Q1 2024 The Middleby Corp Earnings Call

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Operator: Thank you for joining us for the Middleby First Quarter 2024 conference call. With us today from management are CEO Tim FitzGerald, CFO Bryan Mittelman, Chief Technology and Operations Officer, James Pool, Chief Commercial Officer, Steve Spittle, and Vice President of Investor Relations, John Joyner.

Thank you for joining us for the Middleby first quarter 'twenty 'twenty four conference call.

Operator: With us today from management are CEO, Tim Fitzgerald, CFO, Bryan Mittelman Chief.

Operator: Chief Technology and operations Officer, James Paul.

Operator: Chief Commercial officer, Steve Spittle.

Operator: <unk>, Vice President of Investor Relations John Joyner.

Operator: We will begin the call with opening remarks, then open the lines for questions. Instructions on how to join the queue will be given at that time. Now, I would like to turn the call over to Mr. FitzGerald. Please go ahead.

Speaker Change: We will begin the call with opening remarks, then open the lines for questions instead.

Operator: Instructions on how to join the queue will be given at that time.

Timothy J. FitzGerald: Now I would like to turn the call over to Mr. Fitzgerald. Please go ahead.

Timothy J. FitzGerald: Good morning, and thank you for joining us today on our first quarter earnings call. As we begin, please note there are slides to accompany the call on the investor page of our website.

Timothy J. FitzGerald: Good morning, and thank you for joining us today on our first quarter earnings call.

Timothy J. FitzGerald: As we begin please note there are slides to accompany the call on the Investor page of our website.

Timothy J. FitzGerald: The first quarter proved to be challenging, with a backdrop of the housing market, the interest rate environment, and price-cost pressures at our restaurant and food processing customers weighing out our businesses as we started the year. Even though challenges persist, we are seeing improving order activity and expect this to continue as we move through the year, as customers execute on their state of business plans and as opportunities in the pipeline begin to convert. However, customers are slow to restock inventories given shorter lead times and higher carrying costs.

Fitzgerald: First quarter proved to be challenging with the backdrop of the housing market interest rate environment and price cost pressures at our restaurant and food processing customers weighing out our businesses as we started the year.

Timothy J. FitzGerald: Even though challenges persist we are seeing improving order activity.

Timothy J. FitzGerald: In fact this to continue as we move through the year.

Timothy J. FitzGerald: Customers execute on state of business plans and as opportunities in the pipeline begin to convert.

Timothy J. FitzGerald: Well customers are slow to restock inventories given shorter lead times and higher carrying costs.

Timothy J. FitzGerald: Inventories in the channel have returned to normalized levels and now provide a tailwind as end-user sell-through occurs, and this bodes well for the latter part of the year. At a commercial food service business, customer execution has been slow this year given continued longer lead times for permitting and construction, along with longer deliberation on their business plans given the economics of higher restaurant operating costs. However, our channel partners are building backlogs weighted to the second half of the year, and our chain customers continue to maintain their plans for operational upgrades and store openings, which are also weighted to the second half.

Timothy J. FitzGerald: Inventories in the channel have returned to normalized levels and that will provide a tailwind as end users and user sell through occurs and this bodes well for the later part of the year.

Timothy J. FitzGerald: At our commercial foodservice business customer execution has been slow starting the year.

Kevin: Kevin continue.

Timothy J. FitzGerald: Continued longer lead times for permitting and construction along with longer deliberation on their business plans, given economics of higher restaurant operating costs.

Timothy J. FitzGerald: However, our channel partners are building backlogs weighted to the second half of the year.

Timothy J. FitzGerald: And our chain customers continue to maintain their plants for operational upgrades and store openings, which are also weighted to the second half.

Timothy J. FitzGerald: We are gaining market share in new and large product categories, such as beverage and ice. And we are well positioned to capitalize on our market-leading positions, capturing growing trends in ventless and electrified cooking. And we have early-stage traction with some of our game-changing innovations as we lead the future of automation, digital, and IoT. In our business, in our residential business, the housing market remains very challenged in terms of existing home sales.

Timothy J. FitzGerald: We are gaining market share in new and large product categories, such as beverage and ice.

Timothy J. FitzGerald: And we are well positioned to capitalize on our market leading positions capturing growing trends and boundless electrified cooking.

Timothy J. FitzGerald: And we have early stage traction with some of our game changing innovations as we lead the future of automation digital and Iot.

Timothy J. FitzGerald: At our business and our residential business. The housing market remains very challenged in terms of existing home sales.

Timothy J. FitzGerald: New Home Starts and Remodels. While the residential market will take time to fully recover, it has stabilized, with the luxury end of the market showing improvement over the past several quarters. We are now seeing growth in order rates, and we expect that to continue as we progress through the year. And we are well positioned to benefit from the many investments that we have made in new product innovation as we move beyond the current market conditions.

Timothy J. FitzGerald: New home starts and Remodels.

Timothy J. FitzGerald: While the residential market will take time to fully recover that has stabilized with the luxury end of the market showing improvement over the past several quarters.

Timothy J. FitzGerald: We're now seeing growth in order rates and we expect that will continue as we progress through the year.

Timothy J. FitzGerald: And we are well positioned to benefit from the many investments that we've made in new product innovation.

Timothy J. FitzGerald: We moved beyond the current market conditions.

Timothy J. FitzGerald: Many of these new product innovations were on display at the recent Kitchen & Appliance Show. We are proud to receive a Best of K-Biz Award at Viking for our new reveal series, and we were also awarded Best of K-Biz at Novi, one of our newest Middleby residential brands, which we are now launching into the U.S. market, featuring state-of-the-art induction cooking, integrated ventilation, and unique accent lighting

Timothy J. FitzGerald: Many of these new product innovations were on display at the recent kitchen and Bath show.

Timothy J. FitzGerald: We're proud to receive a best of cases towards at Viking for our new reveal series and we were also awarded best of cable cable does that note one of our newest middleby residential brands.

Timothy J. FitzGerald: Which we're now launching into the U S market featuring state of the art induction cooking integrated ventilation and unique accent Whiting.

Timothy J. FitzGerald: Our industry-leading brand portfolio, with launches of new colors, new designs, and new technologies, generated tons of excitement with builders, our dealer partners, and the design community at the show, leading to new business opportunities coming out of the show and a much greater awareness of all the Middleby residential portfolio has to offer. Our food processing business, and our customers are proceeding somewhat cautiously as they monitor food costs, demand levels, and the interest rate impact on larger projects. The pipeline of active projects continues to build for expansions and needed upgrades, with requirements to increase throughput, reduce labor, minimize food waste, and with a growing focus on sustainability. Automation remains in great demand.

Timothy J. FitzGerald: Our industry, leading brand portfolio with launches of new colors, new designs and new technologies generate tons of excitement with builders, our dealer partners and the design community at the show leading to new business opportunities coming out of the show and a much greater awareness for all.

Timothy J. FitzGerald: The middleby residential portfolio has to offer.

Timothy J. FitzGerald: Our food processing business.

Timothy J. FitzGerald: Customers are proceeding somewhat cautiously as they monitor food cost demand levels and the interest rate impact on larger projects.

Timothy J. FitzGerald: Still the pipeline of active projects continues to build for expansions and needed upgrades, where the requirements to increase throughput and reduce labor minimize food waste and with a growing focus on sustainability.

Timothy J. FitzGerald: Automation remains in great demand are.

Timothy J. FitzGerald: Our backlog remains healthy, and as market dynamics have become more stable, we're expecting the pipeline to convert into orders. Our strategy to become the leading provider of best-in-class, full-line, integrated solutions for the protein and bakery markets is responding, and we are best positioned to offer our customers state-of-the-art automation to address their operational and efficiency challenges. We posted continued overall strong profitability at our commercial and food processing segments in the quarter, despite revenue declines. However, residential margins were significantly challenged given the more significant market conditions and our strategic decision to invest in KBiz.

Timothy J. FitzGerald: Our backlog remains healthy and as we as market dynamics have become more stable, we're expecting the pipeline will convert into orders.

Timothy J. FitzGerald: Our strategy to become the leading provider of best in class full line integrated solutions for the protein and bakery markets is resonating and we are best positioned to offer our customers state of the art automation.

Timothy J. FitzGerald: To address their operational and efficiency challenges.

Timothy J. FitzGerald: We posted continued overall strong profitability at our commercial and food processing segments in the quarter Despite revenue declines.

Timothy J. FitzGerald: Residential margins were significantly challenged given the more significant market conditions and our strategic decision to invest in cases.

Timothy J. FitzGerald: We expect to return to the path of longer-term margin expansion as we benefit not only from revenue recovery but also as we realize greater benefits from profitability initiatives, including investments made at our factories to realize greater production efficiencies, along with the impact of favorable profitability on our newer product innovation. The supply chain also provides a continuing opportunity as we have moved away from the crisis management of the past several years and are now focused on leveraging our scale and realizing synergies across our business.

Timothy J. FitzGerald: We expect to return to the path of longer term margin expansion as we benefit not only from revenue recovery.

Timothy J. FitzGerald: Also as we realized greater benefits from profitability profitability initiatives.

Timothy J. FitzGerald: Including investments made in our factories to realize greater production efficiencies along with the impact of favorable profitability on our newer product innovations.

Timothy J. FitzGerald: Supply chain. It also provides a continuing opportunity as we have moved away from the crisis management over the past several years and are now focused on leveraging our scale and realizing synergies across our businesses.

Timothy J. FitzGerald: While we navigate the near-term market conditions, we continue to focus on the execution of our business strategies, expanding profitability, and growing our cash flow, while building upon our competitive advantage at each of our three industry-leading food service businesses, which we are confident is setting us apart in the long term. Now I'll pass the call over to James to spotlight some of our exciting, award-winning products we'll be unveiling at the National Restaurant Association show in Chicago later this month. Again, highlighting the results of our strategic focus to invest in and accelerate the pace of innovation.

Timothy J. FitzGerald: While we navigate the near term market conditions will continue to focus on the execution of our business strategies, expanding profitability and growing our cash flow while building upon our competitive advantage at each of our three industry, leading food service businesses that we are confident is setting us apart in the long term.

Timothy J. FitzGerald:

Timothy J. FitzGerald: Now I'll pass the call over to James to spotlight some of our exciting award winning products, we'll be unveiling.

James: The National Restaurant Association show in Chicago later, this month again, highlighting the results of our strategic focus to invest in and accelerate the pace of innovation.

James K. Pool: Thanks Tim. Last quarter, I remarked that Middleby had won eighth of the 28th Coveted Kitchen Innovation Award honors. But because of timing, I couldn't say which Middleby brands won. Well, with a little more than one week to go before the NRA show in Chicago, we are excited to introduce the Great Eight.

Timothy J. FitzGerald: James Thanks, Tim last quarter I remarked middleby in one in eight of the 28 Covenant Kitchen Innovation Award honors.

