Q2 2021 John Bean Technologies Corp Earnings Call
Good morning, and welcome to JBT Corporation's second quarter 2021 earnings conference call, meaning is Vicki 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.
I will now.
Call over the GBP, Vice President of corporate development, and Investor Relations, Patrick Meredith to begin today's conference.
Thank you Vic and.
Good morning, everyone and welcome to our second quarter 2021 conference call.
With me on the call is our Chief Executive Officer.
Now, Brian deck, and our Chief Financial Officer net Meister.
In 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 filings.
Jbt's periodic SEC filings also contain information regarding risk factors that may have an impact on our results.
These documents.
<unk>, Brian are available in 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 Investor Relations section of our website.
Finally, I encourage you to review the second quarter Slide deck, which is also posted in the Investor Relations.
<unk> of the JBT website in it we show historical trends highlight key performance metrics and business opportunities and speak to our growth strategy.
Now I'll turn the call over to Brian.
Thanks, Scott and good morning, everyone.
It's great to be here to talk about Jbt's strong financial performance and strategic progress.
Section even in the second quarter.
As we highlighted last quarter JBT continues to enjoy robust demand of food tech and encouraging signs of recovery at aerotech.
At the same time, we continue to face a challenging macro environment, driving increasing cost of doing business, including material cost inflation and supply chain constraints.
<unk> and <unk>.
Those pressures have intensified, but now also include rising labor costs and labor shortages.
Notwithstanding this challenging backdrop, we outperformed expectations on the top and bottom lines in the second quarter.
I'd like to express my appreciation to everyone at JBT, who did an excellent job.
We made getting orders out the door to satisfy customer needs in this tough operating environment and a specific thank you to our service technicians have gone above and beyond to meet customer expectations.
Quite the complexities and restrictions associated with the pandemic.
In the second quarter, we also booked record orders in.
Excellent cash flow. Moreover, we advanced our growth strategy with the exciting acquisition of <unk>, which expands our recurring revenue stream from further strengthened jbt's will in food safety.
I'll hand, it over to Matt who will provide a more detailed analysis of the second quarter results.
To the benefit.
The convertible note offering we completed in the quarter.
And walk you through our updated guidance.
Thanks, Brian.
Jbt's second quarter performance continued to demonstrate our ability to deliver on growth in a challenging operating environment.
<unk> revenue was $361 million.
Increase of 19.
In general percent year over year, and 16% sequentially.
As Brian mentioned, we outperformed in the quarter.
Driven primarily by better than expected shipments as our businesses executed well despite the challenges they face.
The impact of foreign exchange translation was also a positive factor in the quarter accounting.
From approximately 5 percentage points of the year over year growth.
Which was 3 percentage points higher than expected.
Adjusted EBITDA margin for the quarter was 19%.
Operating margins of 14, 3%.
At the low end of our guidance range and negatively impacted by the cost pressures, we experienced the supply chain.
19 per market.
Aerotech revenue of $150 million, which was ahead, 6% year over year and 8% sequentially was at the high end of our expectations.
Adjusted EBITDA margins of 11, 1% and operating margins of 10, 5% exceeded guidance due to a favorable mix.
And the higher recurring revenue.
Interest expense came in nearly $1 million less than forecast due to better than expected cash flow.
As a result, JBT reported diluted earnings per share from continuing operations of <unk> 95 in the second quarter.
Adjusted EPS of $1.19 include it.
Adjustments for at $4.4 million or <unk> 14 per share noncash deferred tax re measurement.
Good day to with the tax law change in the U K.
Adjusted EBITDA for the second quarter was $70.1 million up 2.5% year over year and 20% sequentially.
Operate.
<unk> profit per $47.3 million declined 1% year over year on higher M&A costs.
It had 25% sequentially.
Free cash flow for the quarter remained strong at $35 million.
Representing a conversion rate of 115%.
With continued good collections of accounts receivable.
Customer deposits and a slower than expected investment in inventory due to supply chain constraints.
Going forward, we need to invest in inventory levels to support the increased backlog.
And therefore with higher forecasted revenue, we anticipate that the balance sheet will expand in the second half of the year.
Additionally, we are increasing our capital expenditure.
Operating cash for the year by approximately $5 million from our previous guidance to support further strategic investments in our digital capabilities.
Altogether, we expect free cash flow conversion for the year to remain north of 100%.
As we look ahead to the full year 2021 we have refined our guidance based on first half results and.
Venture funds.
We have again raised top line guidance for food Tech.
Forecasting a year over year gain of 10% to 12% organically.
