Q4 2020 John Bean Technologies Corp Earnings Call
Okay.
Yeah.
Good morning, and welcome to JBT Corporation's fourth quarter, and full year 'twenty and 'twenty earnings Conference call. My name is Denise and I will be your conference operator today.
At this time all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session John.
Good question. During this time press star followed by one on your telephone keypad to withdraw your question press the pound key I will now turn the call over to Jbt's, Vice President of Investor Relations Megan Rattigan to begin today's conference.
Thank you Denise good morning, everyone and welcome to our fourth quarter and full year, 'twenty and 'twenty conference call.
With me on the call is our Chief Executive Officer, Brian deck, and our Chief Financial Officer, Matt Meister.
On today's call. We will use forward looking statements that are subject to the safe Harbor language in yesterday's press release and 8-K filing.
Jbt's periodic SEC filings also contain information regarding risk factors that may have an impact on our results. These documents are available and the Investor Relations section of our website.
Also our discussion today includes references to certain non-GAAP measures a reconciliation of these measures to the most comparable GAAP measure can be found in the press release issued last night.
Now I'd like to turn the call over to Brian.
Yeah.
Thanks, Megan and good morning, everyone.
With the onset of COVID-19, and early 2020, Gbt's financial performance collect clearly fell short of the expectations, we set and during the year.
Yes, and I am proud of the way our entire company navigated the many challenges associated with the pandemic.
Operationally JBT, our customers' and suppliers' experience.
It's a difficult environment.
Which has continued into the first quarter as we all deal with the inefficiencies related to Covid protocols and higher absenteeism.
Fortunately on the commercial side JBT accelerated the level of customer engagement as the year progressed as we all learned to manage through this difficult environment.
For the year JBT remains solidly profitable as we quickly adjusted our cost structure.
Our broad product line and enabled us to serve stronger segments of the market.
And our recurring revenue business provided vital stability.
Moreover, we ended the year on a positive note with excellent orders and exceptionally strong cash flow.
With that let me turn the call over to Matt and let him provide analysis of our fourth quarter performance and present guidance for 'twenty and 'twenty one.
Thank you Brian.
While our year end call normally focuses on full year results.
Given the significant impact of Covid on our markets and year over year comparisons, we will concentrate on sequential trends and the fourth quarter and how that position JBT for a better 2021.
And the fourth quarter of 2020 food Tech sequential revenue was up 6%.
Rightly above our high end of our forecasted range of 3% to five per cent.
We saw sequential growth and both recurring and equipment revenue of approximately 5% and 8% respectively.
<unk> operating margins of 13, 4% and adjusted EBITDA margins of 18, 7% were in line with our forecast.
Aerotech revenue of 118 million and exceeded our expectations and the quarter with higher sales of passenger boarding bridges.
The additional volume helped aerotech exceeded guidance with operating margins of 10, 7% and adjusted EBITDA margins of 12%.
Corporate expense was $11 3 million, which included $2 2 million of management succession, and M&A related costs was better than our forecast due to lower charges related to incentive compensation and a foreign exchange gain.
Separately restructuring costs and the quarter of approximately $1 million.
And interest expenses favorable in the quarter and strong cash flow has reduced our debt balance.
For the fourth quarter of 2020, JBT posted diluted earnings per share from continuing operations of <unk> 94.
Our adjusted EPS of $1 two.
Outperforming our guidance, primarily due to higher revenue along with lower corporate costs and interest expense.
Excellent fourth quarter free cash flow of $92 million was the result of continued proactive management of inventory purchases.
On favorable collections of customer deposits and accounts receivable.
For the full year free cash flow was 232 million, representing a conversion rate of more than 200%.
Such strong cash flow enabled us to continue to reduce net debt by $70 million and the fourth quarter and $180 million for the full year.
Total liquidity stood at $450 million at year end with a bank leverage ratio of two two times net debt to EBITDA.
We continue to be encouraged by order momentum in the fourth quarter food.
Food Tech orders of $364 million increased 17% sequentially.
And the book to Bill of 113.
Aerotech orders were up 16% sequentially with a book to Bill of one point of weight.
JBT capitalize on a pandemic driven driven cyclical trends of increased eat at home demand and a recovery and quick service restaurants, and food processors, who serve these markets added capacity.
Geographically, both North America, and Asia continued the trend of improving customer demand that we experienced in the third quarter of 2020.
