John Bean Technologies(JBT)2023-08-02 19:40Financial Data and Key Metrics - Revenue from continuing operations increased 8 6% YoY in Q2 2023, at the high-end of previous guidance for the FoodTech business [4] - Adjusted EBITDA margins from FoodTech operations reached 19 7%, exceeding previous guidance of 18% to 18 75% [5] - Free cash flow from continuing operations was 11 million to 4 million [7] - Adjusted EPS for 2023 is forecasted at 4 05, an increase from the previous implied guidance of 3 65 [8] Business Line Data and Key Metrics - The company achieved an attractive valuation for AeroTech, positioning it with a strong balance sheet to support strategic M&A [3] - The sale of AeroTech resulted in net cash proceeds of approximately 300 million of higher-cost variable rate debt [26] - The company expects to generate annualized run-rate savings of 20 million by mid-2024 from its restructuring program [7] Market Data and Key Metrics - Demand for meat and poultry end markets remains under pressure, but significant orders were booked from the pharmaceutical and nutraceutical industries [29] - The company sees opportunities to expand its presence in end markets such as snack foods, bakery, confectionery, and sustainable food and beverage alternatives [31] - The digital solution, OmniBlu, continues to gain traction, with additional customer contracts and improved system yield and uptime [13] Company Strategy and Industry Competition - The company's priority is to optimize opportunities and manage a smooth transition to a pure-play food and beverage technology company [10] - The company plans to deploy capital to acquire businesses that complement existing operations and expand end markets [10] - The company will focus on customers' needs for automation, sustainability, and efficiency in potential acquisition candidates [11] Management Commentary on Operating Environment and Future Outlook - The company expects a slight sequential decline in revenue and adjusted EBITDA in Q3 due to seasonal declines and softer backlog in meat and poultry markets [8] - The company is confident that being part of Oshkosh provides the best means to capitalize on AeroTech's market leadership and strong demand environment [14] - The company maintains a highly disciplined M&A process with firm criteria for strategic fit and financial hurdle rates [30] Other Important Information - The company's net debt to adjusted EBITDA ratio from continuing operations would have been below 1x as of June 30, on a pro forma basis considering the AeroTech sale [89] - The company is increasing the scope of its restructuring program to streamline its cost structure and transition to a pure-play food and beverage technology company [89] Q&A Session Summary Question: How does the mix in orders and backlog impact revenue recognition and margins? - The backlog is diverse and supportive of growth, with strength in nutraceutical and pharma markets, but tepid demand in poultry and pork due to higher costs and lower capital availability [17] Question: What drove the strong incremental margins in Q2? - Margins benefited from higher recurring revenue, proactive cost management, and pricing actions implemented in the previous year [37][60] Question: What is the outlook for poultry market demand? - Q2 was likely the bottom for poultry market economics, with some signs of improvement expected in Q4, but investment remains cautious until profitability improves [58] Question: What is the normalized incremental EBITDA margin outlook? - Incremental margins for food operations are expected to be in the high 20% to low 30% range, with consolidated margins likely in the mid to high 20s, including corporate costs [62][63] Question: How is the OmniBlu digital solution performing? - OmniBlu is gaining traction, with customer contracts increasing and providing meaningful efficiency gains, such as an 8% to 10% increase in capacity opportunity in a freezer installation case study [46][69] Question: What is the M&A strategy and focus? - The company is focusing on bolt-on technologies and solutions that complement existing offerings, with a disciplined approach to strategic fit and financial hurdle rates [30][31]