Q3 2023 John Bean Technologies Corp Earnings Call

Please standby were about to begin.

Good morning, everyone and welcome to JBT Corporation's third quarter 2023 earnings Conference call. My name is Beau and I will be your conference operator today as a reminder, today's call is being recorded at this time all lines have been placed on mute to prevent any background noise. After the speakers' prepared remarks, there will be a question and answer session.

If you would like to ask a question during this time.

Star one on your telephone keypad and if you would like to withdraw your question Press Star One again I will now turn the call over to Jbt's, Vice President corporate development and Investor Relations Kendrick Meredith. Please go ahead Sir.

Thank you Bill good morning, everyone and welcome to our third quarter 2023 conference call with me on the call is our Chief Executive Officer, Brian deck, and Chief Financial Officer, Matt 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 filing Jbt's periodic SEC filings also contain information.

Asian regarding risk factors that may have an impact on our results. These documents 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 now I'll turn the call over to Brian.

Okay.

Thanks, Patrick and good morning, everyone.

JBT reported another good quarter, and our first as a pure play food and beverage technology business.

Third quarter orders were solid.

While we maintain a cautious posture due to macroeconomic uncertainty interest rate pressure and geopolitical risk.

We're encouraged by some strengthening of activity activity in Europe, and Asia, and we believe that improving price cost dynamics in the poultry industry will create a more attractive environment for investment.

Higher order activity in the fourth quarter and in 2024.

While third quarter revenue came in a little soft we are very pleased with margins that exceeded our forecast and the resulting EBITDA growth.

Overall Jbt's performance continues to reflect the benefit of our resilient business model, a diverse product and end market mix.

And our value added acquisitions.

With that I'll turn the call over to Matt who will walk you through our third quarter performance and fine tuned full year guidance.

Thanks, Brian and the third quarter revenue increased one 2% year over year.

Slightly below our guidance as book and ship orders were below expectations.

However, as Brian stated margins were stronger than we forecasted with gross profit margins increasing over the prior year by 170 basis points.

The results of our actions on pricing restructuring and supply chain.

With that adjusted EBITDA grew nine 4% year over year to $66 million with adjusted EBITDA margin of 16, 4% an.

An increase of 120 basis points.

Excluding corporate related costs, the adjusted EBITDA margin from our operations was 29%.

Reflecting strong execution as we continue to make progress toward our elevate two point.

Margin target.

Income from continuing operations exceeded the midpoint of our guidance driven by higher interest income from the investment of the proceeds on the sale of Aerotech.

Additionally, our effective tax rate for the quarter of 12, 3%, which included some beneficial discreet items was significantly better than we forecasted.

Earnings per share continuing operations was <unk> 95 in the third quarter compared with 80 in the prior year.

Adjusted EPS was $1 11 versus <unk> 96.

Okay.

Year to date free cash flow from continuing operations was $62 million, representing a conversion rate of 83%.

For the quarter free cash flow of $33 million represented a conversion rate of 107%.

<unk> pension contributions of approximately $10 million.

Moving forward, we expect our conversion rate to be more stable as a pure play business.

Completion of the sale of Aerotech, our net debt to adjusted EBITDA ratio as of September 30 was less than one times, providing excellent flexibility to pursue strategic initiatives.

Looking ahead, our guidance for the fourth quarter of 2023 includes year over year revenue growth of zero to 4% and adjusted EBITDA of 70 $379 million, representing a margin of 16, 5% to 17%.

We expect interest income of about $2 5 million.

That tax rate of 22% to 23%.

Resulting in forecasted adjusted earnings per share of $1 25 to $1 40.

Given our updated fourth quarter guidance and year to date performance, we are narrowing our full year outlook for adjusted EBITDA to 265 $271 million.

And adjusted EPS to $3 95 to $4 10 minutes.

The midpoint of our guidance ranges that translates to year over year growth of 18% and 10% respectively for adjusted EBITDA and adjusted EPS.