Another 2% increase related to FX translation.
That compares with our previous guidance of 9% to 11%.
With the inclusion of.
<unk> acquisition are all in topline guidance for food <unk>, 14% to 16% growth from full year.
Considering the continuing supply chain and operational cost pressures, we have updated the margin guidance range for food Tech with projected operating margin of 14% to 14 and 3 quarters percent.
And adjusted.
Preventing EBITDA margin of 19% to 19 in 3 quarters per cent.
At Aerotech, we have narrowed our revenue guidance range to 1% to 4%.
From the previously communicated range from zero to 5%.
We are holding margin guidance with projected operating margins of 10% and 3 quarters.
To 11% net.
Adjusted per cent.
And adjusted EBITDA margin of 12% 12, 5%.
Additionally, we are adjusting our forecast for corporate costs as a percent of sales down slightly to 2.7% and lowering interest expense guidance to 10% to $9 million to $10 million.
Altogether, we have raised our adjusted.
Quarter, GAAP guidance to $4.60 to $4.80.
Which excludes M&A and restructuring costs.
$12 million to $14 million and the previously mentioned UK tax remeasurement in the second quarter.
Our GAAP EPS guidance of $4.15, $4.35 <unk>.
<unk> depot of our previous guidance.
Primarily due to higher M&A related costs.
We have also raised our full year adjusted EBITDA guidance to $280.290 million up from the previous guidance of $2.70 to 285 million.
Now focusing on the third quarter.
We expect revenue growth for JBT of 18% to 19%.
This consists of year over year growth of 19% to 20% of food Tech.
Which includes 3% to 4% from acquisitions.
The <unk> business, we are projecting growth of 15% to 16% for the quarter.
At <unk>, we are projecting.
<unk> third quarter operating margin of 14 to 14, 5%.
Adjusted EBITDA margins of 19% to 19, 5%.
For Aerotech operating margins are forecasted at 11.25% to 11% and 3 quarters per cent.
With adjusted EBITDA margin of 12, and a quarter to 12, 3%.
Corporate costs for the quarter are expected to be 13% to $14 million <unk>.
Excluding approximately $4 million in M&A and restructuring costs.
Interest expense should be.
2.5% to $3 million.
That brings third quarter 2021 earnings per share guidance to a $1 per $1.10 on a GAAP basis.
And $1.
<unk> to $1.20 as adjusted.
Finally, I would like to briefly touch on the convertible note offering that we completed in the second quarter.
With net proceeds of more than $350 million, we have locked in a portion of Jbt's capital.
Historically low fixed interest rate with favorable conversion terms that limit shareholder dilution.
Until the stock exceeds.
Fedex strike price of $240 per share.
The notes also afford JBT additional flexibility in our capital structure to support our growth of our.
Our organic investments and acquisition strategy with that let me turn the call back to Brian.
Thanks, Matt.
As I mentioned at the top of the call JBT generated record orders in the second quarter.
Food Tech orders expanded 3% sequentially from the first quarter's record level.
We continued to enjoy robust demand from customers, serving the retail market with improvements from the foodservice side.
With particular.
Strength in poultry plant based foods pet foods fresh produced produce and packaged readiness.
In addition, our automated guided vehicle business outperformed in the second quarter with several large food customer orders a reflection of the growing demand for backend automation among our customers.
Please.
<unk> robust order trends are also a direct reflection of the continued investment we've made in product innovation Jamie.
Jbt's recent product launches featuring advances in hygiene capacity and automation have gained nice acceptance in the marketplace.
Furthermore.
Customer features that reduce waste and promote from a more efficient use of water and energy enable JBT to help our customers on their sustainability journey.
Geographically food Tech commercial activity in North America remained robust.
Europe was essentially flat versus the.
Volatile first quarter with progress on vaccine penetration and governmental economic support.
Its outlook seems to be more promising, albeit subject to uncertainty surrounding COVID-19.
As it relates to Asia, and South America, we are experiencing some fresh fresh pandemic related delays and customer.
Investment decision, making.
Aerotech also enjoyed record orders in the second quarter.
This primarily reflected some major orders on the infrastructure side of the business with.
Which will mostly shipped in 2022.
Aerotech second quarter orders also reflected typical seasonal strength.
Including demand for cargo loaders and <unk>.
Given the Lumpiness of orders, we expect Aerotech order activity in the second half of the year to be normal to be more normalized relative.
Due to the outstanding second quarter.
At the same time, we are encouraged by the pickup in U S passenger traffic and have a few it's secured a few additional orders from commercial airlines.