James K. Pool: The timing I couldn't say, which middleby brands, one well with a little more than one week to go before the NRA show in Chicago, We are excited to introduce the great eight.

James K. Pool: Blodgett, Pitco, Evo, Newton, Wonder Bar, Wild Goose Filling, VariMixer, and L2F, now known as Middleby Automation. These eight brands are the National Restaurant Show Association's KI winners. If you are attending the show May 18th through 21st, please make sure you visit the Kitchen Innovation Awards Pavilion to see and experience these new products from the grade eight, and then come check out Middleby to experience our latest solutions around digital, embedded, and robotic automation, as well as beverage solutions, and the launch of our newest combi, the Invoke, a Red Dot Design Award winner. We couldn't be happier with these new products.

James K. Pool: Well I did petco Evo Newton Wunder bar.

James K. Pool: How do you feeling very mixer and <unk> now known as Middleby automation. These eight brands are the National restaurant show associations K I winners. If you were attending the show may 18th through 'twenty. One. Please make sure you visit the kitchen Innovation Awards pavilion to see and experience. These new.

James K. Pool: Products from the Great eight and then come checkout middleby to experience our latest solutions around digital embedded and robotic automation as well as beverage solutions and the launch of our newest comedy the invoke a red Dot design Award winner.

James K. Pool: We couldnt be happier with these new products. These innovations are as diverse as our brands, but they were all developed with our customers daily challenges in mind.

James K. Pool: These innovations are as diverse as our brands, but they were all developed with our customers' daily challenges in mind. Labor Reduction and Simplification. Consistency of product.

James K. Pool: Labor reduction and simplification.

James K. Pool: Consistency of product throughput all aimed to maximize our customers' profitability.

James K. Pool: Throughput, all aimed to maximize our customers' profitability. In the interest of time, I won't go through each innovation, but you can find each one in the deck that Tim referenced. The first is the PictoTorque Fryer. The torque introduces continuous filtration and convective fryer, with Continuous Filtration and Auto Oil Top Off. The torque essentially provides infinite oil life for the operator, and with continuous filtration comes forced convection, as oil is forced to circulate around the food on its way to being filtered.

James K. Pool: In the interest of time I won't go through each innovation well you can bind each in the deck that Tim referenced.

James K. Pool: The first is the pickup torque fryer.

James K. Pool: Torque introduces continuous filtration and conductive Fry with.

James K. Pool: With continued continuing filtration and auto oil top off the torque essentially provide infinite oil wife for the operator.

James K. Pool: And the continuous filtration comes forced convection as oil is forced to circulate around the food well on its way to being filter. This for circulation reduces our cook times up to 10%.

James K. Pool: This forced circulation reduces our cook times by up to 10%. While we are talking about numbers, let's cover a few more. The torque is 10% more efficient than the typical ROV fryer and boasts flue temperatures 60% lower than the typical gas fryer, thus substantially reducing your kitchen ventilation requirements. Lastly, the torque reduces labor needed to filter a traditional fryer by up to 90%. By the numbers, this fryer stands to replace most fryers in the market today.

James K. Pool: While we were talking about numbers, let's cover a few more the torque is 10% more efficient than the typical <unk> fryer and boats flu temperature, 60% lower than the typical gas fired thus substantially reducing your kitchen ventilation requirements lastly, the torque reduces labor needed to filter.

James K. Pool: A traditional prior by up to 90% by the numbers. This prior stands to obsolete most fryers in the market today.

James K. Pool: Moving on to the Blodgett Invection Oven, this is a first-of-its-kind oven, allowing the operator to select between a high heat transfer, accelerated cook oven or a gentle convection oven by simply selecting a menu item from its Middleby OneTouch controller. Once the operator selects a menu item, the convection mechanic configures the oven for the optimal cooking profile, whether it be high-veloc This innovation enables a multi-cavity convection oven, typically found in the back of the house, to also function in the front of the house as an accelerated cooking oven, thus offering our customers the ability to cook ala minute. So whether you need to cook delicate laminated pastries in 20 minutes, or you need to cook something else, you can cook it ala minute. 16-Inch Pizzas in 3 minutes and 30 seconds? The Invection is your solution.

James K. Pool: Moving onto the blodgett convection oven.

James K. Pool: This is a first of its kind oven, allowing the operators to select between a high heat transfer accelerated cook oven.

James K. Pool: Or a gentle convection oven by simply selecting and menu item from it and there'll be one touch controller.

James K. Pool: Once the operators flex the menu items the infections mechanic configure the oven for the optimal cooking profile, whether it would be high velocity impingement air or gentle convection.

James K. Pool: This innovation enables a multi cavity convection oven typically found at the back of the house to also function in the front of the house as an accelerated cooking oven, thus offering our customers the ability to cook all of them in that.

James K. Pool: So whether you need to cooking delicate laminate the Patriots in 20 minutes or you need to Cook 16 inch pizza is in three minutes and 30 seconds. The infection is your solution.

James K. Pool: Now on to Beverage Dispensary. We have three brands introducing beverage dispensing products aimed at reducing waste while improving speed of service and delivering a better tasting, highly consistent product. I've spoken about Newton CFD valves in the past.

James K. Pool: Now on to beverage dispensing.

James K. Pool: We have three brands introducing beverage dispensing products aimed at reducing waste, while improving speed of service and delivering a better tasting highly consistent product I.

James K. Pool: I've spoken about Newton Cfd valves in the past.

James K. Pool: But now, we have two new products that feature the Valve's patent design that enable the consistent, precise delivery of beverage and or ingredients regardless of the factors that plague traditional valves, the Newton Discrete Valve and the Wonder Bar M5 Bar Gum. With these innovations, our customers now have confidence that they are serving bottle-quality beverages or dispensing individual ingredients without the expense of consistently calibrating their systems or wondering if their systems are in calibration.

James K. Pool: But now we have two new products that feature of the <unk> patent design that enable a consistent precise delivery of beverage and or ingredients, regardless of the factors that plagued traditional valves, the newton discrete valve and the wunder bar in five bar gun.

James K. Pool: With these innovations our customers now have confidence that they are serving bottle quality beverage or dispensing individual ingredients with the ERP expenses consistently calibrating their systems or wondering if their systems are in calibration, the new discreet valve and the wunder bar in five bar gun.

James K. Pool: The Newton Discrete Valve and the WonderBar M5 Bar Gun eliminate calibration, waste, reduce service calls, and improve customer satisfaction through consistent delivery of product. The Newton CFV valve is also being used throughout Middleby to control mixing and dispensing of highly concentrated ingredients, such as individual flavors, and even cleaners. These concentrations can be as high as 500 to 1, which unlocks our customers' ability to change how they distribute and dispense ingredients or even clean their equipment, say with Newton's new clean-in-place technology.

James K. Pool: Nate calibration waste reduced service costs and improved customer satisfaction through consistent delivery of product.

James K. Pool: Newton CFB valve is also being used throughout and it'll be to control mixing and dispensing of highly concentrated ingredients such as individual flavors. Even cleaners. These concentrations can be as high as 501, which unlocks our customers' ability to change how they distribute in suspense.

James K. Pool: <unk> or.

James K. Pool: Even cleaner equipment say with Newton's new clean in place technologies.

James K. Pool: The final dispensing solution that I'll discuss is the Wild Goose Cervisi, which utilizes the same filling systems to dispense beer that Wild Goose uses in its industry-leading high-speed canning. Cervizi turns anyone pouring their first beer into a seasoned bartender by automatically dispensing beer twice as fast as a normal tap system while also minimizing waste by precisely controlling the pour volume to the nearest fraction of an ounce or Cervizi also improves keg yield from 75% to 95% by controlling the pour volume and the beer serving condition.

James K. Pool: Final dispensing solution I will discuss is a wild goose for BC, which utilizes the same filling systems dispense sphere, the wild Dias uses and its industry, leading high speed Cannae lines.

James K. Pool: <unk> turns any one pouring their first bearing the season bartender by automatically dispensing beer twice as fast as a normal tap system, while also minimizing waste by precisely controlling the poor volume to the nearest fraction of an ounce or just a few million acres all with no training.

James K. Pool: <unk> also improved CAG, you from 75% to 95% by controlling the poor volume and the beer serving conditions why they'd get a chance to cover the other products such as the Pizza bought two point out Evo event, the very mixed certain or ago, we will hit those in later.

James K. Pool: While I didn't get a chance to cover the other products, such as the PizzaBot 2.0, EvoEvent, and VariMixer Ergo, we will hit those in later calls, or again, you can see them at the NRA show. But know they share the same traits as the other innovations I described today. They all reduce waste, increase throughput, maximize consistency, and decrease simplified labor, all of which improve our customers' profitability. Thank you, and over to you, Brian. Thanks, James.

James K. Pool: Calls or again, you can see them at the NRA show. They know they shared the same traits as the other innovations I described today, they all reduce waste increased throughput maximize consistency decreased simplified labor all of which improve our customers' profitability. Thank you and over to you Brian.

Brian: Thanks James.

Bryan E. Mittelman: For the first quarter, we generated revenue of $927 million and adjusted EBITDA of $186 million at a margin of 20%. Q1 GAAP earnings per share were $1.59, and adjusted EPS was $1.89. Commercial food service revenues globally were down 4% organically over the prior year, yet the adjusted EBITDA margin was consistent with the prior year at 26%. All the margin values I will go through are on an organic basis, meaning excluding any acquisitions and foreign exchange impact. In food processing, revenues for the first quarter were nearly $163 million.

Brian: For the first quarter, we generated revenue of $927 million and adjusted EBITDA of $186 million and a margin of 20%.

Bryan E. Mittelman: Q1, GAAP earnings per share $1, 59, and adjusted EPS was $1 89.

Bryan E. Mittelman: Commercial foodservice revenues globally were down 4% organically over the prior year, yet the adjusted EBITA margin was consistent with the prior year at 26% all the margin values that would go through are on an organic basis, meaning excluding any acquisitions and foreign exchange impacts.

Bryan E. Mittelman: In food processing revenues for the first quarter were nearly $163 million. This was our second best Q1 ever for this segment was a tough comp given the Q1 record was that last year. Our adjusted EBITDA margin held strong and was also consistent with the prior year and nearly 20.

Bryan E. Mittelman: This was our second best Q1 ever for this segment with a tough comp given the Q1 record was set last year. Our adjusted EBITDA margin held strong and was also consistent with the prior year at nearly 24%, and in Residential, we saw an organic revenue decline of 22% versus 20-25%. The adjusted EBITDA margin was over 6% and was negatively impacted by our investment to attend the Kitchen and Bath show for the first time since 2016.

Bryan E. Mittelman: 4%.

Bryan E. Mittelman: In residential we saw an organic revenue decline of 22% versus 2023.

Bryan E. Mittelman: The adjusted EBITDA margin was over 6% and was negatively impacted by our investment to attend to kitchen and Bath show for the first time since 2016.

