MIDD - Earnings call transcript Q3 2020 | The Middleby Corporation

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Operator

Thank you for joining us today for The Middleby Corporation Third Quarter Conference Call. With us today from the management are CEO, Tim FitzGerald; CFO, Bryan Mittelman; and COO, David Brewer.

We will begin the call with comments from management and then open it up for question and answer. Instructions on how to get in the queue will be given at that time. Also, a presentation to accompany this discussion is available on the Middleby Investor homepage at middleby.com. tab to Investor it. the to on access middleby.com Go folder in right It available presentation on is also page. the the this side of

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

Timothy FitzGerald

Thank conference quarter our call. joining you us for on third today

found may these but said, be we slides purposes to lead discussion are today, will meant on They there page for the as Investor Stephen to accompany not our As call. them while at are informational our refer slides can on middleby.com, and call. our

earnings, we get done would Before we again once thank job tremendous Middleby into navigate has I that like business conditions. to team evolving as our a

rise to times from ever changing resulting be our pandemic, the with crisis, continue while and to in success. many continues long-term to position for adapting challenges COVID We to business the our team

team the to entire again, So the Middleby you. world, thank around

ongoing have business of we the Now disruptions, were business at segments. across to pleased profitability quarter. looking levels our all Despite improved three

actions the focus reflected posted on results structure in the quickly profitability for with continued reset Our are our quarter. cost to

We also third with structure refinancing. strengthened capital quarter our our

business. critical forward are and the We and transform investments our operating as move strategic make we initiatives well-positioned on to

it have As Foodservice segment activity the with customers. Group, in seen Commercial to relates performance, we our improvement consistent

October. rates down of X% XX% month were order the Our for down the and for quarter

rapid growth curbside activity seen improving drive-through, across most benefiting categories, in have from customers and We our delivery. and pickup are

pizza, continue well, customers. are Segments to in customers. Although fast chain dining sales as support casual challenges we has quick-serve, at and to dine-in grown and remain indoor improving and c-stores is to reflected desire for positioned dining, retail the casual these perform and such our

broad to date, not very base we preferred installed locations Open the service, made kitchen, of report only at menu have is support operators. customer and specifically Open and and than provides kitchen. to we've we've challenges footprint. quickly simplify, restaurants flexibility the as excess as its is in As grow tools to of ventless, continues relevant equipment X,XXX excited IoT before. and engagement that we to and XXXX leading in all in Since made challenges IoT all platform in automation, address of are to Open Kitchen our capabilities system. Kitchen the to operating the labor, the our ever operating retail given beginning solution, Key investments This but critical platform and in facility the this continue It industry-leading is now is such critical in to such the delivery our beyond more this investments of examples literally other into operations continue of the clear many Kitchen year, COVID. and of industry equipment HVAC only the and launch curbside operations as many Kitchen on the one I'm solution connect as be trend Open monitor delivery foodservice importance the increased lighting, speed of will will with Kitchen platform. our Open ventilation. automate have that all adapting,

While revenues operational also customers, our is this challenges. is foodservice benefiting of it the presenting significant

challenges interaction customer-employee times, from considerations. and customer service all quality New around food are safety satisfaction,

cabinet our Middleby. by And as variety solutions press needs. saw the critical and introduction gain Bluezone a of including Carter-Hoffmann continues in the pick-up contactless have announced We release, of to addressing we automated PUC, which interest you solution, yesterday

rates of virus customer are the kill highest supporting We to and solution returns. now the as employee into at indoor This dining safety enhance protection restaurant. moving provides safety

industrial the foodservice with and military, existing and We applications are which excited has unique hospitals proven to introduce technology, patented operations. in this been

our Residential Kitchen Moving Group. on to

XX%. XX% We and the UK in increased October Order markets. QX and US have in rates at both continue seen robust continued order levels into

We're of sales and And premium cooking home portfolio our in in consumers the across at our continues brands. these order Interest and home are debuted Virtuoso spending X-series, schooling entire rates. Viking with from to products returned. working, reflected realizing activities construction grow product the and along favorable more New also conditions time with families. momentum have recently Tuscany

initial have from as La offerings such the as ranges launch designs We from growing our showrooms of Viking. also our brand. Hues design we Lynx such interest well We're and and from product from Delta around our USA brands our with color The community, build excitement pleased as and interest Mercury as leverage new the with Cornue AGA

with light the demand Food Brava, speed interest while teams a newest a The at reported convenience consumer Processing in technology. very cooking and business countertop We environment. our smart growing In connected offering we addresses quarter, Group, revolutionary our solid clear growing continue a wave trend. in difficult executed to and brand see cooking

customer installations, restrictions equipment complete been global and upon with to travel Although made challenging have engage which commitments. timing. will capabilities to difficult made has leverage customers affect disruption Travel we've it it deliver likely able to minimize on demonstrations, to our order

with continued However, increased sous our robust pandemic. systems from savings TurboChef cooking developed conveyorized and rooms and growing a offer by products examples vide Oven we solutions the pipeline footprint. backlog new we uncertainties accelerated Alkar. product our from on in space solid high-speed In flexibility maturing the innovations resulting These COVID anticipate and interest a summary, equipment advantages have such automation, Armor are from as throughput that recently of of Inox

the prepared comments, ongoing across build necessary our well-positioned taken Those are these of to turn leadership to Bryan continue my and foodservice from have discussion. the trends. our and for three to benefit We're withstand position over it platforms. to We business to actions new all like now I'd to market financial the positions we emerging challenges. upon And