Oliver as we've said, we expect full recovery to take another 2 years to play out.
And we're cautiously watching the developments surrounding the delta variable.
Nonetheless.
We feel we are clearly beyond the bottom of the investment cycle.
Now to the acquisition of <unk>, which closed in early July.
Preventing.
Preventing further strengthens jbt's roll in food safety, which is a critical and growing concern for our food processing customers.
They offer a unique delivery system for consumption, driven anti microbial solutions, which provides <unk>.
A safer environment for their employees as well as enhances food integrity.
Financially <unk> has demonstrated an impressive growth record with EBITDA margins in.
Customers.
<unk>.
Moreover, the revenue model is predominantly consumable and contractual adding to the strength of our recurring revenue profile.
And as part of JBT, we foresee significant opportunities to expand in preventing those applications.
<unk> beyond its core poultry market and into other proteins and fresh fruit and vegetables, where JBT has a strong presence.
Furthermore, over time, we see opportunities to expand its geographic reach.
Switching gears toward internal investments.
<unk> plans to accelerate investment in our digital.
In the mid strategy and <unk> platform that those intelligence and in our products and services.
Through a focus on digitally enabled customer centric solutions. We believe we can further entrench JBT as a holistic. Additionally, I want to speak to a REIT.
The branding of what was previously our liquid foods business within.
<unk> segment.
Its new name diversified food and health.
It reflects a business that has expanded far beyond its historical focus on juice and canned goods as a result of continued investment both organically and through acquisition.
Diversified food and health now provides a wide portfolio of solutions.
<unk> for customers across the <unk> packaging solutions.
To serve end markets for fresh cut.
And processed fruits and vegetables convenience foods prepared and ready to eat meals pet food protein and plant based beverages.
Gary Pharmaceuticals and Nutraceuticals.
Together with our protein business <unk> has an enviable diverse offering for our food and beverage customers.
Overall, we are very pleased with the robust commercial activity at food Tech, which has enjoyed broad based strength on the retail side growing demand for auto.
Automation solutions and a pickup in the hard hit foodservice side.
At Aerotech continued strength on the infrastructure side has been accompanied by initial improvement in our business with commercial airlines.
However, we remain concerned by the recent resurgence in COVID-19 and the potential impact on macroeconomic conditions and.
We are otherwise mindful of our high cost environment under which we are working.
Lastly, as part of Jbt's core values, we continue to prioritize a diverse and inclusive work culture that promotes continued education enhanced development opportunities mutual respect.
Team, who have embraced our corp.
Core values.
Which enabled which enable us to serve our customers and meet their needs for essential solutions.
With that I'll take your call your questions operator.
A reminder to ask a question you will need the breadth is tier 1 dollar phone do enjoy any question.
John breast the pound.
Please standby, while we compile the Q&A you lost me.
Your first question comes from the line of Lauren and Mike Yes.
From William Blair. Your line is open.
Thanks, Good morning, everybody.
Good morning.
<unk> talked about.
Key broadly about and you're worried.
Backlog.
Okay conversion time.
What it means ultimately for the first half of 'twenty, 2 what your seems like and more important.
The orders for next year can flip into <unk>.
41 or.
Or are we specifically seeing orders that are pushed out into 'twenty 2.
What obviously you give us some more confidence into.
The growth trajectory for next year.
Yeah. Thanks, Larry So as you know we do have a broad range of lead times of the rate per product offering anywhere from 6 to 8 weeks up too.
9 months and even a year I will tell you that the strength of the orders in key tech for the for.
For the quarter.
And a little bit it will go into the fourth quarter 2022.
Share of the projects that we're looking at.
Particularly.
You mentioned that the ATV side.
Some larger orders on the diversified health side, which.
Hello.
Have a much larger backlog at the end of this year versus where we were at the end of 2020. So we are setting ourselves up.
He has been on a first half from 2022.
And similarly on the Aerotech side as I mentioned.
Infrastructure related projects almost all of that will go into 2022.
And we are seeing improvement on the commercial airlines and generally speaking in the gone support side. So we would also expect a larger backlog ending 2021 and aerotech.
As well.
Okay. That's very helpful. Thanks, Brian and then the second part maybe just to talk about price I know, there's a lot of inflation out there obviously.
And.
Historically, I think there's more risk on price cost on aerotech, but can you just talk about.
Goodbye.
How you are protecting yourselves on these origin from next year that would mature obviously margin expansion or difficult kind of rescue there is in the backlog that pricing and margin.
