Welbilt, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Well-Built Incorporated 2020 Q4 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this time, you will need to press star then one on your telephone. If you would like to withdraw your question, you may press the pound key. If you require any further assistance, you may press star zero and an operator will come back on to assist you. I would now like to hand the conference over to your first speaker today. Mr. Rich Sheffer, please go ahead.

Good morning and welcome to Wellbill's 2020 fourth quarter earnings call and webcast. Joining me on the call today is Bill Johnson, our president and chief executive officer, and Marty Agard, our chief financial officer. Before we begin our discussion, please refer to our safe harbor statement on slide two of the presentation slides and in our earnings release, both of which can be found in the investor relations section of our website, www.wellbuilt.com. Any statements in this call regarding our business that are not historical facts are forward-looking statements, and our future results could differ materially from any express or implied projections or forward-looking statements made today. Our actual results may be affected by many important factors, including risks and uncertainties identified in our press release and in our FCC filings. We do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or other circumstances. Today's presentation and discussion will include both GAAP and non-GAAP measures. Please refer to our earnings release for our non-GAAP reconciliations and other important information regarding the use of non-GAAP financial measures. Now I'd like to turn the call over to Bill.

Thanks, Rich, and good morning. Before we get into our fourth quarter results, I want to share some details on the current market environment. Looking at the MillerPulse weekly same-store sales graph on slide 3, You can see the recovery in the restaurant market since the historic drop that began the second week of March. QSR same-store sales have consistently been positive since early July. Most QSRs have more than 50% of their sales come through their drive-through windows prior to the crisis and now are also embracing delivery. As a result, they have been more resilient than casual dining restaurants who pre-crisis saw the majority of their sales tied to dine-in traffic. Same-store sales at casual dining restaurants began the quarter down 15% to 20% compared to prior year. The lost momentum beginning in November bottomed out down nearly 40% in December. They've recovered much of the ground they lost since the first of the year and are now down just slightly more than 20% compared to last year. We expect conditions to begin improving for casual restaurant operators. If temperatures warm up enough to allow outdoor dining in colder areas, We make further progress on vaccinating the population. The National Restaurant Association estimates that 110,000 restaurants, or 16% of the pre-COVID population, have closed their temporarily or permanently. They also reported their restaurant employment remains 2.5 million below pre-COVID levels, the majority of this in those operations that rely on indoor dining or service. QSRs have also reduced headcount as they have been closing their indoor dining rooms and shifting to a takeout and delivery only model. In EMEA, most countries still have restrictions on dining away from home, but more are allowing takeout and delivery compared to last spring. Market expectations are that most of these restrictions will start to be eased beginning late this quarter through the second quarter. In APEC, there's a split between countries that are operating with few to no restrictions like Australia and China, those that are still significantly impacted by the pandemic, primarily Southeast Asia and India. Increased distribution of COVID vaccines globally will help these markets reopen. We've heard several QSRs publicly comment during their recent earnings calls that they will begin to focus on new builds in 2021 as their same-store sales have recovered and they see a share growth opportunity due to the continued weakness in casual dining. Given our strong position with most of these chains, we expect to benefit as this market segment starts to expand again. Looking at other end markets, we've seen increased interest from C-stores about expanding their food and beverage offerings. We have new programs with a number of major C store chains and are optimistic that this will expand as the markets continue to recover. Moving on now to slide four of our presentation to review our financial results. Our net sales declined 16.2% in the fourth quarter with organic net sales decreasing 17.6%. This continued the gradual improvement that we have seen since the first two months of the pandemic. With sales still down in the mid-teens percent, we delivered an adjusted operating EBITDA margin of 18.8%, which is a 20 basis point increase from last year's fourth quarter. Along with the increased margin, we delivered $37.7 million of free cash flow in the quarter, a 10% increase compared to last year's fourth quarter. This operating performance was made possible by the progress the Weldwell team made on the transformation program over the last year and by the cost containment actions we took in March. On slide five, sales in America decreased 15.1% in the quarter from the prior year. Sales to QSRs increased year over year in the fourth quarter, driven primarily by an increase in non-repeating large chain rollout sales. The majority of this attributable to the rollout of Mary Chef high-speed ovens. That is the continuation of that program with a global customer that launched in Q3. We also saw an uptick in sales of Garland clamshell grills for the large QSR. In the general market, sales decreased in the quarter, but we did begin to see some momentum building in the C-store segment and roll-ups of Mary Chef ovens, CombiTherm combi ovens, and fresh blend smoothie machines. We remain very excited about the C-store segment. Other areas within the general market, such as casual restaurants, education, healthcare, travel, and leisure end markets, We're softer in the quarter due to the impact from rising COVID cases. Finally, kitchen fare aftermarket sales decreased primarily due to the absence of any bulk parts buys from master parts distributors in this year's Q4. Looking at EMEA on slide six, sales decreased 15.6%, organic net sales down 21.1%. Large chain sales were impacted by strong QSR sales last year. Declines in the general market were similar due to the re-imposition of local dine-out restrictions. As I previously mentioned, the impact wasn't as bad as what we experienced in the spring as kitchens were allowed to remain open for takeout and delivery in most countries. We did have a continuation of the small rollout for CREM with the European governmental