With that let me turn the call back to Brian.

Thanks, Matt.

Let me start by speaking to geographic trends as I mentioned at the top of the call. We are seeing some improvement in Europe with the pickup of the pickup in orders in the pipeline.

Activity in Asia improved as well.

In North America demand from protein customers remained soft in the third quarter. However, we believe rising prices at the wholesale level lower corn feed costs and the result in improvement in profitability among our poultry customers will translate to healthier orders.

Otherwise in terms of end markets, we enjoyed strength in the fruit and vegetable beverage dairy and Turkey end markets and continued strength for our Adv warehouse automation business.

One important shift we are seeing across our customer base is there demand for sustainability.

As we have discussed at length sustainability is a core element of Jbt's cultural DNA DNA.

Our equipment features environmentally friendly packaging solutions, low emissions technologies and systems that reduced food waste and lower energy and water consumption.

Increasingly beyond yield improvement high efficiency and labor savings.

Demand for sustainability solutions is becoming a larger part of our customers' decision process.

We believe the commitment and investment in JBT has made to enhance the environmental performance of our systems will increasingly be a competitive advantage.

On the logistics and supply chain front conditions have materialized has stabilized materially with minimal component shortages and reduce lead times for electronics and fabricated parts.

This is enabling us to more aggressively execute our supply chain initiatives.

The area that represents jbt's largest margin enhancement opportunity.

We are largely offsetting inflation with cost savings actions, including leveraging our spend consolidating our supply base and value engineering our products.

Additionally, with the improvement in lead times were able to lower safety stock requirements, and we remain focused on improving inventory management.

Changing gears.

<unk> sale of the Aerotech business in the third quarter, which generated net proceeds of 793 million before taxes.

<unk> is the liquidity and capital structure to continue to invest in our peer play food and beverage strategy.

We are committed to identifying and acquiring technologies that expand our capabilities.

Provide entry into near Adjacencies that enable us to provide more comprehensive customer solutions.

Yes.

Recently, the overall M&A market activity has been muted.

Yet with JBT is always on posture, we have maintained an active pipeline.

<unk> proprietary opportunities.

Moreover, we believe our strong balance sheet and ability to create value through globalization of regional technology.

Supply chain synergies, leveraging our digital infrastructure and keen aftermarket focus our distinct advantages.

As always we will maintain a thoughtful and disciplined approach ensuring that all transactions meet our strategic and financial objectives, while preserving an appropriate debt leverage ratio.

During the third quarter, we made an investment into Denmark based company inspection to advanced Jbt's value proposition in the poultry meat and seafood markets and.

In inspection as an innovative bone detection system that has raised the standard for accurate identification of even the smallest bones.

This system reduces false detection rates lowers work rework labor and cuts product yield loss, all while enhancing food safety and quality.

Through our new partnership with an inspection this cutting edge technology solution is now available to JBT customers worldwide.

Of course, none of Jbt's progress would be possible without the commitment of our employees around the globe. Thank you for your dedication and service to our customers.

With that let's take your questions operator.

Thank you ladies and gentlemen at this time do you have any questions simply press star one and if you do find your question has already been addressed you can remove yourself from the queue by pressing star one again, and we'll pause for just one moment to assemble the queue.

And we'll go first this morning too made del Rey at R. W. Baird.

Alright, great. Thank you.

Everyone.

Good morning.

I guess.

Where I'm looking to start getting a little more context around what youre seeing from a demand standpoint.

Europe, and Asia, you talked about being a little bit better.

So I don't know if there is if there is something specific.

Driving things over there because obviously from a from a macro standpoint.

I need a region seems to be doing frankly, all that great. So I'm kind of curious what's what's changing over there for your business.

Yes, it's interesting I would say generally speaking when you think about geographies and end markets in general it's kind of all over the board and mixed.

