Q1 2024 John Bean Technologies Corp Earnings Call

Operator: Good morning, and welcome to JBT Corporation's first quarter 2024 earnings conference call. My name is Marvilou, and I will be your conference operator today. As a reminder, today's call is being recorded. At this time, all lines have been placed on mute to prevent any background noise.

Good morning, and welcome to JBT Corporation's first quarter 'twenty 'twenty four earnings Conference call. My name is Marvin and I will be your conference operator today.

Operator: As a reminder, today's call is being recorded.

Operator: This time all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I will now turn the call over to JVP's Vice President of Corporate Development and Investor Relations, Kedric Meredith, to begin today's conference. Kedric, you may begin.

Kedric Meredith: You would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Kedric Meredith: If you would like to withdraw your question Press Star one again, thank you.

Kedric Meredith: I will now turn the call over to Jbt's, Vice President of corporate development and Investor Relations Cadbury married deep to begin today's conference category you may begin.

Kedric Meredith: Thank you, Marva Liu. Good morning, everyone.

Kedric Meredith: Thank you Barbara Lou and good morning, everyone and welcome to our first quarter 2024 conference call with me on the call is our Chief Executive Officer, Bryan, Derek and Chief Financial Officer, Matt moisture.

Kedric Meredith: And welcome to our first quarter 2024 conference call. With me on the call is our Chief Executive Officer, Brian Deck, and Chief Financial Officer, Matt Meister. In today's call, we will use forward-looking statements that are subject to the Safe Harbor language in yesterday's press release and 8K filing. JVT's periodic SEC filings also contain information regarding risk factors that may have an impact on our results. These documents are available in the Investor Relations section of our website.

Kedric Meredith: Today's call we will use forward looking statements that are subject to the safe Harbor language in yesterday's press release and 8-K filings.

Kedric Meredith: Jbt's periodic SEC filings also contain information regarding risk factors that may have an impact on our results. These documents are available in the Investor Relations section of our website also our discussion today includes references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measure can be found in the Investor relations.

Kedric Meredith: Also, our discussion today includes references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measure can be found in the investor relations section of our website. Now, I'll turn the call over to Brian.

Kedric Meredith: Section of our website now I'll turn the call over to Brian.

Brian A. Deck: Thanks, Kedric, and good morning, everyone. JBT's first quarter, our seasonally lightest period, came in largely as expected.

Brian: Thanks, Scott and good morning, everyone.

Brian: Jbt's first quarter, our seasonally lightest period came in largely as expected.

Brian A. Deck: Consistent with previously outlined commentary, we continue to capture margin expansion with a 60 basis point increase in adjusted EBITDA margins compared with the prior year period. As announced in our April 5th press release, we signed a definitive transaction agreement with Morrell. The agreement, which was approved by both companies' boards of directors, reflects extensive collaboration between the teams. Based on our diligence, it confirms our belief in the industrial logic of the combination and the value creation opportunities for customers, shareholders, and other stakeholders.

Brian: Consistent with previously outlined commentary.

Brian A. Deck: Continued to capture margin expansion with a 60 basis point increase in adjusted EBITDA margins compared with the prior year period.

Brian A. Deck: As announced in our April 5th Press release, we signed a definitive transaction agreement with morale.

Brian A. Deck: The agreement, which was approved by both companies board of directors.

Brian A. Deck: It reflects extensive collaboration between the teams.

Brian A. Deck: Based on our diligence it confirms our belief in the industrial logic of the combination and value accretion opportunities for customers shareholders and other stakeholders. The agreement also represents a significant step forward in anticipation of the middle of a voluntary takeover offer.

Brian A. Deck: The agreement also represents a significant step forward in anticipation of the submittal of a voluntary takeover offer. With that, I'll turn the call over to Matt, who will walk you through our first quarter performance. Then I'll speak about the anticipated recovery in the poultry market and provide greater detail about the progress we've made on the proposed merger with Murrah.

Brian A. Deck: With that I'll turn the call over to Matt who will walk you through our first quarter performance, then I'll speak about the anticipated recovery in the poultry market and provide greater detail about the progress we've made on the proposed merger with morale.

Brian A. Deck: Matt?

Brian A. Deck: Sure.

Matthew J. Meister: Thanks, Brian, and good morning. Our revenue was $392 million, an increase of 1% year-over-year. Our gross margin in the quarter of 35.8%, an improvement of 160 basis points, was driven primarily by the cost-saving benefits of restructuring actions and continued progress on our supply chain initiatives. Adjusted EBITDA of $57 million increased 6% year-over-year, and the adjusted EBITDA margin increased 60 basis points to 14.6%, as increases in incentive compensation and in labor inflation partially offset the gross profit improvements we realized in the quarter.

Matt: Thanks, Brian and good morning.

Matthew J. Meister: For the first quarter, our revenue was $392 million, an increase of 1% year over year.

Matthew J. Meister: Our gross margin in the quarter of 35, 8% an improvement of 160 basis points was driven primarily by the cost saving benefits of restructuring actions and continued progress on our supply chain initiatives.