entity during the quarter. On slide 7, sales in APAC decreased 21%, with organic net sales down 23.1%. We had sales growth in Australia again this quarter and saw sales growth in Japan and Malaysia for the first time since the beginning of the pandemic. Sales in China decreased due to tough comparisons from two rollouts in last year's fourth quarter and the shift of a coffee customer to EMEA that was included in APEC results last year. We still view the China market as fully recovered. However, Southeast Asia, the Philippines, and India are still being highly impacted by the pandemic. Moving to slide eight, the progress we have made on our transformation program, once again, positively impacted our results for this quarter. We delivered approximately $5 million of end-period savings in the fourth quarter, which is a $20 million run rate. Looking at our various initiatives, our procurement team has implemented many new agreements with current and new suppliers and is continuing to work on implementing the remaining opportunities presented by our key responses. most of which are now going through the product qualification and testing processes. We continue to see savings from our procurement activities ramp up in the quarter, which kept us positive when netted against commodity inflation that began to increase in the fourth quarter. More of the early benefits are now beginning to flow from the balance sheet, where they are initially capitalized into inventory and onto our P&L. We will continue to see some inventory obsolescence and transitional costs as we shift suppliers along with the recent escalation of logistics costs. Those should now be fully offset by the savings we are now generating. We are continuing to develop our own site-led value analysis, value engineering, or BABE initiatives, but the RFQ process didn't provide the right solution for our businesses. These VAV initiatives have identified additional savings opportunities to supplement the RFQ process and is a great example of how we are transforming the culture of our company, the one that embraces continuous improvement. This will help us keep a full pipeline of savings opportunities moving forward. We remain confident that we will clean our procurement activities close to our original timeline when they lag in actual dollar savings until the business returns to pre-COVID levels. We've continued to make progress at the five North American manufacturing plants that are currently part of the transformation program and have seen productivity gains emerge at not only these sites but most of our sites globally as we are deploying our lessons learned broadly to accelerate improvements. Some of these productivity gains have been substantial by dealing with lower volumes and inconsistent production shifts that work against us in some facilities. These productivity gains have led to leaner operations and a smaller workforce, with headcount reductions that began in Q4 of 2019 and continued into each quarter of 2020. We anticipate some additional productivity-related headcount reductions continuing through 2021. We've taken delivery and installed some new fabrication equipment. However, the pace of capital spending for additional fabrication equipment has been slower than originally anticipated due to the impacts of COVID-19. expect the pace of capital spending will increase in 2021 allowing us to catch up on these planned savings we are working on additional plant consolidations currently this one in shreveport louisiana where we have had two plants that support our frymeister and merco businesses we're in the process of consolidating one of those plants into the other one expect to have this completed during the first half of this year as i mentioned we did see a step up in transformation program savings in the fourth quarter with in-period savings increasing to approximately $5 million, which is a $20 million run rate. We remain fully committed to delivering the 500 basis points of margin improvement from the transformation program and expect to complete all the planned execution actions that will drive the savings by the end of 2021. However, the timing of realizing the full $75 million will cost saving the dollar terms along with the all-in EBITDA margin target of 23% will be delayed due to the pause experience related to the pandemic, creating uncertainty of when sales and manufacturing volumes return to pre-COVID levels. Before I turn the call over to Marty, I want to share some recent developments from some of our other strategic initiatives. On slide nine, we introduced the newest version of Kitchen Connect and launched our new common controller, into our first product lines last quarter. As a reminder, Kitchen Connect is our open cloud-based digital platform that brings the benefits of connectivity to commercial food service operators in a stable, secure digital environment. And because it is an open cloud-based solution, we can share data with other kitchen management platforms to connect competitors' equipment to well-built Kitchen Connect. Our new common controller connects to Kitchen Connect 3.0 and is now being integrated into new products across all of our brands. We will also be retrofitting several existing products with new controllers and will offer kits to operators who want to retrofit their equipment with a new controller to take advantage of our integrated digital platform. Operators increasingly demanding digital capabilities when choosing what equipment they will use in their kitchens. Wellville's integrated approach to having a leading cloud-based data management system with the only controller that uses the same operating logic across all of its brands. puts Wellbuilt at the leading edge for digital platforms in our industry. Since our dual launch last quarter, we have had several chain operators express interest in adopting Kitchen Connect along with Wellbuilt equipment into their operations. We are currently working with these customers on field testing within their operations. More on this in future quarters. The last item I want to cover is an update on our Ghost Kitchen efforts. On slide 10, you can see one of our standard ghost kitchen designs that was developed by our pit kitchen team to help the operators of these kitchens adopt an efficient modular layout that is digitally enabled by Kitchen Connect. Demand for ghost kitchen is expected to grow rapidly with an estimated 1,000 ghost kitchen openings over the next four years, and America is representing approximately $100 million of equipment. We estimate that we have some equipment in the majority of ghost kitchens in operation today, have agreements in place with multiple ghost kitchen operators for their planned store openings in 2021. This is yet another example of where our leadership and digital capabilities will help us grow in an emerging market segment. With that, I'll turn the call over to Marty.