Europe, which lagged and the third quarter started to show recovery and customer investment as it is Latin America.
At Aerotech, we continued to see demand for fixed equipment and airport infrastructure improvement projects that offset the lack of equipment orders from commercial airlines.
While we entered 2021 with a high level of commercial activity and good momentum on orders and we will have to manage the evolving challenges from demand driven commodity inflation and supply chain inefficiencies associated with the pandemic.
With all that in mind, we expect the seasonally slower first quarter 2021 revenue to be between $400 million to $425 million.
Which consists of $300 million to $315 million, and food tech and $100 million to $110 million and aerotech.
Our first quarter 2021 guidance for operating margins, our 13% to 13, 5% at Flotek.
And with adjusted EBITDA margins of 18, and a quarter to 18 and three quarters per cent.
Aerotech operating margins are forecasted at 7% and seven 5%.
With adjusted EBITDA margins of eight to eight 5%.
Corporate costs for the quarter are expected to be $12 million to $13 million, not including approximately $2 million to $3 million and M&A and restructuring costs.
Our first quarter 'twenty and 'twenty one earnings per share guidance is <unk> 65 to 75 on a GAAP basis and.
And 70 to 80 as adjusted.
Now looking to the full year 2021.
We anticipate total JBT revenue to grow 4% to 7% versus 2020.
And that includes growth of 5% to 8% and food Tech.
Zero to 5% and Aerotech and.
And a small translation benefit of approximately 1%.
We expect adjusted EBITDA margins to expand to 19, 520% at food Tech, while remaining and the 12 to 12, 5% range at Aerotech.
We are forecasting corporate expense of roughly two 7% of revenue.
Depreciation and amortization expense of approximately $75 million.
Interest expense of 13% to 14 million and and annual tax rate of 25%.
Jim Keyes guidance for full year 2021 diluted earnings per share is $4 10 to $4 35 on a GAAP basis.
Converts to net income of $131 million to $140 million.
On an adjusted basis, the forecast is $4 and $34 55 per share.
We are forecasting adjusted EBITDA of 270 to 285 million.
This represents a year over year gain of 7% at the midpoint.
In terms of free cash flow, we expect to achieve a conversion rate of 90% to 100% and 2021 free.
Free cash flow performance will reflect some expansion of our balance sheet and support of volume growth and.
The higher capex spend of approximately $45 million per year.
With that let me turn the call back to Brian.
Thank you.
While Matt talked about the shorter term impacts from this pandemic driven cycle.
And I'm going to focus on the strength of Jbt's offering and the longer term secular trends, which have been which we have been investing in and are well positioned to capitalize on and both food Tech and aerotech.
First and foremost JBT food tech enjoys a very broad participation and that food end markets and.
<unk> eight.
Ada drink something today, there is a very good chance that JBT technology played a critical part and its preparation.
That gives us an advantaged position to meet evolving trends and consumer demand and food consumption and wherever they go.
Let me mentioned a few examples of very attractive fast growing categories.
As you know plant based and cultured meat represents a graph and rapid growth market.
JBT is expanding and some panic.
And as penetration of that market portion of the equipment and array of cooking coding and freezing technologies high pressure preservation systems, mixing and blending solutions tray sealing and clipper applications.
We even provide equipment for bio reactors used per cultured meat products.
Jbt's processing packaging and preservation solutions are also going into the production of fast growing categories are functional and plant based beverages, such as oat and coconut milks energy drinks tea and coffee base strength alcohol infused beverages and.
Protein based beverages.
And our opportunities to go beyond the food for human consumption, we're actively selling the same solutions into the pet food market with rising demand for premium wet and fresh food.
In fact, one of our largest categories of orders and the fourth quarter was for pet food applications.
And JBT is tapping the high and the high growth Nutraceuticals market.
Such as products that improve digestive health and immune systems like pilot like probiotics.
JBT also plays and increasing ROE and the production of pharmaceuticals, particularly with recent trends towards onshoring of this production.
JBT fabricators vessels process modules clean in place systems, and high purity piping tanks and mixed systems that meet pharmaceutical and biotechnology grade requirements.
In addition to the secular trends and food consumption, such as meal convenience organics and clean labels. They.
<unk> strength.
Our capabilities and broader purpose really standout when it comes to sustainability.
JBT solutions reduced consumption of water and electricity and.
And provide environmentally friendly packaging maximize food yield minimize waste and preserve food and all of its forms to extend shelf life.