Matthew J. Meister: Adjusted EBITDA of $57 million increased 6% year over year.

Matthew J. Meister: And adjusted EBITDA margin increased 60 basis points to 14, 6%.

Matthew J. Meister: As increases in incentive compensation and labor inflation, partially offset the gross profit improvements we realized in the quarter.

Matthew J. Meister: From an operating perspective, we are pleased with our continued margin expansion. As we have discussed, we believe that JBT's greatest opportunity for margin improvement is from our supply chain initiative. In the first quarter alone, we realized savings of approximately $5 million in terms of direct, indirect, and logistics spend. Additionally, we have seen a significant and steady improvement in supplier on-time delivery, driven by our actions to consolidate procurement activity with key suppliers.

Matthew J. Meister: From an operating perspective, we are pleased with our continued margin expansion as we have discussed we believe that jbt's greatest opportunity for margin improvement from our supply chain initiatives in the first quarter alone we realized savings of approximately $5 million in terms of direct indirect and logistics spend.

Matthew J. Meister: Additionally, we have seen a significant and steady improvement in supplier on time delivery driven by our actions to consolidate procurement activity with key suppliers.

Matthew J. Meister: This has had a meaningful and positive effect on JBT's production efficiency, allowing our businesses to further shift their resources to additional supply chain and manufacturing productivity projects. First quarter adjusted EPS was $0.85 versus $0.61 in the prior year. EPS was positively impacted by our operational improvements, which added about $0.07 per share, as well as $9 million of net interest expense improvement, which contributed about $0.22 per share. This was partially offset by a higher effective tax rate for the quarter, which included a discrete item of approximately three cents.

Matthew J. Meister: This has had a meaningful and positive effect on jbt's production efficiency allow.

Matthew J. Meister: Allowing our businesses to further shift their resources to additional supply chain and manufacturing productivity projects.

Matthew J. Meister: First quarter adjusted EPS was <unk> 85 versus 61 in the prior year.

Matthew J. Meister: EPS was positively impacted by our operational improvements, which added about <unk> <unk> per share.

Matthew J. Meister: As well as $9 million of net interest expense improvement, which contributed about <unk> 22 per share.

Matthew J. Meister: This was partially offset by a higher effective tax rate for the quarter, which included a discrete item of approximately <unk> <unk> per share.

Matthew J. Meister: The first quarter is generally our seasonally slowest free cash flow quarter, and our results in the first quarter reflect our preparation for revenue growth through the remainder of the year. While we still have work to do on working capital management, we remain confident in our ability to achieve a free cash flow conversion rate in excess of 100% for the full year. As of the end of the first quarter of 2024, we completed our multi-year restructuring program, recording total charges of $18 million.

Matthew J. Meister: First quarter is generally our seasonally slowest free cash flow quarter and our results in the first quarter reflect our preparation for revenue growth through the remainder of the year.

Matthew J. Meister: While we still have work to do on working capital management, we remain confident in our ability to achieve a free cash flow conversion rate in excess of 100% for the full year.

Matthew J. Meister: As of the end of the first quarter of 2024, we completed our multiyear restructuring program recording total charges of $18 million.

Matthew J. Meister: All in, cumulative annual run rate savings are on track to be $18 million as we exit the quarter, of the second quarter of 2024. Regarding our full year 2024 outlook, we are reiterating our guidance for adjusted EBITDA at $295 to $310 million and adjusted EPS at $5.05 to $5.45, which at the midpoint represent 11% and 28% year-over-year growth, respectively. We continue to expect organic revenue growth of 4 to 6%. However, we did adjust the total revenue range to account for current expectations. Foreign Exchange Translation.

Matthew J. Meister: All in cumulative annual run rate savings are on track to be $18 million as we exit the quarter.

Matthew J. Meister: Second quarter of 2024.

Matthew J. Meister: Yes.

Matthew J. Meister: Regarding our full year 2024 outlook, we are reiterating our guidance for adjusted EBITDA at $295 million to $310 million and adjusted EPS at $5 five to $5 45.

Matthew J. Meister: Which at the midpoint represent 11% and 28% year over year growth respectively.

Matthew J. Meister: We continue to expect organic revenue growth of 4% to 6%. However, we did adjust the total revenue range to account for current expectations for foreign exchange exchange translation.

Matthew J. Meister: Additionally, we have updated guidance for GAP EPS to a range of $4.40 to $4.80 for the following item. First, we revise our expectations for M&A costs, which are now estimated to be $30-35 million for the full year, excluding any transaction contingent fees. Additionally, our updated forecast for net interest income of $2 million includes the impact of our new bridge credit facility secured as part of the expected tender offer for Morrell. Finally, in the second quarter, we are forecasting a discrete tax benefit of between $8 million and $9 million related to the successful implementation of internal tax planning actions. With that, let me turn the call back to Brian.

Matthew J. Meister: Additionally, we have updated guidance for GAAP EPS to a range of $4 40.

Brian: The $4 80 for the following items.