Thanks, Bill, and good morning, everyone. I'm going to start with side 11 and the discussion of our adjusted operating EBITDA margin results. As you might expect, the year-over-year drop in volume had impacts throughout our system and these margin drivers, although this is beginning to be mitigated by the progress we've made in executing our transformation program. Volume, which we measure at the gross profit level and is netted against the impact of net pricing, drove a decline of 100 basis points in the fourth quarter. This reflects the 16% decline in sales versus prior year, partially mitigated by positive net pricing as our 2020 price increases continued to hold up Material costs, including tariffs, was a 30 basis point positive contributor this quarter compared to the prior year. This is a reflection of the net savings coming through from our transformation programs procurement activities, which are still ramping up, but more than offset rising commodity costs in the quarter. We have seen more inflationary pressures so far in the first quarter of 2021 related to both vendor pandemic related operating constraints and logistics costs, particularly overseas. We expect these headwinds to be present through the first half of the year, but despite that, we believe that our transformation program efforts and our upcoming 2021 price increase will be effective in expanding our margin from 2020 as we proceed through 2021. Other manufacturing expenses, mainly labor, overhead, and warranty, were a 20 basis point positive contributor to margin this quarter. We continue to effectively flex our production expenses to the lower volume environment again this quarter. As a reminder, we implemented a reduction in force at the end of March that addressed both lower volume and anticipated productivity gains and took an additional but smaller action early in Q3 as we made further progress on improving productivity in our plants and gained more visibility on upcoming demand. As volume improved sequentially in many of our plants this quarter, we minimized the headcount that was brought back in and held onto the productivity gains that we've made. We still have a degree of fixed costs we could not impact proportion to volume, but that was less impactful this quarter due to the higher volumes. We are continuing to execute the transformation program-related labor strategies across our plants in 2021, have several more equipment upgrades planned over the next few quarters. As Bill mentioned, we are executing a few facility consolidations, and we remain encouraged by the organization's lean focus. We expect to continue taking additional restructuring actions over the next few quarters as each plant progresses in its individual transformation program. SG&A on an adjusted basis contributed 70 basis points towards margin improvement in the quarter. Like our actions within the manufacturing footprint on SG&A, we also took early and aggressive action to contain spending as the pandemic's impact emerged in March. Many of those actions continue to contribute to lower SG&A costs and enabled us to show favorability in most of the SG&A categories in the quarter, as professional fees, marketing, and travel expenses were all favorable. As a reminder, if you are reading the face of the income statement, the SG&A includes the transformation program investments that are excluded from our adjusted operating EBITDA. You can track the specifics through the non-GAAP reconciliation schedules. Moving to slide 12, free cash flow was a positive $38 million in the quarter and increased 10% from last year's fourth quarter. Working capital was a slight use of cash in the quarter with a decrease in inventory offset by slightly larger reduction in accounts payable. Overall, working capital remains well managed. Also impacting free cash flow is our investment program in both traditional capital spending and the transformation program. For the quarter, we spent $4 million in capital, down $12 million from 2019. We finished the year at $20 million in capital spending, down from $34 million in 2019, reflecting