Bryan Mittelman

Tim. Thanks,

bit no our call seeking expected. recounting reflective not did that of into and results political While a to XXX% divisions fun, are a to I our reported everyone having commentary, is in the want of turn having financials ensure of our

release, which GAAP earnings quarter, successful our the quarter were from negatively Adjusted as was For the pension was I'd which amortization was press by and expense well at non-operating EPS, in $X.XX, for us. the say very income noted other $X.XX. items a acquisitions. third $X.XX back our as it share excludes per impacted of reconciliation

addressing cash record strong While flows, delivered we challenges generated our pandemic, presented operating and very structure. the by enhanced margins the capital

quarter. COVID Let XX.X% were me results. start declined of and and segment impacted with performance Across XX.X% back flows revenues then cash XXX basis, XX% was the investing XXXX. nearly second represented initiatives organically, Total points XX%. million EBITDA a million XX% increase a and from the company, of consolidated basis achieved liquidity. improvement this brief our $X deliver able nearly company or to overview $XXX while On during revenues come of to adjusted gross We quarter margin as technology revenues, we significantly of or and a in the also

took the well and as Residential, will We are and from over led outdoor for North organic spring delivered over I this meaning aggressive acquisitions actions margin position. at gross taken and adjusted strong saw were and any we XX%, of organic demand basis, and values premium an XX%, impacts. we of on the we EBITDA revenue to over EBITDA and excluding appliances XX.X%. discuss platform. cooking up over exists In margin All approximately of just XX%. additional continue to programs FX we profitability this XX% to This globally was America, adjusted in decline as the execute are revenues entered Commercial the swift Gross more when looking actions leading XX% organically; as down and We with continuing margins, maintain recently. margins benefit to period were Foodservice XX%.

points basis gross Additionally, EBITDA businesses, over In revenues margins if Processing, XX% our was XX.X%. and we exclude margin XXX increased non-core XX% the higher. adjusted is Food exceeded operating organically, margin

previously and at the the a level. somewhat prior higher come low than for revenue expected relatively was year the did While revenue in quarter period

as those groups. mix and well before, see I As within in based bakery on variability have discussed here between as two brands margins protein

This benefit did I from segments higher on protein-related all products. margin quarter will the to outlook shortly. contributions from back the comments some come relatively

acquisitions, of provide cost was QX from million from of headcount control million saving million compared Restructuring $XX expenses, when cost QX. $X XXXX of which benefits excluding will or terms the our XX% million. down to reduction over expense $X over million saved $X approximately over were SG&A In quarter, over $XX charges Interest annual from for actions. we and

of a recall that a resulted likely You'll of such equity interest conversion August. notes over be requires of QX. on levels. charge charge in nearly into between U.S. in yield without $XXX than hypothetical million a bifurcation issued been In million paying $X $XX notes in outstanding portion, QX. a the having This and generated million expense we from debt operations and non-cash is $X currently for this with due difference cash nearly GAAP for less we a inventory strong the convertible reduced QX, half benefit a from will million. are notes in flows, non-cash The only We increase feature. interest X% coupon note to the with along

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

is So our X.X total leverage times. X.X set times, just our covenant at while below ratio limit is now

over our to having our figures These on have the hand our credit billion the amending capture our reducing promise of capacity term $X.X convertible our $XXX agreement, allow investments. that We million loan of borrowing agreement. notes, capital credit to solution around current also we during impacts issued strategic down make on the our cash under quarter. us paying any financial and would delivered against structure We million flexibility and provide $XXX implemented

was that financial We to XXX term. leading deploy are existing being returns points. percentage team margins up QX will our very continue provide these points management under basis was a considerably XX%. company solid total continues adjusted over very very nearly we with EBITDA deliver Commercial long from The our their responsibly QX. to the segments and expanded over of industry up in proud experienced covenants, comfortable and into I'm over the Residential is headroom results. XXX All to capital basis

But Having and also do providing Chicagoland, on rates, While of provide household local customers. house, the I I do some discussing some cash to broadly, part am this satisfying want maintain my thought costs, so, XX-mile how of drive website. forward. support our wasn't control insights insights our tirelessly way, to around a on are By referencing Middleby about which is to section executing come markets QX, before we having with were cease order restaurants order the upcoming have are Investor that some I to demand. is rates With to working drive into place to family's making our at our quarter. the to shared I plans available operations let the the Relations impacting intention few restaurants ones In our doing be flow. going presentation QX way especially going reviewed back order start will in we monthly A restrictions my that we from I'd sure get are I our cravings favorite weekend. takeout and the past of dining but in

to truly with well which Cafe, Dough So Brava it Company, is put servers has reheating. I'm Pizza a cooking Robert's out food, in into my some amazing Lula shout few a great for and ovens must-visit beloved as Marshall and Once as all a my I quick exceptional their pies. who

who's Foodservice, ever the the August, then creates cooks Lynx slightly is my X%. in is were contributions, continue Robert's. throughout was XX% and it September, driven you in down to what favorite October our my XX% Now she [indiscernible] masterfully so or crew may Commercial for Well, only Orders down by see dining in quarter. with down we improvements it at wife Oven ask, Napoli then and my

a in to of ultimate some of mind beginning need program to of look would the includes is longer-term Now fulfilled expect in exceptional first data. offer I've been way that looking timing of was as fulfillment QX. Overall, back be has the we the is can to that positive risk consistently all interpretation some the monthly year. that an as to of I October sales commented next variability trend month, on key but previously the data exist. obviously at this we keep caution half it orders The these the

and September of So points it to be the result. QX revenue reflective order would expect data not be appropriate to the October

dining somewhere expectations, it changes consider seek September, especially I set be As emerging appropriate given restrictions. or would QX to and seasonal to you many of more believe, between August weather and model