Bryan E. Mittelman: We've seen a recent inflection in order rates, which is driving our view that residential revenues have hopefully started to move off their low points. A high point for the quarter was our exceptionally strong operating cash flows of nearly $141 million for the quarter and nearly $678 million for the trailing four quarters. It was our best first quarter ever, and our free cash flow conversion was around 135% for the trailing four quarters. Our total leverage ratio is now down to 2.4 times.

Bryan E. Mittelman: We've seen a recent inflection in order rates, which is driving our view that the residential revenues have hopefully started to move off their low point.

Bryan E. Mittelman: The high point for the quarter was our exceptionally strong operating cash flows of nearly $141 million for the quarter and nearly $678 million for the trailing four quarters. It was our best first quarter ever and our free cash flow conversion was around 135% for the trailing.

Bryan E. Mittelman: Four quarters.

Bryan E. Mittelman: Our total leverage ratio is now down to two four times.

Bryan E. Mittelman: Despite the challenging quarter we faced from a revenue perspective, our business model demonstrated that we have resilient margins and continually generate strong cash flows. Nonetheless, in Q2, you will see some further restructuring charges as we continue to take actions to appropriately manage the business given market conditions. As we work to protect our margins, we are also aggressively controlling costs.

Bryan E. Mittelman: Despite the challenging quarter, we face from a revenue perspective, our business model demonstrated that we are resilient margins and continually generating strong cash flows.

Bryan E. Mittelman: Nonetheless in Q2, you will see some further restructuring charges as we continue to take actions to appropriately manage the business given market conditions as we work to protect our margins. We are also aggressively controlling costs.

Bryan E. Mittelman: In terms of an outlook, I will start by reminding everyone that the second quarter of 2023 was our strongest revenue quarter ever. So, given recent order rates and demand for our innovation, we expect total Q2 revenues to be up at least mid-single digits sequentially from Q1. But given the tough comp, we anticipate falling a little short of the prior year revenue level overall. To provide greater insights, I will separately address each segment. In the commercial,

Bryan E. Mittelman: In terms of an outlook I will start by reminding everyone that the second quarter of 2023 was our strongest revenue quarter ever.

Bryan E. Mittelman: Given recent order rates and demand for innovation, we expect total Q2 revenues to be up at least mid single digits sequentially from Q1.

Bryan E. Mittelman: But given the tough comp, we anticipate falling a little short of the prior year revenue level overall.

Bryan E. Mittelman: To provide greater insights I will separately address each segment.

Bryan E. Mittelman: In commercial.

Bryan E. Mittelman: The year-over-year comparison for Q2 is especially tough given the all-time record revenue for us in 2023. While we may fall a little short of the prior year's revenue in Q2, sequentially, revenues could be up high single digits as compared to Q1. Our viewpoint is based on our backlog, which is currently up slightly from year-end, and that order rates have been improving over the past three quarters. Orders through April of this year are up 15% over the back half of 2023.

Bryan E. Mittelman: The year over year comparison for Q2 was especially tough given the all time record revenue for us in 2023.

Bryan E. Mittelman: While we May fall, a little short of the prior year revenue in Q2 sequentially revenues could be up high single digits as compared to Q1.

Bryan E. Mittelman: Our viewpoint is based on our backlog, which is currently up slightly from year end and that order rates have been improving over the past three quarters.

Bryan E. Mittelman: Orders through April of this year are up 15% over the back half of 2023.

Bryan E. Mittelman: We also expect margins to be in line with prior year levels. Looking into the back half of the year, at this time, we expect revenues to continue to grow sequentially and be at least mid-single digits above prior year levels. Moving on to food processing.

Bryan E. Mittelman: We also expect margins to be in line with prior year levels.

Bryan E. Mittelman: Looking into the back half of the year at this time, we expect revenues to continue to grow sequentially.

Bryan E. Mittelman: And be at least mid single digits above prior year levels.

Bryan E. Mittelman: Moving on to food processing.

Bryan E. Mittelman: Recall that Q2 of 23 was our second highest revenue quarter ever for that segment, and while I expect us to fall short of that revenue level in Q2 of 24, margins should be up over the prior year. And then, on a sequential basis, Q2 revenues and margins should be up meaningfully versus what we just posted for Q1. So recall that, you know, lumpy is a word used to describe this business sometimes.

Bryan E. Mittelman: Recall that the Q2 of 'twenty three was our second highest revenue quarter ever for that segment.

Bryan E. Mittelman: And while I expect us to fall short of that revenue level in Q2 of 'twenty four margins should be you know margins should be up over the prior year.

Bryan E. Mittelman: And then on a sequential basis Q2 revenues and margins should be up meaningfully versus what we just posted for Q1. So recall that lumpy is a word you used to describe this business sometimes.

Bryan E. Mittelman: As I look back to last year, we did see a big drop in revenues when we moved from Q2 to Q3, but that is not our expectation for Q3 of this year. We continue to see strength in this business overall. Orders in the past two quarters have been amongst our strongest intake periods for the segment. Thus, we are expecting that the second half of this year's revenues will be above the first half of this year and above prior year levels.

Bryan E. Mittelman: As I look back to last year, we did see a big drop in revenues. When we moved from Q2 to Q3, but that is not our expectation for Q3 of this year.

Bryan E. Mittelman: We continued to see strength in this business overall, whereas in the past two quarters have been amongst our strongest intake periods for this segment.

Bryan E. Mittelman: Thus, we are expecting that the second half revenues through this year will be above the first half of this year and above prior year levels.

Bryan E. Mittelman: In residential, the good news is that the order trend is moving slightly upward. Looking at the past couple of quarters and extrapolating on the start of Q2, we are trending above the first three quarters of 2023. Revenues for Q2 of 24 will likely not be ahead of the prior year, and this is due to a year ago, our domestic premium indoor appliances having posted a relatively strong quarter. Nonetheless, we are anticipating stable conditions in our European businesses when comparing Q2 of this year back to Q23, and we should see growth in the outdoor market in Q2. So, this all results in that Q2 revenues should be above Q1.

Bryan E. Mittelman: In residential the good news is that the order trend is moving slightly upward.

Bryan E. Mittelman: Looking at the past couple of quarters and extrapolating on the start of Q2, we are trending above the first three quarters of 2023.

Bryan E. Mittelman: Revenues for Q2 of 24 will likely not be ahead of the prior year and this is due to a year ago, our domestic premium indoor appliances, having posted a relatively strong quarter.

Bryan E. Mittelman: Nonetheless, we're anticipating stable conditions in our European businesses, when comparing Q2 of this year back to 'twenty, three and we should see growth in the outdoor market in Q2.

Bryan E. Mittelman: So this all results in a Q2 revenues should be above Q1.

Bryan E. Mittelman: Visibility to the second half of the year in residential is certainly limited, but given recent trends, revenue comps, and building upon our showing at KBiz in the overall strength of our portfolio, our view for the second half of this year is currently for growth, both as compared to the prior year and over the first half of this year. We are also working to maintain double-digit profit margins for the year. Bringing it all together, for the total company, we should continue to build and strengthen as we progress through 24. We look forward to Q2 being stronger than Q1.

Bryan E. Mittelman: Visibility to the second half of the year in residential certainly limited, but given recent trends revenue comps and building upon our showing at K bids and the overall strength of our portfolio R.

Bryan E. Mittelman: Our view for the second half of 'twenty four is currently for growth both as compared to the prior year and over the first half of this year.

Bryan E. Mittelman: We are also working to maintain double digit profit margins for the year.

Bryan E. Mittelman: Bringing it back altogether for the total company, we should continue to build and strengthen as we progress through 24 weeks.

Bryan E. Mittelman: We look to we look forward to Q2 being stronger than Q1 and.

Bryan E. Mittelman: And we continue to firmly believe at this time that for the second half of this year, we will deliver sequential and year-over-year growth. We remain focused on operational efficiency and optimally managing our resources. We are sharply focused on controlling and reducing our costs. We remain committed to improving our margins. These actions should drive year-over-year growth in cash generated and consistently high levels of free cash flow conversion as well. So, to further understand how we will achieve this, along with enjoying many tasty creations from both humans and kobops.

Bryan E. Mittelman: And we continue to firmly believe at this time it for the second half of this year, we will deliver sequential and year over year growth.

Bryan E. Mittelman: We remain focused on operational efficiency and optimally managing our resources, we are sharply focused on controlling and reducing our costs.

Bryan E. Mittelman: We remain committed to improving our margins.

Bryan E. Mittelman: These actions should drive year over year growth and cash generated and consistently high levels of free cash flow conversion as well.

Bryan E. Mittelman: So to further understand how we will achieve this along with enjoying many tasty creations from both humans and Cobalts, Please come and see our people and products in action at the National Restaurant Association show later this month here in Chicago.

Bryan E. Mittelman: Please come and see our people and products in action at the National Restaurant Association show later this month here in Chicago. Please reach out to us to arrange a visit so you can deeply understand how we are solving the needs of our customers, which will drive our growth in 24 and beyond. We remain committed to our mantra, More in 24. Thank you, and we will now take your questions.

Bryan E. Mittelman: Please reach out to us to arrange a visit so you can deeply understand how we are solving the needs of our customers, which will drive our growth in 'twenty four and beyond.

Bryan E. Mittelman: We remain committed to our mantra more in 'twenty four.

Bryan E. Mittelman: Thank you and we will now take your questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Mig Dobre with Baird. Please go ahead.

Speaker Change: We will now begin the question and answer session.

Mircea Dobre: To ask a question you May Press Star then one on your Touchtone phone.

Operator: If youre using a speakerphone please pick up your handset before pressing the keys.

Mircea Dobre: Is it any time your question has been addressed and you would like to withdraw your question. Please press Star then two.

Operator: At this time, we will pause momentarily to assemble our roster.

Operator: The first question today comes from Mick Dupre with Baird. Please go ahead.

Mircea Dobre: Thank you for taking the question. Good morning, everyone. Good morning, Rick.

Mircea Dobre: Thank you for taking the question good morning, everyone.

Mircea Dobre: Good morning, Greg.

Unknown Executive: So if I understand your guidance commentary correctly, it sounds like book-to-bill and commercial food service was above one because backlog went up a little bit in the quarter. When you sort of think about the outlook that you've laid out for Q2 and the rest of the year, are you essentially baking in stable backlog and just sort of orders ramping relative to Q1 and that flowing through? Or is there still sort of a backlog conversion element here that will come to sort of help us in the back half of 2020?

Mircea Dobre: No.

Mircea Dobre: If I understand your your guidance commentary correctly it sounds like book to Bill in commercial foodservice was above one because backlog went up a little bit in the quarter.

Unknown Executive: When you sort of think about the outlook that you've laid out for Q2 and the rest of the year.

Unknown Executive: Are you essentially.

Unknown Executive: King and stable backlog, and just sort of orders ramping relative to Q1 and that flowing through or is there still sort of a backlog conversion element here that comes to sort of help us in the back half of 2024.

Unknown Executive: Yeah, so I think we are thinking, it's not converting, we're not reducing our backlog further. That's not the assumption if you're, if that's the question.

