The Middleby Corporation

Thank you for joining us for the Middleby First Quarter 2024 conference call. With us today from management are CEO Tim Fitzgerald, CFO Brian Middleman, Chief Technology and Operations Officer James Poole, Chief Commercial Officer Steve Spittel, and Vice President of Investor Relations John Joyner. We will begin the call with opening remarks, then open the lines for questions. Instructions on how to join the queue will be given at that time. Now, I would like to turn the call over to Mr. Fitzgerald. Please go ahead.

Good morning, and thank you for joining us today on our first quarter earnings call. As we begin, please note there are slides to accompany the call on the investor page of our website. First quarter proved to be challenging with a backdrop of the housing market, interest rate environment, and price-cost pressures at our restaurant and food processing customers weighing out our businesses as we started the year. Even though challenges persist, we are seeing improving order activity and expect this to continue as we move through the year, as customers execute on stated business plans and as opportunities in the pipeline begin to convert. While customers are slow to restock inventories given shorter lead times and higher carrying costs, Inventories in the channel have returned to normalized levels and now provide a tailwind as end-user sell-through occurs, and this bodes well for the later part of the year. At our commercial food service business, customer execution has been slow starting the year, given continued longer lead times for permitting and construction, along with longer deliberation on their business plans, given economics of higher restaurant operating costs. However, our channel partners are building backlogs weighted to the second half of the year, and our chain customers continue to maintain their plans for operational upgrades and store openings, which are also weighted to the second half. We are gaining market share in new and large product categories such as beverage and ice, and we are well-positioned to capitalize on our market-leading positions, capturing growing trends in vetless and electrified cooking. And we have early-stage traction with some of our game-changing innovations as we lead the future of automation, digital, and IoT. At our residential business, the housing market remains very challenged in terms of existing home sales, new home starts, and remodels. While the residential market will take time to fully recover, it has stabilized, with a luxury end to the market showing improvement over the past several quarters. We're now seeing growth in order rates, and we expect that will continue as we progress through the year. And we are well positioned to benefit from the many investments that we have made in new product innovation as we move beyond the current market conditions. Many of these new product innovations were on display at the recent Kitchen and Bath Show. We are proud to receive a Best of KBiz award at Viking for our new reveal series, And we're also awarded Best of KBiz at Novi, one of our newest Middleby residential brands, which we're now launching into the U.S. market, featuring state-of-the-art induction cooking, integrated ventilation, and unique accent lighting. Our industry-leading brand portfolio with launches of new colors, new designs, and new technologies generated tons of excitement with builders, our dealer partners, and the design community at the show. leading to new business opportunities coming out of the show and a much greater awareness for all the Middleby residential portfolio has to offer. Our food processing business, our customers are proceeding somewhat cautiously as they monitor food costs, demand levels, and the interest rate impact on larger projects. Still, the pipeline of active projects continues to build for expansions and needed upgrades. with requirements to increase throughput, reduce labor, minimize food waste, and with a growing focus on sustainability. Automation remains in great demand. Our backlog remains healthy, and as market dynamics have become more stable, we're expecting the pipeline will convert into orders. Our strategy to become the leading provider of best-in-class full-line integrated solutions for the protein and bakery markets is resonating. and we are best positioned to offer our customers state-of-the-art automation to address their operational and efficiency challenges. We posted continued overall strong profitability at our commercial and food processing segments in the quarter, despite revenue declines, while residential margins were significantly challenged given the more significant market conditions and our strategic decision to invest in KBiz. We expect to return to the path of longer-term margin expansion as we benefit not only from revenue recovery, but also as we realize greater benefits from profitability initiatives, including investments made at our factories to realize greater production efficiencies, along with the impact of favorable profitability on our newer product innovations. Supply chain also provides a continuing opportunity as we have moved away from the crisis management of the past several years and are now focused on leveraging our scale and realizing synergies across our businesses. While we navigate the near-term market conditions, we continue to focus on the execution of our business strategies, expanding profitability, and growing our cash flow, while building upon our competitive advantage at each of our three industry-leading food service businesses that we are confident is setting us apart in the long term. Now I'll pass the call over to James to spotlight some of our exciting award-winning products we'll be unveiling at the National Restaurant Association show in Chicago later this month. Again, highlighting the results of our strategic focus to invest in and accelerate the pace of innovation. James?