We QX. back EBITDA margin be control. focus bring are for as business, have started to on our in Nonetheless, our not we into some minor losing degradation cost and there the costs could

plans quarter. improvement tremendous in and over We a our order for to additional higher place margins this continue 'XX the recent to we months' We resurgence in had Residential has costs ahead. with committed than monitor remain up seen profit year XX%. rates delivering

focus and year better on effect rate we as employee growth - marginally we and As well of production QX consider be as levels safety ensuring rates, environment, our rate comps, evaluate of fill expect the QX. staffing prior that than the to

The Given expect will consumer do previously backlogs 'XX. persist low. matters into production sequential keep and noted demand, also growth we margin to environment expansion

we Processing, Food quarter in in For year. we expectations. QX. an We of where the slightly come at We've admittedly now backlog, third easier also levels had the are ahead recovery some as near did seen somewhat for term the below comp started

QX XXXX, grew over at or sequentially. $XX XX% million revenues back look you if So

QX best, lower may at project the from this For to margins. Also, sequential sequential only growth year, modest, QX. to mix QX contribute expect we

seeing encountered with is businesses especially of disruption continued US. customers' in some being outside are We our installations, the difficulty and

[ph] While have only occurring, the arisen. laser cancellations limited

I the with As to to the back noted, levels is had close of backlog year. even the beginning

ensure long-term and operations continued So near medium took employee innovation. in and is invest was in and QX volatility outlook and risk to we especially These in and to margins product look we customer our efforts stable. costs. modest, we continue are to cash maintain in performance Nonetheless, persist, cut solid, positioning. of The we continuity QX, as also term to environment expectations technology actions In the In flows. seemingly extremely will some current but confident meet QX. demands challenges for the presents rather at are conclusion, safety,

Our please as 'XX. further growth drive questions. that, leading open technologies With will help we enter call Stephen, the to

Operator

question first Dobre come line Our Instructions] now Baird. The line of will Mig the [Operator you. open. from Thank is from

Mig Dobre

good you everyone. morning, Thank and

Timothy FitzGerald

Mig. Hey,

Bryan Mittelman

Good morning.

Mig Dobre

little your get head converted I order slides, I down instance, be independent your your ask I looking And given the to In way you've in you've spinning the guess, frankly, verticals a revenue travel in understand that and orders exposure go and a how the this to. My my color is that I that revenue in of question really at that dining, a And way. XXXX. terms of to into am recollection of for here. got would I'm is restaurants. X% comment number this looking to conversion this October some past, various maybe more leisure, for bit. and these might is us casual But October, breakdown

was So pizza accounted impacted QSR, been arguably speaking of about the areas Institutional, rest. that for have XX% business. really kind of by the really the pandemic, that your

casual the I'm looking at two relative retail? create or months? QSR parse would, Thank of beyond level can have kind some you you you. these important you for one guess next relative more to what us this out with maybe, to of do help point I and customers help some at your visibility So of an seeing you order outlook think us in kind then if trends, of to wondering, as dining institutional And pizza you're you what to we're

Timothy FitzGerald

Okay.

are chains, there. at out casual say, there's are be And don't and mean all say all the But increasing. I'll improving. done improving. we're on restrictions tend the we're bullish some casual tied of so is is business that foodservice think a store So of of year. because and and come fast certainly, in rising. tracking And I hence, that to Certainly, large, mentioned lot well quick-serve October boats The we outside by I we're rollout shutting program, and seeing and down I those I there's shutting call - dining see why And -- convenience that's seasonal spent our are certainly, would want in in in customers the at improvement number, home give know pizza we pizza. seasonal to you that kind a of we've particular, order in mean, as in categories. dollar I'll see but we're some period. emerging we start lagging impact. do necessarily to a segments. that They things down, typically not unpack are just that general conditions restaurants week some first by And some off rates in by just saying - included be the of - which next we would We but it, We if program, expect change. have to Bryan to that activities, I some, X color. well.

So up. of Casual we've I c-store, market well. come and just are parts that retail quick-serve, before, the dining performing pizza, again, talked about mentioned the has

So element in late service all just service. until that which our quarter probably much see back you'd October pick a of was in in that number, and kind didn't one - disruption early other little up in really in and bit QX, QX. I'd say there Because it's the business, that QX

that service as are they back operating, their of So restaurants need bodes to equipment. hence, and well kind also

Mig Dobre

I see. looking as I growth the strikes outright in your to number we're having have at only that mean, what it could order here is me portions we for business. be an to way of you

where know wallet they're essentially going share maybe your are that is consumer be and you specific So there with in And seeing gaining sense of customers expansion you have can share. on of about unit a these enough as terms I in growth? do outright customers? talking what are you know you to - more some XXXX,

with built customers sense sustain that potentially that So there's are getting you into can XXXX? the that's momentum these enough up

Timothy FitzGerald

I'm another. sure I maybe it. mean fully I Mig, understood not Okay. take I'll

all, So October... first of

Mig Dobre

that obviously then that are business portions call down, but some imagine the your are up that are are portions it, your still of struggling. stress, orders there in there that you actually I of experiencing offset If still business have Let to customers only some - to X%, your erosion of me rephrase are would are this. that

you I'm into us guess if tell this year-over-year point wondering can and at might I So 'XX? have who's what visibility up you

Timothy FitzGerald

Yeah.

number. mean, through what's here, and us the there's seeing confidence we've to we're rollouts business have in understood September covers you when October some I So is and period, on who going we've to we something what X%, under of people again, the with you're transparent in the so this that - because there. kind segments But wanted knows bring. October the point, number, kind improvement recovering. of your probably and as an positive October, if will say, November But be above, are in right, see seen