That said, what we have seen in Europe over the last 30 days and at the end of the quarter and as we entered the fourth quarter here some strengthening in northern Europe, which has been the weakest area for the last several quarters in Europe in general while Southern Europe has been a little bit stronger in middle East has been a little bit stronger. So we are.

Starting to see some benefits there, Germany still remains pretty tepid.

But but as a whole just in terms of where we're penetrated in our product lines. We are seeing some pickup in activity.

North America as.

As we mentioned, it's actually if you exclude poultry, which is hard to do because it's such a big market for us.

It's kind of been okay, not awful, but but obviously poultry kind of leads the way there in terms of its impact on JBT.

And poultry market.

Is that comment.

Relevant for the OE component of the business or has there been an.

And then backed on aftermarket parts that sort of thing as well.

It's mostly related to the equipment side of the business and as I mentioned, we are seeing some improvement in the fundamentals in terms of input costs as well as wholesale prices.

That's the good news it has impacted some of their aftermarket.

But the more meaningful obviously is on the equipment side.

Okay. Then I guess my final question on demand just to sort of level set expectations here.

Your fourth quarter guidance implies that.

That normal sort of seasonal uptick in revenue Q4 relative to <unk>.

I'm sort of curious if you expect.

Is that to be reflected in incoming orders as well.

So I recognized that you probably cant guide to book to Bill for the fourth quarter, but as it stands right now.

You expect.

Sure.

Significant backlog burn in the fourth quarter or is demand in terms of incoming orders sort of consistent with this.

Unknown Executive: We stand by. We're about to begin.

Bo: Good morning everyone and welcome to the JDT Corporation third quarter, 2023 earnings conference call. My name is Bo and I will be your conference operator today. As a reminder, today's call is being recorded at this time. All lines have been placed on mute to prevent any background noise. After the speakers prepared remarks, there will be a question and answer session.

Seasonal uptick that you normally get in the fourth quarter.

I would say, we still expect some seasonal uptick in orders in the fourth quarter, whether or not that exceeds revenue and it builds backlog or are opposite.

It won't I don't think it will meaningfully affect our backlog, we still expect a pretty decent backlog.

Bo: If you would like to ask a question during this time, press star one on your telephone key bed and if you would like to withdraw your question, press star one again.

Going into the quarter.

As I mentioned on the poultry, we actually do expect some improvement in orders in the fourth quarter on poultry, which is good news that will help along with some of the seasonal activity and we'll see what the backlog shakes out but as a whole I think you saw from our release that our backlog is in pretty good shape.

Kedric Meredith: I will now turn the call over to JDT's vice president, the corporate development and investor relations. Kedric Meredith, please go ahead sir. Thank you Bo.

Kedric Meredith: Good morning everyone and welcome to our third quarter, 2023 conference call. With me on the call is our chief executive officer Brian Deck and chief financial officer Matt Meister. In today's call, we will use for looking statements that are subject to the safe harbor language in yesterday's press release in an 8K filing. JBT's periodic SEC filings also contain information regarding risk factors that may have an impact on our results. These documents are available in the investor relations section of our website. Also, our discussion today includes references to certain non-gap measures. A reconciliation of these measures to the most comparable gap measure can be found in the investor relations section of our website.

Year over year, and it should be and relative similar situation as we exit the year. So obviously, it's a little too early to talk about our revenue and demand for 2024, but we feel decent about.

Backlog and while we expect as we end the year.

Now it does very helpful. My last question on capital allocation, you know you talked a little bit about how you are looking at various opportunities to deploy this capital.

But.

I guess, what I'm, what I'm trying to learn from you is whether or not you're you're looking outside of the U S or if you have a preference geographically at this point.

Brian Deck: Now I'll turn the call over to Brian. Thanks, Kedric and good morning everyone.