Matthew J. Meister: First we revised our expectations for M&A costs, which are now estimated to be 30% to $35 million for the full year, excluding any transaction contingent fees.

Matthew J. Meister: Additionally, our updated forecast for net interest income of $2 million includes the impact of our new bridge credit facility secured as part of the expected tender offer for morale.

Matthew J. Meister: Finally in the second quarter, we are forecasting a discrete tax benefit of between $8 million to $9 million related to the successful implementation of internal tax planning actions.

Matthew J. Meister: With that let me turn the call back to Brian.

Brian: Thanks, Matt.

Brian A. Deck: Orders booked in the first quarter of 2024 reflected select market softness in North America. Additionally, we experienced some order timing issues in our AGV business, but as we have been saying, that market remains quite robust. And while orders from the poultry industry in North America didn't recover in the first quarter, the economics of that market have continued to improve. Corn input prices costs have remained stable, while wholesale poultry pricing has increased due to more favorable supply-demand dynamics. For example, the benchmark large bird deboned breast meat is now hovering around $2 per pound versus less than $1 just five months ago.

Matthew J. Meister: Orders booked in the first quarter of 2024 reflected.

Brian A. Deck: <unk> market softness in North America.

Brian A. Deck: Separately, we experienced some order timing issues in our HIV business, but as we've been saying that market remains quite robust.

Brian A. Deck: And while orders from the poultry industry in North America didn't recover in the first quarter. The economics of that market have continued to improve.

Brian A. Deck: Corn input price costs have remained stable, while wholesale poultry pricing has increased due to more favorable supply demand dynamics.

Brian A. Deck: For example, the.

Brian A. Deck: Benchmark large bird debone breast meat is now hovering around $2 per pound versus less than $1 just five months ago.

Brian A. Deck: We're optimistic that the improved poultry industry economics will translate to orders during the second quarter. We are very encouraged by the expanding level of quote activity. Specifically, we are seeing demand for midstream and downstream equipment, which we call secondary and further processing. Producers are looking to increase output and efficiency of their value-added processes, to capture more margin dollars and address deferred investment.

Brian A. Deck: We are optimistic that the improved poultry industry economics will translate to orders during the second quarter.

Brian A. Deck: We are very encouraged by the expanding level of quote activity.

Brian A. Deck: Specifically, we are seeing demand for midstream and downstream equipment, which we call secondary and further processing.

Brian A. Deck: Producers are looking to increase output and efficiency of their value added processes.

Brian A. Deck: To capture more margin dollars and address deferred investments.

Brian A. Deck: Geographically, while orders softened year over year in North America, as discussed, inbound remained solid in Europe and the Middle East posted a record quarter; we enjoyed particular strength in fruit juice processing. Let me switch gears and provide updates on the proposed merger with Morrell. As I mentioned earlier, the execution of the definitive transaction agreement was a major milestone in combining our two companies. As outlined in the agreement, preserving Morale's heritage and culture is important to advancing the combined business.

Brian A. Deck: Geographically, while orders softened year over year in North America as discussed inbound remains solid in Europe, and middle East posted a record quarter.

Brian A. Deck: In terms of end markets, we enjoyed particular strength and fruit juice processing and convenience meals.

Brian A. Deck: And having had the opportunity to work closer with Morrell since the execution of the transaction agreement, I'm as confident as ever on the compelling industrial logic of the transaction, including meaningful value creation opportunities. We expect substantial revenue synergies, such as cross-selling, enhanced service, and an improved overall value proposition, which we continue to analyze and intend to communicate in connection with the offer launch. Regarding the cost synergies, we expect annual run rate benefits of more than $125 million within three years of transaction close, and we continue to explore for upside as we refine our work.

Brian A. Deck: Let me switch gears and provide updates on the proposed merger with morale.

Brian A. Deck: As I mentioned earlier the execution of definitive transaction agreement was a major milestone in combining our two companies.

Brian A. Deck: As outlined in the agreement preserving morose heritage and culture is important to advancing the combined business.

Brian A. Deck: And having the opportunity work closer with morale since the execution of the transaction agreement I'm as confident as ever on the compelling industrial logic of the transaction, including meaningful value creation opportunities.

Brian A. Deck: We expect substantial revenue synergies such as cross selling enhanced service and improve and an improved overall value proposition.

Brian A. Deck: Which we continue to analyze and intend to communicate in connection with the offer launch.

Brian A. Deck: Okay.

Brian A. Deck: Regarding the cost synergies, we expect annual run rate benefits of more than $125 million within three years of transaction close and continue to explore for upside as we refine our work.

Brian A. Deck: We anticipate approximately 45% of cost synergies will come from cost of goods sold and approximately 55% from operating expenses. In terms of cost of goods sold, we expect to generate meaningful supply chain savings as the combined company consolidates and optimizes procurement, standardizes components through value add, value engineering processes, and expands best cost country sources. We also expect to leverage the combined production capacity and gain efficiencies across a broader footprint. As relates to OPEX, we expect to realize savings from cost overlaps, including IT systems, public company costs, third-party contracts, and certain back-office resources.