the reduced activity through the pandemic restrictions. We will ramp this back up in 2021 to be more similar to 2019 spending levels with investments planned for equipment upgrades, facility investments, new product innovation, and IT initiatives. The transformation program investment is reflected in both SG&A and restructuring. For the spend reported in SG&A, after the $2.4 million in Q4, we have spent $59 million since the program began in May 2019. And combined with transformation-related restructuring charges of $9 million since inception, we have now incurred approximately $67 million of the original $75 to $85 million range of investments planned. We expect to finish the incremental spending later in 2021 and to be in the lower half of the range for the full life of the program. One last reminder on our free cash flow is that it is traditionally a seasonal use of cash in the first quarter as we pay customer rebates and annual incentive compensation, build inventory, and experience seasonally lower volumes. We then generate seasonally stronger cash flow in the remaining three quarters. As shown on this chart, we have remained free cash flow positive since the beginning of the pandemic. While we are not providing a free cash flow forecast today, nor expecting it to achieve pre-pandemic levels in 2021, absent an abrupt market disruption, we expect free cash flow to be materially improved in 2021. Moving on to liquidity, which we define as cash and short-term investments plus availability on our revolver. We ended the fourth quarter with $375 million of total liquidity, which is well ahead of where we were at the end of the last three quarters and close to even with December 2019. In summary, we are very pleased with our free cash flow and liquidity performance through the pandemic in 2020. Cash and cash equivalents plus restricted cash increased by $2 million during the quarter, while our overall debt balance decreased by $40 million, providing the $42 million improvement in liquidity this quarter. We remain in compliance with the liquidity, EBITDA, and capital expenditure covenants in our amended credit agreements with significant headroom. Finally, on slide 12, I'd like to share a few initial thoughts on 2021. First, we will not reinstate full-year guidance until conditions efficiently stabilize and become more predictable. We are providing first-quarter sales guidance, which we expect to be down between 11 and 16 percent from 2020. We expect this will be our last quarter of negative sales comparisons, and we will be able to provide sales growth guidance next quarter absent a significant setback in the fight against COVID or some other external shock to our end markets. We currently believe that 2021 will show full-year growth compared to 2020, but that we won't be back to 2019 or pre-pandemic levels in 2021. Similarly, related to our EBITDA margin, we expect to deliver meaningful expansion from 2020 but are not likely to reach the pre-pandemic 2019 level. And we still expect a degree of seasonality, particularly related to the first quarter, where some of the inflationary pressures I mentioned earlier are evident. We have seasonally lower sales, and our expected price increases have not taken effect yet. This is just a reminder of the quarterly pattern from the last three years, and by no means do I want to suggest any doubt about our transformation program. As Bill stated, we remain confident that transformation actions are working, On a transactional level, we can clearly see the savings are materializing, and we are confident those benefits will accelerate as we move through the year. Under the headwinds of the pandemic-related volume declines and hopefully temporary inflationary and logistics cost pressures, our efforts are positioning us to be a stronger and more profitable company in the quarters ahead when both our transformation actions are mature and the market has recovered. We've not lost sight of our 500 basis point improvement goal, nor our path to it. That concludes my comments. Operator will now open the call for questions.