So the you, c-stores program the well, in black. not sure of I'm but or obviously pizza some but it back in with to was negative, And be honest close chains the of improved, Casual being meaning as quick-serve are with the activities it's about institutional, positive to dining, then I if think emerging to schools, classroom, also they're probably has doing getting it's are dining, which before. where fine improving. down [indiscernible] and

kind So is also of volatile. service way would And again, bucket I'll And of back of service go kind there. to I kind uncertain. which It's I year very again, level. be that it's the think to then very would last back

to monthly I talk we - orders. So hate about

to seeing, is we'll - monthly as are what we have business Middleby the have orders. was get the and positioned, wanted because we reporting, again, XX% that will before. apart the but restaurants that that just there confidence performing. October out year, the near the some I we'll uncertainty to the away mean by the mean, there. But the to what down or doesn't probably how stats was in long we'll - in again, back pulling business to are so with on while relative be into be we from - rollouts otherwise, Bryan confidence the expect it's for color - got of rate we foodservice we It going largely think, continue in what term, to and the others X% the foodservice visibility have gives said, to do the think just year down order recovery where some that how Technomic to also, that is get I be Kind that next we're of kind term And next in trends I The and still going will get it XXXX. where is improve. we're

them they into about we that going next still see And to could business is also pre-COVID, in we'll programs segments year. move of that be right? only where there's they with being categories, I expect thinking their That So accelerated but so confidence, think, a the environment, transform that and underperforming have said, that the current into how in that there allowing had opportunities some we lot forward not coming year. the spending may they're is do

Mig Dobre

great looking say better the able That's heard at then And you a question, Bryan, That's that clarification. Thank you, color. was my just be that margin third to I for should do quarter, for. looking final than you. Commercial I what that. Foodservice in I thought XXXX, you for if we're

looking I'm comment. 'XX year? pertaining third clarify that And is to the to the of Thank timing or that you. quarter full So

Bryan Mittelman

feel actions positives. poised so say do, point. to further, right? the full our QX maybe dangerous year, see knit that was the that So are be Yes. as margin recovers, cut we would right? we completely a for The bit mix pricing how to there's well, volumes whole there's comfortable little what be what what low with becomes, newer a be business back tweak we've mean a it's I - and No, adoption a right, We our things I performance costs time of some variety driving to variety year, of next what all or - and going will for become, go in flows ebbs guess it the cut, of tell acceptance we bit, where the right? technologies, right? things -- little the of and

to new all kind this better is, things floor. assuming from the continue we then of it trying get get QX, through we're And to assess, is here. right, As

Mig Dobre

luck. the good Okay. Thanks color for and

Bryan Mittelman

Mig. Thanks,

Operator

come question next now Our will King. open. line is line from The of the Todd from Brooks CL

Todd Brooks

quarter. everyone. morning, job and Good great the Hey. Thanks on for questions the

two quick on One Kitchen, sites. questions. you Just about X,XXX talked Open installed

can talk operational and kind gone have and many change triggered how about sales of new evaluation products, so for during and the through fact we new given of pandemic front that, the going that Now the operators connected equipment historically funnel forward? solutions appetite much of these has of

Timothy FitzGerald

Yes.

So but various -- right for I mean, and seeing been as I of IoT while, of we're point the factors said, engagement. a increased and it's then I one think has around because becomes those industry other things it's that things. inflection

we're with impact their So realize business. mean, I that, can restaurants seeing meaningful the this have on

mentioned is mean, mean rate the I numbers. I So our adoption I increasing.

number to of a customers We a customers kind that let's have their large brands it now. are across of, at a are adopting have We significantly it. dozen that restaurant right up say, pipeline of looking

labor, ROI So is right ROI the see safety, for up I ability a of kind ensure costs. and got think reasons that growing of operating mentioned: And proven the service equipment, food interest now. mean we going it's as automation, the I to

of be we're our well. that we'll advent that launching, the platform IoT With here into as Bluezone tying

to kitchen modules facility the and your employing do in we do well. ensure safety. And mean safety I costs, go we you how after your improve of these of want really how think think of as and it, reduce now have customer visibility you do So into operations kind as I manage different how you food

cost competitive mean both are dynamic. a meaningful, things from all and So these I

And So we to good some feel where here further color at. pretty maybe I'll ask add well. about as Steve we're

Unidentified Company Representative

center it's what I mean And commercial years We by going We're around it center. a we perspective, calling calls. Kitchen. are internationally getting especially our Tom, it in presenting were this. food ago. good the Yes, see us, presented business. X.X customers question Strategically, I Open Kitchen, through through going The Open from now is

Our system, it the just And it temperature. is that that to over more includes for valves. pretty system. data it we're gas It's a total generational cloud. then standardized customers It the controller, has proven efficiencies, meaningful to wary improve not frankly, face. locations, timing, they of that because as costs, service. look their And their proven generates systems then which perfect costs, I labor use a lower think that's X,XXX-plus of is speed improve their trends maintenance now that And at are it's connects It based managers their And controller. then just a than they're the that a around people making very and comfortable are ROI. in restaurants, And general are one sensors It has very of in with running it's a unproven control management, people to the the operational restaurant upon restaurants you then data and operator. management to goes data now restaurant the changes it above technology. And level of lower the data.

it's see And see it's It Other very It's integrated falling extremely it that's job. in like it. data over it, it So control works exciting operation. can chains feel truly to they're they customers see just to proven. team need soup-to-nuts big system. operational now customers can a X,XXX platform. doing the great The a that it large meaningful catch of not They running and operator. just behind. because Other other standardized in in see proud Open chains. it. is restaurants. that's system. Kitchen strategically I'm restaurant I it's It's up, an a And And generates And

