Q4 2024 JBT Marel Corp Earnings Call
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Pam: Good morning and welcome to JBT Morel's earnings conference call for the fourth quarter and full year 2024. My name is Pam and I will be your conference operator today. As a reminder, today's call is being recorded. At this time, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
Speaker Change: I will now turn the call over to JVT MARL's Director of Investor Relations, Marlee Spangler, to begin today's conference.
Marlee Spangler: Thank you, Pam. Good morning, everyone, and thank you for joining our conference call. With me on the call today is our Chief Executive Officer, Brian Deck.
Marlee Spangler: President Arne Sigurdsson, 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.
Marlee Spangler: These documents are available in the investor relations section of our website.
Marlee Spangler: Also, our discussion today includes references to certain non-GAAP and non-IFRS measures. A reconciliation of these measures to the most comparable GAAP and IFRS measures can be found in the Investor Relations section of our website. With that, I'll turn the call over to Brian.
Brian Deck: Thanks Marlee, and good morning. We are excited to be hosting our first earnings call since uniting JBT and Morrell. The combination, which we completed on January 2nd, represents the culmination of more than a year of work bringing together two leaders in the food technology industry.
Brian Deck: We are now seven weeks into integration and are increasingly confident in our ability to generate long-term value for our customers, shareholders, and other stakeholders.
Brian Deck: Given our focus on realizing the benefits of this combination, I will begin today's call providing an update on our progress. Then Arne will provide color on the integration process and talk about Morrell's 2024 performance.
Brian Deck: The combination of JBT and morale is complimentary portfolio of innovative technology and service capabilities allows us to integrate primary secondary further and endocrine processing under one brand.
Brian Deck: This matters for our customers as it reduces the complex engineering required to integrate and commission full line solutions.
Brian Deck: It also leads to improved operational efficiency machine uptime, and traceability and high volume operations.
Brian Deck: Additionally, our software and digital solutions are a differentiator as customers increasingly adopt digital technologies to optimize processing efficiency and improved profitability.
Brian Deck: Overall, our many productive conversations at IPP E along with our recently reported financial results of our customers confirm the strong fundamentals of the poultry industry.
Brian Deck: We believe we look for incremental investment in 2025 as customers look to take advantage of our technology to support automation and efficient operations by investing in existing facilities as well as consider greenfield opportunities in a more meaningful way than we have seen in some time.
Brian Deck: I am pleased that we are already seeing the commercial strategies created by the combination.
Brian Deck: We secured a few significant orders in IPP that included equipment, we booked on the strength of each other's existing relationships.
Brian Deck: Speaking of orders as you saw in our earnings release, JBT reported record orders of $523 million in the fourth quarter.
Brian Deck: <unk> also reported record orders of 474 million euros.
Together orders totaled more than $1 billion for the period benefiting benefiting from broad based strength.
Brian Deck: Geographically, we enjoyed a pickup globally with the sole exception of Asia Pacific.
Brian Deck: Okay.
From an end market perspective, as already mentioned the poultry industry remains strong in the fourth quarter and is expected to improve further in 2025.
Brian Deck: Yes.
Other proteins, we enjoyed a very solid quarter for both meat and fish.
Brian Deck: While the fundamentals of these markets remain uncertain, we are starting to see increased pipeline activity for pork and remain confident in the long term fundamentals for fish.
Brian Deck: Okay.
Brian Deck: We also enjoyed strong order demand in the fruit and vegetable and pharmaceutical markets, which have continued into the first quarter of 2025.
Brian Deck: Okay.
Brian Deck: While the beverage end markets was weaker through most of 2024 due to challenging industry fundamentals, we saw some pick up exiting the year.
Lastly, both Pud lastly, both pet food and ready meals performed well in the quarter, while adv or automated material handling business experienced another solid quarter of demand.
Brian Deck: Our positive view on the key end markets must be balanced against macro concerns, including U S and potential retaliatory tariffs and the prospect of higher inflation.
Brian Deck: However, we believe the end market dynamics are generally favor for favorable for investment while our recurring revenue franchise for parts and service is expected to provide resilience growth and close to half of our total revenue.
Brian Deck: Most importantly, we are increasingly confident in the value created by this combination as it relates to serving our customers.
Ernie: Now, let me turn the call over to Ernie.
Ernie: Thanks, Brian.
Ernie: When JBT and motto began exploring the potential to combine the two businesses.
Ernie: Quickly became clear that we share a common purpose.
Ernie: Which is to transform the future of food.
We achieved that purpose by helping our customers improve their operations solutions uptime and sustainable processes.
Ernie: I am very pleased to see and experience the momentum generated in just the first few weeks as JBT modest.