We see a real opportunity to do more working hand in hand with customers as part of our respective ESG journeys.
Beyond these specific and market opportunities and consumer trends JBT is satisfying customers accelerating demand for labor saving automation.
Customers come to JBT for automation solutions, because our intimate knowledge of food production processes and offerings that not only reduce labor, but at the same time enhanced yield and speed lower operating costs improve uptime, all in conjunction with global service and support.
This is our value proposition.
Further enhancing their proposition as iff's, our internet of things solution, which enhances which brings enhanced process monitoring and controls.
As we build intelligence into nearly every product across JBT.
This improves our products and services to customers by using ongoing field data from a large fleet and connected machines.
Bolstered by our strong liquidity and excellent cash flow, we're looking to deploy capital in 2021 and beyond as we evaluate strategic acquisitions and advance <unk> competitive position.
Is it technology oriented comprehensive solutions provider.
Switching to aerotech diversification of our end markets and muted the blow from the sharp decline and consumer air travel.
Despite the collapse of airline orders Aerotech was able to post low double digit margins in 2020.
And 2021, we expect to continue the solid performance from the infrastructure side and anticipate robust demand from the cargo market and the second half of the year.
On the military side, our advanced product portfolio and product development capabilities gives us an opportunity to compete for a number of upcoming programs that could yield further product diversification.
As with food Tech there are clear secular trends and air transport and automation and electrification.
Aerotech is well positioned to capitalize on.
We are particularly excited about aerotech auto deck docking technology that and.
Insurers the safe damage free docking of cargo loaders and boarding bridges to aircraft.
Our technology target and the store recognition sits JBT apart from the competition.
JBT is also supporting the need for and environmentally friendly airport ground.
Support operations and <unk>.
<unk> equipment.
And <unk> loaders and tow tractors.
As with food, we see the continued movement towards sustainability by the air transportation industry as a longer term opportunity for continued product development and customer engagement.
Yeah.
Overall, despite the massive pandemic driven disruptions and the global marketplace and 2020 JBT quickly adapted and ended the year with solid momentum entering 2021.
On a recurring revenue provided stability and our broad product lines, serving a wide range of end markets enabled us to meet that and shift in customer demand.
Most of all JBT success centers around our employees.
So I think building on our core value of commitment to safety and have taken significant action to protect our employees throughout the pandemic.
Speaking of core values, we have also heightened our commitment to a diverse equitable and inclusive workplace.
We believe our business is best served by our culture, and cultivating and respectful culture that values diverse perspectives.
We also know that our recruiting and development programs that enhance diversity and <unk>.
<unk> to tap the best available count.
Is that talent and commitment to everyone at JBT that deserves a wallet.
Sure well earned and thank you.
And they have enabled us to manage to extraordinary times and excel as a trusted partner to our essential food and air transport customers.
With that let's take your questions operator.
Yes.
Thank you to ask a question. Please press Star then the number one on your telephone keypad.
We'll pause for just a moment to compile the Q&A roster.
Your first question comes from Joel <unk> with BMO. Your line is open.
Well I'm not used to be and first.
I Wonder if you could talk a little bit about the mix that you guys have between your airport business on and commercial airlines inside of Aerotech.
Absolutely so.
It's changed a lot over the last year is as you might imagine it used to be something and the in terms of end markets. We're talking about now it used to be about 45% infrastructure, 40%.
On the airline side commercial airline side and the rest and military.
And and cargo.
Now that shift is more like 60, 65% on the infrastructure side about 25% on the.
On the commercial airline side, and then and a good and another 20% or so on the cargo and military.
And then any insights from the commercial guys about how much the interest there their business to whatever their components.
Components are wearing out and sort of building pent up demand for maybe 2023 and four as things start.
To get back towards more normal run rate.
Yes on the commercial on the commercial side certainly they are they are continuing to use the older equipment as much as they can before they invest in it.
And to see an uptick on the on the service and aftermarket which is good but I do think it will take some time on the commercial airlines to before this really started ordering and equipment.
It's not going to be 2021, we do expect at this point and the back half of 2022.
If the pace of recovery continues as we expect.
And and a good recovery in 2023.
In the meantime, the cargo market looks very strong for 2021 military looks very good and I mentioned, some some upcoming programs on the military side that won't affect our.
2021 revenue, but we're really well positioned us for 2022 2023 with.