Todd Brooks

Thanks. to into the duration nesting But fiscal the strength quarter Have underpinning rate, the That's in levels what into around we is saw behind the meet of a monthly Kitchen segment, great. top just growth macro and the this I we can the the of in 'XX? data. out with versus in with sales helpful. And in QX strength production trend setup vagaries backlog numbers XX% we that and that that kind far fiscal as order orders question. of in gone good as here a housing third And about pointing second would just then kind you're the know carries Residential kind that's the during talk the And built demand? of you into be gear general, see 'XX pandemic in

Timothy FitzGerald

Yes.

of So backlog We're production think that's certainly, and smart mid- backlog into appropriate mean we into adjusting particularly capacity. And should be way, certainly, to to thinking employee about will growing QX. what do levels long-term we're carry that trying a carry we I also safety increasing QX. kind demand. a But in I to a

through XX% of not terms top do period good but for went going order -- unique is time. Certainly, there's like feel growth of a In incoming projecting obviously, we're a dynamics of dynamics pretty the what period. because be, But we we're be backdrop. to immediate the a at to line we long going

So coming market stronger. we mean, year, the I That into the returned. has housing saw

beyond a of area I of work on the in new a lot team product years. kind of a done there absent invested innovations, the year. an of probably mean, us the demand some It's being dynamics sales think home While lot it I for designs, at the just lot that we've longer-term well I mean trends done there maybe was have mentioned comments, in a built products. for what job. there's I elements exciting as recede that, a can do of and seen in throughout pent-up we've platform, months, would last in we've new say, in will bode in And has right? but our of well next number that are few exciting I been that that really even great we

hard were to things long job. done has numbers. the And of team time a our also that to going kind on that I share were pre-COVID to run a those a And bolster have channel gain about little service the market and that Our the partners. next been maybe confidence gives good we've working sustainable a kind going also longer feel we think did as And of we bit we for phenomenal few expand over years. market

we've everybody XX% I our say, which as well. double-digit combined in during and knows, We've think And up even for that's would well, we're that I really tools going us investing last we also I well be going Dallas for we look, as I showroom do Residential. sales for been California. I showrooms forever. investing not mean Foodservice market. up again, processes opened as think to think Commercial COVID. But So mean growth as And for about is showroom is are well. And I in both think to think I as a opening exciting as Southern period

Bryan Mittelman

I'd add to Tim everything I that. agree with said.

us and the backing innovations I that then sets point light acquisitions Tim's the job for supporting apart. product kitchens, durability of leadership about were And on channel as up cooking, homes and it their folks creating off that's buyer other just And up design, really into and acquisition, then done going done for create after set emphasize really and new Brava thing And we need the you and all design as an confidence shows AGA. technology. attract and like this to the products, connectivity, and sales these service in confidence. is It said, looking brands we've just the sale. excellent people The at new with it support does after looking are products. Viking the And wave the And technology. that have with Residential kitchens, and the COVID, then outdoor new it

Todd Brooks

Thank you. Great.

Operator

from next the will Our of from question line John come Joyner BMO.

is now Your line open.

John Joyner

done. well Bonjour,

to other are there declines. your And in internally working kind ahead, your free this each reductions sharp cash in face So more put comfortable been emphasis managing capital of particularly the inventory the year, volume far levels of of cash with flow first, But you I capital? and has segments? working so looking inventory up so in release impressive are tied you on -- quite know that opportunities

Bryan Mittelman

Yes.

and your work are such. it's I certainly look say, terms AR to our up DSO in in to So part and in second the be done AT more taking that that other And priority think is I free of list I'd at much of AP, good inventory. taken and be know actions question, Our right? to there don't shape. areas to monetizing on [ph] don't near-term there's

by seeing in a residential vary segment. inventory, it lot tremendous on Obviously, So of right does we're successes now.

inventory we'd at So end where are levels our like. low certainly the of there

see that we kind term. Food Given much of up flows long long in of are of ebbs some likely delivery short Processing the to them as current too go this. through in projects. time, demand There, isn't and has come all stable been levels, and orders

that where opportunity. us is still there then So leaves with Commercial,

the Now term, the done we given pace. think modest there's in are proud of short what we've volume at But certainly I challenges. additional opportunities a

Timothy FitzGerald

Yes.

would add step one it just Let I further. me to take that.

and and Commercial in the I and that think what Residential Processing. both opportunities is Bryan exist Food about talking

achievable chain six I strategically sets the and for in define goals we through and as time at think purchasing Sunday it XXX advantage and all divisions. the supply And I'm we've because understands leadership. business, Middleby. ago very supply chain he world And to talk aggressive are very around Saturday, and some the restructured that of XXX, the X, then people excellence proud team, operations and to in inventory months Monday, Bryan, purchasing would and every of a across period people and that say, taking operations. levels short I

only and continue Bryan's me to a but hear I lower the because team done voice, we're to But people the and to there's proud, on can more. couldn't an in purchasing cost, work the he's engineers You it. team, in more the going call, And way. operational lot lower be holding accountable of and to we've this know achievements inventory the I on leaders to the aggressive not members achieving

Unidentified Company Representative

we pretty ensure at inventory can the of focus supply that daily, It's had our been deliver sustaining major our operation team cost the really of but that all up really nature has our customers done and mean thing. have the only phenomenal I one business operations. team has to make sure add been chain. job the about talked we reduction, because going other just disruption I'd supply really important obviously not mean I critically after a not that global impressive kind hourly, times. chain, that, the not around a are of that's for -- given world and been operations and and to that's if

Bryan Mittelman

point, Yes, one priority. to of maintained are as this thanks shutdowns, a that's customer's And holding Tim. to leaders, of we rolling perspective, and our a team Especially we do great the customers, our competitors supply safety a didn't that. lot from workplace doing

customer. we have we customer due to Second our that, never to and lack supply. said ever We to never a of never, a operations fail shut failed down yet

team our great a that has and forward in recently guys. done these up Thanks so durability reliability in difference. And into because That's that seeing of sales job. a of some going showing way small to numbers the the corporation. And of that's now and you're made a

So it's point, great a Tim.

