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spk01: Good morning and welcome to JBT Corporation's second quarter 2021 earnings conference call. My name is Vic and I will be your conference operator today. 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. I will now turn the call over to JBT's Vice President of Corporate Development and Investor Relations, Cedric Meredith, to begin today's conference.
spk02: Thank you, Vic. Good morning, everyone, and welcome to our second quarter 2021 conference call. With me on the call is our Chief Executive Officer, Ryan Deck, and our 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 8-day filings. 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. 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. Finally, I encourage you to review the second quarter slide deck, which is also posted in the investor relations section of the JVT website. In it, we show historical trends, highlight key performance metrics and business opportunities, and speak to our growth strategies. Now I'll turn the call over to Brian.
spk03: Thanks, Kedrick, and good morning, everyone. It's great to be here to talk about JBT's strong financial performance and the strategic progress we made in the second quarter. As we highlighted last quarter, JBT continues to enjoy robust demand at Foodtech and encouraging signs of recovery at Aerotech. At the same time, we continue to face a challenging macro environment, driving increasing costs of doing business, including material cost inflation, supply chain constraints, and tight logistics. Those pressures have intensified, but now also include rising labor costs and labor shortages. Now, withstanding this challenging backdrop, we outperformed expectations on the top and bottom lines in the second quarter. I'd like to express my appreciation to everyone at JBT who did an excellent job of getting orders out the door to satisfy customer needs in this tough operating environment. And a specific thank you to our service technicians who have gone above and beyond to meet customer expectations, despite the complexities and restrictions associated with the pandemic. In the second quarter, we also booked record orders and generated excellent cash flow. Moreover, we advanced our growth strategy with the exciting acquisition of Provenio, which expands our recurring revenue stream and further strengthens JBT's role in food safety. I'll hand it over to Matt, who will provide a more detailed analysis of the second quarter results, speak to the benefits of the convertible note offering we completed in the quarter, and walk you through our updated guidance.
spk04: Thanks, Brian. JVT's second quarter performance continues to demonstrate our ability to deliver on growth in a challenging operating environment. Food tech revenue was $361 million, an increase of 19% year-over-year and 15% sequentially. As Brian mentioned, we outperformed in the quarter, driven primarily by better-than-expected shipments as our businesses executed well despite the challenges they faced. The impact of foreign exchange translation was also a positive factor in the quarter, accounting for approximately five percentage points of the year-over-year growth, which was three percentage points higher than expected. Adjusted EBITDA margin for the quarter was 19%. Operating margins of 14.3%. At the low end of our guidance range and negatively impacted by the cost pressures we experienced with supply chains and labor market. Aerotech revenue of $115 million which was ahead 6% year-over-year and 8% sequentially, was at the high end of our expectations. Adjusted EBITDA margins of 11.1% and operating margins of 10.5% exceeded guidance due to a favorable mix with higher recurring revenue. Interest expense came in nearly $1 million less than forecast due to better-than-expected cash flows. As a result, JVT reported diluted earnings per share and continuing operations of $0.95 in the second quarter. Adjusted EPS of $1.19 includes an adjustment for a $4.4 million or $0.14 per share non-cash deferred tax remeasurement associated with the tax law change in the UK. Adjusted EBITDA for the second quarter was $70.1 million, up 2.5% year-over-year and 20% sequentially. Operating profit of $47.3 million declined 1% year-over-year on higher M&A costs, but was ahead 25% sequentially. Free cash flow for the quarter remained strong at $35 million, representing a conversion rate of 115%, with continued good collections of accounts receivable, customer deposits, and a slower-than-expected investment in inventory due to supply chain constraints. Going forward, we need to invest in inventory levels to support the increased backlog, and therefore, with higher forecasted revenue, we anticipate that the balance sheet will expand in the second half of the year. Additionally, we are increasing our capital expenditure forecast for the year by approximately $5 million from our previous guidance to support further strategic investment in our digital capabilities. Altogether, we expect free cash flow conversion for the year to remain north of 100%. As we look ahead to the full year 2021, we have refined our guidance based on first half results and order trends. We have again raised top line guidance for food tech, forecasting