And with the breadth and some of those those new programs that are coming out and they really speak to some of our strength on the on air and power on.
On the military jets, so some nice programs on with the U S Air Force.
And it's even a program with the Army and then some other.
And non U S friendly programs are coming to.
And to the marketplace.
But on the infrastructure side Thats been a real source of strength and 2020 and.
And it looks like and what's going to continue into 2021.
We did have some shifts.
A few of the commercial airlines shifting out some of their production, but we were able to quickly fill that those slots with with other demand. So we ended up beating our original targets on the on the infrastructure side out of our jetway business and.
And that demand continues into 'twenty and 'twenty one.
And it's obviously a little early for 2022.
But all signs on the longer term trends that we've talked about with that business.
With the pace of required investment.
Because of the average age of those of those bridges are really is encouraging is just a question and is.
And what does 2022, and 2023 look like but as we sit here today, it's quite strong and that was the source of it.
<unk> orders and the quarter.
We got some real nice airport.
Orders on the infrastructure side and in the fourth quarter. So.
And while it's going to take a while on the on the ground support side in the meantime, we've got some real stability on the infrastructure cargo and military side.
And great and then at the risk of taking up too much time, just one last question can you talk a little bit about your on 2021 free cash flow just sort of any ballpark and and acquisitions. You know your debt net debt to EBITDA is way back down again, and maybe any areas that seem particularly interesting from values.
Asian or availability or whatever way that you want to talk about thanks sure I'll have Matt on Matt talk a little bit about the free cash flow expectations, and I'll talk a little bit about acquisition.
Yes, so from a free cash flow perspective, Joel you know were looking at and <unk>.
Target of about 100%, maybe a little lower closer to 90% in 2021, just coming off such a good performance in 2020 as well as we expect the balance sheet to expand a little bit in 'twenty and 'twenty, one as volume comes back, especially on the food side.
As well.
We expect to get to more normalized level of Capex as we get back to investing and so.
Some programs to support the growth on the business side. So we think about a 100% is what we call entitlement.
And for JBT, and we've calculated that for each of the business units and thats sort of their targets as their entitlement for the year, which is basically just.
Operating income plus DNA and minus.
Some impacts for.
Capex historical Capex and some expansion on the balance sheet and so.
Businesses have their targets and their operating to those for 2021.
Right and exactly.
And in terms of leverage and acquisitions. So you're right. We're right about two times leverage were and are really good spot our desired leverage range remains.
Two to three times.
And we will be acquisitive for the next couple of years.
And I think we've got a real opportunity here in the marketplace I do think.
The market is there is there is opportunities out there.
And JBT is well positioned to do that throughout the pandemic and before as you know Joe we continue to cultivate and and really try to get the proprietary type deals as opposed to the broad auction type deals and as part of our pipeline.
So we've continued that I think we're well positioned so we could see adding some debt and leverage over the course of the next couple of years again, ideally staying within that two to three times.
But given the right opportunity I can certainly see it's growing well into the threes provided that provided that we have a path.
Back to that two to three time, it's within say 12 to 18 months.
But but that's generally how I think of it.
Okay. That's awesome. Thank you so much and I appreciate it okay. Thanks, John I appreciate it John appreciate it.
Your next question comes from Lawrence de Maria with William Blair. Your line is open.
Hi, Thanks.
Good morning, everybody.
Good morning.
You're on main competition as noted on the need for automation and digital solutions. You mentioned. This earlier, obviously you also with IHOP and so I'm just wondering if you're winning business yet because of digital specifically how competitive your op.
And your offering is and really where I'm going with this is we're looking at cyclical recovery.
After last year.
And I'm curious, how you're going to outgrow the market and if this is a big factor and that over the year.
And two three years et cetera.
Yes, Joel I do.
Automation is something we think a lot and it's a broad it's abroad.
Comment and it's it's about digital it's not just apps right. It's about the automation of our products themselves. It's about the digital tools that we use with our customers not just and.
Not just the <unk>, but also the engagement we have so we've invested a lot of time and money with the course of the year on and the engagement with the customer from a digital perspective in terms of how we interact with them.
We market to them.
Our ability to tap into and to the new customers and.
And then use some of those tools on the cross selling side as well so to me it's a.
Digital experience.
And I have some experience and automation and our products itself.
And we are seeing the orders coming in there was a good strength of automation on.
<unk>.
And the fourth quarter or not.
Not just the <unk> and <unk> and that.