John Joyner

Okay. Excellent. I in. squeeze And could maybe one if more

Just sometime launch been will targeted to to others, anticipated quickly it Bluezone. mentioned But actually Biden I that though with at regard rid Bravas as COVID-related products, But solutions or there COVID COVID. And any than be or nonetheless, are realize new products seems internally? getting been you of you've demand stronger that soon. where has whether able you QualServs

Timothy FitzGerald

have can as sanitizer that QualServ, the actually which hand hand of I and help distributing is in were think washing mean, I and them. cleaning things interested mean, customers, So thought in really mentioned, a think mean about keenly you supplies. we're or we stations, help shields, I team, all and producing So et itself I just plexiglass cetera., I could we, hand you restaurant sanitation dispensers, how we different right? our as mentioned

whole technology we we we're here. Bluezone help because is out UV came that masks. critically room through very with do going sanitize that to KNXX be next So that a But the Brava think we've certainly, we've also done focused were on we one indoor is lot, but products. a higher important go excited working even dining about, safety kind year to as really of oven the

these it's going I would some not of our we're online. want to part I do a our part. meaningful certainly, say mean so We of tell you revenue. to stage. came And things at the I'm early just

think revenue the be it we I the as meaningful could a case in of of Bluezone, go part forward.

those So all one that. technologies, think this. would stages But and things I I of could we're pretty kind excited on of the that's say game-changing that early about be of we most one of think

Bryan Mittelman

agility Yes. think the I of Tim, company. it shows our

the or for three over aircraft in teams. Thanks to We've XX an it's Najib think organization, within then hand appliances, case in ago. our technology. refrigeration years then produced his time, Korey U.S. through was their technology, had teams. connect Army It's Institute our It's I differentiated. sinks reapplied on and those in our usable a installed. long my the sanitizers after first for Achievement his amazing -- winner and and It's Australia, proven you customer It's days, of and around XX It's to carrier. we in Bluezone our Culinary The then sale through months an to And technology every years foodservice. true. residential, ability installing and had into Award. Europe, so channel inside have U.S. a to it's amazing going QualServ. and big installed bolt the U.S. And a years. a All personal through a achieved the days, to using America. years. And internationally XX with we're It's four it are steel furniture, partners. hand brought it team a that team and technology. we proven been product those we to And mind. in and tried that in support It's in campuses it Bluezone is It's been it did

John Joyner

Appreciate Okay. Excellent. you, again. Thank the time.

Operator

come will Jefferies. Saree question is next Our now line of line open. The Boroditsky the from from

Saree Boroditsky

morning congratulations Good and quarter. on the

Timothy FitzGerald

ahead. Go

Saree Boroditsky

Okay, sorry.

backlog mix And what seeing on So bakery? I of on a protein backdrop, processing. versus color provide you orders, more some you including volatile Could just you're cited in solid there? what's order up basis, year-over-year the food but the think,

Timothy FitzGerald

the as we this some but as nicely and numbers past, was the third I've again, came again, it's through around. But - nominally point versus fulfillment, jump or the is where backlog as demand rebounded areas bakery size it. point cancellations third, year and business. our strong, will little had you more it the currently. also In of feeling third though, That's larger it's as a funnel protein But been given part can started noted those two of middle have see is of I down heavier as is there's we year. drivers And to XX-XX that's a bit behind of two this protein it Yes. - bit feeling certainly well limited, said that. good. seeing orders, down probably I disruption kind one Certainly, getting year the of bit the above little the Started the become a at it part at said, little than protein.

Saree Boroditsky

the Great. of with with conversion. seeing you your about you're on opportunities, the talk in And obviously that Are in pipeline. given what foodservice? might Could think, leverage seeing more be stress you some niche have you the the M&A then just flexibility, I more players under commercial

Timothy FitzGerald

most areas QX Things of we as obviously of But a always little financing, there critical really area we initiatives. are the mean is bit technology because we that not the are are would be to we're be through time focused robust lot we started the distress. pipeline. there. on well. really as hibernated spending have period. went -- is things financial a I since think that a some kind on So of that what say Really active I may in we of out certainly, things driving

to you, development. similar So business of pre-COVID but -- had that in mean, I activities kind back of terms our I could we're tell we certainly,

Saree Boroditsky

for taking my Thanks Okay. question.

Timothy FitzGerald

Thanks, Saree.

Operator

now from from Our next of will question Hammond the line The KeyBanc. is Jeff [Operator Instructions] line open. come

Jeff Hammond

Good Hey. morning, guys.\

Timothy FitzGerald

Good morning, Jeff.