a year-over-year gain of 10% to 12% organically, with another 2% increase related to FX translation. That compares with our previous guidance of 9% to 11%. With the inclusion of Prevenio acquisition, Our all-in top-line guidance for food tech is 14% to 16% growth for the full year. Considering the continuing supply chain and operational cost pressures, we have updated the margin guidance range for food tech with projected operating margins of 14% to 14.75% and adjusted EBITDA margins of 19% to 19.75%. At Aerotech, we have narrowed our revenue guidance range to 1% to 4%. from the previously communicated range of 0 to 5%. We are holding margin guidance with projected operating margins of 10 and 3 quarters to 11 and a quarter percent and adjusted EBITDA margins of 12 to 12 and a half percent. Additionally, we are adjusting our forecast for corporate costs as a percent of sales down slightly to 2.7% and lowering interest expense guidance to 9 to 10 million. Altogether, we have raised our adjusted EPS guidance to $4.60 to $4.80, which excludes M&A and restructuring costs of $12 to $14 million in the previously mentioned UK tax-free measurement in the second quarter. Our GAAP EPS guidance of $4.15 to $4.35 is $0.05 below our previous guide, primarily due to higher M&A-related costs. We have also raised our full-year adjusted EBITDA guidance to $280 to $290 million, up from the previous guidance of $270 to $285 million. Now focusing on the third quarter, we expect revenues growth for JVT of 18% to 19%. This consists of year-over-year growth of 19% to 20% at FUTEC, which includes 3% to 4% from acquisitions. For the Aerotech business, we are projecting growth of 15% to 16% for the quarter. At Futek, we are projecting third quarter operating margins of 14% to 14.5%, with adjusted EBITDA margins of 19% to 19.5%. For Aerotech, operating margins are forecasted at 11.25% to 11.75%, with adjusted EBITDA margins of 12.25% to 12.75%. Corporate costs for the quarter are expected to be $13 to $14 million, excluding approximately $4 million in M&A and restructuring costs. Interest expense should be $2.5 to $3 million. That brings third quarter 2021 earnings per share guidance to $1 to $1.10 on a gap basis and $1.10 to $1.20 as adjusted. Finally, I would like to briefly touch on the convertible note offering that we completed in the second quarter. With net proceeds of more than $350 million, we have locked in a portion of JBT's capital at a historically low fixed interest rate with favorable conversion terms that limit shareholder dilution until the stock exceeds the synthetic strike price of $240 per share. The notes also afford JBT additional flexibility in our capital structure to support our organic investments and acquisition strategy. With that, let me turn the call back to Brian.
spk03: Thanks, Matt. As I mentioned at the top of the call, JBT generated record orders in the second quarter. Food tech orders expanded 3% sequentially from the first quarter's record level. We continued to enjoy robust demand from customers serving the retail market with improvements on the food service side, with particular strength in poultry, plant-based foods, pet foods, fresh produce, and packaged ready meals. In addition, our automated guided vehicle business outperformed in the second quarter with several large food customer orders, a reflection of the growing demand for back-end automation among our customer base. Foodtech's robust order trends are also a direct reflection of the continued investment we've made in product innovation. JVT's recent product launches, featuring advances in hygiene, capacity, and automation, have gained nice acceptance in the marketplace. Furthermore, new features that reduce food waste and promote more efficient use of water and energy enable JVT to help our customers on their sustainability journey. Geographically, food tech commercial activity in North America remain robust. Europe was essentially flat versus a volatile first quarter, but with progress on vaccine penetration and governmental economic support, Its outlook seems to be more promising, albeit subject to uncertainty surrounding COVID. As it relates to Asia and South America, we are experiencing some fresh pandemic-related delays in customer investment decision-making. Aerotech also enjoyed record orders in the second quarter. This primarily reflected some major orders on the infrastructure side of the business, which will mostly ship in 2022. Aerotech second quarter orders also reflect the typical seasonal strength, including demand for cargo loaders and de-icers. Given the lumpiness of orders, we expect Aerotech order activity in the second half of the year to be more normalized relative to the outstanding second quarter. At the same time, we are encouraged by the pickup in U.S. passenger traffic and have secured a few additional orders from commercial airlines. However, as we have said, we expect full recovery to take another two years to play out. And we're cautiously watching the developments surrounding the Delta variant, which also could impact the pace of recovery and air travel. Nonetheless, we feel we are clearly beyond the bottom of the investment cycle. Now, to the acquisition of Provenio, which closed in early July. Provenio