Brian Deck: JBT reported another good quarter and our first is a pure play food and beverage technology business. Third quarter orders were solid. While we maintain a cautious posture due to macroeconomic uncertainty, interest rate pressure and geopolitical risk, we're encouraged by some strengthening of activity in Europe and Asia. And we believe that improving price cost dynamics in the poultry industry will create a more attractive environment for investment and higher order activity in the fourth quarter and in 2024. While third quarter revenue came in a little soft, we're very pleased with margins that exceeded our forecast and resulting EBITDA growth.

And what are some of the priorities.

As you look at your portfolios, where you you would think that.

Incremental assets and capital deployment can really.

Accelerate your business. Thank you.

Sure.

We are certainly looking at both.

And in Europe, not so much in <unk>.

Asia may be some opportunities in South America as that market starts to grow or is growing.

But Moreover, it's really about the tech buying really good technology that we can globalize and put into our supply chain system and digital infrastructure et cetera.

In terms of kind of specifically two areas that we're interested in.

Brian Deck: Overall, JBT's performance continues to reflect the benefit of our resilient business model, a diverse product and end market mix and our value added acquisitions.

Because we are a very diversified business the landscape is actually fairly wide.

That said I would say areas that we like generally speaking we do like end of lines that we've had some success with Bev Corp acquisition and some things around that <unk> packaging in general are can be attractive there's kind of a wide range of.

Matt Meister: With that, I'll turn the call over to Matt who will walk you through our third quarter performance and fine-tuned full-year guidance. Thanks, Brian. In a third quarter, revenue increased 1.2% year-over-year. Slightly below our guidance as book and ship orders were below expectation. However, as Brian stated, margins were stronger than we forecasted, with gross profit margins increasing over the prior year by 170 basis points. The result of our actions on pricing, restructuring and supply chain.

Margin profiles in end of line, but there are some things that we feel that we can fit with our our structure nicely be value added to our customers and full airline solutions. So generally speaking and have line I still think there's opportunities in poultry and pork in protein in general to add around our current capabilities.

Matt Meister: With that, adjusted EBITDA grew 9.4% year-over-year to 66 million, with adjusted EBITDA margin of 16.4%, an increase of 120 basis points. Including corporate related costs, the adjusted EBITDA margin from our operations was 20.9%. Reflecting strong execution as we continue to make progress toward our elevated 2.0 margin target. Income from seeing operations exceeded the midpoint of our guidance driven by higher interest income from the investment of the proceeds on the sale of arrow tech.

Where we have some holes and then beyond that there are some near Adjacencies that were not particularly strong in bakery is one for example that we feel that we could add some diversification net the technology is not particularly.

Different but they've got some nuance to niche niche capabilities that can help.

Help that help us penetrate that market further so again, it's kind of a fairly wide mandate. If you will given given our broad exposure.

And given our the strength of our balance sheet.

Great I appreciate the color. Thank you.

Matt Meister: Additionally, our effective tax rate for the quarter of 12.3%, which included some beneficial discrete items, was significantly better than we forecast it. Looted earnings per share from continuing operations was 95 cents in the third quarter, compared with 80 cents in the prior year. Adjusted EPS with $1.11 versus 96 cents. Year day free cash flow from continuing operations was $62 million, representing a conversion rate of 83%. For the quarter, free cash flow of $33 million represented a conversion rate of 107%, which excludes pension contributions of approximately $10 million.

Sure.

Thank you. The next match you Walter Liptak at Seaport Research.

Hi, good morning, everyone.

I wanted to ask about.

Your comments Brian about.

The book and ship and if we can get just get a little bit more detail about how what was the trend change and is it.

Just a temporary change what happened there.

Yes, well its Matt I think from a book and ship perspective in Q3, I think it's just reflective of the current environment that we're experiencing especially as Brian mentioned in North America, and poultry, it's a big market for us and we tend to have some decent book and ship the orders that we.