Jeff Hammond

were I good. to orders. think your They want I and Mig on recount surprisingly

Timothy FitzGerald

We No, it. we - of standing them. behind I'm every one counted

Jeff Hammond

October, because couple past delayed try back? more but that is coming you share some plan Just builds to rollouts bit then for is of focus and new more? we too kind -- some stuff getting, that to was of Or take actual and now on see the struggling from I starting the and don't general, months in food, marketplace of you're are this want customers are on of the go little and other winners if over maybe look a these these in much on commercial just COVID of to

Timothy FitzGerald

spending some them consumers period September, take that again, do market where the things of confidence So now. have in they as cases, right? And I frankly, to would those in conditions that and kind with dollar where of, the the So say advantage moving customers were are October programs forward. current they're came in allow pre-existing intersect COVID,

what really kind it's of we're post-COVID is as seeing So new activities their been operations. rethinking now they're have that

that So year. evolves there's see which building, move how kind of a into we'll next we pipeline when new

Jeff Hammond

Okay. carefully And your there. you period first I up -- then we the just see growth backlog? production on get see into treading and Res levels know where do the Kitchen, do do you're of kind half get Like a revenue you catch-up kind of kind of we playing out Or XXs some just how catch as into up of this here? the we

Timothy FitzGerald

year. mean backlog as to order a year. are as affect half Yes. even the they're evolve seeing the I some implications COVID to mean, well, of this well. in we clearly, is operations of well, be know into how going business And the don't bringing what we which large as our exit trends pretty I can as we're don't forget, and is going U.K. of in

we about right thinking we'll of which our for of lot we're balancing what do is how balancing the with cadence a the set safety. So operations, kind -- doing that with orders

of beginning I I Yes, be may the so XX% mean, top projecting. think is world's it's we now, line orders a But And off. and going possible, right growth? still And highly absolutely the that's a bit look, see QX can given uncertain don't we're what where into year.

Jeff Hammond

just Okay. interest on one final And expense.

quarter, your be I the that kind out, is out something guess, but back forward? of look back impact? to think mean kind about convert run going to get to what's to at report convert impact rate And fair I rate? you'll run if a whether higher, true higher we this we So of going a

Timothy FitzGerald

the million. right. slight Yes, -- mean almost so out There be will a $X take I uptick. I would

there of You through a the non-cash and the with reset that So challenged midway was in kind quarter by some our rates few of also factors, such QX right? then and got amendment.

the result a period is rate for next first the just the through two above pulling that the for number call quarters, out set grid elevated I'd So given takes how bit of us the covenant it probably tends non-cash three little to year. what of next half

little capital entirely reflective kind still But again, full So of current the yes, be, of a lower. bit we'll structure. wasn't quarter the

Jeff Hammond

Okay, perfect. Thanks.

Operator

Our Blair. the of come line De is The William line next open. will Larry now question from Maria from

Larry De Maria

pretty it order Good It in stay Thanks. are that seems morning, included pushed than wrong. little good, But minus I'm want if million my where includes and what print. a I obviously they're other October bit industry considering Because rollouts? rollouts. always seeing. firm is the less the out. companies usually have $X this and everybody. to they're But me we correct understanding Obviously,

And I quarters -- the are would pulling orders orders So that this in the subsequent is, would would what that included rollouts? question them? we be forward? we're some we guess potentially exclude And then if be imply have the always did finally, we

Timothy FitzGerald

Okay.

coming and going of probably we're -- to until kind these we about say in have So PO, start that quarter. order weren't So an I we're it's But would were these there's we so the when estimating orders a talking right? second orders, not hey, not, to rollout period. reporting going be up this bifurcating we're

some shipments those half some QX, in So be a in going first in we the Timing of so schedule. year, have QX. next of have and maybe then we PO to production are a

of So into where it's I rate. kind to mean, order difficult think I sometimes that's read the

down back we if minus QX of not some Now you orders. out so been would the have

is look, General backdrop service well. still doing increase. the I was Pizza think market Now we're business seeing the improves.

again, I But those, feel it tell mean level don't of why to won't. to November probably QX, also, and same Bryan the would mean, the So good rates. -- And in you we be that of kind expect that rollouts at We -- show added all trends. about expect generally of wouldn't -- to October and December think up we I I the because timing we has hey, that incoming certainly, saying, the is

market to you of that about think that are conditions, you on, our you that's where backdrop investments customers, and about are focusing We feel about the term look at why right when you that I think positioned Middleby. organization. but for segments and good of a really think we - we're apply have of terms next bunch in we long the the just hitting into going string year technologies the So things whole current together quarters,

Larry De Maria

Okay.

I rollouts have the would... year. they that that months, in specifically, you those? of PO prints in They guess, So kind a those next be Or published, would prior order would -- month? you've is new

Bryan Mittelman

And Yes, when again, is this I we've about talked then it pre-selling reporting before, is we an you, customer order, this how processes mean, for been practices about funnel looking PO for activity. to -- in things a consistent a here, call or I'll our and is I've get right? the

months. maybe mean, about order, So by the working this I it talking an something and is months been becomes time we've that for or many

the but risks, kinds And And America these what mean as it said to really better it October spend, adopting happy was, risk than did what firm. going technologies. was live our some we performance are us in maybe haven't shows certainly We our we our of is deciding was, technology. world so yet. on well all believe a And adoption we in of start with for it. They're that feel the deliver right, we're that QX, really I quite right? we especially spending North we that this good shows low. certainly segments of It been excited of away overall rate which in of customer is

is thing a tail this view with to all So it it, excitedly the good but very we has those reasons. for right,

Larry De Maria

then cuts. doing And I cutting think EBITDA us into some run temporary actions furloughs, more year which next helped obviously, Okay. the permanent maybe front? year give savings the permanent sense rate to the some had Thanks. you're before, you've cutting, general cost from absolute taken cost and you relates I this on Can a cost it you as know of just

Bryan Mittelman

took $X benefit. it -- I restructuring say I or quote million we drives of of Yes. million $XX and mean so did

so And where -- those or actions for right, top a and the number. weren't question, that was have. have mostly much we to the expense waiting of people on contributing because kind I savings numbers that's we is of already very been of are areas so And numbers really in our were lot the on we the that have, took in furloughed,

margins variable into of some with So in saying what to is I think a nature. ties because it really I it was more COGS, hard of is be absolute about it, overall. It's it

So to I think floor. of we've EBITDA setting come the kind close

going down Now SG&A bring bit a floor. remind that of that have we -- QX your little think further think of shows costs as we you our our models, in levels now, at does as at costs. trade kind some right. But travel risk like the I are is about and Certainly, low you and

a some of perspective. should And volume on of factors that things So are COGS why are things a actually variable driven, the would bit. be leverage that be up goes more improving or SG&A from little

Larry De Maria

you Thank Okay. very much.