further strengthens JBT's role in food safety. which is a critical and growing concern for our food processing customers. They offer a unique delivery system for consumption-driven antimicrobial solutions, which provides optimal food safety performance in our customers' operations, a safer environment for their employees, as well as enhances food integrity. Financially, Provenio has demonstrated an impressive growth record with EBITDA margins in the mid-20s. Moreover, the revenue model is predominantly consumable and contractual, adding to the strength of our recurring revenue profile. And as part of JBT, we foresee significant opportunities to expand Prevenio's applications beyond its core poultry market and into other proteins and fresh fruit and vegetables where JBT has a strong presence. Furthermore, over time, we see opportunities to extend its geographic reach. Switching gears toward internal investments, JVT plans to accelerate investment in our digital strategy and IOPs platform that builds intelligence in our products and services. Through a focus on digitally enabled customer-centric solutions, we believe we can further entrench JVT as a holistic, uptime solutions provider with our customers. Additionally, I want to speak to the rebranding of what was previously our liquid food business within the food tech segment. Its new name, Diversified Food and Health, reflects a business that has expanded far beyond its historical focus on juice and canned goods as a result of continued investment, both organically and through acquisition. Diversified Food and Health now provides a wide portfolio of solutions for customers across the food tech segment, including processing, preservation, and packaging solutions to serve end markets for fresh-cut and processed fruits and vegetables, convenient foods, prepared and ready-to-eat meals, pet foods, protein and plant-based beverages, dairy, pharmaceuticals, and nutraceuticals. Together with our protein business, Foodtech has an enviable, diverse offering for our food and beverage customers. Overall, we are very pleased with the robust commercial activity at Foodtech, which has enjoyed broad-based strength on the retail side, growing demand for automation solutions, and a pickup on the hard-hit food service side. At Aerotech, continued strength on the infrastructure side has been accompanied by initial improvement in our business with commercial airlines. However, we remain concerned by the recent resurgence in COVID and the potential impact on macroeconomic conditions. we're otherwise mindful of a high cost environment under which we are working lastly as part of jbt's core values we continue to prioritize a diverse and inclusive work culture that promotes continued education enhanced development opportunities mutual respect and teamwork i want to extend my serious sincere thanks to the entire jbt team who have embraced our core values which enable us to serve our customers and meet their needs for essential solutions. With that, I'll take your questions. Operator?
spk01: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Lawrence DeMaria from William Blair. Your line is open.
spk07: Thanks. Good morning, everybody. Good morning. I want to talk about the orders and backlog. I think you noted that some of the food tech was, I'm sorry, air tech was for next year. But can you just talk broadly about the new orders and backlog and the conversion time, what it means ultimately for the first half of 22, which it seems like, more important in the second half of 21, given the timing of the orders. And if supply chains ease up, does that imply that, you know, the orders for next year can flip into 21, or are we specifically seeing orders that are pushed out into 22 that would obviously give us some more confidence into the growth trajectory for next year?
spk03: Right. Thanks, Larry. So, as you know, we do have a broad range of lead times of the race for product offerings. anywhere from six to eight weeks up to nine months and even a year. I will tell you that the strength of the orders in food tech for the quarter, a little bit will go into the fourth quarter, but quite a bit will be going into 2022, given the size and nature of the projects that we're looking at. Particularly, I mentioned the AGV side and some large orders on the diversified food and health side, which will help have a much larger backlog at the end of this year versus where we were at the end of 2020. So we are setting ourselves up for a decent first half of 2022. And similarly, on the Aerotech side, as I mentioned, those infrastructure-related projects, almost all of that will go into 2022. And we are seeing the improvement on the commercial airlines and generally speaking on the ground support side. So we would also expect a larger backlog ending 2021 in Aerotech as well.
spk07: Okay, that's very helpful. Thanks, Brian. And then the second part, maybe just talk about price. I know there's a lot of inflation out there, obviously. And historically, I think there's more risk on price cost on Aerotech. But can you just talk about how you're protecting yourselves on these origins next year that would ensure, obviously, margin expansion, and just what kind of risk there is in the backlog on pricing and margin?