At this time, ladies and gentlemen, if you would like to ask a question, please go ahead and press star, then the number one on your telephone keypad. Again, that's star one to ask a question. Our first question today comes from the line of Jeff Hammond with QBank Capital Markets. Please proceed with your question.

Hey, good morning, guys.

Hey, Jeff.

Morning, Jeff. So just thanks for the color on, on one cue, just trying to get a better read on what you're seeing from, you know, order momentum perspective, sequential trends into January, February, understanding seasonality, any kind of disruption from kind of this, this COVID reemergence and, and restaurants shutting down and, and kind of how that all plays in, into, into the guide.

Yeah. So, you know, we, We say in the January time period that it's better than the fourth quarter actual, which was the 16.2%. You know, the shutdowns are having an effect. You know, there's a slight amount of noise in the order patterns in February. We think that'll kind of normalize for March from the guide that we're giving you here. But, yeah, to be sure, it's choppy, you know, week to week right now.

Okay. And then, um, you know, just, you mentioned kind of rebuild and, and, you know, companies starting to talk about, you know, plans for, for new store reemergence. Like when do you start to see, think some of that will start to move ahead? Um, you know, as we kind of come out and we, we get, you know, momentum on vaccines, et cetera.

Well, we saw a little bit of it in the, the fourth quarter, you know, in the Americas, we had some, we had some rollouts that from some of the QSRs that take an effect a little, you know, the smaller rollouts and what we're hearing from, from them is, you know, everything that was in 2020, you know, delayed out of 2020 will take place in 2021. I think, you know, it's, there's, there's some small things happening in the first half, but it's really a second half kind of event that, we'll start to see more pickup of that type of activity.

Male Speaker 1 Okay. And then just on the savings, you know, good to hear that you're on track. You know, you gave kind of run rate exiting 20 million, exiting 2020. Where do you think that, you know, how are you thinking about incremental savings for 2021 or exit run rate savings as you exit, you know, 2021?

yeah you know we we um we're not ready to sort of give you a specific kind of range around that but it should continue to build i mean each quarter we think is is ramping in we are continuing to finish the qualification of parts and and uh and the procurement side of this continuing to buy a little bit more of those new parts at lower cost and the productivity as we talked about continues to expand so i just Can't quite give you, you know, the kind of range you'd like. But just let's say it's going to continue to advance. In fact, probably faster. It will probably advance faster than Q4 did from Q3. If you recall, I think we were at $4 million, a quarter, $16 million run rate in Q3, and now $20 million. I think that page will pick up a little bit as we get through 2021.

And it's probably a couple quarters longer than what we said at the investor day, you know, kind of what it feels like right now. And we kind of said that we would be there somewhere around the end of 2021 hitting that kind of stride. But it's still subject to volume constraints, right? I just don't know when the volume is coming back. But all the actions that we've taken, you can see them in the numbers, are taking hold and materializing, having a material effect on the margins. Okay, thanks.

Our next question today comes from the line of . Please proceed with your question.

Thank you, and good morning, everyone. I guess where I'd like to start is maybe with a little more color on the fourth quarter. I'm trying to sort of separate out the impact of the rollout, which it sounds to me like you called out as, you know, a little bit of a one-time item that helped you in the quarter relative to the actual replacement demand that you also noted in your press release that is starting to materialize. So can you sort of help us understand what's going on there? And I ask this in trying to understand your guidance for the first quarter, right? Because if I look at the midpoint, it seems like the dollar revenue is very similar to what you reported in the third quarter. So we're stepping down sequentially. Try and understand how much of that is the natural seasonality of the business relative to maybe the one-time effects of the rollout or maybe channel stocking or something like that that might have helped you in the fourth quarter.

Yeah, I think, you know, we had a couple of rollouts in the fourth quarter that were kind of in total in kind of the $10 million range compared to Q4 of 2019, which were a couple million dollars. So that's the order of magnitude that kind of rollouts that happened and kind of tailwind in the fourth quarter for Q4. for kind of the QSR segment.

That's helpful. And do you get the sense that your distributors behave any differently than they did in a prior year as far as their own sort of stocking goes?

Yeah, there was no... Of course, we didn't announce a price increase. You know, sometimes we do it on January 1. Sometimes we do it after the first quarter. This year we've done it after the first quarter. You know, it was affected after the first quarter. So sometimes they do pre-buys on that. They weren't doing any of that, partly because we didn't have a price increase announced and mainly because of their own cash constraints and liquidity issues. You know, the inventory in the channel is relatively low right now. And as Marty said, you know, there's some seasonality to inventory stocking. And right now we're starting to ramp up, you know, particularly ice demand for the second quarter. Second and third quarter is a big demand for ice products. And so we'll start ramping up inventory levels and working with our distributors to get their stocking levels up. But in general, I think when you talk to any of the dealers on the general market side of things, their inventories are really low at this point. They're just not carrying anything.