You did on trend, but also discontinued automation.
Trend, but as I mentioned and it's all encompassing I do think we're well positioned we are on tap to invest a good amount of money and 2021 day on this particularly on the IHOP side as we expand.
Our platform on that so so it's something we continue and divested and I am I.
I'm very confident and pretty excited about the path that we're on particularly with Christina Pascoe, who we promoted.
Promoted into the executive team she really has some really excellent.
Currency in this area and really great thoughts and she has been really supportive and development and strategy in that regard.
Okay. Thank you and.
And the other is margins obviously.
And moving the right direction and you guys, especially last couple of years, it's been a really good job.
EBITDA margins higher.
And a lot of that's a result of restructuring. So the question is what's the how much of a benefit are we getting this year and restructuring from prior cost cutting and how much are we leaving on the table because we don't have the volume to where we want it to be to get all those benefits and in other words, what are we getting issue and what do we what can we get into next year into 2022.
Theoretically because.
So on and Mark will have more volume and it'll be easier to capture those cost cuts or are we capturing at all.
From a from a restructuring perspective in 2021, we expect on the food side somewhere around $4 million to $5 million and benefit and.
Another $1 million incrementally on the aerotech side.
For some of the programs that we announced.
And in late 2020.
And at the run rate for the food Tech program is probably in the $6 million to $7 million range and the full benefit on the Aerotech side is 2 million. So it's really just a function of the timing of when we can get.
The restructuring programs in place and get the costs out and get everything sort of moved to the new facilities and we're trying to again.
Reduce our footprint and some of our food businesses over in Europe.
Yeah, and just as a reminder.
Larry.
Originally when we looked at our 2020 guidance back this time last year before the pandemic hit.
And with the kind of I'll say the full benefit of the 2018 restructuring plan that was coming into play we are targeting about 20% for food Tech.
So that was kind of post restructuring.
We're guiding this year to 19.5% to 20%. So we're really well on the way to where we needed to be were about call. It let's say about 90% recovered from the pandemic in 'twenty and 'twenty one when you look at that.
The revenue profile compared to 2019, so and.
And when you consider some of the inflationary impacts that were we're battling I'm really happy and and please.
With the guidance, we're providing and.
And that high 19% range, given the challenges and the marketplace. We've continued to do an excellent job overall with our JBT operating system. We've got really good clarity on our productivity on a plant by plant level, we monitor this.
Very closely with the business unit Presidents, we are constant.
Sure.
And updates on each factory and the productivity levels that they are focused on it and if they see the volumes change they make the proper kick the proper actions.
And to there.
Other staffing levels and their hours and overtime et cetera. So we monitor it closely we're on a great path to where we thought we otherwise would have been on the food Tech side. So I'm really really pleased there on the aerotech side, obviously, it's going to be a longer term trend.
Had originally guided to about a 15% margin in 2020 again. This time last year, that's going to take a few years to get to a given given their volume activity.
But I'll say it again with the inflationary impact that we're seeing.
<unk> posted an increase in margin as we are with our guidance.
We're on a good path with aerotech too.
Okay. Thank you.
Brian Thank you.
Hugh.
Your next question comes from Allison <unk> with Wells Fargo. Your line is open.
Yeah.
Just wanted to go back to sea Tac and I would say access to customer sites is there a way to think about it you know has that hindered the growth rate. There near term is that starting to ease and I'm just trying to get a sense of is there at this level of pent up demand you know as.
Is that access improves that you could experience here as we move through the year.
Sure our access did improve and the and the fourth quarter.
But honestly it was more of a mindset access and then it was physical access and just some of the efforts on the digital marketing side and and digital engagement I think really improved and I do think there was some benefit and then we started to see and some pent up demand in the fourth quarter and hopefully that continues and the first quarter, it's still a.
Little bit early to tell obviously and the conditions certainly as we entered the first quarter.
And with Lockdowns et cetera.
And there were difficult that's starting to ease now.
Good so I'm very hopeful that those trends to continue but definitely we saw some easing of the mindset and the willingness to to.
To really invest so a little bit of pent up demand.
But some really generally speaking.
And some nice pipeline activity and.
And what was really pleasing to see.
And improved conversion rate on the on the <unk>.
Opportunities and the fourth quarter.
Thank you and then on you mentioned supply chain challenges and and that certainly and issued the past few quarters.
Are you starting to see that ease how should we think about that as we move through the year.