spk03: Yeah, so I'll specifically talk to FoodTech first. So as you know, FoodTech is largely project-based, and obviously almost half of our revenue is based on recurring revenue, aftermarket, etc., So generally speaking, we have a good ability to factor in product inflation into our price. So the price cost on the product inflation, it's fairly well covered, especially when you consider the strength of our supply chain team. As you know, Larry, we put a lot of resources behind supply chain over the last two years, and those investments have really proven to pay dividends, especially in this time. While we're not seeing an uplift that we otherwise would have gotten absent inflation, it is really significantly helping hold the line. So we'll generally be able to price for inflationary items and materials. The challenge comes more so on the logistics side. As you may know, things like ocean freight have more than tripled, almost quadrupled, versus this time a year ago. So that is why we do see some pressure on the margins. in the back half of the year for food tech. And we've tried to appropriately adjust our guidance accordingly. But generally speaking, food tech's in pretty good shape. We're guiding to north of 19% margins for the year. And given the environment that we're in, that's pretty flat versus where we were in 2019. So we're really pleased in our ability to price cost and just manage the cost in general. It's just a little bit of pressure here in the back half. On the Aerotech side, you are correct that it is a little bit tougher given the nature of the products and services. On the infrastructure side, those are project-based. We do a pretty good job of factoring our current costs and outlook for the metals industry. environment as we price those. Those tend to be longer-term contracts. As you know, we're going to go well into 2022. So we will do some metal hedging on that. Historically, we've done some metal hedging on the products, but it's not 100%. So there's always a little bit of risk there. But in the current environment with metals at pretty high levels, we would be very hopeful that things don't get worse as we go into 2022. If there's any abatement on the metals prices, there actually could be a little bit of upside. On the ground support equipment, it is a tougher environment from a competition perspective. So price cost is more reflective of the market itself as opposed to material costs. You can see some of that pressure over the last couple quarters, but we've happened to outperform a little bit based on some of the mix on our margins. In the back half of the year, we do see some further pressure versus what we would normally see in terms of our flow-through on EBITDA given the high volume in the back half of the year. So we have tried to properly account for that in the back half of the year given that price-cost pressure. But all in all, if you take a step back and look at the margin profile for JBT for both food and Aerotech, given the conditions we're in, we're really pleased with our current situation. We're holding margins for the most part versus where we were in 2019. And if you look at food tech in general, even if you exclude the impact of acquisitions, overall food tech is looking to outperform 2019, not by a large margin, but the rebound is there both on the margin side and on the revenue side.
spk07: Okay. Thanks a lot, Brian. Appreciate all that, Collin. Good luck.
spk03: Thank you.
spk01: Your next question comes from the line of Nick Dobry from Robert W. Beard and Company. Your line is open.
spk05: Thank you. Good morning, gentlemen.
spk03: Good morning. Just to sort of follow up on this margin discussion, I guess I'm trying to get a better sense from you in terms of what's incremental relative to your prior outlook. At least to me it sounds like maybe things have gotten more challenging on the labor front than what you had envisioned in the past. And I'm also sort of trying to get a sense from you in terms of the various ranges that you provided for each segment, but it's really food tech that I'm most interested in on a margin side. I mean, what takes you to the top end versus the bottom end of your margin guidance at this point?
spk04: Hi, Meg. It's Matt. I'll try to answer it as best I can. I think, as you mentioned, you know, we did see the inflation on labor accelerating Q2, and we tried to take that into our guidance, which is putting pressure in the second half, as well as Brian mentioned the inflation on logistics costs that are also in our guidance. You know, as Brian mentioned, we are fairly well set up to address material inflation through pricing on the food tech side. But you know, there could be some lag there if material costs continue to get worse in the second half of the year. Additionally, On the food tech side, there has been a lot of inefficiency on the operations side as we've had really difficult issues with reliability of vendor supply and delivery. And that's forced the business to be relatively inefficient sometimes on the operating floors and to pick up and set down different various pieces of equipment to deliver to the customer. So we try to build all that into our guidance, and that's what's putting some of the pressure in the back half on the margins. What would potentially get us to the top end would be our ability to continue to offset some of that inflation by our supply chain team, as well as a favorable mix on the aftermarket side if that continues to get better we could see slightly higher margins in the back half if we see higher mix of aftermarket and recurring revenue.
spk03: Right. And I'll also add if logistics prices come down, that would help a lot, as well as if supply chains do ease up, we would get better productivity out of the factories. So that would help as well. So we did try to factor that in in the range of outlook that we see. Okay. And when we're talking about mix at FoodTech, recurring versus non-recurring, you know, the recurring portion of the business has done quite well throughout the COVID downturn. It's become a bigger portion of the pie.