Brian A. Deck: We anticipate approximately 45% of cost synergies will come from cost of goods sold and approximately 55% from operating expenses.

Brian A. Deck: In terms of cost of goods sold we expect to generate meaningful supply chain savings as a combined company consolidates and optimizes procurement standardizes components through value add value engineering processes.

Brian A. Deck: And expands best cost country sourcing.

Brian A. Deck: We also expect to leverage the combined production capacity and gain efficiencies across a broader footprint.

Brian A. Deck: As it relates to Opex, we expect to realize savings from cost overlaps, including it systems public company costs third party contracts and certain back office resources.

Brian A. Deck: Additionally, we will leverage the combined company's R&D and selling and service resources to have a greater collective impact for the customer. Since the announcement of the transaction agreement, JVT and Morrell have made considerable progress on the conditions required to launch the offer. In mid-April, we initiated the review process of the offer document and prospectus with the Financial Supervisory Authority of Iceland, or the FSA. In May, we expect to file the registration on Form S-4 with the SEC, which will contain a preliminary proxy statement and prospectus.

Brian A. Deck: Additionally, we will leverage the combined company's R&D and selling and service resources to have a greater collective impact for the customer.

Brian A. Deck: Since the announcement of the transaction agreement JBT and morale have made considerable progress on the conditions required to launch the offer.

Brian A. Deck: In mid April we initiated the review process of the offer document and prospectus with the financial Supervisory authority of Iceland.

Brian A. Deck: The FSA.

Brian A. Deck: In May we expect to file the registration on form S. Four with the SEC, which will contain a preliminary proxy statement and prospectus.

Brian A. Deck: Subject to the approval of the required documents by the FSA, we expect to promptly launch the voluntary takeover offer. At that point, we plan to host a joint transaction-specific investor call. We have secured a fully committed bridge financing facility to guarantee funds for the takeover offer as required, and we'll pursue a conventional long-term financing structure in connection with the closing of the transfer. In terms of other work streams, we have filed antitrust notification documents in the U.S. and started comparable regulatory clearance work in other filing jurisdictions.

Brian A. Deck: Subject to the approval of the required documents by the FSA, we expect to promptly launched the voluntary takeover offer.

Brian A. Deck: At that point, we plan to host a joint transaction specific investor call.

Brian A. Deck: We have secured a fully committed.

Brian A. Deck: Bridge financing facility to guarantee funds for the takeover offer as required.

Brian A. Deck: And we will pursue a conventional long term financing structure in connection with the closing of the transaction.

Brian A. Deck: In terms of other work streams, we have filed antitrust notification documents in the U S and started comparable regulatory clearance work and other filings jurisdictions.

Brian A. Deck: In early summer, we expect to commence the formal application for the secondary NASDAQ Iceland listing, and pending approval of the final S4 by the SEC, we expect to hold JBT's shareholder vote later in the summer. While the overall transaction timetable remains primarily dependent on the regulatory clearance process, we continue to plan for a year-end close of the transaction. As always, let me extend my sincere thanks to our teams around the globe that deliver exceptional service and solutions to our customers every day. I would also like to extend my appreciation to our partners at Morrell as we work together to advance the value-creating combination of our two great businesses. With that, let's take your questions. Operator.

Brian A. Deck: In early summer, we expect to commence the formal application for the secondary NASDAQ Iceland listing.

Brian A. Deck: And pending approval of the final S. Four by the SEC expect to hold Jbt's shareholder vote later in the summer.

Brian A. Deck: Okay.

Brian A. Deck: While the overall transaction timetable remains primarily dependent on the regulatory clearance process. We continue to plan for a year end close of the transaction.

Brian A. Deck: As always let me extend my sincere thanks to our teams around the globe that deliver exceptional service and solutions to our customers every day.

Brian A. Deck: I would also like to extend my appreciation to our partners at morale as we work together to advance the value, creating combination of our two great businesses with that let's take your questions operator.

Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening through a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the conversation, and your first question comes from the line of Meade Dobre with Robert W. Baird and Company. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Florida is now open for questions. If you have dialed in and I would like to ask a question. Please press star one on your identical.

Mircea Dobre: Go ahead and join the queue.

Mircea Dobre: I would like to withdraw your question. Thank you Brad when again, if you are called upon to ask a question Ed or listening via loud speakers on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

Mircea Dobre: Brett sorry, one to join the queue.

Mircea Dobre: And your first question comes from the line of Dobrich withdraw Bert W. Baird and company. Please go ahead.

Joe Grabowski: Hey, good morning guys. It's Joe Grabowski on for MIG this morning. Morning. Hey, good morning.

Mircea Dobre: Hey, good morning, guys, it's Joe Grabowski on for Mig This morning.

Joe Grabowski: So I wanted to start with your guidance, your organic sales guidance. Based on the 47 percent, 53 percent, first half, second half split, that would seem to imply organic sales of about 1 percent in the first half and about 8 or 9 percent in the second half. Correct me if I'm not right on that, but with orders down a little bit each of the last two quarters, I guess what gives you the confidence that you'll see that level of sales lift in the second half?