I see. And then, you know, just to clarify here, as far as the guidance for the first quarter and the sequential downtick in revenue, it sounds to me like this is pure seasonality that we're experiencing here. Do you think the business can build sequentially from Q1 in terms of revenues higher sequentially as you look at Q2 and Q3? Or are you thinking of a different progression at this point based on what you're seeing in the market?

No, I think you've got it pegged right. It's seasonality in the first quarter, and we'll be able to grow from there.

Great. Then my follow-up is on the transformation program and the way we should think about margins. So if I understand slide eight correctly, um you know you're maybe going to spend closer to 75 million you already spent 67 million the implication here is that most of the work is done it's behind us and maybe now all we need is volume so if i look at the at the targets that you've reiterated here 23 margin 23 percent even down margin on revenue that is close to 2019 levels I guess this would imply 44% incremental margin on $440 million of additional revenue. So my question is this. How should we think about the way these incrementals kind of ramp with revenue? Should the first, say, $200 million in revenues carry different incrementals than the subsequent $200 million? Should the incrementals be higher earlier in the recovery or should we see higher incrementals later as your savings are sort of maturing and ramping up? Thank you.

Yeah, Meg, it's Marty. What I would say is the paces of the rebound and recovery in revenue is not exactly the same time pattern as the savings ramp up. So I think the incrementals will be a little – steeper in the second half of the revenue gains as the procurement cycle really runs its course and the productivity side run their course, whereas some of the steeper rebound in revenue will happen kind of in particularly the second quarter when we're comparing against the depths of 2020 will be the steepest. So you'll get some natural the bouncing in margin in that second quarter, for sure, from just scaling SG&A and so forth year over year, but the real drive towards the 500 basis points and the, and the 23% will come as the, as, as kind of the BTP really matures in the second half of this year and into, into 2022. Yeah.

And I would say that there, there's a significant amount of work still to be done. You know, even though some of the dollars have been spent, we have, A lot of the CapExes, you know, for fabrication equipment and things like that have yet to be installed, up and running, fully operational, all bugs worked out. So there's still quite a bit of work to be done on the productivity side of things that, you know, we see accomplishing that this year. And as Marty said, on the procurement side of things, That's just an ongoing everyday fight, right? And we'll see that mature towards the end of the year in terms of all the actions that we've taken. And then the funnels fill back up again for more after that, right? So we don't stop.

Yeah, I appreciate that. It's just a little counterintuitive if you ask me. I would expect incrementals to be higher as volumes are just starting to come back and then moderate over time. But it sounds to me like you're saying that maybe we should be thinking the opposite here. I'll get back into it. Thank you.

Yeah, Nick, it's that lag around procurement in particular that's powerful. A, qualifying products, getting them um starting to buy them and getting them into inventory buy them in scale as opposed to you know what i'll say buying them at full volume and then getting them through the inventory you know capitalization cycle and out through the p l It's just even though the transformation spending has been done, that exercise, that procurement follow-through will run. I mean, it's been going on several quarters, has several more quarters to go. And so the lag of getting that into the P&L and drive the incremental margins is just not to be underestimated. Thank you for the call. Appreciate it.

Your next question comes from the line of Larry DeMaria with William Blair. Please proceed with your question.

Thanks. Good morning. First question, I think through the first few quarters, you had about $12 million in kind of government assistance, you know, credits, cash, et cetera, that flowed through to you guys. So I'm curious what the full year benefit was, if that impacted the fourth quarter. And then secondly, you know, does any of that come back in 21, or do we have to overcome – you know, obviously a multimillion dollar, uh, headwind. And how do we do that? Thank you.

Yeah. Well, Marty's kind of scrambling for the numbers there. I'll tell you that, um, we, we did see benefit in the, in the fourth quarter. Um, we do still have some benefit in the, in 2021, obviously not to the magnitude that, um, the, the 2020 was, but, uh, I'll let Marty give you the exact numbers here.

Yeah. Um, You know, we're going to get the K out, you know, imminently, and you'll see it in there in a footnote. There was some more in the fourth quarter. It's tapering down. It's in both cost of goods and SG&A. So, you know, I won't scramble around for this number now, but you'll get access to it in the K, you know, soon, and we'll be able to do your analysis. We don't expect much next year, you know, as these things come back just a little bit in some of the more in the international markets, really, where we see a little bit of that still as opportunity.