Matt Meister: Moving forward, we expect our conversion rate to be more stable as a peer play business. Police should know that the sale of arrow tech are net debt to adjusted EBITDA ratio, as of September 30, was less than one time, providing excellent flexibility to pursue strategic initiatives. Looking ahead, our guidance for the fourth quarter of 2023 includes year-over-year revenue growth of 0 to 4%, and adjusted EBITDA of 73 to 79 million, representing a margin of 16.5 to 17%.

We expect in any given period.

In Q3, just with the current environment. It just was a little bit lower than we would've otherwise expected.

Yeah.

Okay.

Are we expecting that to I guess the current environment.

It hasn't gotten less volatile.

With some of the political macro things, but.

Are we expecting things to turn in the fourth quarter or is this something that we should kind of.

Factor into our thinking from here.

Yes, I think it certainly there is uncertainty.

Matt Meister: We expect interest income of about 2.5 million, and a tax rate of 22 to 23%. Resulting in forecasted adjusted earnings per share of $1.25 to $1.40. Given our updated fourth quarter guidance and year-to-day performance, we are narrowing our full-year outlook for adjusted EBITDA to 265 to 271 million, and adjusted EPS to $3.95 per $4.10. The midpoint of our guidance ranges that translates to year-over-year growth of 18% and 10% respectively for adjusted EBITDA and adjusted EPS.

The economy, and as you mentioned and just sort of the overall geopolitical situation.

I do think as Brian mentioned, some of the underlying fundamentals and poultry, especially in North America, we're seeing some improvement certainly not out of the woods, but.

This cost dynamics in that market are getting better.

We expect that to start to translate into improved orders that should include in.

An improvement in book and ship in Q4.

So I think we'll be back to.

Prior to this sort of last four quarters, it's hard to say, but we're certainly seeing improvement in the market.

We're feeling encouraged by the improvement that we're seeing in that market for sure.

Brian Deck: That, let me turn the call back to Brian. Thanks, Matt.

Okay for your for your fourth quarter guidance.

Brian Deck: Let me start by speaking to geographic trends. As I mentioned at the top of the call, we are seeing some improvement in Europe with a pickup in orders and the pipeline. Activity in Asia improved as well. In North America, demand from protein customers remains soft to the third quarter. However, we believe rising prices at the wholesale level, lower corn feed costs, and the resultant improvement in profitability among our poultry customers will translate to healthier orders. Otherwise, in terms of end markets, we enjoyed strength in the food, in vegetable, beverage, dairy, and turkey and markets, and continued strength for our AGV warehouse automation business.

As mentioned in the last question.

Seasonal upturn.

And that's going to happen in both sales and an EBITDA or.

When you are forecasting that is it largely shipments of equipment or are you factoring a book and ship.

Seasonal pick up too.

Yes, we certainly see.

Kris and Q4, and nonrecurring revenue, which will have an impact on margins from a mix perspective.

But certainly right now we have a very strong backlog as we enter into Q.

Four and a lot of that.

Both that we're seeing sequentially from Q3 to Q4 is already built into our backlog.

Brian Deck: One important shift we are seeing across our customer base is their demand for sustainability. As we have discussed at length, sustainability is a core element of JVT's cultural DNA. Our equipment features environmentally friendly packaging solutions, low emissions technologies, and systems that reduce food waste and lower energy and water consumption. Increasingly beyond yield improvement, high efficiency, and labor savings, demand for sustainability solutions is becoming a larger part of our customer's decision process. We believe the commitment and investment in JBT has made to enhance the environmental performance of our systems will increasingly be competitive advantage.

Okay great.

And.

Maybe if we could just switch gears and just talk about.

You alluded to.

The ongoing.

Restructuring cost cutting.

I wonder if you've taken a look at corporate expenses and.

No.

Since we got the divestiture behind us.

Got it any thoughts you can share about how corporate expenses might look.

Yeah.

I would say, although the fifth.

Financial and mechanics of the acquisition are behind Us with Aerotech, we still have.

Support that we're providing in terms of.