Joe Grabowski: <unk>.

Mircea Dobre: Hey, good morning, So I wanted to start with your guidance your organic sales guidance.

Joe Grabowski: Based on a 47%, 53% first half second half split.

Joe Grabowski: That would seem to imply organic sales of about 1% in the first half.

Joe Grabowski: And about.

Joe Grabowski: Eight or 9% in the second half.

Joe Grabowski: Correct me, if I'm right on that.

Joe Grabowski: It's down a little bit each of the last two quarters I guess, what gives you the confidence.

Joe Grabowski: Thank you will see that level of sales lift in the second half.

Brian A. Deck: Sure, I'll speak to that. This is Brian.

Joe Grabowski: Sure.

Joe Grabowski: I'll speak to that this is Brian So first and foremost we have a strong backlog going into the year into the year end and as we sit here today. So we do have visibility as to already what's in the backlog and the delivery schedule for that.

Brian A. Deck: So first and foremost, we have a strong backlog going into the year end and as we sit here today. So we do have visibility as to what's in the backlog and the delivery schedule for that. Secondly, I'd also say that, as I mentioned on our call, we do expect some improvements over the course of the next year with respect to the poultry industry. As you know, that's about 25% of our general market.

Brian A. Deck: Secondly, I would also say that as I mentioned on our call. We do expect some improved improvements over the course of the next.

Brian A. Deck: A few quarters with respect to the poultry industry as you know that's about 25% of our of our general market.

Brian A. Deck: So we do expect that to improve as we progress through the course of the year here. So everything really played out as expected in Q1. So no need for us to change any gears. Everything is going as we expected with the slight modification of the FX translation.

Brian A. Deck: So we do expect that to improve as we progress through the course of the year here. So everything really played out as expected in Q1.

Brian A. Deck: So no need for us to changing gears are everything is laying out as we expected with a slight modification of the FX translation.

Joe Grabowski: Okay, great. Thanks.

Speaker Change: Okay, great. Thanks, and then maybe just drilling in on the North American poultry market.

Joe Grabowski: And then maybe just drilling in on the North American poultry end market. I think in the slide deck in the prepared remarks, you said you expected some orders to start flowing in the second quarter. I guess maybe the level of visibility into those orders and whether there is any risk that maybe they're going to kind of slip into the second half of the year and maybe some of that revenue doesn't get recognized until next year.

Joe Grabowski: The slide deck in the prepared remarks, you said you expected some orders.

Joe Grabowski: Following in the second quarter, I guess, maybe the level of visibility in terms of orders and.

Joe Grabowski: Is there any risk that maybe they are going to kind of slip into the second half of the year and maybe some of that revenue doesn't get recognized until next year.

Brian A. Deck: Well, there's certainly always that risk, but as I sit here today, we looked at the last couple quarters. We were talking about a strong pipeline. Now we're talking about strong quotes, right?

Speaker Change: Well there is certainly always that risk, but as I sit here today, we do.

Brian A. Deck: <unk> looked at that over the last couple of quarters, we were talking about a strong pipeline now we're talking about strong quotes right. So it's really about those quotes converting to orders as we go through the next.

Brian A. Deck: So it's really about those quotes converting to orders as we go through the next couple of quarters. But things can always slip from one quarter to the next. Generally speaking, our lead times are three to six months, so you can even go into the third quarter and still have the opportunity to meet your numbers. And what's really encouraging is that, again, because of the fundamentals of the business, our customers are making money, which is good.

Brian A. Deck: A couple of quarters, we always it seems to me, it's always slip from one quarter to the next generally speaking our lead times are three to six months. So you can even go into the third quarter and still have opportunity.

Brian A. Deck: To meet your numbers.

Brian A. Deck: What's really encouraging is just again because of the fundamentals of the business our customers are making money which is good.

Brian A. Deck: They've opened up the conversations, and they're accepting quotes. Honestly, we're quoting like crazy right now, so it's really a matter of getting those quotes converted to orders, and I don't think we'll be at full run rate in the second quarter, frankly, but we do expect to see the beginning of that activity and then flow into the third quarter from there. Okay.

Brian A. Deck: They've opened up the conversations were accepting quotes.

Brian A. Deck: Honestly, we're quoting like Crazy right now so it's really a matter of getting those quotes converted to orders in.

Brian A. Deck: I don't think we'll be at full run rate in the second quarter, frankly, but we do expect to see that beginning of that activity.

Brian A. Deck: And then flow into the third quarter from there.

Joe Grabowski: Okay, I'll pass it along. Thanks for taking the time to answer my questions.

Pat: Okay Pat.

Speaker Change: Pass along thanks for taking my questions.

Speaker Change: Thank you.

Joe Grabowski: Okay.

Walter Scott Liptak: And your next question comes from the line of Walter Liptak with Seaport Global.

Joe Grabowski: And your next question comes from the line of Walter Liptak.

Walter Scott Liptak: Jack.

Walter Scott Liptak: The board.

Walter Scott Liptak: Yes.