Okay. It just seems like, you know, we're probably in the low mid-teens overall, and that seems like a big number to overcome in 2021, considering, you know, 16% of, I guess, EBIT through the first few quarters. But I guess maybe switching over to price. you know, end of the first quarter you have some price increases come through. Can you give us an order of magnitude and how much confidence you have that, you know, that's enough or are we going to have to raise price again and how broad across your, you know, product portfolio the price increases are? Because obviously we all know there's an awful lot of inflation, supply chain inefficiencies out there in the industry.

Yeah, so, you know, we went out with a price increase on the spare parts piece of our business in January. So we did get part of it implemented and in the first quarter on that. You know, the general market and the rest of GSA global strategic accounts starts in the second quarter. And it varies by product line, you know, anywhere from, you know, three to five percent, depending on the product line, can be, you know, in that range. And we typically net, you know, 60% to 70% of, you know, the number that we go out with just based on, you know, contracts and timing and issues, different issues like that, depending on the customer.

Okay. Thank you. Last question. Mary Sheff obviously did well for Q. Was that part of the one-off things that helped or, you know, year-over-year help, or was that indicative of the industry moving towards some more versatile cooking equipment that may have some legs? And I'll leave it there.

Thanks. No, we believe that we're growing share in Mary Chef and being able to maintain that share and what you're seeing is sustained progress with Mary Chef.

Okay. Thank you.

Hey, Larry, before you drop, I just want to revisit the governmental assistance. The Q4 impact was just a little bit over $4 million, most of that in cost of sales, just a couple hundred thousand in SG&A. And for the full year, we were at just under $13 million. more evenly split between cost of sales and SG&A. But I think one thing to remember, while it's a number to overcome, without that, we would have reduced costs further. So one way or the other, I think, you know, we still would have had a positive impact. It just allowed us to keep folks around that we otherwise would have furloughed or or taken other actions without the, you know, in the absence of government assistance.

Okay. Thanks, Rich.

Thanks.

Your next question comes from the line of Rob Wertheimer with Malleus Research. Please proceed with your question.

Hi. Good morning, everyone. um thanks for the discussion on just sort of some of the customer conversations you're having i just wanted to expand on that um and just kind of what people are saying on the role of technology on connectivity etc as to whether you know not not next week or next month next quarter but just over the next few years if it does ignite, you know, a larger refurbishment, you know, or change in the average content that you have? I mean, just general comments on the sense of urgency your customers, the sense of, you know, value add your customers are seeing from the sort of things you're developing. Thank you.

Yeah, so it is important. It's happening at the larger QSRs right now in terms of people wanting connected devices is where the initial trust is. And I think that's important because once they start it, they start making it affordable for everybody else, for the smaller players, you know, as it becomes more prominent. Every piece of our equipment is born digital now and will be in the future and capable of analytics and connecting to either our cloud or customer cloud. We're able to connect other people's equipment to our cloud. So it's a very open platform, which it has to be because there's so many different pieces of kitchen equipment from different manufacturers in the kitchen that you have to have an open platform. We have somewhere around 8,000 units connected across thousands of kitchens right now. And I can tell you that that's up double what it was a year ago. And we see this accelerating and improving and just almost exponentially as people start to get more equipment connected. There's just too many benefits from having connected equipment for people not to buy connected equipment. their ability to monitor energy, to monitor usage, to monitor maintenance, all the things that it brings. And especially if you look at some of the dynamics going on right now in the political landscape, if you have $15 an hour labor, they're going to be focusing on how do they get more labor out of their kitchens. And having this digital technology and connected kitchens really enables that. And then You know, all things digital, delivery, you know, takeout options, all those things, you know, everybody's working on their digital capabilities. You know, we're coming out with a new product in the second quarter, storage cabinets that our Merco brand is having, and it's specifically centered around storage. people picking up orders at retail outlets where they scan the code from their phone onto the cabinet and they pull their food out. Again, it's all loaded from the back, and the customer never has to touch anything other than their food. So a lot of innovation coming as a result of Connected Kitchen, and we think that we're – in a very strong leadership position with our common controller common user interface and having the ability to connect multiple well-built devices using the same controller and the same user interface same amount of training for operators they can operate a grill they can operate a fryer they can operate a holding cap