Anything that could maybe hold you up in terms of.
Organic growth initiatives there.
Right supply chain challenges.
We're very consistent and fourth quarter and as we entered the fourth quarter and they haven't totally started easing yet really the issue is the absenteeism that we saw at our and.
And our customers as well as our suppliers. So there was some slowdown obviously you know about the chip issues, just emblematic of things generally that really hasn't affected us so much but it's more emblematic of what's happening and the global markets. Obviously the situation with Brexit has also caused a couple of.
Weeks' delay at that board are two two and three or four week delays at the border.
And hopefully those will start to lighten up here.
So there are some challenges they're not over than that without and we should have overcome them and we've factored that all into our guidance and the margins and and the growth rates et cetera. So we've really tried to be thoughtful about all of these challenges and to embed them into the guidance that we've provided so and I really do hope, but and the back half of the year that those those abate.
And it significantly.
Perfect. Thank you.
Your next question comes from Matt O'brien with Robert W. Baird. Your line is open.
Thank you good morning, everyone.
Brian.
Hello, and maybe we can go back to your comments on raw material inflation.
And Im looking maybe to get a little more color here in terms of.
The headwind that you see at this point and for 2021.
I'd love. It if you were able to maybe quantify it for us in terms of dollars.
And then I'm also wondering how you're sort of planning on addressing that on.
Imagining some of this will have to come through and pricing but.
And I'm wondering how how flexible is your is your pricing and addressing any say incremental cost headwinds from from here if commodities continue to move the way they've been moving thus far.
Right.
I'll go on that gave us some nice color on the other specifics and then I'll give some color.
On.
On the pricing side, and particularly go ahead Matt.
Hi, Brian Yeah, and make this is Matt.
So for inflation, we obviously are very aware of and it's certainly something thats.
Clearly on our radar screen as we get into 'twenty and 'twenty, one as we're seeing <unk>.
Commodities increase.
Specifically.
And and steel and other metals, we have a pretty big component of our spend on steel on both food and aerotech as well as other materials, such as copper and aluminum that go into the components.
And that we put on our equipment as well as cell and the aftermarket and so our total.
Metal spend is somewhere in the range of $125 million to $130 million.
And without any mitigating actions in place, we would see a risk of close to $20 million to $30 million.
Inflation.
But our our procurement team is on top of it they've been they've been working on this for a few months now as they saw commodity increases start to rise a few months ago and they've been holding a number of conversations with each other as well as with our suppliers implementing what we can.
Call hold the line negotiations really pushing back on on inflationary increases and.
And especially in cases, where suppliers haven't provided.
<unk> and the past.
As well as they are continuing to evaluate alternatives to those suppliers.
And to get find high quality lower cost suppliers and best cost countries.
And as you alluded to.
We're working with our commercial teams to provide them with information on on commodities. So that they can look at where and when appropriate to try to pass some of that on to our customers.
And again, when it's appropriate book.
Brian said earlier, we have a lot of what we have all of this is baked into our forecast guidance.
And we're really confident and the actions that the.
On the procurement and the commercial teams have taken and are going to take going forward.
And then I'll give I'll give a little bit more color on that so as you might know.
<unk> invested quite significantly and the last few years and developing our strategic sourcing.
And our supply chain resources throughout JBT. So that has really really helped significantly in terms of positioning us and and really having a head start with our vendors.
And the information available to the commercial team in terms of where things are going as they consider pricing and their quotes and the food Tech side.
We certainly have more flexibility than the aerotech side and mainly because.
And a lot of these projects are.
Engineered order configured order so you've got good visibility into the.
The material spend that will be going into it and you can consider that it is not perfect. There usually some kind of a lag a quarter or so.
However, generally speaking they've got great visibility and the procurement team is ex having them look forward on that.
On the cost as opposed to look at what's in the system is Tobias price paid so.
And so we spent a lot of time with those.
Analytics and arming the commercial teams appropriately on the aerotech side, particularly on the ground support side, it's a tougher market, obviously right now a little more competitive.
So as a result of that we were we were less aggressive on the margin expansion for aerotech. This year. Despite some other restructuring savings.
In two and a little bit revenue growth coming into their business. So we really try to capture what we think we can manage to.
No that's great color and Matt just to make sure that and I understand this correctly. The 125 to 130 million metal spend is that for the company as a whole or just for food Tech company as a whole.
The company as a whole.