spk05: I'm sort of curious as to how you're thinking on a goal-forward basis.
spk03: I'm presuming that the rebound in orders that we're seeing is resulting in growth for the non-recurring portion of the business. If that's the case, should we expect negative margin mix as the non-recurring portion of the business is rebounding, or is that not a factor as we think about 2022, Frank? Sure. It is a factor, and we – As you may recall in the last call, I think we were close to 50% after recurring revenue mix last year, given the lower equipment sales, and we guided that it would be reverting to more of about a 45%, 55% mix, 45, recurring 55 equipment in 2021. And we're generally on that pace, actually slightly ahead on the aftermarket. But generally, when you think about our progression from 2020 to 2021, that is a negative factor and, again, considered in the mix and the margins. As we roll into 2022, it's a little early to know the precise mix, but I wouldn't see it diverting significantly from the mix that we see in the current year. So I think the margin profile for 2022 is going to be more of a consideration of supply chain logistics and labor as opposed to a huge change from the mix versus 2021. Okay. So we're taking a hit this year basically on that. Then maybe the last question on this for me. Assuming that material costs don't accelerate yet again from here, do you think you're going to be fully caught up in terms of the pricing actions or the adjustments that you need to make exiting 2021? So as we think about 2022, is it fair for us to think of normal incremental margins for your business And related to that, can you also remind us how you view normal incremental EBITDA margins, incremental EBITDA margins, given your evolving business mix? Thank you. Sure. Now, that's a pretty big assumption regarding new change in costs from where we are today. But absent changes or moderation of inflation and other pressures on labor, etc., we would expect to be a more normalized incremental price flow-through, so to speak. And for food tech, that is typically somewhere in that 25% to 30% flow-through. We call it flow-through here. And on the aerotech side, I would say the swings for mix are potentially a little bit bigger, but absent, again, changes in mix or material cost inflation, they typically are in that 20% to 25% flow. Thanks for the call. I'll jump back in.
spk04: Thank you.
spk01: Your next question comes from the line of Michael McGinn from Wells Fargo Securities. Your line is open.
spk03: Hey, good morning, everybody. Thanks for the time. Good morning.
spk02: Sorry if I missed this, but you mentioned the working capital ramp and the CapEx ramp for the backup year. I don't know if you gave a dollar for that balance sheet for your networking capital figure, but is that kind of shaking out like a I don't know, like a $30 million per quarter free cash flow for the back half? Is that kind of what you guys are thinking?
spk04: Yeah, we did not give specific guidance on the number for free cash flow in the back half. Again, we just expect it to be positive, above 100% of net income for the second half of the year as the balance sheet grows with higher inventory and higher revenue leading to higher accounts receivables. So I think, like I said, the balance sheet will expand. To give you the exact numbers is kind of difficult. But we would expect it, again, to be positive and favorable to the back half of the year. And the CapEx, as I mentioned, is $5 million increase over a prior guide. So our CapEx expectations for the full year are about $45 to $50 million. Go ahead.
spk02: Very helpful.
spk05: So if I could switch gears to Prevenio.
spk02: You mentioned the existing poultry market and then as well as the fruits and vegetables. I mean, is this a situation where you – I guess how – what is the level of investment needed to make the efficacy really – or to take in the poultry? vegetable market versus the poultry market? I mean, do you think it's already being adapted like it is in the poultry market? Just any context or color, that would be great.
spk03: Sure. Yeah, thanks for the question. Prevenio is very exciting, particularly as it relates to our ability to provide resources. And generally speaking, when you think about acquisitions for JBT, this really fits nicely in our portfolio in terms of where we want to be going in terms of closer to the customer's operations, and then finding businesses that, once they're folded into the JVT portfolio, we bring resources to the table. So specific to the fresh fruits and vegetables side, there's not a ton of investment required. It's more about the market penetration, the commercial efforts, working with our food scientists and getting them and our customers comfortable with with the solutions that are provided versus their current use of solutions that provide protection to the fruit and vegetables. So it's really low, generally speaking, from a CapEx or inventory investment. It's really more about the human resources and the time working with our customers to develop that market. Got it. Appreciate that. Great. Thank you.
spk01: Your next question comes from the line of Joel Peace from BMO. Your line is open.