Speaker Change: Yeah. So I think we are thinking it's not converting we're not reducing our backlog for that that's not the.

Unknown Executive: Assumption if you're if that's if that's the big question that is.

Unknown Executive: Yeah, I mean, I think we see order improvement as we go through the year, so I think we've... Backlog has come down, you know, as we had a lot, you know, backlog, I would say, orders that were pulled ahead. We've kind of gone, I'll say, maybe to a certain extent the other way, where inventory is not only at normalized levels, but a lot of our partners are slow to place orders, because they know lead times are short, they don't want to carry inventory, and our channel partners, they see kind of their end users, a lot of the projects are geared towards the half of the year, so they're not going to buy the product right now, they're going to buy it closer to, you know, execution.

Speaker Change: Yeah, I mean, I think I think as we see or improvement as we go through the year. So I think we've.

Unknown Executive: Our backlog has come down as we had a lot of backlog I'll say orders that were pulled ahead.

Unknown Executive: We've kind of gone I'll say, maybe to a certain extent the other way where inventory is not only yet at normalized.

Unknown Executive: Normalized levels, but a lot of our partners are slow to place orders because they know lead times are short they don't want to carry inventory and our channel partners. They see their end users a lot of the projects are geared towards that half of the year, so they're not going to buy the product right now they're going to buy it.

Unknown Executive: Sort of.

Unknown Executive: Execution.

Unknown Executive: So, when we started the year, January was pretty slow, not unexpectedly, for a whole variety of reasons, some of it even weather-driven. And then we saw it gradually improve as we went through the first quarter, and then it's improved a fair bit more as we've kind of gone into the early part of the second quarter. So that kind of lines up with a lot of the commentary that we get from our channel partners along with the discussions that we have with our chain customers, including what they see as the outlook, where the inventory is in the channel, and then kind of line that up with the order trends that we've had as we've progressed through the first four months of the year.

Unknown Executive: So when we started the year.

Unknown Executive: Understandable. Thank you for that. My follow-up, sticking with this segment, is on the margin side.

Unknown Executive: January was pretty slow not unexpectedly for a whole variety of reasons some of it even weather driven I mean, I always saw progressively improve as we went through the first quarter and then it improved.

Unknown Executive: Prudent.

Speaker Change: You know a fair bit for us we've got to go into the early part.

Unknown Executive: The second quarter, so that kind of lines up with a lot of the commentary that we get from our channel partners along with the discussions that we have with our chain customers. So I think a lot of the.

Unknown Executive: The view on the confidence we have is based on a kind of a transparent discussions that we have.

Speaker Change: With them, including what they see as the outlook, where the where the inventories in the channel and that kind of line that up with the order trends that we've had.

Unknown Executive: As we progressed through the first four months of the year.

Speaker Change: Understood. Thank you for that my follow up sticking with the segment.

Speaker Change: It is on the margin side.

Unknown Executive: You know, comparisons are tougher in the back half of the year, so how do you encourage us to think about margins? Especially on a year-over-year basis, and maybe related to all of this, are you seeing any sort of signs of price erosion or, you know, changing competitive dynamics in North America specifically?

Speaker Change: Comparisons are tougher in the back half of the year. So how do you encourage us to think about margins.

Unknown Executive: Especially on a year over year basis, and maybe related to all of this.

Unknown Executive: Are you seeing any any sort of signs of a price erosion or or you know changing competitive dynamics.

Unknown Executive: North America, specifically thank you.

Steven P. Spittle: Yes, I'll contact you with Steve here. I would say... not wholesale changes. I think the mix out there in the marketplace was a little bit different to start the year. I think some of the kind of more immediate replacement type business that tends to be more economy-driven was a little bit more prevalent, so I don't think that's more of a pricing element as it is a mix element. As we kind of get back to more of, I'll say, specified project-driven and chain-driven, we expect some of the mix to improve as we go through the year, so I think that's a little bit of the dynamic that we saw at the beginning of the year, and then maybe you want to touch on pricing. Yeah, Meg. This is Steve.

Speaker Change: Yeah, So I'll kind of tag team with Steve here.

Steve: I would say.

Steven P. Spittle: Not.

Steve: Wholesale changes I think the mix.

Steve: Out there in the marketplace. There is a little bit different to start the year I think some of the kind of more immediate.

Steve: A replacement type business that tends to be more economy, driven was a little bit more prevalent. So I don't think thats more of a pricing element as it is a mix element in that what should we kind of get back to more of I'll say specified.

Steve: Project, driven and chain change driven we expect some of the mix to improve as we go through the year. So I think that that's a little bit of the.

Steve: The dynamic.

Steve: That we saw at the beginning of the year and then maybe you want to touch on pricing.

Steven P. Spittle: We actually just recently announced a price increase that will be upcoming in commercial going into effect in mid-June. Our approach there was making sure that our divisions were really going skew-by-skew, customer-by-customer to make sure that we had captured all the price-cost dynamics that we've obviously all gone through over the past several years. So it'll be a relatively minimal increase or a little single-digit increase as compared to prior year increases, but still want to make sure we're being very thoughtful about it. I think pricing again has been one of the more strategic initiatives in the company the last couple years to make sure we're capturing costs but also making sure we're certainly in a good place from a competitive standpoint. So that again was recently announced a couple weeks ago, and it goes into effect in mid-June for commercial purposes.

Steven P. Spittle: Steve We actually just recently announced a price increase that will be upcoming in commercial.

Steven P. Spittle: Going into effect in mid June our approach. There was you know making sure our divisions were really going SKU by SKU customer by customer to make sure that we had captured you all.

Steven P. Spittle: All the price cost dynamics, but we've obviously all gone through over the past several years, so it'll be a.

Steven P. Spittle: I'll call it relatively minimal decrease our low single digit increases compared to the prior year increases but.

Steven P. Spittle: I want to make sure we're being very thoughtful back in pricing against they want a more strategic initiatives in the company. The last couple of years to make sure we're capturing cost, but also making sure. We're certainly in a good place from a competitive standpoint. So that again was recently announced a couple of weeks ago and it goes into effect in it.

Steven P. Spittle: Mid June for for commercial.

Bryan E. Mittelman: And then, you know, I'll bring it around, this is Bryan, to the margin side of the question. Obviously, you saw in Q1 that even with lower revenues, we were able to protect the margins, and that's, you know, coming from a variety of things, right? There are some, you know, commodity impacts in there. There's the impact of investments we've made in the business. There are impacts of, I'll call it, you know, ongoing, you know, striving for greater efficiency, cost control, you know, headcount control actions in there.

Steven P. Spittle: Then I'll bring it around this is Brian to the margin side of the question. Obviously you saw in Q1 that even with lower revenues, we're able to protect the margins and that's coming from a variety of things, but theres. Some commodities impacts in there there's the impact of investments we've made in the business there's impacts of I'll call. It an <unk>.

Bryan: Knowing you know as you're describing for greater efficiency cost control headcount control actions in there and so as we look forward as volumes grow. We will also have greater absorption I think we will have some modest pricing benefits as Tim was getting after it.

Bryan E. Mittelman: And so, as, you know, we look forward, as volumes grow, we'll also have, you know, greater absorption. I think we'll have some, you know, modest pricing benefits, as Tim was getting after. We believe, you know, mix will improve as well. So we put that all together, and, you know, as I think about how the segment will operate for the entire year, I do think we will be, you know, slightly, you know, modestly above the prior year. Obviously, there are some challenges, you know, always to overcome with the cost of inputs and supply chain and the like, but nonetheless, I think it is, so we'll be, you know, a positive year over year.

Bryan E. Mittelman: We believe mix will improve as well so we put that altogether and you know as I think about how this segment will operate for the entire year I do think we will be slightly modestly above.

Bryan E. Mittelman: The prior year, obviously, there's some.

Bryan E. Mittelman: Some challenges always to overcome with the cost of inputs in supply chain and the like but nonetheless think.

Bryan E. Mittelman: I think it is so it will be.

Bryan E. Mittelman: Our positive year over year.

Operator: Super; thanks for the call.

Speaker Change: Super Thanks for the color.

Operator: Yep.

Jeffrey David Hammond: The next question comes from Jeff Hammond with KeyBank Capital Markets. Please go ahead.

Operator: The next question comes from Jeff Hammond with Keybanc capital markets. Please go ahead.

Operator: Hey, good morning, everyone. Morning, Jeff. Good morning.

Jeffrey David Hammond: Hey, good morning, everyone.

Jeffrey David Hammond: Good morning, Jeff Good morning.

Unknown Executive: I just want to stay on commercial food. I think you mentioned some permitting delays, you know, customers kind of contemplating strategy. It was interesting that you said, you know, you think for the year you're up mid-single digits in commercial food, and that kind of implies, you know, high single-digit, low double-digit growth in the back half. And so, just wanted to get a better handle on... You know, if you're seeing some of these delays kind of move forward, and what gives you the confidence in that second half growth rate?

Jeffrey David Hammond: One is the commercial food.

Unknown Executive: You mentioned you know some permitting delays you know customers kind of contemplating strategy.

Unknown Executive: It was interesting that you you said you know you think for the year Europe mid single digits.

Unknown Executive: In commercial food and that kind of implies high single digit low double digit growth in the back half and so just wanted to get a better handle on.

Unknown Executive: You know if you're seeing some of these delays kind of move forward and what gives you the confidence in that second half growth rate.

Unknown Executive: Yeah, maybe just to add a little bit of color around delays. I mean, I think the world is not fully recovered from supply chains in some respects. I mean, as customers have tried to identify locations, open locations, right? They've got to get through construction, documentation, and permitting. Those things have taken, you know, a bit longer. We saw that at the back end of last year.

Speaker Change: Oh, Yeah, maybe just add a little bit of color around the delays I mean, I think the world has not fully recovered from supply chain in some regards I mean I think is.

Unknown Executive: Customers have tried to do it.

Unknown Executive: Identify locations opened locations right they've got to get through construction.

Unknown Executive: Construction documentation permitting those things have taken a bit longer we saw that in the back.

Unknown Executive: So, I mean, I think, you know, those things are improving in terms of, you know, just the world normalizing, you know, but that is one of the things that we know that a lot of our customers have struggled with, and that's, you know, delayed. So, I think those things will get better. I think there's a little bit of muscle memory as well as customers. The world has kind of gone from, you know, you know, from crisis management, you know, back to Strategic Execution of Business Plans, cause slowness coming out of the gates, plus there's a lot of just dynamics that people were absorbing, right?

Unknown Executive: Half of the year, So I mean, I think you know.

Unknown Executive: Those things are improving in terms of.

Unknown Executive: Just the world normalizing.

Unknown Executive: As one of the things that we know that they've got a lot of our customers have struggled and that's delayed so I think those things get better I think there is a little bit of muscle memory as well as customer the world has kind of gone from.

Unknown Executive: From crisis management back to.