Brian Deck: On the logistics and supply chain front, conditions have stabilized materially, with minimal component shortages and reduced lead times for electronics and fabricated parts. This is enabling us to more aggressively execute our supply chain initiatives, the area that represents JBT's largest margin enhancement opportunity. We are largely offsetting inflation with cost savings actions, including leveraging our spend, consolidating our supply base, and value engineering our products. Additionally, with the improvement and lead times, we are able to lower safety stock requirements, and we remain focused on improving inventory management.

The transition services agreement with Aerotech and so we're still have some of those costs that are built into our corporate.

Environment and.

As we said in the last call.

It's really important that we do make any adjustments or corporate costs thoughtfully not only to support the transition services agreement, but also to support.

Our initiatives to deploy capital from an M&A perspective, so we havent made any significant changes in corporate expenses at this point in time is certainly something that we're going to continue to evaluate especially as we head into the 2020 for planning cycle, but at this point in time, we haven't made any significant changes but.

It's certainly something that we're evaluating as we go forward.

Brian Deck: Changing gears with the completed sale of the Aerotech business in the third quarter, which generated net proceeds of $793 million before taxes, JBT has the liquidity and capital structure to continue to invest in our pure play, food and beverage strategy. We are committed to identifying and acquiring technologies that expand in our capabilities or provide entry into near adjacencies that enable us to provide more comprehensive customer solutions.

Okay, Great alright, thank you.

Thank you and just a reminder, ladies and gentlemen, any further questions. Please press star one at this time.

Okay.

And gentlemen, it appears we have no further questions. Mr deck, I'll hand things back to you Sir for any closing comments.

Brian Deck: Recently, the overall M&A market activity has been muted. Yet, with JBT's always on posture, we have maintained an active pipeline, including proprietary opportunities. Moreover, we believe our strong balance sheet and ability to create value through globalization of regional technology, supply chain synergies, leveraging our digital infrastructure, and niches. As always, we will maintain a thoughtful and disciplined approach, ensuring that all transactions meet our strategic and financial objectives, while preserving an appropriate debt leverage ratio.

Great. Thank you all for joining us this morning, as always <unk> and Marley, we'll be available if you have any follow up questions.

Thank you Mr. Dirk ladies and gentlemen that will conclude the JBT Corporation's third quarter 2023 earnings conference call.

Thank you all so much for joining us and wish you all a great day Goodbye.

Please wait the conference will begin shortly.

[music].

Yes.

Okay.

Okay.

Yes.

Brian Deck: During the third quarter, we made an investment into Denmark-based company in inspection to advance JBT's value proposition in the poultry meat and seafood markets. In inspection is an innovative bone detection system that has raised the standard for accurate identification of even the smallest bones. The system reduces false detection rates, lowers rework labor, and cuts product yield loss, all while enhancing food safety and quality.

Yes.

Yes.

Yes.

Yes.

Okay.

Yes.

[music].

Brian Deck: There are new partnership with an inspection, this cutting edge bone technology solution is now available to JBT customers worldwide.

Brian Deck: Of course, none of JBT's progress would be possible without the commitment of our employees around the globe. Thank you for your dedication and service to our customers.

Bo: With that, I'd take your questions, operator. Thank you, ladies and gentlemen, at this time, if you do have any questions, simply press star one. And if you do find your question has already been addressed, you can remove yourself from the queue by pressing star one again, and we'll pause for just one moment to assemble the key. Thank you.

Mircea Dobre: And we'll be first this morning to make Dobre at R.W. Baird. Great.

Brian Deck: Thank you. Good morning, everyone. Good morning. I guess where I'm looking to start is getting a little more context around what you're seeing from a demand standpoint. You know, Europe and Asia, you talked about being a little bit better, so I don't know if there's sort of something specific that's driving things over there, because obviously from a Mac or standpoint, Anita Regions seems to be doing frankly all that great. So I'm kind of curious what's changing over there for your business.