Ernie: Right after finalizing the transaction, we launched our new JBT modern brands.
Ernie: We also introduced our new purpose vision and volumes, which resonated well with our teams as it builds on the two company cultures, while we transition to a new and exciting future.
Ernie: We also went out on the roads hosting welcome days at key locations around the world introducing the leadership team and the strategic pillars of GBT modest.
Ernie: It was a great success and I am excited about the future.
Ernie: We also recognize the respective strengths that each company brings to the table that makes this combination so exciting.
For example, I am very proud of the reputation that motto has for its industry, leading technology and ongoing investment and innovation.
Ernie: And JBT beyond its technology brings a highly disciplined and efficient operational culture focused on continuous improvement.
Ernie: We realize that a combination of this scale requires rigorous execution and oversight by an experienced team of operators across the organization.
Ernie: The integration teams are co led by top talent from our respective legacy organizations and report directly to Brian and me.
Ernie: Throughout this integration our highest priority is to ensure business continuity and a seamless experience for our customers.
Ernie: Moreover, we are focused on cultural integration as our talented teams across the world represent our greatest asset.
Since the close of the transaction, we have been able to have full transparency with one another allowing us to do a deeper analysis into the benefits of the combination.
Ernie: Based on this extensive work we have raised our expectations for cost synergies to an annual run rate savings of $150 million and thats by the end of year three.
Ernie: That compares with our prior guidance of greater than $125 million.
Ernie: Most of that increase is the result of supply chain savings as we leverage our purchasing power and optimize our combined footprint.
Ernie: Okay.
Ernie: Looking at modest performance in 2024, I'm happy to report that we had a strong fourth quarter to close the year.
Ernie: On an IRS basis record orders of 474 million increased 18% sequentially and reflects the improvement we had been expecting.
Ernie: We saw sequential growth in orders for meat fish and pet food poultry had another healthy quarter.
Ernie: The strong book to Bill of 111 increased the order book, 8% sequentially to $600 million euros.
Ernie: Modest full year revenue of $1 64 billion euros declined four 6% compared to the prior year due to lower project revenues.
Ernie: At the same time, there were continued gains in recurring revenue with a record fourth quarter.
Ernie: For the full year recurring revenues were $821 million and grew 5%.
Ernie: Okay.
Ernie: Full year, adjusted EBITDA of 200 million.
Ernie: Included a net year end adjustment of $17 million, resulting from initial efforts to align policies related to balance sheet reserves as a part of our combination with JBT.
Ernie: Okay.
Ernie: Underlying performance improved year over year, as a result of cost discipline and efficiency improvements.
Ernie: Excluding the balance sheet adjustments models adjusted EBITA margin for 2024 was in line with our most recent guidance of 13% to 14%.
Ernie: Yeah.
Ernie: I want to take this opportunity to commend the dedication and valuable contribution of our teams across the world.
Ernie: We are excited by legacy models momentum entering 2025, underpinned by order growth and strengthening order book and our ability as JBT model to do even greater things for our customers with the combined and highly complementary product portfolios.
Matt Meister: With that let me turn the call over to Matt.
Matt Meister: Thanks, Ernie and good morning.
Matt Meister: Let me begin with a quick recap of Jbt's performance in 2024.
Matt Meister: We ended the year with extremely strong orders in the fourth quarter up 25% year over year and 19% sequentially.
Matt Meister: For the full year orders increased 7%.
Matt Meister: Jbt's full year revenue increased 3% or about three 5% organically, excluding the impact of foreign exchange.
Matt Meister: Adjusted EBITDA of $295 million increased 8%.
Matt Meister: The adjusted EBITDA margin of 17, 2% for the year was an improvement of 80 basis points.
Matt Meister: Driven by supply chain savings and continuous improvement initiatives.
Matt Meister: Specific to the fourth quarter. Our results came in at the lower end of our guidance due to a mix of lower than expected volume on quick turn book and ship revenue and some delayed equipment shipments.
Matt Meister: On the expense side, we had higher than expected employee healthcare costs.
Matt Meister: That said adjusted EBITDA margins for the quarter were 19, 7%, which represented 150 basis point improvement over the prior year.
Matt Meister: Beginning in 2025, we are revising our adjusted EPS calculation to exclude acquisition related items, such as intangible amortization expense.
Matt Meister: We believe this change will be will better reflect our core operating earnings and improve comparability versus peers.
Matt Meister: When further adjusted for this change Gbt's 2024, Standalone adjusted EPS would have been $6 15.
Matt Meister: Compared to the reported figure of $5 10.
Matt Meister: Finally for 'twenty 'twenty four we delivered strong cash flow performance driven by more efficient management of inventory and higher deposits from the strong order growth.