Yes, so specifically talk to food project based.
Obviously, you've also about almost half of our revenue is based on.
Our recurring recurring revenue aftermarket et cetera, but generally speaking.
This cost and the product inflation.
It's fairly well covered especially when you can.
Consider the strength of our supply chain team and as you know resources behind supply chain over the last 2 years.
And those investors.
Things have really proven.
To pay dividends, especially in this time.
Not seeing that.
Hawaii would've gotten absent inflation it is really significantly up and hold the line. So we're generally.
Price for inflationary items on materials.
The challenge comes more so on the logistics side as you may know things like Ocean freight.
More than tripled almost quadrupled versus this time a year ago. So that is what that is why we do see some.
Pressure on the margin in the back half of the year for food Tech.
Tried to appropriately adjust our guidance accordingly, but generally speaking we text in pretty good shape.
We're guiding to north of 19% margin for the year and.
And given the environment that we're in a.
Pretty flat versus where.
Where we were in 2019.
So we're really pleased in our ability to price cost and just manage the cost from general shift a little bit of pressure here in the back half.
On the Aerotech side, you are correct that it is a little bit tougher given the nature of the products and services.
On the infrastructure side those are.
Our project current cost outlook for the metals environment.
Price those those tend to be longer term contracts as you know we're going to go well into 2022. So we will do some metal hedging on that historically, we've done some metal hedging on the products, but it's not 100%. So there is.
I was a little bit of risk there, but in the current environment.
Ironman with metals at pretty high levels.
We would be very hopeful that things don't get worse as we go into 2022. If there is any abatement on the metals prices are actually could be a little bit of upside.
The ground support equipment.
Is a tougher environment from a competition perspective.
So price cost.
It's more reflective of the market the market itself as opposed to material cost.
So if we happen to outperform.
Formed a little bit based on some of the mix.
On a margin.
In the back half of the year, we do see some further pressure versus what we would normally see.
Cost in terms of our flow through on EBITDA, given that given the high volume in the back half of the year. So we have tried to properly account for that in the back half of the year given that price cost pressure, but but all in all if you take a step back and look at the margin profile for JBT for both food and aerotech given the conditions. We're in we're.
With our current situation, we're holding margin for the most part versus where we were in 2019 and and if you look at food Tech in general.
You exclude even if exclude the impact of acquisitions overall food Tech is looking to outperform 2019.
By a large margin.
We're really about the rebound is there both on the margin side and on the revenue side.
Okay. Thanks, a lot Brian appreciate all that color good luck.
Thank you.
Your next question comes from the line of <unk> from Robert W. Baird.
<unk> Company your line is open.
Thank you good morning, gentlemen.
Moving on.
Just to sort of follow up on this margin discussion.
I guess.
I'm trying to get a better sense for you in terms of.
From you in terms of what's what's incremental relative to your to your.
Margin per outlook.
To me it sounds like.
Maybe things have gotten more challenging on the labor front zone than what you had.
Envisioned in the past.
And I'm also sort of trying to get a sense from.
From you in terms of the various ranges that you provided.
<unk>.
Prior each segment, but it's really food tech that are most interested in.
On a margin side I mean, what takes you to the top end versus the bottom end of your of your margin guidance.
At this point.
Hi, Mike its Matt I'll try to answer as best I can I think as you mentioned.
We did see the inflation on labor accelerated in Q2, and we tried to take that into our guidance, which is putting pressure in the second half as well as Brian mentioned.
<unk> on logistics costs.
They're also in our guidance as.
As Brian mentioned, we are fairly well.
Set up to address material inflation through pricing on the <unk> side, but.
There could be some lag there.
Material costs continue to get worse in the second half of the year.
Additionally, on the foodservice side, there has been a lot of inefficiency.
On the operations side, as we've had really difficult issues with vendor reliability of vendor supply and delivery and that forced the businesses to be relatively inefficient sometimes on the operating for US is the pickup in <unk>.
Net down different various.
Equipment deliveries per customer.
So we've tried to build all of that into our guidance and that's what's putting some of the pressure in the back half on the margins.
What would potentially get us to the top end would be our ability to continue to offset some of that inflation by our supply chain team as well as.
Favorable mix on the aftermarket side effect continues.
To get better we could see slightly higher margins in the back half if we see a higher mix of aftermarket and recurring revenue right in and I'll also add logistics prices come down that would help a lot.
As well as supply chain to ease up we would get better productivity out of our factories so that.
As well so we did.
Try to factor that in in the range of outlook that we see.
Okay.