Brian Deck: Yeah, it's interesting. I would say generally speaking, when you think about geographies and end markets in general, it's kind of all over the board and mixed. That said, what we have seen in Europe over the last 30 days and at the end of the quarter, and as we enter the fourth quarter here, some strengthening in Northern Europe, which has been the weakest area for the last several quarters in Europe in general, while Southern Europe has been a little bit stronger and Middle East has been a little bit stronger.

Brian Deck: So we are starting to see some benefits there. Germany still remains pretty tepid, but as a whole, just in terms of where we're penetrated in our product lines, we are seeing some pickup in activity. North America, as we mentioned, it's actually, if you exclude poultry, which it's hard to do because it's such a big market for us, otherwise it's kind of been okay, not awful, but obviously poultry kind of leads the way there in terms of its impact on JBT.

Brian Deck: In poultry market, is that common just relevant for the OE component of the business, or has there been an impact on, you know, aftermarket parts, that sort of thing as well? It's mostly related to the equipment side of the business, and as I mentioned, we are seeing some improvement in the fundamentals in terms of input costs as well as wholesale prices, so that's the good news. It has impacted some of their aftermarket, but the more meaningful, obviously, is on the equipment side.

Brian Deck: Okay, then I guess my final question on demand, just to sort of level set expectations here, you know, your fourth quarter guidance implies, you know, that normal sort of seasonal off-tick revenue to four relative to three, I'm sort of curious if you expect that to be reflected in incoming orders as well, so I recognize that you probably can't guide to book the bill for the fourth quarter, but as it stands right now, do you expect, you know, a significant backlog burden in a fourth quarter, or is demand in terms of incoming orders sort of consistent with this seasonal uptick that you normally get in the fourth quarter? I would say we'd still expect some seasonal uptick in orders in the fourth quarter, whether or not that exceeds revenue and it builds backlog or opposite, it won't, I don't think it will meaningfully affect our backlog, we still expect a pretty decent backlog going into the quarter, as I mentioned on the poultry, we actually do expect some improvement in orders in the fourth quarter, on poultry, which is good news, so that will help along with some of the seasonal activity, we'll see what the backlog shakes out, but as a whole, I think you saw from our release that our backlog is in pretty good shape, decent year over year, and it should be in relative similar situation as we exit the year, so obviously it's little too early to talk about a revenue and demand for 2024, but we feel decent about our backlog and what we expect as we end the year.

Brian Deck: Now, that's very helpful. My last question on capital allocation, you know, you talked a little bit about how you're looking at various opportunities to deploy this capital. But, you know, I guess what I'm trying to learn from you is whether or not you're looking outside of the US or if you have a preference geographically at this point. And what are some of the priorities as you look at your portfolios where you would think that, you know, incremental assets and capital deployment can really accelerate your business.

Brian Deck: Sure, we are certainly looking at both US and Europe, not so much in Asia, maybe some opportunities in South America as that market starts to grow or is growing. But, moreover, it's really about the tech buying really good technology that we can globalize and put into our supply chain system and digital infrastructure, etc. In terms of kind of specifically to areas that were interested in, because we are a very diversified business, the landscape is actually fairly wide.

Brian Deck: That's that I would say areas that we like generally speaking, we do like end of line. So we've done some success with Bev Corp acquisition and some things around that and or packaging in general are can be attractive. If there's kind of a wide range of margin profiles and end of line, but there are some things that we can feel that we can fit with our, our structure nicely and be value added to our customers and in full of line solutions.

Brian Deck: So generally speaking, end of line, I still think there's opportunities in poultry and in pork and protein in general to add around our current current capabilities where we have some holes. And then beyond that, there's some near adjacencies that were not particularly strong and bakery is one, for example, that we feel that we could add some diversification that the technology is not particularly different, but they've got some nuance and niche capabilities that can help that help us penetrate that market further. So again, it's kind of a fairly wide mandate if you will, given, given our, our broad exposure and given our, the strength of our balance sheet.