Matt Meister: For the year, we generated free cash flow of $199 million, an increase of 20% from the prior year period.
Matt Meister: Now, let's move to the results and expectations for the combined JBT Morrell business.
Matt Meister: On a combined basis, which reflects adjustments to align <unk> results with U S. GAAP 224 results were as follows.
Matt Meister: There's a $3 6 billion revenue of $3 5 billion and adjusted EBITDA of $479 million.
Matt Meister: Representing an adjusted EBITDA margin of 13, 7%.
Matt Meister: 125, we are forecasting full year revenue growth on a constant currency basis of four and a half.
Matt Meister: The six 5%, which excludes the projected negative foreign exchange impact of approximately $75 million or 2% due to the recent strength in the U S dollar.
Matt Meister: We are guiding to adjusted EBITDA margin of 15% and three quarters to 16, 5% and 25.
Which represents more than 200 basis points of improvement.
Matt Meister: We expect to realize cost synergies of $35 million to $40 million in 2025.
Matt Meister: During the year estimate achieving run rate synergies of $80 million to $90 million.
Matt Meister: For the full year, we are projecting adjusted EPS of $5 50 to $6 10.
Matt Meister: Certain onetime items and acquisition related costs, which were outlined in yesterday's press release and investor presentation.
Matt Meister: For the first quarter of 2025, we expect revenues to be in the range of $820 million to $850 million inclusive of an estimated negative.
Matt Meister: $23 million of year over year FX translation impact.
Matt Meister: The first quarter is historically jbt's seasonally lightest.
Matt Meister: For morale pickup in orders occurred in late 2024.
Matt Meister: And given the large project nature of its business the conversion time from order to revenue is longer.
Matt Meister: We are forecasting adjusted EBITDA margins of 12%, 13% and adjusted EPS in the range of 70 to 90 sites.
Matt Meister: On the balance sheet, we expect capex of $90 million to $100 million for the year.
Matt Meister: Starting leverage post merger was just under four times, which excludes the benefit of any projected synergies synergies.
Matt Meister: We continue to expect to de lever to below three times by year end 'twenty five due to higher adjusted EBITDA, which includes realized cost synergies and strong cash flow generation.
Brian Deck: Let me turn the call back to Brian for some concluding remarks.
Brian Deck: Thanks, Matt.
Brian Deck: There has been a tremendous amount of hard work getting to this point, where we can leverage our combined expertise and achieve more for our employees customers and communities at JBT morale.
Brian Deck: Together, we've established an unmatched position across the value chain as the premier global food and beverage solutions provider.
Brian Deck: Thank you to everyone across the organization for all you've done.
Brian Deck: We look forward to the exciting things to come as we transform the future of food.
Speaker Change: Now, let's open the call to questions operator.
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Savi Laura: And your first question comes from Savi, Laura did Steve with Jefferies. Please go ahead.
So I wanted to touch on the synergies. So you are now kind of two months into owning moral and you were able to increase the cost synergy guidance on kind of supply chain synergies. So can you talk more about what gave you confidence to raise the guidance.
Speaker Change: Like little bit more color on the supply synergies and whilst there are a lot of like low hanging fruit that you were able tightened supply after owning time. Thank you.
Savi Laura: Yes.
Speaker Change: Yes. Good question. So we've been working together the two companies for the last year or so, but there has been certain limitations on vendor names customer names et cetera that until we combined we were able to have access to so.
Savi Laura: After getting access to that we were really able to determine.
Savi Laura: Our strategy as it relates to supply chain savings.
Savi Laura: And including some of the early hits, we do feel that that $38 $35 million to $40 million first year savings will include some early hits on the supply chain side as well as some of the organizational design things that we're doing so it really the confidence really became came along from access to information.
Savi Laura: We otherwise they didn't have in the past.
Speaker Change: Got it great. Thanks for the color and I guess kind of staying on the synergy.
Speaker Change: More on the revenue side I think you noticed some benefit to our customers slide providing integrated solutions and opportunities to kind of cross sell. So can you can you provide more color on kind of revenue synergy opportunities.
Speaker Change: Yes.
We're really excited about this so as I mentioned in the prepared remarks, we had a really excellent.
Speaker Change: IPP show the poultry show and the conversations were great and frankly, the thing that was most exciting about it was the way our commercial teams interacted with one another.
Speaker Change: They really fell right into understanding each other's product lines. We obviously have experts across the industry. So it was fairly natural for them to be able to engage in conversations with customers on a combined basis.
Speaker Change: And as part of that what we also found was.