<unk>.
When we're talking about mix.
Net food tech recurring versus nonrecurring.
The.
The recurring portion of the business has.
Okay.
I'm quite well throughout the COVID-19 downturn and to become a bigger and bigger portion of the pie I'm sort of curious as to.
How you were thinking on a go forward basis.
Assuming that the.
The rebound in orders that we're seeing.
Resulting in growth for the nonrecurring portion of the business.
If that's the case do we.
Should we expect negative margin mix.
Is the nonrecurring portion of the business.
Rebounding.
Sure.
Or is that not a factor.
About 2022 frankly.
Sure. It is it is a factor and we as you may recall on the last call I think we were close to 50% assets.
Recurring magic revenue mix last year, given the lower equipment sales and we guided that it would be reverting to more.
I have about a 45% 55% mix $40.45 with current 55 equipment in 2021.
And we are generally on that pace actually slightly ahead on the aftermarket, but generally that is a when you think about our progression from 2020 to 2020.
1 that is a negative factor and again considered in the.
In the mix and the margins as we roll into 2020 to us a little early to know the precise mix, but I wouldn't see it.
Diverting significantly from the mix that we see in the current year. So I think.
The margin profile for 2022 is going to be more of a consideration of supply chain logistics and labor as opposed to a huge change from the mix versus 2021.
Okay. So we're taking a hit this year basically.
On that.
And maybe.
Maybe the last question.
That's it for me.
Assuming that material costs don't accelerate yet again from here.
Do you think youre going to be fully caught up in terms of the pricing actions or the adjustments that you need to make.
Exiting 2021, so as we think about 2000.
John on too.
Is it fair for us to think of normal incremental margins for your business.
And related to that can you can you also remind us how you view normal incremental EBITDA margin incremental EBITDA margin.
Given given your evolving business day. Thank you.
Sure.
<unk> thousand.
Big assumption regarding no change in costs from where we are today, but absent.
Absent changes or moderation of of inflation and other pressures on labor et cetera.
We would expect to be in a more normalized incremental.
Sure now that until.
Price.
Flow through so to speak.
And for the food Tech that is typically somewhere in that 25% to 30% flow through from flow through here.
And in the air on the Aerotech side.
I would say the swings from mix or.
And potentially a little bit bigger, but absence again changes in mix or a material cost inflation.
They typically are in that 20% to 25% flow through.
Thanks for the color jump back into queue.
Your next.
Our question comes from the line of Michael Mcginn from Wells Fargo Securities. Your line is open.
Hey, good morning, everyone and thank you for that.
<unk>.
Sorry, if I missed this but you mentioned the working capital ramp in the Capex ramp for the back half of the year I don't know if you gave the dollars for that.
Question for your net working capital figure, but is that kind of shaken out like a.
I don't know I guess 30.
$30 million per quarter free cash flow from the back half is that kind of what you guys are thinking.
Yes, we did not give specific guidance on the number of free cash flow in the back half again.
Balanced specced, it tends to be positive above 100%.
Net income for the second half of the year as the balance sheet growth with higher inventory and higher revenue leading to higher accounts receivable. So I think you said the balance sheet will expand to give you the exact numbers.
Just to kind of difficult.
But we would expect it again to be positive and favorable.
To the back half of the year.
And the Capex as I mentioned is <unk> 5 million increase over our prior guidance. So our capex expectations for the full year or about 45.
$2 million.
Great very helpful. If.
If I could switch gears to prevent <unk>.
You mentioned, an existing poultry market and then as well as the.
First industrial.
Is this a situation.
Where are you.
I guess how.
What is the level of investment needed to make the efficacy.
Or to take them.
Vegetable fruit and vegetable market versus the poultry market.
Do you think it is already being adopted.
Like it is in the poultry market, just any context or color that'd be great.
To fit.
Sure Yes. Thanks for the question prevented us very exciting, particularly as it relates to our ability to provide resources and.
And generally speaking when you think about acquisitions for JBT. This really fits nicely in our portfolio in terms of where we want them to be going in terms of.
Closer to.
Their customers operations, and then finding businesses that will fold into the JBT portfolio, we bring resources to that.
Table spin.
Specific to the fresh fruits and vegetable side.
There's not a ton of investment required it's more about the market penetration of the commercial efforts.
Working.
And with the R R food scientists and getting them and our customers comfortable.
With.
With the solution that provided versus their current.
Use of.
All solutions that provide protection to the fruit vegetable such really low generally speaking from a capex.
Sure.
Inventory investment, it's really more about.