Unknown Executive: Our strategic execution of business plans and.

Unknown Executive: We're at a little bit of a.

Unknown Executive: Restart and I think some of those things.

Unknown Executive: Cause slowness coming out of the gates plus there's a lot of just dynamics step people were absorbing right again, Andrew Scott, while they've been up for a bit here people had been monitoring it and interest rates have been higher for that long.

Unknown Executive: Again, you know, InterScots, while they've been up for a bit here, people have been monitoring it, and its rates have been higher for that long. And then just, you know, where was the pricing on venues? Because I think a lot of our customers had very favorable overlaps on the pricing that they had, you know, put through and were absorbing, you know, what was that impact on the consumer? What was the traffic at the end of the year, at the beginning of the year, when food costs?

Unknown Executive: And then just where was pricing on venues because I think a lot of our customers had very favorable overlaps to the pricing that they had.

Unknown Executive: Put through and were.

Unknown Executive: Absorbing.

Unknown Executive: What was that impact to the consumer.

Unknown Executive: What has been the traffic at the end of the year at the beginning of the year, where food costs. So I think they.

Unknown Executive: So I think they've been absorbing a lot of that relative to the plans they had coming into the year and then re-auditing, you know, those plans. And I think those plans have, by and large, held up, you know, and I think it's just, you know, taken a little bit more time to make sure that, hey, are we doing the right thing, and how are we, you know, working with, you know, our operators, et cetera.

Unknown Executive: They've been absorbing a lot of that relative to the planes that had come into the year and then re auditing those plans, but I think those plans are by and large held up you know and I think it's just taken a little bit more time to make sure are we doing the right thing and how are we working with our.

Unknown Executive: <unk> et cetera, So I think.

Unknown Executive: So I think, you know, we still see the strategies out there, you know, what they want to execute. So again, I think that's where maybe they weren't ready to go on January 1, but I think they're, you know, those things are still progressing, and I think that kind of gives us some of that confidence and the visibility. So again, why maybe things were slow to start, not entirely surprisingly, but, you know, while we think that, you know, the engine will be, you know, stepping on the gas pedal as we kind of progress to the next couple quarters.

Unknown Executive: We still see.

Unknown Executive: The strategies out there what they want to execute too. So again I think that's where maybe they weren't ready to go on January one but.

Unknown Executive: But I think those things are still progressing and I think that kind of gives us some of the you know the confidence and the visibility. So again why maybe things were the agile will start slow to start not entirely surprisingly in but you know what we think the.

Unknown Executive: The engine will be.

Unknown Executive: It will be stepping on the gas pedal.

Unknown Executive: As we kind of progress through the next couple of quarters.

Steven P. Spittle: Jeff, this is Steve. I'd just add on to that. I mean, I've talked about it before. I think one of the nice byproducts of the last several years is a lot more transparency from the chains in terms of new store opening plans. And I'll just say, even though, as Tim alluded to, a little bit slower start from a new store build perspective, they pretty much all recommitted several times to their overall plans for the year.

Speaker Change: Please go ahead, Jeff Steve I'd, just add onto that I mean, I've talked about before I think one of the nice byproducts of velocity for years, there's a lot more transparency from the chains in terms of your new store opening plans and I'd, just say, even though as Tim alluded to OLED floor start from a new store order or a new <unk>.

Steve: <unk> build perspective, they've pretty much all recommitted several times to their overall plans for the year. So I think that's what gives us confidence in more of the back half of the year I think the other thing too I would point out I know, we've talked about before the dynamic between new store you orders and the replacement orders that we have.

Steven P. Spittle: So I think that's what gives us confidence in more of the back half of the year. I think the other thing, too, I would point out, I know we've talked about before the dynamic between new store orders and the replacement orders that we feel like have been deferred over the last three, five, seven years. What's exciting is there are a number of the large chains that have announced, you know, initiatives where the corporate entity is going to help franchisees do, you know, refreshes to build, you know, their stores and help them in that replacement cycle.

Steven P. Spittle: Feel like have been deferred over the last year of 357 years whats been exciting is there's been a number of our large chains that have announced initiatives where.

Steven P. Spittle: Where the corporate entity, it's going to help franchisees, you'll do refreshes to build at their stores and help them in that replacement cycle. So I think that's a relatively new nuance. So we think new store builds you pick up the back half of the year and we're still very bullish on this replacement cycle that we see.

Steven P. Spittle: So I think that's a relatively new nuance. So we think new store builds pick up in the back half of the year, and we're still very bullish on, you know, this replacement cycle that we feel is going to really kick in over the next couple years specific to chain customers.

Steven P. Spittle: That's going to really kick in over the next next couple of years specific to the chain customers.

Unknown Executive: Okay, that's a great color. And then just a couple on Res Kitchen One, can you quantify the kind of one-time kbiz investment, and then Seems like you're, you know, maybe the D-stock's done finally and outdoor grills, and you feel a little bit better about that, but that, you know, kind of the U.S., indoor kitchen is still, you know, maybe one of the choppier areas, is that correct?

Speaker Change: Okay. That's great color and then just a couple on raws kitchen, one can you quantify the kind of one time cables investment and then it.

Unknown Executive: It seems like you're you know maybe the destock as dawn finally in outdoor grills and you feel a little bit better about that but that you know kind of the U S.

Unknown Executive: Indoor kitchen is still you know maybe one of the chop your areas is that correct.

Unknown Executive: Okay.

Unknown Executive: Yeah, on the KBiz investment, I'd put it at 150 to 200 basis points of drag in the quarter. Market Commentary.

Speaker Change: Yeah on the on the KBS investments I'd I'd put it 150 to 200 basis points.

Speaker Change: Of of drag in the quarter.

Speaker Change: Do you want to address the market commentary.

Unknown Executive: Yeah, so Yeah, no, I think that's right. I mean, we're you know, the inventory channel was, you know, far less of an issue I mean that was true in commercial as well as residential start in the The year so really starts coming down to end-user, you know demand Sell-through probably an outdoor has not been you know, very, you know strong So it's kind of a I'll say a neutral fast factor so far But we're early in the grill season, right?

Speaker Change: Yes, So oh, yeah, no I think that's right I mean, we're.

Unknown Executive: The inventory channel is far less of an issue I mean that was true in commercial as well as residential started the.

Unknown Executive: For the year, so it really starts coming down to end user demand.

Unknown Executive: Sell through probably in outdoor has not been very strong. So it's kind of a I'll say a neutral fashion factor so far.

Unknown Executive: But we're early in the girl season, right. So I think it is a what is yet to come as we start moving into <unk>.

Unknown Executive: So I think it is what has yet to come as we start moving into, you know spring, you know in summer months. So You know, so I think you know our revenues there will be highly, you know, depending on how real season, you know Forms not only through that but then that will lead into how do we think about you know? The restocking going into 2025 and we do feel like they're you know When in in some areas, you know picking up floor space and and the way the grill market works is some of those floor planning That happens right now Really, you know is geared toward next year not even this this year so we don't get some of those benefits till later later in the year with the indoor market Yeah, I mean, I think again we're kind of you know bouncing along, you know at the trough While we think the you know, a lot of our Consumers are really geared obviously that that upper, you know echelon and they're in the luxury market and we see some, you know improvement Some of that is a little bit longer, you know lead time So we've seen improvement in order rates and sometimes that the you know, the remodels and the new the new builds They don't need that product Next week like they may in the replacement market So we we see some of that starting to to pick up I think the cave this show was very good for us because again, it was a large investment, but we've really transformed the portfolio over the last number of years, adding new brands, new products, innovations, colors.

Unknown Executive: Spring and summer months so.

Unknown Executive: So I think you know our revenues there will be highly dependent on how real season, you know performs not only through that but then that will lead into how do we think about you know.

Unknown Executive: The restocking going into 2025, but we do feel like there.

Unknown Executive: We're winning in some areas picking up floor space and the way the grille market works with some of those floor playing that happens right now really is geared towards next year not even this year. So we don't get some of those benefits till later later in the year.

Unknown Executive: Where the indoor market.

Unknown Executive: Yeah, I mean, I think again we.

Unknown Executive: We're kind of.

Unknown Executive: Bouncing along.

Unknown Executive: At the trough.

Unknown Executive: While we think.

Unknown Executive: A lot of our consumers are really geared obviously that that upper echelon.

Unknown Executive: In the luxury market and we see some.

Unknown Executive: <unk>.

Unknown Executive: Some of that is a little bit longer lead time. So we have seen improvement in order rates and sometimes that the remodels and the new the new builds are they don't need that product.

Unknown Executive: Next week like they may in the replacement market. So we.

Unknown Executive: We see some of that starting to pick up.

Unknown Executive: The cave. This show was very good for us because again it was a large investment but we've.

Unknown Executive: Really transform the portfolio over the last number of years, adding new brands new products innovations colors. So it was very exciting show not only for us as a company, but for our channel partners. The builders. The deals that came through so I mean, I think that was really the intent is to kind of take the world a little bit.

Unknown Executive: So it was a very exciting show, not only for us as a company but for, you know, our channel partners, the builders, the dealers that came through. So, I mean, I think that was really, you know, the intent was to kind of take the world a little bit by surprise at how far we've come in the last, you know, five years. And now start funneling them, you know, to our residential showrooms that we've also invested in over the last, you know, couple of years, with our Chicago showroom opening in the middle of last year. So, I mean, I think those are the things that help pick up traffic there and build kind of a long-term pipeline of opportunities as people start, you know, converting over to the Middleby portfolio.

Unknown Executive: Surprised at how far we've come in in the last five years and that'll start to funnel all of them to.

Unknown Executive: Our residential showrooms that we've also invested in over the last couple of years with our Chicago showroom opening in the middle of last year. So I think those are the things that help pick.

Unknown Executive: Pick up traffic there and build.

Unknown Executive: Kind of a long term pipeline of opportunities as people start converting.

Unknown Executive: Over to the <unk> portfolio. So I mean, I think we see the gears turning there and we start seeing the housing.

Unknown Executive: So, I mean, I think we see the gears turning there, and then we start seeing the housing improve, but I think it's going to be a modest improvement that's going to, you know, take some time. So, but I think that's where, directionally, you know, we're at the beginning of kind of those those signs, and I think it'll just, it'll kind of, you know, we would like it to be V-shaped. I think it's a little bit more U-shaped. But, you know, I think we will see progression as we move through the year.

Unknown Executive: Improved, but I think it's going to be modest improvement that's going to take some time here, so, but I think thats, where directionally, we're at the beginning of kind of those.

Unknown Executive: Those sides and.

Unknown Executive: I think it will just kind of.

Unknown Executive: We would like it to be V shaped or I think it is a little bit.

Unknown Executive: More U shaped.

Unknown Executive: I think we will see progression as we as we move through the year.

Operator: OK, I appreciate it, guys.

Speaker Change: Okay I appreciate it guys.

Saree Emily Boroditsky: The next question comes from Saree Boroditsky from Jeffreys. Please go ahead.