Thanks, Tim. Last quarter, I remarked that Middleby had won eight of the 28 coveted Kitchen Innovation Award honors. But because of the timing, I couldn't say which Middleby brands won. Well, with a little more than one week to go before the NRA show in Chicago, we are excited to introduce the great eight. Blodgett, Pitco, Evo, Newton, Wonder Bar, Wild Goose Filling, Very Mixer, and L2F, now known as Middleby Automation. These eight brands are the National Restaurant Show Association's KI winners. If you are attending the show May 18th through 21st, please make sure you visit the Kitchen Innovation Awards Pavilion to see and experience these new products from the Grade 8. And then come check out Middleby to experience our latest solutions around digital, embedded, and robotic automation, as well as beverage solutions and the launch of our newest combi, the Invoke, a Red Dot Design Award winner. We couldn't be happier with these new products. These innovations are as diverse as our brands, but they were all developed with our customers' daily challenges in mind. Labor reduction and simplification, consistency of product, throughput, all aimed to maximize our customers' profitability. In the interest of time, I won't go through each innovation, but you can find each in the deck that Tim referenced. The first is the Pitco Torque Fryer. The torque introduces continuous filtration and convective frying. With continuous filtration and auto oil top off, the torque essentially provides infinite oil life for the operator. And the continuous filtration comes forced convection as oil is forced to circulate around the food on its way to being filtered. This forced circulation reduces are cook times up to 10%. While we are talking about numbers, let's cover a few more. The torque is 10% more efficient than the typical ROV fryer and boasts flue temperatures 60% lower than the typical gas fryer, thus substantially reducing your kitchen ventilation requirements. Lastly, the torque reduces labor needed to filter a traditional fryer by up to 90%. By the numbers, This fryer stands to obsolete most fryers in the market today. Moving on to the Blodgett Invection Oven, this is a first-of-its-kind oven, allowing the operators to select between a high-heat transfer accelerated cook oven or a gentle convection oven by simply selecting a menu item from its Middleby OneTouch controller. Once the operator selects the menu item, the Invection's mechanic can figure the oven for the optimal cooking profile, whether it be high velocity impingement air or gentle convection. This innovation enables a multi-cavity convection oven, typically found in the back of the house, to also function in the front of the house as an accelerated cooking oven, thus offering our customers the ability to cook a la minute. So, whether you need to cook delicate laminated pastries in 20 minutes, or you need to cook 16 inch pizzas in three minutes and 30 seconds, the Invection is your solution. Now on to beverage dispensing. We have three brands introducing beverage dispensing products aimed at reducing waste while improving speed of service and delivering a better tasting, highly consistent product. I've spoken about Newton CFV valves in the past. But now we have two new products that feature the valve's patent design that enable the consistent, precise delivery of beverage and or ingredients regardless of the factors that plague traditional valves, the Newton Discrete Valve and the Wonder Bar M5 Bar Gun. With these innovations, our customers now have confidence that they are serving bottle-quality beverage or dispensing individual ingredients without the expense of consistently calibrating their systems, or wondering if their systems are in calibration. The Newton discrete valve and the Wonder Bar M5 bar gun eliminate calibration, waste, reduce service calls, and improve customer satisfaction through consistent delivery of product. The Newton CFV valve is also being used throughout Middleby to control mixing and dispensing of highly concentrated ingredients, such as individual flavors, even cleaners. These concentrations can be as high as 500 to 1, which unlocks our customers' ability to change how they distribute and dispense ingredients or even clean their equipment, say, with Newton's new clean-in-place technologies. The final dispensing solution that I'll discuss is a Wild Goose Cerveci, which utilizes the same filling systems to dispense beer that Wild Goose uses in its industry-leading high-speed canning lines. Cervizi turns anyone pouring their first beer into a seasoned bartender by automatically dispensing beer twice as fast as a normal tap system while also minimizing waste by precisely controlling the pour volume to the nearest fraction of an ounce or just a few milliliters, all with no training. Cervizi also improves keg yield from 75% to 95% by controlling the pour volume in the beer's serving conditions. While I didn't get a chance to cover the other products, such as the Pizza Bot 2.0, Evo Event, the Very Mixer Ergo, we will hit those in later calls, or again, you can see them at the NRA show. But know they share the same traits as the other innovations I described today. They all reduce waste, increase throughput, maximize consistency, decrease simplified labor, all of which improve our customers' profitability. Thank you, and over to you, Brian.