Brian Deck: Great. Appreciate the color. Thank you. Sure.

Unknown Executive: Thank you.

Walter Liptak: The next now to Walter Littak at Seaport Research. Hi. Good morning, everyone.

Walter Liptak: One thing I ask about your comments, Brian, about the book and ship and if we can get just get a little bit more detail about, you know, what was the trend change and is it, you know, just a temporary change, you know, what happened there. Yeah, once Matt, I think from a book and ship perspective in Q3, I think it's just reflective of the current environment that we're experiencing, especially as Brian mentioned in North America and poultry.

Walter Liptak: It's a big market for us and we tend to have some decent book and ship orders that we expect at any given period. And in Q3, just with the current environment, just a little bit lower than we would have otherwise expect. Okay.

Walter Liptak: Are we expecting that to, you know, the I guess the current environment hasn't gotten less volatile, you know, with some of the political macro things, but are we expecting things to turn in the fourth quarter or is this something that we should kind of factor into our thinking from here? Yeah, I think it's certainly there is uncertainty in the economy. And as you mentioned, and just sort of the overall geopolitical situation.

Walter Liptak: I do think as Brian mentioned, some of the underlying fundamentals in poultry, especially North America, we're seeing some improvement. It's certainly not out of the woods, but price cost dynamics in that market are getting better. We expect that to start to translate into improved orders that should include an improvement in book and ship in Q4. So I think, you know, we'll be back to prior to this sort of last four quarters. It's hard to say, but we're certainly seeing improvement in the market where we're feeling encouraged by the improvement that we are seeing in that market for sure. Okay.

Walter Liptak: For your, for your fourth quarter guidance, you know, you know, it's mentioned in the last question that you get that seasonal upturn and that's going to happen in both sales and in EBITDA. When you're forecasting those that largely shipments of equipment, or are you factoring a book and ship seasonal pickup too? Yeah, we certainly see an increase in Q4 in non-recurring revenue, which will have an impact on margins from a mixed perspective. But certainly right now, we have a very strong backlog as we enter into Q4. And a lot of that growth that we're seeing sequentially from Q3 to Q4 is already built into our backlog. Okay. Great.

Walter Liptak: And maybe if we could just switch gears and just talk about, you know, you alluded to the ongoing restructuring cost cutting. I wonder if you've taken a look at corporate expenses. And, you know, as you know, since we've got the divestiture behind us, you know, if you've got any thoughts that you could share about how corporate expenses might look. Yeah. Well, I'd say although the financial and mechanics of the acquisition are behind us with Arotech, we still have support that we are providing in terms of transition services agreement with Arotech.

Walter Liptak: And so we're still have some of those costs that are built into our corporate environment. And, you know, I think as we said in the last call, it's really important that we do make any adjustments to corporate costs, not only to support the transition services agreement, but also to support our initiatives to deploy capital from an M&A perspective. So we haven't made any significant changes in corporate expenses at this point in time.

Walter Liptak: It's certainly something that we're going to continue to evaluate, especially as we head into the 2024 planning cycle. But at this point in time, we haven't made any significant changes, but it's certainly something that we're evaluating as we go forward.

Unknown Executive: Okay, great. All right. Thank you. And just a reminder, ladies and gentlemen, any further questions, please press star one at this time.

Unknown Executive: Gentlemen, it appears we have no further questions.

Brian Deck: Mr. Deckle hand things back to you, sir, for any closing comments. Great. Thank you all for joining us this morning. As always, Kedric and Marley will be available if you have any follow-up questions. Thank you, Mr. Deckle.

Unknown Executive: Ladies and gentlemen, that will conclude the JVT Corporation's third quarter, 2023, early this conference fall. Thank you all so much for joining us and wish you all a great day. Please wait. The conference will begin shortly. Thank you.