Speaker Change: Each company, our legacy company has particularly strong relationships with certain customers and that really facilitated conversations about providing either JBT morale solution to some of the projects that they were considering that perhaps they had not considered one or the other in the past.
Speaker Change: So that was really developed nicely and then I would say, we announced earlier $75 million of revenue synergies by year, three or we haven't updated that but we are taking a close look at it again now that we have access to customer data and conversations on a more combined basis, what we are.
Speaker Change: Taking a review of that and we'll follow up in the next quarter or two.
Speaker Change: That means <unk>.
Speaker Change: Briefly to add on that and kind of I think what was exciting around kind of what we heard and saw and experienced IPA was.
A lot of conversation in the prepared foods area, where our portfolio is quite complementary.
Speaker Change: And we've talked in the past for example, a chicken nugget line.
Speaker Change: When you do see kind of a different technologies across that same line. So that's where we saw some interesting opportunities.
Speaker Change: Really kind of confirming what we believe but it was just nice to see that really happen.
Speaker Change: Okay.
Speaker Change: Your next question comes from Mig <unk> with Baird.
Speaker Change: Please go ahead.
Speaker Change: Thank you good morning, everyone.
Speaker Change: I apologize in advance.
Speaker Change: We have a bunch of questions. So hopefully you can hear me here.
Speaker Change: I guess, maybe we can start with a clarification, maybe I missed this in the guidance slides, but.
Speaker Change: Free cash flow for 25, how should we think about that.
Speaker Change: Yes, let's let's start with that let's start with free cash flow.
Speaker Change: Yes, I think from a free cash flow perspective, it's still a little early for us to provide specific numbers around that I would say as we try to get a better feel for how the cadence and cash flows will go through the year, but.
Speaker Change: I think the fundamentals of the business both businesses together still remained strong with relatively low capex high recurring revenue and deposits from customers and so when we account for some of the onetime items.
Speaker Change: P&L side, our expectation is that we should be able to achieve 100% free cash flow for the year.
Speaker Change: Net income.
Speaker Change: Alright, so yes, so we'll provide more guidance, but if you think about the general profile of this business Mig.
Speaker Change: It's still quite attractive when you think about the.
Speaker Change: The math just between the capex spend versus depreciation and kind of how that.
Speaker Change: Those we will have a lot of onetime costs in 2025 is.
Speaker Change: As mentioned in the in the press release, but if you kind of look away from that.
Speaker Change: It's certainly profile of more than 100% of adjusted net income.
Speaker Change: That's helpful.
Speaker Change: One of the things that also stood out to me.
Speaker Change: Was the order intake rate for I think morale had a bit of a tough comp and yet they were able to grow off of that.
You had quite a bit of growth in legacy JBT.
Speaker Change: Yeah.
Speaker Change: Maybe talk a little bit about what's what's going on here, we heard from you that the poultry markets are getting better but I.
Speaker Change: I guess, it's more than just poultry.
Speaker Change: The question here is on sustainability into 2025 is is this quarter simply been a bit unusual was there like a capex flush or something like that to help you out or are these trends.
Speaker Change: Kind of sustaining into the into Q1, I mean, almost through February what have you seen in Q1, thus far.
Speaker Change: Sure I'll provide some comments on legacy JBT and Ernie can provide a little bit.
<unk> morale and kind of how we're thinking about this going forward. So on the JBT side, what we normally see is I'm talking from an end market perspective.
Speaker Change: There's always pluses and minuses prudent uses.
Speaker Change: Maybe beverages down and.
Speaker Change: And thats since I've been here, that's always been the case because these are lumpy projects often so you see a lot of variability.
Speaker Change: And almost magically kind of evens out by the end of the quarter.
Speaker Change: However, in the fourth quarter.
Speaker Change: There was really no weak markets, which is quite unusual so everything kind of hit we mentioned ready meals pet food.
Speaker Change: Our <unk> business fruit and juice, even beverage improved in the quarter.
Speaker Change: Poultry remains strong so it really kind of.
Speaker Change: Just flu.
Speaker Change: Flow through flow through in a nice way.
Speaker Change: This was a capex dump, but here's the way I think of it generally.
Speaker Change: Is <unk>.
Speaker Change: $900 million kind of a baseline for us right in that $1 billion.
Speaker Change: In the months was extraordinarily strong so I still think we're going to coalesce around that number plus or minus.
Speaker Change: There'll be variability given the lumpy nature of our business. So I do think there will be some general reversion.
Speaker Change: But overall the markets are strong right now and I put the caveat about regarding tariffs and whatnot, but kind of.
Speaker Change: Aside from that.
Speaker Change: Condition to seem strong.
Speaker Change: Yes.
Speaker Change: On the motto side, obviously very pleased with the orders in the quarter and poultry poultry market continues to be quite.