And I see Okay, and then as far as the $20 million to $30 million of inflation.
Is it that you're kind of managing this number down or is it that this full amount is already kind of baked into your into your guidance and look I'm asking the question because.
Go ahead go ahead.
No. Please please finished I was going to say I'm trying to get on what Larry was getting at earlier in terms of thinking about incremental margins beyond 2021, when hopefully maybe at a point and time some of these headwinds.
Commodity headwinds moderate.
So that's why I'm looking for just clarification.
Right so.
And as Matt said, it is 125 130 minute across both businesses and the $20 million to $30 million. That's the number if we if we didn't manage it what could hit our numbers. So instead we're.
We're managing that down and the amount that we've managed it down both between the commercial side.
And the supply chain side is what's reflected in our guidance. So no I don't expect to hit to see $20 million to $30 million.
Net impact we're going to get down.
Got it and then and then.
They go on.
And forward is there an opportunity to continue the margin expansion on the supply chain side. There is if that's kind of where you're going.
John.
That's right so and thank you for that my final question.
On.
On food Tech and it's more along the lines of revenue mix right. I mean, if we're looking at 2020 I think about 44% of your your revenue was recurring revenue and that was up quite a bit relative to 2019.
And and I understand that that sort of was a pandemic driven mix shift, but I'm wondering as you think about 2021 as far as your outlook is concerned do you essentially embed a reversal back to a more normalized kind of level closer to 40% of revenue revenue.
And B and recurring and if so does that have an impact from a mix perspective in terms of your margin guidance. Thank you.
Yes, the short answer is yes.
So and we look at it food versus Aero So at the food side, we're actually and the high Forty's.
For 2021, and and Aerotech in the thirties.
About 30 or 40%.
And and.
And we do see some reversion of the mix in 2021, two or more.
And more equipment mix.
That said, it's not going to go from call it high <unk> to low <unk> more like.
High <unk> to mid to high Forty's on on the aftermarket side.
Cause the aftermarket side continues to be and and the rest of the recurring revenue streams continue to be pretty strong.
So there will be some reversion, but it's it is embedded into the margin.
And that we gave.
Great. Thank you.
Yep.
Your next question comes from Todd Brooks with CL, King and Associates. Your line is open.
Hey, good morning, everybody most of my questions have been answered, but I just have one on the <unk> side of the business as we.
Move forward here and we're moving.
Towards Fuller vaccine rollout and.
And maybe consumer attitudes changing for food away from home versus food at home is there any and your customer discussions is there any in decisions or a desire to pause on moving ahead with order activity, just where they see where's the mix falls out between food away from home and food at home.
As we get towards some sort of new normal on the back side of the pandemic I know there was some indecision.
At the at the start of the pandemic just wanting to see how the mix is.
Fell out and I'm wondering if we're going into that environment again or are the customers fairly confident and around ordering trends. Thank you.
Right, you're correct that earlier in the year second quarter third quarter. There was definitely submit decision as to how this was all going to play out.
I would tell you it does seem and the conversations that we're having with our customers.
And that there is now conviction there does seem to be conviction that this <unk> and eat at home trend not just a quarter or two enough for them to give the confidence on some of the orders. So I haven't seen comments coming back like Oh, let's take let's take a pause here I think there is enough confidence as we enter 2021.
And that this is.
And that it's not going away and 2021 for.
For 2022, we will see.
And the beautiful thing about JBT is that where you have such a broad product portfolio. If those all of those trends start to move back to full service restaurants, and our customers a pivot accordingly will be right there with them.
Okay, great. Thanks Bryan.
Thank you.
Your next question comes from Steve Tusa with Jpmorgan. Your line is open.
Hi, good morning.
Good morning.
Just wondering just for a little more color on on the.
<unk>.
Airport activity I mean.
Yes.
Actually demand kind of percolating there is there whats the source of that is that just continued.
No.
Infrastructure build and during the pandemic here getting out ahead of what may come on recovery.
Right so.
It really isn't infrastructure side and the cargo side, it's literally still particularly zero on the commercial airline side in terms of the equipment.
Equipment at least.
There's a couple of things.
Steve It's first it's.
Some of these longer term orders that continued on these contracts.
Our longer term in nature. So we did have the benefit and things that we signed last year, but for the orders that we took this year.
Basically what we've seen is.
The real need for improving some of these airports across across the country. Both in terms of.
Capacity longer term.