The human resources, and the time working with our customers to develop that market.
Got it I appreciate that.
Thank you.
Yeah.
Opex question comes from the line of John <unk> from BMO. Your line is open.
Hey, John It sounds like John.
Hey, Hi.
I Wonder if you could give us a little sense on the build of the backlog is that.
What percent or how do you think about how much of that is from order strength.
And how much of it is from inability to get stuff out the door because of some of the constraints you were talking about.
Yes interesting question. So I would tell you that the vast majority of that build in the backlog. It's from the order strength now we are seeing some push out of lead times.
Again, it's kind of going back to I think with Larry's question.
Is product line by product line in terms of.
What the lead times have.
We have changed.
But anywhere from 1 to 2 weeks up to <unk>.
Extra 30, 60 days, what we're seeing in the lead times, but overall.
<unk> when you just do the math it's predominantly.
The order strength as the leading to the.
The backlog and just to add to that in some geographies, where there are higher.
Covid outbreaks there are some customers that are pushing deliveries out a little bit too. So we are seeing some.
Customer.
Impacts from the Covid.
Outbreaks against certain geographies, where the.
Section rates or the vaccination rates or anytime right. We're still in that case, it's not so much our lead times its more of the customers' ability to accept great.
Good day is that probably gives you some.
Some ability to see well into 2020.
2.
And then what do you what do you need to do like this is more of a strategic longer term question, but what do you need to do to get the operating margins.
In aerotech up into the mid teens.
Kind of range is that product mix is it volume.
Can you give us a sense there.
Yes, I would tell you it's predominantly volume.
And some of the work and I would tell you the getting a more normalized environment as it relates to our raw material costs et cetera.
As I mentioned the price cost on the ground support side is a little bit more dependent upon.
The market conditions as opposed to pure kind of cost plus so the 2 things I would say is the volume.
As well as some.
The moderation of the inflationary pressures.
If you go back to our guidance pre Covid for 2020.
We were on pace for a mid teen.
<unk> EBITDA.
EBITDA margin so business models totally supports a mid teens margin is just getting the world a little bit back to normal net as you know on the ground support side with the commercial airlines Thats going to take a while it is nice to see the commercial traffic, it's really strong domestically, we'd like to see some more of those.
National routes in the business route to get <unk>.
Airlines, making more money and starting to make some investment but to basically the ground support side does trail from an investment perspective.
Airplanes et cetera. So that's why we say we will take a couple of years, but if you think about the pace that we're on it.
On the infrastructure side, 1 thing Thats, probably really worth mentioning is.
At 1 point last year, there was some concern on the infrastructure side, which has a longer lead time.
Generally longer.
Sales cycle that once the impact from Covid starts to get felt in 2021.
On those projects that there'd be some risk to 2022, we don't see that.
Playing out we see continued strength on the infrastructure side as we did pre COVID-19.
Longer term macro with on net which had been driving a lot of growth on the infrastructure side remain the case and JBT is extraordinarily well positioned.
On the infrastructure side, particularly weighted to the <unk> 40 per passenger boarding bridges and the ancillary that go along with that.
Well, that's great alright, thank you.
<unk>.
Your next question comes from the line of Walter Liptak from.
Global your line is open.
Hi, good morning, everyone. Good morning.
Wanted to do a follow on with this aerotech.
And the infrastructure, yet and maybe the way to think of it as the orders really increased a lot from last quarter.
Up about 100 or about <unk> <unk>.
$80 million.
And I think in your comments you mind, you mentioned guided vehicles versus infrastructure.
I Wonder if you could talk about just sort of the mix in that orders that you saw during the quarter.
Right.
Well just as a reminder, HGV within food Tech. These days, we moved it back.
Back in growth of 2015, or sorry, 2014, so everything on the aerotech orders to $182 million if I believe that's the number.
That's all on the interest.
On the infrastructure side.
The outsized strength of that number.
Is on the infrastructure side.
And then as I mentioned in the prepared remarks.
Question.
And seasonal impact from <unk> and cargo loaders as you know the cargo market is strong and.
And we do have seasonal activity coming up so generally speaking it's that combination, but the bulk of the outperformance is.
It was on the infrastructure side, which is the passengers reporting purchase predominantly.
Okay great.
Okay. So in the <unk> you had the H b.
A significant amount of orders that came in.
Within protect.
<unk> guided vehicles.
It was.
It was a great quarter for for HGV drove us.
Again, if you go back to kind of what is a normalized kind of quarter for JBT.