Walter Scott Liptak: Hey, thanks. Good morning, guys.

Walter Scott Liptak: Hey, Thanks, good morning, guys.

Walter Scott Liptak: Good morning, I wanted to ask about maybe just a follow on to the last one.

Walter Scott Liptak: With the orders.

Walter Scott Liptak: Can you tell us anything about how April went like.

Walter Scott Liptak: With HGV.

Walter Scott Liptak: The timing of those orders do they come in in April are those still.

Walter Scott Liptak: And then it comes in later in the quarter and then same thing for poultry or are you starting to see any lift into April.

Walter Scott Liptak: I wanted to ask about, maybe just to follow on to the last one with the orders, you know, can you tell us anything about how April went, like, you know, with AGV, you know, the timing of those orders, did they come in in April? Are those still something that comes in later in the quarter? And then same thing for poultry.

Walter Scott Liptak: Sure.

Speaker Change: We typically don't give individual guidance on core a months within the quarter, but what I will tell you. There's a couple of things one as we went through the first quarter every subsequent months got better than the prior so the trend is generally good in <unk>.

Walter Scott Liptak: We do have confidence in the second quarter as a whole on HEV specifically.

Brian A. Deck: Are you starting to see any lift in April?

Brian A. Deck: The shift from prostate or Miss if you will in Q1 with somewhere between 10 and $15 million for HGV actually closer to 15.

Brian A. Deck: We certainly expect that in the second quarter and generally speaking, we expect a strong quarter from from HIV here in the second quarter. So again everything is essentially laying out as expected with the one exception of the HEV slipped.

Brian A. Deck: Sure. We typically don't give individual guidance on months within the quarter, but what I will tell you is a couple things. One, as we went through the first quarter, every subsequent month got better than the preceding month. So the trend is generally good, and we do have confidence in the second quarter as a whole. On AGV specifically, the shift from, or I'll say the miss, if you will, in Q1 was somewhere between $10 and $15 million for AGV, actually closer to $15.

Brian A. Deck: Slip of that.

Brian A. Deck: On almost $15 million or so.

Speaker Change: Okay great.

Brian A. Deck: And then.

Speaker Change: Just maybe another follow on.

Brian A. Deck: You mentioned that the second quarter orders would be better, but maybe not full I wonder if you could if that means that it looks like when I look back at last year. It looks like it's a tough comp.

Brian A. Deck: Our orders that was a good order period could you get to.

Brian A. Deck: Okay.

Brian A. Deck: $445 million, which would be flat orders in the second quarters.

Brian A. Deck: Should be thinking about.

Brian A. Deck: We certainly expect that in the second quarter, and generally speaking, we expect a strong quarter from AGV here in the second quarter. So, again, everything is essentially laying out as expected with the one exception of the AGV slip of that almost $15 million or so.

Brian A. Deck: Well without giving specific numbers I do certainly expect a better quarter than the second quarter without question the comp versus last year is tough because if you recall, we had those very large pharma orders, so it's a little bit tough.

Walter Scott Liptak: Okay, great. And then, you know, just maybe another follow-on. You mentioned that the second quarter orders would be better, but maybe not full. I wonder if you could tell me if that means that, you know, when I looked back at last year, it looked like it was a tough competition for orders, but that was a good order period. Could you get to... Say, you know, $445 million, which would be flat orders in the second quarter? That's what we should be thinking about.

Speaker Change: I tend to not focus on any one individual quarter I just look at the trends and I look at do we have the backlog do we have.

Walter Scott Liptak: The momentum to continue to support our guidance on revenue and we feel we do so I feel good about it and we'll.

Brian A. Deck: Well, without giving specific numbers, I do certainly expect a better quarter in the second quarter, without question. The comp versus last year is tough because, if you recall, we had those very large pharma orders. So it's a little bit tough.

Speaker Change: We'll see how things turn out but certainly.

Speaker Change: Certainly I do expect an improvement sequentially.

Speaker Change: Okay. Thanks, Yeah, I think the data point about about quotes.

Brian A. Deck: Great.

Brian A. Deck: <unk>.

Brian A. Deck: We get that that's starting to pick up.

Brian A. Deck: For poultry.

Speaker Change: Wonder if I can ask one last one on aftermarket sales.

Brian A. Deck: They shifted down a little bit.

Brian A. Deck: In the quarter from last year I Wonder if you can talk about that and maybe talk about the aftermarket.

Brian A. Deck: Is there a growth rate that you could tell us about.

Walter Scott Liptak: I tend not to focus on any one individual quarter. I just look at the trends and I say, do we have the backlog? Do we have the momentum to continue to support our guidance on revenue? And we feel we do. So I feel good about it, and we'll see how things turn out. But certainly, I do expect improvements sequentially.

Brian A. Deck: Sure and so we.

Walter Scott Liptak: It was interesting quarter for sure and I would say somewhat reversion to the mean, so we actually had.

Brian A. Deck: Okay, thanks. Yeah, I think the data point about quotes is great, and we know that that's starting to pick up for poultry. I wonder if I could ask one last question on aftermarket sales. You know, they shifted down a little bit in the quarter from last year. I wonder if you could talk about that, maybe talk about the aftermarket and, you know, their growth rate that you could tell us.