Because he sees.
These infrastructure plays but they are thinking about it 510 years out and.
And they really need to improve the first thing and as the customer experience because a lot of these bridges a really old.
And they really frankly are going past life. So part of it is simply the customer experience the safety.
Et cetera, but.
Fortunately they are thinking longer term in terms of an investment cycle. So some other big bridge orders that we took this year.
And really encouraging because while it's not the airlines, making these investments to airports themselves and those airport authorities are thinking longer term and that.
It really bodes well for us.
Yeah.
Great and then just on the.
The price cost side.
Anything to speak of there is there maybe just give a little bit of color on kind of what's in the earnings bridge.
For aerotech or for JBT, and total for JBT and total side.
Yeah, I would say.
On the on Aerotech.
I would say yes.
Less ability on the price cost strategy, it's really about managing our costs. The best we can there with some price.
With pricing ability on the infrastructure side, given the strength of our position in the marketplace and we really do have a premier offering and the marketplace on the infrastructure side.
And the value proposition that we have there.
Has played out nicely.
So that's in good shape on the food Tech side, it's business by business is product line by product line and where.
Where we have where we are best positioned.
Definitely have some pricing capabilities.
But generally speaking it's.
There is there is some pricing impact better than we did in 2020, so to speak, especially given the inflationary environment.
Got it great. Thank you very much I appreciate it.
Okay.
Your next question comes from Andrew and then with Bank of America. Your line is open.
Hi, Good morning. This is Emily <unk> on for Andrew <unk>.
My first question is on working capital release for the year.
And capital relief it was quite strong and 2020 I just wanted to understand that.
Puts and takes for 'twenty, one volume volume mix and particularly.
On the accounts receivable and.
And toy side as well as any impacts on the reversal of carry on.
Okay.
Sure I mean this is Matt on.
The working capital side.
I do expect with the growth on the food Tech side, specifically and we would see expansion of the balance sheet and the working capital.
Specifically, a little bit on inventory I think the efforts that the team has gone through.
In 2020, and some other tools they put in place puts us in a better position to manage those investments more proactively which is why we had such great performance and and.
And the second half of 2020 on.
On the HR side.
I would expect it to kind of grow with sales.
As you would normally expect I think the team has done a really nice job of managing collections and putting us in a good spot from a DSO perspective.
And I think as orders continue to recover on the food Tech side, we should see continued sort of stability and the and the advanced payments and deposits from our customers.
I think thats why were estimating closer to that 90% to 100% free cash flow for the company because we do expect.
The balance sheet, and specifically working capital to expand a bit as the business growth.
Okay, and just real quick as it relates to the cares Act, we did get about a $10 million benefit and in 2021 as it relates to deferred payments on.
And and payroll taxes that that will.
Robert and 2021.
Okay perfect.
Very helpful. And then just my last question is we've been hearing a lot about wage inflation and company.
And the King capital and labor. So I'm just curious is there anything you're hearing from your customers maybe on the protein side in terms of substituting.
Substituting labor for automation.
Yes, subsidy and labor with automation right with all.
Oh, absolutely, yes, and it's.
<unk>.
And it goes beyond the cost.
The labor frankly, so yes, so all the conversations about.
Increasing the minimum wage.
Throughout that on a national level.
Certainly would not.
Be well received by the food industry.
And they are going.
And to continue to work on those automation efforts.
And to not just replace labor, but now it's going to be.
More on imperative up from a cost perspective. So yes. This trend has has really started about a year ago or so.
<unk> does offer a good.
Mixed of automation on the poultry side and.
And the protein side in general.
With some of our and our.
Our inspection products, our portion of <unk> products.
And separately on the <unk>.
And vegetable side similar in terms of the sorting and.
And the all the other vegetable processing and that's another area of high labor content. So we do have a really nice offerings throughout the JBT portfolio.
Trend that started a couple of quarters ago.
And with the lack of labor availability. So it is just going to be I don't think it from a cyclic cyclical perspective. This is really going to be a secular.
Pressure on on.
And on our customers that we're going to continue to meet too.
<unk> supports low.
Okay, great. Thank you day.
Thank you.
And there are no further questions queued up at this time I'll turn the call back over to Brian for closing remarks.
Great. Thank you all for joining us this morning.
Please make and will be available if you have any follow up questions. Thanks, everybody.
This concludes today's conference call you may now disconnect.
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And.
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John.