<unk> hundred $4300.50 million per quarter of orders would be a normal number.
And let's say with preventing it's more like $2.50 to $3.60.
And we have over 400 for the quarter.
Yes, it will be in there.
$406 from technique.
<unk> hundred 87 right.
A decent amount of that outperformance was on the <unk> side, which is actually pretty exciting.
When you think about it because.
<unk> the definition of automation.
And we're seeing a lot of demand automation throughout food tech, but the combination of the penetration of <unk> into the food market, there's a lot of food distributors out there.
Commentary.
A machine and network working together.
With the traditional food tech businesses really.
Paying dividends and we're such such well positioned from a secular.
Secular perspective, where that market is growing so the investments that we've made in HGV.
As long.
Many of the food tech over the last year.
Last several years is really paying off in terms of.
The acceptance in the marketplace.
Okay, great. So when you were talking about how this quarter.
Being at or above that 350 to $3.60.
Raise your borders.
Delta is.
1 is the revision is that.
We are putting together a portion of it yes, a portion of it but diversified food and have also outperformed in the quarter.
And some of their actually on some pet food projects that will be.
Completed in 2022.
Okay.
Just a follow up on the supply chain things. So you are having problems getting some shipments out I wonder how much revenue shifted from the second into the second quarter into the second half.
Yes, it's a good question, we actually I don't think anything really we.
<unk> did a really great job of getting stuff out the door actually I would say better than we thought which was actually part of the driver and while we outperformed on revenue in the quarter. So I would say there is not.
Shifts going from the second quarter to the third quarter.
If anything we've outperformed and got things out the door a little.
And then after.
We basically hit the number.
We would hit but.
But then we were mindful of the risks that we were facing in the quarter.
And we were able to overcome those risks.
Okay, Great is there stuff.
I apologize for all the questions, but is there some is.
The pattern of change going into the third quarter or the fourth quarter, where you think there could be some slippage of orders.
Yes.
Tight supply chains or.
You mentioned cargo ships et cetera is there something that changed or has the potential to meet your shipments on time.
Yes, well that is all.
2 things 1 we are still faced with those challenges and they are increasing.
On the labor side Thats, probably the biggest difference between second quarter and the third quarter are some of the supply chain challenges logistics I think is equally entitled in the third quarter is.
The second quarter.
But but available.
Pricing is a little bit higher obviously to consider this.
In the guidance.
So.
In terms of shipments we've tried to factor that appropriately also noting.
It's worth noting that the third quarter is typically a little bit lighter than the second quarter for a couple of reasons 1.
In Europe, there's usually a fair amount of time, often vacations, you are kind of tends to take a.
A month off there so that usually is reflected in some of the orders are some of the ship.
Additionally, on the food and juice side within diversified food and health.
The seasonal aspect the COVID-19.
Orange juice extraction business that we have so we've tried to factor that as well, but thats all factored into that guidance for the second.
Headquarter.
Okay, great. Okay. Thanks for the current.
Shipment share.
Your next question comes from the line of Stephen Tusa from Jpmorgan. Your line is open.
Hi, good morning.
Great.
Could you maybe just talk about.
Some of the supply issues and a little bit more detail.
On the food side.
We all know kind of the electronic components.
It is in.
Maybe there is obviously some.
Net oil related components, I mean anything more specific on like stuff that's surprised you with.
With regards to what you are having trouble getting.
Tom maybe on the more kind of arcane side of the supply chain and then secondly are you seeing any signs at all of it.
Customers, saying.
They would place an order in the fourth quarter or any or something but they're they're kind of saying we will just take that decision next year.
As inflation cools down.
On the supply chain side, I don't know that we've been surprised by anything.
In terms of the supply chain, we havent been hit significantly with both the chip shortage that you're hearing about in the news.
We've seen some.
Constraints on general electronics.
And certainly.
Just general metals.
Hard to come by and they are increasingly higher cost I think what we've been surprised by a little bit.
The complexity and the difficulty in the logistics market.
It hit us higher and it doesn't hit us directly from.
Times. It also indirectly as that impacts our suppliers right, so they're having issues getting stuff into their factories, which then delayed them, which then delayed the being able to supply us on time, so just being at the end of that supply chain just causes a lot more volatility from our ability to deliver on time.
It makes.
Alright, and then anecdotally see I haven't heard any circumstance, where customers kind of thrown off their hands and say you know it is just too sloppy right now lead times are long form thats going to wait it out until next year as you know.
The sales cycle on food tech tends to be very detail.
Tailed very involved often take.
Weeks to months to get through a quote too.