Speaker Change: Quite attractive and we see that in.
Speaker Change: Also just if you look at.
Speaker Change: The results of some of our customers I mean, they are they're showing very robust numbers on the poultry side. So that continues to be healthy in the fourth quarter for us, but then if we look at it sequentially than we saw improvement in.
Speaker Change: In the other segments as well on the motto side and what I would say is.
Speaker Change: On the pork side kind of the the market sentiment is improving but kind of from a from a very low level.
Speaker Change: There is going to have with the low investment that has been therefore kind of throughout the cycle. There there needs to be at some point catch up on and kind of renewing the installed base and more automation.
Speaker Change: And we kind of consolidation in Europe is in the final steps kind of we saw improved pipeline.
Speaker Change: In the fourth quarter on the pork side, so that was encouraging.
Speaker Change: Face also improved sequentially.
Speaker Change: But I think I'm not as confident about the market there, yes, even though we really believe in the fundamentals of that market.
Speaker Change: And maybe just to clarify that $900 million baseline. That's the combined company quarterly kind of I'll say, a baseline if you will for orders.
Speaker Change: Thank you for the clarification there.
Speaker Change: And I want to move on to your outlook your guidance.
Speaker Change: Apologize for the numbers in the math here, but im trying to understand the moving pieces right. So at the midpoint your EBITDA youre guiding at $582 million.
Speaker Change: On a combined basis. The company has done pro forma $479 million. So we're looking at $103 million of EBITDA growth.
Speaker Change: 37 of that is synergies.
Speaker Change: So the rest of it 66 would be the lift from the two businesses when we look at the 66.
Speaker Change: How much of it comes from legacy JBT versus lift in Morelos business relative to the prior year.
Speaker Change: Yes, I think the starting point on the $4 79 for 2024, Meg is you have to adjust for that year end.
Speaker Change: Piece at morale was about.
Speaker Change: $20 million or so 17 $20 million in U S dollars of sort of year end adjustments to kind of add that back in.
Speaker Change: Starting point, so you're kind of starting closer to $500 million for the combined company.
Speaker Change: And then you add in the synergies.
Speaker Change: So now you are at $5 38. So now you are kind of doing the math off of that number and so the flow through.
Speaker Change: From the combined business is closer to 35% to 40%.
Speaker Change: It's a little higher than we would typically expect for flow through on the combined business, but there is the benefit from morale on some of the restructuring activities that they took in 2024. That's also coming through we estimate that sort of around the $8 million to $10 million benefit in 2025, right. So you've got the benefit of the <unk>.
Speaker Change: <unk> volume.
Speaker Change: As well as some of the I'll say.
Speaker Change: Rollover of some of the actions that morale took in last.
Speaker Change: Last year.
Speaker Change: So overall Mig I'll say more of the improvement is coming from the morale side, giving some given some of the they are a little bit higher growth rate in their forecasted revenues versus JBT because of the recovery continued recovery of the poultry market is as well as some of the restructuring actions that they took.
Speaker Change: Last year, which will flow into this year.
Speaker Change: To be honest with you based on what you've just told me to me it seems like its the opposite where you end up with.
Speaker Change: Ex synergies you end up with maybe like less than $50 million of EBITDA lift, but a good chunk of that would probably come just from JBT and the growth that you have on your business, assuming normal incremental margins on that organic revenue growth.
Speaker Change: Which.
Speaker Change: Maybe I'm missing something where youre, just being conservative which is perfectly fine.
Speaker Change: Just looking to make sure that we understand the moving pieces.
Speaker Change: Yes, so I think we've given revenue guidance for the two businesses individually and if you look at that and apply generally you apply 30% ish flow through on that incremental volume.
Speaker Change: And then from there.
Speaker Change: And the benefit of the synergies and whatnot. So take a look we're happy to walk through in more detail as we go from here, but our math shows a little bit more contribution from the <unk> side than the JBT size at least from an EBITDA perspective.
Speaker Change: Perfect and then my final question is.
Speaker Change: On morale specifically.
Speaker Change: That's what we're trying to look through what the fourth quarter look like at least.
Speaker Change: On our math, the fourth quarter looks to be a sequential step down in margin.
Speaker Change: And maybe even tougher than some of the prior quarters in 'twenty four.
Maybe you can give us some context, our orange if you can give us some context as to what's been going on with margins in the fourth quarter.
Speaker Change: And big picture sort of how you think about progression here through 2025, and maybe you can comment on fish and meat, specifically, because it's pretty clear that poultry is doing all right. It's the other two segments that have struggled thank you.
Speaker Change: Yes, so what I would say.