spk05: Hey, guys. How's it going? Hey, hi. I wonder if you could give us a little sense on the build of the backlog. Is that, you know, what percent or how do you think about how much of that is from order strength and how much of it is from inability to get stuff out the door because of some of the constraints you were talking about?
spk03: Yeah, interesting question. So I would tell you that the vast majority of the bills in the backlog is from the older strength. Now we are seeing some push out of lead times. Again, it's kind of going back to I think with Larry's question, it is product line by product line in terms of what the lead times, how they have changed. But anywhere from, you know, one to two weeks up to, you know, an extra 30, 60 days is what we're seeing in the lead times. But overall, when you just do the math, it's predominantly the order strength is leading to the build of the backlog.
spk04: And just to add to that, in some geographies where there are higher COVID outbreaks, there are some customers that are pushing delivery down a little bit, too. So we are seeing some... customer impacts from the COVID outbreaks and, again, certain geographies where the infection rates or the vaccination rates aren't as high.
spk03: Right. So in that case, it's not so much hourly times. It's more of the customer's ability to accept. Right.
spk05: Yeah, which is good because that probably gives you some ability to see well into 2022. And then what do you need to do, like this is more of a strategic longer-term question, but what do you need to do to get the operating margins in Aerotech up into the mid-teens kind of range? Is that product mix? Is it volume? Can you give us a sense there?
spk03: Yeah, I would tell you it's predominantly volume and some of the work, and I would tell you the getting a more normalized environment as relates to raw material costs, et cetera. As I mentioned, the price cost on the ground support side is a little bit more dependent upon the market conditions as opposed to pure kind of cost plus. So the two things I would say is the volume as well as some moderation of the inflationary pressures. If you go back to our guidance pre-COVID for 2020, we were on pace for a mid-teens EBITDA margin. So business model totally supports a mid-teens margin. It's just getting the world a little bit back to normal. And as you know, on the ground support side with the commercial airlines, that's going to take a while. It is nice to see the commercial traffic. It's really strong domestically. We'd like to see some more of those international routes in the business. to get the airlines making more money and starting to make some investments. But typically the ground support side does trail from an investment perspective, airplanes, et cetera. So that's why we say it will take a couple years. But if you think about the pace that we're on and the infrastructure side, one thing that's probably really worth mentioning is You know, at one point last year, there was some concern on the infrastructure side, which has a longer lead time and generally a longer sales cycle that, you know, once the impact from COVID starts to get felt in 2021 on those projects, that there would be some risk to 2022. We don't see that playing out. We see continued strength. on the infrastructure side as we did pre-COVID. You know, the longer-term macros on that, which have been driving a lot of growth on the infrastructure side, remain the case, and JVT is extraordinarily well positioned on that infrastructure side, particularly as it relates to the passenger boarding bridges and the ancillaries that go along with that.
spk05: Well, that's great. All right, thank you. Thank you.
spk01: Your next question comes from the line of Walter Liptock from Seaport Global. Your line is open.
spk03: Hi. Good morning, everyone. Good morning. I wanted to do a follow-on with this Aerotech and the infrastructure. And maybe the way to think of it is the orders really increased a lot from last quarter, up about 80 million. And I think in your comments, you mentioned guided vehicles versus infrastructure.
spk02: I wonder if you could talk about just sort of the mix in that orders that you saw during the quarter.