To an order.
So we just don't see that is usually a huge driver.
<unk>.
If anything.
<unk> are trying to.
Given the.
The environment that Theyre working on the demand side the strength of the demand side, we do see what thats whats really driving our pipeline.
Which remained strong from here, it's great excellent color.
Thank you.
Your next question comes from the line.
Andrew I'll Bean from Bank of America. Your line is open.
Hey, Good morning. This is Emily <unk> on for Andrew Rubin.
Right.
I just had another question on pricing. So we've heard some sectors have priced at shipment, which mean.
So effectively they can vary customer prices at the time of shipment so.
So I'm wondering if you guys do that or do you use more of our contract pricing structure, where you have to.
Honor pricing contract prices that shipments.
Sure I'll try to take that 1 Amit.
Line of the market side.
We have price lists and we try to publish those and update those as we need to incorporate inflation on the equipment side.
Specifically in food Tech, we base our pricing at the time of the quote and we have.
<unk> the amount of time that Kohl's is valid.
We don't lock in pricing.
Until we get everything agreed to with the customer around engineering and then we can lock in pricing because we can start to lock in the cost from the vendors at that point in time now there are opportunities where we.
If the deflation is significantly higher than we expected at that time, we do have sort of a break the glass clause in some of our contracts that allow us to adjust pricing after that point in time, but we try not to use that clause to often as it impacts our relationships with our customers.
Okay, Great that's very helpful.
And then just my last question is can you just talk about how channel inventory that on both the top and Erica.
Okay.
Sorry, I missed the question.
Just any color on channel inventory.
On channel inventory, yes. Unfortunately.
Only for JBT debts. If you are talking from our factory to our end customer that's not really so much of an issue because we're selling direct like 95% of the time.
So there really is no channel disruptions or a buildup or depletion of inventory we're working on.
Almost exclusively acceptance from Faraway places, where we do use.
From third party to help us out in accessing the markets but.
Predominantly like 95% of our orders are correct.
Thanks, guys.
Thank you.
Again, everyone. If you would like to ask a question this process Taiwan dollar per.
From Keybanc.
Your next question comes from the line of Matt <unk> from Robert W. Baird <unk> Company. Your line is open.
Hey, Thanks for taking a follow up.
Question, Yes, just 1 question from me back from food Tech.
A few weeks ago, we thought that the USDA announced $500 million of funding for expanding meat and poultry processing.
And they were talking about focusing on smaller players and.
Trying to add competition to that market.
I looked at that and that seems.
To be a pretty good thing for your business, but I'm kind of curious on your view on the matter.
I'm curious how long.
With this kind of business with smaller players.
Players take to develop do you have access to that to that channel.
Channel and.
I'm also wondering if the if you think there is a multiplier.
So through this funding that's been provided by the USDA.
How they're seeing it they think private capital from 2.
Add on top of what they are providing in terms of funding so.
How do you think this is going to impact demand or your business.
And how long do you think it takes for this to materialize.
<unk> fast share.
So generally speaking the good news is that <unk>.
<unk> is really really broad participation in the poultry market into the protein market in general.
We noted in the past, it's very rare for.
Even our larger customers to be more than 5 or 10%.
<unk> of our business in any in any 1 year, there's obviously, some peaks and valleys within there.
But generally speaking we are really really broad participation. So.
Any governmental support.
It is good for us.
We actually also see that on the infrastructure side on the aerotech.
With the most recent.
Restructure bill that's being passed along but going.
Going back to protein. So we would view this as a good a good factor as we've talked about in the past it does take a while for.
For investments, especially greenfield ones to turn into.
Into orders.
More on the expansion of individual lines et cetera that can take less than 6 months.
But generally speaking I wouldn't expect that to impact orders for 2021, it would be more of a benefit to 2022.
The multiplier effect.
<unk>.
I don't know the answer to that I'm not an economist, it's really hard for me to figure out what that means obviously any kind of.
Subsidization from government will typically bring other sources of capital just at the highest level. So you would hope and think that but it's really hard for me sitting here today.
To note.
Thats going to specifically benefit JBT or not.
Okay. Thank you sure.
This interest de Novo that restaurant of the final turn the call over to back to Mr. Brian.
Great. Thank you all for joining us this morning.
Cash and Matt will be available if you have any follow up questions.
Good day.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Sure.
Okay.
From then.
Okay.
Yes.
Okay.
Okay.
And then.
Fair enough.
Okay.
Yes.
Okay.
Good day.
John.
And.
Moving on.
Sure.