Lawrence Tighe De Maria: The next question comes from Larry borrowed at ski from.

Saree Emily Boroditsky: From Jefferies. Please go ahead.

Operator: Hi, good morning. I just kind of wanted to build a little bit more on the residential questions. Can you just quantify the performance in Resi and, you know, in Grylls versus Viking versus Saga? And then when you talked about the improving order rates, it sounded like that was largely driven by the industry show, or if not, where did you see that uptick in demand come from?

Saree Emily Boroditsky: Hi, Good morning, I, just kind of wanted to dial it up online residential questions could you quantify the performance in <unk> and <unk>.

Operator: And grills first Viking for saga and.

Operator: And then when you talked about the improving order rate it sounded like that was largely driven by the industry show or if not where do you see that uptick in demand come from.

Unknown Executive: Saree, this is Brian. Sorry, could you repeat the first part of your question?

Operator: Yeah sure. This is Brian sorry could you repeat the first part of it.

Brian: Of your question.

Saree Emily Boroditsky: Just the performance in the quarter of Grylls vs. Viking vs. Aga. Oh, okay.

Brian: The performance in the quarter and of Grilles various Viking for saga.

Bryan E. Mittelman: Okay, I mean, it was a challenging quarter across, across the board in terms of, you know, the year over year, you know, comps. You know, I noted that Q2 last year was really strong for, I'll call it, you know, domestic premium or, you know, mostly Viking, but we have other brands as well. But we started the year there, last year, strong, as well. So certainly, you know, that that market has been down.

Speaker Change: Okay got you.

Speaker Change: Yeah, I mean, it was a challenging quarter.

Bryan E. Mittelman: Across our across the board in terms of the year over year.

Bryan E. Mittelman: Comps I noted.

Bryan E. Mittelman: You know the Q2 last year was really strong for all.

Bryan E. Mittelman: Domestic premium or more.

Bryan E. Mittelman: Mostly Viking, but we have other brands as well, but we started the year there.

Bryan E. Mittelman: Last year strong as well, so certainly you know that that market.

Bryan E. Mittelman: It has been down.

Bryan E. Mittelman: Aga and also the European markets have been continuing to be in challenging environments. We haven't really seen things improve in the UK housing market. I'll say on the continent, we've been maybe faring a little bit better given how Novi's offerings are responding, and on grills, we've seen a different buying pattern this season as compared to the past, with later load-in by our customers, albeit they're also being reserved in their buying. So Q1 did see weakness in grills, but we're actually looking forward to much improvement there should trends continue in the second quarter.

Bryan E. Mittelman: AGA in the I'll say the European markets.

Bryan E. Mittelman: Has it been continue to be.

Bryan E. Mittelman: Under in challenging environments, we haven't seen things really for improvement in the UK housing market I'll say on the continent, we've been maybe faring a little bit better.

Bryan E. Mittelman: Given.

Bryan E. Mittelman: How nobody's product after product offerings are.

Bryan E. Mittelman: Our are resonating and grills, we have seen a different buying pattern.

Bryan E. Mittelman: This season is.

Bryan E. Mittelman: As compared into the past with later.

Bryan E. Mittelman: <unk>.

Bryan E. Mittelman: They are IRA customers, albeit also theyre being reserved and they're buying so Q1 did see weakness in grills, but we're actually looking forward too much.

Bryan E. Mittelman: Much improvement there should trends continue.

Bryan E. Mittelman: In the second quarter.

Operator: Great. And then, you know, obviously, residential margins were weighed down by the show. What do you need to see to support double-digit margins in that segment? Is it just volume or anything else? And then how do you think about incremental margins when you do see volumes turn positive there? Thank you.

Speaker Change: Great and then I know, obviously residential margins were weighed down by the show them, what do you need to see to support double digit margins in that segment is it just volume or anything else and then how do you think about incremental margins. When you do see volumes turn positive there. Thank you.

Bryan E. Mittelman: You know, I think, once you strip off some of the show impacts, you know, recent history has been, you know, a good indicator of where the business can and does perform. So, you know, as we start getting closer to, you know, $200 million or even $190 million, we're likely to see closer to double-digit margins. You know, we continue to evaluate, you know, costs in this business.

Speaker Change: Yeah I think.

Bryan E. Mittelman: Once you strip out some of this show impacts that you know recent history has been.

Bryan E. Mittelman: A good indicator of where the business can.

Bryan E. Mittelman: And does perform so as we start getting closer to 200 million or even $190 million.

Bryan E. Mittelman: We're likely to see closer to the double digit margins.

Bryan E. Mittelman: We continue to evaluate costs.

Bryan E. Mittelman: In this in this business and you've seen obviously, we've been taking charges and we continually to no to address that so we will do more of that to make sure. We are right sized for the current.

Bryan E. Mittelman: And you've seen, obviously, we've been taking charges, and we continually, you know, address that. So we will, you know, do more of that to make sure we are, you know, right-sized for the current, you know, environment. But you know, operationally, we've been making significant investments in these operations, and that really does drive really positive, you know, increments. And I've noted to some before, you know, our factories in this segment tend to have, you know, more throughput than in commercial, right? We have fewer yet larger factories in terms of the volumes they run.

Bryan E. Mittelman: Environment.

Bryan E. Mittelman: Yeah.

Bryan E. Mittelman: Operationally, we've been making significant investments.

Bryan E. Mittelman: You know in these operations and that really does drive really positive.

Bryan E. Mittelman: <unk> I've noted to some before our factories and this segment tend to have more throughput than in commercial right. We have a fewer larger factories in terms of the volumes. They run so I'm not trying to minimize at all our focus on again looking at all the.

Bryan E. Mittelman: So I'm not trying to minimize at all our focus on, again, looking at all the current costs and actions. But, you know, dare I say, as the volumes come back, the margins will come, you know, racing back, as well.

Bryan E. Mittelman: Current costs and actions.

Bryan E. Mittelman: But dare I say as the volumes come back the margins will come racing back as well.

Operator: I appreciate the color, and I'll see you at the NRA show. Thank you. We'll see you next week.

Speaker Change: I appreciate the color and I'll see you at the NRA show. Thank you see you next week.

Operator: Thanks.

Tami Zakaria: The next question comes from Tami Zakaria of J.P. Morgan. Please go ahead.

Operator: The next question comes from Tami Zakaria with Jpmorgan. Please go ahead.

Operator: Hi, good morning. Thank you so much.

Tami Zakaria: Hi, good morning, and thank you so much.

Tami Zakaria: I have two questions regarding the commercial food.

Unknown Executive: I have two questions regarding the commercial food services segment. First of all, can you comment on the price realization you saw in that segment in the first quarter? I'm hoping to learn whether the negative organic growth was purely volume driven, or there is a mix of both price and volume.

Tami Zakaria: Services segment. So first of all what well can you comment on the price realization you saw in that segment in the first quarter I'm, hoping to learn whether the negative organic growth was purely volume driven or is it makes us both price and volume.

Bryan E. Mittelman: This is Bryan. It is mostly, you know, volume driven. We haven't taken, you know, many price actions recently, obviously. Steve noted that we'll be taking one, you know, a modest one, you know, currently. So it's fair to assume that that is, you know, very highly dominated by volume.

Unknown Executive: Yeah I mean this is Brian it is mostly.

Bryan E. Mittelman: Volume driven we haven't.

Bryan E. Mittelman: Taking you know many price actions recently, obviously, Steve noted that will be.

Bryan E. Mittelman: Taking one.

Bryan E. Mittelman: A modest one.

Bryan E. Mittelman: Currently so it's fair to assume that that is.

Bryan E. Mittelman: Very highly dominated by high volume.

Unknown Executive: Yeah, maybe I'll just, we did not have a price reduction, right, so it really is volume, and we did not take a, I'll say, a typical price increase at the end of the year. We've taken significant price increases over the last several years, you know, supply chain related. And I think as we went into this year, we were monitoring, you know, where we were at with the price cost standpoint. And we did see some cost increases, not only labor-related but, you know, even a little bit of supply chain as we went through the year.

Bryan E. Mittelman: Yeah, maybe I'll, just we did not have a price reduction right. So it really is volume and.

Unknown Executive: We did not take a I'll say a typical price increase at the end of the year, we've taken significant price increases over the last several supply chain related and I think as we went into this year, we were monitoring where were out with a price cost standpoint, and we did see some cost cost increases not only labor related but even a little bit of.

Unknown Executive: I changed we went through the year heads.

Unknown Executive: Hence, you know, you know, the evaluation as we went through Q1 as to why, you know, Steve's taken a price increase down on Q2. But as you kind of think about Q1, we got, you know, didn't go backwards on price. We didn't get a benefit, and we probably had a little bit of a weight of the supply chain still coming into the year.

Unknown Executive: State evaluation as you went through Q1 to what Steve has taken a price increase down in Q2, but as you kind of think about Q1, we get didn't go backwards on our price we won't get a benefit and we probably had a little bit of weight of supply chain still coming into the year.

Tami Zakaria: Got it. That's very helpful. So I wanted to follow up on that. So in June, you're taking a slight price increase. I think you mentioned low single digits. Again, I'm trying to understand whether the price increase might actually stick or face some resistance given demand is weak, and you just mentioned there's some price and cost pressure in the industry right now. So can you speak to the rationale for the June increase and how distributors are reacting to it, if you have already communicated that to them?

Speaker Change: Got it that's very helpful. So I wanted to follow up on that so in juniors, taking some price increase I think you mentioned low single digit.

Tami Zakaria: Again, I'm trying to understand whether the price increases might actually stick.

Tami Zakaria: I see some resistance given demand is weak and you just mentioned there is some price cost pressure in the industry right. Now so can you speak to the rationale for for the June increase and how distributors are reacting to it if you have already communicated to them about it.

Steven P. Spittle: Hey, Tami, this is Steve. It has been communicated to the marketplace at this point, and I do believe it will be relatively sticky. I mean, obviously, it's always a task to make sure it does come through, but I think given the thoughtfulness the team has put behind it, again, I keep coming back to it's not an across-the-board kind of peanut butter approach. It really is thoughtful on a skew-by-skew, customer-by-customer basis, so it's hitting both general market and chain customers. So we do believe it mostly holds – or it is sticky and certainly comes through in the early third quarter.

Speaker Change: Yeah tabulate the Steve It has been communicated out to the marketplace at this point and I do believe it will be it will be relatively sticky.

Steven P. Spittle: Obviously, it's always a attached to make sure it does come through but I think given the thoughtfulness. The team has put behind again I keep coming back to it it's not an across the board kind a peanut butter approach. It really is being thoughtful SKU by SKU customer by customer approach. So it's hitting both general market.

Steven P. Spittle: And in chain customers. So we do believe that it mostly holds Ernest sticky and certainly comes through and in early third quarter.

Operator: understood. Thank you.

Tami Zakaria: Understood. Thank you.

Brian Christopher McNamara: The next question comes from Bryan McNamara with Canaccord Genuity. Please go ahead.