Walter Scott Liptak: If you happen to recall first quarter last year, we had really high aftermarket was at 56% of our revenue mix and relatively lower equipment. This quarter, we actually grew equipment by about 10% on the revenue line and declined about 8% on the aftermarket, but again last year. If you recall first.

Walter Scott Liptak: Sure, and so it was an interesting quarter for sure, and I would say somewhat reversion to the mean. So, if you happen to recall, in the first quarter of last year, we had a really high aftermarket. It was like 56% of our revenue mix and relatively lower equipment. This quarter, we actually grew equipment by about 10% on the revenue line and declined about 8% on the aftermarket. But again, last year, if you recall, the first quarter had a tremendous amount of aftermarket and specifically refurbishments as customers started sweating the assets more than they otherwise would.

Walter Scott Liptak: <unk> had a tremendous amount of aftermarket specifically refurbishments as customers started sweating the assets more than they otherwise would so at 52% mix. We're basically back to the mean and actually 52 is quite a strong number for us, but I do generally expect.

Walter Scott Liptak: So at 52%, we're basically back to the mean. And actually, 52 is quite a strong number for us. But I do generally expect... The growth rates for the rest of the year, actually. I expect equipment to slightly outpace aftermarket for the rest of the year, again, as the recovery and delivery of the backlog improve, but generally speaking, aftermarket remains probably our best kind of resource, if you will, and stability within our financial statement. So I feel super good about it. And if we hover in this 50% range, we're really well set. Okay, great. Okay, thank you.

Walter Scott Liptak: The growth rates for the rest of the year actually I expect.

Walter Scott Liptak: <unk> slightly outpace.

Walter Scott Liptak: Aftermarket for the rest of the year again as the recovery.

Walter Scott Liptak: And delivery is a backlog so but generally speaking aftermarket remains.

Walter Scott Liptak: Probably our best kind of resource if you will.

Walter Scott Liptak: And stability within our financial statements. So I feel super good about it and if we hovering in this 50% range.

Walter Scott Liptak: We're really well set.

Walter Scott Liptak: Okay, great. Okay, thank you. I'll get back in queue. Thanks.

Speaker Change: Okay, great. Okay. Thank you I'll get back in queue.

Walter Scott Liptak: Thanks.

Operator: Again, if you would like to ask a question, press star, then the number one on your telephone keypad.

Walter Scott Liptak: Again, if you would like.

Walter Scott Liptak: Question.

Operator: Thus far then the number one on your telephone keypad.

Operator: Okay.

Operator: And we have Walter Liptak again on the Q.

Walter Scott Liptak: Okay, great. Thanks guys. So maybe Matt, one for you. What's the cadence on the cost savings in the second quarter and for the second half? Is it pretty evenly split? How should we think about that? Well, we will.

Speaker Change: Okay. Thank you go ahead.

Speaker Change: Okay, great. Thanks, guys.

Matt: So maybe one for you.

Walter Scott Liptak: What's the cadence on the cost savings.

Walter Scott Liptak: In the second quarter.

Walter Scott Liptak: For the second half.

Walter Scott Liptak: Is it pretty equally split how should we think about that.

Matthew J. Meister: Well, we will hit the run rate of $18 million in savings by the end of Q2, so I would expect there to be a little bit more that filters into Q3, but for the majority of the savings that we expect to achieve from our restructuring program, that should pretty much play out by the end of Q3.

Walter Scott Liptak: We would.

Matthew J. Meister: We will hit the run rate of $18 million in savings by the end of Q2.

Matthew J. Meister: So I would expect there to be a little bit more of that that filters into Q3, but for the majority of the savings that we expect to achieve from our restructuring program that would pretty much play out by the end of Q2.

Speaker Change: Okay Alright.

Matthew J. Meister: Okay, all right, great. Yeah, and just to give a little bit more color on that, sorry, Walt, just to give you a little more color on it. Generally speaking, if you look at our margins,

Speaker Change: Alright, great and just to give a little more color on that sorry, well just give us a little more color on if generally speaking if you look at our margins I would say given the restructuring given the.

Brian A. Deck: [inaudible]

Speaker Change: Supply chain activity, we expect margins to increase sequentially.

Speaker Change: Every quarter in 2024, and every quarter will be better than 2023 from a margin perspective.

Brian A. Deck: Yes.

Walter Scott Liptak: Okay, great. Okay, thanks for that call.

Speaker Change: Okay, great. Okay. Thanks for that color Brian.

Walter Scott Liptak: And, you know, if I could try one on the Merrill synergies, thanks for all the info on the cost-related synergies. You know, is there, and I realize you're not putting any numbers on the sales synergies, but, Uh, you know, can you provide any idea of how you will or may provide us with future guidance? Is it going to be as a percentage of, you know, revenue growth, or are you going to be able to put a dollar amount on sales synergies as your plans for synergies come through too?

Speaker Change: Sure if I could try one on the Merrell.