Speaker Change: We saw healthy kind of absent the balance sheet adjustment that we talked through we saw a.
Speaker Change: A good margin in Q4, both improving.
Speaker Change: Sequentially and year over year, So I think that is moving.
Speaker Change: In the right direction.
Speaker Change: We also saw that.
Speaker Change: Moving in the right direction for for us for efficient meat, but there are still there's still a lot of work to be done on that front. So so we are taking.
Speaker Change: Taking that out so that's kind of on the margin side, where we are.
Speaker Change: Yes on the right track and kind of exiting the year at a healthy level.
Speaker Change: Or more healthy level of kind of improving over the year and we.
Speaker Change: We expect to be able to kind of do more as we enter 2025 and I mean, some of the initiatives that we have been going through we will continue with such as kind of a standard is standardizing the portfolio more rigorous.
Speaker Change: Can a project control and selecting the projects.
Speaker Change: And then we're also kind of we have designed the combined organization in a way.
Speaker Change: Where we believe those businesses will benefit more with.
Speaker Change: Greater scale in emerging markets and betting the service capabilities and some of the other designs that we have taken.
Speaker Change: And to add up to add onto that.
Speaker Change: Mig.
Speaker Change: As we look to bring some of the continuous improvement capabilities.
Speaker Change: We've already started on both meat and fish and.
Speaker Change: We obviously have a large tool chest one of the things we're actually looking at right now is applying some of the 80 20 approach too.
Speaker Change: To the business and looking at the segmentation of.
Speaker Change: Of the larger customers larger projects in our product lines and.
Speaker Change: And how that profitability is segmented in making sure that we've got the right resources in the right places too.
To attack that so.
Speaker Change: As well as some of the general continuous improvement things that we're looking at so we are laser focused on the overall improvement in the synergies perspective, but in particular.
Speaker Change: And fish are getting good intention all the way up to the.
Speaker Change: Yeah, and just make just to clarify again on the Q4 margins again, we want to make sure we kind of look at it with and without the year end adjustments that were booked at morale in December those were really some sort of alignment on accounting policies and procedures.
Speaker Change: <unk> between Morrell, and JBT and so they're a little bit I think kind of onetime in nature and related to some older inventory at some older AAR evaluation reserves and I think if you look at the underlying business I think what <unk> said that they are seeing some improvements in the margins and that's what we.
Speaker Change: We would expect to see heading into 2025.
Speaker Change: I'm, sorry, just to clarify the $20 million that that was a $20 million euro add back so in the fourth quarter with.
Speaker Change: <unk> margin at morale be somewhere close to 15%.
Speaker Change: I think its in the yeah.
Speaker Change: Yes, I think its in the 13% to 14% range is $20 million is about $17 million euros.
Speaker Change: Okay helpful. We're not adding that back from it we're not adding that back from an adjusted perspective is just it's just a different I think again, a different kind of accounting approach. So I don't want to I don't want to blur the underlying performance of the operations with those adjustments.
Speaker Change: Understood understood.
Speaker Change: Correct Me Youre correct Mig if you look at the reported results <unk> $200 million euros that is burdened by about $17 million to $18 million of one time items.
Speaker Change: And if you would absent of that you would have kind of EBITDA margin for the full year.
Speaker Change: Would have been north of 13%.
Speaker Change: And so so fourth quarter was more healthy.
Speaker Change: Yes.
Speaker Change: Got it thank you.
Speaker Change: Okay.
Speaker Change: Okay. Thanks.
Speaker Change: Your next question comes from Ross Spandex Buck with William Blair. Please go ahead.
Speaker Change: Hey, good morning, guys.
Speaker Change: Morning.
Speaker Change: Matt you touched on this in your opening remarks, but can you maybe just remind us of the timing of backlog conversion for JBT and morale and kind of what that mix looks like on a pro forma and are you going forward.
Speaker Change: Yes.
Speaker Change: For the most part.
Speaker Change: Look at about.
Speaker Change: JBT it's in.
Speaker Change: 50% or so of our equipment revenue is in backlog that we would expect for the backlog for equipment is sort of in the $450 million range for JBT, historically or legacy JBT.
Speaker Change: And only a small portion of that sort of bleeds into next year, we did take some bigger pharma projects and fruit and veg projects. So those will bleed into 2026.
Speaker Change: Four.
Speaker Change: Morrell they do have some larger.
Speaker Change: Greenfield type projects that do have longer lead times I don't have the exact.
Speaker Change: Sort of timing of that but I would expect.
Speaker Change: Their revenue cadence to look very similar in terms of the backlog for equipment. So I would expect probably 80% to 85% of their.
Speaker Change: Backlog on equipment would result in revenue in 2025.
