The Middleby Corporation

Good day, and welcome to the Middle B Corporation's fourth quarter 2025 earnings conference call. All participants will be in a listen-only mode. On today's call are Tim Fitzgerald, CEO, Mark Salmon, President of Middle B Food Processing Group, Brian Middleman, CFO, James Poole, CTO and COO, and Steve Spittel, Chief Commercial Officer. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star then one. Please note, this event is being recorded. I would now like to turn the conference over to Tim Fitzgerald. Please go ahead.

Good morning, and thank you for joining today's call. Over the past year, we have executed decisive actions to unlock significant value for our shareholders. through the strategic optimization of our portfolio of industry-leading businesses across commercial food service, food processing, and what was formerly our residential kitchen segment. Before we dive into our results for the quarter, let me start with our strategic accomplishments. In February, we announced the completion of the sale of a 51% stake in our residential kitchen business to 26 North at $885 million. total enterprise valuation, delivering approximately $565 million in immediate cash proceeds, subject to future closing adjustments. This transaction represents premium valuation while allowing us to retain meaningful upside through our 49% ownership stake. Following the close of the transaction, Middleby operates two highly focused industry-leading platforms, commercial food service and food processing. While we retain a 49% stake in the residential JV, we are treating this as a non-core part of our operations, which is why you'll see it in discontinued operations in the fourth quarter and going forward will be excluded from our adjusted results. In anticipation of the proceeds from the deal, we'll immediately put this capital to work for our shareholders. Combined with our ongoing share pre-purchase program, We reduced our overall share count in 2025 by approximately 9% through $710 million in buybacks, one of the most aggressive capital return programs in our industry. This reflects our conviction that Middleby shares remain significantly undervalued relative to our earnings power and growth prospects. In the second quarter, we plan to complete the separation of our food processing business creating two independent pure-play industry leaders. Each business will emerge with enhanced focus, optimized capital structures, and the resources to maximize growth in their respective markets. The financial impact is compelling. Following these transactions, Middleby will operate as a focused commercial food service leader with industry-leading 27% segment-level EBITDA margins. while food processing becomes an independent growth platform with segment-level EBITDA margins over 20% and significant expansion opportunities through both organic and acquisition growth initiatives. Turning to our fourth quarter results, our total revenue of approximately $866 million for our remaining two segments exceeded our expectations. This strong top-line performance drove adjusted EBITDA of approximately $197 million. Through a combination of these operational results and the substantial share repurchases we made in 2025, this translated to adjusted EPS of $2.14 for the quarter and $8.39 for the full year. For today's discussion on segment level results and trends, I'll be discussing the commercial food service results in Outlook, and I have asked Mark Solomon, the current president of our food processing segment, and as we announced today, the CEO of Food Processing SpinCo upon completion of the spinoff to discuss the food processing segment performance. Starting with commercial food service, we generated revenue approximately $602 million, which exceeded our expectations during the fourth quarter. The outperformance was driven primarily by the general market with our dealer partners. which had double-digit growth in the quarter. We attribute this second half momentum to improved demand with independence and in the institutional market, along with continued growth with emerging chains. We're gaining share with our dealer partners as a result of investments to strategically align those relationships over the past several years. The broad-based strength we saw in the general market was offset by continued declines among our large QSRs and C-store customers. who faced lower traffic and cost pressures throughout 2025. While the QSR market conditions remain challenging, we are encouraged by actions taken by our larger chain customers to better position themselves heading into 2026. We have seen our customers address menu pricing, return to limited-time offers, and launch new beverage programs to reposition against the challenging backdrop with a focus to drive customer traffic. We are encouraged by the early traction we have with some of our largest customers with our new ice and beverage innovations. This is a targeted area of expansion for our commercial food service business, and we are well positioned with exciting new solutions. As we think about the year ahead for commercial food service, we remain focused on building our business for long-term success. but are optimistic that the chain restaurant environment will stabilize and improve as we move through the upcoming year. Brian will provide additional color, but our guidance assumes a relatively consistent environment relative to what we are currently experiencing as we await larger chain customers to firm up their plans for the year, particularly in the second half. More specifically, we have clear catalysts for accelerated growth with restaurant industry fundamentals stabilizing, with early signs of traffic improvement, with our dealer partnerships generating strong momentum in the general market and institutional segments, and our ice and beverage platform representing a significant growth opportunity that we're uniquely positioned to capture. As we think longer term, the investments we have made position us with unmatched competitive advantages, both now and in the future. with the industry's broadest portfolio of leading brands, the strongest innovation pipeline, and leadership in automation and IoT capabilities that will drive market share gains for years to come. We still have work to do, but I'm excited for what the future holds for Middleby Commercial Food Service. I would now like to turn the call over to Mark to discuss food processing.

Thanks, Tim. Before I discuss the segment results, I want to thank the board of directors for entrusting me with leading food processing spinco. Leading this company is the honor of a lifetime, and I am excited for the opportunity ahead. I also want to thank you, Tim, for the partnership you've shown me over the past 10 years here at Middleby. I look forward to working with you even more closely through this process. Turning to the food processing segment, in the fourth quarter, we generated the revenue of approximately $265 million, which outperformed our expectations. As I look at the business, I am proud of what we have accomplished in the fourth quarter, particularly our extreme strong order rate, but more excited about the strong foundation it creates as we enter 2026. 2025 was challenged with disruption from tariffs and high food costs, which delayed our customers' purchasing and investment in solutions in the first half. However, the latter part of the year, we saw our customers moving ahead. We had very strong orders in both the third and fourth quarters, with a record backlog as we finished the year. This was driven by continued success with our total line solution offering along with strategic expansion in international markets. We have a strong sales pipeline and continuing strong order intake. This all gives me a great confidence in our position for not only next year, but the longer term. Taking a step, what sets Middleby Food Processing apart is our comprehensive approach to serve individual protein, bakery, and snack processors. Rather than creating a portfolio of disconnected brands, we have created a portfolio designed to deliver complete end-to-end total line solution offerings that optimize our customers' entire production lines and are committed to delivering the lowest total cost of ownership. Our success reflects year of strategic investment in building these comprehensive customer solutions. and we are gaining momentum in the marketplace with a growing competitive advantage. Our decentralized culture promotes agility, innovation, and speed. We have state-of-the-art innovation centers, with the most recent one opened this fourth quarter outside Venice, Italy, where we can showcase our know-how in the most innovative and collaborative environments. This strategy is one of the key foundations that will drive our organic growth in the years to come. I am also very excited about the continued opportunities that exist as we expand the platform through targeted strategic acquisitions. We have built the food processing business through additions of brands and products very specific to the food applications that we have targeted and that complement our total line solutions. This has proven to be a very successful acquisition strategy, providing significant revenue and operating synergies. We have a consistent and proven track record of executing on our acquisition strategy over many years with our strategic approach and financial discipline. Although we have been executing our strategy for some time, We are still in early innings, and it's the right time for the separation into an independent company. We now have the proper scale. We can accelerate what has proven to be our unique and successful business model. I am excited for what lies ahead. With that, I'll turn the call back over to Tim.