The Middleby Corporation

Thank you for joining us for the Middleby Corporation fourth quarter earnings conference call. With us today from management are Tim Fitzgerald, CEO, Brian Middleman, CFO, James Pohl, Chief Technology and Operations Officer, Steve Spittel, Chief Commercial Officer, and John Joyner, Vice President of Investor Relations. We will begin the call with comments from management, then open the line for questions. Instructions on how to get into the queue will be given at that time. Please note this event is being recorded. I would now like to turn the conference over to Tim Fitzgerald. Please go ahead.

Good morning. Thank you for joining us today on our fourth quarter earnings call. As we begin, please note there are slides to accompany the call on the investor page of our website. We are proud of the accomplishments the Middleby team delivered across the business in 2023. The year proved to once again be challenging, marked by supply chain disruptions, inflationary costs, and the impact of interest rates, presenting operational challenges across all three businesses and materially affecting the demand at our residential business. Our teams focused on delivering every day for our customers while executing on our long-term strategic growth initiatives and delivering the strong financial results we reported for the year. We are pleased to have closed 2023 with a record EBITDA eclipsing $900 million, record operating cash flows exceeding $600 million, and made significant progress toward the long-term profitability goals we have set out, achieving combined company margins, which expanded to over 22%. While delivering the financial performance for the year, we have continued to remain focused on investing in and advancing our strategic initiatives. launching industry-leading innovations and customer-focused solutions, developing our highly differentiated go-to-market capabilities, and investing in our operational capabilities to support profitability and growth. In 2023, we brought to market an exciting pipeline of innovations addressing operator needs and customer demand for automation, energy savings, labor reduction, speed, simplicity, and flexibility. We expanded our offerings of electrified, energy-efficient, and beltless equipment. We launched our middle B1 touch control, now across many of our commercial products. We furthered our lineup of integrated full-line solutions, providing for the latest in automation for customers of our food processing group. And we made significant strides expanding our offerings of IoT-enabled products, now launching in the marketplace. Across all three of our food service businesses, we entered 2024 with a portfolio of customer-focused solutions, positioning Middleby as the innovation leader with offerings to address the current and future trends of the market. In 2023, we continue to invest heavily in our go-to-market capabilities that we believe are uniquely positioning us for the long term. We've made great progress developing our digital sales and marketing capabilities, We expanded our culinary and food science teams that engage with our customers on a daily basis. And we have deepened the partnerships with our strategic channel partners. The investments we have made in our innovation centers continue to prove to be a strategic asset for our businesses. With successful new additions in 2023 of our Middleby Innovation Kitchen in Madrid, serving our commercial customers internationally, and our Middleby Residential Showroom in Chicago, featuring the exciting offerings across our residential brands. Engagement at our innovation centers continues to be meaningful and is providing benefits across our commercial, residential, and food processing businesses. In 2023, we continue to make smart investments in our operations with over $80 million invested in factory automation and facility expansion to bolster profitability initiatives across our businesses and support growth opportunities in our brands. In 2023, we were pleased with the improvements in our overall profitability as we progressed towards our longer-term margin targets. We are benefiting from our focus on new product innovation to drive improved profitability in our sales mix. We are realizing efficiency gains reflecting the impact from our manufacturing investments. and we're focused on long-term supply chain opportunities with ongoing product design and sourcing initiatives providing for additional improvements over the course of the next year. Market conditions remain challenging as we begin 2024, and while inventory to stocking is largely behind us, the housing market remains difficult, and customers in our commercial and food processing segments are cautious, giving uncertain uncertainty in macro conditions and challenges facing their businesses as we start the year. Despite what may be a slow start, we are optimistic on the year as we expect improving market conditions for the residential market as we progress through the year, with significant long-term growth opportunities ahead as the market recovers from the current disrupted lows and returns to normalized levels. and we have a building pipeline of opportunities with our commercial and food processing customers, which we expect will gain momentum as they execute against their established growth plans as we continue through the year. As we start 2024, we'll continue to focus on business execution, driving profitability and cash flow, while executing on our strategic initiatives that we continue to build upon our growing competitive advantage at each of our three industry-leading food service businesses. Now I'll pass the call over to James to spotlight some of the exciting things that we have in store at the upcoming Kitchen and Bath Show, which is at the end of this month in Las Vegas. It's a great opportunity to see all our latest in products, designs, and technologies across our entire portfolio of leading indoor and outdoor brands. will be featuring a record number of innovative product launches and demonstrating all the exciting things we have to offer across the portfolio of our residential brands. James?

