

bookings factory? to possible some will for thanks of In the around XXXX? maybe business, then And of book need – the Or kind it digital of Okay. process there Is there. there's some it out kind like orders the face-to-face that. using methods maybe instead new you sounds – there's do for projects walking think the capacity those sales that out into push

Timothy FitzGerald

we've customer we had our relationships come the and We is center we've a day. and second to particularly with longstanding and innovation our so that innovation be test performance that customers Yes. center. tools mean, and or lot that They every when a know great XXXX where them support up and with if they're we've putting said, the our equipment. that the a up teams protein challenge. relationship technology year have innovation really a bit half, it of is a being XXXX, products they're in very had equipment last or lot new bakery Actually, we by followed a the in validation center, it you opened of Yes, great – our to of to a that familiar gets these in project had possible? new That I a over new and demonstrate equipment helpful it's can one customers. our we so a opened processing equipment, are got

get We So tough now. those customers right it's in there.

from got of goes the U.S. of I just kind So I orders get France when And airplanes away? systems kind people, to his of that on just element mean, now. global going but Middle No. safety being you engaging to kind We've right from people hard of them. when business. which will a element element mean the with being do all an that the as got we is on does business the border. just mean, processing. that of Russia overall is, there's very about and is be an us But do but it I there's And certainly, also cross you've send really the the that but think is able certainly considering we're a kind very is function to the to able in mentioned of dependent East. of Bryan installs comments, food service, – Middleby

Bacon solutions including and and than into disruption foods, already near-term being coming as proteins. we’re year, expand well all-time but a innovations demand area product tactical address We such record alternative meats, QX those in, recent an acquisitions we’re up kind chalk we pet So trying backlog, that were continuing Pacpro are about the markets, I to because was received. an build new things both to to as that really there, dried of continued to such we with of had matters new footprint our beef, ago. rather – that did dry would year

all very bit. think settle once a still on they are I So relevant, things line the those come back so business conditions will

some we're couple see factors here this to where we might done. still stuff disruptive world tough on of of quarters positive the but and the truly a in So very going it on make business, get optimistic just the

Walter Liptak

for Thanks description. Okay. the

David Brewer

everything thing just is, food that be to maintained agree world. to for inherent Tim manufacturing but said, I'd need only with The the add is I there around an

of a And piece it, equipment being some maintain them are a bring so new the exceptions. food – equipment, and some the and running they there's to do keep governments and to us people processing that exceptions made. plant need are keep When doing get a or help in up call

I said, just underestimate So food the supply the to everything with but ensure agree don't need Tim inherent to population.

Timothy FitzGerald

to those generally Yes. are strong is right. the eating right mean, generally further way. now, by I at that, the I demand mean, customers just And people on more add maybe

mean, of it's – kind I think things consumption there's whether whether about up. there out So the Residential as COVID-XX. it's all or Processing, of food segments, of one it's the our you whether Food going that is stand I Commercial, think is

£XX the pandemic. many I have gained during of us think

So consumption is is up. It down. of not going going the food

issues this consumption you is really is processing availability of meat systems it automated important, and generally, but right. for our automate and people add I have And can food and dog that consumption coming business. more you well. customers. we as think talked the complete about And in things and people mean, demand which of for other employee mean, the element, So and difficult certainly I only the more of starts commercial the of safety. one And we've more not to with highly the labor resurgence to the automation, our hot seen COVID, in it's good we and space is into but that's now element and bringing things there's our solutions. kind like processing food – production the facilities then foodservice, also that true and to got extent bring are we out, customers, we reasons is becoming as I they've had

we is inquiries have. automation going during that getting which be are So more period, food solutions to on we more to And this important. continue to address

Walter Liptak

If you've done squeeze it's now, great. one I get one can a on if think you've don't to I just a a I question if last That's M&A. taken Yes, deal wonder in. got possible pipeline.

Timothy FitzGerald

Yes.

question. good So

And half swing. quarter view type some issues, still we is certainly, kind our back of the M&A year, the of move start of in trajectory, So bringing kind sure of under think but possible it And of be to online. be Middleby and of we've of activities we through of into kind the development we're hallmarks pipeline kind the as said expressly of down expectation as us maybe second that's would we prudent keeping opportunities the understand one and business we that deferring was. back a and gotten Certainly, alive. better make we'll in of second – where through the we're we legs obviously the current the mean, as also world the think I our locked I is of our expectation working XXXX, I

Walter Liptak

Okay. Thank you.

Operator

would for Thank have you. management turn for closing That's to remarks. over the to now I all any the back time questions. like we call

Timothy FitzGerald

to you the today's time Well, appreciate thank and and I'll discussions. and it everybody of say questions wrap for all kind We up just attending call.

forward to with QX we you So the again earnings call. look on connecting

Operator

gentlemen, this today's and call. participating. concludes Thank you for Ladies conference

now may You disconnect.

The Middleby Corporation (MIDD) 5 Aug 202020 Q2 Earnings call transcript