spk03: Right. So, Walt, just as a reminder, AGV is within food tech these days. We moved it back in most of 2015 or so, 2014. So everything on the Aerotech orders to $182 million, if I believe that's the number, That's all on the infrastructure, not all on the infrastructure side, but the outside strength of that number is on the infrastructure side. And then as I mentioned in the prepared remarks, a progression of seasonal impact from de-icers and cargo loaders. As you know, the cargo market is strong and we do have seasonal activity coming up. So generally speaking, it's that combination. But the bulk of the outperformance It was on the infrastructure side, which is the passenger boarding bridges predominantly. Okay, great. Okay, so in food tech, you had the H&V. Was it like a significant amount of orders that came in within food tech for the guided vehicles? It was. It was a great quarter for AGV. It drove us. Again, if you go back to kind of what is a normalized kind of quarter for JBT, $340 million, $350 million per quarter of orders would be a normal number. And let's say with Prevenio, it's more like $350 million to $360 million. And we were over $400 million for the quarter order. Yeah, I think it was number 406 or something like that. 307, right. A decent amount of that outperformance was on the AGV side, which is actually pretty exciting when you think about it because AGV is the definition of automation, and we're seeing a lot of demand automation throughout food tech, But the combination of the penetration that AGV is seeing into the food market, there's a lot of food distributors out there. That combination and that working together with the traditional food tech businesses is really paying dividends. And we're such well positioned from a secular perspective where that market is going. So the investments that we've made in AGV as well as the rest of food tech over the last year, last several years is really paying off in terms of the acceptance in the marketplace. Okay, great. So when you were talking about how this quarter, you know, being at that, you're above that 350 to 360 level, range of orders. The Delta is the AGV. Is that what you're saying? A portion of it. Yeah, a portion of it. But diversified food and health also outperformed in the quarter on some of their, actually on some pet food projects that will be completed in 2022. Okay. And then just a follow-up on the supply chain thing. So you are having problems getting some shipments out. I wonder how much revenue uh shifted from this the second into the second quarter into the second half yeah that's a good question we actually i don't think anything really we we did a really great job of getting stuff out the door actually i would say better than we thought which was actually part of the driver and while we outperformed on revenue in the quarter so i would say there's not shifts going from the second quarter to the third quarter. If anything, we outperformed and got things out the door a little bit faster. We basically hit the number we had hoped we would hit, but then we were mindful of the risks that we were facing in the quarter, and we were able to overcome those risks. Okay, great.
spk02: Is there something, and I apologize for all the questions, but is there some, is there something that changed going into the third quarter or the fourth quarter where you think there could be some slippage of orders, you know, with, you know, tight supply chains or, you know, you mentioned cargo ships, et cetera? Is there something that changed or is there the potential to meet your shipments on time?
spk03: Yeah, well, there's two things. One, we are still faced with those challenges, and they're increasing, particularly on the labor side. That's probably the biggest difference between the second quarter and the third quarter are some of the supply chain challenges. Logistics, I think, is equally entitled in the third quarter as the second quarter, but pricing is a little bit higher. Obviously, we've considered this in the guidance. So in terms of shipments, we've tried to factor that appropriately. Also noting, it's worth noting that the third quarter is typically a little bit lighter than the second quarter for a couple reasons. One, in Europe, there's usually a fair amount of time off and vacations. Europe kind of tends to take uh a month off there so that usually is reflected in some of the orders sorry some of the shipments uh additionally uh on the food and juice side within diversified food and health uh there's a seasonal aspect to the uh to the orange juice extraction business that we have so we've tried to factor that as well so that's all factored into that guidance uh for the second quarter okay great okay thanks for the color sure
spk01: Your next question comes from the line of Stephen Tusa from JP Morgan. Your line is open.
spk06: Hi, good morning. Good morning. Can you maybe just talk about some of the supply issues in a little bit more detail on the food side? We all know kind of the electronic components shortages, and maybe there is obviously some metal-related components. I mean, anything more specific on, like, stuff that's surprised you with regards to, you know, what you're having trouble getting, maybe on the more kind of arcane side of the supply chain? And then, secondly, are you seeing any signs at all of, you know, customers saying, you know, they would have placed an order in, like, the fourth quarter or something, but they're, you know, they're kind of saying, we'll just make that decision next year as, you know, as inflation cools down?
spk04: On the supply chain side, I don't know that we've been surprised by anything in terms of the supply chain. We haven't been hit significantly with the chip shortage that you're hearing about in the news. We've seen some constraints on general electronics, and certainly just general metals are hard to come by, and they are increasingly higher cost. I think what we've been surprised by a little bit is the complexity and the difficulties in the logistics market that probably has hit us higher. And it doesn't hit us directly sometimes. It also hits us indirectly as that impacts our suppliers, right? So they're having issues getting stuff into their factories, which then delays them, which then delays them being able to supply us on time. So just being at the end of that supply chain just causes a lot more volatility for our ability to deliver on time. That makes a lot of sense.
spk03: Right. And then anecdotally, Steve, I haven't heard any circumstances where customers kind of phone up their hands and say, you know, it's just too sloppy right now. Lead times are long, so I'm just going to wait it out until next year. As you know, the sales cycle on food tech tends to be very detailed, very involved. It can often take weeks to months to get through a quote to a to an order. So we just don't see that as usually a huge driver of complexity. If anything, folks are trying to, given the environment that they're working on, the demand side, the strength of the demand side, we do see that's what's really driving our pipeline, which remains strong from here. Great. Thanks for the call. Thank you.