Walter Scott Liptak: Synergies thanks for all the info on the cost related synergies.

Walter Scott Liptak: Is there and I realize youre not putting any numbers on the sales synergies but.

Walter Scott Liptak: Yeah.

Walter Scott Liptak: Could you provide any idea of like how you will or may provide.

Walter Scott Liptak: Provide us in the future guidance is it going to be as a percentage of revenue growth or unit would it be able to put a dollar amount.

Walter Scott Liptak: And sales synergies.

Walter Scott Liptak: Planes for synergies come through to fruition.

Brian A. Deck: Yeah, more likely we would give you a target dollar amount, but we may convert that to basis points. We'll see.

Walter Scott Liptak: More likely we would not we would give you a target dollar amount, but we may convert at two basis points, we'll see we're working on pretty intensely as we speak but just in terms of the synergy potential itself. There is.

Brian A. Deck: We're working on it pretty intensely as we speak. But just in terms of the synergy potential itself, there are three or four buckets, and I would say certainly the biggest opportunity is really this better value proposition of fuller line solutions to the customer and pull-through of equipment that we can leverage one another's portfolio. Just to give you a couple of examples, right, the JBT is really well known for water jet portioning, right?

Brian A. Deck: Three or four buckets and I would say.

Brian A. Deck: Certainly the biggest opportunity is really there is better value proposition for airline solutions to the customer pull through.

Brian A. Deck: Equipment debt.

Brian A. Deck: We can leverage one another's portfolio.

Brian A. Deck: Just to give you a couple of examples right.

Brian A. Deck: JBT is really well known for pushing right.

Brian A. Deck: Certainly, we believe we're the leaders in the market. We feel that given Morrell's strength on the primary side and into the secondary side, there could certainly be some pull-through that wouldn't otherwise exist or the customers would have to figure out a solution on their own. So from an engineering perspective, from a value perspective, pulling that flowline solution makes it really helpful.

Brian A. Deck: Certainly we believe we are the leaders in the market, we feel that given <unk> strength on the primary side and into the secondary side, there could certainly be some pull through into that.

Brian A. Deck: Wouldn't otherwise exist or the customers would have to figure out a solution on their own.

Brian A. Deck: So from a from.

Brian A. Deck: Similarly, on the kind of opposite, on the FP side, the further processing side, Morrell is particularly strong in forming, where we have some exposure to some products, but they're the leaders, right? So, but we're overall very strong on the FP side, but that's just a hole in our portfolio. So we would expect to be able to pull through that. So those are just a couple of examples on the product side.

Brian A. Deck: From an engineering perspective from a value perspective, pulling therefore solution makes it really helpful.

Brian A. Deck: Similarly on the kind of opposite on the.

Brian A. Deck: On the FTE side to further processing side morale is particularly strong in <unk>.

Brian A. Deck: Farming, where we have some we have some exposure in some products, but they are the leaders right. So but we're overall very strong on the FTE side, but thats just a hole in our portfolio. So we would expect to be able to pull through the thing that so those are just a couple of examples on the product side.

Brian A. Deck: Also, I would say on the service side, and this is what we hear from our customers, they really want to see improved service, and you think about the tremendous opportunity of bringing our very large service capabilities, combining them with their large service capabilities throughout the globe, right, on every continent, bringing those two organizations together to help our customers with their uptime, with their efficiency, and just helping overall, making them a better company. We think that's a tremendous opportunity, so those two are the biggest.

Brian A. Deck: Also I'd say on the service side and this is what we hear from our customers. They really want to see improved service and you think about the tremendous opportunity of bringing our very large service capabilities combine it with their large service capabilities throughout the globe and every continent, bringing those two organizations together too.

Brian A. Deck: To help our customers with their uptime with their efficiency.

Brian A. Deck: Just helping overall, making them a better company, we think thats a tremendous opportunity. So those two are the largest we will give more color on some of the other buckets as we get into the joint shareholder call here once we do the offer but.

Brian A. Deck: We'll give more color on some of the other buckets as we get into the joint shareholder call here once we make the offer, but we feel very good about opportunities on the commercial side. Okay, great. Yeah, sounds good.

Brian A. Deck: We feel very good about opportunities on the commercial side.

Walter Scott Liptak: Okay, great. Yeah, sounds good. Thank you for providing some color on those.

Speaker Change: Okay, Great sounds good thank you for providing some color on those buckets.

Speaker Change: Thank you.

Operator: That concludes our Q&A session. I will turn the call over to Mr. Brian Deck for closing remarks.

Walter Scott Liptak: That concludes our Q&A session I will turn the call over to Mr. Brian <unk> for closing remarks.

Brian A. Deck: Thank you all for joining us this morning. As always, Kedric and Marlee will be available if you have any follow-up questions.

Brian A. Deck: Thank you all for joining us this morning, as always <unk> will be available if you have any follow up questions.

Operator: This concludes today's conference call. You may now disconnect.

Speaker Change: This concludes today's conference call you may now disconnect.

Operator: Okay.

Operator: Okay.