Operator

The of open. the from from is will Liptak today last from come Walter Our Seaport. now line question line

Walter Liptak

guys. morning, Good thanks. Hey,

Timothy FitzGerald

Morning.

Walter Liptak

some want it seems ask, orders. trend of ghost I in the to money behind The it's now. to kitchens like I relation guess, investment got October

partly kitchens really that? of getting an Are kind category. think you it's should emerging Are orders? kitchens ghost So kitchens? place How starting or about full we to

Timothy FitzGerald

So of a trends. emerging lot there's

that We're of industry yes, there. are out say out players. think models ghost only would I kitchens, not Certainly, and dozen of can with engaged there. new are you kind some dollars So various several

see are are not on is worked are but I business dozens revenues Others And some our on. new area think today, business, say, going doubt. Some no It's that very moving some overall initiatives. We've it there's of that gotten we've to customer we it's still there's them planning. we of meaningful would to models. forward early. an opportunities

kitchens we whether ventless, they're about they're be be data have, -- be So that do the going platform. to to mechanical whether automation Kitchen-type we IoT solutions again, are with right, footprint. ghost about about thinking and in different. going it's throughput Open In capturing of the going to thinking And or customer They're because how in think that's out there. thinking they that engage

et cetera. delivery So systems,

large So we're potentially not a as our next going these well come think growth overall that rates. do will models a really be part we but of think it's business, on. it will it lot year, We impact but of new to -- positioned

that they're and business doing you there anytime emerging. business together that's is. putting of start-ups, mean plans, as during But I got well So COVID. think I the hard they we're period and Because trajectory think new proving see something they're We're engaged what that do out engaged about. pretty to a also come models, that certainly, actively business with, we'll models are and it's

Unidentified Company Representative

is Yes. would with I insignificant, pretty agree I say as everything said. it Tim -- that

-- just to they've from technology, three think, is and total tracking and and kitchens got at connectivity of ventless we're in dark our up think competitive X:X them, Open I us are in perspective, a Kitchen. a many I very kitchens. much. versus units show while think which, -- clearly And it And a The chance kitchens. competitors it's so I are insignificant installed talking or about about how -- I from ghost

So It of couple tiny. strategically kitchens important -- believe next restaurant but in do the ghost concept of and dark for I is over the it's years. teeny still kitchens operator. the

Walter Liptak

Okay. Bryan, that. then, one you. for Great. Thanks And for

wonder your bit. I if going bit inefficiencies? And Residential, outlook the it be a that? just would I the little about the or margin you comments and a you margin Is in the think being in mix the down lower? about expansion little -- talk could the - quarter Why about talked fourth

Bryan Mittelman

Yes.

somewhat really it's are a knowing through. bit little of coming what products mix it So is of -- and

levels production increasing some standpoint, much spending from back and as of on costs, people And is a it being some brought right inefficiency not now. but

as opposed the levels offset could that's be bit do together. it, opportunity a called I hopefully, in too more and maybe how definitive we a to of volumes that, volumes -- kind little come a bringing and have know we're bit I from may And costs. as I'll where So right? But conservative months know little couple here back revenue of

And better about lot are do keep improvements being a industry-leading in of being we're cash to And And for look that bit again, some -- here. But plenty improvement about we and a about mix. our bit I we others. some the everything at in in the businesses us decreases little that our continue all opportunities to margin I'm again, past, little with to while day-to-day the of But how market, customers of expand in that or of technology, follows very next to about fund was as somewhat on. And not from And of proud in getting overall acquired work as hidden a trying relatively us kind we the flows and digging take and as us markets driving little continue view not then our hiccup look investments costs there's dramatic again, looking year. this. track mix evaluating more operational we're unfortunately, on track long-term So Mig trends, coming at to upon a earlier, and the at of have businesses, potential it able current all making performing it's pricing terms a that bit businesses. these what talked talking doing margins. what's I'm margin we're as at the those than at at recently off bump. look improvement of

term medium on and near term thoughts margins. on the So my kind that's of the

Timothy FitzGerald

just highlight And period to year, maybe mean where next that few to to his this through -- -- Yes. in be quarter. I of that's We we had. in mentioned need initiatives a need kind really Bryan even not things years. that third investing to down, million important really we we continued commentary, three to in comments, because where the those in technology with we the $X next take highlighted be He think we did in and

are about we a So things critical talked Those automation. things that lot are like for controls. Obviously, us. IoT,

that technology are engage really to we're -- things investments as the we those continue showrooms are market higher sales. showrooms. mean different, on things I those important to I we're products a at an really with with the things engage marketing committed them, marketing our making sales the up well end extent customers. really have engaging we as that of it's with quarter, to we second some that the they the coming but so may requires to to And that have as are pretty I around mean approaching and important in open those I I to move those and types them users all. how mean, are to bit really that initiatives. ROI investment in in pushed slowed and think back and areas up mentioned little that the mean

Walter Liptak

Okay. Thank you. it. Got

Operator

you. Thank call the over had is like in closing remarks. That queue. all any back to the questions of we I'd to management the for turn

Timothy FitzGerald

you. to just joining everybody for on like next Thank to speaking thank everybody I'd call. No, And us with today's look forward we quarter.

Operator

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

now may You disconnect.

The Middleby Corporation (MIDD) 5 Nov 202020 Q3 Earnings call transcript