spk01: Your next question comes from the line of Andrew Aubin from Bank of America. Your line is open.
spk00: Hey, good morning. This is Emily Hsu on for Andrew Aubin. Good morning. I just had another question on pricing. So we've heard some sectors have price at shipment, which means effectively they can raise customer prices at the time of shipment. So I'm wondering if you guys do that or do you use more of a contract pricing structure where you have to, you know, honor contract prices at shipments? Thanks.
spk04: Sure. I'll try to take that one. On the aftermarket side, we have price lists and we try to publish those and update those as we need to to incorporate inflation. On the equipment side, specifically in food tech, we base our pricing at the time of the quote, and we have reduced the amount of time the quote is valid. And we don't lock in pricing until we get everything agreed to with the customer around engineering. And then we can lock in pricing because we can start to lock in the cost from the vendors at that point in time. Now, there are opportunities where we can, if the inflation is significantly higher than we expected at that time, we do have sort of a break the glass clause in some of our contracts that allow us to adjust pricing after that point in time. But we try not to use that clause too often as it impacts our relationship with our customers.
spk00: Okay, great. That's very helpful. And then just my last question is, can you just talk about how channel inventories are on both the food tech and aerotech side?
spk03: Thanks. I'm sorry, I missed a question.
spk00: Just any color on channel inventory?
spk03: Oh, on channel inventory? Yeah, fortunately for JBT, if you're talking from our factory to our end customer, that's not really so much of an issue because we're selling direct like 95% of the time. So there really is no channel disruptions or a buildup or depletion of inventory. We're working almost exclusively except in some faraway places where we do use some third party to help us out in accessing the markets, but predominantly like 95% of our orders are direct.
spk00: Thanks, Greg.
spk03: Thank you.
spk01: Again, everyone, if you would like to ask a question, just press star 1 on your telephone keypad. Your next question comes from the line of Nick Dobry from Robert W. Beard and Company. Your line is open.
spk03: Hey, thanks for taking a follow-up. Just one question. Yeah, just one question for me back on food tech. So a few weeks ago, we saw that the USDA announced $500 million of funding for expanding meat and poultry processing projects. and you know, they were talking about focusing on, on smaller players and, and trying to add competition to that market. Um, you know, I looked at that and that seems to be a pretty good thing for your business, but I'm kind of curious on, on your view on the matter. Um, I'm curious how long, uh, with, with this kind of business with smaller players, players take to, to develop, do you have access to that, to that channel? And, um, I'm also wondering if you think there is a multiplier effect to this funding that's been provided by the USDA. I mean, that's kind of how they're seeing it. They think private capital is going to come to add on top of what they're providing in terms of funding. So how do you think this is going to impact demand of your business, and how long do you think it takes for this to materialize? Sure. Sure. So generally speaking, the good news is that JBT is really, really broad participation in the poultry market and in the protein market in general. As we noted in the past, it's very rare for even our larger customers to be more than 5% or 10% of our business in any one year. There's obviously some peaks and valleys within there. um but but generally speaking we have really really broad participation so any governmental support uh is is good for us uh so we actually also see that on the infrastructure side on the aerotech uh with the most recent um infrastructure bill that's being passed along but uh going back to protein so we would view this as a good a good factor it as we talked about in the past it does take a while for for investments, especially greenfield ones, to turn into orders. If it's more on the expansion of individual lines, et cetera, that can take less than six months. But generally speaking, I wouldn't expect that to impact orders for 2021. It would be more of the benefit to 2022. As to the multiplier effect, I don't know the answer to that. I'm not an economist. It's really hard for me to figure out what that means. Obviously, any kind of subsidization from government will typically bring other sources of capital just at the highest level, so you would hope and think that, but it's really hard for me sitting here today to know if that's going to specifically benefit JBT or not. Okay. Thank you. Sure.
spk01: Presenters, there are no further questions at this time. Let me turn the call over back to Mr. Brian Duck.
spk03: Great. Thank you all for joining us this morning. Kedrick and Matt will be available if you have any follow-up questions. Have a good day.
spk01: This concludes today's conference call. Thank you for participating. You may now disconnect.
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