Speaker Change: And I would say as a whole when you consider the stability of the recurring revenue business when.
Speaker Change: When you kind of add that into kind of the visibility as we start the year on the equipment side, we have similar ballpark, 70% visibility for the full year revenue.
Speaker Change: Okay. So with that expectation then on recurring revenue is probably being implied to over 50%.
Speaker Change: 25 guidance.
Speaker Change: It's actually a little bit less because youre, a little bit less because your equipment. We were at about combined right about 50% last year. However, we do expect equipment growth to outpace aftermarket growth in 2025, so that mix will actually.
Speaker Change: We'll grow both but the mix will change a little bit just because of the asset growth on the equipment side.
Speaker Change: Okay. That's helpful. And then just going back to a prior question on kind of done around margin lift for next year. The filings called out I believe 11700 employees, which does imply some material attrition over the past year. So I'm trying to get a sense of timing there around reductions and maybe how we should we should think about sizing that benefit.
Contact stent that eight to 10 and morale.
Speaker Change: Restructuring actions that are going to step up next year.
Speaker Change: Yes, I think theres, two things to kind of mentioned there Ross.
Speaker Change: First I think there is as we're going through this integration process. Some definitional differences between what was reported historically for tomorrow and what we reported is that 11700, so thats a little bit of a difference, but I do think that morale has taken some significant actions in 2020 forward to reduce.
Speaker Change: Their ftes, that's sort of already built into our guidance and part of.
Speaker Change: The additional self help that we were talking about in terms of the margin uplift for morale and that is before we actually think about this the benefit from synergies.
Speaker Change: Okay and is there any definitional changes between the recurring revenue to more LNG between kind of looks like there might have been slightly slightly.
Speaker Change: <unk>.
Speaker Change: There is.
Speaker Change: The Big question is.
The question is Refurbishments and how they were both treat those otherwise.
Speaker Change: Haven't marry those up quite yet so you will do that as we report out the first quarter.
Speaker Change: Not materially.
Speaker Change: Okay. Thank you guys.
Speaker Change: Hmm.
Speaker Change: Your next question comes from Walter Liptak with Seaport Research Partners. Please go ahead.
Walter Liptak: Hi, Thanks, good morning, and congratulations and good morning.
Speaker Change: I wanted to ask about.
Speaker Change: The year one.
Speaker Change: Synergy savings and I Wonder if you could just help bucket it for us in terms of.
Speaker Change: Yeah.
Speaker Change: Procurement versus people cost versus planned consolidation.
Speaker Change: And then.
Speaker Change: Procurement side, how are you thinking about pricing and tariffs this year and.
Speaker Change: Our.
Speaker Change: Inflationary pressures.
Speaker Change: How do you expect to deal with those.
Speaker Change: I'll take the first part.
Speaker Change: So in terms of pocketing I would say approximately of the 34, 35% to 40 million, 45% to 50% of that is related to procurement and cost of goods sold.
Speaker Change: And the remainder of the.
Speaker Change: Synergy is going to be related to either.
Speaker Change: In a redundant contracts logistics.
Speaker Change: <unk>.
Speaker Change: Other SG&A related sort of redundancies that we may have between the two businesses.
Speaker Change: And then as it relates to tariffs is still little bit early to tell we still don't know all the specifics of the tariff policies in and any potential retaliation.
Speaker Change: So we haven't factor.
Speaker Change: Factored in tremendous amount into the numbers right now mainly because as it sits today with what has been announced.
Speaker Change: Can largely managed through that in terms of our supply chain. So over the last few years coming out of Covid and this is Earl.
Speaker Change: <unk>, both legacy morale in JBT.
Speaker Change: We've enhanced our supply chain in terms of.
Speaker Change: More options.
Speaker Change: I'll say more diversification of our supply chain just because of some of the challenges. We saw a few years ago. So I think for both.
Speaker Change: Well positioned.
Speaker Change: We're particularly well positioned relative to our competition given our.
Speaker Change: Global scale, our strength of our procurement.
Organization.
Speaker Change: As well as our diversified manufacturing footprint so.
Speaker Change: So we do need to see how this plays out but I think in the short term in terms of at least what we know today, we don't see a material impact in 2025.
Speaker Change: Okay. Okay, great. Thanks for that and then wanted to ask a follow on.
Speaker Change: You commented about.
Speaker Change: Doing some segmentation in some 80 20 work.
Speaker Change: And that's very interesting to me.
Speaker Change: I Wonder if you could talk a little bit more about that as like a homegrown thing or are you, bringing in experts like <unk>.
Speaker Change: Robust.
Speaker Change: 2020 program are you thinking about.