Thank you, Tim. I'm proud to start off the call with an affirmation of Middle East's commitment to innovation. Each year, the National Restaurant Association solicits applications for manufacturers for their best innovations in commercial food service launching in 2024. The awards are known as the Kitchen Innovation Awards, and the winners are displayed each year at the NRA show. The NRA show is May 18th through 21st. Without giving too much away, I'm pleased to announce that Middleby has garnered a large percentage of the 25 honorees, aka winners, and while I'd like to share all the Middleby product honorees, I must wait for the National Restaurant Association to publicly announce the awards tomorrow. Please check Middleby's various social media channels for a list of all Middleby's winning innovations upon announcement. Now, per Tim, let's shift our focus to the Kitchen and Bath Industry Show, which happens next week in Las Vegas, where Middleby Residential is set to make a statement. Referring to our slide deck, you will see a selection of new design and innovations Middleby Residential is showcasing. Our expansive booth will display 250 Middleby appliances representing 16 different Middleby brands. It's worth noting that the majority of these 250 pieces will be seen for the first time at KBITS. From indoor to outdoor cooking, grills, ventilation, ice, and refrigeration, Middleby Residential has the most comprehensive lineup of premium appliances in the industry. We are also excited to announce two entrants to the U.S. market from our well-known European brands, Novi and Josper. Novi's elegant and highly innovative induction, surface cooking, and ventilation products bring a modern European design to Middleby Residential's U.S. lineup, while the Josper Casa brings the ultimate Michelin star cooking experience to Middleby outdoors and your backyard with their Spanish charcoal ovens. While I can't go into every product in the deck or on display at KBiz, I'd like to highlight some of the design and technology themes that will be on display. First and foremost, color has become an integral part of Middleby's DNA. We are expanding our color offerings across Middleby Residential with the introduction of 20 luxury colors from Viking Range, eight colors from Lynx Grills, as well as the introduction of Lynx's premium outdoor kitchen cabinetry, will be offered in the same colors. While our iconic brands, such as AGA and La Crenue, have always celebrated a rich history of color, Viking and Lynx's new colors offer designers and architects the ultimate palette of expression for their clients. Lastly, we are unveiling the AGA Era, which is a complete modern makeover of our classic AGA cast iron cooker, which has been a staple in European homes for centuries. From a technology standpoint, induction will share the stage at the Middleby food. Each Middleby cooking brand will showcase their newest induction products, demonstrating Middleby's commitment to electrification. We firmly believe our induction cooking will be rapidly adopted by consumers, With Middleby's commitment to high quality and high design, people will experience a remarkable speed, precision, and efficiency that our induction appliances bring, allowing them to rapidly embrace electrification in the most positive of ways. Continuing on with our innovations, connectivity remains a focus for Middleby. In our outdoor section, we are displaying our full line of connected digital charcoal products from Kamado Joe and Masterbuilt, including the new premium connected Masterbuilt Gravity Series Grill, the XT. At Viking Indoors, we are introducing our new contemporary reveal line, which I had previously discussed on past calls. The reveal single and double wall ovens feature our new connected and guided cooking platform, Viking Cloud. By simply connecting your Reveal Oven to the Viking Cloud app, you can enjoy a connected culinary journey. The Viking Cloud provides complete control of your Reveal Oven. You can browse through a wide range of recipes, select your favorite, and the app will guide you step by step through the cooking process while sending instructions to your oven along the way. The app will turn your oven on, will notify you when you would when your oven is preheated, and of course, when your food is perfectly cooked. Moreover, our AI-powered tool in the app allows you to transform any recipe on the web into a step-by-step guided cooking experience, just like the recipes from Viapy. This innovative feature lets you take control of the internet for a never-ending culinary journey with the reveal. I encourage you to visit the Middleby booth at the Kitchen and Bath Innovation Show at industry show to witness these market leading designs and innovations firsthand. Thank you and over to you, Brian.