John Bean Technologies(JBT) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 2024, revenue was $402 million, a decline of 6% year-over-year, impacted by a $4 million negative effect from foreign exchange translation and a $15 million revenue shift to Q3 [4][5] - Gross profit margin improved to 35.6%, up 120 basis points year-over-year [5] - Adjusted EBITDA was $64 million, down 11% year-over-year, but increased 11% sequentially, with an adjusted EBITDA margin expansion of 120 basis points [5] - Adjusted EPS for Q2 was $1.05 compared to $0.97 in the prior year, benefiting from a $9 million improvement in net interest expense [5][6] - Full year guidance for organic revenue growth was updated to 3% to 5% [6][8] Business Line Data and Key Metrics Changes - The food technology segment saw strong orders, marking the second-best quarterly performance in its history with orders of $437 million, a 13% sequential improvement [3][9] - The automated material handling business (AGV) rebounded significantly, contributing positively to revenue growth expectations [3][7] - AGV is expected to contribute 2% to total revenue growth for 2024, an increase from previous guidance [7] Market Data and Key Metrics Changes - North American poultry producers showed initial recovery in equipment demand, with expectations for further improvement in Q3 [3][9] - Demand in Europe remained stable, while the Middle East showed strong demand; however, the Asia Pacific region experienced disappointing results due to elongated order conversion cycles [10] - South America has a promising pipeline for future orders [10] Company Strategy and Development Direction - The company is focusing on sustainability, enhancing its product offerings to improve customers' environmental footprints and operational performance [11][12] - The proposed merger with Marel is expected to create significant revenue and cost synergies, with anticipated revenue synergies of over $75 million and cost synergies exceeding $125 million by the end of the third year post-close [12][13] - The company is actively engaged in regulatory processes for the merger and has initiated operational integration planning [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovering poultry market demand and anticipated strong order rates in Q3 [3][10] - The company expects double-digit year-over-year revenue growth in each quarter of the back half of 2024, with improving margins [8][10] - There is confidence in achieving a free cash flow conversion rate exceeding 100% as backlog converts to revenue [6] Other Important Information - The company published its fourth annual Environmental, Social & Governance report, emphasizing its commitment to sustainability [11] - The company is calculating its Scope 3 emissions to identify opportunities for reducing its carbon footprint [12] Q&A Session Summary Question: Impact of system issues on Q2 revenue - Management acknowledged a $15 million revenue impact from system upgrade issues and customer-related delays, with expectations to recover most of this in Q3 [17][19] Question: Backlog progression and future implications - Management indicated that while backlog depletion is expected due to high revenue, they anticipate good orders in the back half of the year, particularly in the North American poultry market [21][22] Question: Poultry market volume relative to pre-COVID levels - Management noted that North American poultry demand is still 15% to 20% below pre-COVID levels, indicating room for growth [23] Question: Margin expectations for the back half of the year - Management confirmed expectations for improved margins year-over-year in both Q3 and Q4, driven by higher volume and improved manufacturing efficiency [25][26] Question: Update on regulatory filings related to Marel - Management clarified that regulatory submissions vary by jurisdiction, with some being formal and others still in advocacy stages [27] Question: Investor outreach efforts regarding Marel - Management reported successful investor outreach efforts, including meetings with major shareholders and a strong reception from retail investors [29] Question: Progression of poultry orders through the quarter - Management indicated that poultry orders started slow but gained momentum throughout Q2, with expectations for continued improvement in Q3 [30][31]