Speaker Change: Yes, well we are the experts on continuous improvement and 80 20, so we have more than enough resources within within the company.
Speaker Change: We're going to do is just to get a little bit more specific what you do is.
Speaker Change: Look at the revenue streams and.
Speaker Change: And new segment that and look at the underlying.
Speaker Change: Seth concentration.
Speaker Change: And then what are the costs associated with those buckets. If you will and then you make sure you're that you're serving your best customers and your best product lines in a way that allows you to grow them and then taking taking a close look at.
Speaker Change: Your projects otherwise.
Speaker Change: The discipline around pricing the discipline around.
Costing those projects before you give those quotes.
Speaker Change: Then strongly in execution on those projects as you go through so there's a lot of different tools that will have its not just 80 20.
Speaker Change: But.
Speaker Change: As continuous improvement experts.
Speaker Change: We are focused on this.
Speaker Change: Okay, great. Thanks, and then.
Speaker Change: With regard to the <unk>.
Speaker Change: Change in focus to end markets.
Speaker Change: Is that has that happened already or what's the timing on that taken place.
Speaker Change: Turning as we speak it started organizational design started in the fourth quarter and continues to the end of the first quarter here. So organizationally wise, we should be done by the end of the first quarter I think there'll be some transition over the next.
Speaker Change: A few months, but I would say, we would be done with that transition by the middle of the year completely.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Justin <unk> with CJS Securities. Please go ahead.
Speaker Change: Hi have ever under.
Speaker Change: Great. Thanks.
Speaker Change: During the prepared remarks, there was a comment about some greenfield opportunities, but just hoping to get a little more color on either end markets or where that is.
Speaker Change: Yes, so I.
Speaker Change: I would say first and foremost that is in the poultry segment I mean that is.
Speaker Change: An area where.
Speaker Change: The fundamental mentals have been improving.
Speaker Change: We've seen some of those opportunities.
Speaker Change: In the past I mean, I think modest spoke to kind of one big one in the fourth quarter of 2023 weeks kind of explained the tough comp.
Speaker Change: For Q4 2024.
Speaker Change: And then we've seen kind of the improvement in the market in the second half of 2024 also what is very interesting, which I've spoken just spoken about and modest results is some of the solutions and technologies that we have been introducing in the U S market such as the <unk>.
Speaker Change: The line split solution that allows our customers to two.
Speaker Change: To increase the line speeds.
Speaker Change: And we model has been a very good technologies.
Speaker Change: To be able to advance.
Speaker Change: Industry and help our customers.
Speaker Change: In particular in the U S market.
Speaker Change: And to invest so there is a lot of there is a few very interesting opportunities that we see there is still early but we're optimistic.
And just to follow up on that so on the poultry side morose technology.
Speaker Change: Best in class without question and some of these techniques of line split allows I'll say, the unleashing of the speed and the and that technology that is currently let's say under some restrictions under the USDA policy, but this line split solution effectively allows us to again leverage this technology.
Speaker Change: While still remaining compliant with USDA. So that's exciting for our customers in fact.
Speaker Change: We do here is.
Speaker Change: If you can.
Speaker Change: Unleashed this technology and these line speeds it allows customers to take.
Speaker Change: Current I'll say inefficient operations.
Speaker Change: Maybe you can closed two facilities and opened one new Greenfield facility that you could take on that capacity with one operation. So those are the type of conversations that are happening on the poultry side and then on the non poultry side. What we are we have been seeing.
Speaker Change: Is particularly in the middle East a lot of greenfield opportunities on fruit and juice.
Speaker Change: And then we're also seeing greenfield opportunities on the pharma side. So those are the areas, where we are seeing some good activity.
Speaker Change: That's helpful. Thanks, and then just one more on <unk> and I know, it's a smaller portion of the combined entity now, but I was hoping to get a little more color. I know you said demand in fourth quarter, which was good but looking ahead what it is.
Speaker Change: What are expectations for that.
Speaker Change: Mentor end market, However, you want to define it.
Speaker Change: Yes, <unk> is a great business. It was probably it was definitely our most improved business in 2024, we talked quite a bit about that I won't go into all those details, but there is very good business. So and in terms of go forward expectations continued double digit.
Speaker Change: Our revenue growth.
Speaker Change: And they are in that 20% EBITDA range, so accretive on the growth and accretive on the margins.
Speaker Change: I appreciate that thank you.
Speaker Change: Thank you.
Brian Deck: There are no more questions I will now turn the conference back over to Mr. Brian <unk> for closing remarks.
Brian Deck: Thank you all for joining us this morning as always our Investor relations team will be available if you have any additional questions.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Brian Deck: Yeah.
Brian Deck: Okay.