Operator: The next question comes from Bryan Mckeag Tomorrow with Canaccord Genuity. Please go ahead.

Operator: Hey, good morning, thanks for taking the questions. I guess two for me on residential. First, a question we often get from investors is the breakdown in sales and grills versus the rest of the residential kitchen. I don't expect you to quantify, but can you give us maybe a qualitative picture of kind of how grills look today relative to when you first acquired them?

Brian Christopher McNamara: Hey, good morning, Thanks for taking the questions I guess two for me on residential first a question we often get from investors is the breakdown in sales grilles versus the rest of residential kitchen I don't expect you to quantify but can you give us maybe a qualitative picture of kind of how real work today.

Operator: Relative to when you first acquired them.

Bryan E. Mittelman: This is Bryan. Obviously, the grills are down quite significantly from when we bought them. I think we've said before, over 50%, and I'll probably leave it at that at this time. I think it's fair to, in general terms, I think about the segment in fourths. I'd say, if you think about it, I'll call it U.S. domestic indoor premium. I should say the UK business, the outdoor business, and then all else, which would primarily be, I call it, the continental European businesses.

Brian: This is Brian.

Bryan E. Mittelman: The I mean, obviously, the grilles are down quite significantly from when we.

Bryan E. Mittelman: Bought them.

Bryan E. Mittelman: I think we've said before over 50%.

Bryan E. Mittelman: Probably leave it at that.

Bryan E. Mittelman: At this time I think it's fair to in general terms.

Bryan E. Mittelman: You know I think about the segment.

Bryan E. Mittelman: And fourth our I'd say you know.

Bryan E. Mittelman: [noise] about I'll call it.

Bryan E. Mittelman: U S domestic indoor premium.

Bryan E. Mittelman: <unk>.

Bryan E. Mittelman: European.

Bryan E. Mittelman: Oh, I should say U K the U K business, the outdoor business and then I'll I'll switch would primarily be I'll call. It the European.

Bryan E. Mittelman: Continental European.

Bryan E. Mittelman: Mrs.

Unknown Executive: Yeah, that's helpful. And then secondly, on grills again, I'm curious what you're seeing currently with your retail partners in the category. Are they willing to either add to or at least hold floor space for the category? And if not, how do you break in given your relatively small size and brand recognition compared to the bigger players?

Speaker Change: Got it that's helpful. And then secondly on girls again, I'm curious what you're seeing currently with your retail partners in the category are they willing to either add to or at least hold floor space for the category and if not how do you break and given your relatively.

Unknown Executive: Relatively small size and brand recognition compared to the bigger players.

Unknown Executive: I'm not sure with the holding floor space if that was specific to us or Grillz overall. I mean, it's specific to the category, but I mean, presumably, you would need to be a part of that, just given your relative size at the moment.

Unknown Executive: I'm not sure where the holding floor space or if that was specific to us or.

Unknown Executive: Girls overall.

Unknown Executive: It's specific to the category, but I mean, presumably you wouldn't you would need to be a part of that just given your relative size at the moment.

Unknown Executive: Yeah, I mean, we've focused kind of on product differentiation, some of the new technologies that we've had, and I think, you know, one of the items that we've highlighted here is our connected platform, you know, both for Masterbuilt as well as for Kamado Gel. That's, you know, definitely something that we think we've got a lot of innovation that you don't see across the grill platform. Also, you know, we've had a heavy focus on charcoal, which is, you know, differentiated, particularly with the vertical charcoal, the Masterbuilt.

Unknown Executive: Yeah, I mean, I think we've we focus kind of on that.

Unknown Executive: Differentiation.

Unknown Executive: Some of the new technologies that we've had and I think one of the items that we've highlighted.

Unknown Executive: Here is our connected platform.

Unknown Executive: Both for Master built as well as commodities, Joe that's definitely.

Unknown Executive: Something that we think we've got a lot of innovation that that.

Unknown Executive: You don't see across the <unk> platform also we've had the heavy focus on charcoal which is.

Unknown Executive: Differentiated.

Unknown Executive: Particularly with the <unk>.

Unknown Executive: Vertical.

Unknown Executive: So, I mean, I think there are things that we offer that some of the other players out there do not have, and we think we follow some of the, you know, trends of the fuel type, which ties to, you know, flavor and digital, which, you know, ties to convenience and culinary. So, I mean, those are some of the things that we think some of the retail partners recognize, you know, also, and I think we've had some success with. You know, certain partners there are picking up, you know, floor space over the last 12 months there and, you know, probably going into 2025 as well.

Unknown Executive: Charcoal the master build so I mean, I think there's things that we offer that some of the other players out there do not have and we think we follow some of those.

Unknown Executive: The trends of the fuel type, which ties to flavor and digital which ties to convenience and culinary.

Unknown Executive: So I mean, I think those are some of the things that.

Unknown Executive: We think some of the retail partners recognize also and I think we've had some success with.

Unknown Executive: Certain partners there with pick it up floor space over the last 12 months, there and probably going into 2025 as well.

Operator: As a reminder, if you would like to ask a question, please press star then 1 to be joined in the question queue. The next question comes from Walt Liptak with Seaport Res. Please go ahead.

Unknown Executive: As a reminder, he would like to ask a question. Please press Star then one to be joined into the question queue.

Walter Scott Liptak: The next question comes from Walter Liptak with Seaport.

Walter Scott Liptak: Please go ahead.

Walter Scott Liptak: Thanks. Good morning, guys. I wanted to just back up to Bryan when he gave the guidance and can you just repeat the sales guidance for the year? I think you said that you were expecting sales to go higher, you know, to grow this year and margins as well as cash flow to be higher, is that correct?

Walter Scott Liptak: Hi, Thanks, Good morning, guys.

Speaker Change: I wanted to just.

Walter Scott Liptak: Back up to Brian when you gave the guidance and can you just repeat the the sales guidance for the year. I think you said the sales you were expecting sales to go higher to grow this year and margins as well as cash flow to be higher is that correct.

Bryan E. Mittelman: Yes, let me find my place in the script here. So on a total company basis, you know, I started with Q2 being stronger than Q1, right, and that as we look at the second half of the year, we will grow sequentially, you know, so Q3 above Q2, Q4 above Q3, as well as Q3 and Q4 being above prior year levels. I did note that for Q2, it will be a little bit of a challenge to achieve the prior year revenue level.

Walter Scott Liptak: Yes.

Bryan E. Mittelman: Yeah find my please script here yet so we're on a total company basis.

Bryan E. Mittelman: Starting with the.

Bryan E. Mittelman: Q2 will be stronger than Q1 right in that as we look at the second half of the year.

Bryan E. Mittelman: We will grow sequentially. So Q3 above the Q2 Q4 above Q3 as well as for Q3 and Q4 being above prior year levels I did note that for Q2.

Bryan E. Mittelman: We will be well.

Bryan E. Mittelman: There will be a little bit of a challenge.

Bryan E. Mittelman: To achieve the prior year revenue levels, So Q2, better than Q1, maybe a little short of prior year.

Bryan E. Mittelman: So Q2, better than Q1, maybe a little short of the prior year. Q3 and Q4, ahead of the prior year and also sequentially improving as we move through this year. And with that, those comments are very specific to revenues, but they do also, you know, generally apply, you know, to margins as, you know, as well. I do expect total company margin to improve, you know, sequentially as we move, you know, through the year. Obviously, we demonstrate we have a business that really gets nice increments and has, you know, nice leverage, and, you know, I'd expect to see that in the individual segments individually as well.

Bryan E. Mittelman: Q3 and Q4.

Bryan E. Mittelman: Ahead of prior year and also sequentially improving as we move through this year and.

Bryan E. Mittelman: And with that.

Bryan E. Mittelman: His comments are very specific.

Bryan E. Mittelman: Two revenues, but they do also generally apply.

Bryan E. Mittelman: To to margins.

Bryan E. Mittelman: As you know.

Bryan E. Mittelman: As well I do expect total company margin.

Bryan E. Mittelman: To improve sequentially as we move through the year. Obviously, we demonstrate we have a business that really gets nice increments and has nice nice leverage and I'd expect to see that in the segments individually as well.

Operator: Okay, and just to make sure I'm totally clear on this, so revenue. You're expecting revenue to go up this year, even with the tougher first quarter.

Speaker Change: Okay, and just to make sure I'm totally clear on this so the revenue you're expecting revenue to go up this year, even with the tougher first quarter.

Bryan E. Mittelman: Yeah, you know, and I think, you know, I know you're when you tear it apart, and that you do look at things, you know, by by segment, so total company revenue, we do expect it to go up, obviously, the challenging, the most challenging segment, and the one where I'd say we have, you know, some of the lesser visibility right now is exactly how, you know, residential, you know, will play out, you know So higher conviction in the other two segments, I think, in terms of the year over year, and I think we do end up still being a total company up year over year.

Speaker Change: Yeah, and I think I know you are.

Bryan E. Mittelman: When you tear it apart and that you do look at things.

Bryan E. Mittelman: Bye Bye segment. So total company revenue, we do expect up obviously the challenging the most challenging segment into one where I'd say we have.

Bryan E. Mittelman: Some of the lesser visibility right now is exactly how.

Bryan E. Mittelman: Residential.

Bryan E. Mittelman: Well, we'll play out where we have started a week or so.

Bryan E. Mittelman: Higher conviction.

Bryan E. Mittelman: And the other two segments I think.

Bryan E. Mittelman: Terms of the year over year, and I think we do end up still total company up year over year.

Bryan E. Mittelman: Okay.

Operator: Okay, good. And then just to follow up, when you guys were talking about the CFS segment and some of the strategic changes, or, you know, maybe strategy normalizing from the crisis, I noticed that Shake Shack commented that they were decreasing some investments this year. Was that what you guys were referring to, or is there something else out there in the market that you were referring to?

Speaker Change: Okay. Good and then just a follow up when you guys were talking about the.

Operator: The CFS segment.

Operator: And some of the strategic changes or maybe strategy normalizing from crisis.

Operator: I noticed that shake shack.

Operator: I commented that there were decreasing some investments. This year was that when you guys were referring to or is there something else out there in the market that you're referring to.

Unknown Executive: You know, you're talking about the overall idea of building kind of new stores and in the strength of what's happening out there, I mean, you know, our comments are not specific to one chain, certainly not specific to Shake Shack. I think as you look at the print across the board from, you know, the very large, you know, QSRs, right, that they have, you know, started the year slower in terms of, you know, completion of projects, right?

Operator: You were talking about the overall building kind of new stores and the strength of what's happening out there I mean <expletive> yeah. Our comments are not specific to one change certainly not specific to shake shack I think as you look at the print.

Unknown Executive: Across the board from you know the you know the.

Unknown Executive: Very large <unk> Sars right that they have.

Unknown Executive: Started the year slower in terms of completion of projects right, there was weather and permitting and such so again I think it's a pretty consistent comment we've seen across the large <unk> that no. One there they're all still committed to their build plans.

Unknown Executive: There was weather and permitting and such. So, again, I think it's a pretty consistent comment we've seen, you know, across the large QSRs that no one, they're all still committed to their build plans. It just, you know, did not start off the first quarter as probably exceeding any of their, you know, internal benchmarks for the total number of new doors to be opened.

Unknown Executive: Just did not start off the first quarter.

Unknown Executive: It is probably exceeding any of their internal benchmarks for the total number of new doors to be opened.

Unknown Executive: Okay, great. And maybe just one final one on the NRA. Joe, I think the Invoke copy oven that we've heard some things about is, you know, how, I wonder if you could tell us a little bit about the features and what you're expecting as you commercialize that product.

Speaker Change: Okay, Great and maybe just one final one on the NRA show I think you guys mentioned the invoke combi oven that we've heard some things about it.

Unknown Executive: I Wonder if you could tell us a little bit about the features and what you're expecting as you commercialize that product.

Unknown Executive: Yeah, so I'll jump in and talk about the Invoke. So we've spent the last several years designing the Invoke, and we finally, you know, have it out on the market. We think there's a ton of novel features in the Invoke. You know, kind of one of the first things that I like to talk about is the fact that we've developed a half-size combi oven that fits a full-size combi pan.

Joe: Yes, so I'll jump in and talk about the info. So we've spent the last several years.

Unknown Executive: Signing the evoke and finally have it out on the market.

Unknown Executive: I think there is a.

Unknown Executive: Ton of novel features in the invoke.

Unknown Executive: One of the first things that I like to talk about is the fact that.

Unknown Executive: We've developed a half sites combi oven that fits full sides combi.

Unknown Executive: So that means that.

Unknown Executive: So that means that, you know, if you think about a traditional full size combi oven, it's got, you know, kind of an X dimension. If you look at a half size combi oven, it's about a third less in volume than a full size combi. So what does that mean for the kitchen? That means more space for the, for other equipment in the kitchen. That means less, you know, hood requirement.

Unknown Executive: If you think about traditional full sized combi oven.

Unknown Executive: Scott you know kind of extra mentioned, if you look at our <unk> Combi oven, it's about a third.

Unknown Executive: Less than volume Danny a full size combi. So what does that mean for the kitchen that means more space for the for other equipment in the kitchen that means less.

Unknown Executive: Hood requirement.

Unknown Executive: It means lower energy input right into the product more efficient.

Unknown Executive: It means, you know, lower energy, you know, input rate into the product, a more efficient product. A couple of other features we've done is that we've really spent a lot of time on the wash cycle to reduce the amount of power going into the wash cycle. We have a steam on demand, you know, feature that is incredibly efficient, using 17% less energy for the steam on demand. And then I will say, you know, the last cool feature that we've done is that we've been able to add another shelf in the oven.

Unknown Executive: A couple of other features we have done is that we've really spent a lot of time on the wash cycle do you see amount of power going into the wash cycle, we have a steam on demand.

Unknown Executive: Feature that.

Unknown Executive: He is incredibly efficient using 17% less energy for the steam on demand.

Unknown Executive: <unk>.

Unknown Executive: And then I will say the last.

Unknown Executive: Cool feature that we've done is we've been able to add.

Unknown Executive: Add another shelf in the oven. So traditionally their economies are either six or 10 Pan here, we have a combi that at seven or 11.

Unknown Executive: So traditionally, you know, your combis are either 6 or 10 pans. Here, we have combis that have 7 or 11, you know, pans. So we've been able to increase the production capacity in the oven, and by doing that, we improve the efficiency of the oven as well. So we're pretty excited about it. Our combi has a Middleby one-touch control. It is open kitchen ready, so it is really one of the more advanced pieces of, you know, technology that we've got coming out at Middleby. And I think, you know, when you compare it to the other combis in the marketplace, this puts us right up at the number one, number two, you know, combi on the global market.

Unknown Executive: So we've been able to increase the.

Unknown Executive: The production capacity in the oven and by doing that we improve the efficiency of the oven as well. So we're pretty excited about it our combi Hasnt Middleby one touch control is open kitchen are ready.

Unknown Executive: So it's really one of the more advanced pizza techs.

Unknown Executive: Technology that we've got coming out at.

Unknown Executive: But it will be and I think you know what.

Unknown Executive: And you compare it to the other companies in the marketplace.

Unknown Executive: This puts us right up at the number one number two combi.

Unknown Executive: On the global market.

Operator: Okay, great. Thank you.

Speaker Change: Okay, great. Thank you yeah, I mean, I just you know I think I'm glad you asked the question because I mean I think we are excited about I think it is a good example of a lot we talked about innovation a lot James goes through it.

Unknown Executive: Yeah, I mean, you know, I'm glad you asked the question because I think we are excited, but I think it's a good example of a lot. We talked about innovation a lot, and James is going through it.

Unknown Executive: Our significant investments that we've made over a number of years a lot of different products.

Unknown Executive: That we think some of them are the future of innovation, where the restaurant is going which a lot of that has yet to be realized and so but our existing large markets copy is clearly one of those it's a large market.

Unknown Executive: These are significant investments that we've made over a number of years on a lot of different products that we think some of them are the future of, you know, innovation where the restaurant is going, a lot of which has yet to be realized. And some of them are existing large markets. Combi is clearly one of those.

Unknown Executive: We live in a lot of categories coffee is not not been one and this was a multiyear development.

Unknown Executive: Development project to make sure that we have the best in class features James just wants your mall, but water energy space throughput.

Unknown Executive: And again that.

Unknown Executive: The the ease of use with the control that.

Unknown Executive: It's a large market. You know, we lead in a lot of categories, Combi has not been one. And this was a multi-year development project to make sure that we had the best in class features. James just went through them all, but water, energy, space, throughput, and again, the ease of use with the control, that also, James, you know, a team we've developed over multiple years and connected to IoT, which we think is, you know, is the future, so it does have a lot of, you know, legs here, and I think it's going to be one of the things that that, you know, helps us grow, and we have a lot of expectations for it over the next several years, and we have a lot of channel partners that are highly not only intrigued, but engaged right now as we start bringing it to market, so I think it's another, you know, great example of a lot of things that we talk about.

Unknown Executive: That also changes the team have developed over multiple years and connected to Iot, which we think is the future. So it does have a lot of legs here, but I think it is going to be one of the things that.

Unknown Executive: It helps us.

Unknown Executive: <unk> grown we have a lot of expectations.

Unknown Executive: For it over the next several years and we have a lot of channel partners that are highly.

Unknown Executive: Dollar tree, but engaged right now as we start bringing it to market. So I think it's just another great example of a lot of things that we've talked about.

Unknown Executive: And I think this one will gain traction much like, you know, last quarter, James talked about, you know, ICE, right? Like, again, another large market of similar size. We've not necessarily been a player as you kind of went back a number of years ago, and we are gaining a lot of, you know, traction in that. We've got a full line of solutions there, and so whether that's success with some channel partners and some chains, we're starting to see that early this year. And again, I think one of the things that bodes well for us growing in certain targeted product categories as I'll just add one more point. The InvoCombi is shipping now.

Unknown Executive: And I think this one will gain traction much like last quarter, James talked about ice Lake again another.

Unknown Executive: Large market of similar size, we've not necessarily been a player as you kind of went back a number of years ago, and we are gaining a lot of traction in that we've got a full full lineup of solutions, there and so whether that success with some channel partners and some change we are starting to see that.

Unknown Executive: Early this year to get it and I think one of the things that bodes well for <unk>.

Unknown Executive: Australia and certain targeted product categories as we go through the next several years. So I'll just add one more point.

Unknown Executive: I'll just add one more point. The InvoCombi is shipping now, so we've been distributing the product in Europe for a number of months, and now we have just started distributing the product in the U.S., so it is actively being sold.

Unknown Executive: The company is shipping now so we are we've.

Unknown Executive: We've been distributing the product in.

Unknown Executive: In Europe now for a number of months and now we have just started distributing the product in the U S.

Unknown Executive: It is actively being sold.

Unknown Executive: Great.

Speaker Change: Thanks, Paul.

Operator: This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Speaker Change: This concludes our question and answer session I would now.

Speaker Change: Like to turn the conference back over to management for any closing remarks.

Timothy J. FitzGerald: Yeah, no. I'd like to thank everybody for being on the call. I just have one final comment, which is a little bit more of a follow-up to some of the questions on residential. So I'll say it's an answer to a question earlier. Just as we think about margins, fundamentally, our residential business is much stronger today than it's ever been. New Products, Manufacturing Efficiencies, Quality, the investments that we have made in distribution and some of the capabilities, things that are, you know, our design team, Sherome's, you know, etc.

Speaker Change: Yeah, no I'd like to thank everybody for being on the call I just got one final comment which is a little bit more of a follow up to some of the questions on residential.

Timothy J. FitzGerald: So I'll say, it's a answer too.

Timothy J. FitzGerald: Question earlier, just as we think about margins.

Timothy J. FitzGerald: Fundamentally our residential business is much stronger today than its ever been from.

Timothy J. FitzGerald: New products manufacturing efficiencies.

Timothy J. FitzGerald: Quality the investment so that we have made in <unk>.

Timothy J. FitzGerald: Distribution in some of the capabilities things that are.

Timothy J. FitzGerald: So Brian made a comment about margins coming racing back. We're operating at volumes that are far less than normalized periods. So pre-COVID, if you look at the number of units that are going through the factory. So just kind of re-answering a little bit of the question of what gives us confidence about the margins on that platform and why it is a great platform. You're seeing it, you know, at its worst right now, but it's actually the strongest it's ever been right now.

Timothy J. FitzGerald: Our design team shareholders et cetera, So Brian made a comment of margins come racing back we're operating at volumes that are.

Timothy J. FitzGerald: Far less than normalized period, so pre COVID-19. If you look at the number of units that are <unk>.

Timothy J. FitzGerald: Going through factory, so I'm, just kind of re answering a little bit of the question of what gives us confidence for the margins in that platform and why it is a great platform youre seeing it at its worse.

Timothy J. FitzGerald: Right now.

Timothy J. FitzGerald: But it's actually the strongest it's ever been right now so a normalized period.

Timothy J. FitzGerald: So a normalized, you know, period, we're pretty excited about all that, you know, residential has to offer. So certainly, we've got a couple quarters still here of rocky road ahead, but we see it, you know, inflecting, and just something that I wanted to hammer home, given that question that was put to Brian earlier. So with that, we'll wrap it up and thank everybody for attending the call today. The conference has now ended.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Excited about all the residential has to offer so certainly we've got a couple quarters still here of Rocky Road ahead, but we see it reflecting.

Operator: And just something I wanted to hammer home.

Operator: Given that that question of that.

Operator: Yep.

Operator: It was put to Brian earlier.

Operator: So with that.

Operator: That will wrap it up and thanks, everybody for attending the call today.

Operator: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: Yeah.

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